Page 1

ILLUSTRATION: ALFA LAVAL, OFFICE BUILDING, AALBORG DENMARK

TK DEVELOPMENT A/S | CVR NO. 24256782

ANNUAL REPORT 2013/14 (1 Feb. 2013 - 31 Jan. 2014)


TA B L E O F C O N T E N T S Page 3 Summary 6

Consolidated financial highlights and key ratios

7

Results for 2013/14 and outlook for 2014/15

14

Market conditions

17

Business concept and knowledge resources

21

Property development

25

Asset management

30

Discontinuing activities

32

Financial targets

33

Risk issues

38 Shareholders 41

Corporate Governance

44

Statutory Annual Corporate Social Responsibility Statement

45

The Board of Directors

48

The Executive Board

49

Statement by the Board of Directors and Executive Board on the Annual Report

50

Independent auditor’s report

51

Consolidated financial statements

97

Parent company financial statements

115

Company information

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SUMMARY R E S U LT S FO R 2 0 1 3 / 1 4

Fashion Arena Outlet Center, Prague, Czech Republic

In the 2013/14 financial year TK Development recorded results of DKK 3.9 million before tax, excluding discontinuing activities, against DKK -272.3 million for the 2012/13 financial year. The results for the year are in line with expectations. The results after tax amounted to DKK -49.0 million for 2013/14 against DKK -493.3 million in 2012/13. The balance sheet total amounted to DKK 3,839.6 million at

project and related services. The current occupancy rate is

31 January 2014 against DKK 4,009.3 million at 31 January

84 % (Q3 2013/14: 82 %). Construction started in autumn

2013. Consolidated equity totalled DKK 1,553.7 million ver-

2013, and the opening is scheduled for the end of 2014.

sus DKK 1,389.7 million at 31 January 2013, corresponding to a solvency ratio of 40.5 % (31 January 2013: 34.7 %).

In Esbjerg TK Development owns a plot earmarked for the construction of a new shopping centre, BROEN, of about

The cash flows for the year amounted to DKK 9.3 million

29,800 m². The process of obtaining permits for the pro-

against DKK -24.2 million the year before. Net interest-bear-

ject has been delayed because the project must undergo

ing debt amounted to DKK 1,890.9 million at 31 January

a validation and approval procedure to ensure safe railway

2014 against DKK 2,206.1 million at 31 January 2013.

operations, etc. The validation procedure is expected to continue until after the end of the summer, and therefore

P RO P E RT Y D E V E LO PM E N T

construction startup is anticipated in autumn 2014. Discus-

In June 2013 TK Development sold a retail park project of

sions are being held with PFA regarding the sale of a share

about 20,000 m² in Barkarby, Stockholm in Sweden, to a

of the project at its current stage. Thus, if a final agreement

fund managed by Cordea Savills. The sale is based on for-

is reached, PFA will take part in the value generation at an

ward funding. 94 % of the project premises (Q3 2013/14: 82

early project development stage. This falls in line with the

%) have been let. Construction started in August 2013, and

Group’s business model, whose aims include entering into

the opening is scheduled for autumn 2014. Earnings from

partnerships regarding major development projects.

the sale will be recognized in the 2014/15 financial year upon handover of the project to the investor.

In addition, agreements regarding the letting and sale of several minor retail projects have been concluded. The earn-

In January 2013 construction of the first phase of 7,850 m²,

ings from these sales are expected to be recognized in the

a total of 136 units, of TK Development’s residential project

2014/15 financial year upon handover of the projects to the

in Bielany, Warsaw in Poland, was completed. Handover to

investors.

the buyers began in February 2013. In total 97 % of the firstphase units have been sold (Q3 2013/14: 93 %). The startup

In February 2014, after the reporting date, TK Development

of the next project phase is currently under preparation. A

conditionally sold a 6,000 m² office project in Aalborg, Den-

building permit for the second phase, consisting of about

mark. The project is being developed for the international

300 residential units and service facilities, has been granted.

Alfa Laval Group, which has entered into a long-term lease

The pre-construction sale, which started in December 2013,

for the property. The project has been sold to Pension­

is progressing better than expected, with pre-reservations

Danmark at a total price of DKK 126.1 million. Construction

having been received for 29 % of the units. Construction is

began in March 2014, and the project will be handed over

expected to begin in late spring 2014, and handover to the

to the investor in June 2015. Earnings from the sale will be

buyers is slated for spring 2016. The residential units will be

recognized in 2015/16 upon handover of the project to the

sold as owner-occupied apartments to private users.

investor.

In the autumn of 2013 TK Development sold an 80 % stake

The Group’s project portfolio in the property development

in a planned shopping centre project of 14,800 m2 in the

area comprised 405,000 m² at 31 January 2014 (31 January

Czech town of Frýdek Místek to a business partner. Follow-

2013: 452,000 m²).

ing the sale, TK Development currently holds an ownership interest in the project of 10 %. TK Development will receive fee income for letting and managing the construction of the

ASSET MANAGEMENT The total portfolio of own properties under asset manage-

S ummary |

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SUMMARY ment, which thus generates cash flow, comprised 138,250

handed over to the buyer once the usual commercial con-

m² and amounted to DKK 1,934.2 million at 31 January

ditions have been met, including those relating to project

2014, of which investment properties accounted for DKK

construction and letting. The selling price is based on a re-

308.5 million. The annual net rent from the current leases

turn requirement of 8.5 %. The retail park will be built in two

corresponds to a return on the carrying amount of 6.7 %.

phases. Construction of the first phase of about 7,500 m²

Based on full occupancy, the return on the carrying amount

was completed in March 2014.

is expected to reach 7.9 %. The timing and phase-out of the discontinuing activities are The operation of these properties is generally proceeding

subject to major uncertainty. The phase-out is progressing,

satisfactorily. Chain stores are managing satisfactorily,

and the risk exists that these activities may be phased out

while local tenants are generally recording difficulties. Over-

at a value lower than their carrying amount.

all the footfall and centre revenue are developing positively. In 2013 more than 16 million customers visited the Group’s six shopping and outlet centres, which corresponds to an index of 102 relative to 2012.

MARKET CONDITIONS In Management’s opinion, the market conditions are improving for the Group, which expects to see financial growth and rising consumer confidence in its markets, although levels

In February 2014, after the reporting date, TK Development conditionally sold its 75 % stake in the Fashion Arena Outlet

will vary from country to country. Private consumption is expected to continue increasing.

Center in Prague, the Czech Republic. The outlet centre has been sold to Meyer Bergman, and the selling price for the

In this phase of the business cycle, where economic growth

whole property amounts to EUR 71.5 million. The sale is con-

is on the rise, some uncertainty, although diminishing, per-

tingent on final financing, which is expected to fall into place

sists in the property markets, and the decision-making pro-

in April 2014. This sale generates a minor profit compared

cess of tenants, investors and financing sources remains

to the carrying amount, reduces the balance sheet total by

lengthy and carefully considered.

about DKK 400 million and makes a substantial contribution to the Group’s free cash resources.

Access to project financing, which has remained difficult for a prolonged period, poses the greatest challenge to the

DISCONTINUING ACTIVITIES

property sector. The Group is now experiencing an easing

The results before tax of the discontinuing activities

in project finance restraints. The options for procuring fi-

amounted to DKK -38.9 million in 2013/14 against DKK -53.7

nancing vary from project to project, depending on the type,

million in 2012/13, of which DKK -13.3 million derives from

location and status of the properties concerned, including

current operations, DKK -1.0 million from losses recognized

letting and sales. When granting project finance credits, the

on completed sales, and DKK -24.6 million from impairment

banks continue to require relatively high borrower equity,

losses and value adjustments of remaining assets.

but there also appears to be some relaxation of these requirements.

At 31 January 2014 the balance sheet total for the discontinuing activities amounted to DKK 367.7 million against

FINANCIAL ISSUES

DKK 425.4 million at 31 January 2013, a decline of 13.6 %.

At the Company’s Annual General Meeting on 22 May 2013,

DomusPro Retail Park in Vilnius, which has been sold in ad-

the Board of Directors was authorized to carry out a capital

vance, accounted for DKK 92.9 million of the balance sheet

increase with gross proceeds of about DKK 210-231 million.

total at 31 January 2014.

The capital increase was implemented in September 2013.

In 2013/14 TK Development sold two of the Group’s German

A substantial portion of the proceeds from the capital in-

investment properties: a minor investment property was

crease has been used to reduce the debt to credit institu-

sold in June 2013, and in September 2013 another German

tions and project finance loans granted by a number of the

investment property was sold at a price of DKK 43.8 million,

Company’s major shareholders and members of Manage-

corresponding to the carrying amount.

ment.

In August 2013 TK Development announced that a Group

TK Development has a general agreement with the Group’s

project, DomusPro Retail Park in Vilnius, Lithuania, had been

main banker about operating and project credits. The agree-

conditionally sold to BPT Baltic Opportunity Fund, which is

ment has been extended until mid-2015.

managed by BPT Asset Management. The project will be

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SUMMARY Since 31 January 2013 TK Development has entered into

not been included in the outlook for 2014/15.

agreements on the refinancing of project credits totalling DKK 1.2 billion. The main project credit that has been refi-

The expectations mentioned in this Annual Report, including

nanced has been prolonged until mid-2015. At 31 January

earnings expectations, are naturally subject to risks and un-

2014 credit facilities of DKK 0.1 billion only were due to ex-

certainties, which may result in deviations from the expected

pire prior to 31 January 2015. The credits are expected to be

results. Various factors may impact on expectations, as out-

refinanced prior to maturity or repaid in connection with the

lined in the section “Risk issues”, particularly the valuation

sale of projects.

of the Group’s project portfolio, as described under “Business risks” and “Risks related to the presentation of financial

The solvency ratio stood at 40.5 % at 31 January 2014, and

statements”.

thus the Group has fulfilled its strategic goal of achieving a solvency ratio of about 40 %. In the course of the year, the Group obtained interest margin reductions on several major credits.

O U T L O O K FO R 2 0 1 4 / 1 5 Management anticipates positive results of about DKK 40 million before tax, excluding discontinuing activities, for the 2014/15 financial year. The timing and phase-out of the discontinuing activities are subject to major uncertainty. The activities are in the process of being discontinued, and the Group risks incurring further losses before the phase-out is complete. Therefore, the results before tax of the discontinuing activities have

Alfa Laval, office building, Aalborg, Denmark

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C O N S O L I D AT E D F I N A N C I A L H I G H L I G H T S A N D K E Y R AT I O S DKKm

2009/10

2010/11

2011/12

2012/13

2013/14

407.0

FINANCIAL HIGHLIGHTS Net revenue

1,384.9

602.4

359.8

632.3

Value adjustment of investment properties, net

-10.9

30.0

36.7

-37.8

-14.9

Gross profit/loss

200.5

256.0

195.8

-139.5

163.9

57.5

127.2

65.5

-241.1

71.5

Operating profit/loss (EBIT) Financing, etc.

-17.9

-53.2

-83.6

-87.4

-102.4

Profit/loss before tax and writedowns, etc.

53.8

48.2

-1.2

-0.3

-28.8

Profit/loss before tax

39.4

74.2

14.3

-326.0

-35.0

Profit/loss for the year

25.4

73.6

27.0

-493.3

-49.0

4,377.3

4,622.0

4,639.5

4,009.3

3,839.6

364.3

394.2

445.2

498.8

437.3

355.1

387.4

440.5

496.3

435.9

3,249.5

3,424.7

3,498.1

3,030.9

2,986.0

17.8

12.2

18.2

0.0

0.0

1,593.4

1,866.0

1,876.4

1,389.7

1,553.7

Balance sheet total Property, plant and equipment of which investment properties/investment properties under construction Total project portfolio Contract work in progress Equity Cash flows from operating activities Net interest-bearing debt, end of year

-582.8

-182.7

-78.8

45.6

55.6

2,178.9

2,170.2

2,244.9

2,206.1

1,890.9

K E Y R AT I O S Return on equity (ROE)

1.6 %

4.3 %

1.4 %

-30.2 %

-3.4 %

EBIT margin

4.2 %

21.1 %

18.2 %

-38.1 %

17.6 %

36.4 %

40.4 %

40.4 %

34.7 %

40.5 %

35.7

32.0

32.2

23.9

15.8

0.5

0.5

0.3

0.4

0.4

Number of shares, end of year

28,043,810

42,065,715

42,065,715

42,065,715

98,153,335

Average numbers of shares, adjusted

28,043,810

35,095,222

42,065,715

42,065,715

74,870,019

0.6

1.5

0.5

-8.5

-0.7

0

0

0

0

0

18

16

10

9

7

Solvency ratio (based on equity) Equity value in DKK per share Price/book value (P/BV)

Earnings per share (EPS) in DKK Dividend in DKK per share Listed price in DKK per share

K E Y R AT I O S A D J U S T E D FO R WA R R A N T S Return on equity (ROE) Solvency ratio (based on equity) Equity value in DKK per share Diluted earnings per share (EPS-D) in DKK

1.6 %

4.3 %

1.4 %

-30.2 %

-3.4 %

36.4 %

40.4 %

40.4 %

34.7 %

40.5 %

35.7

32.0

32.2

23.9

15.8

0.6

1.5

0.5

-8.5

-0.7

The calculation of key ratios was based on the 2010 guidelines issued by the Danish Society of Financial Analysts. The comparative figures that include the number of shares have been corrected by an adjustment factor of 0.72 to show the effect of the capital increase implemented.

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R E S U LT S F O R 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 4 / 1 5 In the 2013/14 financial year TK Development recorded results

The activities within each individual business segment are de-

of DKK 3.9 million before tax, excluding discontinuing activities,

scribed in more detail on pages page 21-31.

against DKK -272.3 million for the 2012/13 financial year. The property development segment is described on pages The results before tax, including discontinuing activities,

21-24. The description includes information about the

amounted to DKK -35.0 million against DKK -326.0 million in

development potential of TK Development’s project portfo-

2012/13.

lio, including an outline of the individual development projects.

The results after tax amounted to DKK -49.0 million against DKK -493.3 million in 2012/13.

The asset management segment is described on pages 25-29. The description contains information about TK

The balance sheet total amounted to DKK 3,839.6 million at 31

Development’s own properties under asset management,

January 2014 against DKK 4,009.3 million at 31 January 2013.

including an outline of the operation and customer influx for

Consolidated equity totalled DKK 1,553.7  million versus DKK

the individual projects.

1,389.7 million at 31 January 2013, corresponding to a solvency ratio of 40.5 % (31 January 2013: 34.7 %).

The discontinuing activities are described on pages 30-31, which provides more details about TK Develop-

The results for 2013/14 and the balance sheet at 31 January

ment’s properties and projects in the countries where Man-

2014, broken down by business segment, appear from the ta-

agement has decided to phase out activities.

bles below.

R E S U LT S 2 0 1 3 / 1 4 ( D K K M )

Profit/loss     Revenue Gross margin Costs, excl. depreciation and amortization Operating profit/loss Financing, net Profit/loss before tax Tax on profit/loss for the year Profit/loss for the year    

2013/14 407.0 163.9 91.0 71.5 -102.4 -35.0 14.0 -49.0

Property development 258.9 68.7 68.7 -21.8 49.6 -

Asset management 137.7 112.6 112.6 -61.3 51.6 -

Discontinuing 10.4 -17.4 8.5 -25.9 -5.9 -38.9 -

B A L A N C E S H E E T S T R U C T U R E AT 3 1 J A N U A R Y 2 0 1 4 ( D K K M )

Balance sheet

Assets Investment properties Investment properties under construction Other non-current assets Projects in progress or completed Receivables Cash, cash equivalents, escrow accounts, etc. Assets       Equity and liabilities Equity     Credit institutions Other liabilities Equity and liabilities               Solvency ratio      

Property development

Asset management

Discontinuing

411.7 24.2 164.8 2,986.0 162.8 90.1 3,839.6

24.2 3.8 1,110.9 61.3 34.8 1,235.0

308.5 3.4 1,625.7 84.7 16.5 2,038.8

103.2 249.4 15.1 367.7

1,553.7 1,989.6 296.3 3,839.6 40.5 %

689.1 442.6 103.3 1,235.0 55.8 %

746.6 1,179.1 113.1 2,038.8 36.6 %

217.1 113.7 36.9 367.7 59.0 %

31 Jan 2014

Unallocated 0.0 0.0 82.5 -83.9 -13.4 -97.3 14.0 -111.3

Unallocated

157.6 1.7 38.8 198.1  

M anagement C ommentary |

-99.1 254.2 43.0 198.1 -50.0 %

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 7 / 1 1 5


R E S U LT S F O R 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 4 / 1 5 The financial review below contains a description of the results

about 1,800 m² was completed in March 2013 and handed over

and balance sheet total at group level only.

to the investor in the first quarter of 2013/14. The second phase is fully let and tenanted by Plantagen (2012/13: 100 %).

ACCOUNTING POLICIES

The overall project has been sold to the German investment

The consolidated financial statements and parent financial

fund Commerz Real.

statements for 2013/14 for the Group and TK Development A/S, respectively, have been presented in compliance with the

Residential park, Bielany, Warsaw, Poland

International Financial Reporting Standards, as adopted by the

Construction of the first phase of 7,850 m², a total of 136

EU, and in accordance with Danish disclosure requirements for

units, was completed in January 2013, and the first units were

listed companies.

handed over to the buyers in February 2013. Agreements for the sale of 97 % of the units have now been concluded. The

The consolidated financial statements and parent financial

residential units have been sold as owner-occupied apartments

statements for 2013/14 have been presented in accordance

to private users.

with the financial reporting standards (IFRS/IAS) and IFRIC interpretations applicable for financial years beginning at 1 February

Shopping centre, Frýdek Místek, Czech Republic

2013.

In the autumn of 2013 TK Development sold an 80 % stake in a planned shopping centre project of 14,800 m2 in the Czech

The implementation of new and amended financial reporting

town of Frýdek Místek to a business partner. Following the sale,

standards and interpretations that have entered into force as

TK Development currently holds an ownership interest in the

of the 2013/14 financial year has not impacted recognition and

project of 10 %. TK Development will receive fee income for let-

measurement in the consolidated financial statements and

ting and managing the construction of the project and related

thus has no effect on the earnings per share and the diluted

services.

earnings per share. In addition, a few minor projects and a few plots of land have The accounting policies have been consistently applied com-

been sold, mainly in Q4 2013/14.

pared to the 2012/13 financial year. Gross margin In March 2013 the Board of Directors decided to change the

The gross margin for the 2013/14 financial year amounted to

internal reporting procedure. In this connection, the segment

DKK 163.9 million against DKK -139.5 million in 2012/13. The

definition has been revised, and segments are now divided into

gross margin derives from the operation of the Group’s com-

property development, asset management and discontinuing

pleted projects, the operation and value adjustment of the

activities. The comparative figures have been restated accord-

Group’s investment properties and profits on handed-over pro-

ingly.

jects.

The consolidated financial statements and the parent financial

The value adjustment of the Group’s investment properties

statements are presented in DKK, which is the presentation

amounted to DKK -14.9 million net, with DKK -9.5 million relat-

currency for the Group’s activities and the functional currency

ing to the German investment properties and DKK -5.4 million

of the Parent Company.

relating to remaining investment properties. The value adjustment amounted to DKK -37.8 million in 2012/13.

I N C O M E S TAT E M E N T Revenue

The gross margin includes impairment losses on projects of

The revenue for 2013/14 totalled DKK 407.0 million against

DKK 8.9 million and a reversed impairment loss of DKK 17.6 mil-

DKK 632.3 million in 2012/13.

lion on an individual project as a result of changes and improved project progress.

The revenue stems from the sale of projects, rental and fee income, etc.

Staff costs and other external expenses Staff costs and other external expenses amounted to DKK 91.0

Handed-over projects

million for 2013/14 against DKK 99.4 million in 2012/13, a re-

Retail park, Enebyängen, Danderyd, Sweden

duction of about 8.5 %.

In the municipality of Danderyd near Stockholm, TK Development handed over close to 13,000 m² – the first phase of a

Staff costs amounted to DKK 63.8 million against DKK 69.2 mil-

retail park – to an investor in 2010/11. The second phase of

lion the year before, a decline of about 7.8 %. The number of

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R E S U LT S F O R 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 4 / 1 5 employees totalled 90 at 31 January 2014 (31 January 2013:

erty development and asset management activities in Poland

112), including employees working at operational shopping

and the Czech Republic. Based on the impairment test made,

centres.

Management has found no indications of impairment of goodwill.

Other external expenses amounted to DKK 27.2 million, a 9.9 % reduction compared to 2012/13.

Investment properties and investment properties under construction

Overheads are being reduced by around 20 % relative to

TK Development’s investment properties consist of:

2012/13, with half of the reduction deriving from the discontinuation of activities in Germany, Finland and the Baltic States. Cost-reducing measures have been implemented and will

Futurum Hradec Králové, shopping centre, the Czech Republic (a 20 % interest)

achieve full impact in the course of 2014/15.

Galeria Tarnovia, shopping centre, Tarnów, Poland (a 30 % interest)

Development in costs

German investment properties.

180 150

The total value of the Group’s investment properties amount-

120

ed to DKK 411.7 million against DKK 479.4 million at 31 Janu-

90

ary 2013. The decline relates mainly to the sale of two of the

60

Group’s German investment properties.

30

DKK 103.2 million of the value at 31 January 2014 is attribut-

0

2008/09

2009/10

2010/11

Costs, DKKm

2011/12

2012/13

2013/14

2014/15E

Trend (Costs, DKKm)

able to the Group’s German investment properties, which are described in more detail in the section “Discontinuing activities” below.

Financing TK Development realized net financing expenses of DKK 102.4

The two remaining investment properties, totalling DKK 308.5

million against DKK 87.4 million in 2012/13. The increase is at-

million, fall under the asset management activities and are de-

tributable partly to higher financing costs on individual project

scribed in more detail under that heading. The valuation of the

credits and partly to the declining volume of projects on which

Czech investment property, the Futurum Hradec Králové shop-

interest is capitalized following the decision made by the Board

ping centre, made at 31 January 2013 was based on an ongoing

of Directors in March 2013 to sell some of the Group’s plots of

sales process. This valuation was upheld at 31 January 2014.

land. TK Development’s 30 % ownership interest in Galeria Tarnovia In connection with the capital increase implemented in Sep-

has been recognized at fair value, based on a discounted cash-

tember 2013, TK Development has obtained interest margin

flow model over a five-year period, with the terminal value be-

reductions on several major credits.

ing recognized in year five.

Corporate income tax

TK Development’s investment properties under construction

Tax on the results for the year amounts to DKK 14.0 million.

consist of the Group’s ownership interest in the Jelenia Góra

The tax amount has been negatively affected by a DKK 8.5 mil-

development project in Poland and amount to DKK 24.2 million.

lion impairment of the Group’s Danish tax asset following the

No value adjustment of this project was made at 31 January

adoption of new legislation to gradually reduce the corporate

2014, pending fulfilment of the conditions in the agreement

tax rate.

with the investor, and thus startup of the project.

BALANCE SHEET

Deferred tax assets

The Group’s balance sheet total amounted to DKK 3,839.6

Deferred tax assets were recorded at DKK 122.6 million in the

million, which is a decline of DKK 169.7 million compared to 31

balance sheet against DKK 127.0 million at 31 January 2013.

January 2013. The valuation of the tax assets is based on existing budgets Goodwill

and profit forecasts for a five-year period. For the first three

Goodwill amounted to DKK 33.3 million and is unchanged com-

years, budgets are based on an evaluation of specific projects

pared to 31 January 2013. Goodwill relates to the Group’s prop-

in the Group’s project portfolio. The valuation for the next two

M anagement C ommentary |

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R E S U LT S F O R 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 4 / 1 5 years is based on specific projects in the project portfolio with

Cash and cash equivalents

a longer time horizon than three years as well as various project

Cash and cash equivalents amounted to DKK 38.7 million

opportunities.

against DKK 31.2 million at 31 January 2013. The Group’s total cash resources came to DKK 90.8 million against DKK 70.1 mil-

Due to the substantial uncertainties attaching to these val-

lion at 31 January 2013.

uations, provisions have been made for the risk that projects are postponed or not implemented and the risk that project

Equity

profits fall below expectations. A change in the conditions and

The Group’s equity came to DKK 1,553.7 million against

assumptions for budgets and profit forecasts, including time

DKK 1,389.7 million at 31 January 2013.

estimates, could result in the value of the tax assets being considerably lower than that computed at 31 January 2014, which

The Group’s equity includes the net proceeds of DKK 218.9 mil-

could have an adverse effect on the Group’s results of opera-

lion of the capital increase implemented in September 2013.

tions and financial position.

Moreover, since 31 January 2013 equity has partly been affected by the results for the year and negative market-value adjust-

Project portfolio

ments after tax of DKK 6.5 million related to foreign subsidiar-

The total project portfolio came to DKK 2,986.0 million against

ies and hedging instruments.

DKK 3,030.9 million at 31 January 2013. The decline is a combined result of an increase in the Group’s portfolio of ongoing

The solvency ratio amounts to 40.5 %. Thus, the Group has ful-

projects and a decrease due to the sale of projects.

filled its strategic goal of achieving a solvency ratio of about 40 %.

Total prepayments based on forward-funding agreements

The Group’s total portfolio of completed projects and invest-

1,000

ment properties amounted to DKK 2,066 million at 31 January 2014 (31 January 2013: DKK 2,132 million), and the Group’s net interest-bearing debt amounted to DKK 1,891 million (31 January 2013: DKK 2,206 million).

500 0

31 Jan 2010

31 Jan 2011

31 Jan 2012

Equity, DKKm

40.5 %

1,500

34.7 %

tion of forward funding on new projects.

59 %

2,000

40.4 %

handover of projects to investors, combined with an accumula-

40.4 %

January 2013. The change is due to a decline resulting from the

Equity and solvency

36.4 %

amounted to DKK 59.1 million against DKK 369.6 million at 31

31 Jan 2013

31 Jan 2014

Solvency ratio

The ratio of cash-flow-generating properties to total net interest-bearing debt in the Group developed positively in the

Non-current liabilities

amount of DKK 249 million during the year under review.

The Group’s non-current liabilities represented DKK 143.0 million against DKK 141.0 million at 31 January 2013.

Cash-flow-generating properties and interest-bearing debt Current liabilities

2,500

The Group’s current liabilities represented DKK 2,142.9 million against DKK 2,478.6 million at 31 January 2013. The decline is

2,000

mainly attributable to the reduction of debt to credit institutions.

1,500

1,000

31 Jan 2010

31 Jan 2011

31 Jan 2012

31 Jan 2013

31 Jan 2014

Net interest-bearing debt, DKKm Investment properties and completed projects, DKKm

C A S H F L O W S TAT E M E N T The Group’s cash flows from operating activities were positive in the amount of DKK 55.6 million (2012/13: positive in the amount of DKK 45.6 million). This amount is mainly a combined

Receivables

result of the reduction in funds tied up in projects following pro-

Total receivables amounted to DKK 162.8 million, a decline of

ject sales/accumulation of forward funding, new project invest-

DKK 78.2 million from 31 January 2013 that relates mainly to

ments, interest and tax paid, as well as other operating items.

other receivables. The Group’s cash flows from investing activities were positive

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R E S U LT S F O R 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 4 / 1 5 The Group owns two minor plots of land in Finland and is working on the development of a retail park project on one of these plots, while attempting to dispose of the other plot through an outright sale.

in the amount of DKK 47.7 million (2012/13: positive in the amount of DKK 6.4 million), due mainly to the realized sale of two of the Group’s German investment properties. Cash flows from financing activities were negative in the amount of DKK 94.0 million (2012/13: negative in the amount of DKK 76.2 million). The negative cash flows are a combined

The portfolio of projects not initiated (plots of land) is to be reduced from about DKK 1.1 billion to about DKK 500 million. •

result of the proceeds generated by the capital increase implemented in September 2013, the reduction in payables to credit institutions and the financing raised for project investments. Overall cash flows for the year are positive in the amount of DKK 9.3 million against DKK -24.2 million in the year before.

E X E C U T I O N O F A N N O U N C E D S T R AT E G Y As described in company announcement no. 6/2013 and the Annual Report for 2012/13, in March 2013 Management re-

planned two-year period.

solved to revise the Group’s strategy and business model and to adjust its market focus.

The portfolio of projects not initiated is to be reduced through the sale of land and the initiation of projects. This process is progressing satisfactorily and according to plan for many of the projects. For a few, however, the process is taking longer than expected. One such project is the BROEN shopping centre in Esbjerg, Denmark, as described under the heading “Property development”. Based on the plans drawn up for each individual project, Management believes it will still be possible to implement the balance sheet adjustment within the

As announced previously, the goal is to execute these adjustments within a period of two years. In Management’s opinion, the strategy execution is generally progressing satisfactorily and as planned.

The balance sheet is to be adjusted, with a solvency ratio of about 40 %. • After implementing the capital increase in September 2013, the Group has met this strategic goal. The solvency ratio stood at 40.5 % at 31 January 2014, and solvency will be further strengthened through completion of the agreed sale of the Fashion Arena Outlet Center in April 2014.

The initiatives adopted and their current status are outlined below: The remaining activities will be limited to Denmark, Sweden, Poland and the Czech Republic. •

TK Development’s activities in Germany, Finland and the Baltic States are being discontinued, and the phase-out is progressing satisfactorily. ◦◦ The German activities have been reduced through the sale of a further two investment properties in 2013/14. Thus, the Group has two remaining investment properties, two minor plots of land and a share of a minor shopping centre. The branch office in Berlin has been closed down, and the employees have left their positions. ◦◦ In Lithuania, a conditional agreement has been concluded regarding the sale of the Group’s retail park project DomusPro in Vilnius, which will be handed over to the buyer upon completion of construction. In addition, the Group owns two plots of land in Latvia. No decision has yet been made regarding when to close down the branch office in Vilnius, because the Group is awaiting the completion of DomusPro Retail Park and clarification of the next steps in respect of the two remaining plots of land. ◦◦ In Helsinki, Finland, the branch office has been closed down, and the employees have left their positions.

Overheads are to be reduced by around 20 % relative to 2012/13, with half of the reduction deriving from the discontinuation of activities in Germany, Finland and the Baltic States. •

Cost-reducing measures have been implemented and will achieve full impact in the course of 2014/15.

Financing costs are to be normalized as a result of the initiatives implemented. •

In connection with the implementation of the capital increase, the Group has reached agreements for a reduction of the interest payable on several major credits, and is currently negotiating interest rate reductions for other credits.

FINANCIAL ISSUES Capital increase At the Company’s Annual General Meeting on 22 May 2013, the Board of Directors was authorized to carry out a capital increase with gross proceeds of about DKK 210-231 million. The capital increase was implemented in September 2013. For technical reasons, a capital reduction was implemented before the capital increase, whereby the denomination of all shares was written down from DKK 15 to DKK 1. The capital

M anagement C ommentary |

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R E S U LT S F O R 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 4 / 1 5 reduction amounted to DKK 588.9 million, which was allocated

million against DKK -333.8 million the year before.

to a special fund under equity. Subsequently, this special fund can only be used following a resolution to this effect at a Gen-

The results include income from investments in group enter-

eral Meeting.

prises in the amount of DKK -130.0 million against DKK -336.1 million the year before. In addition, earnings consist mainly of

The capital increase was implemented by issuing 56,087,620

net financing income from loans to subsidiaries. In 2013/14

new shares of nominally DKK 1 at a price of DKK 4.11, thus

TK Development made writedowns for impairment of invest-

yielding gross proceeds of DKK 230.5 million. The net proceeds

ments in group enterprises in the amount of DKK 180.0 million

after costs totalled DKK 218.9 million.

(2012/13: DKK 410 million). Accumulated impairment relating to investments in group enterprises amounted to DKK 1,050.2

A substantial portion of the proceeds from the capital increase

million at 31 January 2014 (31 January 2013: DKK 870.2 mil-

has been used to reduce the debt to credit institutions, primar-

lion).

ily in connection with the prolongation of credits, and to repay project finance loans of DKK 68.5 million granted by a number

At 31 January 2014, the balance sheet total amounted to DKK

of the Company’s major shareholders and members of Manage-

2,118.6 million, an increase of DKK 60.0 million over the year

ment.

before. Equity totalled DKK 2,001.3 million at 31 January 2014, an increase of DKK 132.7 million relative to 31 January 2013,

Other financial issues

due in part to the capital increase implemented in September

In February 2014 TK Development conditionally sold its 75 %

2013 and the negative results realized for the year.

stake in the Fashion Arena Outlet Center in Prague, the Czech Republic. The outlet centre has been sold to Meyer Bergman,

O U T L O O K FO R 2 0 1 4 / 1 5

and the selling price for the whole property amounts to EUR

Management anticipates positive results of about DKK 40

71.5 million. The final completion of the sale in April 2014 will

million before tax, excluding discontinuing activities, for the

substantially strengthen the Group’s financial platform.

2014/15 financial year.

Planned projects are initiated once the commercial conditions

The timing and phase-out of the discontinuing activities are

for starting construction have been met and partial or full fi-

subject to major uncertainty. The activities are in the process

nancing of the project has been procured, either from credit

of being discontinued, and the Group risks incurring further

institutions or from investors in the form of forward funding.

losses before the phase-out is complete. Therefore, the results

Project startup is also contingent on the provision of any equity

before tax of the discontinuing activities have not been includ-

financing by means of TK Development’s own financial resourc-

ed in the outlook for 2014/15.

es, with due consideration for the liquidity covenants adopted by Management.

The expectations mentioned in this Annual Report, including earnings expectations, are naturally subject to risks and un-

TK Development has a general agreement with the Group’s

certainties, which may result in deviations from the expected

main banker about operating and project credits. The agree-

results. Various factors may impact on expectations, as out-

ment has been extended until mid-2015.

lined in the section “Risk issues”, particularly the valuation of the Group’s project portfolio, as described under “Busi-

Since 31 January 2013 TK Development has entered into

ness risks” and “Risks related to the presentation of financial

agreements on the refinancing of project credits totalling DKK

statements”.

1.2 billion. The most important of the project credits refinanced has been prolonged until mid-2015.

SUBSEQUENT EVENTS In February 2014 TK Development conditionally sold its 75 %

At 31 January 2014 credit facilities of DKK 0.1 billion only were

stake in the Fashion Arena Outlet Center in Prague, the Czech

due to expire prior to 31 January 2015. The credits are expect-

Republic. The outlet centre has been sold to Meyer Bergman,

ed to be refinanced prior to maturity or to be repaid in connec-

and the selling price for the whole property amounts to EUR

tion with the sale of projects.

71.5 million. The sale is contingent on final financing, which is expected to fall into place in April 2014. This sale generates

PA R E N T C O M PA N Y, T K D E V E L O P M E N T A / S

a minor profit compared to the carrying amount, reduces the

In 2013/14, TK Development A/S, the Parent Company, realized

balance sheet total by about DKK 400 million and makes a sub-

results before tax of DKK -72.0 million against DKK -285.6 mil-

stantial contribution to the Group’s free cash resources.

lion in 2011/12. The results after tax amounted to DKK -86.8

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R E S U LT S F O R 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 4 / 1 5 In February 2014 TK Development also conditionally sold a

T R A N S A C T I O N S W I T H R E L AT E D PA R T I E S

6,000 m² office project in Aalborg, Denmark. The project is be-

In 2013/14 TK Development made interest payments on pro-

ing developed for the international Alfa Laval Group, which has

ject finance loans granted by a number of major shareholders,

entered into a long-term lease for the property. The project

including members of Management. In September 2013 TK De-

has been sold to PensionDanmark at a total price of DKK 126.1

velopment repaid these project finance loans out of the pro-

million. Construction began in March 2014, and following com-

ceeds from the capital increase implemented. Apart from this,

pletion the project will be handed over to the investor in June

no significant transactions were made with related parties; nor

2015.

did any unusual transactions with related parties occur during the financial year.

Other than those mentioned in the Management Commentary, no significant events of relevance to the Company have oc-

A D J U S T M E N T O F WA R R A N T S

curred after the reporting date.

As a consequence of the capital reduction and capital increase implemented in 2013, the Board of Directors resolved, in ac-

T H E B OA R D O F D I R ECTO RS

cordance with the Company’s Articles of Association, to adjust

The Board of Directors is currently composed of six members.

the number of warrants allocated to the Company’s Executive

After last year’s Annual General Meeting, a meeting was held

Board and other executive staff members as well as the sub-

for the purpose of electing officers, with Niels Roth being elect-

scription price for exercising the warrants. The adjustment was

ed as the Chairman, and Peter Thorsen being elected as the

made to ensure that the value of the warrants for the employ-

Deputy Chairman of the Board of Directors. At this year’s Annu-

ees will be maintained after implementation of the above-men-

al General Meeting, the Board of Directors will propose that the

tioned alterations to TK Development’s capital structure.

Board of Directors should remain composed of six members. All members of the Board of Directors are prepared to stand for

The adjustment means that the employees will be allotted a

re-election.

number of additional warrants, and that the subscription price upon exercise of the warrants will be reduced.

DIVIDENDS The Board of Directors recommends that the Annual General Meeting resolve not to distribute dividends for the 2013/14 financial year.

Shopping centre, Frýdek Místek, Czech Republic

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MARKET CONDITIONS In Management’s opinion, the Group’s markets are showing

competitive returns going forward. Investor interest is currently

signs of recovery.

changing in two areas: investors are showing interest in projects outside capital cities, and they are increasingly seeking to play

The Group’s markets are characterized by expectations for fi-

an active role in project development, thus assuming a higher

nancial growth and rising consumer confidence, although var-

risk against an anticipated higher return. These opportunities

ying in strength from country to country. The effect is not yet

fall in line with the Group’s business model, according to which

reflected in private consumption, which is also expected to rise

TK Development is interested in entering into partnerships re-

in the years to come.

garding development projects and completed properties in order to improve the allocation of the Company’s equity, diversify

In this phase of the business cycle, where economic growth is

risks and better utilize the Group’s development competencies.

on the rise, some uncertainty, although diminishing, persists in the property markets, and the decision-making process of

Location is the paramount consideration for retail property in-

tenants, investors and financing sources remains lengthy and

vestors, and in case of shopping centres, good performance,

carefully considered.

customer influx and revenue will also be key to the investor’s comfort with the investment risk. The required rates of return

TENANTS

for prime locations are relatively low compared to the period

In the retail property market, tenants continue to focus on loca-

before the onset of the economic and financial crisis. The re-

tion, and the rental level for prime-location projects is expected

turn requirement is somewhat higher for properties in more

to remain fairly stable in the period ahead. The retail sector is

secondary locations, although investors are currently moving

showing a good amount of interest in well-situated projects,

higher up on the risk curve in terms of the amount of risk they

which are particularly attractive to robust national and interna-

can and will assume on specific investments.

tional branded retailers wishing to expand. The interest shown by tenants in secondary locations is slack, and the rental level

Prime-location office properties with stable tenants are at-

for such locations is also expected to remain under pressure in

tracting great investor interest, and here the return require-

the period to come. In relation to shopping centres, the over-

ment is at the same level as before the onset of the economic

all picture is that chain stores are managing satisfactorily and

and financial crisis. Return requirements are a great deal higher

that local tenants are generally recording difficulties.

for properties in more secondary locations, although investors are also currently assessed to be willing to assume a slightly

The vacancy rate is increasing in the office property market,

higher risk than in the most recent period.

where the demand for primary and secondary locations also differs vastly. In the years to come the vacancy rate is expect-

Residential properties are likewise attracting great investor in-

ed to remain at a relatively high level, but with reasonable de-

terest. This interest is focused on locations in capitals, major

mand for fairly new premises with a practical layout. The rental

towns and cities, where substantial population growth is pres-

level for primary locations is expected to remain relatively sta-

ently being recorded. Coupled with lower return requirements

ble, but the level for secondary locations will most likely contin-

for prime locations than before the economic and financial

ue to be under pressure.

crisis, the higher rental level has rekindled the interest in developing residential projects, and the migration towards major

In the residential property sector there is a clear trend on all

towns and cities is expected to continue in future years as well.

markets: a vast number of people are moving to major towns

Population growth in major towns and cities combined with

and cities, thus pushing up demand for new dwellings. Depend-

confidence in the future development of the economy also

ing on local tradition in the individual market, this trend mani-

decisively impacts families’ interest in buying owner-occupied

fests itself as demand for either new owner-occupied dwellings

dwellings, and the price level has shown a respectable upward

or new rental dwellings or both. As far as rental housing is con-

trend in the past year. Thus, the market for developing housing

cerned, this has led to higher rental levels in the most recent

for sale to private owner-occupants has again become inter-

period, levels that are expected to be maintained in the period

esting.

to come.

  

 

FINANCING I N V E STO RS

Access to project financing, which has remained difficult for a

Investors are showing growing optimism and a good amount of

prolonged period, poses the greatest challenge to the property

interest in investing in real property. Many institutional inves-

sector. The Group is now experiencing an easing in finance re-

tors wish to increase the share of property investments in their

straints. The options for procuring financing vary from project

portfolios, being confident that real property will deliver stable

to project, depending on the type, location and status of the

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MARKET CONDITIONS properties concerned, including letting and sales. Generally,

The residential market in Denmark has regained its appeal.

lenders continue to require relatively high equity financing for

There is demand for both rental dwellings and owner-occupied

new projects, but there also appears to be some relaxation of

dwellings in major towns and cities, which are recording sub-

these requirements.

stantial population growth. The rental level for rental housing is currently relatively high and expected to remain stable in the

DENMARK

period ahead. Residential rental properties are also attracting

Economic growth is on the rise in Denmark. Consumer confi-

great investor interest, and the market for developing and sell-

dence is increasing, although consumers’ continuing caution

ing housing to private owner-occupants has become attractive

tends to dampen private consumption. There are expectations

once again. TK Development is currently working on several res-

for continued, albeit low, growth in the years ahead. In recent

idential projects and will continue to do so in the years to come.

years, the unemployment rate has been fairly stable and is expected to remain at an unchanged level in the years to come.

Denmark

The Danish market has been subject to uncertainty for a pro-

– startup in 1989

longed period, partly because of a weakened financial sector.

GDP (% yr./yr.)

The Group is now experiencing an easing in project finance re-

Private consumption

straints – also in the Danish market.

2012

2013

2014e

2015e

-0.4

0.4

1.3

1.7

-0.1

0.0

1.3

2.0

6.1

5.8

5.6

5.5

(% yr./yr.) Unemployment (%)

In Denmark TK Development focuses on the retail as well as the

(Source: Nordea, March 2014)

SWEDEN

office and residential segments.

The Swedish market continues to benefit from the strong Investors are showing a good amount of interest in the Group’s

Swedish economy and high purchasing power. The growth rate

retail, office and residential projects at attractive locations in

in 2013 surpassed the 2012 rate, and private consumption

major towns and cities. At the same time, investor interest in

is expected to continue expanding and rising in the years to

secondary towns is waning. Location and quality are the two

come. Unemployment is anticipated to remain at an unchanged

key determinants of investment decisions. The Group can ob-

level in the years ahead.

tain satisfactory selling prices for prime-location properties where the risk of vacancies is relatively limited, while selling

As in previous years, TK Development will focus on the retail

prices for properties in secondary locations are under pressure.

segment in Sweden. Retail chains are interested in attractive

Foreign investors are showing mounting interest in investing in

rental premises, although tenants’ decision-making processes

properties in major towns and cities, with Copenhagen being

are also protracted in the Swedish market. Retail chains are still

the preferred location. Institutional investors and other profes-

expanding, and several new foreign chains have entered the

sional investors need options for placing their funds. This paves

Swedish market.

the way for setting up new project partnerships with these investors with a view to cooperation on project execution.

Project location continues to be the paramount consideration for tenants, and the trend is clearly for retail chains to expand

Particularly in the retail letting market, tenants also focus on

in cities, particularly Stockholm and Gothenburg, but also in

the right location. Both supermarket chains and retail chains

other major towns in Sweden. Stockholm continues to record

are still willing to expand if the location is right, although their

high annual population growth. This results in a demand for new

decision-making processes are protracted. The rental level for

retail establishments and retail store extensions, as concerns

primary locations is expected to be fairly stable, whereas the

both retail parks and shopping centres.

rental level for secondary locations is under pressure. Both local and international investors are showing mounting inActivity has revived in the office market, with projects in major

terest, particularly in prime locations, and the selling prices for

towns and cities attracting greater interest. Projects in prime

such projects are on the rise.

locations, such as those in the Group’s waterfront areas, appeal to tenants and investors alike, and the Group expects to create

Sweden is considered to be the most transparent and inter-

interesting office projects in the years to come. Examples of

esting market in the Nordic region, and given the continued

such locations are the Group’s sites at Amerika Plads in Copen-

retail expansion, the Swedish market is highly interesting for

hagen and Stuhrs Brygge in Aalborg, where TK Development

TK Development. TK Development intends to focus on develop-

conditionally sold a 6,000 m² office building to PensionDanmark

ing prime-location superstores and shopping centres in major

in February 2014, with the premises being let to the interna-

towns and cities, with Stockholm and Gothenburg being the

tional Alfa Laval Group.

primary areas of interest.

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MARKET CONDITIONS Sweden – startup in 1997

Poland 2012

2013

2014e

2015e

0.9

1.5

2.8

3.5

GDP (% yr./yr.) Private consumption

- startup in 1995 GDP (% yr./yr.)

2012

2013

2014e

2015e

1.9

1.6

3.6

4.2

Private consumption

(% yr./yr.)

1.6

2.0

2.6

2.2

(% yr./yr.)

Unemployment (%)

8.0

8.0

7.9

7.6

Unemployment (%)

1.2

0.8

2.7

3.6

13.4

13.4

12.6

11.8

(Source: Nordea, March 2014)

(Source: Nordea, March 2014)

POLAND

CZECH REPUBLIC

The Polish economy developed positively in 2013, and this pos-

The economic situation in the Czech Republic was marked by

itive trend is expected to continue for the years to come. Thus,

negative growth and falling private consumption in 2013. Low

moderate growth is anticipated in the years ahead, along with

growth and a moderate increase in private consumption are ex-

rising private consumption and decreasing unemployment.

pected for the years to come. Unemployment is expected to remain at an unchanged level in the years ahead.

In Poland TK Development focuses on both the retail segment and the residential segment.

TK Development focuses on the retail segment in the Czech Republic. In Management’s opinion, the next few years will see

Strong national and international retail chains still wish to ex-

a demand for outlet centres as well as for converting and revi-

pand, although at a more controlled pace than in the past, with

talizing existing centres. Supermarket chains are also expected

location being the key focus as in the Group’s other markets.

to continue expanding.

Generally, prime-location retail premises in major towns and cities are in high demand, while tenants want improvements to

Investors are showing renewed interest in real property invest-

the terms of secondary-location leases or even want to vacate

ments. International funds focus on major projects, while local

their premises in such locations.

investors are showing interest in minor projects.

As the market for shopping centres matures, new development

Czech Republic

options are expected to arise, also making projects to extend

– startup in 1997

and/or revitalize existing centres attractive.

GDP (% yr./yr.)

2012

2013

2014e

2015e

-1.0

-1.2

1.8

2.2

-2.1

-0.4

0.4

2.0

7.0

7.0

6.8

6.6

Private consumption

Investors focus chiefly on major towns and cities, primarily Warsaw, and continue to show reasonable interest in prime-location projects or in projects with development potential in the

(% yr./yr.) Unemployment (%)

(Source: The European Commission, European Economic Forecasts, Winter 2014)

major towns and cities of Poland. International investors dominate the Polish market. In the residential segment in Warsaw in Poland, there is good demand for housing, and during the year under review the Group regularly concluded agreements for the sale of apartments in its completed residential project in Bielany, with only four apartments remaining to be sold. The volume of projects initiated dropped for a period, which has stabilized the supply of housing for sale. The total volume of property sales currently exceeds the supply of new housing, which has led to slightly increasing prices for attractive housing. In Management’s opinion, it is once again attractive to develop residential projects in Poland, primarily in the Warsaw area, and the pre-construction sale of the second phase of the Group’s residential project in Bielany, Warsaw, was initiated in December 2013 and is proceeding better than anticipated.

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BUSINESS CONCEPT AND KNOWLEDGE RESOURCES The Group’s mission

Architects

Engineers

Option/purchase of site

The overall mission of TK Development is to create added value by velopment and services environments, and specializes in being the

Finished project

Investors

developing real property. The Group operates in the property deTenant requirements

Tenants

creative and result-oriented link between tenants and investors. Investor requirements

Project management Letting Sales

Fundamental values Public authorities

TK Development bases its operations on a number of fundamental

Contractors Subcontractors

values that are the Group’s hallmarks. They define the framework for the actions of TK Development’s employees and the values that TK Development wants to signal.

In collaboration with tenants and investors, TK Development

Good business sense

plans and arranges the construction of new buildings, and the

Being result oriented

Innovation and creativity

expansion and conversion of real property based on tenant

Being trustworthy

Keeping it simple

Commitment

needs and investor requirements. The Group develops the projects, which involves letting the premises, managing construction and concluding contracts with construction companies and subcontractors for the execution of the building works.

Strategy for business area – Property development Developing projects from the conceptual phase through to project completion, based on one of several models: •

Sold projects (forward funding/forward purchase).

Projects with partners.

On TK Development’s own books based on a high degree of

In terms of segments, the Group focuses on the development of shopping centres, superstores, office buildings and corporate headquarters and related mixed and multifunctional projects as well as housing in Poland and Denmark.

confidence in the letting and sales potential.

In Denmark, TK Development’s focus in the years to come will

Services for third parties.

be on the retail segment as well as the office and residential segments, based on the wish to better exploit the opportuni-

Strategy for business area – Asset management Owning, operating, maturing and optimizing completed projects for a medium-long operating period that matches the potential for adding value.

ties for developing real property in segments other than the retail segment. Particularly in its foreign markets, the Group will continue basing its activities on the retail segment as the primary segment.

BUSINESS CONCEPT

The Group’s primary business area is the development of real

Shopping centres

property, termed property development, and the Group’s sec-

Stores/superstores

ondary business area is asset management.

Shopping-street properties

DK

SE

PL

CZ

Offices

P RO P E RT Y D E V E LO PM E N T The Group has a large, strong network forged on the basis of long-standing, close business relationships with tenants and

Mixed Residential

investors, and regularly enters into contracts with these business partners. The Group is predominantly a knowledge-based

The Group’s primary focus is real property development, which

service provider and has specialized in being the productive and

may be based on several models:

creative liaison between tenants, investors, architects, construction companies and other business partners. TK Development wants to be the preferred property development partner in the retail segment as well as an attractive business partner within the development of office and residential property projects, with the interaction with customers, tenants and investors being based on know-how and mutual respect.

For the Group’s own account, with or without advance project sales, where the Group can either finance the projects on its own books or procure staged financing from the buyer in step with project completion, also termed forward funding. Together with business partners during the construction period. Services for third parties.

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BUSINESS CONCEPT AND KNOWLEDGE RESOURCES companies.

Customer relations The Group’s principal customers consist of tenants and investors. TK Development continuously strives to create new,

Project and risk management

improved services to make the Group an even more attractive

New projects are initiated based on a careful assessment of

business partner.

their earnings potential viewed in light of project complexity, completion time, tied-up capital, including balance sheet and

Tenants

cash flow impact, and other use of resources. The assessment

Over the years, TK Development has built close partnership re-

includes deliberations about project location, regulatory mat-

lations with a large number of companies, including in particular

ters, pre-letting, construction matters and market conditions.

retail chains looking to set up new stores. Limiting risks

The Group has gained in-depth knowledge of tenant needs and

A number of management tools contribute to ensuring a satis-

requirements. From this platform, TK Development can develop

factory project process. Construction is typically not initiated

retail solutions that meet tenants’ requirements for design and

until satisfactory pre-construction letting has been achieved

location. In addition, the numerous close relations with a wide

for at least 60 % of the project. If the project is sold, construc-

range of retail chains mean that the Group is always able to put

tion will not be initiated until the Group anticipates being able

together an attractive retail mix that boosts individual tenants’

to meet such investor requirements as would allow final com-

revenue.

pletion of the project sale. Meeting these requirements typically falls within the Group’s sphere of competencies.

Over the years TK Development has developed and executed a number of office projects, primarily corporate headquarters.

Forward funding

Thus the Group has wide experience in developing attractive

TK Development aims to secure the sale of projects at an early

office projects that match the requirements of tenants and in-

stage, and the Group considers it important to expand investor

vestors alike.

commitment by having the investors fund the project during the construction process (forward funding) where possible. For-

Investors

ward-funding agreements with investors are usually concluded

TK Development has also built close relations with a number of

before construction startup, thus ensuring that the funds tied

Danish and foreign property investors.

up in the Group’s projects are kept at an absolute minimum, which also reduces the balance sheet total and minimizes the

The Group has in-depth knowledge of investor needs and re-

risk.

quirements. Among other things, TK Development offers standardized, international contracts and a smooth process from

Green building

initiation to delivery.

The Group is experiencing increasing demand for green buildings from both tenants and investors. TK Development offers

Over the years, the Group has sold projects to a range of Danish

to construct green buildings as and when requested by the

and foreign banks, investment funds, pension funds and private

Group’s customers. Several of the Group’s projects have been

Funds tied up (DKK)

The diagram below illustrates the Group’s funds tied up in projects, in scenarios both with and without forward funding.

Project implementation without forward funding Project implementation based on forward funding

Construction period

Handing-over

Development phase

Construction start

Site purchase

Project progress

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BUSINESS CONCEPT AND KNOWLEDGE RESOURCES constructed as green buildings and certified according to the

co-investors that wish to participate in both the construction

BREEAM standards or equivalent.

and maturing phases. By entering into joint ventures, the Group will achieve more effective placement of its equity financing

Environment

of projects under development, better risk spread, and more

TK Development is keenly aware that the public eye is sharply

efficient use of the Group’s staff resources and competencies.

focused on environmental optimization throughout the construction process. Public concerns include the reduction of CO2

The Group owns a few investment properties and a number of

emissions and the sustainability of building projects.

completed projects. These properties and projects fall into the Group’s asset management segment.

When the Group acquires sites for its projects, the land is examined to determine any contamination. If a plot of land is con-

KNOWLEDGE RESOURCES

taminated, the Group will clean up the land for its intended use

TK Development develops projects of a high standard. Together

before starting construction or refrain from buying the relevant

with the employees’ knowledge and qualifications, the Group’s

plot.

close relations with tenants and investors play an essential role in minimizing the risks of individual projects. This combination

When developing projects, the Group strives to achieve an op-

is the prerequisite for developing projects that generate satis-

timum balance between environmental and social concerns

faction for tenants and investors alike, as well as satisfactory

while also generating revenue for the Group. The choice of ma-

earnings for the Group on individual projects.

terials, design, energy consumption and environmental impact all form part of such considerations.

Employees The employees’ knowledge and competencies are essential to

The Group aims to complete projects without causing unneces-

TK Development’s value creation, and TK Development contin-

sary environmental impact. TK Development cooperates with

uously strives to secure the best match between employees’

tenants and investors to establish appropriate environmental

competencies and the specific job requirements of the proper-

solutions when developing and implementing new projects. For

ty development business. The Group’s employees work within

instance, the Group seeks to create finished projects with low

individual, specialized areas: project developers, letting manag-

energy consumption and a good indoor climate that will provide

ers, legal and financial project controllers, and engineers.

a comfortable working environment for future employees. Education

ASSET MANAGEMENT

To raise the employees’ level of expertise to an even higher

Asset management is TK Development’s secondary business

level and thus reinforce TK Development’s value creation, the

area. This business area consists of owning, operating, running

Group has continuous focus on training and education. The aim

in, maturing and optimizing completed projects for a medi-

is to strengthen the Group in the development phases that are

um-long operating period whose length matches the potential

critical to maximizing the value of each individual project.

for being able to add value. In addition to improving the Group’s knowledge resources, edIn relation to new projects, the Group can choose to initiate pro-

ucation helps cement TK Development’s position as an attrac-

jects with a view to construction and subsequent startup and

tive workplace for both existing and future employees.

maturing over a short span of years. Such projects will typically be classified as investment properties.

Project organization TK Development believes it is important to give employees an

This is a natural consequence of the current risk picture, includ-

inspiring workplace where individual projects afford them the

ing in particular investor behaviour, which means that the de-

opportunity to accumulate knowledge and experience that can

velopment process for some projects is not optimally finalized

be passed on throughout the organization and thus continu-

until they have been matured and run in. The portfolio of invest-

ously improve the Group’s collective know-how and skills.

ment properties generated by this element will ensure both a positive operating margin and a positive cash flow, viewed in

In order to ensure a high degree of quality in all services provid-

isolation. After the maturing process, the project returns can

ed by the Group to tenants and investors - as well as efficient

be even better documented and higher prices obtained.

progress and quick decisions in the development of individual projects - the Group’s staff is anchored in a matrix organization

Investment properties can be developed either for the Group’s

as follows:

own account or in project development joint ventures with

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BUSINESS CONCEPT AND KNOWLEDGE RESOURCES

Project groups

Interdisciplinary competencies

1

2

3

Breakdown of the Group’s employees 4

At 31 January 2014 the Group employed a total of 90 persons, broken down as follows:

Sale and rental Controlling

Other countries 2

Project management/ Construction management

Czech Republic 9

Finance and accounting

Poland 24

Group/services 10

The matrix organization means that all the Group’s peak com-

Shopping centre management 14

petencies, covering the progress of a project from blueprint to

Denmark 17 Sweden 14

completion, exist in the project group that carries through the individual project from A to Z. Organization, management and employees

Group functions and related services include management, ac-

TK Development’s organization and management structure are

counting and finance, and other staff functions.

based on branch offices managed by divisional managers (senior vice presidents). The Group’s international management team consists of the above-mentioned group of persons, as well as functional managers in the individual countries. The Group’s management structure (excluding discontinuing activities) is shown below:

Frede Clausen President and CEO Robert Andersen Executive Vice President Accounting, Finances and Controlling

Denmark

Sweden

Poland

Czech Republic

Erik Godtfredsen

Dan Fæster

Zygmunt Chyla

Mogens Pedersen

Organizational focus on segments To underpin the segmentation chosen, the business activities are organized so as to best ensure management focus on both property development and asset management activities. The members of the Executive Board attempt as far as possible to focus primarily on their own individual business areas, while taking into account that the Executive Board members are jointly responsible for the day-to-day management of the overall business activities. TK Development has several years’ experience in asset management and increasingly focuses on this area, including utilization of the Group’s competencies and employee know-how to ensure continued progress in maturing the completed projects.

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PROPERTY DEVELOPMENT The Group’s primary business area is the development of real

m². The project portfolio had a total development potential of

property, termed property development. The Group’s primary

452,000 m² at 31 January 2013.

segments are the retail, office and residential segments, with variations from country to country.

The development in the Group’s project portfolio is outlined below:

Strategy for business area – Property development Developing projects from the conceptual phase through to project

DKKm

31 Jan 2012

31 Jan 2013

31 Jan 2014

completion, based on one of several models: •

Sold projects (forward funding/forward purchase)

Sold

Projects with partners

Completed

0

15

2

On TK Development’s own books based on a high degree of

In progress

17

17

10

confidence in the letting and sales potential

Not initiated

10

6

0

Services for third parties.

Total

27

38

12

Remaining

Property development Countries:

Denmark, Sweden, Poland and the Czech Republic

Revenue:

2013/14: DKK 258.9 million (2012/13: DKK 183.4 million)

Gross profit/loss:

2013/14: DKK 68.7 million (2012/13: DKK -81.8 million)

Balance sheet total:

31 Jan 2014: DKK 1,235.0 million (31 Jan 2013): DKK 1,284.5 million)

Completed

0

38

6

In progress

286

198

206

Not initiated

938

901

887

Total

1,224

1,137

1,099

Net project portfolio

1,251

1,175

1,111

293

370

59

1,544

1,545

1,170

91.6 %

90.7 %

83.1 %

Forward funding Gross project portfolio Forward funding in % of gross carrying amount

In its property development segment, TK Development focuses

of sold projects

on executing existing projects in the portfolio, as well as on se-

Table 1

curing robust pre-construction letting or sales. In addition, the Group continuously works on new project opportunities.

By means of forward funding, the Group reduces the funds tied up in the portfolio of sold projects. The change in forward fund-

Planned projects are initiated once the commercial conditions

ing since 31 January 2013 is due to a decline resulting from the

for starting construction have been met and partial or full fi-

handover of projects to investors, combined with an accumula-

nancing of the project has been procured, either from credit

tion of forward funding on new projects.

institutions or from investors in the form of forward funding. Project startup is also contingent on the provision of any equity

The development potential of the Group’s project portfolio is

financing by means of TK Development’s own financial resourc-

shown below (in square metres):

es, with due consideration for the liquidity covenants adopted by Management.

m² (‘000)

The gross margin for development activities amounted to DKK

Sold

68.7 million in 2013/14 against DKK -81.8 million in 2012/13. The Group’s retail projects on which construction is already ongoing or about to start are still attracting a good amount of in-

31 Jan 2012

31 Jan 2013

31 Jan 2014

Completed

0

4

0

In progress

7

3

21

Not initiated

29

0

0

Total

36

7

21

terest from tenants. During the period under review, the Group

Remaining

also concluded lease agreements for several of these projects.

Completed

0

3

0

Moreover, agreements regarding the sale of several minor retail

In progress

39

20

21

projects were concluded in the course of the year. The earnings from these sales are expected to be recognized in the 2014/15 financial year upon handover of the projects to the investors. The development potential of the project portfolio represented 405,000 m² at 31 January 2014, of which sold projects

Not initiated

560

422

363

Total

599

445

384

Total project portfolio

635

452

405

50

37

36

Number of projects Table 2

accounted for 21,000 m² and remaining projects for 384,000

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PROPERTY DEVELOPMENT Geographical segmentation of the development potential in square metres:

Denmark Czech Republic Poland

Sweden

PROJECT OUTLINE The outline below lists the key projects in the portfolio in the property development segment. TKD’s ownerProject

TKD’s

Construction start/

ship share of ownership

expected construc-

Opening/

tion start

expected opening

2004

Continuously

-

-

October 2013

Autumn 2014

August 2013

Autumn 2014

City/town

Country Segment

area (m2)

interest

Amerika Plads, underground car park

Copenhagen

DK

Car park

16,000

50 %

Vasevej

Birkerød

DK

Mixed

3,400

100 %

Ahlgade

Holbæk

DK

Mixed

1,550

50 %

Barkarby Gate, retail park

Stockholm

SE

Retail

20,000

100 %

Shopping centre, Frýdek Místek

Frýdek Místek

CZ

Retail

1,480

10 %

Autumn 2013

End-2014

BROEN, shopping centre

Esbjerg

DK

Retail

29,800

100 %

Autumn 2014

Autumn 2016

Østre Teglgade

Copenhagen

DK

Office/residential

32,700

100 %

Continuously

Continuously

Amerika Plads, lot C

Copenhagen

DK

Mixed

6,500

50 %

2014

2016

Amerika Plads, lot A

Copenhagen

DK

Office

5,900

50 %

2014

2016

Aarhus South, phase II

Aarhus

DK

Retail

2,800

100 %

2014

2015

Ejby Industrivej

Copenhagen

DK

Office

12,900

100 %

-

-

Østre Havn/Stuhrs Brygge

Aalborg

DK

Mixed

36,000

Continuously

Continuously

Retail park, Marsvej

Randers

DK

Retail

4,700

100 %

Mid-2014

2015

Development of town centre

Køge

DK

Mixed

26,500

100 %

2014

Continuously

The Kulan commercial district

Gothenburg

SE

Mixed

45,000

100 %

2014

2016

Retail park, Söderhamn

Söderhamn

SE

Retail

10,000

100 %

2014

2015

Retail park, Gävle, phase II

Gävle

SE

Retail

15,800

100 %

Continuously

Continuously

Shopping centre, Jelenia Góra

Jelenia Góra

PL

Retail

7,320

30 %

Spring 2014

End-2015

In progress

Not initiated

Residential park, Bielany,

1)

1)

50 %

Residential/

remaining phases

Warsaw

PL

services

48,350

100 %

Continuously

Continuously

Bytom Retail Park

Bytom

PL

Retail

25,800

100 %

Continuously

Continuously

Most Retail Park, phase II

Most

CZ

Retail

2,000

100 %

-

-

Property development, total floor space 1)

approx.

355,000

Share of profit on development amounts to 70 %.

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PROPERTY DEVELOPMENT PROJECTS IN PROGRESS

Intersport, H&M, NewYorker and Euronics. Construction started

Amerika Plads, underground car park, Copenhagen, Denmark

in autumn 2013, and the opening is scheduled for the end of

Kommanditaktieselskabet Danlink Udvikling (DLU), which is

2014.

owned 50/50 by Udviklingsselskabet By & Havn I/S and TK Development, owns three projects at Amerika Plads: lot A, lot C

P R O J E C T S N O T I N I T I AT E D

and an underground car park. Part of the underground car park

BROEN, shopping centre, Esbjerg, Denmark

in the Amerika Plads area has been built. The Group expects to

In Esbjerg TK Development owns a plot earmarked for a shop-

sell the total parking facility upon final completion. For a de-

ping centre project, BROEN, of about 29,800 m², to be built at

scription of Amerika Plads, lots A and C, please see the section

Esbjerg Station. The shopping centre is expected to comprise

“Projects not initiated” below.

about 70 stores. The process of obtaining permits for the project has been delayed because the project must undergo a

Vasevej, Birkerød, Denmark

validation and approval procedure to ensure safe railway oper-

TK Development owns a property of almost 3,000 m² at Va-

ations, etc. The validation procedure is expected to continue

sevej in Birkerød, rented by SuperBest. The project consists of

until after the end of the summer, and therefore construction

a refurbishment of the existing property and a minor extension

startup is anticipated in autumn 2014. Discussions are being

comprising a few stores and dwellings.

held with PFA regarding the sale of a share of the project at its current stage. Thus, if a final agreement is reached, PFA will

Ahlgade, Holbæk, Denmark

take part in the value generation at an early project develop-

TK Development owns 50 % of the shares in a company that

ment stage. This falls in line with the Group’s business model,

is developing an approx. 3,100 m² residential and retail project

whose aims include entering into partnerships regarding major

in Holbæk. The residential section has a floor space of about

development projects.

1,900 m² and has been sold and handed over to a housing association. The commercial section has premises of about 1,200

Østre Teglgade, Copenhagen, Denmark

m². Following the conclusion of a lease for a large portion of this

TK Development owns an attractively located project area at

area in Q4 2013/14, all premises are now fully let. Construction

Teglholmen of about 32,700 m². Current plans involve estab-

started in October 2013, and the opening is scheduled for au-

lishing a church and possibly a residential care facility in part of

tumn 2014.

the project area. Discussions are also being held with an interested party regarding the construction of residential property

Barkarby Gate, retail park, Stockholm, Sweden

in the area.

In Barkarby in the northwestern part of Stockholm, TK Development is developing a 20,000 m² retail park expected to consist

Amerika Plads, lots A and C, Copenhagen, Denmark

of 12 to 14 units, of which 9 to 10 will be retail stores. The

Kommanditaktieselskabet Danlink Udvikling (DLU), which is

current occupancy rate is 94 % (Q3 2013/14: 82 %), and lease

owned 50/50 by Udviklingsselskabet By & Havn I/S and TK De-

agreements have been concluded with various major tenants,

velopment, owns three projects at Amerika Plads: lot A, lot C

including XXL (sports store), Clas Ohlson, Intersport, Lager

and an underground car park. A building complex with about

157, Grizzly, Kjell & Co., Burger King, Pizza Hut and the fitness

11,800 m² of office space is to be built on lot A, and a building

chain Nordic Wellness. In June 2013 the project was sold to a

complex with about 13,000 m² of commercial and residential

fund managed by Cordea Savills. The sale is based on forward

space on lot C. Construction will take place as space is let or

funding. Construction started in August 2013, and the open-

pre-sold.

ing is scheduled for autumn 2014. Earnings from the sale will be recognized in 2014/15 upon handover of the project to the

Østre Havn/Stuhrs Brygge, Aalborg, Denmark

investor.

In the area previously occupied by Aalborg Shipyard at Stuhrs Brygge, TK Development is developing a business and residen-

Shopping centre, Frýdek Místek, Czech Republic

tial park of about 72,000 m² through a company jointly owned

In the autumn of 2013 TK Development sold an 80 % stake in

with Frederikshavn Maritime Erhvervspark on a 50/50 basis.

a planned shopping centre project in the Czech town of Frýdek

The area was acquired by the jointly owned company, with pay-

Místek to a business partner. Following the sale, TK Develop-

ment being effected for the development rights acquired in

ment currently holds an ownership interest in the project of 10

step with the development and execution of specific projects.

%. The shopping centre will consist of about 60 retail stores.

For one thing a project is currently being developed for the In-

TK Development will receive fee income for letting and man-

ternational Alfa Laval Group; see below. In addition, work on a

aging the construction of the project and related services. The

new local plan comprising about 31,000 m² of housing, offices

current occupancy rate is 84 % (Q3 2013/14: 82 %), and lease

and parking facilities has been launched.

agreements have been concluded with such tenants as Billa,

M anagement C ommentary |

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PROPERTY DEVELOPMENT Alfa Laval, Østre Havn/Stuhrs Brygge, Aalborg, Denmark

housing. TK Development will be in charge of developing the

In February 2014, after the reporting date, TK Development

45,000 m² for a shopping centre, services and commercial fa-

conditionally sold a 6,000 m² office project in Aalborg. The pro-

cilities, while JM AB will have responsibility for the 30,000 m²

ject is being developed for the international Alfa Laval Group,

of housing. The local plan is currently being prepared. The pro-

which has entered into a long-term lease for the property. The

ject is being discussed with potential tenants, and a number of

project has been sold to PensionDanmark at a total price of

lease agreements have been concluded.

DKK 126.1 million. Construction began in March 2014, and following completion the project will be handed over to the inves-

Shopping centre, Jelenia Góra, Poland

tor in June 2015. Earnings from the sale will be recognized in

TK Development has bought a plot of land in Jelenia Góra and

2015/16 upon handover of the project to the investor.

has an option on additional land for the development of a shopping centre of about 24,400 m². The project will comprise

Retail park, Marsvej, Randers, Denmark

a supermarket of about 2,200 m² and retail, restaurant and

In October 2010 the Group took over a plot of land on Marsvej in

service premises totalling about 22,200 m². A building permit

Randers, intended for a retail development project of 4,700 m².

has been granted for the project. Letting is ongoing, and lease

Letting has been initiated, and there is a satisfactory level of

agreements for about 51 % of the floor space have so far been

interest among potential tenants. A lease agreement has been

signed. The tenants include Intermarché, H&M, Stradivarius,

concluded with jem & fix, among others.

Reserved, Carry, CCC and Bershka. Construction is expected to commence in spring 2014, and the opening is scheduled for the

Development of town centre, Køge, Denmark

end of 2015. In December 2012 70 % of the project was handed

TK Development is working on a potential project in Køge. In

over to Heitman, and in this connection the Group’s 30 % own-

February 2012 Køge Kyst and TK Development entered into a

ership interest was classified under “Investment properties un-

conditional agreement under which TK Development is to buy

der construction”. TK Development will receive fee income from

land for constructing a project of about 26,500 m². The project,

the jointly owned company established for developing, letting

to be built immediately next to Køge Station and the town cen-

and managing the construction of the project.

tre shopping area, comprises retail stores of about 11,500 m², public service facilities of about 8,800 m² including a town hall

Residential park, Bielany, Warsaw, Poland

and rehabilitation centre, residential premises of about 3,300

TK Development owns a tract of land in Warsaw allowing for

m² and office premises/fitness facilities of about 2,900 m² as

the construction of residential units of about 56,200 m² in all;

well as an underground car park of about 12,000 m². The local

see above under “Completed projects”. Construction of the first

plan was adopted in June 2013. TK Development expects to

phase of 7,850 m² has been completed. The plan is to initiate

enter into an agreement with Køge Municipality regarding the

construction of the remaining approx. 48,350 m² in three suc-

municipality’s takeover of both town hall and rehabilitation

cessive phases in continuation of the completion of the first

centre. Letting of the retail premises has started, and potential

phase and once pre-construction sales have reached a satis-

tenants are showing a good amount of interest in the project.

factory level. A building permit for the second project phase, consisting of about 300 residential units and service facilities,

The plan is to build the project in phases. The first phase will

has been granted. The pre-construction sale, which started

comprise about 2,400 m² of retail premises, of which about

in December 2013, is progressing better than expected, with

2,000 m² has been let to a supermarket operator, an approx.

pre-reservations having been received for 29 % of the units.

5,500 m² rehabilitation centre to the municipality and about

Construction is expected to begin in late spring 2014, and

5,500 m² of the approx. 11,000 m² projected underground car

handover to the buyers is slated for spring 2016. The residen-

park to EuroPark. Construction is expected to start in 2014

tial units will be sold as owner-occupied apartments to private

once the ongoing tender procedure for the award of construc-

users.

tion contracts has been completed. Bytom Retail Park, Bytom, Poland The Kulan commercial district, shopping centre and service/

TK Development intends to develop a retail park with total leas-

commercial space, Gothenburg, Sweden

able space of about 25,800 m² on its site at the Plejada shop-

TK Development and the Swedish housing developer JM AB

ping centre in Bytom, which is centrally located in the Katowice

have entered into a cooperation agreement with SKF Sver-

region. Construction of the project will be phased in step with

ige AB to develop SKF’s former factory area in the old part of

letting. Letting efforts are ongoing, and construction will start

Gothenburg. The contemplated project comprises a total floor

as space is let.

space of about 75,000 m²: 30,000 m² for a shopping centre, 15,000 m² for services/commercial use and 30,000 m² for

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ASSET MANAGEMENT The Group’s secondary business area is asset management,

Although these properties have been classified under asset

which consists of owning, operating, running in, maturing and

management, TK Development is working towards selling them

optimizing completed projects for a medium-long operating pe-

in whole or in part. In February 2014 the Group entered into a

riod whose length matches the potential for adding value.

conditional agreement for the sale of its 75 % stake in the Fashion Arena Outlet Center in Prague, the Czech Republic. The sale is expected to be completed in April 2014.

Strategy for business area – Asset management Owning, operating, maturing and optimizing completed projects for a medium-long operating period that matches the potential for adding value.

The current focus is on maturing the individual properties to the extent possible and selling them once the Group no lon-

Asset management

ger expects to be able to add further significant value to the

Countries:

Denmark, Sweden, Poland and the Czech Republic

Revenue:

2013/14: DKK 137.7 million (2012/13: DKK 434.5 million)

Gross profit/loss:

2013/14: DKK 112.6 million

projects. The total portfolio of properties under asset management amounted to DKK 1,934.2 million at 31 January 2014 (31 Janu-

(2012/13: DKK -21.0 million)

ary 2013: DKK 1,932.1 million), of which investment properties

31 Jan 2014: DKK 2,038.8 million

accounted for DKK 308.5 million (31 January 2013: DKK 312.1

(31 Jan 2013): DKK 2,100.7 million)

million). The operation of these properties, which largely con-

31 Jan 2014: 14

sist of shopping centres, is generally proceeding satisfactorily.

(31 Jan 2013: 12)

The annual net rent from the current leases corresponds to a

Balance sheet total: Number of employees at centres:

return on the carrying amount of 6.7 % (2012/13: 6.7 %). Based Breakdown of own properties under asset management by

on full occupancy, the return on the carrying amount is expect-

country (carrying amount):

ed to be 7.9 % (2012/13: 7.9 %).

Denmark

On balance, the Group’s shopping and outlet centres recorded growth in footfall and revenue. In 2013 the Group’s six centres had more than 16 million visitors.

Poland

Development in footfall (2011 = index 100): 110

Czezh Republic

105

The gross margin for asset management amounted to DKK

100

112.6 million in 2013/14 against DKK -21.0 million in 2012/13. 95

2011

2012

2013

The Group’s own properties under asset management comprised the following nine properties at 31 January 2014: TKD’s ownership Project

Country

Type

Futurum Hradec Králové

Czech Republic

Galeria Tarnovia, Tarnów

Poland

Sillebroen, Frederikssund Fashion Arena Outlet Center, Prague

Current occupancy

interest

Project area m2

rate

Shopping centre

20 %

28,250

100 %

Shopping centre

30 %

16,500

93 %

Denmark

Shopping centre

100 %

25,000

92 %

Czech Republic

Outlet centre

75 %

25,000

96 %

Galeria Sandecja, Nowy Sącz

Poland

Shopping centre

100 %

17,300

96 %

Ringsted Outlet

Denmark

Outlet centre

50 %

13,200

63 %

Most Retail Park

Czech Republic

Retail park

100 %

6,400

91 %

Aabenraa

Denmark

Retail park

100 %

4,200

71 %

Brønderslev

Denmark

Shopping-street property

100 %

2,400

93 %

Investment properties

Other completed projects

Total

138,250

The development of the individual centres appears from pages 26-29.

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ASSET MANAGEMENT FUTURUM HRADEC KRÁLOVÉ, SHOPPING CENTRE, CZECH REPUBLIC Opening

November 2000/May 2012

Leasable area Occupancy rate

28,250 m² 100 % (Q3 2013/14: 100 %)

Footfall 2013

5.9 million

In 2012 an extension of almost 10,000 m² was added to the shopping centre, and the existing centre was also modernized. The number of retail stores now totals 110. The shopping centre is fully let and continues to record a satisfactory operating profit and customer influx. Compared to 2012, the shopping centre’s revenue increased by 16 % and its footfall by 4 % in 2013. 2011

2012 2013 (2011=index 100)

140 130

Major tenants: Cinestar, Tommy Hilfiger, H&M, New Yorker, Adidas, Reserved, Intersport, Takko Fashion, Foot Locker, Gant, C & A, Lindex, Datart.

120 110 100 90 80 70 60

Revenue

Footfall

G A L E R I A TA R N O V I A , S H O P P I N G C E N T R E , TA R N Ó W , P O L A N D Opening Leasable area Occupancy rate Footfall 2013

November 2009 16,500 m², including a supermarket of about 2,000 m² 93 % (Q3 2013/14: 94 %) 1.8 million

TK Development owns 30 % of the centre. The shopping centre continues to have a satisfactory influx of customers and to perform well. The shopping centre’s footfall in 2013 increased on the year before. The revenue is on a par with the previous year.

2011

140

2012 2013 (2011=index 100)

130

Chain stores are managing satisfactorily, while local tenants are generally recording difficulties. TK Development’s focus is on enhancing the centre’s attraction value, and current initiatives are aimed at bolstering occupancy and customer influx, among other things. Major tenants: H&M, New Yorker, Euro RTV AGD, Reserved, Deichmann, Douglas, Rossmann, Stradivarius, Takko Fashion, Simply Market.

120 110 100 90 80 70 60

Revenue

Footfall

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ASSET MANAGEMENT SILLEBROEN, SHOPPING CENTRE, FREDERIKSSUND, DENMARK Opening Leasable area Occupancy rate

March 2010 25,000 m², including about 5,000 m² of supermarket units 92 % (Q3 2013/14: 91 %)

Footfall 2013

2.9 million

In the continuing difficult economic climate with subdued private consumption, the centre’s footfall and revenue showed a slightly declining trend in 2013 compared to 2012. The footfall is at index 96 and the revenue at index 97. Revenue and footfall reflect the general weak development of Danish retail trade in 2013.

2011

140

2012 2013 (2011=index 100)

130 120 110 100

Major tenants: Kvickly, Fakta, H&M, Fona, Gina Tricot, Matas, Sport-Master, Frederikssund Isenkram, Deichmann, Vero Moda, Designersmarket, Wagner, Frederikssund Apotek, Tøjeksperten, Skoringen, Companys, Bog & Idé, Café Vivaldi.

90 80 70 60

Chain stores are managing satisfactorily, while local tenants are generally recording difficulties. Tenants are regularly replaced to optimize the centre. New tenants have also been attracted to the centre, including Gina Tricot, Signal, Sisters Point and Tippy, which all opened outlets in 2013. Negotiations with tenants for several of the remaining rental units are ongoing. The centre is still being run in and matured, and continued efforts are being made to position the centre on the market. TK Development’s focus is on strengthening the occupancy and revenue levels for the centre.

Revenue

Footfall

FA S H I O N A R E N A O U T L E T C E N T E R , P R A G U E , C Z E C H R E P U B L I C Opening Leasable area Occupancy rate Footfall 2013

2011

140

2012 2013 (2011=index 100)

November 2007/October 2010 25,000 m² 96 % (Q3 2013/14: 96 %) 2.2 million

In recent years the Fashion Arena Outlet Center has truly distinguished itself as one of the most successful outlet centres in Central Europe. TK Development owns 75 % of this outlet centre. Since the opening of the second phase in 2010, the outlet centre has recorded a highly positive development in footfall and revenue. The outlet centre’s revenue rose by 24 % in 2012 compared to 2011, and the positive trend continued in 2013. Compared to the year before, footfall declined slightly in the first six months of 2013, but rose again from August 2013. Revenue in the centre increased to index 104 from 2012 to 2013. Major tenants: Tommy Hilfiger, Nike, Adidas, Benetton, Tom Tailor, Ecco, Gant, Lacoste, Levi Strauss & Co., Esprit.

130 120

As previously mentioned, TK Development conditionally sold its 75 % stake in the outlet centre to Meyer Bergman in February 2014, after the reporting date. The selling price for the entire property amounts to EUR 71.5 million. The sale is contingent on the final financing arrangement, which is expected to fall into place shortly. This sale generates a minor profit compared to the carrying amount, reduces the balance sheet total by about DKK 400 million and makes a substantial contribution to the Group’s free cash resources.

110 100 90 80 70 60

Revenue

Footfall

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ASSET MANAGEMENT GALERIA SANDECJA, SHOPPING CENTRE, NOWY SĄCZ, POLAND Opening Leasable area

October 2009 17,300 m², including a 5,000 m² hypermarket

Occupancy rate Footfall 2013

96 % (Q3 2013/14: 96 %) 2.4 million

The operation of Galeria Sandecja has generally been satisfactory. Measured on the basis of figures for 2012, revenue in the centre was at index 99 and footfall at index 103 in 2013.

2011

2012 2013 (2011=index 100)

140 130 120

The opening of yet another shopping centre in the town at the end of the year intensified competition in Nowy Sącz. Therefore, TK Development is focusing on initiatives to maintain and step up the current development of the centre and is attempting to attract tenants by letting vacant premises under temporary leases. This helps boost the centre’s activity level and dynamics and ensures full occupancy. Efforts are simultaneously being made to conclude usual long-term lease agreements for the premises. Major tenants: Carrefour, H&M, New Yorker, Reserved, Deichmann, Douglas, Camaieu, Carry, Euro RTV AGD.

110 100 90 80 70 60

Revenue

Footfall

R I N G S T E D O U T L E T, R I N G S T E D , D E N M A R K Opening Leasable area Occupancy rate Footfall 2013

March 2008 13,200 m² 63 % (Q3 2013/14: 61 %) 1.2 million

Ringsted Outlet has been developed in a 50/50 joint venture with Miller Developments. After a long running-in period, Ringsted Outlet has recorded pleasing progress in the past two years. Despite the difficult letting situation and ever keener competition in the Danish retail trade sector, Ringsted Outlet recorded renewed progress in 2013. Footfall increased about 10 % and revenue close to 14 % compared to the year before. 2011

180

2012 2013 (2011=index 100)

160

Lease agreements were concluded with several new tenants during the year, and a number of new stores opened for business in 2013, including Superdry, Saint Tropez, Envii, Mio my Mio and Haglöfs. LEGO Wear opened an outlet in the centre in March 2014.

140

Major tenants: Hugo Boss, Nike, Puma, Diesel, G-Star Raw, Redgreen, Ticket to Heaven, McDonald’s, Superdry, Le Creuset, Levi’s, Sparkz, Samsøe & Samsøe, Rosendahl, Noa Noa, Helly Hansen, Saint Tropez, Asics, Envii, Signal.

120 100 80 60 40 20

Revenue

Footfall

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ASSET MANAGEMENT M O S T R E TA I L PA R K , C Z E C H R E P U B L I C TK Development is developing a retail park of about 8,400 m² in the Czech town of Most, to be built in phases. The first phase of about 6,400 m² opened in April 2009, and the current occupancy rate for this phase is 91 % (Q3 2013/14: 91 %). One vacant rental unit remains, and efforts are being made to let this unit. Management believes the vacant rental unit should be let before the project can be sold.

R E TA I L P A R K , A A B E N R A A , D E N M A R K TK Development built a retail park of approx. 4,200 m² in Aabenraa in 2009. The retail park’s occupancy rate declined from 100 % to 71 % in mid-2013 after Biva went bankrupt and vacated its premises. The tenants in the retail park are jem & fix, Petworld, T. Hansen and Sport24. Discussions with potential tenants for the vacant unit are ongoing.

S H O P P I N G - S T R E E T P R O P E R T Y, B R Ø N D E R S L E V, D E N M A R K TK Development has developed retail stores of about 2,400 m2 in the former Føtex property at Mejlstedgade in Brønderslev. The premises have been let to Deichmann, Fitness World and Intersport. The current occupancy rate is 93 % (Q3 2013/14: 93 %).

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DISCONTINUING ACTIVITIES As described previously, Management has chosen a market

vestment property was sold in June 2013. In September 2013

focus that targets the countries expected to contribute to

another German investment property was sold at a price of

generating substantial value in future, and thus to the efficient

DKK 43.8 million, corresponding to the carrying amount.

utilization of capital resources. This means that the Group will phase out its activities in Finland, Germany, the Baltic States

Following these sales, the Group now has two investment prop-

and Russia. The phase-out, with resulting office closures and

erties left in Germany. These properties consist of a combined

employee dismissals, is being carried out as quickly as possible,

commercial and residential rental property in Lüdenscheid in

while taking into account that all the countries in question have

western Germany and one residential rental property on the

projects that need to be handled so as to retain as much of the

outskirts of Berlin.

value of the existing portfolio as possible. The value of these properties totalled DKK 103.2 million at 31 January 2014 against DKK 167.3 million at 31 January 2013.

Discontinuing activities Countries:

Germany, Finland, Lithuania, Latvia and Russia

Revenue:

fected during the year; see above.

2013/14: DKK 10.4 million (2012/13: DKK 14.4 million)

At 31 January 2014 the valuation of the property in Lüden­

2013/14: DKK -17.4 million

scheid was based on a return requirement of 6.5 % p.a. calcu-

(2012/13: DKK -36.7 million)

lated on the basis of a discounted cash-flow model over a ten-

31 Jan 2014: DKK 367.7 million

year period and recognition of the terminal value in year ten.

(31 Jan 2013: DKK 425.4 million)

Part of the property has not been let, and work is proceeding on

31 Jan 2014: 2

a development plan aimed at optimizing and subsequently sell-

(31 Jan 2013: 11)

ing the whole property. Therefore, Management expects the

Gross profit/loss: Balance sheet total:

The decrease in value is primarily attributable to the sales ef-

Number of employees:

time horizon for disposing of this property to be slightly longer. The results before tax of the discontinuing activities amounted to DKK -38.9 million in 2013/14 against DKK -53.7 million in

The valuation of the other property is based on initial sales ne-

2012/13, of which DKK -13.3 million derives from current oper-

gotiations currently being conducted with a potential investor.

ations, DKK -1.0 million from losses recognized on completed

These negotiations are based on the assumption that a cur-

sales, and DKK -24.6 million from impairment losses and value

rently vacant commercial rental unit will be relet. The Group

adjustment of remaining assets.

is negotiating with a potential tenant about the letting of this unit, but at a rental level lower than expected and previous-

The value adjustments relate to the Group’s German invest-

ly obtained. Management considers it essential to continue

ment properties, amounting to DKK -9.5 million in 2013/14

downscaling the German activities and has therefore chosen to

against DKK -13.5 million the year before. The value adjust-

proceed with these negotiations.

ments in 2013/14 are primarily attributable to the reletting of vacant premises at a lower rental level than expected, as well

In addition to these investment properties, the Group owns a

as initial sales negotiations in which Management considers it

share of a minor shopping centre and a few plots of land.

essential to continue downscaling the German activities. The employees left their positions at the end of September At 31 January 2014 the balance sheet total for the discontinu-

2013, and the branch office has closed down.

ing activities amounted to DKK 367.7 million against DKK 425.4 million at 31 January 2013, a decline of 13.6 %. DomusPro Retail

FINLAND

Park in Vilnius, which has been sold in advance, accounted for

The Group’s activities in Finland are fairly limited and, apart from

DKK 92.9 million of the balance sheet total at 31 January 2014.

a single project opportunity, comprise the projects listed below.

The timing and phase-out of the discontinuing activities are

Floor space

subject to major uncertainty. The phase-out is progressing, and

Project

City/town

Segment

the risk exists that these activities may be phased out at a val-

Pirkkala Retail Park, phase II

Tammerfors Retail

5,400

ue lower than their carrying amount.

Kaarina Retail Park

Turku

6,600

Retail

(m²)

GERMANY

Efforts are still being made to phase out the activities as quick-

In the 2013/14 financial year, TK Development sold another

ly as possible. Management expects to wind up the remaining

two of the Group’s German investment properties. A minor in-

activities later in 2014 rather than in spring 2014, as previously

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DISCONTINUING ACTIVITIES envisaged.

operator RIMI as the anchor tenant. Construction of the second phase will start once a satisfactory occupancy level has been

The employees have left their positions, and the branch office

reached.

closed down on 31 October 2013. Efforts are being made to phase out the remaining activities in

B A LT I C S TAT E S

the Baltic States as quickly as possible, with due consideration

The Group’s Baltic activities comprise the following projects:

paid to retaining the maximum possible value of the existing portfolio. The phase-out of the activities will continue in the

Floor space Project

City/town

Segment

DomusPro Retail Park

Vilnius (LT)

Retail

11,100

Milgravja Street

Riga (LV)

Residential

10,400

Ulmana Retail Park

Riga (LV)

Retail

12,500

2014/15 financial year.

(m²)

RUSSIA The Group owns a minor project in Moscow, consisting of Scandinavian-style dwellings that are used for rental. Efforts will be made to sell this project once market conditions have normal-

DomusPro Retail Park, Vilnius, Lithuania

ized.

TK Development owns a plot of land in Vilnius reserved for building an 11,100 m² retail park. The project has been conditionally sold to BPT Baltic Opportunity Fund, which is managed by BPT Asset Management. The project will be handed over to the buyer once the usual commercial conditions have been met, including those relating to project construction and letting. The selling price is based on a return requirement of 8.5 %. The retail park will be built in two phases. Construction of the first phase of about 7,500 m2 started in August 2013, and the opening took place on 20 March 2014. TK Development is engaged in constructive dialogue with potential tenants, and 85 % of the first-phase premises have been let, with supermarket

DomusPro Retail Park, Vilnius, Lithuania

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F I N A N C I A L TA R G E T S To provide for sufficient future financial resources, liquidity

The covenant is expressed as follows:

targets have been formulated for the whole Group; see below. Moreover, Management has adopted a target solvency ratio

L + K > E + O + R,

of about 40 % at group level, calculated as the ratio of equity

to total assets.

where

C O V E N A N T S R E L AT E D T O C R E D I T FA C I L I T I E S

L = The TK Development Group’s free cash resources in the

The Group has given its main banker an undertaking to com-

form of deposits with banks and the value of listed Dan-

ply with a solvency ratio covenant of minimum 30 % at group

ish government and mortgage bonds with a term to ma-

level, measured in connection with the presentation of interim

turity of less than five years.

and annual reports.

K = The TK Development Group’s amounts available on com-

LIQUIDITY COVENANT

E = The planned impact on cash resources from the projects

mitted operating credit facilities from time to time. The Group has used covenants for quite some years. In short,

which the TK Development Group is obliged to complete

the liquidity covenant expresses that the Group’s cash re-

within six months, including the new/expanded project,

sources – to enable the Group to cover liabilities requiring sub-

taking into account committed project credit facilities

stantial liquidity - must at any time correspond to the fixed

from financial institutions and forward funding.

costs for the next six-month period, excluding funds received

O = The TK Development Group’s cash non-project-related

as proceeds from projects sold, but including project liabilities

capacity costs for the following six months less manage-

materializing within the next six months.

ment fees falling due within six months. In addition, preagreed project fees from final and binding agreements

The covenant represents a liquidity target for the whole Group and a commitment to the Group’s main banker.

with project investors falling due within six months are to be set off against the amount. R = Interest accruing on the TK Development Group’s operat-

The covenant must be calculated and met before projects re-

ing credit facilities for the following six months.

quiring liquidity can be acquired and initiated. The Group’s solvency and liquidity covenants were both met during the year under review.

Residential Park, Bielany, Poland

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RISK ISSUES RISK MANAGEMENT

considered.

In connection with determining TK Development’s strategy and overall goals, the Board of Directors and Executive Board have

Economic and financial trends on the individual markets will

identified the most significant business risks and seek contin-

materially affect TK Development’s ability to realize its strat-

uously to ensure efficient risk management. In connection with

egy, and a worsening of these trends may have a material ad-

the strategy adjustment made in March 2013, the Group has

verse effect on the Group’s future development, results of op-

further strengthened its risk management by striving only to

erations, cash flows and financial position.

initiate projects based on a strict awareness that the expected earnings will match the project’s complexity, completion time,

The most important risks for the Group, apart from general

tied-up capital and other use of resources.

risks, are described below.

The Group has a consistently strong focus on financial man-

FINANCIAL RISKS

agement, with particular emphasis on managing and optimizing

Financing and liquidity risks

loans and strengthening the financial platform. For one thing,

Having sufficient cash resources is essential for TK Develop-

the sale of TK Development’s 75% ownership interest in the

ment. Access to project financing, which has remained difficult

Fashion Arena Outlet Center in Prague, the Czech Republic, will,

for a prolonged period, poses the greatest challenge to the

when finally completed, substantially strengthen the Group’s

property sector. The Group is now experiencing an easing in

financial platform. The sale of completed projects secures fi-

project finance restraints. The options for procuring financing

nancial resources to regenerate momentum and thus realize

vary from project to project, depending on the type, location

the development potential inherent in several of the Group’s

and status of the properties concerned, including letting and

projects.

sales. When granting project finance credits, the banks continue to require relatively high borrower equity, but there also ap-

Another core element of the Group’s risk management is the

pears to be some relaxation of these requirements.

solvency and liquidity targets adopted for the Group. 
 The Board of Directors regularly considers issues relating to

Planned projects are initiated once the commercial conditions

the project portfolio, properties, market conditions, financing,

for starting construction have been met and partial or full fi-

IT and staffing as part of its broader assessment of potential

nancing of the project has been procured, either from credit

risks and scarcity factors.

institutions or from investors in the form of forward funding. Project startup is also contingent on the provision of any equity

Reports to the Board of Directors are submitted on an ongoing

financing by means of TK Development’s own financial resourc-

basis with respect to the Group’s risk issues, which also consti-

es, with due consideration for the liquidity covenants adopted

tute an important element in the decision-making basis for all

by Management.

major projects. The Group’s short-term debt to credit institutions consists of

RISK ISSUES IN GENERAL

operating and project credits. TK Development has a general

Property market conditions in the countries in which the Group

agreement with the Group’s main banker about operating and

operates have in recent years been affected by the financial

project credits. The agreement has been extended until mid-

and economic crisis, which has resulted in lower prices on prop-

2015. In addition, the Group has entered into project-financing

erty and reduced access to financing. Particularly the Danish

agreements with various banks in Denmark and abroad. Project

market has been subject to uncertainty for a prolonged period,

credits are usually granted with different terms to maturity, de-

partly because of a weakened financial sector.

pending on the specific project.

In Management’s opinion, the market conditions are improving

Of the Group’s interest-bearing debt at 31 January 2014, credit

for the Group. The Group’s markets are characterized by expec-

facilities of DKK 0.1 billion only were due to expire prior to 31

tations for financial growth and rising consumer confidence,

January 2015. The credits are expected to be refinanced prior

although varying in strength from country to country. The ef-

to maturity or repaid in connection with the sale of projects.

fect is not yet reflected in private consumption, but growth is anticipated in private consumption in the years to come. In this

A number of loan agreements contain provisions on cross de-

phase of the business cycle, where economic growth is on the

fault, which means that default on a loan under a loan agree-

rise, some uncertainty, although diminishing, persists in the

ment may be considered default of a number of other loan

property markets, and the decision-making process of tenants,

agreements.

investors and financing sources remains lengthy and carefully

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RISK ISSUES The Group has undertaken towards its main banker to comply

income and property prices, which could have an adverse ef-

with certain conditions (liquidity and solvency covenants). The

fect on the Group.

conditions may, among other things, restrict opportunities to launch new business activities and in case the conditions are

Property prices and rental income

not complied with, the operating and project credit facilities

The Group is affected by price fluctuations in the various prop-

may be terminated.

erty markets in which it operates, as well as by general economic trends. Part of the Group’s project portfolio and some

Many of the Group’s loan agreements contain provisions giving

of its investment properties have thus been under earnings

the banks a discretionary option to terminate the agreement.

pressure during the financial and economic crisis. Rental levels

In such cases, maintaining financing depends on the bank’s

for part of the project portfolio have also been under pressure.

subjective assessment of the quality and profitability of the

Such fluctuations affect the value, including the selling price,

facility in question, as well as the value of the security provided

of the Group’s portfolio of land, ongoing and completed pro-

by the Group. If the Group fails to meet its commitments un-

jects, investment properties, and the potential for developing

der such agreements with its banks, the agreements risk being

new projects. Falling prices on land and property and falling

terminated. There is a risk that TK Development will not have

rental levels may have an adverse effect on the Group.

adequate capital resources to meet substantial repayment demands.

Investment properties and completed projects The Group’s investment properties and completed projects are

If the Group is unable to obtain sufficient funding in future, or if

essentially subject to the same risks, primarily risks related to

such funding cannot be obtained on viable terms, it could have

rental conditions and property prices, and their value may de-

a material adverse effect on the Group’s future performance,

cline substantially relative to the carrying amount in the bal-

results of operations, cash flows and financial position.

ance sheet.

Interest-rate risks

Portfolio of land

The main part of the Group’s interest-bearing debt consists of

In March 2013 the Group adopted a strategy aimed at reducing

floating-rate loans. Accordingly, increasing interest rates will

the portfolio of projects not initiated (plots of land) over a two-

push up the Group’s interest expenses. An interest-rate fluc-

year period from a level of DKK 1.1 billion in March 2013 to a

tuation of 1 % will have a direct impact of about DKK 10 million

level of DKK 0.5 billion. The portfolio can be reduced by initiat-

on TK Development. In addition, rising interest rates would, all

ing development projects or selling plots of land. The risk exists

other things being equal, affect investor return requirements

that land will be sold at a value lower than its carrying amount.

and by extension real property prices.

If planned projects cannot be executed on acquired sites, it may be necessary to make writedowns for impairment, which

Currency risks

could have a material adverse effect on the Group.

TK Development’s Danish subsidiaries operate almost exclusively in DKK, while the foreign subsidiaries generally operate

Discontinuing activities

in their local currency or alternatively EUR. As far as possible,

In March 2013 the Group decided to phase out its activities in

the Group attempts to minimize the currency risk by conclud-

Finland, Germany, the Baltic States and Russia. The phase-out,

ing related agreements in the same currency. For instance, it

with resulting office closures and employee dismissals, is be-

aims to conclude purchase and sales agreements, construction

ing carried out as quickly as possible, while taking into account

contracts and financing agreements regarding a single project

that all the countries in question have projects that need to

in the same currency. Currency fluctuations may materially

be handled so as to retain as much of the value of the existing

affect the Group’s future development, results of operations,

portfolio as possible. The timing and phase-out of the discon-

cash flows and financial position. The most important currency

tinuing activities are subject to major uncertainty. The phase-

risks are assessed to relate mainly to foreign subsidiaries’ net

out is progressing, and the risk exists that these activities may

results, intercompany balances and foreign-exchange adjust-

be phased out at a value lower than their carrying amount.

ments of the Group’s investments in foreign subsidiaries. Agreements with tenants

BUSINESS RISKS

Apart from the risk attaching to lease agreements, which pri-

Retail trade developments

marily comprises the ability of tenants to live up to the terms

Negative developments in the retail sector, for example due

and conditions of a lease agreement, including particularly the

to economic trends or increased Internet sales, may result in

obligation to pay, there is a letting risk attaching to those of the

lower demand for retail rental premises, and thus lower rental

Group’s leases that expire while the Group owns the underlying

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RISK ISSUES investment properties/completed projects. If the Group fails

garding a project has been concluded, a number of major risks

to renew these agreements, fails to enter into new leases, or

and conditions may still be attached to the project, which could

if the agreements can be entered into only on less favourable

lead to termination of a sales agreement on account of breach

terms and conditions, it could have a material adverse effect

by one of the parties.

on the Group. In cases where a sales agreement is concluded before all lease Part of the Group’s rental income from tenants includes a reve-

agreements in the project have been finalized, the Group under-

nue-based share. The Group’s total rental income under these

takes a calculated risk that the remaining premises cannot be

lease agreements depends partly on the tenant’s ability to

let on terms and conditions that ensure a satisfactory return.

maintain a certain amount of revenue in the relevant premis-

The Group also assumes a counterparty risk, including with re-

es. The share of such revenue-based rent may vary consider-

spect to, but not limited to, tenants and investors.

ably depending on the nature of the brand, the store and the products. Failure by the tenant to generate sufficient revenue

For such sold projects, construction will not be initiated until

to trigger the revenue-based share of the overall rental income

the Group expects to be able to meet the requirements from

could have a material adverse effect on the Group.

the investor which finalize the project sale. Meeting these requirements typically falls within the Group’s sphere of compe-

Development activities

tencies. If the sale cannot be completed anyway, it could have

TK Development’s primary business area is property develop-

a material adverse effect on the Group’s future performance,

ment, and the Group functions as the creative liaison between

results of operations, cash flows and financial position.

tenants, investors, architects, construction companies and other business partners when developing projects.

Regulatory approvals The Group’s future earnings depend on the inflow of new pro-

Projects are only initiated after a careful assessment of their

jects and consequently on the future availability of new build-

earnings potential viewed in light of project complexity, com-

ing sites and authority approvals (planning legislation, local

pletion time, tied-up capital, and other use of resources.

development plans, planning permission, etc.) concerning the location, size and use of a property. Changes in local plans or

Where agreements with investors and contractors, for exam-

other factors that make obtaining planning permission difficult

ple, have not been brought into alignment, the Group assumes

or restrict the supply of building sites may have a material ad-

an extra project development risk in that it may have to recti-

verse effect on the Group.

fy defects or other matters that the contractor is either not obliged or not able to address.

Compliance with time schedules The Group bases its individual projects on overall and detailed

Agreements with investors

time schedules. Time is a crucial factor in complying with agree-

The Group’s customers on the investment side are private indi-

ments concluded with tenants and investors and a significant

viduals, property companies and institutional investors. To the

factor in ensuring that the individual projects progress accord-

extent possible, the Group seeks to reduce its tied-up capital

ing to plan and, accordingly, that the Group generates the

and risks relating to ongoing projects by applying forward fund-

earnings expected. Postponing an individual project may, for

ing from investors, which means that one or more investors un-

instance, mean that lease agreements lapse, tenants become

dertake to provide funding as project construction progresses.

entitled to compensation and, ultimately, that an investor is no longer under an obligation to buy the project.

When concluding forward-funding agreements, the investor and the Group come to an agreement on a well-defined project

Environmental matters

before construction starts. Subsequently, the investor has a

Before buying plots of land or existing properties for its pro-

liquidity commitment throughout the construction period and

jects, the Group assesses the contamination risk. In case of

is consulted on major decisions. These principles ensure that

known or suspected contamination, the Group may, for ex-

the Group’s risks from construction startup are largely limited

ample, include a caveat to this effect in the contract, either

to the letting risk attaching to any remaining unlet premises

requiring guarantees from the seller or possibly requiring that

and the risk of construction budget overruns.

the seller clean up the land for its future purpose or defray the costs of such clean-up. Alternatively, the Group may decide

In agreements with institutional investors, the overriding risk

not to acquire the land or property. If the land is insufficiently

relates to the Group’s ability to deliver on time and in accord-

cleaned up or an assessed need for clean-up proves wrong, this

ance with specifications. Even though a sales agreement re-

could have an adverse effect on the Group.

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RISK ISSUES Third-party agreements

specific projects in the project portfolio with a longer time ho-

A major portion of the Group’s business consists of conclud-

rizon than three years as well as various project opportunities.

ing agreements with development partners, investors, tenants

This includes making provision for the risk that projects are not

and contractors for property development projects.

implemented and the risk that project profits fall below expectations.

Several cooperation agreements with business partners contain provisions stipulating that the Group has an obligation to

A change in the terms and assumptions for budgets and profit

inject capital into jointly owned companies or otherwise con-

forecasts, including time estimates, could result in the value

tribute to their financing. If the Group fails to meet such obli-

of the tax asset being lower than that computed at 31 Janu-

gations, including due to a lack of liquidity, the Group may be

ary 2014, which could have a material adverse effect on the

bought out by the relevant company at a reduced price or the

Group’s results of operations and financial position.

Group’s ownership interest may be diluted. Joint taxation Insurance risks

The Group has been jointly taxed with its German subsidiaries

The Group reviews its overall insurance plan at least once a

for a number of years. The retaxation balance in respect of the

year, and Management believes the Group has necessary and

jointly taxed German companies amounted to DKK 389.4 million

adequate insurance against all relevant and usual risks. The

at 31 January 2014. Full retaxation would trigger a tax charge

Group is not insured against loss, damage or injury caused by

of DKK 97.4 million at 31 January 2014. Tax has not been pro-

natural disasters (including floods, earthquakes, etc.), wars,

vided on the retaxation balance, because Management does

terrorist attacks, etc.

not plan to make changes in the Group that would result in full or partial retaxation. If Management takes a different view, this

R I S K S R E L AT E D T O T H E P R E S E N TAT I O N O F

could have a material adverse effect on the Group’s future per-

F I N A N C I A L S TAT E M E N T S

formance, results of operations, cash flows and financial posi-

When applying the Group’s accounting policies in practice, Man-

tion.

agement makes a number of significant accounting estimates and judgments that materially affect the Annual Report, par-

LEGAL RISKS

ticularly as concerns the measurement of various assets. A sig-

TK Development constantly enters into agreements with a

nificant part of the Group’s balance sheet consists of ongoing

range of contracting parties, such as investors, contractors,

and completed projects on which any indications of impairment

tenants, etc. These agreements involve opportunities and risks

are determined based on a specific assessment of each indi-

that are assessed and identified prior to contract conclusion.

vidual project, including existing project budgets and the ex-

From time to time, the Group is involved in disputes and law-

pected future development potential. If the actual course of

suits. The Group is not a party to any lawsuits that, either in-

a project deviates from the expected development, this could

dividually or collectively, are expected to materially affect the

have an adverse effect on the Group.

Group’s earnings.

TA X M AT T E R S FO R T H E G R O U P

Senior Vice President indicted by the Polish police

Deferred tax assets

In June 2006 the Senior Vice President in charge of the Group’s

A deferred tax asset of DKK 122.6 million has been recognized

Polish branch office was charged by the Polish police with irreg-

in the balance sheet at 31 January 2014. The tax asset relates

ularities related to obtaining regulatory approval (zoning per-

mainly to tax loss carryforwards in the various subsidiaries. Val-

mission) for the Polish Galeria Biala shopping centre project in

uation is based on the existing rules for carrying forward losses

Bialystok. The Polish prosecution service subsequently indicted

and joint taxation or group contributions and the assumption

the Senior Vice President, and the case is currently being tried.

that each subsidiary is a going concern. A change in the conditions and assumptions for carrying forward losses and joint

During the entire process, Group Management has been unable

taxation/group contributions could result in the value of the

to find any irregularities in connection with the project, and still

tax asset being lower than that computed at 31 January 2014.

fails to comprehend that the Senior Vice President could be involved in the alleged practices.

Management has performed the valuation of the tax asset on the basis of available budgets and profit forecasts for a five-

If, contrary to Management’s expectations, the Senior Vice

year period. For the first three years, budgets are based on an

President is convicted, this might damage the Group’s reputa-

evaluation of specific projects in the Group’s project portfolio.

tion and thus adversely affect its activities and earnings.

For the following two years, the profit forecasts are based on

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RISK ISSUES Litigation TK Development is currently party to the following lawsuit/arbitration case that is of relevance due to its scope: In the summer of 2002, De Samvirkende Købmænd, a trade association of grocery retailers, filed a complaint with the Nature Protection Board of Appeal (Naturklagenævnet) in respect of the City of Copenhagen’s approval of the layout of the Field’s department store. In particular, the claim asserted that the Field’s department store is not one department store, but that it consists of several individual stores. The Nature Protection Board of Appeal made its decision in the matter on 19 December 2003, after which the department store layout was approved. De Samvirkende Købmænd subsequently took out a writ against the Nature Protection Board of Appeal before the Danish High Court. At the beginning of 2011, the High Court gave judgment in favour of De Samvirkende Købmænd. Neither the owner of the centre nor any company in the TK Development Group is a direct party to the case, but the High Court’s judgment may have the effect that the Field’s department store will have to be redesigned following negotiations with the relevant municipal authorities. As a result of the judgment, the owner of Field’s may have to incur the financial burden of causing the necessary changes to the building layout, and in that connection it cannot be ruled out that a claim may be made against the Group. Regardless of the judgment, Management still believes the risk of this case to be negligible.

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SHAREHOLDERS S H A R E I N FO R M AT I O N

Share price development

Stock exchange

NASDAQ OMX Copenhagen

On 31 January 2014 TK Development A/S’ shares were listed

SmallCap

at a price of DKK 6.7 per share with a nominal value of DKK 1,

Index Share capital

DKK 98,153,335

Share denomination

DKK 1

Number of shares

98,153,335

Share classes

One

Number of votes per share

One

Bearer security

Yes

Voting right restrictions

No

Share transfer restrictions

No

ISIN code

DK0010258995

equal to a market value of DKK 658 million. The price of TK Development A/S shares developed as follows during the year under review: 15

40 35 30

10

25 20 15

5

10

capital at 31 January 2014 (31 January 2013: 91.62 %).

January 2014

December

November

October

July

June

May

September

The registered shareholders represented 91.11 % of the share

August

at the beginning of the year to 7,231 at the end of the year.

April

The number of registered shareholders decreased from 7,396

March

0

February 2013

5

Shareholders and their holdings

0

Share price development Volume of trading, DKKm

The table below shows the ownership structure of TK Development A/S as of today, as reported to NASDAQ OMX Copen-

Volume of trading

hagen pursuant to section 29 of the Danish Securities Trading

During the year under review, the share was traded on 248

Act.

days, with a total trading volume of DKK 250 million against

Shareholders holding more than 5 %

Ownership and vo-

DKK 154 million the year before. 11,425 trades were completed

ting interest in %

(2012/13: 4,628 trades), covering a total of 34,743,730 shares

Storm Real Estate ASA, 100 New Bond Street, London W1S 1SP, United Kingdom

10.49 %

Dava 1 ApS, c/o Kurt Daell, Lysagervej 25, 2920 Charlottenlund, Denmark

10.02 %

Strategic Capital ApS, Islands Brygge 79 C, 2300 Copenhagen S, Denmark

9.99 %

(2012/13: 11,382,365 shares).

C A P I TA L A N D S H A R E S T R U C T U R E TK Development A/S’ shares are not divided into several share classes, and no shares are subject to special rights or restrictions. Each share confers one vote on the holder. TK Develop-

Henrik Østenkjær Lind, Åkrogs Strandvej 32, 8240 Risskov, Denmark

5.20 %

ment’s Articles of Association contain no restrictions governing share ownership, the number of shares that a shareholder

The table below shows a breakdown of shares held by the

may hold or share transferability. As all shareholders thus have

Board of Directors and Executive Board.

equal rights, the Board of Directors believes that the share Change for

structure chosen is the most appropriate one.

Ownership

the year in

Number of

and voting

number of

shares *)

interest in %

shares

Niels Roth

2,575,127

2.62 %

1,871,501

Peter Thorsen

4,192,220

4.27 %

3,431,840

Pedersen

652,186

0.66 %

372,678

loan capital and thus maximizing the return for the Company’s

Arne Gerlyng-Hansen

104,533

0.11 %

59,733

shareholders. In Management’s opinion, the present capital and

9,815,033

9.99 %

5,660,416

10,300,216

10.49 %

5,895,009

Board of Directors:

Per Søndergaard

Kim Mikkelsen Morten E. Astrup

Frede Clausen

568,023

0.58 %

324,584

Robert Andersen

326,667

0.33 %

211,667

28,534,005

29.07 %

17,827,428

Executive Board:

Total

*) The holdings include all shares held by all members of the entire household as well

The Company’s Management reviews the Group’s capital structure on a regular basis, as well as the need for any adjustments. Management’s overall aim is to provide a capital structure that supports the Group’s earnings potential, while at the same time ensuring the best possible relation between equity and

share structure fulfils this aim.

SHAREHOLDERS’ AGREEMENTS Management is not aware of any shareholders’ agreements that have been concluded between TK Development A/S’ shareholders.

as companies controlled by the above-named persons.

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SHAREHOLDERS R U L E S R E G A R D I N G A LT E R AT I O N S T O T H E

deduction for dividends, has been fixed at DKK 20.2 in the first

C O M PA N Y ’ S A R T I C L E S O F A S S O C I AT I O N

exercise window, DKK 20.8 in the second window and DKK 21.8

The Articles of Association of TK Development A/S can only be

in the third window.

altered following a resolution adopted at a General Meeting in compliance with the Danish Companies Act. Requests for the

The main condition for exercising these warrants is that the

inclusion of a specific proposal in the agenda of the Annual

employee has not given notice to terminate his or her employ-

General Meeting shall be submitted in writing by shareholders

ment before having exercised the warrants allocated.

to the Board of Directors. If the request is submitted no later than six weeks before the date of the General Meeting, the

The Group’s total expenses for the incentive scheme amount to

shareholder is entitled to have the proposal included in the

DKK 2.0 million, being charged to the income statement over a

agenda. If the Board of Directors receives the request later

period of 35 months.

than six weeks before the Annual General Meeting, the Board of Directors will determine whether the request has been made

Number of warrants 2011 scheme

sufficiently early to permit its inclusion in the agenda. Board of Directors

At a General Meeting, resolutions can only be adopted in re-

0

Executive Board:

spect of business included in the agenda and any proposed

Frede Clausen

86,636

amendments. If proposals to alter the Articles of Association

Robert Andersen

86,636

are to be considered at a General Meeting, the essentials of

Other executive staff

442,189

such proposals must be stated in the convening notice. A pro-

Total

615,461

posed resolution to alter the Company’s Articles of Association is subject to the proposal being adopted by at least two-thirds

DIVIDENDS AND DIVIDEND POLICY

of the votes cast as well as of the voting stock represented at

TK’ Development’s long-term policy is to distribute a portion

the General Meeting.

of the year’s profit as dividends or alternatively via a share repurchase programme. This will always be done with due regard

SHARE-BASED INCENTIVE SCHEMES

for the Group’s capital structure, solvency, cash resources and

2011 scheme

investment plans.

In June 2011 the Board of Directors granted 125,000 warrants to the Executive Board and 375,000 warrants to other execu-

ANNUAL GENERAL MEETING

tive staff members, a total of 500,000 warrants. Following the

The General Meeting of shareholders is the supreme authority

capital reduction and capital increase implemented in Septem-

in all corporate matters of TK Development A/S, subject to the

ber 2013, the number of warrants allocated has been adjusted

limitations provided by Danish law and TK Development A/S’

by 171,461 warrants. The number of outstanding warrants to-

Articles of Association. The Annual General Meeting must be

talled 615,461 at the reporting date.

held in the municipality where TK Development A/S’ registered office is located sufficiently early to permit compliance with

Under the four-year warrant scheme, warrants can be exercised

the Company’s applicable time limits for the holding of General

at the earliest three years after the grant date, and any shares

Meetings and the filing of Annual Reports. General Meetings are

subscribed for are subject to an additional lock-up period of up

convened by the Board of Directors. The Annual General Meet-

to two years. Warrants comprised by the incentive scheme may

ing will be held at 3 p.m. on 30 April 2014 at Aalborg Kongres &

be exercised during three six-week windows. These six-week

Kultur Center, Radiosalen, Aalborg.

windows are placed thus: Extraordinary General Meetings are held following a resolution following publication of the preliminary announcement of financial statements for the 2013/14 financial year (from around 1 April 2014);

by the shareholders in General Meeting or the Board of Direc-

following publication of the interim report for the six-month period ending 31 July 2014 (from around 15 September 2014); and

less than 5 % of the total share capital.

following publication of the preliminary announcement of financial statements for the 2014/15 financial year (from around 1 April 2015). The subscription price per share of nominally DKK 1, before any

tors or at the request of the auditors of TK Development A/S or at the written request of shareholders collectively holding not

All business transacted at General Meetings, with the exception of alterations to the Articles of Association or a resolution to dissolve the Company, is decided by a simple majority of votes unless otherwise provided by current legislation; see Article 6 of the Company’s Articles of Association.

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SHAREHOLDERS REGISTERED SHARES

RULES ON INSIDER TRADING

All shares are registered in book-entry form in accounts main-

TK Development’s Management and employees are only al-

tained in the computer system of VP Securities A/S, Weide­

lowed to trade in the Company’s shares during the six-week

kampsgade 14, PO Box 4040, 2300 Copenhagen S, Denmark,

period after the publication of annual and quarterly reports

and must be held and managed through a Danish bank or other

and any other comprehensive announcements of financial re-

institution authorized to be registered as the custodian of the

sults. If Management or employees are in possession of inside

shares. The shares must be issued to named holders and may

information that may influence the pricing of TK Development’s

not be transferred to bearer.

shares, they may not trade in the shares even during the sixweek period. The Company keeps a register of the shares held

T H E B OA R D O F D I R ECTO RS ’ P OW E RS

by insiders, including any changes in their portfolios, and dis-

Powers to issue new shares

closes this information in accordance with existing legislation.

The Board of Directors is authorized to increase the share capital by issuing new shares having a total nominal value of DKK

I N V E S T O R R E L AT I O N S

63,098,573 with a pre-emptive right for the Company’s existing

TK Development aims to keep its shareholders and investors

shareholders. In 2013 the Board of Directors exercised this au-

up-to-date on all relevant matters.

thorization in respect of DKK 56,087,620, with the remaining authorization amounting to DKK 7,010,953. The increase of the

The Company’s website, www.tk-development.com, includes

share capital can be implemented against cash payment only.

all company announcements issued for the past five years, updated share prices and information about the Group’s pro-

Moreover, the Board of Directors is authorized to increase the

jects in progress. When investor presentations are published

Company’s share capital by one or more issues during the pe-

in connection with the announcement of annual and half-year

riod ending on 30 June 2015 by up to nominally DKK 659,818,

financial results, they are also made available at the Company’s

without any pre-emptive rights for the Company’s existing

website.

shareholders. This authorization is to be used for implementing the capital increases resulting from the exercise of warrants

Moreover, there is a direct link from TK Development A/S’

under the existing incentive scheme.

website to the NASDAQ OMX Copenhagen website (www.nasdaqomxnordic.com), which contains further information about

The authorization for the Board of Directors to subscribe for

the TK Development A/S share. Reference is also made to the

capital amounts to 7.8 % of the Company’s share capital.

description of corporate governance at the Company’s website, www.tk-development.com.

Treasury shares At the Annual General Meeting on 25 May 2010, the Board of

Financial calendar

Directors was authorized, on behalf of the Company, to acquire

Annual Report 2013/14

8 April 2014

treasury shares having a nominal value of not more than 10

Annual General Meeting

30 April 2014

% of the share capital in order to optimize the Group’s capital

Interim Report Q1 2014/15

13 June 2014

Interim Report H1 2014/15

12 September 2014

structure. The authorization is valid for a period of five years from the adoption of the resolution at the Annual General Meeting.

Interim Report Q1-Q3 2014/15

17 December 2014

Preliminary announcement of financial statements 2014/15

27 March 2015

Annual Report 2014/15

7 April 2015

Annual General Meeting

28 April 2015

Shopping centre, Jelenia Góra, Poland

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C O R P O R AT E G O V E R N A N C E TK Development’s Board of Directors and Executive Board

pay elements, wholly or in part, is longer than one financial year.

continue to focus on the recommendations for corporate governance, and the Board of Directors reassesses its policies for

T H E B OA R D O F D I R ECTO RS

compliance with the recommendations at least once a year. In

Composition and rules regarding appointments and replace-

a few areas, the Company does not comply with the recommen-

ments

dations, but instead provides an explanation of its reasons for

According to the Articles of Association, the Board of Directors

not complying with a specific recommendation. The Board of

must be composed of not less than four nor more than seven

Directors is of the opinion that TK Development A/S lives up to

members. The Board of Directors is currently composed of six

the existing Recommendations on Corporate Governance.

members elected by the General Meeting. Management considers the composition of the Board of Directors to be appropriate

A detailed review of the Board of Directors’ policies for compli-

relative to the Company’s current activities and requirements.

ance with the recommendations issued by the Committee on

In Management’s opinion, the current members of the Board of

Corporate Governance is available at

Directors have the financial, strategic and commercial exper-

www.tk-development.com/cg_2013_14.

tise required by an international business such as TK Development. The members of the Board of Directors are elected at the

The Committee recommendations not followed are listed be-

General Meeting of shareholders to serve for a term of one year

low:

at a time. Retiring board members are eligible for re-election.

Corporate social responsibility

The Board of Directors’ competencies cover a wide spectrum,

In light of the Company’s size and activities and the Group’s

including strategic management, international relations, capi-

operating markets, the Board of Directors has decided not to

tal structure, the property sector, the retail trade, risk assess-

adopt policies for corporate social responsibility. The Board will

ment and control, investor relations, business development as

regularly assess the need for policies in this area.

well as accounting and financial expertise.

Audit committee

The professional qualifications of the members of the Board of

The Board of Directors believes that auditing is an issue that

Directors are listed individually under the heading “The Board

concerns all board members. For this reason, and given the

of Directors”.

complexity of the accounting procedures and the size of the Board of Directors, it has been considered appropriate not to

The Board of Directors considers all its members, with one ex-

set up an actual audit committee, but to let all board members

ception, to be independent of the Company. Per Søndergaard

function jointly as the audit committee.

Pedersen is not considered independent because he was previously a member of the Company’s Executive Board and has held a seat on the Board of Directors for more than 12 years.

Nomination committee The Board of Directors has decided not to establish a nomination committee because, given its size, the Board of Direc-

Self-evaluation
Once a year the Board of Directors systemati-

tors finds that these tasks are best handled by the Board as

cally evaluates its work and competencies with a view to con-

a whole.

tinuously improving and streamlining its work.

Content of remuneration policy

The Chairman is in charge of this internal evaluation of the

So far, the Board of Directors has decided not to set limits for

Board of Directors. To date, the Board of Directors has chosen

how high a portion of the total remuneration may be constitut-

to conduct a qualitative evaluation in the form of interviews

ed of variable components, as the amount of bonus will only be

and open, constructive dialogue with all members present at

paid if a minimum 8 % return on equity is achieved. Until further

the same time. The evaluation is based on a predetermined list

notice, the amount of bonus is expected to account for a minor

of subjects, including communication and collaboration, results

portion only relative to the fixed pay elements.

achieved compared to targets set, short- and long-term composition of the Board of Directors, and the competencies of its

As bonus is only paid if a minimum 8 % return on equity is

members as well as any need for knowledge and skills develop-

achieved for an individual financial year, the Board of Direc-

ment. Other relevant issues are considered on an ad-hoc basis.

tors assesses that the remuneration policy ensures constant

The mutual confidence of the members in each other automat-

alignment between the interests of the Executive Board and

ically leads to a free exchange of opinions, and each member is

the shareholders. It has therefore been found unnecessary to

encouraged to take an active part in discussions. If desired by

establish criteria ensuring that the vesting period for variable

any member or the Chairman, the members can be interviewed

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C O R P O R AT E G O V E R N A N C E individually on any specific subject.

The remuneration policy appears from the Company’s website, www.tk-development.com.

The Board of Directors carried out a self-evaluation at the beginning of the financial year. The self-evaluation has promot-

Remuneration

ed the further development of the Group’s strategy, including

The remuneration of the Executive Board in 2013/14 was based

sharper focus on risk management and on improving communi-

on the guidelines adopted at the General Meeting in 2011. As

cation with the market. For instance this translated into a deci-

part of the cost cuts implemented by the Group in January

sion to change the Group’s internal and external reporting with

2012, the remuneration of the Executive Board was reduced

effect from the 2012/13 financial year.

by 20 % for a 24-month period starting on 1 February 2012. Warrants were not granted to the Executive Board in 2013. The

Number of Board of Directors meetings

remuneration of each individual member of the Executive Board

The Board of Directors held nine board meetings in the 2013/14

appears from the Group’s Annual Report. The remuneration for

financial year.

2014/15 will also be based on the guidelines adopted at the General Meeting in 2011, as no changes have been made to

R E M U N E R AT I O N O F T H E B O A R D O F D I R E C T O R S

these guidelines. However, a two-year agreement has been

The members of the Board of Directors are paid a fixed fee

made with the Executive Board, according to which a further

and are not covered by the Company’s bonus and incentive

20 % of the Executive Board’s annual fixed remuneration is not

schemes. No separate fee is paid for audit committee work as

paid during the term of the agreement, equal to a 36 % reduc-

all members of the Board of Directors sit on this committee.

tion compared to the remuneration paid in the 2011/12 finan-

The remuneration payable to members of the Board of Direc-

cial year. The agreement applies to the period from 1 May 2013

tors consists of a basic fee. The Chairman is paid three times

to 30 April 2015. During that period, the reduced fixed annual

the basic fee, while the Deputy Chairman is paid twice the ba-

salary will amount to DKK 2.7 million for Frede Clausen and DKK

sic fee. As part of the cost cuts previously implemented by the

2.0 million for Robert Andersen. Up to two-thirds of the remu-

Group, the basic fee for 2013/14 was reduced to DKK 160,000.

neration withheld during the two-year period will be paid when

Together with its proposal for adoption of the Annual Report for

the Group meets specific operational targets, fixed as part of

2013/14, the Board of Directors will recommend to the Annual

the previously described two-year transformation process that

General Meeting that the basic fee be maintained at the cur-

consists of realizing the initiatives adopted under the revised

rent level of DKK 160,000 for 2014/15.

strategy. Warrants will not be granted to the Executive Board in 2014 either.

R E M U N E R AT I O N O F T H E E X E C U T I V E B O A R D Remuneration policy

Retention and severance programmes

Every year the Board of Directors assesses and determines the

Under the Executive Board’s service agreements, the individual

remuneration payable to the Executive Board members, based

Executive Board member may give notice of termination no lat-

on the recommendation of the Chairman and Deputy Chairman.

er than three months after the occurrence of an extraordinary

The overall pay package and its composition are determined by

event (change of control), such termination to take effect 12

the results achieved, the Executive Board’s competencies and

months after notice has been given. The Executive Board mem-

the Board of Directors’ wish to ensure that the Company can

ber may demand to be released from his or her duties during

continue to attract, retain and motivate qualified executives.

the period of notice, with the usual remuneration being payable

In this connection, the Board of Directors takes the Company’s

during such period.

situation and general development into account. Every year, the Board of Directors reviews the remuneration payable to the

The Executive Board members are not subject to any other spe-

Executive Board by comparing it to that payable to executive

cial severance terms. The term of notice for Executive Board

boards of other comparable companies with international ac-

members is 12 months on the part of the Company and six

tivities.

months on the part of the member.

The Executive Board’s remuneration consists of a fixed and a

It is company policy to ensure that Executive Board members

variable portion. The variable remuneration consists of a short-

have an incentive to work dedicatedly in the interests of the

term and a long-term incentive scheme. The overall pay pack-

Company and its shareholders in the event of a merger, take-

age consists of a fixed salary, bonus, defined-contribution pen-

over bid or other extraordinary situations. Against this back-

sion of 2 % of the basic salary and other benefits, including a

ground, the Board of Directors may decide, on the basis of a

company-provided car, telephone, IT solution and newspaper,

specific assessment, to pay a retention bonus whereby Exec-

as well as health insurance and warrants.

utive Board members receive a special consideration, however,

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C O R P O R AT E G O V E R N A N C E not exceeding 12 months’ fixed salary, for example in the event that the Company merges with another company or if another company takes over all the Company’s activities, subject to the General Meeting’s approval.

To enhance the employees’ level of competencies, the Company is in regular dialogue (at least once a year) with the individual employees. This dialogue forms the basis for the employee’s further education and supplementary personal/ professional development as well as discussions about career options.

AUDIT COMMITTEE The Board of Directors believes that auditing is an issue that

The policy aims were fulfilled in the 2013/14 financial year.

concerns all board members. For this reason, and given the complexity of the accounting procedures, it has been consid-

S TAT U T O R Y A N N U A L C O R P O R AT E G O V E R -

ered appropriate not to set up an actual audit committee, but

N A N C E S TAT E M E N T

to let all board members function jointly as the audit commit-

TK Development has chosen to present its Statutory Annual

tee. The terms of reference of the audit committee have been

Corporate Governance Statement on its website instead of in

laid down, and, basically, four meetings are held each year.

the Management Commentary.

The Company website contains information about the most

The Corporate Governance Statement is available at www.

important activities during the year, the number of audit com-

tk-development.com/cgs_13_14.

mittee meetings held and the terms of reference of the audit committee.

S TAT U T O R Y A N N U A L S TAT E M E N T O N D I V E R SITY The Board of Directors has adopted a policy to ensure diversity. For more details about the policy and the status on fulfilment of the policy aims, please see below. Top management level At the beginning of the financial year, Management adopted a goal of having about 20 % women on the Board of Directors by 2016, equal to at least one member. This goal has been set in light of the acknowledgment that TK Development operates in a male-dominated sector. At present there are no women on the Board of Directors. Other managerial levels in the Group At the beginning of the financial year, Management also adopted a policy of increasing the share of women at other managerial levels in the Group. In drawing up this policy, Management took into consideration that the limited size of the organization and its division into units operating in different countries with relatively few employees in each country mean that the Group is largely compelled to focus on knowledge, competencies and experience when recruiting and promoting employees. The policy comprises the following key elements: TK Development acknowledges the importance of the diversity of the Company’s staff. The Company must provide equal opportunities to both genders when recruiting and promoting employees. As far as possible, the Company should strive to fill vacant positions internally before offering them externally. When recruiting employees for executive or mid-management positions, the Company strives to consider at least one female candidate.

M anagement C ommentary |

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S TAT U T O R Y A N N U A L C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y S TAT E M E N T

In addition to carrying on profitable business activities, TK Development intends to adhere to and expand the Group’s ethical, social and environmental responsibilities as a business corporation. TK Development fundamentally endorses the UN’s ten social responsibility principles, but has not acceded to the UN Global Compact. In light of the Company’s size and activities and the Group’s operating markets, the Board of Directors has decided not to adopt policies for the voluntary integration of corporate social responsibility or human rights and climate policies. The Board will regularly assess the need for policies in this area.

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THE BOARD OF DIRECTORS Name

Took office

Re-election

Birthday

Independence 1)

Niels Roth (Chairman)

2007

April 2014

July 1957

Independent

Peter Thorsen (Deputy Chairman)

2012

April 2014

March 1966

Independent

Per Søndergaard Pedersen

2002

April 2014

March 1954

Not independent 2)

Arne Gerlyng-Hansen

2013

April 2014

March 1956

Independent

Kim Mikkelsen

2013

April 2014

October 1968

Independent

Morten E. Astrup

2013

April 2014

July 1975

Independent

1)

See section 3.2.1 in the Recommendations on Corporate Governance prepared by NASDAQ OMX Copenhagen.

2)

Has served on the Board of Directors for more than 12 years and was previously a member of the Company’s Executive Board.

N I E L S R O T H

PETER THORSEN

Chairman of the Board of Directors

Deputy Chairman

Born

Born

July 1957

March 1966

Joined the Board of Directors 2007

Joined the Board of Directors 2012

Term of office ends

Term of office ends

April 2014

Education 1983

Education

MSc (Economics).

1992

Employment 1989-2004 CEO of Carnegie Bank, and Group Head of Investment Banking in the Carnegie Group (2001-2002). 1997-2004 Member of the Danish Securities Council. 2001-2004 Chairman of the Danish Securities Dealers’ Association. Special competencies Financial markets, capital structure, investment, accounting, investor relations.

MSc (Business Administration and Auditing).

Employment 1992-1994 Accountant, More Stevens. 1994-1997 Marketing Manager, Group CFO & International Controller, KEW Industri A/S. 1997-1997 Finance Manager, Electrolux Hvidevarer A/S. 1997-1998 Finance Manager, Marwi International A/S (Incentive A/S). 1998-2000 CEO, Basta Group A/S. 2001-2005 CEO, Bison A/S. 2005-2008 CEO, Louis Poulsen Lighting A/S.

Executive Board member Zira Invest II ApS; Zira Invest III ApS.

2007-2008 Group Chief Executive, Targetti Poulsen. 2008-

Chairman of the Board of Directors Fast Ejendom Danmark A/S; Friheden Invest A/S; Investeringsforeningen SmallCap Danmark; Porteføljeselskab A/S; SmallCap Danmark A/S. Member of the Board of Directors Arvid Nilssons Fond; A/S Rådhusparken; A/S Sadolinparken; Realdania. Board committees and other posts None.

April 2014

CEO, Kirk & Thorsen Invest A/S.

Special competencies Strategic management, accounting and finances, business development. Executive Board member EBP Ejendomme A/S; EBP Holding A/S; Kirk & Thorsen A/S; Kirk & Thorsen Invest A/S; Modulex Holding ApS; SE BLUE RENEWABLES DK ApS; SE BLUE RENEWABLES DK 2 ApS; SE BLUE RENEWABLES GP ApS. Chairman of the Board of Directors Biblioteksmedier A/S; Modulex A/S; Ravn Arkitektur A/S; Starco Europe A/S. Member of the Board of Directors BoConcept A/S (Deputy Chairman); BoConcept Holding A/S (Deputy Chairman); Careitec A/S; EBP Holding A/S; Kirk & Thorsen A/S; Kirk & Thorsen Invest A/S; Ny Droob ApS; Rotationen Nykøbing F. A/S; SE BLUE RENEWABLES DK P/S; SE BLUE RENEWABLES DK 2 P/S; SE BLUE RENEWABLES K/S. Board committees and other posts Chairman of the Executive Committee, Sct. Maria Hospice.

M anagement C ommentary |

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THE BOARD OF DIRECTORS

PER SØNDERGAARD PEDERSEN

Born

March 1954

A R N E G E R LY N G - H A N S E N

Born

March 1956

Joined the Board of Directors 2002

Joined the Board of Directors 2013

Term of office ends

Term of office ends

April 2014

April 2014

Education

Education

Trained with Sparekassen Nordjylland (Spar Nord Bank).

1981             Law graduate from the University of Copenhagen. 1984            Attorney-at-law.

Employment 1983-1986 Head of the business department at Sparekassen Nordjylland headquarters, Østeraa branch. 1986-1989 Regional manager, Sparekassen Nordjylland, Hasseris branch. 1989-2002 CEO, TK Development A/S. Special competencies Retail trade, property sector, financial markets, business development, investor relations. Executive Board member A.S.P. Ejendom ApS; JA Plastindustri Holding A/S; PSP Holding ApS; PSPSH Holding ApS. Chairman of the Board of Directors AG I A/S; Arne Andersen A/S; Athene Group A/S; Bjørk & Maigård Holding ApS; Conscensia A/S; Conscensia Holding A/S; dansk boligstål a/s; EIPE Holding A/S; GLC Management Invest ApS; Global Car Leasing A/S; Global Car Splitleasing A/S; Ib Andersen A/S; Ib Andersen A/S Øst; Ib Andersen Ventilation A/S; J.A. Plastindustri A/S; K/S Waren; Lindgaard A/S – Rådgivende Ingeniører F.R.I.; Nowaco A/S; P.J. Skovværktøj ApS; Restaurant Fusion A/S. Member of the Board of Directors Arkitekterne Bjørk & Maigård ApS; Discovery A/S; Ejendomsmægleraktieselskabet Thorkild Kristensen; Ejendomsmægleraktieselskabet Thorkild Kristensen Bolig; Ejendomsmægleraktieselskabet Thorkild Kristensen, Blokhus; Ejendomsmægleraktieselskabet Thorkild Kristensen Erhverv; Ejendomsselskabet Albanigade 23 A/S; Ejendomsselskabet Dampmøllen A/S; Ejendomsselskabet Skøjtehallen A/S; Exclusive Travel Collection ApS; Homekit A/S; Investeringsforeningen SmallCap Danmark; JA Plastindustri Holding A/S; K/S Danske Dagligvarebutikker; MBC Gruppen A/S; Peacock A/S; PL Holding Aalborg A/S; P L Invest, Aalborg ApS; Porteføljeselskab A/S; Remergy A/S (Deputy Chairman); SmallCap Danmark A/S; ST Holding Aalborg A/S; Systemteknik A/S (Deputy Chairman); Sømoseparken A/S; Tech2Tech ApS; Tom Anton Andersen Reklamebureau A/S; Tom Anton Holding A/S; Ungbo Danmark A/S; Wahlberg VVS A/S. Board committees and other posts None.

Employment 1981-1983 The law office of Advokaterne Amaliegade 4, Copenhagen K. 1983-2004   The law office of Nielsen Nørager, Frederiksberggade 16, Copenhagen K. 1985-1992   Tutor and associate professor in the law of obligations at the University of Copenhagen. 2004-           CEO of Harald Nyborg A/S. Special competencies Retail trade, law, management and business development. Executive Board member Arpema ApS; Arpema Holding ApS; ApS KBUS 8 NR. 2454; Dacabo-HN Komplementarselskab; Dava 1 ApS; Dava Holding ApS; Divan 6 A/S; Ejby Industrivej 3-29 A/S; Harald 1 ApS; Harald Fix A/S; Harald Glostrup Komplementaranpartsselskab; Harald Nyborg A/S; Harald Slagelse Komplementaranpartsselskab; Harald-Gladsaxe Komplementaranpartsselskab; HN Research Holding A/S; K/S Harald Skåne I; Komplementarselskabet Skerrisvej, Brande; Lady & Kid A/S; Skerris Holding A/S. Chairman of the Board of Directors Habro a/s; Habro Finans a/s; Habro Fondsmæglerselskab a/s; Habro Fund Management a/s; Habro Holding ApS. Member of the Board of Directors A/S Daells Bolighus; ApS KBUS 8 NR. 2454; Bernstorff Slot ApS (Deputy Chairman); Company Water A/S; Company Water International A/S; Dacabo-HN Komplementarselskab; Danish Bottling Company A/S; Dava 1 ApS; Dava Holding ApS; Divan 6 A/S; Ejby Industrivej 3-29 A/S; Harald 1 ApS; Harald 2000 A/S; Harald Auto A/S; Harald Fix A/S; Harald Glostrup Komplementaranpartsselskab; Harald Nyborg Byggeselskab ApS; Harald Parat I Komplementarselskab; Harald Research A/S; Harald Skåne I ApS; Harald Slagelse Komplementaranpartsselskab; Harald-Gladsaxe Komplementaranpartsselskab; HN Research Holding A/S; jem & fix A/S; K/S Dacabo; K/S Fraugde; K/S Harald Gladsaxe; K/S Harald Glostrup; K/S Harald Parat I; K/S Harald Skåne I; K/S Harald Slagelse; K/S Lady & Kid; K/S Skerrisvej, Brande; Kid-Holding ApS; Komplementarselskabet Skerrisvej, Brande; Lady & Kid A/S; Skerris Holding A/S; W. Homann A/S. Board committees and other posts Member of Sydbank’s Committee of Representatives and of Community Council Funen.

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THE BOARD OF DIRECTORS

KIM MIKKELSEN

Born

MO RT E N E . AST RU P

October 1968

Born

July 1975

Joined the Board of Directors 2013

Joined the Board of Directors 2013

Term of office ends

Term of office ends

April 2014

Education

April 2014

Education

1989        

Savings bank school 1

1991          

Savings bank school 2

1990-1992 GCSE examinations, Institute Le Rosey, Rolle-Gstaad, Switzerland.

1991-1994 Graduate Diploma studies (Financing)

1992-1994 International Baccalaureate, Berg Videregående Skole, Norway. 1998    

Employment 1994-1997 Swiss Bank Corp. – Head of Nordic Fixed Income Trading. 1997-1999 RBS Greenwich Capital - Director, Proprietary Trading. 1999-2002 SEB MERCHANT BANKING - Head of Mortgage Risk & Trading. 2003-2009 Nordic Asset Management A/S - CIO and majority owner. Special competencies Financial affairs, investment and management.

Employment 1997            Financial Director, InfoStream ASA, Oslo. 1997-2000 Financial Adviser, Ørn Rådgivning AS, Oslo. 1997-2006 Portfolio Manager, Ørn Norden AS, Oslo. 2006-         

Executive Board member København Håndbold A/S; Nordic Sports Management ApS; Nordic Wine Invest ApS; Proinvestor ApS; Strategic Capital ApS; Strategic Investments A/S; Strategic Venture Capital ApS.

Exchange programme at City University, London.

1995-1999 Norwegian School of Management, Sandvika, Norway. Specialized in shipping - worked full time from 1997 while completing studies.

Founding partner and CIO, Storm Capital Management Ltd., London.

Special competencies Real estate investments, financing and business development. Executive Board member None.

Chairman of the Board of Directors None. Member of the Board of Directors FC Fredericia ApS; Genobiotix ApS; Innogie ApS; København Håndbold A/S; NTR Holding A/S; Proinvestor ApS; Storm Real Estate ASA, Norway; Strategic Investments A/S. Board committees and other posts Member of the Committee of Representatives, Fynske Bank; member of the audit committee, Storm Real Estate ASA, Norway.

Chairman of the Board of Directors Aconcagua Management Ltd., Bermuda; Neptune Properties AS, Norway; Polar Boligutvikling AS, Norway; Storm Bond AS, Norway; Storm Bond Fund SICAV, Luxembourg; Storm Nordic Fund SICAV, Luxembourg; SurfSide Holding AS, Norway; SurfSide Ventures Ltd., British Virgin Islands; Svalbard Adventure Group AS, Norway. Member of the Board of Directors Bjørgvin AS, Norway; Pactum AS, Norway; Storm Capital Management Ltd., UK; Storm Real Estate ASA, Norway (Deputy Chairman); Ørn Norden AS, Norway. Board committees and other posts None.

M anagement C ommentary |

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THE EXECUTIVE BOARD

FREDE CLAUSEN

RO B E RT A N D E RS E N

President and CEO

Executive Vice President

Born on 30 July 1959 Member of the Executive Board of TK Development A/S since 1992

Born on 3 April 1965 Member of the Executive Board of TK Development A/S since 2002

Executive Board member Frede Clausen Holding ApS.

Executive Board member Ringsted Outlet Center P/S *; Ringsted Retail Company ApS *; Palma Ejendomme A/S; PE Skagen ApS.

Chairman of the Board of Directors Ahlgade 34-36 A/S *; Ringsted Outlet Center P/S *; SPV Ringsted ApS *; Step Re CSP Invest I A/S *; Udviklingsselskabet Nordkranen A/S *. Member of the Board of Directors Euro Mall Luxembourg JV S.à r.l. *; Euro Mall Ventures S.à r.l. *; Kommanditaktieselskabet Danlink-Udvikling *; Komplementarselskabet DLU ApS *; K/S Købmagergade 59, st.; Palma Ejendomme A/S; PE Skagen ApS. Board committees and other posts None.

Chairman of the Board of Directors None. Member of the Board of Directors Ahlgade 34-36 A/S *; Kommanditaktieselskabet Danlink-Udvikling *; Kommanditaktieselskabet Østre Havn *; Komplementarselskabet DLU ApS *; Ringsted Outlet Center P/S *; SPV Ringsted ApS *; Udviklingsselskabet Nordkranen A/S *; Østre Havn Aalborg ApS *; Palma Ejendomme A/S; PE Skagen ApS. Board committees and other posts None.

*) The companies form part of the TK Development Group and are partly owned, directly or indirectly, by TK Development A/S.

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S TAT E M E N T B Y T H E B O A R D O F D I R E C T O R S A N D E X E C U T I V E B O A R D O N T H E A N N U A L R E P O R T

The Board of Directors and Executive Board have today con-

Moreover, we consider the Management Commentary to

sidered and adopted the Annual Report of TK Development

give a fair presentation of the development in the Group’s

A/S for the financial year from 1 February 2013 to 31 Janu-

and Company’s activities and financial affairs, the results

ary 2014.

for the year and the Company’s and Group’s overall financial position, as well as a true and fair description of the most

The Annual Report is presented in accordance with the In-

significant risks and elements of uncertainty faced by the

ternational Financial Reporting Standards (IFRS), as adopted

Company and the Group.

by the EU, and in accordance with Danish disclosure requirements for annual reports prepared by listed companies.

We recommend that the 2013/14 Annual Report be adopted by the Annual General Meeting of shareholders.

In our opinion, the consolidated financial statements and parent financial statements give a true and fair view of the Group’s and Company’s financial position at 31 January 2014 and of the results of the Group’s and Company’s operations and cash flows for the financial year from 1 February 2013 to 31 January 2014.

Aalborg, 2 April 2014 EXECUTIVE BOARD

Frede Clausen

Robert Andersen

President and CEO

Executive Vice President

B OA R D O F D I R ECTO RS

Niels Roth

Peter Thorsen

Chairman

Deputy Chairman

Per Søndergaard Pedersen

Arne Gerlyng-Hansen

Kim Mikkelsen

Morten E. Astrup

S tatement by t h e S upervisory and E xecutive B oards |

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INDEPENDENT AUDITOR’S REPORT To the shareholders of TK Development A/S Report on the consolidated financial statements and parent financial statements

ent financial statements, whether due to fraud or error. In making those

We have audited the consolidated financial statements and parent finan-

nancial statements that give a true and fair view in order to design audit

cial statements of TK Development A/S for the financial year 1 February

procedures that are appropriate in the circumstances, but not for the

2013 - 31 January 2014, which comprise the income statement, state-

purpose of expressing an opinion on the effectiveness of the entity’s

ment of comprehensive income, balance sheet, statement of changes

internal control. An audit also includes evaluating the appropriateness

in equity, cash flow statement and notes, including the accounting pol-

of accounting policies used and the reasonableness of accounting esti-

icies, for the Group as well as for the Parent. The consolidated financial

mates made by Management, as well as the overall presentation of the

statements and parent financial statements are prepared in accordance

consolidated financial statements and parent financial statements.

risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements and parent fi-

with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Management’s responsibility for the consolidated financial stateOur audit has not resulted in any qualification.

ments and parent financial statements Management is responsible for the preparation of consolidated financial statements and parent financial statements that give a true and fair

Opinion

view in accordance with International Financial Reporting Standards as

In our opinion, the consolidated financial statements and parent finan-

adopted by the EU and Danish disclosure requirements for listed com-

cial statements give a true and fair view of the Group’s and the Parent’s

panies and for such internal control as Management determines is nec-

financial position at 31 January 2014, and of the results of their opera-

essary to enable the preparation and fair presentation of consolidated

tions and cash flows for the financial year 1 February 2013 - 31 January

financial statements and parent financial statements that are free from

2014 in accordance with International Financial Reporting Standards as

material misstatement, whether due to fraud or error.

adopted by the EU and Danish disclosure requirements for listed companies.

Auditor’s responsibility Our responsibility is to express an opinion on the consolidated financial

Statement on the management commentary

statements and parent financial statements based on our audit. We

Pursuant to the Danish Financial Statements Act, we have read the man-

conducted our audit in accordance with International Standards on Au-

agement commentary. We have not performed any further procedures in

diting and additional requirements under Danish audit regulation. This

addition to the audit of the consolidated financial statements and par-

requires that we comply with ethical requirements and plan and perform

ent financial statements.

the audit to obtain reasonable assurance about whether the consolidated financial statements and parent financial statements are free from

On this basis, it is our opinion that the information provided in the man-

material misstatement.

agement commentary is consistent with the consolidated financial statements and parent financial statements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and parent financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatements of the consolidated financial statements and par-

Aalborg, 2 April 2014

Copenhagen, 2 April 2014

NIELSEN & CHRISTENSEN

DELOITTE

Statsautoriseret Revisionspartnerselskab

Statsautoriseret Revisionspartnerselskab

Johny Jensen

Marian Fruergaard

René H. Christensen

Jan Bo Hansen

State-authorized

State-authorized

State-authorized

State-authorized

public accountant

public accountant

public accountant

public accountant

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C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S I N C O M E S TAT E M E N T

DKKm

Note

2013/14

2012/13

Net revenue

4

407.0

632.3

External direct project costs

5

-228.2

-734.0

Value adjustment of investment properties, net

-14.9

-37.8

Gross profit/loss

163.9

-139.5

Other external expenses

6

27.2

30.2

Staff costs

7

63.8

69.2

Total

91.0

99.4

Profit/loss before financing and depreciation

72.9

-238.9

Depreciation and impairment of non-current assets Operating profit/loss

1.4

2.2

71.5

-241.1

-4.1

2.5

Income from investments in associates

10

Financial income

12

5.5

5.6

Financial expenses

13

-107.9

-93.0

-106.5

-84.9

-35.0

-326.0

Total Profit/loss before tax Tax on profit/loss for the year

14

Profit/loss for the year

14.0

167.3

-49.0

-493.3

EARNINGS PER SHARE IN DKK Earnings per share (EPS)

15

-0.7

-8.5

Diluted earnings per share (EPS-D)

15

-0.7

-8.5

-49.0

-493.3

-11.2

6.1

C O M P R E H E N S I V E I N C O M E S TAT E M E N T Profit/loss for the year Items that may be re-classified to profit/loss: Foreign-exchange adjustments, foreign operations Value adjustments of hedging instruments Tax on value adjustments of hedging instruments Other comprehensive income for the year Comprehensive income for the year

C onsolidated financial statements |

-2.3

3.1

7.0

-3.5

-6.5

5.7

-55.5

-487.6

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C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S BALANCE SHEET

DKKm

Note

31 Jan 2014

31 Jan 2013

17

33.3

33.3

33.3

33.3

1.4

2.5

1.4

2.5 479.4

ASSETS Non-current assets Goodwill Intangible assets Other fixtures and fittings, tools and equipment

19

Property, plant and equipment Investment properties

18

411.7

Investment properties under construction

18

24.2

16.9

435.9

496.3

2.6

1.7

Receivables from associates

4.6

4.6

Other securities and investments

0.3

0.8

Financial assets

7.5

7.1

122.6

127.0

Other non-current assets

122.6

127.0

Non-current assets

600.7

666.2

2,986.0

3,030.9

54.1

73.2

12.0

19.0

Investment properties Investments in associates

Deferred tax assets

10

20

Current assets Projects in progress or completed

21

Trade receivables

22

Receivables from associates Corporate income tax receivable

1.7

4.0

Other receivables

77.2

122.4

Prepayments

17.8

22.4

162.8

241.0

Receivables Other securities and investments

23

4.0

4.3

Deposits in blocked and escrow accounts

24

47.4

35.7

38.7

31.2

Current assets

3,238.9

3,343.1

ASSETS

3,839.6

4,009.3

Cash and cash equivalents

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C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S BALANCE SHEET

DKKm

Note

31 Jan 2014

31 Jan 2013

Share capital

25

98.2

631.0

Other reserves

26

587.7

5.3

867.8

753.4

1,553.7

1,389.7

102.2

EQUITY AND LIABILITIES Equity

Retained earnings Equity

Liabilities Credit institutions

27

108.0

Provisions

28

0.0

2.3

Deferred tax liabilities

20

35.0

35.0

Other debt

30

Non-current liabilities Credit institutions

27

Trade payables Corporate income tax

0.0

1.5

143.0

141.0

1,881.6

2,189.1

95.3

106.3

6.5

5.0

Provisions

28

9.6

13.1

Other debt

30

139.0

150.2

10.9

14.9

Current liabilities

2,142.9

2,478.6

Liabilities

2,285.9

2,619.6

EQUITY AND LIABILITIES

3,839.6

4,009.3

Deferred income

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C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S S TAT E M E N T O F C H A N G E S I N E Q U I T Y

DKKm Equity at 1 February 2012

Share

Other

Retained

capital

reserves

earnings

Total equity

631.0

139.8

1,105.6

1,876.4

Profit/loss for the year

0.0

0.0

-493.3

-493.3

Other comprehensive income for the year

0.0

5.7

0.0

5.7

Total comprehensive income for the year

0.0

5.7

-493.3

-487.6

Special reserve transferred to distributable reserves

0.0

-140.2

140.2

0.0

Share-based payment

0.0

0.0

0.9

0.9

631.0

5.3

753.4

1,389.7 -49.0

Equity at 31 January 2013 Profit/loss for the year

0.0

0.0

-49.0

Other comprehensive income for the year

0.0

-6.5

0.0

-6.5

Total comprehensive income for the year

0.0

-6.5

-49.0

-55.5

-588.9

588.9

0.0

0.0

56.1

0.0

0.0

56.1

Capital decrease Capital increase Premium on capital increase

0.0

174.4

0.0

174.4

Costs of share issue

0.0

-11.6

0.0

-11.6

Premium on capital increase transferred to distributable reserves

0.0

-162.8

162.8

0.0

Share-based payment Equity at 31 January 2014

0.0

0.0

0.6

0.6

98.2

587.7

867.8

1,553.7

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C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S C A S H F L O W S TAT E M E N T

DKKm

2013/14

2012/13

71.5

-241.1

Operating profit/loss Adjustments for non-cash items: Value adjustment of investment properties, net

14.9

37.8

Depreciation and impairment

-7.5

290.1

0.6

0.9

-5.6

0.4

Share-based payment Provisions Foreign-exchange adjustment Increase/decrease in investments in projects, etc. Increase/decrease in receivables Changes in deposits on blocked and escrow accounts

-12.8

7.5

60.5

139.9

81.9

22.4

-11.7

9.5

Increase/decrease in payables and other debt

-22.6

-61.1

Cash flows from operations

169.2

206.3

-119.8

-142.9

5.3

4.3

Interest paid, etc. Interest received, etc. Corporate income tax paid

0.9

-22.1

Cash flows from operating activities

55.6

45.6

Investments in equipment, fixtures and fittings

-0.2

-0.2

0.0

0.4

Investments in investment properties

-9.1

-11.3

Sale of investment properties

54.3

17.3

Sale of equipment, fixtures and fittings

Dividend from associates Purchase of securities and investments Sale of securities and investments Cash flows from investing activities

2.0

0.0

-0.1

-0.7

0.8

0.9

47.7

6.4

Repayment, long-term financing

0.0

-0.7

Raising of long-term financing

0.0

13.0

Raising of project financing

29.5

149.5

-342.4

-238.0

Capital increase

230.5

0.0

Costs of share issue

-11.6

0.0

Cash flows from financing activities

-94.0

-76.2

Reduction of project financing/repayments, credit institutions

9.3

-24.2

Cash and cash equivalents, beginning of year

31.2

55.1

Foreign-exchange adjustment of cash and cash equivalents

-1.8

0.3

Cash and cash equivalents at year-end

38.7

31.2

Cash flows for the year

The figures in the cash flow statement cannot be inferred from the consolidated financial statements alone.

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TA B L E O F C O N T E N T S ,

N O T E S , C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Page 57

Note 1. Accounting policies

65

Note 2. Accounting estimates and assessments

67

Note 3. Segment information

69

Note 4. Net revenue

70

Note 5. External direct project costs

70

Note 6. Other external expenses

70

Note 7. Staff costs

71

Note 8. Share-based payment

72

Note 9. Fees payable to the auditors elected at the General Meeting

73

Note 10. Investments in associates

73

Note 11. Investments in joint ventures

74

Note 12. Financial income

74

Note 13. Financial expenses

75

Note 14. Corporate income tax

75

Note 15. Earnings per share in DKK

75

Note 16. Dividends

76

Note 17. Goodwill

77

Note 18. Investment properties and investment properties under construction

79

Note 19. Other fixtures and fittings, tools and equipment

80

Note 20. Deferred tax

82

Note 21. Projects in progress or completed

83

Note 22. Trade receivables

83

Note 23. Other securities and investments

84

Note 24. Deposits in blocked and escrow accounts

84

Note 25. Share capital

85

Note 26. Other reserves

86

Note 27. Credit institutions

86

Note 28. Provisions

87

Note 29. Operating leases

87

Note 30. Other debt

88

Note 31. Contingent assets and liabilities as well as security furnished

89

Note 32. Financial risks and financial instruments

94

Note 33. Transactions with related parties

95

Note 34. Post-balance sheet events

95

Note 35. Approval of Annual Report for publication

96

Note 36. Overview of group companies

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NOTES N OT E 1 . ACCO U N T I N G P O L I C I E S

pretations had not yet entered into force or been adopted by the EU. Thus, they have not been incorporated into the Annual

The consolidated financial statements for 2013/14 for TK De-

Report. Other than those stated below, none of these stand-

velopment A/S are presented in compliance with the Interna-

ards and interpretations are expected to materially affect the

tional Financial Reporting Standards, as adopted by the EU, and

annual reports for the next financial years, with the exception

in accordance with Danish disclosure requirements for annual

of the additional disclosure requirements following from the rel-

reports of listed companies; see the Executive Order on IFRS

evant standards and interpretations.

issued in pursuance of the Danish Financial Statements Act. TK Development A/S is a public limited company with its regis-

IFRS 11, Joint Arrangements (May 2011), supersedes IAS 31,

tered office in Denmark.

Joint Ventures. Following the withdrawal of IAS 31, the option of consolidating joint ventures on a pro-rata basis no longer

As the Group has chosen to postpone the implementation of

exists, and they will subsequently have to be recognized ac-

IFRS 10, Consolidated Financial Statements, and IFRS 11, Joint

cording to the equity method in compliance with IAS 28, Invest-

Arrangements, until the 2014/15 financial year, the consolidat-

ments in Associates and Joint Ventures. The standard will be-

ed financial statements do not comply with the International

come effective for financial years beginning at 1 February 2014

Financial Reporting Standards (IFRS) issued by the International

or later. For TK Development A/S, IFRS 11 means that a number

Accounting Standards Board (IASB), unlike in previous financial

of the Company’s partly-owned enterprises jointly controlled

years.

with other parties can no longer be consolidated on a pro-rata basis, but must be recognized according to the equity method

All figures in the consolidated financial statements are pre-

instead. The amendment will affect a great number of items

sented in DKK million, unless otherwise stated. DKK is the pres-

in the income statement, assets and liabilities, and will over-

entation currency for the Group’s activities and the functional

all result in a reduction of the Group’s balance sheet total. The

currency of the Parent Company.

amendment will not impact consolidated results or equity. The effect has not yet been finally calculated, as this would require

The consolidated financial statements are presented on the

further analysis.

basis of historical cost, with the exception of investment properties, derivative financial instruments and financial assets

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

classified as available for sale, which are measured at fair value.

The consolidated financial statements comprise the Parent Company, TK Development A/S, and the enterprises controlled

I M P L E M E N TAT I O N O F N E W A N D A M E N D E D

by the Parent Company. The Parent Company is considered to

F I N A N C I A L R E P O R T I N G S TA N D A R D S A N D I N -

exercise control when it holds more than 50 % of the voting

T E R P R E TAT I O N S I S S U E D B Y I F R I C

rights, whether directly or indirectly, or otherwise may exercise

The consolidated financial statements for 2013/14 have been presented in accordance with the financial reporting standards (IFRS/IAS) and IFRIC interpretations applicable for financial years beginning at 1 February 2013.

or actually exercises control. Enterprises in which the Group holds between 20 % and 50 % of the voting rights, whether directly or indirectly, and thus has significant influence, but not a controlling interest, are consid-

The implementation of new or amended financial reporting

ered associates. Enterprises jointly controlled with other inves-

standards and interpretations that entered into force in the

tors are considered joint ventures.

2013/14 financial year has not resulted in any changes to the accounting policies that affect recognition and measurement,

Consolidated financial statements are prepared on the basis

but has involved a number of increased disclosure require-

of the financial statements of the Parent Company and its

ments, which have all been complied with in the preparation of

subsidiaries by adding together items of a uniform nature. The

the Annual Report for 2013/14.

financial statements on which the consolidated financial statements are based are prepared in accordance with the account-

The accounting policies have been consistently applied com-

ing policies applied by the Group. The items in the subsidiaries’

pared to last year and are set out below.

financial statements are fully recognized in the consolidated financial statements.

F I N A N C I A L R E P O R T I N G S TA N D A R D S A N D I F R I C I N T E R P R E TAT I O N S N O T Y E T I N FO R C E

On consolidation, intercompany income and expenses, share-

At the date of publication of this Annual Report, a number of

holdings, balances and dividends as well as gains on transac-

new or amended financial reporting standards and IFRIC inter-

tions between consolidated enterprises are eliminated. Losses

C onsolidated financial statements |

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NOTES N OT E 1 . ACCO U N T I N G P O L I C I E S , CO N T I N U E D are eliminated to the extent that no impairment has occurred.

DKK 29.1 million.

The consolidated financial statements include subsidiaries and

Gains or losses on the sale or winding-up of subsidiaries and

associates throughout the period of ownership.

associates that result in the cessation of control and significant influence, respectively, are determined as the difference

B U S I N E S S C O M B I N AT I O N S

between (i) the fair value of the sales proceeds or winding-up

Newly acquired or newly established enterprises are recognized

proceeds plus the fair value of any remaining equity invest-

in the consolidated financial statements as from the date of

ments and (ii) the carrying amount of net assets at the date of

acquisition or establishment. The date of acquisition is the date

sale or winding-up, including goodwill, less any minority inter-

on which control of the enterprise is effectively transferred to

ests. The gain or loss thus calculated is recognized in profit or

the acquirer. Sold or wound-up enterprises are recognized in

loss together with accumulated foreign-exchange adjustments

the consolidated income statement until the date of sale or

previously recognized in other comprehensive income.

winding-up. Comparative figures are not adjusted for newly acquired, sold or wound-up enterprises.

A S S O C I AT E S / J O I N T V E N T U R E S I N T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Upon the acquisition of new enterprises in which the Group

In the consolidated financial statements, investments in asso-

gains a controlling interest in the acquired enterprise, the pur-

ciates are recognized and measured according to the equity

chase method is used, which means that the identifiable as-

method, which means that investments are measured at the

sets, liabilities and contingent liabilities of the newly acquired

proportionate share of the associates’ carrying amount, deter-

enterprises are measured at fair value at the acquisition date.

mined according to the Group’s accounting policies, with the

Restructuring provisions are only recognized in the transfer

addition of goodwill and plus or less any proportionate inter-

balance sheet if they constitute a liability for the enterprise

company profits or losses.

acquired. The tax effect of revaluations made is taken into account.

The proportionate share of the associate’s results after tax and the proportionate elimination of unrealized intercompany prof-

The purchase consideration for an enterprise consists of the

its and losses are recognized in profit or loss, less any impair-

fair value of the consideration paid for the enterprise acquired.

ment of goodwill. The proportionate share of all transactions

If the final determination of the consideration depends on one

and events recognized in the associate’s other comprehensive

or more future events, the effect of such events is recognized

income is recognized in consolidated other comprehensive in-

at fair value at the acquisition date. Costs directly attributable

come.

to the acquisition are recognized directly in profit or loss upon being incurred.

Investments in associates with a negative equity value are measured at DKK 0. Receivables and other non-current finan-

Positive balances between (i) the purchase consideration, the

cial assets considered to be part of the overall investment in

value of any minority interests in the acquired enterprise plus

the associate are written down by any remaining negative eq-

the fair value of previously acquired equity investments, and (ii)

uity value. Trade receivables and other receivables are written

the fair value of the assets, liabilities and contingent liabilities

down to the extent that they are considered uncollectible. A

acquired are recognized as goodwill in the balance sheet under

provision for the remaining negative equity value is only recog-

intangible assets, and the goodwill amount is subjected to im-

nized if the Group has a legal or constructive obligation to meet

pairment tests at least once a year. If the carrying amount of

the relevant associate’s liabilities.

the asset exceeds the recoverable amount, it is written down to the recoverable amount. Any negative balances are recog-

Associates whose activities comprise projects within the

nized as income in profit or loss.

Group’s primary sphere of activity (development and contract work), and which are managed together with other investors in

For business combinations effected before 1 February 2004,

accordance with shareholders’ or similar agreements (joint ven-

the accounting classification according to the previous ac-

tures), are included in the consolidated financial statements

counting policies has been retained. Thus, goodwill from such

by pro-rata consolidation of the associates’ accounting items,

business combinations is recognized on the basis of the cost

so that a proportionate share, equal to the participation in the

recognized according to the previous accounting policies, net

associates, is included in the corresponding items in the consol-

of amortization and impairment until 31 January 2004. As of 31

idated financial statements.

January 2014, the carrying amount of goodwill relating to business combinations effected before 1 February 2004 totalled

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NOTES N OT E 1 . ACCO U N T I N G P O L I C I E S , CO N T I N U E D

T R A N S L AT I O N O F FO R E I G N - C U R R E N C Y I T E M S

When associates/joint ventures that present financial state-

A functional currency is determined for each of the reporting

ments in a functional currency other than DKK are recognized

enterprises in the Group. The functional currency is the curren-

in the consolidated financial statements, income statement

cy used in the primary economic environment in which the indi-

items are translated on the basis of the average exchange

vidual reporting enterprise operates. Transactions in currencies

rates for the period under review, and balance sheet items

other than the individual enterprise’s functional currency are

are translated on the basis of the exchange rates ruling at the

considered foreign-currency transactions and are translated

reporting date. Exchange differences arising on translating

into the functional currency on initial recognition, based on

foreign enterprises’ beginning-of-year balance sheet items at

the exchange rates ruling at the dates of the transactions. Ex-

the exchange rate ruling at the reporting date and on trans-

change differences arising between the exchange rate on the

lating the income statement items from the average exchange

transaction date and the exchange rate on the payment date

rate for the period under review to the exchange rate at the

are recognized in profit or loss under financial items.

reporting date are recognized in other comprehensive income. Exchange differences arising as a result of changes recognized

Receivables, payables and other monetary items in foreign cur-

directly in the equity of the foreign reporting enterprise are also

rencies that have not been settled by the reporting date are

recognized in other comprehensive income.

translated into the functional currency according to the exchange rates ruling at the reporting date. Realized and unreal-

D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S

ized exchange gains and losses are recognized in profit or loss

On initial recognition, derivative financial instruments are meas-

as financial items. Property, plant and equipment, intangible

ured at fair value at the settlement date.

assets, projects in progress or completed and other non-monetary assets that have been bought in foreign currencies and

After initial recognition, the derivative financial instruments are

are measured on the basis of historical cost are translated at

measured at fair value at the reporting date. Positive and neg-

the exchange rate ruling on the transaction date. Non-mone-

ative fair values of derivative financial instruments are recog-

tary items that are revalued at fair value are translated at the

nized under other receivables and other debt.

exchange rate ruling on the date of revaluation. Changes in the fair value of derivative financial instruments When enterprises that present financial statements in a func-

that are classified as and meet the conditions for the fair-value

tional currency other than Danish kroner (DKK) are recognized

hedging of a recognized asset or liability are recognized in profit

in the consolidated financial statements, items in the income

or loss together with changes in the value of the hedged asset

statement are translated on the basis of the average exchange

or liability.

rates for the period under review, and items in the balance sheet (including goodwill) are translated on the basis of the

Changes in the fair value of derivative financial instruments that

exchange rates ruling at the reporting date. If the average ex-

are classified as and meet the conditions for effective hedging

change rates for the period under review deviate significantly

of future transactions are recognized in other comprehensive

from the actual exchange rates at the transaction dates, the

income. Any ineffective portion is recognized immediately in

actual exchange rates are used instead.

profit or loss. When the hedged transactions are realized, the accumulated changes are recognized as part of the cost of the

Exchange differences arising on translating foreign enterpris-

relevant transactions.

es’ beginning-of-year balance sheet items at the exchange rate ruling at the reporting date and on translating the income

Changes in the fair value of derivative financial instruments

statement items from the average exchange rate for the period

that are used to hedge net investments in foreign subsidiaries

under review to the exchange rate at the reporting date are

are recognized in the consolidated financial statements under

recognized in other comprehensive income. Exchange differ-

other comprehensive income in the event of hedge effective-

ences arising as a result of changes recognized directly in the

ness. Any ineffective portion is recognized immediately in profit

equity of the foreign reporting enterprise are also recognized in

or loss. When the relevant foreign enterprise is sold, the accu-

other comprehensive income.

mulated changes in value are transferred to profit or loss.

Foreign-exchange adjustments of intercompany accounts

Derivative financial instruments that do not meet the condi-

with foreign subsidiaries that are considered part of the Par-

tions for treatment as hedging instruments are considered

ent Company’s total investment in the relevant subsidiary are

trading portfolios and are measured at fair value, with fair-value

recognized in other comprehensive income in the consolidated

adjustments being recognized under financial items in profit or

financial statements.

loss on a continuing basis.

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NOTES N OT E 1 . ACCO U N T I N G P O L I C I E S , CO N T I N U E D

SHARE-BASED INCENTIVE SCHEMES

Net revenue is measured at the fair value of the consideration

The Group’s incentive schemes are equity-based warrant

received or receivable. If a sale is based on interest-free credit

schemes. The equity-based incentive schemes are measured

with a term extending beyond the usual credit period, the fair

at the fair value of the options at the time of allocation and are

value of the consideration receivable is calculated by discount-

recognized in profit or loss under staff costs over the vesting

ing future payments. The difference between the fair value and

period. The offsetting amount is taken directly to equity.

nominal value of the consideration is recognized in profit or loss as financial income over the extended credit period by using

In connection with initial recognition of the share options, an

the effective interest method.

estimate is made of the number of options to which the employees are expected to become entitled. Subsequently, ad-

Construction contracts

justments are made to reflect changes in the estimated num-

When the outcome of a construction contract can be estimat-

ber of vested options, such that the overall recognition is based

ed reliably, net revenue and construction costs are recognized

on the actual number of vested options.

in profit or loss by reference to the stage of completion of the project at the reporting date (the percentage of completion

The fair value of the options allocated is estimated by using

method).

the Black-Scholes formula, based on the parameters indicated in note 8.

When the outcome of the construction contract cannot be measured with a sufficient degree of reliability, the net reve-

I N C O M E S TAT E M E N T

nue corresponding to the construction costs incurred during

Net revenue

the period is recognized if it is probable that such costs will be

The sales method is used to recognize income on projects sold;

recoverable.

see IAS 18, Revenue. Thus, profits are recognized once the project has been sold, construction completed and all essential el-

External direct project costs

ements of the sales agreement fulfilled, including delivery and

This item consists of all costs relating to projects incurred to

transfer of risk to the buyer.

generate the year’s revenue and includes direct project costs, as well as interest during the construction period, plus a share

The percentage of completion method is used for projects

of the relevant indirect project costs, determined as a per-

meeting the definition of a construction contract; see IAS 11.

centage of staff costs, project materials, cost of premises and

Thus, the revenue for the year on these projects corresponds

maintenance and depreciation resulting from the project devel-

to the selling price of the work performed during the year. The

opment activity and proportionately attributable to the project

recognized profit is the estimated profit on the project, calcu-

development capacity utilized.

lated on the basis of its stage of completion. Reference is made to the section “Construction contracts” below.

Moreover, this item includes any impairment losses on projects in progress or completed and the expensing of project devel-

Where the Group is in charge of development, letting and con-

opment costs to the extent that the relevant projects are not

struction management, etc. on behalf of investors and receives

expected to be realized.

fee income for such services, the fee income is recognized as income on a continuous basis in step with the provision of ser-

Value adjustment of investment properties, etc.

vices.

Changes in the fair values of investment properties are recognized in profit or loss under the item “Value adjustment of in-

Where a sold project consists of several instalment deliveries

vestment properties, net”.

that can be segregated and the financial effect can be assessed separately and measured reliably for each delivery, the

Realized gains and losses on the sale of investment properties

profit on the individual instalment delivery is recognized when

are determined as the difference between the carrying amount

all essential elements of the agreement have been fulfilled.

and the selling price and are also recognized in profit or loss under the item ”Value adjustment of investment properties, net”.

Rental income on completed projects and investment properties is accrued and recognized in accordance with the lease

Other external expenses

agreements concluded.

The item “Other external expenses” includes costs for administration, cost of premises and operating expenses for cars.

For other income, the sales method is used.

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NOTES N OT E 1 . ACCO U N T I N G P O L I C I E S , CO N T I N U E D Income from investments in associates in the consolidated

Deferred tax assets, including the tax base of tax losses al-

financial statements

lowed for carryforward, are recognized in the balance sheet at

The proportionate share of the associates’ results after tax

the value at which the asset is expected to be realized, either

and the proportionate elimination of unrealized intercompany

by setoff against deferred tax liabilities or as net tax assets for

profits and losses, less any impairment of goodwill, are recog-

setoff against future positive taxable income within the same

nized in consolidated profit or loss. The proportionate share of

entity subject to joint taxation. At each reporting date, it is re-

all transactions recognized in the associate’s other comprehen-

considered whether it is likely that sufficient future taxable in-

sive income is recognized in the Group’s other comprehensive

come will be generated to utilize the deferred tax asset, based

income.

on an individual and specific assessment. If it is considered that an individual tax asset cannot be utilized, it is written down

Financial income and expenses

against profit or loss.

Financial income and expenses include interest income and expenses, realized and unrealized gains and losses on foreign-cur-

Deferred tax on temporary differences related to equity invest-

rency transactions, debt and securities as well as the amortiza-

ments in subsidiaries and associates is recognized, unless the

tion of financial liabilities.

Parent Company is able to control when the deferred tax will crystallize and the deferred tax is not likely to crystallize as cur-

Interest income and interest expenses are accrued, based on

rent tax in the foreseeable future. Deferred tax relating to the

the principal and the effective interest rate. The effective in-

retaxation of previously deducted losses in foreign subsidiaries

terest rate is the discount rate used to discount the expected

is recognized based on a specific assessment of the purpose of

future payments associated with the financial asset or finan-

the individual subsidiaries.

cial liability to ensure that the present value of such asset or liability is equal to its carrying amount.

Deferred tax is measured by using the tax rules and rates that will be applicable in the respective countries at the time when

Borrowing costs that are directly associated with the acqui-

the deferred tax is expected to crystallize as current tax, based

sition, construction or production of assets are capitalized as

on the legislation in force at the reporting date. Any changes in

part of the cost of the relevant asset. Other borrowing costs

deferred tax resulting from changed tax rates and tax rules are

are recognized in the income statement.

recognized in profit or loss, unless the deferred tax is attributable to items previously recognized directly in equity or in other

Tax on profit/loss for the year

comprehensive income. In such cases, the change in deferred

The tax for the year, which consists of the year’s current tax

tax is also recognized directly in equity or in other comprehen-

and changes in deferred tax, is recognized in profit or loss as

sive income.

follows: the portion attributable to the profit or loss for the year is recognized in profit or loss, and the portion attributable

The Parent Company is jointly taxed with all Danish subsidiaries.

to items under equity or other comprehensive income is posted

The Parent Company administers the joint taxation. The total

directly to equity or other comprehensive income.

income taxes payable by the jointly taxed companies are distributed between the Danish jointly taxed companies in propor-

Current tax payable and receivable is recognized in the balance

tion to their taxable income.

sheet as tax computed on the taxable income for the year, adjusted for tax paid on account. The calculation of the year’s

Balances arising under the interest deduction limitation rules

current tax is based on the tax rates and tax rules applicable at

laid down in the Danish Corporation Tax Act have been distribut-

the reporting date.

ed between the jointly taxed companies according to the joint taxation agreement concluded.

Deferred tax is recognized according to the balance-sheet liability method on the basis of all temporary differences between

BALANCE SHEET

the carrying amount and the tax base of assets and liabilities,

Goodwill

except deferred tax on temporary differences arising on the in-

On initial recognition, goodwill is recognized and measured as

itial recognition of either goodwill or a transaction that is not

the difference between (i) the purchase consideration for the

a business combination and that does not affect the profit or

acquired enterprise, the value of any minority interests in the

loss or taxable income upon initial recognition.

acquired enterprise plus the fair value of previously acquired equity investments, and (ii) the fair value of the assets, liabili-

Deferred tax is calculated on the basis of the planned use of

ties and contingent liabilities acquired; see the description un-

the individual asset and settlement of the individual liability.

der “Consolidated financial statements”.

C onsolidated financial statements |

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NOTES N OT E 1 . ACCO U N T I N G P O L I C I E S , CO N T I N U E D The carrying amount of goodwill is allocated to the Group’s

to identify any indications of impairment. If such indications are

cash-flow-generating units at the date of acquisition.

identified, the recoverable amount of the asset is calculated

Cash-flow-generating units are defined on the basis of the

to assess the need for any impairment and the extent of such

management structure and internal financial control and re-

impairment.

porting in the Group. The cost of these assets is depreciated according to the Goodwill is not amortized. The amount of goodwill is subject-

straight-line method over their expected useful lives, viz. a peri-

ed to impairment tests at least once a year to ensure that the

od of 5-10 years. Leasehold improvements are depreciated ac-

asset is written down to the extent that the carrying amount

cording to the straight-line method over the term of the lease.

exceeds the recoverable amount. The recoverable amount is determined as the higher of the fair value less selling costs and

Other non-current assets

the present value of estimated future net cash flows from the

Other securities and investments consist of unlisted shares,

cash-flow-generating unit to which the goodwill relates. Impair-

which are measured at fair value.

ment of goodwill is recognized in a separate line in the income statement. Impairment of goodwill is not reversed.

Projects in progress or completed Projects in progress or completed consist of real property pro-

Investment properties and investment properties under

jects.

construction Properties are classified as investment properties when they

The project portfolio is recognized on the basis of the direct

are held to obtain rental income and/or capital gains. On ini-

costs attributable to the projects, including interest during

tial recognition, investment properties are measured at cost,

the project period, plus a share of the relevant indirect project

consisting of the acquisition cost of the property and directly

costs. Where considered necessary, the projects have been

associated costs.

written down to a lower value, and the capitalized amounts are subjected to impairment tests on a continuous basis to ensure

Subsequently, investment properties are measured at fair

that the assets are written down to the extent that the carry-

value, which represents the selling price estimated to be ob-

ing amount exceeds the recoverable amount.

tainable at the reporting date in an arm’s length transaction. Generally, the valuation is made on the basis of a discounted

Additions for indirect project costs are calculated as a percent-

cash-flow model, where future cash flows are discounted to

age of staff costs, project materials, the cost and maintenance

net present value on the basis of a given rate of return. The

of premises and depreciation resulting from project develop-

rate of return is fixed for each individual property. Where a sales

ment and proportionately attributable to the project develop-

process has been started, the selling price discussed will be

ment capacity utilized.

used as a basis for the valuation, if the price is found to correctly reflect the fair value.

Prepayments from customers on sold projects in progress (forward funding) are deducted from the carrying amount of the

The valuation of the Group’s investment properties under con-

project portfolio, and any negative net amount, determined for

struction is also based on a specific assessment of project

each individual project, is included in the item “Prepayments re-

progress at the reporting date, including the risks attaching to

ceived from customers”.

project completion. The costs incurred in connection with construction are added to the value of the property.

Receivables Receivables consist of trade receivables, receivables from con-

Changes in the fair value are recognized in profit or loss under

tract work in progress, receivables from associates and other

“Value adjustment of investment properties, net” in the finan-

receivables. Receivables are classified as loans and receivables,

cial year in which the change occurs.

which are financial assets with fixed or determinable payments that are not quoted in an active market and are not derivative

Other fixtures and fittings, tools and equipment

financial instruments.

Other fixtures and fittings, tools and equipment are measured at cost less accumulated depreciation and impairment. The

Receivables are measured at fair value on initial recognition and

cost consists of the acquisition cost and costs directly asso-

subsequently at amortized cost, which usually corresponds to

ciated with the acquisition until the date when the asset is

nominal value less impairment provisions to meet estimated

ready for use. The carrying amounts of other fixtures and fit-

losses. Impairment losses on receivables are calculated on the

tings, tools and equipment are reviewed at the reporting date

basis of an assessment of the individual receivables.

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NOTES N OT E 1 . ACCO U N T I N G P O L I C I E S , CO N T I N U E D Financial assets and liabilities are charged against the balance

gree of reliability, are measured at cost.

sheet if the Company has a right of setoff and at the same time intends or is under a contractual obligation to realize assets

Equity

and liabilities simultaneously.

Dividend is recognized as a liability at the time of its adoption at the Annual General Meeting.

Prepayments, recognized under assets, consist of paid expenses relating to subsequent financial years. Prepayments are

Pension obligations and the like

measured at cost in the balance sheet.

The Group’s pension obligations consist of defined contribution plans on which fixed contributions are paid regularly to inde-

Construction contracts

pendent pension companies and the like. The contributions are

When the outcome of a construction contract can be estimat-

recognized in profit or loss over the period during which the em-

ed reliably, the construction contract is measured at the sell-

ployees have performed the work entitling them to the pension

ing price of the work performed as of the reporting date (the

contribution. Contributions payable are recognized as a liability

percentage of completion method) less any amounts invoiced

in the balance sheet.

on account and writedowns for impairment. The selling price is measured on the basis of the stage of completion as of the re-

Provisions

porting date and the total revenue expected from the individual

Provisions are recognized when a legal or constructive obliga-

construction contract.

tion is incurred due to events before or at the reporting date, and meeting the obligation is likely to result in an outflow of

The stage of completion of each individual project is normally

resources from the Group.

calculated as the proportion between the resources used by the Group and the total budgeted use of resources.

This item includes provisions for rent guarantees, with the provision being based on experience with rent guarantees and on

When the outcome of the construction contract cannot be

an individual assessment of the individual leases.

measured reliably, the construction contract is measured at the construction costs incurred if it is probable that they will be

Provisions are measured as the best estimate of the costs re-

recoverable. If it is probable that the total construction costs

quired to settle the relevant liabilities at the reporting date.

will exceed total contract revenue, the estimated loss is recog-

Provisions for liabilities with an expected maturity of more than

nized as a cost immediately.

one year are classified as non-current liabilities and measured at present value.

The individual construction contract in progress is recognized in the balance sheet under receivables or liabilities, depending on

Liabilities other than provisions

whether its net value is a receivable or a liability.

Non-current financial liabilities are measured at cost at the time the relevant loans are raised, equivalent to the proceeds

Other securities and investments

received after transaction costs. Subsequently, financial liabil-

Securities under current assets consist of listed and unlisted

ities are measured at amortized cost, such that the difference

shares.

between the proceeds and nominal value is recognized in profit or loss as a financial expense over the term of the loan.

Securities are classified either as financial assets available for sale or as held-to-maturity financial assets.

Other financial liabilities are recognized at amortized cost, which usually corresponds to the nominal value.

Available-for-sale securities are measured at fair value on the reporting date. Fair-value adjustments are recognized in other

Lease payments relating to operational leases are recognized

comprehensive income and are recognized in profit or loss on

in profit or loss according to the straight-line method, over the

the sale or settlement of the securities.

term of the lease.

Listed securities are measured at their official listed price, and

Financial liabilities, which comprise payables to credit institu-

unlisted securities are measured at their fair value, based on

tions, trade payables and other debt, are classified as “Financial

the calculated value in use.

liabilities measured at amortized cost�.

Equity interests that are not traded in an active market, and

Deferred income, recognized under liabilities, consists of in-

where the fair value cannot be determined with a sufficient de-

come received that relates to subsequent financial years. De-

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NOTES N OT E 1 . ACCO U N T I N G P O L I C I E S , CO N T I N U E D ferred income is measured at cost in the balance sheet.

structured as follows:

C A S H F L O W S TAT E M E N T

property development activities

The cash flow statement is presented according to the indirect

asset management activities

method, based on the operating profit or loss, and shows cash

discontinuing activities.

flows generated from operating, investing and financing activities, as well as free cash resources at the beginning and end of

The segment information in note 3 has been disclosed accord-

the financial year.

ingly, and the comparative figures have been restated to reflect the new segmentation.

Cash flows relating to operating activities are calculated as the operating profit or loss, adjusted for non-cash operating items,

Segment income and expenses and segment assets and lia-

changes in working capital and paid financial income, financial

bilities comprise the items directly allocable to the individual

expenses and corporate income tax.

segment and the items that can be allocated to the individual segments on a reliable basis. The unallocated items relate

Cash flows relating to investing activities comprise payments

mainly to assets, liabilities, income and expenses associated

made in connection with the purchase and sale of enterprises,

with the Group’s administrative functions, corporate income

property, plant and equipment and other non-current assets.

tax, and the like.

Cash flows relating to financing activities consist of changes

Non-current assets in the segments comprise the assets used

in the Parent Company’s share capital and associated costs,

directly in the operation of the segments, including intangible

the raising and repayment of loans, other repayments on inter-

assets, property, plant and equipment and investments in as-

est-bearing debt as well as the payment of dividend.

sociates. Current assets in the segments comprise the assets directly allocable to the operating activities in the segment,

Cash flows in currencies other than the functional currency are

including projects in progress or completed, trade receivables,

recognized in the cash flow statement by using average ex-

other receivables, prepayments and cash and cash equivalents.

change rates for the period under review, unless they deviate significantly from the actual exchange rates at the transaction

Liabilities attributable to the segments comprise the liabilities

dates.

deriving from the operating activities in the segment, including trade payables, payables to credit institutions, provisions, other

In preparing the consolidated cash flow statement, opening

debt and the like.

balance sheets and cash flows in foreign currencies are translated on the basis of the foreign-exchange rates prevailing at the reporting date. This eliminates the effect of exchange differences on the period’s movements and cash flows. Interest paid is shown separately. Consequently, project interest for the period is not included in liquidity movements resulting from the project portfolio. Thus, the figures in the cash flow statement cannot be inferred directly from the financial statements. Free cash resources comprise cash and cash equivalents.

S E G M E N T I N FO R M AT I O N The segment information is prepared in accordance with the Group’s accounting policies, based on the Group’s internal management reporting. At the beginning of the financial year, Management decided as part of the adjustment of the Group’s strategy and market focus - to change the internal and external reporting in order to create a better overview and highlight values and value generation in the Group’s business areas. The business areas are

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NOTES N OT E 1 . ACCO U N T I N G P O L I C I E S , CO N T I N U E D

R AT I O D E F I N I T I O N S

18. Thus, Management specifically assesses each individual

Return on equity: Profit/loss attributable to the Parent Company’s shareholders x 100

project for the purpose of determining recognition principle and method.

Average equity excluding minority shares EBIT-margin:

Deferred tax assets

Operating profit/loss x 100

A deferred tax asset of DKK 122.6 million has been recognized

Net revenue

in the balance sheet at 31 January 2014. The tax asset relates

Solvency ratio (based on equity):

mainly to tax loss carryforwards in the various subsidiaries. Val-

Equity excluding minority interests x 100

uation is based on the existing rules for carrying forward losses

Total equity and liabilities

and joint taxation or group contributions and the assumption

Book value in DKK per share: Equity excluding minority interests x 100 Number of shares Price/book value (P/BV): Listed price Book value per share

that each subsidiary is a going concern. A change in the conditions and assumptions for carrying forward losses and joint taxation/group contributions could result in the value of the tax assets being significantly lower than that computed at 31 January 2014. Impairment of deferred tax assets in the amount of DKK 27.8 million was reversed in the 2013/14 financial year. This should be viewed in light of a tax expense in the 2013/14

Earnings in DKK per share:

financial year of DKK 45.9 million, which relates to future

Profit/loss attributable to the Parent Company’s shareholders

changes to tax rates, primarily in Denmark. DKK 37.4 million

Average number of shares in circulation Diluted earnings in DKK per share:

of the above-mentioned DKK 45.9 million was written down to DKK 0 at the beginning of the year.

Diluted profit/loss attributable to the Parent Company’s shareholders Diluted average number of diluted shares

The valuation of the tax assets is based on existing budgets

Dividend in DKK per share:

and profit forecasts for a five-year period. For the first three

The Parent Company’s dividend per share

years, budgets are based on an evaluation of specific projects in the Group’s project portfolio. The valuation for the next two years is based on specific projects in the project portfolio with

N O T E 2 . A C C O U N T I N G E S T I M AT E S A N D A S S E S S MENTS

a longer time horizon than three years as well as various project opportunities.

Many account items cannot be measured with certainty, but

Due to the substantial uncertainties attaching to these valua-

only estimated. Such estimates consist of assessments based

tions, provisions have been made for the risk that projects are

on the most recent information available at the time of present-

postponed or not implemented and the risk that project profits

ing the financial statements. It may be necessary to change

fall below expectations. If the conditions and assumptions for

previous estimates based on changes in the assumptions un-

budgets and profit forecasts change, including time estimates,

derlying the estimate or based on supplementary information,

or if the expectations do not materialize, this could result in the

additional experience or subsequent events.

value of the tax assets being significantly lower than that computed at 31 January 2014, which would have an adverse effect

In connection with the practical application of the accounting

on the Group’s results of operations and financial position.

policies described, Management has made a number of significant accounting estimates and judgments that have materially

Joint taxation

affected this Annual Report.

The Group has been jointly taxed with its German subsidiaries for a number of years. The retaxation balance in respect of the

Recognition of revenue

jointly taxed German companies amounted to DKK 389.4 million

The sales method is used to recognize income on projects sold,

at 31 January 2014. Full retaxation would trigger a tax charge

see IAS 18, Revenue. Revenue on projects that can be classi-

of DKK 97.4 million at 31 January 2014. Tax has not been pro-

fied as construction contracts is recognized according to IAS

vided on the retaxation balance, because Management does

11. For sold projects consisting of several instalment deliveries

not plan to make changes in the Group that would result in full

that can be segregated, where the financial effect can be as-

or partial retaxation. If Management takes a different view, this

sessed separately, the profit on the individual instalment deliv-

could have a significant adverse effect on the Group’s future

ery is recognized when all essential elements of the agreement

performance, results of operations, cash flows and financial

have been fulfilled, thus meeting the recognition criteria of IAS

position.

C onsolidated financial statements |

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NOTES N O T E 2 . A C C O U N T I N G E S T I M AT E S A N D A S S E S S M E N T S , C O N T I N U E D Investment properties and investment properties under

If the return required by investors on real property investments

construction

changes, this could also have an adverse effect on the Group.

The Group’s investment properties and investment properties under construction are measured at fair value in the balance

Negative developments in the retail sector, for example due

sheet. The valuation is made on the basis of a discounted cash-

to economic trends or increased Internet sales, may result in

flow model, where expected future cash flows are discounted

lower demand for retail rental premises, and thus lower rental

to net present value on the basis of a given rate of return, or

income and property prices, which could have an adverse ef-

on the basis of an ongoing sales process where applicable.

fect on the Group.

The valuation of the Group’s investment properties under construction is also based on a specific assessment of project

In addition to rental rates and property prices, as described

progress at the reporting date, including the risks attaching to

above, regulatory approvals and compliance with time sched-

project completion. If any changes occur in the assumptions

ules are two crucial elements affecting the Group’s develop-

used, the value may deviate from the value determined at 31

ment projects.

January 2014. In the 2013/14 financial year, a negative value adjustment of the Group’s investment properties was made,

Regulatory approvals

amounting to DKK -14.9 million. The carrying amount of invest-

The Group’s future earnings depend on the inflow of new pro-

ment properties and investment properties under construction

jects and consequently on the future availability of new build-

amounted to DKK 435.9 million at 31 January 2014.

ing sites and regulatory approvals (planning legislation, local development plans, planning permission, etc.) concerning the

Projects in progress or completed

location, size and use of a property. Changes in local plans or

The Group’s project portfolio comprises land and projects and

other factors that make obtaining planning permission difficult

can generally be categorized as follows:

or restrict the supply of building sites may have a material adverse effect on the Group.

Completed projects in operation

Development projects

Compliance with time schedules

Portfolio of land

The Group bases its individual projects on overall and detailed

Discontinuing activities

time schedules. Time is a crucial factor in complying with agree-

ments concluded with tenants and investors and a significant

Any indications of impairment are determined based on a spe-

factor in ensuring that the individual projects progress accord-

cific assessment of each individual project, including existing

ing to plan and, accordingly, that the Group generates the

project budgets and the expected future development poten-

earnings expected. Postponing an individual project may, for

tial. If the actual course of a project deviates from the expected

instance, mean that lease agreements lapse, tenants become

development, this may necessitate changes to the impairment

entitled to compensation and, ultimately, that an investor is no

recognized, which could have an adverse effect on the Group.

longer under an obligation to buy the project.

Each project category is subject to a number of risks which may

Portfolio of land

negatively impact the project valuation. The most significant

In March 2013 the Group adopted a strategy aimed at reducing

risks are primarily business-related and concern:

the portfolio of projects not initiated (plots of land) over a twoyear period from the level in March 2013 of DKK 1.1 billion to a

Rental rates and property prices

level of DKK 0.5 billion. The portfolio can be reduced by initiat-

The Group is affected by price fluctuations in the various prop-

ing development projects or selling plots of land. The risk exists

erty markets in which it operates, as well as by general eco-

that land will be sold at a value lower than its carrying amount.

nomic trends. Declining rental levels and lower prices for land

If planned projects cannot be executed on acquired sites, it

and property may have an adverse effect on the Group.

may be necessary to make writedowns for impairment, which could have a material adverse effect on the Group.

The risks on the Group’s completed projects include a letting risk attaching to those of the Group’s lease agreements that

Discontinuing activities

expire while the Group owns the relevant properties. If the

In March 2013 the Group decided to phase out its activities in

Group fails to renew these agreements, fails to enter into new

Finland, Germany, the Baltic States and Russia. The phase-out,

agreements, or if the agreements can be entered into only on

with resulting office closures and employee dismissals, is be-

less favourable terms and conditions, it could have an adverse

ing carried out as quickly as possible, while taking into account

effect on the Group.

that all the countries in question have projects that need to

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NOTES N O T E 2 . A C C O U N T I N G E S T I M AT E S A N D A S S E S S -

N O T E 3 . S E G M E N T I N FO R M AT I O N

MENTS, CONTINUED be handled so as to retain as much of the value of the existing

The Group’s internal reporting to the Parent Company’s Board

portfolio as possible. The risk exists that these activities may

of Directors is organized into three business areas:

be phased out at a value lower than their carrying amount, and that the phase-out will take longer than anticipated. Valuation at 31 January 2014

Property development

Asset management

Discontinuing activities

With a carrying amount of DKK 2,986.0 million at 31 January 2014, projects in progress and completed projects account

These business areas represent the Group’s operating seg-

for a significant share of the Group’s balance sheet total. The

ments, as defined by IFRS 8.

changed indication of impairment of projects in progress and completed projects has had a positive impact of DKK 8.7 million

Property development comprises most of the Group’s projects,

on the results for the year. Accumulated impairment amounted

i.e. all the projects that are located in one of the Group’s con-

to DKK 440.5 million at 31 January 2014. The portion of the

tinuing markets, Denmark, Sweden, Poland and the Czech Re-

project portfolio on which impairment losses have been recog-

public, and which are not investment properties or completed

nized represented a carrying amount of DKK 1,474.8 million at

properties.

31 January 2014. Asset management comprises the Group’s investment propReceivables

erties and completed projects in operation, to the extent that

Indications of impairment of receivables are determined based

such properties are located in one of the Group’s continuing

on a specific assessment of each individual receivable. If any

markets, Denmark, Sweden, Poland and the Czech Republic.

changes occur in the assumptions used, the value may deviate from the value determined at 31 January 2014. The carrying

Discontinuing activities comprise all the Group’s activities in the

amount of receivables totalled DKK 162.8 million at 31 January

markets where the activities are being phased out, viz. Germa-

2014.

ny, Finland, the Baltic States and Russia.

Goodwill

The unallocated items in the income statement primarily com-

To identify any indication of impairment of the goodwill amounts

prise staff costs and other external expenses, to the extent

recognized, the values in use of the cash-flow-generating units

that these costs and expenses cannot be allocated to discon-

to which the goodwill amount is attributable must be calculat-

tinuing activities and tax. The unallocated items in the balance

ed. Calculating the value in use assumes that an estimate of

sheet primarily comprise goodwill, deferred tax assets and de-

future expected cash flows in the individual cash-flow-gener-

ferred tax liabilities, cash and cash equivalents and operating

ating unit has been made and that a reasonable discount rate

credit facilities that are not directly allocable to an individual

has been determined. The goodwill amount recognized in the

segment.

balance sheet has not been written down for impairment. The carrying amount of goodwill totalled DKK 33.3 million at 31 Jan-

The segment information has been disclosed accordingly.

uary 2014. The accounting policies used in compiling the segment information are identical to the Group’s accounting policies; see the description above.

C onsolidated financial statements |

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NOTES N O T E 3 . S E G M E N T I N FO R M AT I O N , C O N T I N U E D

31.1.2014 Net revenue, external customers Impairment losses on projects in progress or completed

Development

Asset management

Discontinuing activities

Unallocated

Total

258.9

137.7

10.4

0.0

407.0

0.0

0.0

8.9

0.0

8.9

17.6

0.0

0.0

0.0

17.6

0.0

-5.4

-9.5

0.0

-14.9

Gross profit/loss

68.7

112.6

-17.4

0.0

163.9

Financial income

2.4

3.1

0.0

0.0

5.5

-24.2

-64.4

-5.9

-13.4

-107.9

Depreciation and impairment

0.0

0.0

0.0

1.4

1.4

Shares of profit or loss in associates

2.7

0.3

-7.1

0.0

-4.1

Reversal of impairment losses on projects in progress or completed Value adjustment of investment properties, net

Financial expenses

Profit/loss before tax

49.6

51.6

-38.9

-97.3

-35.0

1,235.0

2,038.8

367.7

198.1

3,839.6

Investments in associates

1.3

1.3

0.0

0.0

2.6

Capital expenditure *)

7.3

1.8

0.0

0.2

9.3

545.9

1,292.2

150.6

297.2

2,285.9

Development

Asset management

Discontinuing activities

Unallocated

Total

Net revenue, external customers

183.4

434.5

14.4

0.0

632.3

Impairment losses on projects in progress or completed

142.7

130.1

30.7

0.0

303.5

15.6

0.0

0.0

0.0

15.6

0.0

-24.3

-13.5

0.0

-37.8

-81.8

-21.0

-36.7

0.0

-139.5

-2.8

-63.4

-8.2

-13.0

-87.4

Depreciation and impairment

0.0

0.0

0.1

2.1

2.2

Shares of profit or loss in associates

1.6

0.0

0.9

0.0

2.5

-83.0

-84.4

-53.7

-104.9

-326.0

1,284.5

2,100.7

425.4

198.7

4,009.3

0.7

1.0

0.0

0.0

1.7

10.1

1.2

0.0

0.2

11.5

718.0

1,388.1

191.1

322.4

2,619.6

Segment assets

Segment liabilities

31.1.2013

Reversal of impairment losses on projects in progress or completed Value adjustment of investment properties, net Gross profit/loss Financing, etc.

Profit/loss before tax Segment assets Investments in associates Capital expenditure *) Segment liabilities *)

Capital expenditure comprises additions to intangible assets and property, plant and equipment.

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NOTES N O T E 3 . S E G M E N T I N FO R M AT I O N , C O N T I N U E D Geografical information TK Development operates primarily on the markets in Denmark, Sweden, Poland and the Czech Republic. Because of the Group’s accounting policies for recognizing sold projects, revenue in the individual countries may vary substantially from one year to another. For the purpose of presenting information about geographical areas, the information about the distribution of revenue on geographical segments was prepared on the basis of project location. Net revenue, external customers

Non-current assets *)

2013/14

2012/13

2013/14

2012/13

Denmark

88.5

95.0

33.8

34.7

Sweden

30.2

118.5

0.0

0.1

197.3

340.6

105.7

102.1

80.7

63.8

227.9

227.8

Germany

6.4

11.1

103.2

167.4

Other countries **)

3.9

3.2

0.0

0.0

407.0

632.3

470.6

532.1

Poland Czech Republic

Total *) Non-current assets comprise intangible assets and property, plant and equipment.

**) Net revenue for other countries comprises the remaining revenue, including revenue in the countries for which no specific amount is indicated for the individual year.

Non-current assets relate primarily to the Group’s investment properties in the Czech Republic, Poland and Germany; see note 18. Information about major customers: In 2013/14, The Group sold one project to a customer where the revenue on the project exceeded 10 % of the Group’s total revenue. The revenue on this projects amounted to DKK 48.2 million. In the 2012/13 financial year, two different projects were sold to two different customers where the revenue on each project exceeded 10 % of the Groups total revenue. The revenue amounted to DKK 282.7 million and DKK 95.6 million respectively. N OT E 4 . N E T R E V E N U E

Sale of projects and properties Income from construction contracts (recognized according to the percentage of completion method) Rental income Sale of services Total net revenue

C onsolidated financial statements |

2013/14

2012/13

203.1

409.9

0.0

20.0

152.6

171.2

51.3

31.2

407.0

632.3

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 6 9 / 1 1 5


NOTES N OT E 5 . E X T E R N A L D I R ECT P ROJ ECT COSTS 2013/14

2012/13

236.9

446.1

8.9

303.5

Project costs Impairment losses on projects in progress or completed Reversal of impairment losses on projects in progress or completed

-17.6

-15.6

External direct project costs, total

228.2

734.0

Impairment losses previously recognized have been reversed due to the significantly improved progress of the relevant project.

N OT E 6 . OT H E R E X T E R N A L E X P E N S E S 2013/14

2012/13

13.4

14.8

Cost of premises

8.8

9.8

Cars, operating expenses

5.0

5.6

27.2

30.2

2013/14

2012/13

Fees for Board of Directors

1.5

1.8

Salaries, etc. for the Parent Company’s Executive Board; see below

6.0

6.2

47.3

50.4

Defined contribution pension plans

0.9

1.0

Other social security costs

6.4

7.3

Share-based payment, other employees

0.4

0.7

Other staff costs

1.3

1.8

Total staff costs

63.8

69.2

Average number of employees

100

115

90

112

Administrative expenses

Other external expenses, total

N O T E 7 . S TA F F C O S T S

Other salaries

Number of employees at year-end Salaries, etc. for the Parent Company’s Executive Board:

Salary

Pension

Share-based payment

Total

Frede Clausen

3.2

0.1

0.1

3.4

Robert Andersen

2.4

0.1

0.1

2.6

Salaries, etc., total

5.6

0.2

0.2

6.0

Frede Clausen

3.3

0.1

0.1

3.5

Robert Andersen

2.5

0.1

0.1

2.7

Salaries, etc., total

5.8

0.2

0.2

6.2

2013/14

2012/13

In addition, the Executive Board has the usual free benefits, including free company car. The value of these benefits amounted to DKK 0.17 million per Executive Board member in 2013/14 (2012/13: DKK 0.16 million per Executive Board member).

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NOTES N O T E 7 . S TA F F C O S T S , C O N T I N U E D The Board of Directors is composed of the Chairman, Deputy Chairman and four other members. In 2013/14, the Board of Directors members were paid a basic fee of DKK 160,000. The Chairman is paid three times the basic fee and the Deputy Chairman twice the basic fee, while the remaining members are paid the basic fee. In the 2012/13 financial year a new two-year agreement was made with the Executive Board, according to which 20 % of the Executive Board’s already reduced fixed annual remuneration will not be paid on an ongoing basis, which will equal a 36 % reduction compared to the remuneration paid in the 2011/12 financial year, which applies to the period from 1 May 2013 to 30 April 2015. Up to two-thirds of the remuneration withheld during the two-year period will nevertheless be paid when the Group meets specific operational targets. Defined contribution plans The Group has entered into defined contribution plans with the majority of the employees in Danish group companies. According to these plans, the group companies pay a monthly amount of 2 % of the relevant employees’ basic salaries to independent pension companies. An amount of DKK 1.1 million was expensed for defined contribution plans in the 2013/14 financial year (2012/13: DKK 1.2 million). No employees in the Group are comprised by defined benefit plans. N O T E 8 . S H A R E - B A S E D PAY M E N T For several years, TK Development has used incentive schemes for the Executive Board and other executive staff members. The aim of using incentive schemes is to forge a link between the individual staff member’s efforts and the Group’s long-term value creation. As at 31 January 2014, only one incentive scheme remains. 2011 scheme In June 2011 the Board of Directors allocated 500,000 warrants to the Executive Board and other executive staff, broken down by 62,500 warrants to each Executive Board member and 375,000 warrants to other staff members. Following the capital reduction and capital increase implemented in September 2013, the number of warrants allocated has been adjusted by 171,461 warrants. At the reporting date, the number of outstanding warrants totalled 615,461, corresponding to 0.6 % of the share capital. The outstanding warrants can be exercised in three six-week periods placed as follows: following publication of the preliminary announcement of financial statements for the 2013/14 financial year (from around 1 April 2014); following publication of the interim report for the six-month period ending 31 July 2014 (from around 15 September 2014); and following publication of the preliminary announcement of financial statements for the 2014/15 financial year (from around 1 April 2015). The fair value of the warrants allocated has been calculated using the Black-Scholes pricing formula and amounts to DKK 2.1 million, which will be expensed over the term of the incentive scheme. The main condition for exercising these warrants is that the employee has not given notice to terminate his or her employment before having exercised the warrants allocated.

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 7 1 / 1 1 5


NOTES N O T E 8 . S H A R E - B A S E D PAY M E N T, C O N T I N U E D The development in outstanding warrants is shown below: Weighted average exercise prices

Number of warrants 31 Jan 2014

31 Jan 2013

31 Jan 2014

31 Jan 2013

Outstanding warrants, beginning of year

930,315

1,707,812

27.65

41.54

Allocated during the financial year (adjustment)

171,461

0

-

-

Lapsed due to termination of employment

-40,000

-16,000

28.90

28.90

-446,315

-761,497

26.30

78.40

615,461

930,315

20.81

27.65

0

446,315

-

-

0.6

0.9

-

-

Expired in the financial year Outstanding warrants, end of year Number of warrants exercisable at the reporting date Share-based payment recognized in the profit or loss (DKK million)

For the outstanding warrants at 31 January 2014. the exercise prices range from DKK 20.2 to DKK 21.8 per warrant (2012/13: DKK 26.3 to DKK 30.2 per warrant). The weighted average term to expiry has been calculated at 16 months (2012/13: 15 months). Outstanding warrants is specified as below: Number of warrants

Expiry date (last period)

Exercise price (last period)

Fair value at the time of allocation (DKKm)

615,461

May 2015

21.8

2.1

2013/14

2012/13

Total fees, Deloitte

1.9

1.7

Total fees, Nielsen & Christensen

1.1

0.8

Total fees

3.0

2.5

Statutory audit

1.4

1.5

Other assurance reports

0.4

0.0

Tax consultancy

0.1

0.1

Other services

0.0

0.1

Total

1.9

1.7

Statutory audit

0.7

0.7

Other assurance reports

0.4

0.0

Tax consultancy

0.0

0.1

Total

1.1

0.8

Allocated June 2011

N O T E 9 . F E E S PAYA B L E T O T H E A U D I T O R S E L E C T E D AT T H E G E N E R A L M E E T I N G

Fees break down as follows: Deloitte:

Nielsen & Christensen:

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NOTES N O T E 1 0 . I N V E S T M E N T S I N A S S O C I AT E S 2013/14

2012/13

Cost at 1 February

1.3

0.6

Additions on the purchase of equity investments

0.0

0.7

Cost at 31 January

1.3

1.3

-4.6

-6.3

Revaluations and impairment at 1 February Share of profit/loss for the year after tax Revaluations and impairment at 31 January Transferred for setoff against receivables Carrying amount at 31 January

-6.1

1.7

-10.7

-4.6

12.0

5.0

2.6

1.7

In the consolidated balance sheet, investments in associates are measured according to the equity method after deduction of any impairment. The Group’s associates appear from the overview of group companies, note 36. Income from investments in associates is shown below: 2013/14

2012/13

Profit on sale

0.0

0.8

Dividends received (preferential, in excess of ownership interest)

2.0

0.0

Other income from associates

-6.1

1.7

Total income from investments in associates

-4.1

2.5

2013/14

2012/13

25.0

4.8

Financial disclosures for associates:

Net revenue Profit/loss for the year

-16.2

5.5

Assets

255.9

301.3

Liabilities

280.8

309.9

The Group’s share of profit/loss for the year

-6.1

1.7

The Group’s share of equity

-9.4

-3.3

N OT E 1 1 . I N V E STM E N TS I N J O I N T V E N T U R E S For an overview of the Group’s investments in joint ventures, please see the overview of group companies in note 36, which also shows the accounting treatment of each individual company in the consolidated financial statements. The figures below represent the Group’s share. 2013/14

2012/13

Income

79.9

66.4

Expenses

36.1

123.2

Current assets

762.1

723.9

Non-current assets

329.3

330.4

Current liabilities

551.1

561.2

69.0

115.0

Non-current liabilities

C onsolidated financial statements |

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NOTES N OT E 1 2 . F I N A N C I A L I N COM E 2013/14

2012/13

Interest, cash and cash equivalents, etc.

0.7

0.9

Interest income from joint ventures

3.6

2.5

Interest income from associates

0.0

0.4

Other interest income

1.0

0.7

Financial income from loans and receivables

5.3

4.5

Interest from securities (held-to-maturity)

0.1

0.1

Foreign-exchange gains from other comprehensive income

0.1

1.0

Total financial income

5.5

5.6

Interest income from financial assets not measured at fair value through profit and loss

5.3

4.6

Other financial income

0.2

1.0

Total financial income

5.5

5.6

2013/14

2012/13

113.5

136.4

Interest expenses, joint ventures

2.0

1.3

Other interest expenses

1.8

3.6

Foreign-exchange losses and capital losses on securities

0.0

0.9

Other financial expenses

2.6

3.0

-16.0

-52.2

Which breaks down as follows:

N OT E 1 3 . F I N A N C I A L E X P E N S E S

Interest expenses, credit institutions

Of which capitalized financial expenses Loss on financial assets Total financial expenses

4.0

0.0

107.9

93.0

103.9

92.1

Which breaks down as follows: Interest expenses on financial liabilities not measured at fair value through profit and loss Other financial expenses

4.0

0.9

Total financial expenses

107.9

93.0

An interest rate of 1.0 – 6.0 % is used to capitalize interest on projects in progress, depending on the interest rate applicable to the individual project loans (2012/13: 3.0 – 10.0 %).

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NOTES N O T E 1 4 . C O R P O R AT E I N C O M E TA X 2013/14

2012/13

Current corporate income tax

1.8

4.9

Adjustment regarding tax relating to prior year(s)

0.1

-2.7

12.1

165.8

Change in deferred tax

0.0

-0.7

14.0

167.3

Tax calculated based on the Danish tax rate

-8.7

-81.5

Difference in tax rate, foreign subsidiaries

-1.9

5.5

0.1

-2.7

Non-taxable income/expenses

6.6

39.5

Forfeiture of losses written down in prior years

0.9

0.3

-28.7

200.5

45.9

-1.1

0.0

-0.5

Deferred tax transferred from other comprehensive income (re-classification) Tax on profit/loss for the year The tax on the profit/loss for the year results as follows:

Adjustment relating to prior year(s) Tax effect of:

Change in impairment of tax assets, incl. reversal of prior years’ impairment regarding the forfeiture of this year’s losses Change of tax rate

*)

Difference, tax on foreign-exchange adjustments transferred from other comprehensive income Other

-0.2

7.3

Tax on profit/loss for the year

14.0

167.3

-40.0 %

-51.3 %

Effective tax rate *)

The effect of the reduced Danish corporate tax rate totals a gross amount of DKK 45.9 million. Of this amount, DKK 37.4 million was written down to

DKK 0 at the beginning of the financial year. Thus, the net effect amounts to DKK 8.5 million.

N OT E 1 5 . E A R N I N G S P E R S H A R E I N D K K 2013/14

2012/13

Earnings in DKK per share (EPS)

-0.7

-8.5

Diluted earnings in DKK per share (EPS-D)

-0.7

-8.5

Profit/loss for the year

-49.0

-493.3

Shareholders’ share of profit/loss for the year

-49.0

-493.3

Average number of shares of nom. DKK 1 (2012/13: DKK 15 )

74,870,019

42,065,715

Average number of shares in circulation of nom. DKK 1 (2012/13: DKK 15 )

74,870,019

42,065,715

The outstanding warrants do not have a dilutive effect, as the average market price of ordinary shares in the financial year or the comparative year did not exceed the subscription price in the first window. This means that the outstanding warrants are ”out-of-themoney” and therefore not included in the diluted average number of shares in circulation. In the long term, the outstanding warrants may have an effect on earnings per share. The comparative figures for earnings per share have been corrected by an adjustment factor of 0.72 to show the effect of the capital increase completed in September 2013. N OT E 1 6 . D I V I D E N D S In the 2013/14 financial year, no dividends were distributed to the Company’s shareholders for the 2012/13 financial year. At the Annual General Meeting on 30 April 2014, the Board of Directors will propose that no dividends be distributed to the Company’s shareholders for the 2013/14 financial year.

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 7 5 / 1 1 5


NOTES N OT E 1 7 . G O O D W I L L 31 Jan 2014

31 Jan 2013

47.8

47.8

Cost at 1 February

0.0

0.0

Cost at 31 January

47.8

47.8

Amortization and impairment at 1 February

14.5

14.5

Additions

0.0

0.0

Amortization and impairment at 31 January

14.5

14.5

Carrying amount at 31 January

33.3

33.3

Impairment for the year

The total goodwill relates to the Group’s property development and asset management activities in Poland and the Czech Republic. At 31 January 2014, Management performed an impairment test of the carrying amount of goodwill. The recoverable amount is based on the value in use, which has been determined using the expected cash flows on the basis of budgets approved by the Board of Directors for the next two financial years and budgets/forecasts for another three financial years and recognition of the terminal value in year five. The calculation of the recoverable amount included a discount rate of 15 % before tax (2012/13: 15 %). The budgets for the first three years have been prepared on the basis of Management’s expectations for each individual, specific project, including expectations as to project progress, construction period, anticipated financing, contribution margin and date of sale. In this connection, the most important uncertainties relate to the expected contribution margin and date of sale. The impairment test did not give rise to any recognition of impairment. Management assesses that significant changes to the basic assumptions would not result in the carrying amount of goodwill exceeding the recoverable amount.

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NOTES N OT E 1 8 . I N V E STM E N T P RO P E RT I E S A N D I N V E STM E N T P RO P E RT I E S U N D E R CO N ST RU CT I O N 31 Jan 2013

31 Jan 2014 Completed investment properties

Investment properties under construction

Completed investment properties

Investment properties under construction

Cost at 1 February

413.5

16.9

333.5

18.9

Foreign-exchange adjustments, beginning of year

0.0

0.0

1.6

0.0

Costs of improvements/constructions

1.8

7.3

1.2

0.0

Transferred from investment properties under construction

0.0

0.0

25.9

-25.9 23.9

Other additions

0.0

0.0

84.4

-107.6

0.0

-33.1

0.0

Cost at 31 January

307.7

24.2

413.5

16.9

Revaluations at 1 February

Disposals for the year

160.7

0.0

130.0

54.7

Foreign-exchange adjustments, beginning of year

0.0

0.0

0.2

0.1

Revaluations for the year

0.0

0.0

0.0

0.0

Revaluations reversed

0.0

0.0

-23.3

-1.0

Transferred from investment properties under construction

0.0

0.0

53.8

-53.8

160.7

0.0

160.7

0.0

94.8

0.0

96.6

0.0

0.0

0.0

0.5

0.0

14.9

0.0

14.2

0.0

-53.0

0.0

-16.5

0.0

56.7

0.0

94.8

0.0

Revaluations and impairment at 31 January

104.0

0.0

65.9

0.0

Carrying amount at 31 January

411.7

24.2

479.4

16.9

Central European investment properties

308.5

24.2

312.1

16.9

German investment properties

103.2

0.0

167.3

0.0

Total

411.7

24.2

479.4

16.9

Rental income, investment properties

36.5

-

32.2

-

Direct operating expenses, premises let

-2.5

-

-2.3

-

Direct operating expenses, unlet premises

-1.7

-

-1.1

-

Net income from investment properties before financing and tax

32.3

-

28.8

-

Revaluations at 31 January Impairment at 1 February Foreign-exchange adjustments, beginning of year Impairment for the year Impairment reversed Impairment at 31 January

Which breaks down as follows:

Completed investment properties and investment properties under construction:

Location

Ownership

Year

in %

acquired

Futurm Hradec Kralové

Czech Republic

20 %

2000/2012

28,250

Galeria Tarnovia

Poland

30 %

2009

16,500

Lüdenscheid/Berlin

Germany

100 %

1994-1998

16,500

Jelenia Góra

Poland

30 %

Under construction

24,000

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 7 7 / 1 1 5


NOTES N OT E 1 8 . I N V E STM E N T P RO P E RT I E S A N D I N V E STM E N T P RO P E RT I E S U N D E R CO N ST RU CT I O N , CONTINUED The Group’s investment properties and investment properties under construction are measured at fair value (Fair-value hierarchy: Level 3). The valuation of the properties is based on a discounted cash-flow model over a five- to ten-year period and a given return requirement, as described in more detail below. The fair-value measurement is based on expected rental income and operating expenses. In the cases where sales negotiations are ongoing with potential investors, these negotiations form the basis for the valuation. There have been no changes to the methods used for calculating fair values in the current financial year. There have been no transfers between the different levels of the fair-value hierarchy in the current financial year, and no external appraisers have been involved in the valuation. Completed investment properties The calculation of the fair value is based on the following input for each of the Group’s investment properties: The Czech investment property, the Futurum Hradec Králové shopping centre, is owned in a joint venture with GE Capital and Heitman. TK Development has access to a performance-based share of the value adjustments on the property, which has been included in the carrying amount. The joint venture has decided to attempt selling the property and has initiated the sales process. The valuation of the property at 31 January 2013 was made against this background, and the value was written down to the expected selling price. This valuation was upheld at 31 January 2014 as Management believes that this valuation still reflects the fair value of the property. The valuation of TK Development’s 30 % ownership interest in Galeria Tarnovia, Poland, is based on a return requirement of 8.5 % p.a. calculated on the basis of a discounted cash-flow model over a five-year period and recognition of the terminal value in year five. The valuation of the Group’s German investment property in Lüdenscheid is based on a return requirement of 6.5 % p.a. calculated on the basis of a discounted cash-flow model over a ten-year period and recognition of the terminal value in year ten. Part of the property has not been let, and work is proceeding on a development plan aimed at optimizing and subsequently selling the whole property. Therefore, the valuation is subject to major uncertainty. The valuation of the Group’s other German investment property has been based on initial sales negotiations currently being conducted with a potential investor. These negotiations are based on the assumption that a currently vacant commercial rental unit will be relet. The Group is negotiating with a potential tenant about the letting of this unit, but at a rental level lower than expected and previously obtained. Otherwise, the most significant non-observable input data is an average overall rent per square metre of DKK 880 for the properties whose fair value is based on a discounted cash-flow model. An increase in the return requirement will result in a decline in the properties’ fair value, while an increase in the occupancy rate and/ or the average rent per square metre will cause the fair value of the properties to rise. In Management’s opinion, there is not necessarily a direct relationship between changes to the rent per square metre and changes to the return requirement. Investment properties under construction TK Development’s investment properties under construction consist of the Group’s 30 % ownership interest in the Jelenia Góra development project in Poland. The development project will comprise a shopping centre of about 24,000 m2, consisting of a supermarket unit of about 2,200 m² and retail, restaurant and service premises totalling about 21,800 m². Construction is expected to start in mid-2014, with the opening scheduled for early 2016. No value adjustment of this project was made at 31 January 2014, pending fulfilment of the conditions in the agreement with the investor and startup of the project.

7 8 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


NOTES N OT E 1 8 . I N V E STM E N T P RO P E RT I E S A N D I N V E STM E N T P RO P E RT I E S U N D E R CO N ST RU CT I O N , CONTINUED Future minimum rent on irrevocable lease contracts (total for the properties, not taking ownership share into consideration): 31 Jan 2013

31 Jan 2014

Completed investment properties

Investment properties under construction

Within 1 year from reporting date Within 1 - 5 years from reporting date After 5 years from reporting date Total

Completed investment properties

Investment properties under construction

64.8

-

67.7

-

161.8

-

171.0

-

42.5

-

50.4

-

269.1

-

289.1

-

A large number of lease agreements concluded for completed investment properties stipulate a period during which the agreement is non-terminable by the tenant. Generally, the term of the lease agreements can be extended.

N OT E 1 9 . OT H E R F I X T U R E S A N D F I T T I N G S , TO O LS A N D EQ U I PM E N T 31 Jan 2014

31 Jan 2013

Cost at 1 February

47.6

51.0

Foreign-exchange adjustments, beginning of year

-0.1

0.1

Additions

0.2

0.2

Disposals

-3.1

-3.7

Cost at 31 January

44.6

47.6

Depreciation and impairment at 1 February

45.1

46.3

Foreign-exchange adjustments, beginning of year

-0.1

-0.1

1.2

2.3

Depreciation and impairment, assets disposed of

-3.0

-3.4

Depreciation and impairment at 31 January

43.2

45.1

1.4

2.5

Depreciation for the year

Carrying amount at 31 January

Other fixtures and fittings, tools and equipment are depreciated over a term of five years. Leasehold improvements included in the above amounts are depreciated according to the straight-line method over the term of the lease. The carrying amount of leasehold improvements is considered insignificant, for which reason other fixtures and fittings, tools and equipment are not divided into different classifications.

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 7 9 / 1 1 5


NOTES N O T E 2 0 . D E F E R R E D TA X 31 Jan 2014

31 Jan 2013

92.0

259.7

0.1

-0.3

-12.1

-165.8

Deferred tax assets/tax liabilities at 1 February, net Foreign-exchange adjustment, beginning of year Deferred tax for the year recognized in profit or loss for the year Adjustment relating to prior year(s) recognized in profit or loss for the year

0.0

0.4

Deferred tax for the year recognized in other comprehensive income

7.0

-2.8

0.6

0.8

87.6

92.0

Investments

1.5

1.5

Property, plant and equipment

0.6

0.4

Investment properties

0.0

0.0

Other additions, net Deferred tax assets/tax liabilities at 31 January, net Deferred tax relates to:

Other non-current assets Current assets Untaxed reserve relating to Sweden Provisions Temporary differences

12.0

12.4

-29.3

-22.1

-6.8

-9.5

9.6

13.7

-12.4

-3.6

320.5

344.8

-220.5

-249.2

87.6

92.0

Deferred tax assets

122.6

127.0

Deferred tax liabilities

-35.0

-35.0

87.6

92.0

184.7

208.6

Value of tax loss(es) Impairment of tax assets Total Deferred tax recognized in balance sheet breaks down as follows:

Deferred tax assets/tax liabilities at 31 January, net Deferred tax assets not recognized in balance sheet: Value of tax losses Other non-current assets

11.0

7.5

Current assets

21.5

28.2

Provisions Total

3.3

4.9

220.5

249.2

97.4

97.4

Deferred tax liabilities not recognized in balance sheet: Contingent retaxation liabilities attaching to German subsidiaries

The Company controls whether such tax liabilities will be triggered, which is considered unlikely.

8 0 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


NOTES N O T E 2 0 . D E F E R R E D TA X , C O N T I N U E D

31 Jan 2014

Deferred tax assets/ tax liabilities at 1 February, net

Recognized in profit/ loss

1.5

0.0

0.0

0.4

0.2

0.0

Investments Property, plant and equipment

Foreign exchange adjustments, beginning of year

Deferred tax assets/ tax liabilities at 31 January, net

0.0

0.0

1.5

0.0

0.0

0.6

Recognized in other comprehensive Other additions, income net

0.0

0.0

0.0

0.0

0.0

0.0

12.4

-0.4

0.0

0.0

0.0

12.0

-22.1

-14.4

7.0

0.6

-0.4

-29.3

-9.5

2.5

0.0

0.0

0.2

-6.8

13.7

-4.1

0.0

0.0

0.0

9.6

-3.6

-16.2

7.0

0.6

-0.2

-12.4

344.8

-23.7

0.0

0.0

-0.6

320.5

-249.2

27.8

0.0

0.0

0.9

-220.5

92.0

-12.1

7.0

0.6

0.1

87.6

Investment properties Other non-current assets Current assets Untaxed reserve relating to Sweden Provisions Temporary differences Value of tax losses Impairment of tax assets Total Deferred tax recognized in other comprehensive income: Tax on foreign-exchange adjustments, foreign operations

6.6

Tax on value adjustments of hedging instruments

0.4

Total

7.0

31 Jan 2013

Deferred tax assets/ tax liabilities at 1 February, net

Investments

1.5

0.0

0.0

0.0

0.0

1.5

Property, plant and equipment

0.4

0.0

0.0

0.0

0.0

0.4

Investment properties

0.0

0.0

0.0

0.0

0.0

0.0

20.3

-7.9

0.0

0.0

0.0

12.4

Current assets

-47.1

26.2

-2.8

1.2

0.4

-22.1

Untaxed reserve relating to Sweden

-16.1

7.0

0.0

0.0

-0.4

-9.5

7.8

5.9

0.0

0.0

0.0

13.7

Temporary differences

-33.2

31.2

-2.8

1.2

0.0

-3.6

Value of tax losses

341.6

3.3

0.0

0.0

-0.1

344.8

Other non-current assets

Provisions

Recognized in profit/ loss

Recognized in other comprehensive Other additions, income net

Foreign exchange adjustments, beginning of year

Deferred tax assets/ tax liabilities at 31 January, net

Impairment of tax assets

-48.7

-200.3

0.0

0.0

-0.2

-249.2

Total

259.7

-165.8

-2.8

1.2

-0.3

92.0

Deferred tax recognized in other comprehensive income: Tax on foreign-exchange adjustments, foreign operations

-2.2

Tax on value adjustments of hedging instruments

-0.6

Items that may be re-classified to profit/loss:

-2.8

Deferred tax transferred from other comprehensive income

-0.7

Total

-3.5

A significant share of the total tax asset relates to the Danish share of joint taxation, as the tax loss carryforwards have no expiry date.

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 8 1 / 1 1 5


N O T E 2 0 . D E F E R R E D TA X , C O N T I N U E D The valuation of the tax asset is based on existing budgets and profit forecasts for a five-year period. For the first three years, bud­ gets are based on an evaluation of specific projects in the Group’s project portfolio. The valuation for the next two years has been based on specific projects in the project portfolio with a longer time horizon than three years as well as various project opportunities. These valuations are subject to substantial uncertainty, for which reason a provision has been made for the risk that projects are postponed or not implemented and the risk that project profits fall below expectations. On this basis, Management assessed the total impairment loss on the tax asset to be DKK 220.5 million at 31 January 2014. At 31 January 2013, total impairment of the tax asset amounted to DKK 249.2 million. The impairment of the tax asset relates mainly to Danish tax losses that can be carried forward perpetually, as well as Polish and Czech losses that expire within one to five years. Reference is made to note 2, accounting estimates and assessments. N OT E 2 1 . P ROJ ECTS I N P RO G R E S S O R COM P L E T E D

Projects in progress or completed, excl. interest, etc.

31 Jan 2014

31 Jan 2013

3,025.1

3,300.5

Capitalized interest, etc.

460.5

589.9

Payments received on account

-59.1

-369.6

-440.5

-489.9

2,986.0

3,030.9

Projects classified as development activities

1,110.9

1,175.3

Completed projects classified as asset management

1,625.7

1,620.0

Impairment Total projects in progress or completed Which breaks down as follows:

249.4

235.6

2,986.0

3,030.9

Projects classified as discontinuing activities Total projects in progress or completed

The carrying amount of the portion of the project portfolio on which impairment losses have been recognized is DKK 1,474.8 million (2012/13: DKK 1,531.7 million).

8 2 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


NOTES N O T E 2 2 . T R A D E R E C E I VA B L E S 31 Jan 2014

31 Jan 2013

Receivables from tenants

13.6

21.6

Other trade receivables

40.5

69.1

0.0

-17.5

Total trade receivables

54.1

73.2

Impairment for the year recognized in the income statement

-3.4

-4.9

31 Jan 2014

31 Jan 2013

14.1

19.2

Setoff in credit institutions

Impairment at 1 February Correction of opening balance

1.1

0.2

Disposals on sale (provisions at beginning of year)

0.0

-2.6

Foreign-exchange adjustments, beginning of year

-0.1

0.1

Applied for the year

-4.2

-7.6

3.6

8.7

0.0

-3.7

Provisions for the year Disposals on sale (provisions for the year) Reversed provisions

-0.3

-0.2

Impairment at 31 January

14.2

14.1

Any impairment is made to the net realizable value, equal to the sum total of future net cash flows that the receivables are expected to generate. Impairment losses on receivables are calculated on the basis of an assessment of the individual receivables. The carrying amount of receivables written down to net realizable value based on an individual assessment is DKK 15.4 million. The corresponding amount at 31 January 2013 was DKK 14.6 million. The majority of the written-down receivables are past due. There are no major overdue receivables that have not been written down for impairment. In by far the most cases, receivables from tenants are secured by deposits or other guarantees, which are included in the basis for any impairments. No interest income on impaired receivables was recognized as revenue in the 2013/14 financial year or in the comparative year. N OT E 2 3 . OT H E R S EC U R I T I E S A N D I N V E STM E N TS 31 Jan 2013

31 Jan 2013

Listed securities

0.1

0.1

Unlisted securities

3.9

3.9

Financial assets available for sale

4.0

4.0

Other unlisted securities

0.0

0.3

Total securities

4.0

4.3

The securities consist of listed shares and unlisted equity interests. Listed securities consist of listed shares and are measured at fair value (Fair value hierarchy: Level 1). No transfers have been made between the individual levels of the fair-value hierarchy in the current financial year. Unlisted equity interests available for sale are not traded in an active market. As the fair value of these equity interests cannot be determined with a sufficient degree of reliability, they are measured at cost. Other unlisted securities consist of mortage deeds on real property and are measured at fair value.

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 8 3 / 1 1 5


NOTES N OT E 2 4 . D E P OS I TS I N B LO C K E D A N D E S C ROW ACCO U N TS 31 Jan 2014

31 Jan 2013

Blocked accounts and other accounts that the Group cannot fully dispose of

51.1

35.7

Setoff of financial liabilities

-3.7

0.0

Total deposits in blocked and escrow accounts

47.4

35.7

N O T E 2 5 . S H A R E C A P I TA L In May 2013 the shareholders in General Meeting resolved to reduce the Company’s share capital by DKK 588.9 million from DKK 631.0 million to DKK 42.1 million by an equal writedown of all shares from DKK 15 to DKK 1 as part of a planned capital increase. The capital reduction was effected in June 2013. In September 2013 the Group implemented a rights issue in which 56,087,620 new shares of nominally DKK 1 were subscribed for. Accordingly, the share capital consists of 98,153,335 shares of DKK 1 each. The share capital has been paid up in full. The shares are not divided into several share classes, and no shares are subject to special rights or restrictions, including restrictions with regard to the payment of dividend and repayment of capital. Changes in the share capital over the past five years: Number in thousands 2009/10

Nominal value

Changes

Year-end

Changes

Year-end

-

28,043.8

0.0

560.9

2010/11: Capital reduction on change of share denomination from nom. 20 to nom. 15

-

28,043.8

-140.2

420.7

14,021.9

42,065.7

210.3

631.0

2011/12

0.0

42,065.7

0.0

631.0

2012/13

0.0

42,065.7

0.0

631.0

-

42,065.7

-588.9

42.1

56,087.6

98,153.3

56.1

98.2

Capital increase against cash payment

2013/14: Capital reduction on change of share denomination from nom. 15 to nom. 1 Capital increase against cash payment

The Group did not hold treasury shares in the 2013/14 financial year or in the comparative year.

8 4 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


NOTES N OT E 2 6 . OT H E R R E S E RV E S Reserve for value adjustment of available-forSpecial sale financial reserve assets

Reserve for value adjustment of hedging instruments

Reserve for foreignexchange adjustments

Total

140.2

-0.1

-3.2

2.9

139.8

-140.2

0.0

0.0

0.0

-140.2

Exchange-rate adjustment, foreign operations*)

0.0

0.0

0.0

6.1

6.1

Value adjustment of hedging instruments

0.0

0.0

3.1

0.0

3.1

Value adjustment of financial assets available for sale

0.0

0.0

0.0

0.0

0.0

Deferred tax on other comprehensive income

0.0

0.0

-0.6

-2.9

-3.5

Other reserves at 1 February 2012 Special reserve transferred to distributable reserves Other comprehensive income:

0.0

-0.1

-0.7

6.1

5.3

Capital decrease

588.9

0.0

0.0

0.0

588.9

Premium on capital increase

174.4

0.0

0.0

0.0

174.4

Costs on share issue

-11.6

0.0

0.0

0.0

-11.6

-162.8

0.0

0.0

0.0

-162.8

Exchange-rate adjustment, foreign operations*)

0.0

0.0

0.0

-11.2

-11.2

Value adjustment of hedging instruments

0.0

0.0

-2.3

0.0

-2.3

Value adjustment of financial assets available for sale

0.0

0.0

0.0

0.0

0.0

Deferred tax on other comprehensive income

0.0

0.0

0.4

6.6

7.0

588.9

-0.1

-2.6

1.5

587.7

Other reserves at 31 January 2013

Premium on capital increase transferred to distributable reserves Other comprehensive income:

Other reserves at 31 January 2014 *)

Of which DKK 0.1 million is transferred to the income statement in respect of sale/liquidation of companies (2012/13: DKK 1.0 million)

In May 2013 the shareholders in General Meeting resolved to reduce the Company’s share capital by DKK 588.9 million from DKK 631.0 million to DKK 42.1 million by an equal writedown of all shares from DKK 15 to DKK 1, as part of the planned capital increase that was subsequently implemented in September 2013. The capital reduction was carried out in June 2013, and the amount of the reduction was allocated to a special reserve fund that can only be used following a resolution to this effect at a General Meeting. In connection with the rights issue in September 2013, 56,087,620 new shares of nominally DKK 1 each were subscribed for. The new shares were subscribed for at a price of DKK 4.11 per share, which yielded net proceeds of DKK 218.9 million after the costs of the offering. The premium paid on the shares, DKK 174.4 million less the costs of the offering of DKK 11.6 million, has been transferred to distributable reserves. The reserve for value adjustment of financial assets available for sale comprises the accumulated net change in the fair value of financial assets classified as available for sale. The reserve is dissolved as the relevant financial assets are sold or expire. The reserve for value adjustment of hedging instruments comprises the accumulated net change in the fair value of forward-exchange transactions and interest-rate hedging transactions concluded to hedge future transactions. The reserve for foreign-exchange adjustments comprises all foreign-exchange adjustments arising on the translation of financial statements for enterprises with a functional currency other than Danish kroner; foreign-exchange adjustments relating to assets and liabilities that are part of the Group’s net investment in such enterprises; and foreign-exchange adjustments relating to any hedging transactions that hedge the Group’s net investment in such enterprises. On the sale or winding-up of subsidiaries, the accumulated foreign-exchange adjustments recognized in other comprehensive income in respect of the relevant subsidiary are transferred to the profit or loss.

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 8 5 / 1 1 5


NOTES N OT E 2 7 . C R E D I T I N ST I T U T I O N S 31 Jan 2013

31 Jan 2014 Payables to credit institutions are recognized as follows in the balance sheet: Non-current liabilities

108.0

102.2

Current liabilities before setoffs

1,885.3

2,206.6

Total payables to credit institutions

1,993.3

2,308.8

Assets set off against current liabilities: Trade receivables

-3.7

-17.5

Payables to credit institutions after setoff against assets

1,989.6

2,291.3

Fair value

1,993.8

2,294.8

Carrying amount

1,989.6

2,291.3

The fair value has been determined at the present value of future principal repayments and interest payments by using the effective interest method (Fair value hierarchy: Level 2). At 31 January, the Group had the following loans and credits:: Effective rate

Carrying amount

Fair value

Fixed/ va足riable

2013/14

2012/13

2013/14

2012/13

2013/14

2012/13

2027-2040

variable

1 - 5.25 %

1.75 - 5.25 %

68.8

71.1

73.0

74.6

Bank DKK

2015

variable

2.5 - 5.5 %

2.75 - 10 %

547.7

1,158.4

547.7

1,158.4

Bank DKK

2015

fixed

5%

-

530.9

0.0

530.9

0.0

Bank SEK

2015

variable

5 - 5.4 %

5 - 5.6 %

25.2

43.7

25.2

43.7

Loans Mortgage credit DKK

Maturity

Bank PLN

2017

variable

7 - 7.25 %

7 - 8.5 %

91.6

173.6

91.6

173.6

Bank CZK

2014-2017

variable

3.5 - 4.25 %

2.5 - 4.25 %

36.4

44.4

36.4

44.4

Bank EUR

2014-2027

variable

1.6 - 6 %

1.75 - 6 %

Total

689.0

800.1

689.0

800.1

1,989.6

2,291.3

1,993.8

2,294.8

N OT E 2 8 . P ROV I S I O N S 31 Jan 2014

31 Jan 2013

15.4

14.6

Provisions at 1 February

0.0

0.4

-12.8

-11.3

-0.5

-0.1

Provisions for the year

7.5

11.8

Provisions at 31 January

9.6

15.4

0-1 year

9.6

13.1

1-5 years

0.0

2.2

> 5 years

0.0

0.1

Provisions at 31 January

9.6

15.4

Foreign-exchange adjustments, beginning of year Applied during the year Reversed rent guarantees

Expected maturity dates of the liabilities provided for:

Provisions consist of rent guarantee liabilities for sold properties and relate to guarantees issued by the Group in a few cases towards the buyers of the properties. Rent guarantee liabilities have been calculated based on experience with rent guarantees and an individual assessment of each lease.

8 6 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


NOTES N O T E 2 9 . O P E R AT I N G L E A S E S For the years 2014-2018, operating leases for the rental of office premises, office machines and operating equipment have been concluded. The leases have been concluded for a one to five-year period with fixed lease payments that are index-adjusted annually. The leases are non-terminable for the period mentioned, after which it is expected that the majority can be renewed for one to threeyear periods. Future minimum lease payments according to non-terminable lease contracts break down as follows:

Within 1 year Within 1-5 years

2013/14

2012/13

9.1

10.3

12.6

18.6

0.0

0.9

Total

21.7

29.8

Minimum lease payments for the year recognized in the income statement

10.8

11.4

31 Jan 2014

31 Jan 2013

Employee-related payables

5.1

6.8

Holiday pay obligations

6.8

7.7

Derivative financial instruments (hedging instruments)

2.4

0.9

Other debt

124.7

136.3

Other debt, total

139.0

151.7

After 5 years

N OT E 3 0 . OT H E R D E BT

Broken down as follows under liabilities: 0.0

1.5

Current liabilities

139.0

150.2

Other debt, total

139.0

151.7

Non-current liabilities

The carrying amount of employee-related payables consisting of salaries, personal income tax, social security contributions, holiday pay, etc., project-related costs and other costs payable is equal to the fair value of these payables. Holiday pay obligations represent the Group’s liability to pay salary during holiday periods to which the employees had earned entitlement by the reporting date and which are to be taken in the following financial year(s). Derivative financial instruments concern interest-rate hedging transactions and are classified as financial liabilities used as hedging instruments, measured at fair value.

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 8 7 / 1 1 5


NOTES N OT E 3 1 . CO N T I N G E N T AS S E TS A N D L I A B I L I T I E S AS W E L L AS S EC U R I T Y F U R N I S H E D Contingent assets A contingent asset in the form of deferred tax assets not recognized appears from note 20. Contingent liabilities and security furnished 31 Jan 2014

31 Jan 2013

0.0

65.8

Surety and guarantee commitments on behalf of associates

26.1

16.6

Surety and guarantee commitments on behalf of joint ventures

13.1

3.0

Share of surety and guarantee commitments in associates

0.0

0.0

83.4

100.0

2,816.3

2,842.8

483.3

532.0

Share of surety and guarantee commitments in joint ventures Other surety and guarantee commitments Carrying amount of projects in progress or completed and contract work in progress furnished as security to credit institutions Carrying amount of escrow account deposits, etc., investments, receivables and property, plant and equipment furnished as security to credit institutions

The below figures in brackets are comparative figures for 2012/13. The amounts stated for surety and guarantee commitments on behalf of associates and joint ventures are the upper limits. The Group’s other surety and guarantee commitments consist primarily of the Group’s total rent guarantee commitments for which no provisions have been made in the financial statements. The provisions made in the financial statements relate to the rent guarantees that are likely to be called up. The Group’s project portfolio amounts to DKK 2,986.0 million (DKK 3,030.9 million), of which DKK 2,816.3 million (DKK 2,842.8 million) has been furnished as security to the credit institutions that have granted building credits or mortgage credit loans. The carrying amount of escrow account deposits, etc., and non–current assets totalling DKK 483.3 million (DKK 532.0 million), consists of security furnished in the form of escrow accounts, securities, etc., DKK 47.4 million (DKK 35.7 million), and investment properties, DKK 435.9 million (DKK 496.3 million). TK Development has entered into construction contracts regarding the execution of projects wholly or partly owned by the Group. The total contract sum amounts to DKK 305.4 million (DKK 6.4 million). Usual performance bonds have been furnished for construction works performed. The performance bonds have been issued via a credit insurance company. To a large extent, any work to be carried out under performance bonds will be attributable to subcontractors. TK Development can in some cases be required to make the necessary funds available to joint ventures in step with the development and execution of specific projects, or might be required to contribute further capital where this is necessary. TK Development is currently party to the following lawsuit that is of relevance due to its scope: In the summer of 2002, De Samvirkende Købmænd, a trade association of grocery retailers, filed a complaint with the Nature Protection Board of Appeal (Naturklagenævnet) in respect of the City of Copenhagen’s approval of the layout of the Field’s department store. In particular, the claim asserted that the Field’s department store is not one department store, but that it consists of several individual stores. The Nature Protection Board of Appeal made its decision in the matter on 19 December 2003, after which the department store layout was approved. De Samvirkende Købmænd subsequently took out a writ against the Nature Protection Board of Appeal before the Danish High Court. At the beginning of 2011, the High Court gave judgment in favour of De Samvirkende Købmænd. Neither the owner of the centre nor any company in the TK Development Group is a direct party to the case, but the High Court’s judgment may have the effect that the Field’s department store will have to be redesigned following negotiations with the relevant

8 8 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


NOTES N OT E 3 1 . CO N T I N G E N T AS S E TS A N D L I A B I L I T I E S AS W E L L AS S EC U R I T Y F U R N I S H E D , CO N T I N U E D local authorities. As a result of the judgment, the owner of Field’s may have to incur the financial burden of causing the necessary changes to the building layout, and in that connection it cannot be ruled out that a claim may be made against the Group. Regardless of the judgment, Management still believes the risk of this case to be negligible. In addition, the Group is involved in a few disputes, none of which is deemed to have a scope that, either individually or collectively, may affect the Group’s performance to any appreciable extent. The contingent retaxation liability attaching to German subsidiaries regarding which no provisions for deferred tax have been made amounts to DKK 97.4 million (DKK 97.4 million). The Company controls whether such tax liabilities will be triggered, which is considered unlikely.

N OT E 3 2 . F I N A N C I A L R I S K S A N D F I N A N C I A L I N ST RU M E N TS Capital management The Group’s capital structure consists of equity, cash and cash equivalents and payables to credit institutions. The Company’s Management reviews the Group’s capital structure on a regular basis, as well as the need for any adjustments. Management’s overall aim is to provide a capital structure that supports the Group’s earnings potential, while at the same time ensuring the best possible relation between equity and loan capital and thus maximizing the return for the Company’s shareholders. Financial targets The Group has adopted a solvency target corresponding to a solvency ratio of around 30 %, and compliance with this target also represents a covenant that commits the Group vis-à-vis its main banker. This target was met throughout the financial year. In March 2013 the Board of Directors adopted a goal of achiving a solvency ratio of about 40 %. After the capital increase in September 2013 this goal was met. The solvency ratio was 40.5 % at 31 January 2014 (31 January 2013: 34.7 %). Liquidity covenant The Group has used liquidity covenants for quite some years. In short, the liquidity covenant expresses that the Group’s cash resources – to enable the Group to cover liabilities requiring substantial liquidity - must at any time correspond to the fixed costs for the next six-month period, excluding funds received as proceeds from projects sold, but including project liabilities materializing within the next six months. The covenant represents a liquidity target for the whole Group and a commitment to the Group’s main banker. The covenant must be calculated and met before projects requiring liquidity can be acquired and initiated. The covenant is expressed as follows: L + K > E + O + R, where: L=

The TK Development Group’s free cash resources in the form of deposits with banks and the value of listed Danish government and mortgage bonds with a term to maturity of less than five years.

K=

The TK Development Group’s amounts available on committed operating credit facilities from time to time.

E=

The planned impact on cash resources from the projects which the TK Development Group is obliged to complete within six months, including the new/expanded project, taking into account committed project credit facilities from financial institutions and forward funding.

O=

The TK Development Group’s cash non-project-related capacity costs for the following six months less management fees falling due within six months. In addition, pre-agreed project fees from final and binding agreements with project investors falling due within six months are to be set off against the amount.

R=

Interest accruing on the TK Development Group’s operating credit facilities for the following six months.

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 8 9 / 1 1 5


NOTES N OT E 3 2 . F I N A N C I A L R I S K S A N D F I N A N C I A L I N ST RU M E N TS , CO N T I N U E D The Group’s liquidity covenant was met during the year under review. Dividend policy TK Development’s long-term policy is to distribute a portion of the year’s profit as dividends or alternatively via a share repurchase programme. This will always be done with due regard for the Group’s capital structure, solvency, cash resources and investment plans. Breach of loan agreements During the financial year and the comparative year the Group was not in breach of any loan agreements. Categories of financial instruments 31 Jan 2014

31 Jan 2013

Other securities and investments, non-current

0.3

0.8

Securities, current

0.0

0.3

Financial assets held to maturity

0.3

1.1

Trade receivables

54.1

73.2

Receivables from associates

16.6

23.6

Other receivables

77.2

122.4

Cash, cash equivalents, blocked and escrow accounts

86.1

66.9

234.0

286.1

Securities

4.0

4.0

Financial assets available for sale

4.0

4.0

1,989.6

2,291.3

95.3

106.3

136.6

150.8

2,221.5

2,548.4

Derivative financial instruments entered into to hedge interest rates

2.4

0.9

Hedging instruments

2.4

0.9

Loans and receivables

Credit institutions Trade payables Other debt Financial liabilities measured at amortized cost

The Group’s risk management policy As a consequence of its activities, TK Development is exposed to fluctuations in foreign-exchange and interest rates. The overall objective of the Group’s risk policy is to manage risks and exposures and thus minimize the negative effects on earnings and cash flows. To the extent possible, the Parent Company manages the Group’s financial risks centrally and coordinates the Group’s liquidity management, including the raising of funds and the investment of surplus funds. Foreign-exchange risks The Group primarily hedges its foreign-exchange risks by matching the currency of payments received with the currency of payments made. As a main rule, the financing of the individual projects, whether raised with credit institutions or by forward funding, is raised in the same currency as the currency agreed upon or expected to be used for the project sale. Likewise, the main rule is for construction contracts to be concluded in the project invoicing currency. In the cases where the Company concludes the construction contract in a different currency than the relevant project’s invoicing currency, it will be assessed in each case whether the foreign-exchange risk is to be hedged through a forward agreement or other derivative financial instruments. In the 2013/14 financial year and in the comparative year, the Group did not enter into any forward agreements or other financial instruments.

9 0 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


NOTES N OT E 3 2 . F I N A N C I A L R I S K S A N D F I N A N C I A L I N ST RU M E N TS , CO N T I N U E D Interest-rate risks As a main rule, the TK Development Group finances its projects in progress by way of short-term, floating-rate bank loans or by forward funding, generally based on a fixed interest rate. Other interest-bearing debt is largely subject to variable interest (floating-rate debt). Based on the Group’s risk policy, Management regularly assesses whether a portion of its loans should be hedged by financial instruments. In the financial year 2013/14 the Group entered into two interest swaps to hedge interest-rate-risks regarding completed projects in Poland. In the comparative year the Group had one interest swap which expired in 2013. Liquidity risks The Group manages its liquidity risks by using continuous short-term cash budgets and long-term cash budgets that cover several years. The Group aims to continuously secure an optimum liquidity buffer to make efficient use of its cash resources in case of unforeseen fluctuations in cash withdrawals. The Group aims to optimize its liquidity buffer by the sale of completed projects and plots of land, by raising loans or by entering into forward funding agreements for its projects in progress. Credit risks In connection with the sale of the Group’s projects. the title to a project does not pass to the investor until payment has been effected. Thus, the Group’s sale of projects does not generally generate credit risks as such. Each receivable is assessed individually, after which any necessary impairment losses are recognized. The maximum credit risks associated with securities, equity investments, trade receivables, other receivables, cash and cash equivalents and deposits in blocked and escrow accounts correspond to their carrying amounts. The impairment losses for the year relating to trade receivables appear from note 22. Impairment losses on other financial assets amount to DKK 4.0 million in the financial year 2013/14 (2012/13: DKK 0.0 million).The carrying amount of other receivables written down to net realizable value amounts to DKK 2.2 million (2012/13: DKK 0.0 million). Foreign-exchange risks relating to recognized assets and liabilities: Cash, cash equivalents, blocked accounts and securities

Receivables

Credit institutions

Liabilities

Unsecured net position

26.0

69.6

-689.0

-71.1

-664.5

SEK

0.3

4.4

-25.2

-7.2

-27.7

PLN

28.1

6.1

-91.6

-11.2

-68.6

CZK

8.0

10.8

-36.4

-16.5

-34.1

62.4

90.9

-842.2

-106.0

-794.9

EUR

13.0

85.8

-800.1

-30.9

-732.2

SEK

0.8

9.6

-43.7

-18.5

-51.8

PLN

25.9

16.8

-173.6

-34.3

-165.2

CZK

15.1

6.6

-44.4

-25.9

-48.6

31 Jan 2013

54.8

118.8

-1.061.8

-109.6

-997.8

2013/14 EUR

31 Jan 2014 2012/13

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 9 1 / 1 1 5


NOTES N OT E 3 2 . F I N A N C I A L R I S K S A N D F I N A N C I A L I N ST RU M E N TS , CO N T I N U E D 2013/14

2012/13

Effect if the EUR rate were 10 % lower than the actual rate

50.2

54.9

Effect if the SEK rate were 10 % lower than the actual rate

2.1

3.9

Effect if the PLN rate were 10 % lower than the actual rate

5.2

12.4

Effect if the CZK rate were 10 % lower than the actual rate

2.6

3.6

Sensitivity of equity to foreign-exchange fluctuations

2013/14

2012/13

Effect if the EUR rate were 10 % lower than the actual rate

50.2

5.9

Effect if the SEK rate were 10 % lower than the actual rate

2.1

3.9

Effect if the PLN rate were 10 % lower than the actual rate

5.2

12.4

Effect if the CZK rate were 10 % lower than the actual rate

2.6

3.6

Sensitivity of profit/loss to foreign-exchange fluctuations

The Group’s major foreign-exchange exposures relate to EUR, SEK, PLN and CZK. The above calculations show the effect on equity and profit or loss if the rate of the relevant currency had been 10 % lower than the actual rate. A corresponding increase in foreignexchange rates would have a corresponding negative impact on profit or loss and equity. Interest-rate risks and the dates of revaluation or maturity regarding financial assets and liabilities: Date of revaluation/maturity

Effective rate

0 - 1 year

1 - 5 years

> 5 years

Total

in %

Other securities and investments, non-current

0.0

0.3

0.0

0.3

0%

Other securities and investments, current

4.0

0.0

0.0

4.0

0%

Trade receivables

54.1

0.0

0.0

54.1

0%

Other receivables

77.2

0.0

0.0

77.2

0-7%

Deposits with credit institutions (cash, cash equivalents and blocked and escrow accounts)

86.1

0.0

0.0

86.1

0-3%

Receivables from associates

12.0

4.6

0.0

16.6

0-6%

-95.3

0.0

0.0

-95.3

0

Other debt

-139.0

0.0

0.0

-139.0

0 - 7.5 %

Payables to credit institutions

-138.3

-1,486.7

-364.6

-1,989.6

1.75 - 7.5 %

-83.7

-69.6

-70.1

-223.4

-222.9

-1,551.4

-434.7

-2,209.0

2013/14

Trade payables

Interest payments on loans Total at 31 January 2014

9 2 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


NOTES N OT E 3 2 . F I N A N C I A L R I S K S A N D F I N A N C I A L I N ST RU M E N TS , CO N T I N U E D Date of revaluation/maturity 2012/13 Other securities and investments, non-current

Effective rate

0 - 1 year

1 - 5 years

> 5 years

Total

in %

0.0

0.8

0.0

0.8

0% 0 - 7.75 %

4.3

0.0

0.0

4.3

Trade receivables

73.2

0.0

0.0

73.2

0%

Other receivables

122.4

0.0

0.0

122.4

0-9%

66.9

0.0

0.0

66.9

0.5 - 4.5 % 0-6%

Other securities and investments, current

Deposits with credit institutions (cash, cash equivalents and blocked and escrow accounts)

19.0

4.6

0.0

23.6

Trade payables

-106.3

0.0

0.0

-106.3

0%

Other debt

-150.2

-1.5

0.0

-151.7

0 - 7.5 %

-1,857.2

-109.3

-324.8

-2,291.3

1.75 - 10 %

-50.3

-38.9

-76.5

-165.7

-1,878.2

-144.3

-401.3

-2,423.8

Receivables from associates

Payables to credit institutions Interest payments on loans Total at 31 January 2013

The fair value at 31 January 2014 of outstanding interest swaps entered into to hedge interest-rate risks on floating-rate loans amounts to DKK 2.4 million. The interest swap contracts expire in 2016 and 2017. The income statement was not affected by hedge inefficiency in the 2013/14 financial year or in the year of comparison. With regard to interest-rate sensitivity, an increase in the interest level of 1 % p.a. compared to the interest level at the reporting date in respect of the Group’s variable-interest deposits with and payables to credit institutions would have a negative impact on the profit or loss for the year, and thus on equity, of DKK 9.8 million for a full year. A fall in the interest level of 1 % p.a. would result in a corresponding positive impact on the profit or loss for the year and on equity. For the 2012/13 financial year, the interest-rate sensitivity in case of a change in the interest level of 1 % p.a. would have a DKK 15.2 million impact for a full year. Liquidity risks The maturity dates of financial liabilities are specified for the individual categories of liabilities in the notes, with the exception of trade payables and other debt largely falling due for payment within one year. The TK Development Group’s liquidity reserve consists of cash and cash equivalents as well as unutilized operating credit facilities. 2013/14

2012/13

38.7

31.2

4.7

3.2

Total

43.4

34.4

Deposited funds for later release

47.4

35.7

Total liquidity reserve

90.8

70.1

The liquidity reserve breaks down as follows: Cash and cash equivalents Unutilized operating credit facilities

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 9 3 / 1 1 5


NOTES N O T E 3 3 . T R A N S A C T I O N S W I T H R E L AT E D PA R T I E S The Company has no related parties with a controlling interest. The Company has the following related parties: Board of Directors and Executive Board (and their related parties) Joint ventures and associates; see the overview of group companies, note 36. 2013/14

2012/13

Board of Directors and Executive Board (and their related parties): Holding of shares, in terms of number (balance)

26,519,562 1)

1,940,251

Obligation towards Executive Board, employee bonds (balance)

0.5

1.5

Remuneration, Board of Directors

1.5

1.8

Remuneration, Executive Board, see note 7

6.0

6.2

Interest expenses, project financing from Board of Directors and Executive Board

1.3

0.4

Project financing from Board of Directors and Executive Board (balance) 2)

0.0

21.7

-20.7

0.0

0.0

0.3

Fees from joint ventures

1.7

1.5

Interest income from joint ventures

3.6

2.5

-2.0

-1.3

Receivables from joint ventures (balance)

56.1

85.8

Payables to joint ventures (balance)

16.1

17.9

Repayment, project financing from Board of Directors and Executive Board 2) Accrued interests, project financing from Board of Directors and Executive Board (balance) Joint ventures:

Interest expenses, joint ventures

Associates: Interest income from associates Receivables from associates (balance) 1)

0.0

0.4

16.6

23.6

The increase results mainly from changes to the Board of Directors following the Company’s Annual General Meeting in May 2013 and the subscription

of additional shares in connection with the capital increase implemented in September 2013. 2)

The difference between project finance loans of DKK 21.7 million at 31 January 2013, granted by the Executive Board and the Board of Directors, and

the repayment for the year of DKK 20.7 million is due to changes to the composition of the Board of Directors adopted at the Company’s Annual General Meeting in May 2013.

Suretyships and guarantees have been issued on behalf of joint ventures and associates; see note 31. Apart from the above, there were no transactions with related parties in the year under review. In accordance with the accounting policies, transactions with subsidiaries are eliminated in the consolidated financial statements. No security or guarantees had been furnished for balances owing to or by related parties at the reporting date. As at 31 January 2013, the Group had taken out second mortgages on two projects of DKK 5 million each as security for project finance loans granted by the Board of Directors and the Executive Board. Moreover, as security for the total project finance loans granted by a group of the Company’s major shareholders, of which the share granted by the Board of Directors and the Executive Board amounted to DKK 21.7 million, the Group had granted a mortgage of DKK 70 million on the land for the project to be financed by the loans. Receivables and payables are settled by payment in cash. No losses were realized on receivables from related parties. In 2013/14 and the comparative year no impairment was made to provide for any probable losses on receivables from related parties.

9 4 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


N OT E 3 4 . P OST - BA L A N C E S H E E T E V E N TS In February 2014 TK Development conditionally sold its 75 % stake in the Fashion Arena Outlet Center in Prague, the Czech Republic. The outlet centre has been sold to Meyer Bergman, and the selling price for the whole property amounts to EUR 71.5 million. The sale is contingent on final financing, which is expected to fall into place in April 2014. This sale generates a minor profit compared to the carrying amount, reduces the balance sheet total by about DKK 400 million and makes a substantial contribution to the Group’s free cash resources. In February 2014 TK Development also conditionally sold a 6,000 m² office project in Aalborg, Denmark. The project is being developed for the international Alfa Laval Group, which has entered into a long-term lease for the property. The project has been sold to PensionDanmark at a total price of DKK 126.1 million. Construction began in March 2014, and the project will be handed over to the investor in June 2015. Other than those mentioned in the Management Commentary, no significant events of relevance to the Company have occurred after the reporting date. N O T E 3 5 . A P P R O VA L O F A N N U A L R E P O R T FO R P U B L I C AT I O N At the board meeting on 2 April 2014, the Board of Directors approved the Annual Report for publication. The Annual Report will be submitted to the Company’s shareholders for adoption at the Annual General Meeting on 30 April 2014.

C onsolidated financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 9 5 / 1 1 5


NOTES N O T E 3 6 . O V E R V I E W O F G R O U P C O M PA N I E S No parent companies other than the listed company TK Development A/S prepare consolidated financial statements. The TK Development Group’s subsidiaries Ownership Name

Reg. office

TK Bygge-Holding A/S

Aalborg

TK Bygge-Holding Russia A/S

interest

Ownership Name

Reg. office

100 %

Nowa Wilda Sp. z o.o.

Warsaw

interest 100 %

Aalborg

100 %

Euro Mall Polska III Sp. z o.o. in liquidation

Warsaw

100 %

TKD Projekt A/S

Aalborg

100 %

TK Polska Development II Sp. z o.o.

Warsaw

100 %

Kommanditaktieselskabet Frederikssund Shoppingcenter

Aalborg

100 %

TK Development Sp. z o.o. in liquidation

Warsaw

100 %

Driftsselskabet Frederikssund ApS

Aalborg

100 %

TK Czech Operations s.r.o.

Prague

100 %

Kommanditaktieselskabet Østre Teglgade 7

Aalborg

100 %

Euro Mall Ceske Budejovice s.r.o.

Prague

100 %

Komplementarselskabet Østre Teglgade ApS

Aalborg

100 %

TK Czech Development III s.r.o.

Prague

100 %

Kommanditaktieselskabet Esbjerg Shoppingcenter

Aalborg

100 %

Euro Mall Bohemia s.r.o.

Prague

100 %

Komplementarselskabet Esbjerg Shoppingcenter ApS

Aalborg

100 %

Euro Mall City s.r.o.

Prague

100 %

Euro Mall Holding A/S

Aalborg

100 %

Euro Mall Delta s.r.o.

Prague

100 %

Ejendomsselskabet Smallegade P/S

Aarhus

100 %

Euro Mall Event s.r.o.

Prague

100 %

Komplementarselskabet Smallegade ApS

Aarhus

100 %

Euro Mall Praha a.s.

Prague

100 %

K/S Tampere IV, Finland in liquidation

Copenhagen

100 %

TK Development Slovakia s.r.o.

Bratislava

100 %

ApS Komplementarselskabet Tampere retail IV, Finland in liquidation

Copenhagen

100 %

UAB TK Development Lietuva

Vilnius

100 %

Euro Mall Sweden AB

Stockholm

100 %

UAB ”Profista”

Vilnius

100 %

TK Development Sweden Holding AB

Stockholm

100 %

SIA TKD Retail Park

Riga

100 %

TK Projekt AB

Stockholm

100 %

SIA ”KK”

Riga

100 %

EMÖ Projekt AB

Stockholm

100 %

Euro Mall Luxembourg S.A.

Luxembourg

100 %

EMÖ Center AB

Stockholm

100 %

Euro Mall Czech & Slovakia Invest B.V.

Amsterdam

100 %

TK Utveckling AB

Stockholm

100 %

Euro Mall Sterboholy Holding B.V.

Amsterdam

100 %

Enebyängen Fastighets AB Stockholm

Stockholm

100 %

TK Development Bau GmbH

Berlin

100 %

TKD Suomi OY

Helsinki

100 %

TK Development GmbH

Berlin

100 %

OY TKD Construction Finland

Helsinki

100 %

TKH Datzeberg Grundstücksgesellschaft mbH

Berlin

100 %

Kaarinan Kauppakuutonen OY

Helsinki

100 %

TKH Oranienburg Grundstücksgesellschaft mbH

Berlin

100 %

TK Polska Operations S.A.

Warsaw

100 %

TKH Mahlow Wohnungsbaugesellschaft mbH

Berlin

100 %

Euro Mall Polska X Sp. z o.o.

Warsaw

100 %

TKH Ferienwohnungsgesellschaft mbH

Berlin

100 %

Euro Mall Targówek III Sp. z o.o.

Warsaw

100 %

EKZ Datzeberg Scan-Car GmbH

Berlin

100 %

Euro Mall Targówek Sp. z o.o.

Warsaw

100 %

EKZ Datzeberg Scan-Car GmbH & Co. KG

Berlin

100 %

Euro Mall Polska XV Sp. z o.o.

Warsaw

100 %

The companies are included in the consolidated financial statements by full consolidation. The TK Development Group’s joint ventures Kommanditaktieselskabet Østre Havn P/S

Aalborg

50 %

Euro Mall Polska XIV Sp. z o.o.

Warsaw

Østre Havn ApS

Aalborg

50 %

Euro Mall Polska XXIII Sp. z o.o.

Warsaw

30 % 30 %

Ringsted Outlet Center P/S

Aalborg

50 %

Euro Mall Hradec Kralove Real Estate s.r.o.

Prague

20 %

SPV Ringsted ApS

Aalborg

50 %

Euro Mall Sterboholy SC a.s.

Prague

75 %

Udviklingsselskabet Nordkranen A/S

Copenhagen

50 %

Fashion Arena Center Management s.r.o.

Prague

75 %

Kommanditaktieselskabet Danlink - Udvikling

Copenhagen

50 %

Euro Mall Ventures S.á r.l.

Luxembourg

20 %

Komplementarselskabet DLU ApS

Copenhagen

50 %

Euro Mall Luxembourg JV S.á r.l.

Luxembourg

30 %

Ahlgade 34 - 36 A/S

Holbæk

50 %

The companies are included in the consolidated financial statements by pro-rata consolidation. Associates Step Re CSP Invest I A/S

Herning

50 %

Pedersen Fritscheshof Neubrandenburg KG

Hamburg

35 %

Trøjborg ApS

Ikast-Brande

20 %

Camacuri s.r.o.

Prague

45 %

The companies are recognized in the consolidated financial statements according to the equity method.

9 6 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | C onsolidated financial statements


P A R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S I N C O M E S TAT E M E N T DKKm

Note

2013/14

2012/13

Net revenue

0.0

0.0

External direct project costs

0.0

0.1

Gross profit/loss

0.0

0.1

Other external expenses

3

3.3

3.3

Staff costs

4

2.1

1.6

5.4

4.9

-5.4

-4.8

Total Operating profit/loss Income from investments in associates

7

-130.0

-336.1

Financial income

8

69.3

64.4

Financial expenses

9

-5.9

-9.1

-66.6

-280.8

-72.0

-285.6

14.8

48.2

-86.8

-333.8

Profit/loss for the year

-86.8

-333.8

Comprehensive income for the year

-86.8

-333.8

Total Profit/loss before tax Tax on profit/loss for the year Profit/loss for the year

10

C O M P R E H E N S I V E I N C O M E S TAT E M E N T

Parent compan y financial statements |

A N N U A L R E P O RT 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 9 7 / 1 1 5


P A R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S BALANCE SHEET DKKm

Note

31 Jan 2014

31 Jan 2013

Goodwill

5.1

5.1

Intangible assets

5.1

5.1

ASSETS Non-current assets

718.1

867.6

Receivables from group enterprises

1,371.8

1,159.1

Financial assets

2,089.9

2,026.7

19.3

21.3

19.3

21.3

2,114.3

2,053.1

Prepayments

0.2

1.4

Receivables

0.2

1.4

Investments in group enterprises

Deferred tax assets

7

11

Other non-current assets

Non-current assets Current assets

4.0

4.0

Cash and cash equivalents

0.1

0.1

Current assets

4.3

5.5

2,118.6

2,058.6

Other securities and investments

ASSETS

12

9 8 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | Parent compan y financial statements


P A R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S BALANCE SHEET DKKm

Note

31 Jan 2014

31 Jan 2013

Share capital

13

98.2

631.0

Other reserves

13

EQUITY AND LIABILITIES

Equity

588.9

0.0

Retained earnings

1,314.2

1,237.6

Equity

2,001.3

1,868.6

19.2

Liabilities Provisions

15

19.2

Other debt

17

0.0

1.5

19.2

20.7

81.5

153.0

Non-current liabilities

14

Credit institutions Trade payables Corporate income tax

17

Other debt Current liabilities

Liabilities EQUITY AND LIABILITIES

Parent compan y financial statements |

0.5

0.6

12.7

12.4

3.4

3.3

98.1

169.3

117.3

190.0

2,118.6

2,058.6

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P A R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S S TAT E M E N T O F C H A N G E S I N E Q U I T Y DKKm

Share capital

Other reserves

Retained earnings

Total equity

631.0

140.2

1,430.3

2,201.5

Profit for the year

0.0

0.0

-333.8

-333.8

Other comprehensive income for the year

0.0

0.0

0.0

0.0

Total comprehensive income for the year

0.0

0.0

-333.8

-333.8

Special reserve transferred to distributable reserves

0.0

-140.2

140.2

0.0

Share-based payment

0.0

0.0

0.9

0.9

631.0

0.0

1,237.6

1,868.6

Equity at 1 February 2012

Equity at 31 January 2013 Profit for the year

0.0

0.0

-86.8

-86.8

Other comprehensive income for the year

0.0

0.0

0.0

0.0 -86.8

0.0

0.0

-86.8

-588.9

588.9

0.0

0.0

56.1

0.0

0.0

56.1

Premium on capital increase

0.0

174.4

0.0

174.4

Total comprehensive income for the year Capital decrease Capital increase Costs on share issue

0.0

-11.6

0.0

-11.6

Premium on capital increase transferred to distributable reserves

0.0

-162.8

162.8

0.0

Share-based payment

0.0

0.0

0.6

0.6

98.2

588.9

1,314.2

2,001.3

Equity at 31 January 2014

1 0 0 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | Parent compan y financial statements


P A R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S C A S H F L O W S TAT E M E N T DKKm Operating profit/loss

2013/14

2012/13

-5.4

-4.8

0.2

0.0

Adjustments for non-cash items: Share-based payment Exchange-rate adjustments Increase/decrease in receivables Increase/decrease in payables and other debt Changes in deposits on blocked and escrow accounts Cash flows from operations

-0.3

0.7

-241.5

-17.6

-1.5

-1.0

0.0

0.3

-248.5

-22.4

Interest paid, etc.

-5.6

-8.5

Interest received, etc.

69.3

64.1

Corporate income tax paid Cash flows from operating activities

-12.4

-13.0

-197.2

20.2

0.0

-95.7

Dividend received

50.0

73.9

Cashflow from investment activities

50.0

-21.8

Capital increase

230.5

0.0

Costs on share issue

-11.6

0.0

Raising of short-term financing

0.0

0.9

Repayment, credit institutions

-71.7

0.0

Cash flows from financing activities

147.2

0.9

Cash flows for the year

0.0

-0.7

Cash and cash equivalents, beginning of year

0.1

0.8

Cash and cash equivalents at year-end

0.1

0.1

Purchase of securities and investments

The figures in the cash flow statement cannot be inferred from the parent company consolidated financial statements alone.

Parent compan y financial statements |

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TA B L E O F C O N T E N T S ,

N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S

Page 103

Note 1. Accounting policies

104

Note 2. Accounting estimates and assessments

104

Note 3. Other external expenses

105

Note 4. Staff costs

105

Note 5. Share-based payment

105

Note 6. Fees payable to the auditors elected at the General Meeting

106

Note 7. Investments in group enterprises

107

Note 8. Financial income

107

Note 9. Financial expenses

107

Note 10. Corporate income tax

108

Note 11. Deferred tax assets

108

Note 12. Securities

109

Note 13. Share capital and other reserves

109

Note 14. Credit institutions

109

Note 15. Provisions

110

Note 16. Operating leases

110

Note 17. Other debt

111

Note 18. Contingent assets and liabilities as well as security furnished

112

Note 19. Financial risks and financial instruments

114

Note 20. Transactions with related parties

114

Note 21. Post-balance sheet events

114

Note 22. Approval of Annual Report for publication

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N OT E 1 . ACCO U N T I N G P O L I C I E S

C A S E S W H E R E T H E PA R E N T C O M PA N Y ’ S A C C O U N T I N G P O L I C I E S D E V I AT E F R O M T H O S E

The financial statements of the Parent Company for 2013/14

OF THE GROUP

are presented in compliance with the International Financial Reporting Standards, as adopted by the EU, and in accordance

Translation of foreign-currency items

with Danish disclosure requirements for annual reports pre-

Foreign-exchange adjustments of receivables from or payables

pared by listed companies; see the Executive Order on IFRS is-

to subsidiaries that are considered part of the Parent Compa-

sued in pursuance of the Danish Financial Statements Act.

ny’s total investment in the relevant subsidiary are recognized in the income statement under financial items. Such foreign-ex-

The parent financial statements are presented in DKK million,

change adjustments are recognized in other comprehensive in-

which is the Company’s functional currency.

come in the consolidated financial statements.

The parent financial statements are presented on the basis of

Share-based incentive schemes

historical cost.

No intercompany settlement takes place between the Parent Company and subsidiaries in respect of the Parent Company’s

Generally, the Parent Company applies the same accounting

share-based payments to employees in subsidiaries. In the par-

policies regarding recognition and measurement as the Group.

ent financial statements, the value of incentive schemes allo-

The cases where the Parent Company’s accounting policies de-

cated to subsidiaries’ employees is recognized under “Invest-

viate from those of the Group are described below. For a de-

ments in subsidiaries”, with a corresponding amount recorded

tailed overall description of accounting policies, reference is

directly in equity.

made to note 1 to the consolidated financial statements. Dividends on investments in subsidiaries

I M P L E M E N TAT I O N O F N E W A N D A M E N D E D

Dividends on investments in subsidiaries are recognized in the

F I N A N C I A L R E P O R T I N G S TA N D A R D S A N D I N -

Parent Company’s income statement under financial income in

T E R P R E TAT I O N S I S S U E D B Y I F R I C

the financial year in which the right to dividend vests. Usually,

The parent financial statements for 2013/14 have been pre-

this will be the date on which the General Meeting of share-

sented in accordance with the financial reporting standards

holders adopts the distribution of dividend from the relevant

(IFRS/IAS) and IFRIC interpretations applicable for financial

company.

years beginning at 1 February 2013. Investments in subsidiaries The implementation of new or amended financial reporting stand-

The Parent Company’s investments in subsidiaries are meas-

ards and interpretations that entered into force in the 2013/14

ured at cost. The carrying amounts of investments in subsid-

financial year has not resulted in any changes to the accounting

iaries are reviewed at the reporting date to identify any indi-

policies that affect recognition and measurement.

cations of impairment. If such indications are identified, the recoverable amount of the asset is calculated to assess the

The accounting policies have been consistently applied with

need for any impairment and the extent of such impairment.

those of the previous financial year.

If the cost exceeds the recoverable amount, it is written down to the recoverable amount. If the dividend distributed exceeds

F I N A N C I A L R E P O R T I N G S TA N D A R D S A N D I F -

the comprehensive income recorded by the enterprise for the

R I C I N T E R P R E TAT I O N S N O T Y E T I N FO R C E

relevant year, this is considered an indication of impairment.

At the date of publication of this Annual Report, a number of new or amended financial reporting standards and IFRIC inter-

Impairment losses are recognized in the income statement.

pretations had not yet entered into force or been adopted by the EU. Thus, they have not been incorporated into the Annual

Upon the sale of equity investments in subsidiaries, gains or

Report. None of these standards and interpretations are ex-

losses are determined as the difference between (i) the carry-

pected to materially affect the parent financial statements for

ing amount of the sold equity investments and (ii) the fair value

the next financial years, with the exception of the additional

of the sales proceeds and the fair value of any remaining equity

disclosure requirements following from the relevant standards

investments.

and interpretations.

Parent compan y financial statements |

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N O T E 2 . A C C O U N T I N G E S T I M AT E S A N D A S S E S S MENTS

or if the expectations do not materialize, this could result in the value of the tax assets being significantly lower than that computed at 31 January 2014, which would have an adverse effect

Many account items cannot be measured with certainty, but

on the Group’s results of operations and financial position. The

only estimated. Such estimates consist of assessments based

carrying amount of deferred tax assets totalled DKK 19.3 mil-

on the most recent information available at the time of present-

lion at 31 January 2014.

ing the financial statements. It may be necessary to change previous estimates based on changes in the assumptions un-

Investments in and receivables from group enterprises

derlying the estimate or based on supplementary information,

To assess the need for impairment of investments in and re-

additional experience or subsequent events.

ceivables from group enterprises in the Parent Company Financial Statements, the values in use of the cash-flow-gen-

In connection with the practical application of the accounting pol-

erating units to which the investment and receivable relate

icies described, Management has made a number of significant

must be calculated. Calculating the value in use assumes that

accounting estimates and assessments that have materially

an estimate of future expected cash flows in the individual

affected this Annual Report:

cash-flow-generating unit has been made and that a reasonable discount rate has been determined. If the actual course of

Deferred tax assets

an investment deviates from the expected development, this

The valuation has been based on the existing possibilities for

may necessitate adjustments to the impairment recognized. In

carrying forward losses and for joint taxation. A change in the

the 2013/14 financial year, a DKK 180.0 million writedown for

conditions for carrying forward losses and joint taxation could

impairment of investments was made. The impairment totalled

result in the value of the tax assets being either higher or lower

DKK 1,050.2 million at 31 January 2014. The carrying amount

than the carrying amount computed at 31 January 2014. The

of investments in group enterprises totalled DKK 718.1 million

valuation of the tax asset has been based on existing budgets

at 31 January 2014.

and profit forecasts for a five-year period. For the first three years, budgets are based on an evaluation of specific projects in the Group’s project portfolio. The valuation for the next two years has been based on specific projects in the project portfolio with a longer time horizon than three years as well as various project opportunities. Due to the substantial uncertainties attaching to these valuations, provisions have been made for the risk that projects are postponed or not implemented and the risk that project profits fall below expectations. If the conditions and assumptions for budgets and profit forecasts change, including time estimates,

N OT E 3 . OT H E R E X T E R N A L E X P E N S E S 2013/14

2012/13

Administrative expenses

3.0

3.0

Cars, operating expenses

0.3

0.3

Other external expenses, total

3.3

3.3

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N O T E 4 . S TA F F C O S T S 2013/14

2012/13

Fees for Board of Directors

1.5

1.8

Salaries, etc. for the Parent Company’s Executive Board; see below

6.0

6.2

Other social security costs

0.0

0.0

Other salaries and staff costs

0.1

0.1

-5.5

-6.5

2.1

1.6

Average number of employees

2

2

Number of employees at year-end

2

2

Reinvoiced via service agreements Total staff costs

For salaries, etc. for the parent company’s Executive Board and fees for the Board of Directors reference is made to note 7 in the consolidated financial statements. Defined contribution plans The Company has entered into defined contribution plans with the employees in the Company. According to these plans, the Company pays a monthly amount of 2 % of the relevant employees’ basic salaries to independent pension companies. An amount of DKK 0.2 million was expensed for defined contribution plans in the 2013/14 financial year (2012/13: DKK 0.2 million). No employees in the Company are comprised by defined benefit plans. N O T E 5 . S H A R E - B A S E D PAY M E N T For a more detailed description, please see note 8 in the consolidated financial statements.

Share-based payment recognized in the profit or loss

2013/14

2012/13

0.2

0.2

N O T E 6 . F E E S PAYA B L E T O T H E A U D I T O R S E L E C T E D AT T H E G E N E R A L M E E T I N G 2013/14

2012/13

Total fees, Deloitte

0.6

0.2

Total fees, Nielsen & Christensen

0.5

0.2

Total fees

1.1

0.4

Statutory audit

0.2

0.2

Other assurance reports

0.4

0.0

Total

0.6

0.2

Statutory audit

0.1

0.2

Other assurance reports

0.4

0.0

Total

0.5

0.2

Fees break down as follows: Deloitte:

Nielsen & Christensen:

Parent compan y financial statements |

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N OT E 7 . I N V E STM E N TS I N G RO U P E N T E R P R I S E S

Cost at 1 February Additions for the year

2013/14

2012/13

1,457.6

1,361.0

252.3

96.6

-251.8

0.0

1,458.1

1,457.6

Impairment at 1 February

-870.2

-460.2

Impairment for the year

-180.0

-410.0

-1,050.2

-870.2

280.2

270.2

Disposals for the year Cost at 31 January

Impairment at 31 January Setoffs at 1 February

30.0

10.0

Setoffs at 31 January

310.2

280.2

Carrying amount at 31 January

718.1

867.6

Impairment set off against receivables/provisions

Investments in group enterprises are recognized at cost. Investments and receivables were subjected to an impairment test at 31 January 2014. In the cases where the cost exceeds the recoverable amount, it is written down to such lower value. The recoverable amount is based on the value in use, which has been determined using the expected cash flows on the basis of budgets for the next two financial years and budgets/forecasts for another three financial years approved by the Board of Directors, with the terminal value being recognized in year five. The calculation of the recoverable amount included a discount rate of 15 % before tax (2012/13: 15 %). The budgets for the first three years have been prepared on the basis of Management’s expectations for each individual, specific project, including expectations as to project progress, construction period, anticipated financing, contribution margin and date of sale. In this connection, the most important uncertainties relate to the expected contribution margin and date of sale. Impairment is recognized in the line ”Income from investments in group enterprises”. 2013/14

2012/13

-180.0

-410.0

50.0

73.9

-130.0

-336.1

Income from investments in group enterprises: Impairment for the year; see above Dividends Total income from investments Overview of investments in group enterprises: Name

Ownership Reg. office

interest

Aalborg

100 %

TK Development Bau GmbH

Berlin

100 %

TK Development GmbH

Berlin

100 %

TK Bygge-Holding A/S

The ownership interests shown above are the Company’s direct holdings.

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N OT E 8 . F I N A N C I A L I N COM E 2013/14

2012/13

Interest income from group enterprises

67.4

62.2

Financial income from loans and receivables

67.4

62.2

Other financial income

1.9

2.2

Total financial income

69.3

64.4

67.4

62.2

Which breaks down as follows: Interest income from financial assets not measured at fair value through profit and loss Other financial income

1.9

2.2

Total financial income

69.3

64.4

N OT E 9 . F I N A N C I A L E X P E N S E S 2013/14

2012/13

Interest expenses, credit institutions

5.1

6.1

Miscellaneous interest expenses

0.7

3.0

Foreign-exchange losses and capital losses on securities

0.1

0.0

Total financial expenses

5.9

9.1

Interest expenses on financial liabilities not measured at fair value through profit and loss

5.8

9.1

Other financial expenses

0.1

0.0

Total financial expenses

5.9

9.1

2013/14

2012/13

12.8

12.3

Which break down as follows:

N O T E 1 0 . C O R P O R AT E I N C O M E TA X

Current corporate income tax Change in deferred tax Tax on profit/loss for the year

2.0

35.9

14.8

48.2

-18.0

-71.4

32.5

84.0

The tax on the profit/loss for the year results as follows: Danish tax rate Tax effect of: Non-deductible expenses/non-taxable income Other Change in value adjustment Change of tax rate Tax on profit/loss for the year

Parent compan y financial statements |

0.1

0.9

-3.8

34.7

4.0

0.0

14.8

48.2

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N O T E 1 1 . D E F E R R E D TA X A S S E T S 31 Jan 2014

31 Jan 2013

Deferred tax assets at 1 February

58.9

60.1

Disposals for the year

-5.8

-1.2

Deferred tax assets at 31 January

53.1

58.9

Value adjustment at 1 February Value adjustment for the year Value adjustments at 31 January Carrying amount at 31 January

-37.6

-2.9

3.8

-34.7

-33.8

-37.6

19.3

21.3

Deferred tax assets relate to: 1.5

1.5

Current assets

-1.7

-1.7

Postponed deduction of interest expenses

32.5

43.5

Temporary differences

32.3

43.3

Value of tax losses

20.8

15.6

-33.8

-37.6

19.3

21.3

31 Jan 2014

31 Jan 2013

Value of tax losses

20.8

15.6

Postponed deduction of interest expenses

13.0

22.0

Total

33.8

37.6

97.4

97.4

31 Jan 2014

31 Jan 2013

Listed securities

0.1

0.1

Unlisted securities

3.9

3.9

Total securities

4.0

4.0

Investments

Impairment of tax assets Total

The change in deferred tax assets for the year has been recognized in the income statement.

Deferred tax assets not recognized in balance sheet:

Deferred tax liability not recognized in balance sheet: Contingent retaxation liability attaching to German subsidiaries

The Company controls whether such tax liabilities will be triggered, which is considered unlikely.

N OT E 1 2 . S EC U R I T I E S

The securities consist of listed shares and unlisted equity interests. Listed securities consist of listed shares and are measured at fair value (Fair value hierarchy: Level 1). No transfers have been made between the individual levels of the fair-value hierarchy in the current financial year. Unlisted equity interests are not traded in an active market. As the fair value of these equity interests cannot be determined with a sufficient degree of reliability, they are measured at cost. The securities are financial assets available for sale.

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N O T E 1 3 . S H A R E C A P I TA L A N D O T H E R R E S E R V E S Share capital Reference is made to note 25 in the consolidated financial statement. Other reserves Other reserves amounted to DKK 588.9 million at 31 January 2014 and concern a special fund arising in connection with the capital reduction implemented in June 2013, when the denomination of the Group’s shares was changed from DKK 15 to DKK 1. This reserve can be used only following a resolution passed at the General Meeting.

N OT E 1 4 . C R E D I T I N ST I T U T I O N S 31 Jan 2013

31 Jan 2014 Payables to credit institutions are recognized as follows in the balance sheet: Non-current liabilities

0.0

0.0

Current liabilities

81.5

153.0

Total payables to credit institutions

81.5

153.0

Fair value

81.5

153.0

Carrying amount

81.5

153.0

At 31 January, the Parent Company had the following loans and credits: Effective rate

Carrying amount

Fair value

Loans

Maturity

Fixed/variable

2013/14

2012/13

2013/14

2012/13

2013/14

Bank DKK

2015

variable

4-5%

4-5%

29.5

30.0

29.5

2012/13 30.0

Bank EUR

2015

variable

3.25 - 3.5 %

3.3 - 4.1 %

52.0

123.0

52.0

123.0

The fair value has been determined at the present value of future principal repayments and interest payments by using the effective interest method (Fair value hierarchy: Level 2). N OT E 1 5 . P ROV I S I O N S

Provisions at 1 February Provisions for the year Provisions at 31 January

31 Jan 2014

31 Jan 2013

19.2

19.2

0.0

0.0

19.2

19.2

Expected maturity dates of the liabilities provided for: 0 - 1 year

0.0

0.0

1 - 5 year

19.2

19.2

Provisions at 31 January

19.2

19.2

Provisions relate to provisions for negative equity in a subsidiary.

Parent compan y financial statements |

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N O T E 1 6 . O P E R AT I N G L E A S E S For the years 2014-2016, operating leases for the rental of operating equipment have been concluded. The leases have been concluded for a five-year period with fixed lease payments. The leases are non-terminable for the period mentioned, after which it is expected that the majority can be renewed for one year. Future minimum lease payments according to non-terminable lease contracts break down as follows: 31 Jan 2014

31 Jan 2013

Within 1 year

0.3

0.3

Within 1-5 years

0.5

0.7

After 5 years

0.0

0.0

Total

0.8

1.0

Minimum lease payments for the year recognized in the income statement

0.3

0.3

N OT E 1 7 . OT H E R D E BT 31 Jan 2014

31 Jan 2013

Employee-related payables

1.5

3.8

Holiday pay obligations

0.7

0.9

Other debt

1.2

0.1

Other debt, total

3.4

4.8

Non-current liabilities

0.0

1.5

Current liabilities

3.4

3.3

Other debt, total

3.4

4.8

Broken down as follows under liabilities:

The carrying amount of employee-related payables consisting of salaries, personal income tax, social security contributions, holiday pay, etc., project-related costs and other costs payable is equal to the fair value of these payables. Holiday pay obligations represent the Company’s liability to pay salary during holiday periods to which the employees had earned entitlement by the reporting date and which are to be taken in the following financial year(s).

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N OT E 1 8 . CO N T I N G E N T AS S E TS A N D L I A B I L I T I E S AS W E L L AS S EC U R I T Y F U R N I S H E D Contingent assets Contingent assets in the form of tax assets not recognized appear from note 11. Contingent liabilities and security furnished

Surety and guarantee commitments on behalf of group enterprises

31 Jan 2014

31 Jan 2013

1,414.6

1,649.7

9.9

3.0

10.0

0.0

Surety and guarantee commitments on behalf of joint ventures Surety and guarantee commitments on behalf of associates Other surety and guarantee commitments Carrying amount of equity investments furnished as security to credit institutions

7.6

7.6

718.1

251.4

The below figures in brackets are comparative figures for 2012/13. The amounts stated for surety and guarantee commitments on behalf of group enterprises are the upper limits. At 31 January 2014, the subsidiaries had drawn an amount of DKK 1,335.8 million (DKK 1,646.1 million) on their credit facilities. In addition, the Company has guaranteed the liabilities of a few group enterprises in relation to construction contracts, and a few other project related contracts. The contingent retaxation liabilities attaching to German subsidiaries regarding which no provisions for deferred tax have been made amounts to DKK 97.4 million (DKK 97.4 million). The Company controls whether such tax liabilities will be triggered, which is considered unlikely. The Company is the management company for the Group’s Danish jointly taxed companies, and as from the 2013/14 financial year it has unlimited, joint and several liability together with the other jointly taxed companies for all corporate income taxes arising under the joint taxation scheme and as from 1 July 2012 the Company has unlimited, joint and several liability for the withholding taxes payable by these companies. Corporate income tax payable for the Danish jointly taxed companies amounted to DKK 0 million at 31 January 2014.

Parent compan y financial statements |

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N OT E 1 9 . F I N A N C I A L R I S K S A N D F I N A N C I A L I N ST RU M E N TS Categories of financial instruments

31 Jan 2014

31 Jan 2013

Receivables from group enterprises

1,371.8

1,159.1

0.1

0.1

1,371.9

1,159.2

Securities

4.0

4.0

Financial assets available for sale

4.0

4.0

Cash, cash equivalents and blocked and escrow accounts Loans and receivables

Credit institutions

81.5

153.0

Trade payables

0.5

0.6

Other debt

3.4

4.8

85.4

158.4

Financial liabilities measured at amortized cost

For a description of the Company’s capital management, risk management policy, foreign-exchange risks, interest-rate risks, liquidity risks and credit risks, reference is made to note 32 in the consolidated financial statements. Foreign-exchange risks relating to recognized assets and liabilities In the 2013/14 financial year and the comparative year, the Company did not enter into any forward agreements or other derivative financial instruments to hedge foreign-exchange risks in the Company. Cash, cash equivalents and securities

Receivables

Credit institutions

Unsecured net position

EUR at 31 January 2014

0.0

134.1

-52.0

82.1

PLN at 31 January 2014

0.0

3.5

0.0

3.5

CZK at 31 January 2014

0.0

0.4

0.0

0.4

EUR at 31 January 2013

0.1

212.3

-123.0

89.4

PLN at 31 January 2013

0.0

2.6

0.0

2.6

CZK at 31 January 2013

0.0

0.3

0.0

0.3

2013/14

2012/13

-6.2

-6.7

2013/14

2012/13

Sensitivity of profit/loss and equity to foreign-exchange fluctuations Effect if the EUR rate were 10 % lower than the actual rate

The Company’s major foreign-exchange exposures relate to EUR. The above calculations show the effect on equity and profit or loss if the rate of exchange for EUR had been 10 % lower than the actual rate. A corresponding increase in the foreign-exchange rate would have a corresponding positive impact on profit or loss and equity. As all foreign-exchange adjustments relating to the above-mentioned financial instruments are recognized in the income statement, any exchange-rate fluctuations will have the same effect on profit or loss and equity.

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N OT E 1 9 . F I N A N C I A L R I S K S A N D F I N A N C I A L I N ST RU M E N TS , CO N T I N U E D Interest-rate risks and the dates of revaluation or maturity regarding financial assets and liabilities: Date of revaluation/maturity 0 - 1 year

1 - 5 years

> 5 years

Effective rate Total

in %

2013/14 Securities

4.0

0.0

0.0

4.0

0%

Receivables from group enterprises

0.0

1,371.8

0.0

1,371.8

0-8%

Deposits with credit institutions

0.1

0.0

0.0

0.1

0%

Payables to credit institutions

0.0

-81.5

0.0

-81.5

3.25 - 5 %

Interest payments on loans

-3.3

-0.8

0.0

-4.1

Trade payables

-0.5

0.0

0.0

-0.5

0%

Other debt

-3.4

0.0

0.0

-3.4

0-5%

Total at 31 January 2014

-3.1

1,289.5

0.0

1,286.4

2012/13 Securities

4.0

0.0

0.0

4.0

0%

Receivables from group enterprises

0.0

1,159.1

0.0

1,159.1

0-8%

Deposits with credit institutions

0.1

0.0

0.0

0.1

0.25 - 2 %

-153.0

0.0

0.0

-153.0

3-5%

Interest payments on loans

-1.1

0.0

0.0

-1.1

Trade payables

-0.6

0.0

0.0

-0.6

0%

Other debt

-3.3

-1.5

0.0

-4.8

0-5%

-153.9

1,157.6

0.0

1,003.7

Payables to credit institutions

Total at 31 January 2013

With regard to interest-rate sensitivity, an increase in the interest level of 1 % p.a. compared to the interest level at the reporting date in respect of the Company’s variable-interest deposits with and payables to credit institutions would have a negative impact on the profit or loss for the year, and thus on equity, of DKK 0.6 million for a full year. A fall in the interest level of 1 % p.a. would result in a corresponding positive impact on the profit or loss for the year and on equity. For the 2012/13 financial year, the interest-rate sensitivity in case of a change in the interest level of 1 % p.a. would have a DKK 1.1 million impact for a full year. Liquidity risks The maturity dates of financial liabilities are specified for the individual categories of liabilities in the notes, with the exception of trade payables and other debt largely falling due for payment within one year. The Company’s liquidity reserve consists of cash and cash equivalents as well as unutilized credit facilities. Reference is also made to note 32 in the consolidated financial statements. Breach of loan agreements During the financial year and the previous year, the Company was not in breach of any loan agreements.

Parent compan y financial statements |

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N O T E S , PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S N O T E 2 0 . T R A N S A C T I O N S W I T H R E L AT E D PA R T I E S The Company has no related parties with a controlling interest. The Company has the following related parties: Board of Directors and Executive Board (and their related parties) Associates, joint ventures and group enterprises; see the overview of group companies, note 36 in the consolidated financial statements. 2013/14

2012/13

Board of Directors and Executive Board (and their related parties) Holding of shares, in terms of number (balance)

26,519,562 *)

1,940,251

Obligation towards Executive Board, employee bonds (balance)

0.5

1.5

Remuneration, Board of Directors

1.5

1.8

Remuneration, Executive Board

6.0

6.2

Joint ventures and group enterprises Management fee to group enterprises

1.0

1.0

67.4

62.2

1,371.8

1,159.1

-180.0

-410.0

1,050.2

870.2

Costs allocated to group enterprises according to service agreements concluded

5.5

6.5

Guarantee commission to group enterprises

1.9

2.0

50.0

73.9

176.3

95.7

Interest income from group enterprises Receivables from group enterprises (balance) Impairment for the year of investments in group enterprises Total impairment of investments in group enterprises (balance)

Dividends from subsidiaries Capital increase in group enterprises *)

The increase results mainly from changes to the Board of Directors following the Company’s Annual General Meeting in May 2013 and the subscription of additional shares in

connection with the capital increase implemented in September 2013.

Surety and other security furnished for subsidiaries appear from note 18. Suretyships and guarantees have been issued on behalf of joint ventures and associates; see note 31 in the consolidated financial statements. Apart from this, no securities or guarantees had been furnished for balances owing to or by related parties at the reporting date. Receivables and payables are expected to be settled by payment in cash. No losses were realized on receivables from related parties. The impairment made to provide for any probable losses on investments in group enterprises amounted to DKK 180.0 million in 2013/14 (2012/13: DKK 410.0 million). Apart from the above, there were no transactions with related parties in the year under review. N OT E 2 1 . P OST - BA L A N C E S H E E T E V E N TS Reference is made to note 34 in the consolidated financial statements. N O T E 2 2 . A P P R O VA L O F A N N U A L R E P O R T FO R P U B L I C AT I O N Reference is made to note 35 in the consolidated financial statements.

1 1 4 / 1 1 5 | T K D E V E LO PM E N T A / S | A N N U A L R E P O RT 2 0 1 3 / 1 4 | Parent compan y financial statements


C O M P A N Y I N F O R M AT I O N TK Development A/S The Annual General Meeting will be held at 3 p.m. on 30 April CVR no.:

2014 at Aalborg Kongres & Kultur Center, Radiosalen, Europa

24256782

Plads 4, DK-9000 Aalborg.

ISIN code: DK0010258995 (TKDV) Municipality of registered office: Aalborg, Denmark Website: www.tk-development.com e-mail: tk@tk.dk Executive Board: Frede Clausen and Robert Andersen Board of Directors: Niels Roth, Peter Thorsen, Per Søndergaard Pedersen, Arne Gerlyng-Hansen, Kim Mikkelsen and Morten E. Astrup.

Aalborg

Stockholm

Vestre Havnepromenade 7

Gamla Brogatan 36-38

DK-9000 Aalborg

S-101 27 Stockholm

T: (+45) 8896 1010

T: (+46) 8 751 37 30

Copenhagen

Vilnius

Islands Brygge 43

Gynėjų str. 16

DK-2300 Copenhagen S

LT-01109 Vilnius

T: (+45) 3336 0170

T: (+370) 5231 2222

Warsaw ul. Mszczonowska 2 PL-02-337 Warsaw T: (+48) 22 572 2910

Prague Karolinská 650/1 CZ-186 00 Prague 8 T: (+420) 2 8401 1010

C ompan y information |

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Tk development 2013 14 annual report  

http://tk-development.com/Files/Billeder/Issuu/Annual%20reports/TK_Development_2013_14_Annual_Report.pdf

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