tk_development_annual_report_2006_07

Annual report 2006/07

TK Development A/S

CVR 24256782

2/127 Annual Report 2006/07 for TK Development A/S

Table of Contents

Company information 3

Summary 4

Consolidated financial highlights and key ratios 8

Business concept 9

Management’s review 14

Fiscial year 2006/07 14

TK Development, the Parent Company 17

TKD Nordeuropa 18

Euro Mall Holding 29

Investment properties 38

Financial review for 2006/07 40

Value creation in TK Development 46

Shareholders 49

Corporate governance 53

Risk issues 58

Posts held by Supervisory and Executive Board members 67

Statement by the Executive Board and Supervisory Board 71

Independent auditors’ report 72

Accounting policies 73

Consolidated Financial Statements 84

Overview of group companies 109

Financial statements for TK Development A/S 111

Annual Report 2006/07 for TK Development A/S 3/127

Company information

TK Development A/SCVR 24256782 - ISIN code 0010258995Municipality of registered office: Aalborg

www.tk-development.dke-mail: [email protected]

Tel: +45 8896 1010

Euro Mall Holding A/S

CVR 20114800

TKD Nordeuropa A/S

CVR 26681006

Executive boardFrede Clausen

Robert Andersen

Head officeAalborg

Vestre Havnepromenade 7DK-9000 Aaborg

Tel: (+45) 8896 1010

CopenhagenArne Jacobsens Allé 16, 3. t.v.

DK-2300 København STel: (+45) 3336 0170

Warsawul. Mszczonowska 2PL-02-337 Warsaw

Tel: (+48) 22 572 2910

PragueKarolinská 650/1

CZ-186 00 Prague 8Tel: (+420) 2 8401 1010

BerlinAhornstraße 16D-14163 Berlin

Tel: (+49) 30 802 10 21

VilniusA. Gostauto 40

LT-01112 VilniusTel: (+370) 5231 2222

HelsinkiKorkeavuorenkatu 34FIN-00 130 HelsinkiTel: (+358) 9 2284 81

StockholmGamla Brogatan 36-38SE-101 27 StockholmTel: (+46) 8 751 37 30

RigaLacplesa 20a

LV-1011 RigaTel: (+371) 7 821 811

100 %80 %

SofiaThe Executive Center

2a Saborna Street, 2nd Floor, Office No. 27 & 28

BG-1000 SofiaTel:(+359) 2 9264 180

Supervisory boardPoul LauritsenTorsten Erik RasmussenPer Søndergaard PedersenKurt DaellJesper Jarlbæk


Summary

Summary

At a Supervisory Board meeting today, Wednesday, 25 April

2007, TK Development A/S considered and adopted the

2006/07 Annual Report.

In the 2006/07 financial year, the TK Development

Group recorded a profit of DKK 249.4 million after tax

and minority interests, compared to DKK 28.3 million

the year before.

Management considers the profit for the year to be sa-

tisfactory.

Consolidated equity totalled DKK 1,290.9 million at 31

January 2007, corresponding to a solvency ratio of 35.0

%. The balance sheet total was reduced by more than

DKK 1.0 billion during the financial year, amounting to

DKK 3,685.8 million at 31 January 2007.

During the year under review, the Group sold completed

properties for a total amount of about DKK 1.0 billion,

thus strengthening focus on the Group’s core business

concept, development of real property.

The Group’s project portfolio grew to 1,161,000 m² and

represents an increasing earnings potential.

The Group has opened an office in Sofia to investigate

the potential for developing shopping centres and retail

parks in Bulgaria.

The Group has launched its first housing project in Po-

land and is working on several other project opportuni-

ties in the Polish residential segment.

A profit of at least DKK 240 million after tax and mi-

nority interests is anticipated for the 2007/08 financial

year.

After the capital increase effected and as part of the capital

restructuring, the Group has concentrated on various aspects

of its business, for instance optimizing, maturing and selling

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completed projects, adapting the Group’s business model so

as to minimize risks (with special focus on the use of forward

funding) and, finally, developing the Group’s pipeline of pro-

jects.

Project portfolio

The earnings potential of the Group’s project portfolio conti-

nues to grow. The main portfolio elements are set out below:

31.01.05 31.01.06 31.01.07Gross project portfolio (DKKm) 2,843 2,862 2,039

Of which, forward funding (DKKm) 191 638 590

Carrying amount of project portfolio (DKKm)

2,652 2,224 1,449

Development potential in ’000 m²:Sold projects (’000 m²) 242 289 351Other projects (’000 m²) 778 720 810Total project portfolio (’000 m²) 1,020 1,009 1,161

Number of projects 90 90 94

TK Development, the Parent Company

This part of the Group recorded a loss of DKK -49.8 million

after tax, which Management considers unsatisfactory.

During the year under review, the Group sold its project in

St. Petersburg, Russia, and the Słoneczne Centrum Handlowe

shopping centre, Szczecin, in Poland, as well as the remaining

18 holiday units on the island of Usedom in Germany. In

addition a property in Næstved, Denmark, was handed over

to the investor.

Writedown of receivable from the Field’s project

Management has reassessed the outstanding selling price re-

ceivable from the Field’s project, which has resulted in a DKK

152.5 million writedown before tax in the 2006/07 financial

year. The valuation is based on an overall settlement reached


Summary

between the buyer and seller after the balance sheet date.

Value adjustment of the Group’s German investment properties

In the year under review, the Group adjusted its German in-

vestment properties upwards by DKK 1.3 million before tax

and minority interests.

TKD Nordeuropa- continued strengthening of project portfolio

In the 2006/07 financial year, TKD Nordeuropa realized a

profit after tax of DKK 104.3 million against DKK 6.0 mil-

lion the year before.

Management considers the profit for the year to be satisfac-

tory.

In the year under review, the Group placed heavy focus on im-

proving the quality of its project portfolio. At the same time,

several projects developed and completed in previous financial

years were sold, the most important being the Kennedy Ar-

cade, Aalborg, with a selling price of DKK 465 million. More-

over, the Group developed, sold and handed over a number of

small and medium-sized projects during the financial year.

Project developments

The Entré multifunctional centre, Malmö, Sweden

The project was sold to CGI – Commerz Grundbesitz Invest-

mentgesellschaft mbH in the year under review. The sale was

based on forward funding and a return requirement of 6 %.

The total price is expected to amount to about SEK 1.5 bil-

lion. Construction has started, and the current occupancy rate

is 55 %.

Galerija Azur, Riga, Latvia

The construction of the Group’s first shopping centre project

in the Baltic States has been completed, and the centre opened

on 24 August 2006. The centre has been sold to Meinl Euro-

pean Land Ltd. and is fully let.

In addition, the financial year saw the startup of a number of

new projects, including a shopping centre in Frederikssund

and a retail park in Albertslund, Denmark, several retail parks

in Sweden and a combined retail and office project in Vilnius,

Lithuania.

Euro Mall Holding- highly satisfactory year

Euro Mall Holding continued the positive development of the

preceding year. The profit after tax amounted to DKK 243.9

million, against DKK 247.5 million the year before.

Management considers the profit for the year to be highly sa-

tisfactory.

The project contributing most to the profit for the year is

Šestka Shopping Centre in Prague, the Czech Republic,

which opened in November 2006 and was sold to Europolis.

Moreover, Euro Mall Holding initiated and sold a number of

projects in the past financial year that will generate earnings

in subsequent financial years, and also completed the sale of

land.

In addition, Euro Mall Holding’s investment properties were

adjusted upwards by DKK 109.7 million before tax and mi-

nority interests owing to the sale of Plejada Shopping Cen-

tre, Sosnowiec, Poland, as well as continued price increases in

Central Europe.

The Euro Mall Holding subgroup recorded satisfactory de-

velopment in its project portfolio in the year under review.


Summary

Project developments

Galeria Biala, Bialystok, Poland

This project is being developed in a joint venture with Meinl

European Land Ltd., which will also hold a long-term invest-

ment in the project. Construction has started, and the centre

is scheduled for completion in autumn 2007. The current oc-

cupancy rate is 98 %.

Plejada Shopping Centre, Sosnowiec, Poland

In the year under review, this project was sold and handed

over to a company owned by the UK property investment

company, St. Martins Property Corporation Limited. The

sale was based on a 6.75 % rate of return for the investor.

Moreover, TK Development is developing an extension of the

centre, also sold to an investor on the basis of a 6.75 % rate

of return, based on forward funding. Construction has started

and is scheduled for completion in autumn 2007.

Targówek retail park, Warsaw, Poland

Construction of this 24,400 m² retail park started in autumn

2006 and is expected to be completed in autumn 2007. In the

year under review, the project was sold to Credit Suisse Asset

Management Immobilien Kapitalanlagegesellschaft mbH at a

7 % rate of return, based on forward funding. The current

occupancy rate is 84 %.

Multifunctional centre, Gdansk “Young City”, Poland

Together with Meinl European Land Ltd., Euro Mall Holding

has entered into an agreement with the Baltic Property Trust

Group regarding the acquisition of a plot of land for the con-

struction of an 84,000 m² multifunctional centre, comprising

retail, restaurant and leisure facilities, as well as office and resi-

dential space. Construction is scheduled to start at the end of

2007, with the centre opening planned for the end of 2009.

In addition, the parties have signed a letter of intent regarding

the development of a further 100,000 m² in the area.

The financial year also saw the startup of a range of new pro-

jects, including shopping centres in Tarnow and Nowy Sacz

in Poland, a retail park in Liberec, the Czech Republic, and a

shopping centre in Kolin, the Czech Republic.

Bulgaria

The Group has opened an office in Sofia to investigate the

potential for developing shopping centres and retail parks in

Bulgaria. At present, the Group is establishing new contacts

among potential tenants and investigating possible locations

in major towns and cities.

Charges brought by the public prosecutor for serious economic crime

In the autumn of 2005, TK Development A/S and six in-

dividuals were charged by the public prosecutor for serious

economic crime with fraudulent income recognition and

price manipulation concerning periods covering the 2000/01,

2001/02, 2002/03 and 2003/04 financial years. The charge

relates to a total of 29 projects. Management still believes that

the charges brought are based on misconceptions concerning

the Group’s accounting policies.

In addition, charges have now been brought against two of the

Company’s former auditors because, according to the public

prosecutor for serious economic crime, the conditions for the

Group’s use of the percentage of completion method for the

relevant financial years had not been met.

The matters covered by the charges have no impact on the

Company’s current financial position.

Change to composition of the Supervisory Board

The Supervisory Board recommends to the Annual General

Meeting that Niels Roth, who is also the Deputy Chairman


of the Supervisory Board of TK Development’s subsidiary,

TKD Nordeuropa A/S, become a member of the Supervisory

Board.

Outlook

A profit after tax and minority interests of at least DKK 240

million is anticipated for the 2007/08 financial year. This pro-

fit estimate is based on the following assumptions:

A sustained favourable market outlook for the Northern

and Central European markets, where the Group’s most

important segment, the retail segment, is enjoying

growth generated by the retail chains’ ongoing expan-

sive drive, coupled with strong investor demand for new

projects.

A good pipeline of projects, to be kept at a level of

1,100,000 m², which corresponds to three to four years’

activity at the current level.

This announcement of annual financial results is available at

the TK Development Group’s website:

www.tk-development.dk

Any questions relating to this annual report may be directed to

Frede Clausen, President and CEO, on telephone no. 88 96 10

10.

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Summary


Consolidated financial highlights and key ratios

Consolidated financial high-lights and key ratios

Consolidated financial highlights and key ratios Danish GAAP IFRS(Percentage of

completion method) (Completed contract method)

(DKK million) 2002/03 2003/04 2004/05 *) 2005/06 *) 2006/07

Financial highlights:Net revenue 1,016.5 1,557.2 2,131.8 1,623.3 2,719.1Value adjustment, investment properties 0.0 0.0 8.4 157.1 111.0Gross profit/loss -109.2 -624.0 413.0 379.0 623.9Profit/loss from ordinary activities before financing -313.0 -847.5 253.0 224.9 462.5Financing, etc. -120.9 -166.1 -158.0 -177.7 -126.3Profit/loss before tax -433.9 -1,013.7 94.4 44.6 335.7Consolidated profit/loss -336.5 -850.2 81.6 72.6 298.5Shareholders’ share of profit/loss for the year -343.2 -722.8 33.1 28.3 249.4

Balance sheet total 7,567.3 6,762.6 5,291.2 4,739.1 3,685.8Property, plant and equipment 56.6 794.1 628.0 787.2 551.7of which investment properties 0.0 648.0 598.7 761.6 533.7Total project portfolio 5,630.8 4,978.0 2,715.0 2,260.4 1,491.1Projects sold 2,391.5 2,985.9 - - -Other projects 3,239.3 1,992.1 - - -Equity excl. minority interests 1,435.1 574.1 310.8 899.1 1,153.7Equity 1,477.9 579.6 343.7 986.7 1,290.9Total capital resources** 2,188.8 1,237.8 1,122.5 1,493.5 1,290.9

Cash flows from operating activities -765.3 -959.6 1,507.5 506.1 1,219.9Net interest-bearing debt, end of year 4,087.1 5,093.3 3,603.7 2,577.9 1,125.1

Key ratios:Return on equity (ROE) -20.7% -72.0% 11.2% 8.5% 24.3%Earnings before interest and tax (EBIT margin) -30.8% -54.4% 11.9% 13.9% 17.0%Solvency ratio (based on equity) 19.0% 8.5% 6.5% 20.8% 35.0%Solvency ratio (based on capital resources) 28.9% 18.3% 21.2% 31.5% 35.0%Equity value (nom. DKK 20) 102.3 40.9 22.2 32.1 41.1Earnings per share (EPS-D) of nom. DKK 20 -24.5 -51.6 2.3 2.0 8.9Dividend (in DKK per share) 0.0 0.0 0.0 0.0 0.0Listed price of shares (nom. DKK 20) 36 23 34 57 82

Key ratios adjusted for the issue of convertible bonds:Return on equity (ROE) -19.4% -65.3% 11.2% 8.5% 24.3%Solvency ratio (based on equity) 20.3% 10.0% 6.5% 20.8% 35.0%Solvency ratio (based on capital resources) 28.9% 18.3% 21.2% 31.5% 35.0%Equity value (nom. DKK 20) 105.0 46.1 22.2 32.1 41.1Earnings per share (EPS-D) of nom. DKK 20 -23.3 -49.3 2.3 2.0 8.9

The calculation of key ratios was based on the guidelines issued by the Danish Society of Financial Analysts. Basis for calculating solvency ratio: equity at year-end/liabilities at year-end.

From fiscal year-end 2005/06 and forward the accounting principles are in accordance with International Financial Reporting Standards (IFRS)The key ratios for 2004/05 has been changed accordingly.

*) In the 2006/07 financial year, the accounting policies were changed in accordance with IAS 21. The comparative figures for 2004/05 and 2005/06were changed correspondingly.

**) According to IFRS, total capital resources include minority interests for 2004/05, 2005/06 and 2006/07.


Business concept

Business concept

Company history

The TK Development Group develops and operates real pro-

perty, in Denmark and internationally, within a number of

specific segments. The activities primarily include the estab-

lishment of shopping centres, superstores and corporate

headquarters, but also housing in Central Europe, initially

Poland.

Headquartered in Aalborg, Denmark, the Group has offices in

Copenhagen, Berlin, Warsaw, Prague, Stockholm, Helsinki,

Vilnius, Riga and Sofia.

The Group began operations in 1960. Throughout the first 25

years, its activities mainly comprised trading in building sites

for holiday homes and construction of holiday homes as such.

In the late 1980s, the then Thorkild Kristensen A/S company

expanded its activities to include the development of shopping

centres and superstores in Denmark. Two years after Thorkild

Kristensen A/S was listed in 1991, the company merged with

TK Ejendomsinvest A/S to form TK Development A/S.

In the early 1990s, the Group expanded into Germany and

later into Central Europe. The Group collaborated with the

Investment Fund for Central and Eastern Europe to establish

companies that launched activities in Poland in 1994 and in

the Czech Republic in 1997. In Northern Europe, activities

were expanded to include the Swedish market in 1997. After

setting up a branch in Finland in 1999, the Group probed

into the Baltic States in 2001. During the 1990s, the Group

experienced strong growth based on its expansion of activities

into eight countries in Northern and Central Europe. Today,

the Group’s activities also comprise centre management opera-

tions through Euro Mall Holding’s 33% interest in a company

whose principal activity, via subsidiaries in Poland, the Czech

Republic and Slovakia, is centre management. Centre ma-

nagement operations include letting, marketing and operati-

ons and financial management of shopping centres.

In the 2002/03 and 2003/04 financial years, the Group re-

cognized substantial losses as a result, among other things,

of major writedowns on a number of projects, particularly in

Central Europe and mainly because of the macroeconomic

conditions prevailing in that region. The strain on the Group’s

cash resources forced it to reduce its balance sheet, including

by shelving projects already initiated.

With effect from 1 February 2004, the Group completed a

restructuring that pivots on the two subgroups, Euro Mall

Holding comprising Central European activities, and

TKD Nordeuropa comprising Northern European activities.

The working capital was boosted by the issue of a listed bond

loan. In January 2006, the Group implemented a rights is-

sue to strengthen its financial platform and reinforce its liqui-

dity for the purpose of repaying subordinated bond loans. In

November and December 2006, the Group repaid the listed,

subordinated bond loans, and has thus implemented the re-

construction as planned.

Together with cost savings, the capital restructuring was the

first decisive phase in the overall turnaround experienced by

the Group in the past three years.

The second phase consisted of optimizing and maturing com-

pleted projects and subsequently re-selling them, a process

that has resulted in major asset sales to the tune of DKK 1.5

billion in the past two years. This has considerably reduced

the balance sheet total and interest-bearing debt, while relea-

sing working capital for new and future projects. At the same

time, this phase contributed to strengthening the focus on the

Group’s core business, the development of real property.


Business concept

In the third phase, the Group adapted its business concept so

as to minimize risks. This was done by using forward funding,

which means that investors buy and take over the projects at

a relatively early stage, typically when the building permit is

granted. At this stage, the investor pays for the site and de-

sign, with successive payments being made as the project is

completed. This reduces the amount of capital tied up in the

Group’s projects and substantially optimizes the use of capital,

while securing a stronger commitment from the investor at an

early phase of the project. The aim is for such forward funding

to be used for the majority of the Group’s projects.

The fourth phase consisted of maintaining and expanding the

Group’s pipeline of projects. In this connection, it is vital to

uphold a continuous flow of projects to ensure a continuous,

good level of earnings, as it takes a certain length of time to

prepare and generate new projects before construction can

start. During the period from 2003 to 2005, the Group ac-

corded higher priority to developing and completing existing

projects than on creating new ones, which impacted on the

pipeline of projects. In the past year, the Group re-intensified

the development of new projects, a strategy that is reflected in

a growing project pipeline.

The two first phases have been implemented and the im-

plementation of the last two is well underway. Against this

background the Group has also launched a fifth phase, with

the focus on growth. Thus, the Group has generated growth

on existing markets but within new segments, in the form of

retail parks on the Central European markets and housing on

the Polish market.

As a consequence, the Group has a strong capital base today,

with a solvency ratio of around 35 %. Combined with the

Group’s project portfolio, where the earnings potential re-

mains at a satisfactorily high level, this helps underpin future

earnings projections.

With the establishment of an office in Sofia in spring 2007,

the Group has also begun sounding out the Bulgarian market

to investigate the potential for developing shopping centres

and retail parks.

Mission statement and strategy

Mission statement

The overall mission of the TK Development Group is to create

value through the development of real property.

The Group is a development and service enterprise specia-

lizing in being the productive and creative liaison between

tenants and investors.

Strategy

In collaboration with tenants and investors, the TK Develop-

ment Group plans and arranges the construction of new

buildings, expansion and conversion of real property based

on tenant needs and investor requirements. The Group is in

charge of the projects, including construction management

and signing of contracts with construction companies and

subcontractors for the performance of construction assign-

ments.

In terms of segments, the Group focuses on the establishment

of shopping centres, superstores and corporate headquarters

and related mixed and multifunctional projects as well as hou-

sing in Central Europe.

The retail segment will remain the Group’s most important

segment in the years ahead based on continued expansion of

its already extensive network of contacts. In Denmark, the

Group’s focus will remain on office projects, primarily large

corporate headquarters.

The Group owns a number of investment properties for let-


Business concept

EngineersArchitects

Option/purchase of site

Tenant requirements

Tenant requirements

Public authorities

ContractorsSubcontractors

Tenants

Investors

Project managementLettingSales

Finished project

ting purposes. The Group monitors the market situation on

an ongoing basis with a view to selling its investment proper-

ties. The Group does not intend to acquire further investment

properties, but to use its capital for development projects

instead.

Project development

The Group has strong networks forged on the basis of long-

standing, close business relationships with tenants and inve-

stors, and regularly enters into contracts with these business

partners.

The Group is predominantly a service provider and has spe-

cialized in being a productive and creative liaison between

tenants, investors, architects, construction companies and

other business partners.

A typical project includes the following phases:

Prime geographic locations are identified and selected on

the basis of tenant needs and investor requirements as to

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specific sitings.

A rough budget is prepared.

As a general principle, the acquisition of the selected area

is secured by an option to buy.

Independent architects prepare a conceptual design.

The Group’s project engineers review the construction

costs indicated in the project proposal.

The final budget is prepared and submitted for approval

by Management.

Leases are signed with the project’s future tenants. An

agreement for the sale of the project to one or more inve-

stors is often signed at this point.

Contracts are signed with construction companies and

subcontractors for completion of the construction pro-

cess.

The Group’s project engineers are in charge of construc-

tion management while the project is being carried out.

The sales department seeks to sell/let any projects that

have not been sold or fully let to investors or tenants

throughout all project phases.

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Business concept

The diagram below illustrates the Group’s funds tied up in projects, both in a normal project scenario and a forward funding scenario.

Project and risk management

New projects are initiated on the basis of an overall assessment

of their earnings potential, balance sheet impact and impact

on cash resources relative to the specific risks attaching to the

individual project. The Group works with both short-term

and long-term cash budgets to ensure sufficient funds relative

to the Group’s day-to-day operations and compliance with co-

venants in respect of the Group’s credit-granting bankers and

other stakeholders.

A number of management tools contribute to ensuring a satis-

factory project process. Construction is typically not initiated

until at least 60 % of a project is let or sold. If the project is

sold, construction will not be initiated until the Group ex-

pects to be able to meet such requirements from the investor

as would finalize the project sale. Meeting these requirements

typically falls within the Group’s sphere of competencies. Ca-

reful project management and follow-up are essential factors

of any project, and liquidity statements are prepared on a re-

gular basis at both project and group levels.

The Group emphasizes that project location, regulatory mat-

ters, pre-letting, construction matters and market conditions

should combine to limit the complexity of and thus the risk

attaching to the projects.

In general, the Group aims to secure the sale of projects at

an early stage, and Management believes it is important to

expand investor commitment by having the investors fund

the project during the construction process (forward funding)

where possible. Forward funding agreements with investors

are usually made before construction startup, which means

that the investor’s payments on account during the construc-

tion period coincide with the payments to be made to TK

Development’s contractors.

The criteria for using forward funding are based on several

important principles, including to keep the funds tied up in

the Group’s projects at an absolute minimum, which also mi-

Normal project financing

Forward funding

Site

pur

chas

e Development phase Construction period

Cons

tructi

on st

art

Hand

ing-o

ver

Fund

s tied

up

(DKK

)

Project progress


Business concept

nimizes the risk. Before construction starts, the investor and

TK Development come to an agreement on a well-defined

project, and the investor remains involved throughout the

construction period, being consulted on all major decisions.

These principles ensure that from construction startup, TK

Development’s risk in the project is mostly limited to the let-

ting risk attaching to any remaining unlet premises and the

risk of construction budget overruns.


Management’s review

Fiscial year 2006/07

The profit for the 2006/07 financial year amounts to DKK

249.4 million after tax and minority interests, compared to

DKK 28.3 million the year before. The balance sheet total

amounted to DKK 3,685.8 million at 31 January 2007, a de-

cline of DKK 1,053.3 million, or 22.2 %, compared to 31

January 2006. Consolidated equity totalled DKK 1,290.9

million at 31 January 2007. The solvency ratio amounts to

35.0 %.

The profit for the year meets the previously announced profit

forecast, and Management considers this performance satis-

factory.

During the year under review, the Group’s targeted efforts to

optimize, mature and sell completed projects resulted in the

sale of completed properties for a total amount of about DKK

1.0 billion. In addition, the use of forward funding remained

a key focus, and the Group succeeded in obtaining forward

funding for about 95 % of the projects for which sales agre-

ements were completed in the past financial year. Finally, the

Group focused on developing its pipeline of projects. Thus,

the quality of the Group’s project portfolio has improved

further, and the earnings potential of the project portfolio

continues to climb.


Net revenue by geographic segment Danish GAAP(Percentage of completion method)

IFRS(Completed contract method)

(DKKm) 2002/03 2003/04 2004/05 2005/06 2006/07Geographic segments:Northern Europe 1,314.5 1,623.8 1,342.4 931.6 1,953.8Central Europe -298.0 -66.6 789.4 691.7 765.3Total 1,016.5 1,557.2 2,131.8 1,623.3 2,719.1

Net revenue highlights by segment:

The Group has launched a growth phase, expanding existing

markets with new segments in the form of retail parks on the

Central European markets and housing in Poland, as well as

establishing an office in Bulgaria.

In the past financial year, the Group started up a whole range

of new projects in Northern and Central Europe, including

shopping centres, retail parks and combined projects. These

projects are described in more detail under the individual

business units.

Markets and business units

The TK Development Group has business activities in two

geographic segments, Northern and Central Europe. Net re-

venue highlights are shown by segment below.

The Group’s markets recorded satisfactory economic growth,

as described in more detail under the respective business units,

and thus the outlook for the future is positive.

Bulgaria

The Group has opened an office in Sofia to investigate the

potential for developing shopping centres and retail parks in

Bulgaria. At present, the Group is establishing new contacts

among potential tenants and investigating possible locations

in major towns and cities. The Group expects to acquire the

land for its first project in Bulgaria in the 2007/08 financial

year, and the expansion of the Group’s geographic segment to

include Bulgaria helps underpin the expectations for Group

earnings in the somewhat longer term.



The main elements of the Group’s project portfolio are set out below:

31 Jan. 05 31 Jan. 06 31 Jan. 07Gross project portfolio (DKKm) 2,843 2,862 2,039Of which, forward funding (DKKm) 191 638 590Carrying amount of project portfolio (DKKm) 2,652 2,224 1,449

Development potential in ’000 m²:Sold projects (’000 m²) 242 289 351Other projects (’000 m²) 778 720 810Total project portfolio (’000 m²) 1,020 1,009 1,161


The table below shows the distribution of the carrying amount of the projects in the portfolio at 31 January 2007, for the Company and the two subgroups. The projects are divided into sold and unsold at 31 January 2007 and sub-divided into completed, in progress and not initiated.

Projects at 31 January 2007 TKD Nordeuropa *) Euro Mall Holding TK Development, Parent Company *)

Group, total

(DKKm) Per cent of total

SoldCompleted 0 0 0 0 0.0 %In progress 501 22 0 523 36.1 %Not initiated 46 32 0 78 5.4 %Total 547 54 0 601 41.5 %

UnsoldCompleted 145 0 35 180 12.4 %In progress 113 0 0 113 7.8 %Not initiated 196 342 17 555 38.3%Total 454 342 52 848 58.5 %

Total project portfolio 1,001 396 52 1,449 100.0 %*) adjusted for intercompany eliminations

The diagram below shows economic indicators for Bulgaria,

which support Management’s assessment of the growth pro-

spects in this market.

Bulgaria – startup in 2007 2006 2007e 2008e

GDP (real growth) 5.9 % 5.8 % 5.7 %

Private consumption (real growth) 6.6 % 6.1 % 5.1 %

Source: Danske Bank, April 2007

For a more detailed description of the outlook for each of the

individual business units, please see pages 19 and 31 in this

present annual report.

The Group’s project portfolio

Project portfolio status

At 31 January 2007, the Group’s project portfolio repre-

sented a total of about 1,161,000 m², of which 351,000 m²

is attributable to sold projects and the remaining 810,000

m² is attributable to other projects. Other projects consist of

456,000 m² in TKD Nordeuropa, 338,000 m² in Euro Mall

Holding and 16,000 m² in TK Development A/S, the Parent

Company. The Group’s project portfolio totalled 1,009,000

m² at 31 January 2006.


The table below shows the square meters of the project portfolio broken down in the same manner as in the table above.

Projects at 31 January 2007TKD Nordeuropa Euro Mall Holding TK Development,

Parent CompanyGroup, total

Projekter (m² (‘000)) Per cent of total

SoldCompleted 0 0 0 0 0.0 %In progress 117 90 0 207 17.8 %Not initiated 18 126 0 144 12.4 %Total 135 216 0 351 30.2 %

UnsoldCompleted 12 0 2 14 1.2 %In progress 42 0 0 42 3.6 %Not initiated 402 338 14 754 65.0 %Total 456 338 16 810 69.8 %

Total project portfolio 591 554 16 1,161 100.0 %


The development at group level is outlined below (DKKm):

DKK mio.

Sold 31 Jan. 2005 31 Jan. 2006 31 Jan. 2007Completed 126 185 0In progress 97 350 523Not initiated 337 78 78

Total 560 613 601

UnsoldCompleted 1,037 643 180In progress 242 88 113Not initiated 813 880 555

Total 2,092 1,611 848

Total project portfolio 2,652 2,224 1,449


Forward funding 191 638 590

In % of gross carrying amount of sold projects

25.4 % 51.0 % 49.5 %

Over a period of time, the Group has succeeded in reducing the carrying amount of the project portfolio by means of forward funding.

At 31 January 2007, forward funding represented 49.5 % of the gross carrying amount of sold projects. As appears from the figures, a

number of completed projects were sold during the period, while the value of sold projects in progress increased substantially.

Projects (1.000 m²)

Sold 31 Jan. 2005 31 Jan. 2006 31 Jan. 2007Completed 14 21 0In progress 98 188 207Not initiated 130 80 144

Total 242 289 351

UnsoldCompleted 83 58 14In progress 51 30 42Not initiated 644 632 754

Total 778 720 810

Total project portfolio 1,020 1,009 1,161

The development at group level is outlined below (m2(000)):


A more detailed description of all major projects appears from

the section concerning the project portfolio under each of the

individual business units.

Outlook

A profit after tax and minority interests of at least DKK 240

million is anticipated for the TK Development Group for the

2007/08 financial year. This profit estimate is based on the

following assumptions:

A sustained favourable market outlook for the Northern

and Central European markets, where the Group’s most

important segment, the retail segment, is enjoying

growth generated by the retail chains’ ongoing expan-

sive drive, coupled with strong investor demand for new

projects.

A good pipeline of projects, to be kept at a level of

1,100,000 m², which corresponds to three to four years’

activity at the current level.

This outlook is supported by the planned completion of a

number of sold projects in progress during the current finan-

cial year.

TK Development, the Parent Company

TK Development, the Parent Company, is a holding company

for TKD Nordeuropa and Euro Mall Holding. Moreover, this

part of the Group owns the receivable from the Field’s project,

the projects in Germany and Russia and a few other assets.

The year’s results for this part of the Group constitute a loss

of DKK -49.8 million after tax. Management considers the

performance in this part of the Group unsatisfactory.

Writedown of receivable from the Field’s project

Management has reassessed the outstanding selling price re-

•

•


ceivable from the Field’s project, which has resulted in a total

DKK 152.5 million writedown before tax in the 2006/07 fi-

nancial year. The valuation is based on an overall settlement

with the buyer that has been negotiated in light of all the op-

portunities and risks relating to the project. This settlement,

which was reached after the balance sheet date, results in a

writedown of the outstanding receivable of DKK 42.5 million

in the second half of 2006/07.

The issues negotiated include the value of the revenue-driven

rent realized for the period from 1 March 2006 to 28 Fe-

bruary 2007, the value of vacant tenancies and risks associated

with vacancies, introductory schemes for tenants, exercising

the phase II development option and the contingent liability

relating to the establishment of additional parking facilities.

The total receivable will be paid before the end of April 2007,

after which there will be no further outstanding accounts with

the buyer concerning Field’s.

Value adjustment of the Group’s German investment pro-

perties

The Group’s investment properties in Germany consist of

commercial and residential rental properties, all situated on

the outskirts of Berlin, apart from a property in Lüdenscheid.

The value of these properties aggregated DKK 229.5 mil-

lion at 31 January 2007. A value adjustment was made in

the 2006/07 financial year in light of the improved letting

situation. The value adjustment amounts to DKK 1.3 million,

impacting on the year’s profit before tax and minority inte-

rests. The value adjustment is based on a 6 % rate of return,

calculated on the basis of a discounted cash-flow model. The

properties are almost fully let.

Current assets

At the beginning of the year, the project portfolio in this part

of the Group consisted of plots of land and holiday units in



Germany, rental properties in Russia, a minor shopping centre

in Szczecin, Poland, and a few other assets. The letting of TK

Development A/S’ projects in Russia and Germany has pro-

ceeded satisfactorily.

Germany

During the year under review, TK Development sold and

handed over the remaining 18 holiday units on the island of

Usedom in northern Germany. Following the sale of these ho-

liday units, the Group’s project portfolio in Germany consists

of four plots of land, and the sale of one of these plots is cur-

rently being negotiated.

Russia

The Group’s housing project near the Summer Palace in St.

Petersburg was sold and handed over to a Swedish investor in

the past financial year. Thus, the remaining project portfolio

in Russia consists of a housing project in Moscow, comprising

11 Scandinavian-style detached single-family dwellings.

Poland

In September 2006, the Group sold a 4,500 m² shopping cen-

tre in Szczecin, Poland, to a UK investor after owning it for a

number of years.

In addition a property in Næstved, Denmark, was handed

over to the investor.

The investment properties of TK Development A/S, the Pa-

rent Company, are described in the section on investment

properties below.

TKD Nordeuropa

The Group’s activities in Northern Europe are placed in the

wholly-owned subgroup TKD Nordeuropa.

TKD Nordeuropa primarily operates in the retail property

(shopping centres and retail parks), office property and multi-

functional project segments.

In the 2006/07 financial year, TKD Nordeuropa realized a

profit after tax of DKK 104.3 million against DKK 6.0 mil-

lion the year before.


tory.

The gross margin amounts to DKK 311.7 million against

DKK 164.4 million the year before. TKD Nordeuropa recor-

ded a satisfactory development in its project portfolio during

the 2006/07 financial year.

In the year under review, the Group placed heavy focus on

improving the quality of its project portfolio. At the same

time, several projects that had been developed and completed

in previous financial years were sold and handed over, inclu-

ding CMC Vandtårnsvej in Copenhagen, the remaining retail

premises of the Daells project in Copenhagen as well as the

Kennedy Arcade in Aalborg. Moreover, the Group developed,

sold and handed over a number of small and medium-sized

projects during the financial year.

Major projects contributing to the profit for the year include

the following:

The Kennedy Arcade, Aalborg, Denmark

The Kennedy Arcade was completed as a multifunctional cen-

tre in spring 2004, consisting of a traffic terminal, multi-storey



Shopping centres Stores/Superstores High-street property Offices Segment mix Residential

Denmark l l l l l lSweden l l l

Finland l lBaltic States l l l l l

TKD Nordeuropa has activities within the following segments in the individual markets:

car park, cinema, offices and a shopping centre, with a total

floor space of about 34,000 m². The cinema section of about

4,500 m² was sold in a previous financial year. The rest of the

Kennedy Arcade was sold to Aberdeen Property Investors for a

total price of DKK 465 million in the past financial year.

CMC, Vandtårnsvej, Copenhagen, Denmark

Through a 50/50 owned development company, TK Develop-

ment and Nordkranen A/S sold this 8,300 m² property, which

is rented by CMC Biopharmaceuticals A/S. The investor is

a Luxemburg fund consisting of institutional investors, and

is managed by Aberdeen Property Investors. The total selling

price amounts to DKK 182.0 million.

Daells, Copenhagen, Denmark

Untenanted retail premises of about 6,400 m² in the conver-

ted former Daells Varehus department store were sold to a

private investor in the past financial year.

AaB College, Hadsundvej, Aalborg, Denmark

Part of the area at Hadsundvej, Aalborg, has been sold to Aal-

borg Boldspilklub A/S for the purpose of developing a sports

college with course and conference facilities as well as student

accommodation. The total project has a floor space of about

15,000 m², to be handed over in phases. The first phase of

6,610 m² has been handed over to AaB.

KMD corporate headquarters, Stuhrs Brygge, Aalborg, Den-

mark

In autumn 2006, the Group handed over a 26,000 m² corpo-

rate headquarters property to KMD (Kommunedata).

Retail park, Barkarby, Sweden

In July 2006, the Group handed over the first of a total of four

phases to the investor. The first phase consists of about 4,000

m² and is rented by Jula and Färgtema. In autumn 2006, two

additional phases, covering a total of 13,450 m², were handed

over to the tenants, Intersport, Asko, Mio and Pay C. The in-

vestor taking over the entire project is the German investment

fund Commerz Grundbesitz Spezialfondsgesellschaft mbH.

Retail park, Kristianstad, Sweden

This project consists of a 3,100 m² retail park. The first phase

has been let to Intersport and the second to Pay C. Both pha-

ses were completed and handed over to private investors in the

year under review.

Galerija Azur, Riga, Latvia

The construction of the Group’s first shopping centre project

in Riga, Latvia, covering 21,000 m², was completed in the

past financial year, and the centre opened on 24 August 2006.

The centre has been sold to Meinl European Land Ltd., and

all premises are fully let.


The development site for the Entré multifunctional centre was

sold and handed over to the investor in the past financial year.

The profit on this sale was recognized in the profit for the

year.

Markets

Geographically, TKD Nordeuropa’s activities are broken

down on four core markets: Denmark, Sweden, Finland and


/


the Baltic States. TKD Nordeuropa has activities in the in-

dividual markets within various segments, as shown by the

table below.

TKD Nordeuropa constantly seeks to be at the forefront of

market developments in order to adapt the choice of projects

to letting and selling prospects.

The rate of return, and consequently the net return required

by investors from their property investments, has declined in

recent years in all of the markets discussed. The decline in in-

vestor return requirements leads to better prices for the Group

when negotiating the sale of projects, thereby supporting the

Group’s earnings estimate.

TKD Nordeuropa’s outlook for the individual markets and

the resulting segment focus are discussed briefly below.

Denmark

The business activities in Denmark are expected to account

for about 50 % of TKD Nordeuropa’s total activities over the

next three years, and the focus will be on all three segments:

retail units, offices and multifunctional projects.

In Denmark, retail tenancies normally generate net returns

ranging from 4.5 % to 6.5 % p.a., whereas office tenancies

typically generate net returns at the level of 5.0 % to 7.0 %

p.a. (Source: Jones Lang Lasalle - Nordic City Report Spring

2007).

Management has strong expectations particularly for the re-

tail segment, supported by expectations of relatively low infla-

tion, low unemployment and good purchasing power. These

expectations are reinforced by Management’s assessment that

Danish supermarket and retail chains are struggling to gain

market shares and generate growth, leading them to focus on

new and central locations. As a result, retail parks and multi-

functional projects are expected to prosper.

Denmark – startup in 1989 2006 2007e 2008e

GDP (real growth) 3.3 % 2.3 % 1.6 %



The office market signals renewed optimism, and attractive

sites are able to attract tenants and investors alike. In most

cases, the Group holds attractive locations, which are typically

in waterfront areas, through partnerships, and it expects to

create attractive projects on this basis in the next couple of ye-

ars. Examples of such projects include the Group’s locations at

Amerika Plads in Copenhagen and Stuhrs Brygge in Aalborg.

Sweden

The business activities in Sweden are expected to remain fo-

cused on the retail segment. Growth in Sweden is relatively

strong, and owing to the expansion in retail facilities in Swe-

den, particularly in the superstore segment, Sweden remains

an attractive market for this type of projects. In Sweden, retail

tenancies normally generate net returns ranging from 4.5 %

to 6.5 % p.a. (Source: Jones Lang Lasalle - Nordic City Report

Spring 2007).

Sweden – startup in 1997 2006 2007e 2008e

GDP (real growth) 4.2 % 2.8 % 2.4 %



Finland

Since its establishment in Finland in 1999, the Group has de-

veloped several retail parks. The Group expects to remain fo-

cused on the retail segment with superstores and a few major

projects. In Finland, retail tenancies normally generate returns

ranging from 5.5 % to 7.5 % p.a. (Source: Jones Lang Lasalle

- Nordic City Report Spring 2007).

Encouraged by the optimism on the Finnish market due to

/


CMC, Vandtårnsvej, Copenhagen, DenmarkThis 8,300 m2 project has been sold and handed over to a Luxemburg fund.

The Kennedy Arcade, Aalborg, DenmarkThis 29,000 m2 project, exclusive of the cinema section, was sold and handed over to Aberdeen Property Investors in the past financial year.


Corporate headquarters for KMD, Aalborg, DenmarkAt end-2006, the 26,000 m² corporate headquarters building was handed over to KMD (Kommunedata).

Selected projects that contribute to the profit for the year.



Galerija Azur, Riga, LatviaThe construction of the Group’s first shopping centre project in Riga, Latvia, covering about 21,000 m², was completed in the past financial year. The centre has been sold to Meinl European Land Ltd.

Retail park, Barkarby, SwedenIn the year under review, the Group handed over three of a total of four phases to the German investment fund Commerz Grundbesitz Spezialfondsgesellschaft mbH. The floor space comprised by the four phases totals 21,350 m2.

The Entré multifunctional centre, Malmö, SwedenThe development site of about 39,500 m2 for this multifunctional centre was sold and handed over to the investor in the past financial year.



sustained good economic indicators, the Group is preparing a

number of retail development projects.

Finland – startup in 1999 2006 2007e 2008e

GDP (real growth) 5.5 % 3.2 % 3.0 %



Baltic States

In recent years, the three Baltic States have experienced sub-

stantial growth, and EU membership is expected to stimulate

continued growth with expectations for a corresponding in-

crease in purchasing power.

Baltic States – startup in 2001 2006 2007e 2008e

GDP (real growth) 11.9 % 7.8 % 3.2 %



The rate of return in the Baltic States reflects that this is still an

immature market for which an amount should be allocated to

cover risks, and therefore the return requirement for the retail

market typically ranges from 7.0 % to 9.0 % p.a. (Source:

Jones Lang Lasalle - Nordic City Report Spring 2007 and Fre-

eman’s Guide to European Property 2007).

The expected investor return requirement continues to be in

the 7 - 9 % range. Within a few years, Management expects

this return requirement to drop to the level currently obtaina-

ble in Poland and the Czech Republic.

The Group intends to focus on the retail segment in Latvia

and Lithuania, but will also evaluate the office and residential

segments. TKD Nordeuropa is currently planning to develop

additional projects in the region.

Project portfolio / project developments

TKD Nordeuropa recorded a satisfactory development in its

project portfolio during the 2006/07 financial year. At 31 Ja-

nuary 2007, the development potential of TKD Nordeuropa’s

total project portfolio represented about 135,000 m² for sold

projects and 456,000 m² for other projects, a total of 591,000

m².

During the year under review, the Group developed and sold

a number of projects, including several properties owned by

the Group for a lengthy period.

Project outline

The outline on page 24 lists the key projects of TKD Nord-

europa’s project portfolio. The carrying amounts of these

projects accounted for more than 90 % of the total carrying

amount of the project portfolio of TKD Nordeuropa at 31 Ja-

nuary 2007. In terms of carrying amount, TKD Nordeuropa’s

five largest projects represented a total of DKK 843.0 million

at 31 January 2007.

Projects

Shopping centre, Frederikssund, Denmark

In the year under review, TKD Nordeuropa acquired several

properties in Frederikssund with a view to constructing an

18,000 m² shopping centre, of which 4,500 m² will be let

to a supermarket operator and the remaining 13,500 m² to

specialty stores. In addition, TKD Nordeuropa will have an

option to construct about 2,500 m² of office space and about

3,800 m² of residential units. The Company has recently

started the letting process. A new local plan for the area is ex-

pected to be adopted at end-2007, and the centre is scheduled

to open at the end-2009.

Retail park, Albertslund, Denmark

In cooperation with Nordkranen A/S, Ejendomsselskab, TKD

Nordeuropa secured a plot of land in Fabriksparken, Alberts-

lund, Copenhagen, allowing for the construction of a 15,000

m² retail park, which will consist of stores that sell space-in-



tensive groups of goods. A new local plan is currently being

prepared. Construction is expected to start at the end of 2007,

and the opening is scheduled for the end of 2008.

Retail park, Storegade, Esbjerg, Denmark

This project consists of a 2,500 m² retail park, which has been

fully let. The planning basis for the project is available, and

construction started in spring 2007, with a view to handing-

over in autumn 2007. The project has been sold to a property

company based on forward funding.

Retail park, Århus South, Denmark

In Århus, the Group is planning a 5,400 m² retail park. The

project will consist of two phases, of which the first 2,500 m²

phase has been fully let. An approval in principle is available

for the first phase, and construction has commenced in spring

2007, with handing-over scheduled for autumn 2007. The

project phases have been sold to an owner-occupant and a

property company, based on forward funding.

Project name City SegmentFloor space (m²)

TKD’s ownership interest

Construction start/Expected construction start

Opening/ Expected opening

DenmarkRingsted factory outlet Ringsted Retail 12,000 50% Autumn 2006 Autumn 2007Østre Teglgade Copenhagen Office/residential 24,000 100 % 1) 2007 2008Amerika Plads, underground car park Copenhagen Underground car park 30,000 50% 2004 ContinuousSpinderiet, Valby Valby Mixed 40,000 100% Early 2005 Autumn 2007Ejby Industrivej Copenhagen Mixed 10,000 100% Early 2008 Late 2008Vandtårnsvej Copenhagen Mixed 26,900 50% Mid-2007 ContinuousHadsundvej Aalborg Mixed 24,800 100% Mid-2007 ContinuousAaB College – phase II Aalborg Mixed 8,850 100% Late 2006 Early 2008Østre Havn Aalborg Mixed 81,000 50 % 1) Continuous ContinuousAmerika Plads, phase C Copenhagen Mixed 11,000 50% Mid-2007 Early 2008Amerika Plads, phase A Copenhagen Mixed 13,000 50% Mid-2007 Mid-2009Retail park, Albertslund Copenhagen Retail 15,000 75% Late 2007 Late 2008Retail park, Storegade Esbjerg Retail 2,500 100% Spring 2007 Autumn 2007

Retail park, Århus South Århus Retail 5,400 100% Spring 2007 Phase 1 autumn 2007. Phase 2 late 2009

Shopping centre, Frederikssund Frederikssund Retail/Residential 18,000 100% Late 2007 Late 2009Neptunvej Randers Mixed 12,000 100% Late 2007 Mid-2008Retail park, Tagtækkervej Odense Retail 4,000 50% Mid-2007 Early 2008SwedenEntré, multifunctional centre Malmö Mixed 39,500 100% Mid-2006 Spring 2009Retail park, Karlstad Karlstad Retail 30,000 100% Late 2009 Phase 1 late 2010Retail park, Barkarby – phase IV Barkarby Retail 3,900 100% Late 2007 Mid-2008

Retail park, Marieberg Örebro Retail 6,350 100% Late 2006 Phase 1 autumn 2007. Phase 2 spring 2008

Retail park, Söderhamn Söderhamn Retail 6,800 100% Mid-2007 Phase 1 mid-2008. Phase 2 late 2008

FinlandVantaanportti Retail Park – phase II Vantaa Retail 11,650 100% Mid-2006 Late 2006Tammisto Retail Park Tammisto Retail 5,300 100% Mid-2006 Spring 2007Tammerfors Retail Park – phase II Tammerfors Retail 5,300 100% Mid-2007 Early 2008Lohja Retail Park Lohja Retail 4,900 100% Early 2007 Early 2008Retail park, Lappeenranta Lappeenranta Retail 3,800 100% Spring 2007 Autumn 2008Baltic StatesRubicon Vilnius Retail/Office 23,200 100% Late 2007 Late 2008Milgravja Street Riga Retail 21,000 100% Mid-2007 Late 2007TKD Nordeuropa, total floor space approx. 500,0001) TKD Nordeuropa’s share of profit on development amounts to 70%



Spinderiet, Valby, Denmark

The centre is a multi-functional shopping and metropolitan

centre of 40,000 m², encompassing about 17,000 m² of retail

and restaurant facilities, about 4,500 m² of office premises,

about 6,500 m² of leisure facilities, 12,000 m² of housing

units and about 550 parking spaces. Construction commen-

ced in spring 2005, and the agreement with the investor pro-

vides for handing-over in autumn 2007. The project, exclusive

of housing, has been sold to DADES, a property investment

company. The housing section, which will consist of 2,500 m²

of rental housing and 9,500 m² of owner-occupied housing,

has been sold to DVB and a private investor, respectively. The

current occupancy rate for the project, exclusive of housing, is

81 %, which meets the investor’s occupancy requirement.

Stuhrs Brygge, Aalborg, Denmark

At the former Aalborg Shipyard, TKD Nordeuropa com-

pleted and handed over a 26,000 m² corporate headquarters

building to KMD (Kommunedata) at the end of 2006. The

project forms part of a future business and residential park

at Stuhrs Brygge of more than 100,000 m², for which TKD

Nordeuropa regularly buys land for developing new projects.

Amerika Plads, Copenhagen, Denmark

Kommanditaktieselskabet Danlink Udvikling (DLU), which

is owned 50/50 by the Port of Copenhagen and TKD Nord-

europa, owns three projects at Amerika Plads: Lot A, Lot C

and underground parking facilities, as yet unsold. The plan is

to erect a building complex with 13,000 m² of office space on

Lot A and an 11,000 m² building complex with commercial

and residential space on Lot C. Construction will take place

as the space is let. The underground parking facilities at the

Amerika Plads site have been partially completed and are ope-

rated by Europark.

Ringsted Factory Outlet, Ringsted, Denmark

TKD Nordeuropa has entered into a 50/50 joint venture agre-

ement with Miller Developments, an experienced factory out-

let developer, concerning the development of a new factory

outlet on the site owned in Ringsted, Denmark. The project

consists of a 12,000 m² factory outlet centre as well as restau-

rant facilities and about 1,000 parking spaces. This will be the

first major factory outlet centre project in Denmark, and the

letting process is underway. Construction started in autumn

2006, and the centre is scheduled to open in autumn 2007.

After startup and maturing, the centre is expected to be sold.

Hadsundvej, Aalborg, Denmark

KMD moved to new corporate headquarters at Stuhrs Brygge

in Aalborg at the beginning of 2007. In this connection, TKD

Nordeuropa has taken over the company’s existing headquar-

ters property at Hadsundvej in Aalborg, at site located close to

the city centre and university. The project area covers 24,800

m², and current plans provide for a project with residential

and office premises, with construction scheduled to start in

mid-2007. The residential and office facilities will be develo-

ped in step with letting or their sale.

AaB College, Aalborg, Denmark

Part of the area at Hadsundvej, Aalborg, has been sold to Aal-

borg Boldspilklub A/S, for the purpose of developing a sports

college with course and conference facilities as well as accom-

modation for students. The project, covering about 15,000

m², will be handed over in stages. The first phase of 6,610 m²

has been handed over and the second phase is to be handed

over at the beginning of 2008.

Østre Teglgade, Copenhagen, Denmark

This project consists of 24,000 m² with an attractive location

at Teglholmen. Owned by TKD Nordeuropa, the land is well-

suited for either a housing or an office project. Construction

may be phased in step with letting and/or sale. At present,

attempts are being made to have the zoning status changed to

allow housing construction in the area.


/



In the year under review, TKD Nordeuropa sold the Entré

multifunctional centre in Malmö to CGI – Commerz Grund-

besitz Investmentgesellschaft mbH. The selling price was de-

termined on the basis of a return requirement of 6 %. The

total selling price is expected to be in the SEK 1.5 billion

range. The sale is based on an agreement regarding forward

funding, and thus the purchase price will be paid by instal-

ments in step with construction of the centre. A design-and-

build contract has been concluded with Skanska regarding

construction of the centre. The necessary regulatory approval

has been obtained for the project, construction has started,

and the current occupancy rate is 55 %. The anchor tenants

include Hennes & Mauritz, Lindex, Hemköp, Intersport and

Svensk Film och Sats. The opening of the centre is scheduled

for spring 2009. The centre will be developed as a multifunc-

tional project of 39,500 m², of which 25,000 m² has been

allocated for retail stores, 10,700 m² for restaurants, cinema,

fitness and bowling facilities, 1,100 m² for offices and 2,700

m² for residential accommodation. In addition, the centre will

have common facilities and 900 underground parking spaces.

In the year under review, TKD Nordeuropa bought out its

business partner, and the Group now has a 100 % profit share

in the project.

Retail park, Marieberg, Sweden

This retail park project of 6,350 m² will be developed in two

phases. The first phase of about 2,350 m² has been fully let

and is expected to be handed over in autumn 2007. The re-

maining premises of about 4,000 m² comprised by the second

phase are being let, and the project is expected to be handed

over in spring 2008. The project has been sold to Oppenheim

Immobilien Kapitalanlagegesellschaft mbH on the basis of

forward funding.

Retail park, Söderhamn, Sweden

The Group is developing a 6,800 m² retail park on its plot of

land in Söderhamn, Sweden. The retail park will be built in

two phases, of which the first phase covers 3,300 m². The let-

ting of premises is proceeding, and lease agreements have been

signed for part of them. A building permit is expected to be

granted in mid-2007, and the first phase is scheduled to open

in mid-2008 and the second at end-2008. A letter of intent

with a private investor has been signed.

Retail park, Barkarby, Stockholm, Sweden

This project consists of a retail park that will cover 21,350 m²,

distributed on eight to ten stores, when fully developed. Con-

struction will be phased in step with letting. The first phase

of 4,000 m², which has been let to Jula and Färgtema, was

completed and handed over to the investor in July 2006. The

second and third phases, consisting of 13,450 m² let to Inter-

sport, Asko, Mio and Pay C, were handed over to the investor

in autumn 2006. The last and fourth phase of 3,900 m² is

expected to be extended to 6,000 m², and a lease agreement

has been signed by the electronics chain Media Markt. The

last phase is expected to be handed over in mid-2008. The

total project has been sold to the German investment fund

Commerz Grundbesitz Spezialfondsgesellschaft mbH on the

basis of forward funding.

Retail park, Karlstad, Sweden

In Karlstad, regulatory approval has been obtained to build a

retail park in a new commercial district with direct motorway

access. TKD Nordeuropa has an option to buy the land. The

project area covers 30,000 m², and construction will be pha-

sed in step with letting.

Retail park, Lappeenranta, Finland

This project consists of a 3,800 m² retail park. A building per-

mit has been obtained for the project so that construction can

be initiated, and handing-over is scheduled for autumn 2007.

Binding lease agreements have been signed in respect of all the

premises. The project has been sold to a private investor, based

on forward funding.

/


Spinderiet, Valby, DenmarkThis project (40,000 m2), exclusive of housing, has been sold to DADES, a property investment company. The residential section has been sold to DVB and a private investor.

Ringsted Factory Outlet, Ringsted, DenmarkA 50/50 joint venture agreement has been concluded with Miller Developments concerning the development of a new 12,000 m2 factory outlet in Ringsted, Denmark.

Shopping centre, Frederikssund, DenmarkTKD Nordeuropa is planning the construction of an 18,000 m² shopping centre.


Selected projects in the project portfolio.

/


The Entré multifunctional centre, Malmö, SwedenIn the year under review, TKD Nordeuropa sold the Entré multifunctional centre (39,500 m2) in Malmö to CGI – Commerz Grundbesitz Investmentgesellschaft mbH.

The Rubicon office and retail project, Vilnius, LithuaniaThis project comprises a combined office and retail project of about 23,200 m².

Retail park, Lappeenranta, FinlandThis project consists of a 3,800 m² retail park and has been sold to a private investor based on forward funding.


/



Tammisto Retail Park, Tammisto, Helsinki, Finland

In Tammisto, Finland, the Group is developing a 5,300 m²

retail park. Construction of the first phase of about 2,500 m²,

let as one unit to TOYS”R”US, was completed in November

2006. The second phase, consisting of two leases, was handed

to the investor after the balance sheet date, and both units

have been let. The project has been sold to a private investor,

based on forward funding.

Vantaanportti Retail Park – Phase II, Helsinki, Finland

When fully developed, this project will cover a total area of

about 25,000 m². Phase I of the retail park of 13,000 m² was

sold in a previous financial year, and all premises have been

fully let. Phase II of the retail park has now been fully develo-

ped and covers 11,650 m². Construction of the last 5,000 m²

was completed at the end of 2006, the main tenant (4,000

m²) being the Finnish EVE Megastore, which sells health and

beauty products, etc. Negotiations with potential investors are

ongoing.

The Rubicon office and retail project, Vilnius, Lithuania

TKD Nordeuropa has acquired a plot of land in Vilnius for

the purpose of building a combined office and retail project

with a total floor space of about 23,200 m², consisting of re-

tail premises of about 16,000 m² and office premises of about

7,200 m². An application for an approval in principle of the

project has been submitted, and construction is expected to

start at the end of 2007, with the opening scheduled for the

end of 2008.

Euro Mall Holding

The TK Development Group carries on its activities in Cen-

tral Europe primarily through Euro Mall Holding, which is

80 % owned by the TK Development Group, with the remai-

ning 20 % owned by the Investment Fund for Central and

Eastern Europe.

Euro Mall Holding continued the positive development of

the preceding year and generated a profit after tax of DKK

243.9 million for the 2006/07 financial year. The profit for

the 2005/06 financial year amounted to DKK 247.5 million.

The gross margin amounts to DKK 346.9 million against

DKK 347.4 million the year before. Euro Mall Holding re-

corded satisfactory development in its project portfolio in the

year under review.

Management considers the performance for the year to be

highly satisfactory.

Major projects contributing to the profit for the year include

the following:

Šestka Shopping Centre, Prague, Czech Republic

The Group’s Šestka shopping centre project covers about

26,500 m², of which the 10,400 m² hypermarket section has

been let to Ahold. The retail section consists of about 16,100

m², and some of the premises have been let to international

tenants. Construction has been completed, and the centre

opened in November 2006. The project has been sold to

Europolis.

Sale of land, Poland

In the 2006/07 financial year, the Group sold its plot of land

in Wroclaw, Poland, to a Polish investor. In addition, the

Group sold a plot in the Polish town Lublin to an interna-

tional investor.

Value adjustment of the Group’s Central European investment

properties

The Group’s investment properties in Central Europe consist

of its 20 % holdings in three shopping centres in the Czech

Republic, located in Hradec Králové, Ostrava and Olomouc.

In the year under review, the Group sold its Polish investment

property, Plejada Shopping Centre in Sosnowiec.



Plejada Shopping Centre, Sosnowiec, PolandIn the year under review, the Group sold its Polish investment property, the Plejada Shopping Centre in Sosnowiec.

Šestka Shopping Centre, Prague, Czech RepublicThe Šestka Shopping Centre has a floor space of about 26,500 m². The centre has been sold to Europolis.

Selected projects that contribute to the profit for the year.



Shopping centres Stores/Superstores Offices Segment mix Residential

Poland l l l l lCzech Republic l l lSlovakia l l

Euro Mall Holding has activities within the following segments in the individual markets:

At 31 January 2007, the total value of the Group’s Central

European investment properties amounted to DKK 304.2

million.

As a consequence of the Group’s sale of its investment pro-

perty, the Plejada shopping centre in Sosnowiec, Poland, and

the sustained positive market development, which led to de-

clining return requirements in Central Europe, Management

adjusted the Group’s investment properties in the Czech Re-

public and Poland upwards by DKK 109.7 million before tax

and minority interests. The Group’s investment property in

Sosnowiec, Poland, accounts for DKK 31.5 million of this

amount. The value adjustment is based on a rate of return of

7.0 % for Czech investment properties, while the valuation at

31 January 2006 was based on an 8.0 % rate of return.

Euro Mall Centre Management

In the past financial year, Euro Mall Holding sold 67 % of

Euro Mall Centre Management (EMCM) to Jan Mølhave and

Jørn Elkjær-Holm, for one thing to strengthen the focus on

property development. EMCM intends to expand its business

platform, and thus EMCM’s future activities will consist not

only of centre management, but also of asset and property

management as well as agency operations for selling property

projects to Danish investors.

By retaining a substantial ownership interest, TK Develop-

ment can continue to benefit from EMCM’s expertise in

centre management, and the expanded business platform

also holds potential for increasing the Group’s earnings. TK

Development is represented on the Supervisory Board of

EMCM.

Markets

In Central Europe, the Group has activities in Poland, the

Czech Republic and Slovakia.

In collaboration with tenants and investors, Euro Mall Hol-

ding develops turnkey property projects - primarily shopping

centres and retail parks. The Group has a close network of

contacts with many local and international retail chains loo-

king to expand into Central Europe. In addition, Euro Mall

Holding works closely with investors, including international

investment funds, looking to invest in Central European pro-

perty projects.

Moreover, Euro Mall Holding has partly-owned investment

properties in the Czech Republic and owns one-third of

the management company Euro Mall Centre Management

(EMCM).

The return requirement in the Group’s markets in Central

Europe has declined significantly in recent years. This ensu-

res better prices for the Group’s projects and contributes to

strengthening its positive outlook for the Central European

market.

On page 32 is a brief description of Management’s expectati-

ons for the individual markets in Central Europe.



Poland

The Group expects the favourable trend in the Polish market

to continue. Both local and international retailers are showing

substantial interest in tenancies in well-situated retail projects

and minor shopping centres in Poland. These projects will

presumably be located in smallish towns in Poland. This posi-

tive trend is evidenced by the fact that the Group’s Galeria Bi-

ala shopping centre in Bialystok is almost fully let, six months

before its opening. In Poland, shopping centre projects are

currently sold at net returns ranging from 6.5 % to 8.0 %

(Source: Jones Lang Lasalle’s report “Warsaw City Profile”,

September 2006), and together with economic indicators and

forecasts for Poland this supports the positive outlook.

Poland – startup in 1995 2006 2007e 2008e

GDP (real growth) 5.8 % 6.2 % 5.6 %



Czech Republic

The Czech market is experiencing strong demand for tenan-

cies in attractive retail projects. In the past financial year, Euro

Mall Holding sold its first retail park project. As the market

for such projects is considered attractive at present, Euro Mall

Holding expects to develop additional retail parks.

In the Czech Republic, shopping centres and retail parks are

currently sold at net returns ranging from 6.5 % to 8.0 %

(Source: Jones Lang Lasalle’s report “Prague City Profile”,

September 2006), and together with economic indicators and

forecasts for the Czech Republic this supports Management’s

positive expectations for the market.

Czech Republic – startup in 1997 2006 2007e 2008e

GDP (real growth) 6.1 % 5.0 % 4.8 %



Slovakia

Management expects to see moderate demand for shopping

centres in Slovakia over the next few years, as demand for

shopping centres has already been met in most of the major

cities in Slovakia. However, Management is currently investi-

gating the potential for establishing retail parks in Slovakia.

The favourable development in the Slovakian economy un-

derpins Management’s expectation that retail parks will be in

demand in the country.

Slovakia – startup in 1999 2006 2007e 2008e

GDP (real growth) 8.3 % 7.8 % 6.0 %



Development of residential units in Central Europe

Management has decided to expand the Group’s business

base to include the Central European residential market. This

decision was made on the basis of detailed analyses indica-

ting that the healthy economic trends in the region will lead

to substantial demand for new residential units in the years

ahead. Central Europe is still undergoing substantial structu-

ral changes, and this also supports a sustained strong demand

for residential units in major towns and cities.

The TK Development Group started the development of its

first housing project in Central Europe in Warsaw, Poland,

in autumn 2006. In recent years, Warsaw has undergone

comprehensive developments, and Management expects the

city to strengthen its position as Poland’s power centre in the

coming years, due among other things to foreign businesses

setting up operations in the capital.

In Poland, improved borrowing facilities are available to

homebuyers, and there is a scarcity of attractive housing,



while much of the existing housing no longer fulfils the Poles’

housing standard requirements. Combined with a relatively

high population growth in major towns and cities and falling

unemployment, this supports Management’s conviction that

the favourable trend on the housing market in Central Europe

will continue.

The graph below shows the development in prices per square

metre:

3000

4000

5000

6000

2006200520042003200220012000

PLN/Sqm

Year

Project portfolio / project developments

In the 2006/07 financial year, Euro Mall Holding recorded sa-

tisfactory development in its project portfolio. At 31 January

2007, the development potential of the portfolio represented

216,000 m² for sold projects and 338,000 m² for other pro-

jects/project opportunities, a total of 554,000 m².

Investment properties are described in a separate section on

page 38.

Project outline

The outline below lists the key projects of Euro Mall Holding’s

project portfolio. The carrying amounts of these projects ac-

counted for more than 85 % of the total carrying amount

of the project portfolio of Euro Mall Holding at 31 January

2007. In terms of carrying amount, Euro Mall Holding’s five

largest projects represented a total of DKK 286.1 million at

31 January 2007.

Project name City Segment Floor space (m²)

TKD’s ownership interest

Construction start/ Expected construction start

Opening/ Expected opening

Czech RepublicPrague Airport Ruzyne II Prague Retail 13,000 100% 2009 2010Prague Outlet Centre Prague Retail 25,000 75% Spring 2007 1st phase

late 2007Ostrava Retail Park Ostrava Retail 10,300 100% Early 2007 Late 2007Futurum Shopping Centre – extension Ostrava Retail 3,000 100% Spring 2007 Late 2007Liberec Retail Park Liberec Retail 18,500 100% Autumn 2007 Spring 2008Kolin Shopping Centre Kolin Retail 10,000 100% Autumn 2007 Mid-2008PolandMultifunctional centre, Gdansk “Young City” Gdansk Mixed 84,000 45% 2008 Late 2009Galeria Biala Bialystok Retail 46,000 24% 1) Autumn 2006 Autumn 2007Targówek Retail Park Warsaw Retail 24,400 100% Autumn 2006 Mid-2007Bytom Retail Park Bytom Retail 25,800 100% Late 2007 Continuous Tivoli Residential Park, Targówek Warsaw Residential/

Services 25,300 100% Spring 2007 Continuous

Poznan Warta Poznan Retail/Residential 50,000 100% Late 2007 Continuous

Reduta III Warsaw Mixed 9,800 100% Mid-2007 ContinuousPlejada Shopping Centre – extension Sosnowiec Retail 3,600 100% Late 2006 Autumn 2007Shopping centre, Tarnow Tarnow Retail 14,800 50% Late 2007 Late 2008Shopping centre, Nowy Sacz Nowy Sacz Retail 14,300 50% Late 2007 Late 2008Shopping centre, Jastrzebie Jastrzebie Retail 41,800 n/a Early 2008 Spring 2009

Euro Mall Holding, total floor space approx. 420,000

1) Euro Mall Holding’s share of profit on development amounts to 50%

Source: Own production


/


Projects

Multifunctional centre, Gdansk “Young City”, Poland

After the extension/optimization of the project area, this mul-

tifunctional centre in Gdansk, Poland, will have total premises

of about 84,000 m², to be developed in a joint venture with

Meinl European Land Ltd. The centre will comprise retail,

restaurant and leisure facilities of about 54,000 m², an office

tower of about 11,000 m² and a residential tower of about

19,000 m². The land for the project has been acquired from

the Baltic Property Trust Group, which will also hold a long-

term investment in the office section. Meinl European Land

Ltd. has undertaken overall financing of the project and will

retain a long-term investment in the retail, restaurant and le-

isure premises. The residential units are expected to be sold to

private owner-occupants. Tenants have shown keen interest

in the centre, the first letters of intent have already been sig-

ned, and negotiations with anchor tenants are ongoing. Du-

ring the development period, TK Development will generate

earnings through fee income and a profit share based on the

rental income obtained when the centre opens. Construction

is scheduled to start at the beginning of 2008, with the ope-

ning planned for the end of 2009. The project constitutes the

first phase of a major development plan for the whole area.

The Baltic Property Trust Group, Meinl European Land Ltd.

and TK Development have signed a letter of intent regarding

expansion of their cooperation with a view to developing a

further 100,000 m² in the area.

Shopping centre, Jastrzębie, Poland

This project consists of a 30,300 m² shopping centre and an

11,500 m² retail park. The project will be implemented by

Meinl European Land Ltd., with Euro Mall Holding as the

project developer. Thus, Euro Mall Holding has entered into

an agreement with Meinl regarding Euro Mall Holding’s as-

sistance for development, letting and construction manage-

ment of the project on a fee basis. Construction is expected to

start at the beginning of 2008, and the centre is scheduled to

open in spring 2009.

Shopping centre, Nowy Sacz, Poland

Euro Mall Holding has acquired a plot of land in the Polish

town of Nowy Sacz for the purpose of constructing a shop-

ping centre with a 4,650 m² hypermarket and specialty stores

of about 9,650 m². A number of tenants have already com-

mitted themselves to renting premises, and Euro Mall Hol-

ding has applied for a building permit, which is expected to be

issued at the end of 2007. The shopping centre is scheduled to

open at the end of 2008. At present, negotiations with poten-

tial investors for the project are ongoing.

Shopping centre, Tarnow, Poland

In the Polish town of Tarnow, Euro Mall Holding has an op-

tion to buy several plots of land for the purpose of building

a 14,800 m² shopping centre, of which a supermarket will

account for about 2,500 m² and specialty stores for about

12,300 m². Euro Mall Holding has applied for a building per-

mit, expected to be issued at the end of 2007. At present, ne-

gotiations are ongoing with both tenants and investors for the

project. The centre is expected to open at the end of 2008.

Plejada Shopping Centre, Sosnowiec, Poland

In September 2006, TK Development entered into an agre-

ement to sell Plejada Shopping Centre in the Polish town of

Sosnowiec to St. Martins Europe BV, the Netherlands, which

is owned by the UK property investment company, St. Mar-

tins Property Corporation Limited. The selling price is ba-

sed on a 6.75 % rate of return for the investor. Moreover,

it has been agreed that TK Development’s subsidiary, Euro

Mall Holding, will be in charge of developing and construc-

ting a 5,000 m² extension of the centre for the purpose of

establishing approximately 19 new specialty and brand stores.

Construction has started, and the centre is expected to open

in autumn 2007.

Galeria Biala, Bialystok, Poland

An agreement has been reached with Meinl European Land

/


Shopping centre, Tarnow, PolandIn the Polish town of Tarnow, a 14,800 m² shopping centre is being built. At present, negotiations with potential investors for the project are ongoing.

Tivoli Residential Park, Warsaw, PolandThe Group is developing its first residential project, with a total floor space of 25,300 m2, in Poland. At present, sales agreements for about 55 % of the first-phase units have been sold.

Multifunctional centre, Gdansk “Young City”, PolandThis project consists of an 84,000 m² multifunctional centre.


Selected projects in the project portfolio.

/


Prague Outlet Centre, Prague, Czech RepublicThis project consists of a 25,000 m² factory outlet centre.

Targówek Retail Park, Warsaw, PolandThis project, which consists of a 24,400 m² retail park situated next to the Targówek shopping centre, was sold to Credit Suisse Asset Management Immobilien Kapitalanlagegesellschaft mbH in the year under review.

Kolin Shopping Centre, Czech RepublicThis project consists of a 10,000 m² shopping centre. Negotiations with a potential investor for the project are ongoing.

Management’s review Management’s review

/



Ltd. regarding the development of a shopping and leisure cen-

tre in Bialystok in Poland. Meinl has acquired the necessary

plots of land and obtained the required regulatory approvals.

The continued development and construction of the centre

will be managed by Euro Mall Holding and funded by Me-

inl European Land Ltd. Covering 46,000 m², the shopping

centre will comprise a hypermarket, about 90 specialty stores

and leisure facilities. Construction of the shopping centre was

initiated in September 2006, with handing-over scheduled for

autumn 2007. The current occupancy rate is 98 %.

Targówek Retail Park, Warsaw, Poland

This project, which consists of a 24,400 m² retail park situated

next to the Targówek shopping centre, was sold to Credit Su-

isse Asset Management Immobilien Kapitalanlagegesellschaft

mbH in the year under review, based on forward funding and

a rate of return of 7 %. A building permit has been granted

for the project, and construction has started. The current oc-

cupancy rate is 84 %. The total project will consist of ten retail

units.

Tivoli Residential Park, Targówek, Warsaw, Poland

The Group is developing its first housing project in Poland

on the plot of land owned by Euro Mall Holding in the Tar-

gówek area in Warsaw. Construction will take place in phases

and when fully developed, the project will consist of almost

300 residential units, as well as service trades on the ground

floor. The residential units will be sold as owner-occupied

apartments. The construction of the first phase of about 140

residential units started in spring 2007 and is expected to be

completed in autumn 2008. Pre-completion sale of the ow-

ner-occupied units comprised by the project has been initi-

ated, and at present sales agreements for about 55 % of the

first-phase units have been concluded.

Bytom Retail Park, Bytom, Poland

Euro Mall Holding intends to develop a retail park with total

leasable space of about 25,800 m² on its site at the Plejada

shopping centre in Bytom, which is centrally located in the

Katowice region. This project will be built in phases in step

with the letting of premises. Letting is underway, and con-

struction will be started as and when lease agreements are

concluded.

Reduta III, Warsaw, Poland

Euro Mall Holding owns a site adjacent to the Reduta shop-

ping centre in Warsaw. In 2003, a building was erected and

sold and subsequently let to the French sporting goods chain

Decathlon. An 9,800 m² office property is being planned,

with construction to begin upon completion of the letting

process. Negotiations with potential tenants for the project

are ongoing at present.

Prague Outlet Centre, Prague, Czech Republic

Euro Mall Holding is working on the development of a

25,000 m² factory outlet centre on its centrally located Best

Plot in Prague. The project is being developed in a joint ven-

ture with an international collaboration partner with factory

outlet experience, which acquired 25 % of the project in the

2006/07 financial year. A building permit for the project has

been obtained. Construction of the first phase, consisting of

about 18,000 m², started in spring 2007, and the opening is

scheduled for the end of 2007.

Ostrava Retail Park, Czech Republic

This retail park will be built on Euro Mall Holding’s site at

the Futurum shopping centre in Ostrava. Euro Mall Holding

has an option to build premises of 10,300 m² and has so far

achieved an occupancy rate of 63 % based on binding agre-

ements. Construction was initiated at the beginning of 2007

and is expected to be completed in autumn 2007. In the past

financial year, the project was sold to GE Real Estate Central

Europe, and the total selling price is estimated at DKK 120

million. As part of the development of the overall area, an ag-

reement has also been made with GE Capital/Heitman regar-

ding a 3,000 m² extension of the Futurum shopping centre,

according to which TK Development’s subsidiary, Euro Mall

Holding, is to be in charge of developing and implementing

the project. Construction is expected to start in spring 2007,

with the opening scheduled for the end of 2007.


Project name City Segment Floor space (m²)

Ownership interest

Opening

Central Europe (Czech Rep.)

Shopping Centre Futurum Ostrava Retail 23,600 20 % May 2000

Multifunctional Centre Futurum Hradec Králové Retail 18,300 20 % Nov. 2000

Haná Shopping Centre Olomouc Retail 10,100 20 % Sept. 2002

Central Europe, total 52,000

Germany Lüdenscheid / Belin Residential/ Mixed 26,000 100 % 1994-1998

Investment properties, total 78,000

* Floor space denotes the floor space owned by the Group, including common areas.


Liberec Retail Park, Czech Republic

This project consists of an 18,500 m² retail park to be built in

phases, of which the first consists of about 11,500 m². Letting

has been initiated, and an application for a building permit

submitted. Construction is planned to start in autumn 2007,

and the retail park is expected to open in spring 2008. Nego-

tiations with a potential investor for the project are ongoing.

Kolin Shopping Centre, Czech Republic

This project consists of a 10,000 m² shopping centre. An ap-

proval in principle has been obtained for the project, an ap-

plication for a building permit has been submitted, and con-

struction of the shopping centre is expected to start in autumn

2007, with the opening scheduled for mid-2008. Negotiati-

ons with a potential investor for the project are ongoing.

Investment properties

The Group’s investment properties are recognized in the ba-

lance sheet under property, plant and equipment. Such inve-

stment properties are measured at fair value. The value of the

Group’s investment properties totalled DKK 533.7 million at

31 January 2007.

The outline below shows the Group’s investment properties.

Central Europe

Euro Mall Holding’s investment properties had a carrying

amount of DKK 304.2 million at 31 January 2007, based on

a rate of return of 7.0 %.

These investment properties are owned in a joint venture with

GE Capital/Heitman, according to which the Group has ac-

cess to a performance-based share of the value adjustments on

some of the properties, which was included in the carrying

amount at 31 Janurary 2007.

In the 2006/07 financial year, the letting situation was satis-

factory, and as shown in the tables below, the centres have

been fully let.

Average annual footfall in the past three yearsFuturum Shopping Centre, Ostrava 5,724,369Futurum Multifunctional Centre, Hradec Králové 5,930,343

Haná Shopping Centre, Olomouc 3,168,571

Development in occupancy rates 2004 2005 2006Futurum Shopping Centre, Ostrava 97.4 97.4 100.0

Futurum Multifunctional Centre, Hradec Králové 99.0 100.0 100.0

Hana Shopping Centre, Olomouc 100.0 100.0 100.0

Development in rental income 2004 2005 2006



Futurum Shopping Centre, Ostrava 100.0 103.4 104.5

Futurum Multifunctional Centre, Hradec Králové 100.0 104.2 104.9

Hana Shopping Centre, Olomouc 100.0 99.3 99.3

An agreement has also been made with GE Capital/Heitman

regarding a 3,000 m² extension of the Futurum shopping cen-

tre in Ostrava, according to which TK Development’s subsi-

diary, Euro Mall Holding, is to be in charge of developing

and implementing the project. Construction is expected to

start in spring 2007, with the opening scheduled for the end

of 2007.

Germany

The Group has five investment properties in Germany owned

by TK Development A/S, of which a combined commercial

and residential property is located in Lüdenscheid in the we-

stern part of the country, whereas the four remaining proper-

ties are residential rental properties on the outskirts of Berlin.

In the 2006/07 financial year, the letting situation was satis-

factory, and the centres have almost been fully let.

At 31 January 2007, the properties were recognized at DKK

229.5 million based on a rate of return of 6.0 % p.a. calcu-

lated on the basis of a discounted cash-flow model with a 2.5

% annual rent increase over a ten-year period. The assumpti-

ons of the cash-flow model imply an initial yield of 5.1 %.



Financial review for 2006/07

The Annual Report is presented in compliance with the Inter-

national Financial Reporting Standards (IFRS), as approved

by the EU, and in accordance with Danish disclosure require-

ments for listed companies.

Changed accounting policies

The 2006/07 Annual Report has been presented in accordan-

ce with the new and amended financial reporting standards

(IFRS/IAS) and new IFRIC interpretations applicable for fi-

nancial years beginning at 1 January 2006 or later. The imple-

mentation of new and amended financial reporting standards

and interpretations into the Annual Report for 2006/07 has

resulted in changes to the accounting policies as regards the

accounting treatment of foreign-exchange adjustments of in-

tercompany accounts with foreign subsidiaries.

With effect for financial years beginning on 1 January 2006

or later, IAS 21 has been amended such that foreign-exchange

adjustments of intercompany accounts with foreign subsidia-

ries that are considered additions to/deductions from the net

investment are posted directly to equity under a special re-

serve for foreign-exchange adjustments, regardless of whether

the account is denominated in the Parent Company’s or the

foreign subsidiary’s functional currency or not. According to

previous standards, foreign-exchange adjustments of inter-

company accounts with foreign subsidiaries could only be

posted directly to equity if the account was denominated in

the Parent Company’s or the foreign subsidiary’s functional

currency.

The monetary effect of the changed accounting policies is spe-

cified in separate section on page 73.

Profit for the year

The profit for the 2000/07 financial year amounts to DKK

249.4 million after tax and minority interests, compared to

DKK 28.3 million the year before. The balance sheet total

amounted to DKK 3,685.8 million at 31 January 2007, a de-

cline of DKK 1,053.3 million compared to 31 January 2006.

Consolidated equity totalled DKK 1,290.9 million at 31 Ja-

nuary 2007. The solvency ratio stood at 35.0 %.


tory.

Income statement

Revenue

The revenue for the 2006/07 financial year totalled DKK

2,719.1 million versus DKK 1,623.3 million for the 2005/06

financial year.

The revenue breaks down on the following geographic seg-

ments: 71.9 % on Northern Europe and 28.1 % on Central

Europe. The revenue breaks down on the following business

segments: 56.8 % on the retail segment, 11.8 % on the office

segment and 31.4 % on mixed-segment projects.

Gross margin

The gross margin for the 2006/07 financial year amounted

to DKK 623.9 million, against DKK 379.0 million the year

before. The gross margin was affected by a positive value ad-

justment of the Group’s investment properties in the amount

of DKK 111.0 million as a consequence of the sale of the

Group’s investment property, Plejada Shopping Centre in

Sosnowiec, Poland, and a continued positive market develop-

ment, resulting in declining return requirements in Central

Europe. In addition, the gross margin was affected by a DKK

152.5 million writedown on the Group’s total receivable for

the Field’s project.



DKK 249.4 million.

Balance sheet

The Group’s balance sheet total amounted to DKK 3,685.8

million at 31 January 2007, a decline of DKK 1,053.3 mil-

lion, or 22.2 %, compared to 31 January 2006.

Assets

Goodwill

Goodwill totalled DKK 29.1 million at 31 January 2007. The

carrying amount of goodwill has been subjected to an im-

pairment test. This impairment test has not given rise to any

writedown.


The valuation of the Group’s investment properties is made

on the basis of a discounted cash-flow model, where future

cash flows are discounted to net present value on the basis of

a given rate of return.

The Group’s German investment properties at 31 January

2007 continue to be valued on the basis of a rate of return

of 6 %. The value adjustment of these investment properties

in the 2006/07 financial year was positive in the amount of

DKK 1.3 million.

As a consequence of a sustained positive market development,

which led to declining return requirements in Central Europe

in the 2006/07 financial year, Management has made a DKK

109.7 million value adjustment of the Group’s investment

properties in the Czech Republic and Poland, affecting the

profit for the year before tax and minority interests.

The value adjustment is based on a rate of return of 7.0 %

for Czech investment properties, while the valuation at 31 Ja-

nuary 2006 was based on an 8.0 % rate of return. The Group’s

investment property in Poland, Plejada Shopping Centre in

Sosnowiec, which was valued on the basis of a return require-

Staff costs and other external expenses

Staff costs and other external expenses amounted to DKK

149.9 million for 2006/07, an increase of 4.0 % compared

to the year before.

Staff costs totalled DKK 102.2 million in the 2006/07 finan-

cial year, thus up 12.7 % on the previous year. From 31 Ja-

nuary 2006 to 31 January 2007, the number of employees in

the Group decreased from 212 to 143. This decrease is a con-

sequence of the Group’s partial divestment of its management

activities in the company Euro Mall Centre Management at

the end of the financial year.

Other external expenses amounted to DKK 47.7 million

against DKK 53.4 million the year before. In 2006/07, other

external expenses were impacted by the refund of expenses

incurred in previous years. Adjusted for this refund, other ex-

ternal expenses were up 2.6 % on the previous year.

Financing

In the 2006/07 financial year, the Group recorded net finan-

cing expenses of DKK 126.3 million, a reduction of almost

30 % compared to the year before. Financing expenses were

favourably impacted by the rights issue implemented by TK

Development A/S in the 2005/06 financial year, with final

settlement of the net proceeds of DKK 540.1 million taking

place at end-January 2006.

Tax on profit for the year

The tax calculated on the profit for the year amounted to

DKK 37.2 million, equal to a tax rate of 11.1 %. The back-

ground for this low tax rate is that a substantial part of the

Group’s earnings in Central Europe is realized as tax-free gains

on shares.

Profit/loss after tax

The Group’s profit after tax amounted to DKK 298.5 million,

and the shareholders’ share of the profit after tax amounted to



ment of 7.5 % at 31 January 2006, was sold to an internatio-

nal investor in the 2006/07 financial year, based on a return

requirement of 6.75 %. The profit on this sale is included

under “Value adjustment of investment properties, net” in the

income statement.

At 31 January 2007, the total value of the Group’s investment

properties constituted DKK 533.7 million, of which DKK

304.2 million relates to the Central European investment pro-

perties in Euro Mall Holding, and DKK 229.5 million relates

to the German investment properties.

Deferred tax asset

The deferred tax asset in the balance sheet amounted to DKK

291.0 million at 31 January 2007, up DKK 21.7 million

from 31 January 2006. Based on existing budgets and profit

forecasts for a five-year period, Management made a speci-

fic assessment of the valuation of the deferred tax asset. This

assessment has resulted in an accumulated DKK 58.1 mil-

lion writedown of the tax asset. Thus, Management expects,

within the next few years, to be able to utilize the tax losses

underlying the deferred tax asset.

Project portfolio

The total project portfolio declined by DKK 769.3 million,

from DKK 2,260.4 million to DKK 1,491.1 million at 31

January 2007. The decline should be viewed in light of the

Group’s sale of completed properties for a total of about DKK

1 billion in the past financial year, thus strengthening focus

on the Group’s core business concept, development of real

property.

Total prepayments based on forward-funding agreements

amounted to DKK 590.4 million at 31 January 2007 against

DKK 638.1 million at 31 January 2006. This development

is due to the completion of major projects with substantial

forward funding during the year under review, while forward

funding on new projects is currently being generated. In fu-

ture, the Group also intends to use forward funding as part of

its contractual basis to the widest extent possible.

Receivables

Total receivables amounted to DKK 642.2 million, a reduc-

tion of DKK 304.1 million from 31 January 2006. This redu-

ction is primarily attributable to trade receivables.

Cash and cash equivalents

Cash and cash equivalents climbed from DKK 363.8 million

to DKK 601.1 million, due to a combination of the outflow

of cash for the repayment of bond loans and the inflow of cash

from project sales completed and positive operating results.

Equity and liabilities

Equity

Consolidated equity totalled DKK 1,290.9 million at 31 Ja-

nuary 2007, of which DKK 137.2 million is attributable to

minority interests. At 31 January 2006, consolidated equity

amounted to DKK 986.7 million, of which DKK 87.6 mil-

lion was attributable to minority interests.

The increase in equity since 31 January 2006 is due mainly

to the profit generated for the year. Moreover, equity was im-

pacted by positive foreign-exchange adjustments of net inve-

stments in subsidiaries and other adjustments, totalling DKK

1.7 million.

The solvency ratio amounts to 35.0%.

Long-term liabilities

The Group’s long-term liabilities represented DKK 390.4 mil-

lion at 31 January 2007, a DKK 159.4 million reduction from

the year before. This reduction is due mainly to the sale of

the Group’s investment property in Sosnowiec, Poland, in the

past financial year, resulting in the repayment of debt related

to the property.



Short-term liabilities

From 31 January 2006 to 31 January 2007, short-term liabi-

lities fell by DKK 1,198.1 million to DKK 2,004.5 million.

The decline is attributable to the repayment of subordinated

bond loans, DKK 494.4 million, and the reduction of debt

owing to credit institutions, resulting from project sales com-

pleted and other debt repayments, DKK 633.3 million, and

finally a reduction of trade payables and miscellaneous debt,

DKK 70.4 million.

Liabilities other than provisions have been offset against trade

receivables and tied-up cash and cash equivalents, to the ex-

tent that the Company has a right of setoff and also intends

or is contractually obliged to realize assets and liabilities at

the same time. The amount offset against trade receivables to-

tals DKK 32.5 million, and the amount offset against tied-up

cash and cash equivalents totals DKK 434.5 million, a total of

DKK 467.0 million.

Cash flow statement

The cash flow statement shows positive cash flows from ope-

rating activities in the amount of DKK 1,219.9 million and

negative cash flows from financing activities in the amount

of DKK 686.1 million. In the year under review, the Group

substantially reduced balances with credit institutions due to

the payment of instalments on and the discharge of credits in

connection with the sale of projects as well as the repayment

of subordinated bond loans.

(DKKm) 2004/05 2005/06 2006/07

Cash flows from operating activities 1,507.5 506.1 1,219.9

Net interest-bearing debt, year-end 3,603.7 2,577.9 1,125.1

Litigation/other legal issues

For some years now, the Group has been involved in a dispute

with the Polish Government regarding incorrect VAT decla-

ration, the consequence of which was the erroneous payment

of a major VAT amount to the Polish authorities. The District

Administrative Court in Poland found for the Group in its

decision of 9 November 2005, ordering the authorities to re-

pay the amount to the Group. This amount was repaid in the

first half of 2006/07.

The Company is not a party to any lawsuits that, either indi-

vidually or collectively, are expected to materially affect the

Group’s earnings.

Senior Vice President charged by the Polish police

In June 2006, the Senior Vice President responsible for the

Group’s Polish branch office was detained, taken into custody

and charged by the Polish police with irregularities related to

obtaining a public authority permit (zoning permission) for

the Polish Galeria Biala shopping centre project in Bialystok.

In November 2006, the Senior Vice President was released

on bail.

During the entire process, Group Management has been una-

ble to find any irregularities in connection with the project,

and thus fails to comprehend that the Senior Vice President

could be involved in the alleged practices. The Polish prosecu-

tion service has not yet decided whether to indict the Senior

Vice President.

Charges brought by the public prosecutor for serious eco-

nomic crime

TK Development A/S and six individuals have been charged

by the public prosecutor for serious economic crime with

fraudulent income recognition and price manipulation con-

cerning periods covering the 2000/01, 2001/02, 2002/03 and

2003/04 financial years. The charge from the autumn of 2005

covers 16 projects. On 14 June 2006, the charge against TK

Development A/S and the six individuals was extended to in-

clude a total of 29 projects.




Company’s auditors from Deloitte and Nielsen & Christensen,

who no longer serve as auditors for the Group. The charges

were brought because, according to the public prosecutor for

serious economic crime, the conditions for the Group’s use of

the percentage of completion method for the relevant finan-

cial years had not been met, and the financial statements of

TK Development A/S for the 2000/01 to 2003/04 financial

years were therefore incorrect on some points.

Reference is also made to the separate section about these

charges on page 63 in this present annual report.

Financial targets

To provide for sufficient future financial resources, Manage-

ment has adopted liquidity targets for the subgroups with ac-

tive projects, TKD Nordeuropa and Euro Mall Holding. In

addition, Management has adopted a solvency target for the

whole Group corresponding to a solvency ratio of 25 % based

on total capital resources.

Liquidity targets and a group solvency ratio of not less than

21 % based on the total capital resources are used as covenants

in respect of the Group’s bankers providing operating credit

facilities.

With a solvency ratio of 35.0 %, the Group has met its sol-

vency target.

Moreover, for some time, Management has pursued the objec-

tive of reducing the balance sheet total to less than DKK 4.5

billion. With a balance sheet total of DKK 3,685.8 million at

31 January 2007, the Group has also fulfilled this objective.

Dividend

The Supervisory Board recommends to the Annual General

Meeting that no dividend be distributed for the 2006/07 fi-

nancial year.

Annual General Meeting

A General Meeting will be held in TK Development A/S on

29 May 2007. The Supervisory Board intends to recommend

to the Annual General Meeting that:

no dividend be distributed for the 2006/07 financial

year;

Niels Roth become a member of the Supervisory Board;

VP Investor Services A/S be appointed the future Regi-

strar or Shareholders.

Post-balance sheet events

No major events other than those mentioned in the Manage-

ment’s review have occurred after the balance sheet date.

The full Annual Report is downloadable from the TK De-

velopment Group’s website, www.tk-development.dk, as from

16 May 2007.

•

•

•


Value creation in TK Development

quirements and is therefore able to satisfy investor needs and

attract new investors. Among other things, the Group offers

standardized, international contracts, a problem-free process

from initiation to delivery and, moreover, the Group offers

centre management through its partial ownership of Euro

Mall Centre Management, thereby contributing to minimi-

zing the risk for prospective investors.

Over the years, the Group has sold projects to Danish and

foreign banks, investment funds, pension funds and private

companies.

Competencies and know-how

Value creation is very much a product of the core competenci-

es of the TK Development Group’s staff within specific fields.

The staff may be divided into the following main areas: project

developers, legal and financial project controllers, and engine-

ers. The project developers initiate the projects launched by

the Group. The project developers have great expertise within

letting and selling retail and office space. Potential locations

are selected for further analysis and conceptual designs for the

final projects are prepared in interaction with independent ar-

chitects, consulting engineers, future tenants, authorities and

investors. The Group’s engineers and project controllers ma-

nage project processes from initiation to delivery and are thus

key to ensuring that budgets are adhered to and that values are

created in accordance with the plans.

Management believes that the combination of long-standing

experience, in-depth knowledge of both investors and tenants

as well as professional competencies and know-how enable the

Group to complete projects from idea to finalized project at

reduced risk and improved profitability.


Value creation in the TK Development Group is mainly a

product of

the Group’s good tenant and investor relations (net-

works); and

the Group’s long-standing experience, competencies and

know-how.

As a result, the Group can minimize the risk inherent in a

project while maintaining a high level of profitability.

Customer relations – tenants

Over the years, the TK Development Group has built close

partnership relations with a large number of companies, in-

cluding in particular retail enterprises looking to set up new

stores.

Based on these partnerships, the Group has gained in-depth

knowledge of tenant needs and requirements, both short-term

and long-term. From this platform, the Group is able to de-

velop retail solutions that meet tenant needs and, for example

in connection with shopping centres, to put together a retail

mix that boosts individual tenant sales.

A number of the companies in the Group’s network are key

customers with whom the Group continually signs new lea-

ses.

Customer relations – investors

The TK Development Group has also built long-standing

partnership relations with both Danish and foreign real pro-

perty investors.

The Group has gained in-depth knowledge of investor re-

•

•



Core competencies:- can reduce project completion time and cost risk- can increase profitability through customer knowledge and project experience

Low

Low

High

High

Project risk

Profitability

Core competencies:Commercial focus combined with practical ability to take a project from the conceptual to the profitable phase

Improved knowledge of tenants

Improved knowledge of investors

Extensive project managementexperience

Idea-driven,innovative organization

The Company continuously strives to expand its knowledge

base and upgrade its competencies within all phases of project

development.

The TK Development Group’s knowledge re-sources

The employees’ knowledge, competencies and know-how are

essential to the TK Development Group’s value creation. To

promote the employees’ development potential, the Company

holds annual personal development interviews. These inter-

views form the basis for launching development, training and

career initiatives for the individual employees.

Project organization

All units in the Group attach weight to creating a stimula-

ting and inspiring learning environment, enabling employees

to accumulate knowledge and experience from individual

projects and to disseminate such knowledge and experience

throughout the organization for the purpose of continuously

improving the Group’s competencies and know-how.

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

vided by the TK Development Group as well as efficient pro-

gress in project developments, the Group’s staff is anchored in

a matrix organization as follows:

Sale andrental

Professional competencies

Inte

rdis

cipl

inar

y co

mpe

tenc

ies

Controlling

Project managem./

Construction managem.

Finance and

accounting

Project group 2

Project group 1

Project group3

Project group 4

The division into professional environments serves to ensure

competencies and professional standards within the indivi-

dual disciplines of project development.

Organization, management and employees

The TK Development Group’s organization and management

structure, like the group structure, is divided into Northern

Europe and Central Europe.

The Northern Europe and Central Europe divisions operate

branch offices managed by divisional managers (senior vice

presidents).

International management team

The Group’s international management team consists of the

above-mentioned group of persons, as well as functional ma-

nagers in the individual countries.

Management seminars are held regularly for the Group’s ma-

nagement team in Northern and Central Europe. Among

other subjects, the management seminars held during the year

under review focused on the Group’s project portfolio and on

broadening the Group’s market insight in Northern and Cen-

tral Europe.



Breakdown of the Group’s employees

At 31 January 2007, the Group employed a total of 143 per-

sons, broken down as follows:

TKD Nordeuropa A/SDenmark: 31Sweden: 14Finland: 7Baltic countries 14Total 66

TK Development A/SGroup/services: 18Germany and Russia: 6Bulgaria 1Total 25

Euro Mall Holding A/SPoland: 34Czech Republic/Slovakia: 18Total 52

TK Development A/S’ staff comprises employees responsible

for operating the activities undertaken by the Company and

for handling across-the-board group functions, i.e. manage-

ment, accounting, finance and other staff functions.

In 2006/07, the number of employees dropped from 212 to

143 as a consequence of the sale of 67 % of the activities in

Euro Mall Centre Management, meaning that the employees

involved in these activities are no longer included in the over-

all staff count.

Today, all the TK Development Group’s business units are

staffed with competent employees. In light of the sustained

higher activity level anticipated on the Group’s markets in the

2007/08 financial year, it may prove necessary to increase the

staffing level more frequently.

The TK Development Group’s management structure

Frede ClausenPresident and Chief Executive Officer (CEO)

Robert AndersenExecutive Vice President

ZygmuntChyla

Senior VicePresident

Poland

Vivi SørensenGroup Accounting Manager

Peter StrandgaardInternational Legal Manager

Niels Chr. OlsenGroup Finance Manager

Helle Yde JensenHead of HR department

(01.05.2007)

ThomasVilladsen

ErikGodtfredsenSenior VicePresidentDenmark

DanFæsterGeneralManagerSweden

LinaKukelkaite

GeneralManager

BalticCountries

MogensPedersen

RikuNisulaGeneralManagerFinland

Erik GodtfredsenSenior Vice President

Northern EuropeCentral Europe

GeneralManagerGermany

Senior VicePresident

Czech Republic/Slovakia &

Bulgaria


Shareholders

Shareholders

Share capital

TK Development’s shares are listed on OMX/the Copenha-

gen Stock Exchange (www.omxgroup.com/nordicexchange).

The share capital amounts to DKK 560,876,200 (nominal

value), divided into 28,043,810 shares, each with a nominal

value of DKK 20. The Articles of Association contain no re-

strictions as to the transferability of the shares.

Share price development

On 31 January 2007, TK Development A/S’ shares were li-

sted at a price of DKK 82.0 per share with a nominal value

of DKK 20, equal to a market value of DKK 2,300 million

versus DKK 1,612 million at 31 January 2006.

30

60

90

120

150

Feb

06

Apr

07

Share price development in DKK

The number of shareholders grew from 8,657 to 8,729 over

the financial year.

The TK Development A/S share increased by 43 % during the

period from 1 February 2006 to 31 January 2007, up from

DKK 57.51 to DKK 82.00 per share of DKK 20. By compa-

rison, OMX Copenhagen financials and the OMXC20 index

rose by 32 % and 16 %, respectively, during the same period.

On 24 April 2007, the TK Development A/S share was listed

at a price of DKK 125.0 per share with a nominal value of

DKK 20, equal to a market value of DKK 3,505 million.

Volume of trading

During the year under review, the share was traded on 252

days, with a total volume of trading of DKK 4.8 billion.

56,151 trades were completed, covering a total of 67,920,689

shares.

TK Development A/S’ shareholders

The table below shows the ownership structure of TK De-

velopment A/S as reported to OMX/Copenhagen Stock Ex-

change pursuant to section 29 of the Danish Securities Tra-

ding Act.

Direct and indirect ownership Reported ownership interest/voting share

ShareholdersSkandinaviska Enskilda Banken AB, Copenhagen 8.29 %

Kurt Daell, Lysagervej 25, 2920 Charlottenlund 5.43 %

The table below shows a breakdown of shares held by the Exe-

cutive Board and the Supervisory Board.

Direct and indirect ownership Number of shares *)

Ownership interest

Supervisory Board: Poul Lauritsen 42,130 0.15 % Torsten Erik Rasmussen 22,760 0.08 % Kurt Daell 1,522,400 5.43 % Per Søndergaard Pedersen 151,372 0.54 % Jesper Jarlbæk 7,000 0.02 %Executive Board:Frede Clausen 121,272 0.43 % Robert Andersen 14,000 0.05 % Total 1,880,934 6.70 %*)The number of shares includes all holdings in the household


Shareholders

At the balance sheet date, the number of shareholders totalled

8,729, distributed as follows:

Banks and insurance companies 13%

Foreign investors 12%

Supervisory Board, Executive Board and executive staff 7%

Unregistered shares 18%

Other 50%

Shareholders’ agreements

Management is not aware of any shareholders’ agreements

that have been concluded between TK Development A/S’

shareholders.

Share-based incentive schemes

On 30 December 2005, the Supervisory Board issued war-

rants to the Executive Board and other executive staff for the

subscription of 826,000 shares, each with a nominal value of

DKK 20. Subsequently, 122,000 warrants have lapsed, lea-

ving a total of 704,000 active warrants at the balance sheet

date. This is a four-and-a-half-year warrant scheme with the

first exercise opportunity after three and a half years and with

a further three-year (max.) lock-up period in respect of any

shares subscribed for. This means that shares having a maxi-

mum market value equal to the subscription amount may be

divested without restrictions, while shares exceeding a market

value equal to the subscription amount can be disposed of

no earlier than during a three-year period after subscription,

such that up to one-sixth of these shares can be disposed of

in each of the six windows during the three-year period. The

above-mentioned 704,000 warrants correspond to 2.5 % of

the share capital. Warrants comprised by the incentive scheme

may be exercised during three six-week windows. These six-

week windows are placed thus:

following publication of the annual report for the

2008/2009 financial year (from around 30 April 2009);

following publication of the interim report for the six

months ending 31 July 2009 (from around 30 Septem-

ber 2009); and

following publication of the annual report for the

2009/2010 financial year (from around 30 April 2010).

The subscription price per share of nominally DKK 20, before

any deduction for dividend, has been fixed at DKK 74.54 in

the first exercise window, DKK 77.05 in the second window

and DKK 80.63 in the third window.

Number of warrants Supervisory Board 0Executive Board Frede Clausen 120,000 Robert Andersen 120,000 Other executive staff 464,000 Total 704,000

Pursuant to the International Financial Reporting Standards,

IFRS, share-based compensation paid as remuneration to

Management and employees must be charged to the income

statement at the fair value of the share compensation at the

date of allocation. The costs to the Group of the above-men-

tioned four-and-a-half-year incentive scheme total around

DKK 7 million, which will be expensed over the period from

January 2006 to May 2009.

Dividends and dividend policy

The Supervisory Board currently intends to retain any ear-

nings for a continued expansion of the Company’s business.

The payment of any dividends will be considered from year

to year.

•

•

•


Shareholders

The statement of consolidated financial highlights and key

ratios on page 8 shows the development in the listed price of

shares, equity value, earnings per share and payment of divi-

dends.

Voting rights

The shareholders of TK Development A/S have one vote for

each share amount of DKK 1 at general meetings. Sharehol-

ders who have acquired shares by transfer may not exercise the

voting rights in respect of the relevant shares unless such sha-

res have been registered in TK Development A/S’ register of

shareholders or the shareholder has reported, and submitted

proof of, his acquisition to TK Development A/S not later

than eight days prior to the relevant general meeting.

Annual General Meeting

The General Meeting of Shareholders is the supreme authority

in all corporate matters of TK Development A/S, subject to

the limitations provided by Danish law and TK Development

A/S’ Articles of Association. The Annual General Meeting

must be held in the municipality where TK Development

A/S’ registered office is located sufficiently early to permit

compliance with the Company’s applicable time limits for the

holding of General Meetings and the filing of annual reports.

General Meetings are called by the Supervisory Board. The

Annual General Meeting will be held at 5 p.m. on 29 May

2007 in Aalborg Parken.

Extraordinary General Meetings are held following a resoluti-

on by the shareholders in General Meeting or the Supervisory

Board or at the request of the auditors of TK Development A/

S or shareholders collectively holding not less than one-tenth

of the total share capital.

All business transacted at General Meetings is decided by a

simple majority of votes unless otherwise provided by current

legislation; see Article 6 of the Company’s Articles of Asso-

ciation.

Registered shares

All shares are registered in book-entry form in accounts main-

tained in the computer system of VP Securities Services, Hel-

geshøj Allé 61, Taastrup, Denmark, and must be held and ma-

naged through a Danish bank or other institution authorized

to be registered as the custodian of the shares. The shares must

be issued to named holders and may not be transferred to

bearer.

Notification of investment

The Articles of Association or other corporate regulations of

TK Development A/S contain no special provisions regarding

the reportable level of investment. Reference is made to sec-

tion 29 of the Danish Securities Trading Act.

Negotiability and transferability of the shares

The shares of TK Development A/S are freely transferable and

negotiable instruments pursuant to Danish law and no restric-

tions apply to the transferability of the shares. No shareholder

is under an obligation to have his shares redeemed in full or in

part by the Company or any other party.

Other rights

No shares of TK Development A/S carry any special rights.

Limitations on shareholdings

No ownership limitations apply to the shares.

Treasury shares

In the year under review, TK Development A/S sold 22,382

shares and thus holds no treasury shares today. At present, the

Company is not authorized to purchase any treasury shares. It

is not the Company’s policy to hold treasury shares.


Shareholders Shareholders

Rules on insider trading

TK Development A/S’s Management and employees are only

allowed to trade in the Company’s shares during the six-week

window opened after the announcement of annual and half-

year financial results and other major corporate financial dis-

closure documents. The Company keeps a register of the sha-

res held by insiders, including any changes in their portfolios,

and announces this information in accordance with existing

legislation.

Investor relations

The TK Development Group aims to keep its shareholders

and investors up-to-date on all relevant matters.

The Company’s website, www.tk-development.dk, includes

all stock exchange announcements issued for the past four

years, updated share prices and information about projects in

progress. When investor presentations are published in con-

nection with annual and interim reports, they are also made

available at the Company’s website.

Moreover, there is a direct link from TK Development A/S’

website to OMX/the Copenhagen Stock Exchange website,

which contains further information about the TK Develop-

ment A/S share (www.omxgroup.com/nordicexchange). Refe-

rence is also made to the section on corporate governance.

Financial calendar

Preliminary announcement of 2006/07 annual financial results 25 April 2007

Annual General Meeting 29 May 2007

Interim report for the six-month period ending 31 July 2007 28 September 2007

A new financial calendar will be issued in the period around

the publication of the interim report for the six-month period

ending 31 July 2007.

No. Dated TitleNo. 3 27-Apr-06 Announcement of 2005/06 annual financial results No. 4 18 May 2006 Notice convening Annual General MeetingNo. 5 19 May 2006 TK Development A/S has taken due note of the decision made by the Danish Securities CouncilNo. 6 30 May 2006 Minutes of the Annual General Meeting of TK Development No. 7 15 June 2006 Further projects added to the charge against TK DevelopmentNo. 8 20 June 2006 Senior Vice President charged by the Polish policeNo. 9 5-Sep-06 Construction starts on shopping centre in Bialystok, PolandNo. 10 11-Sep-06 Court decides to release Polish Senior Vice PresidentNo. 11 13-Sep-06 TK Development sells shopping centre in PolandNo. 12 14-Sep-06 Sale and construction start of the Entré shopping centre, MalmöNo. 13 20-Sep-06 Senior Vice President still in detentionNo. 14 26-Sep-06 Interim report for the six-month period ending 31 July 2006

No. 15 26-Sep-06 Information about the executive staff’s and their related parties’ transactions in TK Development A/S shares and related securities

No. 16 27-Sep-06 Financial calendarNo. 17 15-Nov-06 Euro Mall Centre Management expands its business platform – and TK Development reduces its ownership interestNo. 18 17-Nov-06 Senior Vice President releasedNo. 19 21-Nov-06 TK Development sells its first retail park in the Czech RepublicNo. 20 28-Nov-06 TK Development sells its first retail park in PolandNo. 21 30-Nov-06 TK Development’s subsidiary TKD Nordeuropa has repaid the subordinated bond loan of nom. DKK 220 millionNo. 22 13-Dec-06 TK Development has repaid bond loanNo. 23 29-Dec-06 Development of new 71,000 m² multifunctional centre in Gdansk, Poland

No. 1 26 January 2007 TK Development sells Kennedy Arcade, Aalborg / Estimated consolidated profit for 2007/08 of minimum DKK 240 million after tax and minority interests

Announcements to the Copenhagen Stock Exchange

The complete wording of stock exchange announcements is available at the Company’s website.


Corporate Governance

Corporate governance

The TK Development Group is committed to compliance

with the Corporate Governance rules to the widest possible

extent to ensure that the Group is managed in accordance

with shareholder interests and with due regard to its other

stakeholders.

I. The role of the shareholders and their interaction with cor-

porate management

The supreme authority of TK Development A/S is vested in

the General Meeting of Shareholders.

The Supervisory Board is committed to ensuring that the Ge-

neral Meeting of Shareholders is a forum for open commu-

nication and exchange of opinions between shareholders and

the Supervisory Board. All registered shareholders are entitled

to vote at the General Meeting, and shareholders who are una-

ble to attend may vote by proxy. To the extent possible, the

instruments of proxy are drawn up to allow the individual

shareholder to indicate his vote on each individual item on

the agenda.

The holding of General Meetings of Shareholders is announ-

ced by inserting ads in newspapers, giving not less than eight

days’ nor more than four weeks’ notice. The convening notice

is also sent to registered shareholders by letter. In addition to

the date and time of the General Meeting of Shareholders, the

convening notice also contains information about the items

on the agenda and an indication of the proposals submitted

for consideration.

TK Development A/S has no limitations in respect of ow-

nership of shares or the number of votes that a shareholder

may hold. Shareholders holding in the aggregate not less than

one-tenth of the share capital may convene an Extraordinary

General Meeting.

During the year, the TK Development Group holds a number

of meetings specifically arranged for shareholders, both at its

own initiative and at the request of investors. Information is

communicated to shareholders via announcements of finan-

cial results and stock exchange announcements, and moreover

by circulating dedicated shareholder information immediately

after the announcement of the annual report and the interim

report for the first six months.

The Supervisory Board reviews the Company’s capital and

share structure on a regular basis, and an update is provided of

most recent developments in the annual report.

The Supervisory Board regularly considers whether it is ex-

pedient to increase the use of information technology in

communications with the Company’s shareholders.

II. The role and importance of stakeholders for the

Company

The TK Development Group is committed to an open dia-

logue with its stakeholders, who include investors, tenants,

employees, public authorities and local interest groups.

Representatives of the Group also take part in investor meet-

ings, conferences and lectures and related activities.

The Supervisory Board assesses corporate policies on an ongo-

ing basis to ensure that they match the needs of stakeholders.

The Supervisory Board is kept currently informed about the

Company’s dialogue with its stakeholders and can thus over-

see that their interests are safeguarded, if necessary by making

changes to the Company’s policies in this regard.



III. Openness and transparency

Significant information of importance to shareholders and fi-

nancial markets is published immediately as stock exchange

announcements via OMX/Copenhagen Stock Exchange in

accordance with the stock exchange rules. The announce-

ments are prepared both in a Danish and English version. Im-

mediately after being published, the announcement is trans-

mitted as an e-mail to shareholders and stakeholders who have

signed up for this service with the TK Development Group.

At the same time, the announcement can be accessed on the

Company’s website.

The TK Development Group’s projects have guidelines stipu-

lating at which stages stock exchange announcements are to

be issued, and rules have been introduced specifying which

projects are of a magnitude warranting the publication of

separate announcements. For instance, stock exchange an-

nouncements are issued upon the sale of projects representing

a sales value of DKK 100 million or more.

The Company’s website is being developed on an ongoing ba-

sis. The website contains data regarding the Group’s project

portfolio. Such data are constantly updated. The TK Develop-

ment Group’s website includes a separate Investor Relations

section, which is linked to OMX/Copenhagen Stock Exchan-

ge’s prices and company info page, which gives the updated

TK share price and order depth data.

The TK Development Group arranges a number of investor

meetings during the year. Immediately after these meetings,

the investor presentation material can be accessed from the

Company’s website. Corporate Governance policies are de-

scribed on the website. This description is being developed on

an ongoing basis.

The disclosure of non-financial information will be upgraded

on an ongoing basis, both at the Company’s website and in

annual reports.

The Company publishes an annual report and an interim re-

port for the first six months. Quarterly reports are not issued,

as the Supervisory Board has found that the informative value

would not be commensurable with the resource usage, given

the special nature of the activities carried on by the TK De-

velopment Group.

IV. The tasks and responsibilities of the Supervisory Board

In the interim between General Meetings, the supreme aut-

hority of TK Development is vested in the Supervisory Board.

The work of the Supervisory Board is regulated via rules of

procedure. These rules of procedure are updated once a year.

The Supervisory Board appoints a Chairman and a Deputy

Chairman.

At least four ordinary Supervisory Board meetings are held

each year, one of which is a strategy meeting. The chairmans-

hip arranges meetings in consultation with the Executive

Board.

At its meetings, the Supervisory Board considers issues of ge-

neral importance to the Group, such as:

Goals and strategies

Division of responsibilities

Financial statements and financial reporting

Authorization for major projects

Budgets

Valuation of the Group’s properties

Proposals for mergers, acquisition and sale of companies

and properties

Appointment and remuneration of the Executive Board.

In the event that matters to be considered by the Supervisory

•

•

•

•

•

•

•

•



Board require expedited review, an extraordinary board meet-

ing is convened. In special cases, such board meetings may be

held as telephone conference meetings. In 2006/07, six board

meetings were held, including a strategy meeting.

The Supervisory Board is provided with ongoing reporting

updates, and reporting is provided prior to board meetings

according to specific guidelines.

The Supervisory Board carries out one annual evaluation of

the work of the Supervisory Board and the Executive Board.

The rules of procedure are adapted regularly and include ru-

les about the responsibilities and duties of the Chairman of

the Supervisory Board. Further, the rules of procedure specify

how information is to be exchanged between the Executive

Board and the Supervisory Board.

The Supervisory Board has decided not to set up special board

committees. This decision was made in light of the size of the

Supervisory Board and the commitment to a high composite

information and knowledge level on the board.

V. Composition of the Supervisory Board

According to the Articles of Association, the Supervisory

Board must be composed of not less than four nor more than

seven members. The Supervisory Board is composed of five

members, and reference is made to the section entitled “Posts

held by Supervisory and Executive Board members” for more

information. The Supervisory Board nominates Niels Roth as

a new member. If adopted by the shareholders at the General

Meeting, the Supervisory Board will then be composed of six

members. Today, Niels Roth is the Deputy Chairman of TK

Development’s subsidiary, TKD Nordeuropa A/S. Niels Roth

(49) has substantial management experience from his previous

employment with the Carnegie Group, and for a number of

years he was a member of the Danish Securities Council and

the Chairman of the Danish Securities Dealers’ Association.

Niels Roth will boost the Supervisory Board’s expertise within

management and financial issues.

The Company has decided, in view of its size, not to appoint

employee representatives to the Supervisory Board.

The Supervisory Board’s competencies cover a wide spectrum,

including management, international relations, the property

sector, the retail sector and accounting.

Candidates for election to the Supervisory Board are nomi-

nated based on an overall assessment of their competencies

and experience base. New members are offered a thorough

introduction to the Company.

TK Development publishes the number of shares and opti-

ons held by members of its Executive Board and Supervisory

Board in the section entitled “Shareholders”. The announce-

ment of annual financial results, page 67, contains informa-

tion about the positions of the individual Supervisory Board

members, their ages, supervisory board memberships and the

dates when they joined TK Development A/S’ Supervisory

Board.

The members of the Supervisory Board are elected at the Ge-

neral Meeting of Shareholders to serve for a term of one year

at a time. Setting an age limit for the members of the Supervi-

sory Board has not been considered appropriate, as competen-

cies and experience are weighted higher than an age criterion.

VI. Remuneration of the Supervisory Board and Executive

Board

Since 1995, TK Development A/S has been using incentive

schemes for the Executive Board and a group of key executi-

ves. The basic philosophy underlying these schemes was to tie

them closer to the Company and to enhance the commitment


Corporate Governanve

of the relevant key executives in pursuing financial gains for

TK Development. The Annual Report reviews the current in-

centive schemes.

The Executive Board members receive a fixed salary and a

bonus scheme based on retainment and consolidated profits.

There are no special severance programmes for members of

the Executive Board. The service agreements are based on or-

dinary terms.

The term of notice for Executive Board members is 12 months

on the part of the Company and six months by the member.

Pay and service terms for members of the Executive Board

come up for review once a year.

The remuneration of Frede Clausen, President and CEO,

amounts to DKK 3.1 million for the 2006/07 financial year,

excl. company-provided car, bonus, etc. The remuneration of

Robert Andersen, Executive Vice President, amounts to DKK

2.4 million for the 2006/07 financial year, excl. company-

provided car, bonus, etc. Executive Board members do not

receive any company-provided pension benefits. As concerns

incentive schemes, reference is made to the appropriate sec-

tion under “Shareholders”.

The fee payable to the members of the Supervisory Board is

calculated using a basic fee. The Chairman is paid three ti-

mes the basic fee, while the Deputy Chairman is paid twice

the basic fee. The total fees paid to the Supervisory Board

amounted to DKK 1.0 million for the 2006/07 financial year.

The total fees paid to Supervisory Board members in all group

companies amounted to DKK 1.8 million for the 2006/07

financial year.

The Supervisory Board members are not remunerated via in-

centive schemes.

VII. Risk management

One of the tasks of the Supervisory Board is to ensure efficient

risk management. A central building block of the Group’s risk

management is the adopted solvency target for the Group and

the liquidity targets for the subgroups with active projects, viz.

TKD Nordeuropa and Euro Mall Holding.

Reports to the Supervisory Board are submitted on an ongo-

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

constitute an important element in the decision-making basis

for all major projects.

The Supervisory Board regularly considers issues relating to

the project portfolio, properties, financing, IT and staffing

as an element in a broader assessment of potential risks and

scarcity factors.

VIII. Auditing

Auditors elected by TK Development A/S’ General Meeting

of Shareholders: Deloitte, Statsautoriseret Revisionsaktiesel-

skab, Weidekampsgade 6, DK-2300 Copenhagen S, and Niel-

sen & Christensen, Statsautoriseret Revisionspartnerselskab,

Hasseris Bymidte 6, DK-9000 Aalborg.

The Supervisory Board has made the provisional choice of

continuing with two auditing firms, even though it is now

possible for listed companies to have only one auditing firm.

In addition, the Supervisory Board has found that the audit

task is the common concern of all board members, for which

reason it has not considered it expedient to set up an audit

committee.

IX. OMX/Copenhagen Stock Exchange’s Corporate Gover-

nance Recommendations

In autumn 2005, OMX/Copenhagen Stock Exchange decided

to incorporate the revised corporate governance recommen-



dations by the Nørby Committee into its disclosure require-

ments for listed companies. This means that listed companies

must outline their approach to the corporate governance re-

commendations in annual reports for financial years begin-

ning on or after 1 January 2006.

One of the fundamental principles of the new recommenda-

tions is the “comply-or-explain” principle, which implies that

companies are required either to comply with the recommen-

dations for corporate governance or explain why they do not

comply with the recommendations in whole or in part.

The Supervisory Board is convinced that TK Development

A/S lives up to the new corporate governance recommenda-

tions.


Risk issues

Risk issues

Financial targets

To provide for sufficient future financial resources, the TK

Development Group has adopted liquidity targets for the

subgroups with active projects, Euro Mall Holding and

TKD Nordeuropa; see below. In addition, Management has

adopted a solvency target for the Group corresponding to a

solvency ratio of 25 % based on total capital resources.

Covenants related to credit facilities in TK Development

In favour of the banks providing operating credit facilities,

TK Development has undertaken at group level to comply

with a solvency ratio covenant of 21 %, measured in connec-

tion with the presentation of interim and annual reports. This

ratio is measured as liable capital relative to total assets. Liable

capital is defined as equity including minority interests and

subordinated loans, but less any treasury shareholdings and

holdings of own subordinated loans. Total assets are defined as

all assets less any treasury shareholdings and holdings of own

subordinated loans.

Covenant in Euro Mall Holding

The Group’s relationship with its co-shareholder, the Inve-

stment Fund for Central and Eastern Europe, is subject to

a liquidity covenant intended to ensure available funds in

Euro Mall Holding, equivalent to fixed costs for a period of six

months plus DKK 20 million, not including funds received

in the form of proceeds from projects sold. The calculation

includes project obligations materializing within six months.

The covenant represents a liquidity target for Euro Mall Hol-

ding and a covenant that commits the subgroup vis-à-vis the

Group’s bankers. The covenant must be calculated and be met

before acquiring and initiating projects requiring liquidity, in-

cluding the acquisition of plots of land and buildings in the

Euro Mall Holding group, and after repayments on the inter-

company account with the TK Development Group.

The liquidity covenant is defined as follows:

L + K > E + O + R+ DKK 20 million

assuming

L = The Euro Mall Holding 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 Euro Mall Holding group’s amount available on com-

mitted operating credit facilities from time to time (excluding

project credit facilities).

E = The planned impact on cash resources from the projects

which the Euro Mall Holding group is obliged to complete

within six months, including the new/expanded project, ta-

king into account committed project credit facilities from fi-

nancial institutions and forward funding.

O = The Euro Mall Holding 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 Euro Mall Holding group’s ope-

rating credit facilities and intercompany accounts with the TK

Development Group for the following six months, and half

of the repayments on Euro Mall Holding’s intercompany ac-

counts with the TK Development Group falling due within

six months.


Risk issues

Covenant in TKD Nordeuropa

TKD Nordeuropa is subject to a similar liquidity covenant.

This means that available funds will also have to be secured in

TKD Nordeuropa equivalent to the fixed costs incurred du-

ring a six-month period, without taking into account funds

received in the form of proceeds from projects sold. The cal-

culation includes project obligations materializing within six

months.

The covenant represents a liquidity target for TKD Nordeuro-

pa and a covenant that will commit the subgroup towards the

Group’s bankers.

The covenant must be calculated and be complied with be-

fore projects requiring liquidity are acquired and initiated,

including the acquisition of plots of land and buildings in

the TKD Nordeuropa Group, and in connection with making

repayments on the intercompany account with the TK De-

velopment Group.

The liquidity covenant is defined as follows:

L + K > E + O + R

assuming

L = The TKD Nordeuropa 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 TKD Nordeuropa Group’s amount available on com-

mitted operating credit facilities from time to time (excluding

project credit facilities).

E = The planned impact on cash resources from the projects

which the TKD Nordeuropa Group is obliged to complete

within six months, including the new/expanded project, ta-

king into account committed project credit facilities from fi-

nancial institutions and forward funding.

O = The TKD Nordeuropa 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 TKD Nordeuropa Group’s ope-

rating credit facilities and intercompany accounts with the TK

Development Group for the following six months, and half

of the repayments on the TKD Nordeuropa Group’s inter-

company accounts with the TK Development Group falling

due within six months.

Risks relating to Group operations

Development activities

The TK Development Group operates as a property developer

and seeks to enter into agreements with investors at a very

early stage in the development process, the object being to

limit the Group’s risk solely to the development activity. This

risk limitation strategy means that projects are not always fully

defined at the time contracts are concluded with investors.

However, a contract is usually made with an investor around

the time of construction startup. Consequently, the most sig-

nificant risks attaching to projects for which sales agreements

have been concluded are closely linked to individual elements

of the implementation process, such as obtaining relevant per-

mits from the authorities, coordinating subcontractors, meet-

ing time schedules, assessing the letting risk and complying

with the construction budget. The risk attaching to existing

projects may be significant despite advance agreements made

with an investor, and may thus also result in major uncertain-

ty regarding cash flows, capital to be tied up and timeframes.

If, contrary to expectations, the Group discovers that elements


Risk issues

key to the completion of a project cannot be met, a sold pro-

ject may have to be abandoned or completed at the Group’s

own expense. Project costs defrayed that relate to unsold pro-

jects will have to be expensed if the projects in question are

abandoned.

A substantial number of the Group’s projects will be sold to

investors based on a fixed, agreed initial return calculated on

the lease agreements concluded in the project development

phase. In cases where a sales agreement is concluded before all

lease agreements in the project have been finalized, the Group

undertakes a calculated risk that the remaining unlet premises

will be let on terms and conditions that ensure a satisfactory

profit or the agreed selling price, as the case may be, for the

project.

For projects that are sold, construction will not be initiated

until the Group expects to be able to meet the requirements

from the investor that finalize the project sale. Meeting these

requirements typically falls within the Group’s sphere of com-

petencies. The Group assumes a calculated risk that it may

be unable to meet these requirements, contrary to its expec-

tations.

Basically, construction of unsold projects will only be given

the go-ahead if lease agreements have been concluded for at

least 60 % of the leasable premises. Thus, the Group assumes

the risk of the project being sold as well as project funding. In

addition to the above-mentioned project development risks,

such projects are also subject to the risk that they cannot be

sold at a satisfactory profit. This may force the Group to either

keep the project and continue to tie up the working capital

involved or sell the project at a loss. This risk will be partly

offset by the minimum occupancy rate to be met prior to

commencement of construction.

When changes occur in the Group’s markets, projects not sold

are subject to the risk of investor return requirements increa-

sing sharply, and the Group’s consumption of resources may

be lost and the value of acquired land or relevant associated

rights may depreciate.

Dependency on staff

The knowledge, experience and networks of key employees

constitute some of the TK Development Group’s greatest

assets, and are thus key prerequisites for the Group’s ability

to carry on profitable business. Accordingly, ensuring these

employees’ long-term commitment is a vital competitive pa-

rameter for the Group. There can be no assurance that the

Group can retain existing employees or attract new ones.

Environmental matters

As a development company, the TK Development Group

does not carry on any actual production activities that in

themselves may have a negative environmental impact. If

there are reasons to suspect contamination when plots of land

and existing buildings are acquired, the appropriate reserva-

tions are made in the purchase process, soil samples are ta-

ken and thorough environmental analyses conducted. If a site

has been contaminated by previous activities, the land will

be cleaned up for the particular purpose for which it is to be

used, or the Group will decide not to acquire it. If built-up

areas have been insufficiently cleaned up, or if the assessment

of the required cleaning-up proves incorrect with respect to

undeveloped sites, cleaning-up or disposing of such areas may

result in the Group incurring significant unforeseen expenses

in the cases where the Group cannot pass on such expenses to

its contractors.

Structural changes

For its future earnings, the TK Development Group relies on

the inflow of new projects and, by extension, on the future

availability of new building sites and planning permission

from local authorities. Changes in national legislation, local


Risk issues

plans or other factors that make obtaining planning permis-

sion difficult or restrict the supply of building sites will have a

negative impact on future earnings.

Tax matters

A deferred tax asset of DKK 291.0 million is included in the

balance sheet at 31 January 2007. The tax asset relates mainly

to tax loss carryforwards in the different subsidiaries, and to

negative deferred tax.

Valuation is based on the existing rules for carrying forward

losses and group pooling or group contributions and the as-

sumption that each subsidiary is a going concern. A change

in the terms and assumptions for carrying forward losses and

group pooling/group contributions could result in the value

of the tax assets being lower than the value computed at 31

January 2007. Management performed the valuation on the

basis of the existing business plans. In the event the business

plans do not materialize, the value of the tax assets could be

lower than the value computed at 31 January 2007.

Up to and including the 2004/05 financial year, TK De-

velopment A/S and the Danish subsidiaries subject to group

pooling were taxed with the Group’s German subsidiaries on a

pooled basis. Tax has not been provided on the retaxation ba-

lance, because Management does not plan to invoke changes

in the Group that would result in full or partial retaxation.

Risks relating to legal matters

Third-party agreements

A major portion of the TK Development Group’s business

consists of concluding agreements with development partners,

investors, tenants and contractors for property development

projects. A description is given below of the most significant

risks regarding these contractual issues.

Agreements with development partners

Agreements have been made with the following major de-

velopment partners: Port of Copenhagen Ltd., Nordkranen

Ejendomsudviklingsselskab A/S, Frederikshavn Maritime Er-

hvervspark A/S, Meinl European Land Ltd., Miller Holdings

International Limited, the Baltic Property Trust Group and

LMS (DHL) Limited.

The risks primarily break down into potential problems due

to disagreements regarding strategy and development focus

and speed on the one hand and the risk of cooperation ag-

reements being terminated on the other. TK Development

has attempted to counter these risks by concluding long-term

cooperation agreements that can only be terminated on the

grounds of breach. However, there can be no assurance that

either the Group or a partner will not breach the agreement,

and there can be no assurance that existing cooperation agre-

ements will not give rise to other disagreements between the

parties.

Agreements with investors

The TK Development Group’s customers on the investment

side are private and institutional investors. The Group seeks

to reduce its working capital and risks relating to ongoing

projects by applying forward funding from investors, which

means that one or more investors undertake to provide fun-

ding as project construction progresses. Before construction

starts, the investor and TK Development come to an agre-

ement on a well-defined project. The investor remains finan-

cially involved throughout the construction period and is con-

sulted on major decisions. These principles ensure that from

construction startup, TK Development’s risk in the project is

mostly limited to the letting risk attaching to any remaining

unlet premises and the risk of construction budget overruns.

In agreements with institutional investors, the overriding risk

thus relates to the Group’s ability to deliver on time and ac-

cording to specifications, while the counterparty risk is less


Risk issues

significant. Even though a sales agreement regarding a project

has been concluded, major risks may still attach to the project

in a number of cases, which may lead to the cancellation of a

sales agreement on account of breach by one of the parties.

Several projects are sold via intermediaries to private investors,

initially based on framework agreements that typically con-

tain reservations regarding funding procurement and, subse-

quently, the issuing of title documents, etc. The risk generally

attaches to counterparty risks and primarily the ability of in-

termediaries to lift the reservations that make final completion

of a deal conditional. Accordingly, these factors are to some

extent outside the influence of the Group.

Agreements with tenants

The risk attaching to lease agreements primarily comprises the

ability of tenants to comply with the terms and conditions

of the lease agreement, including particularly the obligation

to pay. If the tenants do not meet the terms of the lease ag-

reement in a project sold, the investor who has bought the

property may in some cases set up a claim against the TK

Development Group. In a worst-case scenario, the investor

may not be obliged to uphold the acquisition. Attempts are

made to reduce the risks by claiming suitable deposits and

bank guarantees and generally being alert to any changes in

the creditworthiness of tenants. However, there can be no as-

surance that such measures will be sufficient to curb any losses

on account of breach of lease agreements.

Agreements with contractors

All contract assignments are sourced externally and are typi-

cally based on fixed-priced contracts containing guarantees as

security for performance of the contractor’s obligations. This

reduces the TK Development Group’s risk regarding unfore-

seen fluctuations in the construction costs with respect to in-

dividual projects. However, there can be no assurance that a

contractor can honour his obligations under a construction

contract, or that the guarantees provided under it are suffi-

cient to ensure that a given project will generate earnings for

the Group. If a contractor breaches a construction contract,

the worst-case scenario would be that the Group cannot ho-

nour its own agreements regarding sale and/or letting of the

relevant property, implying that the Group would risk being

in breach of concluded agreements.

Litigation

The TK Development Group is currently party to the fol-

lowing legal proceedings/arbitration proceedings that are of

relevance due to their scope:

In the summer of 2002, De Samvirkende Købmænd, a trade

association of grocery retailers, filed a complaint with the Na-

ture Protection Board of Appeal (Naturklagenævnet) in re-

spect 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 Protec-

tion 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. A ruling in the matter is expected at

the earliest in 2009 or 2010. Neither the owner of the centre

nor the TK Development Group is a direct party to the case,

but if the High Court were to uphold De Samvirkende Køb-

mænd’s claim in full or in part, the Field’s department store

may have to be redesigned following negotiations with the

relevant local authorities. If the High Court rules in favour of

De Samvirkende Købmænd, 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. In light of

previous rulings made, Management believes the risk of this

case to be negligible.


Risk issues

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 ap-

preciable extent.

Senior Vice President charged by the Polish police

In June 2006, the Senior Vice President responsible for the

Group’s Polish branch office was detained, taken into custody

and charged by the Polish police with irregularities related to

obtaining a public authority permit (zoning permission) for

the Polish Galeria Biala shopping centre project in Bialystok.

In November 2006, the Senior Vice President was released

on bail.

During the entire process, Group Management has been una-

ble to find any irregularities in connection with the project,

and thus fails to comprehend that the Senior Vice President

could be involved in the alleged practices. The Polish prosecu-

tion service has not yet decided whether to indict the Senior

Vice President.

If, contrary to Management’s expectations, the Senior Vice

President is indicted and convicted, this might damage the

Group’s reputation and thus adversely affect its activities and

earnings.

Charges brought by the public prosecutor for serious eco-

nomic crime

As stated in stock exchange announcements nos. 19/2005 and

20/2005, the prospectus published on 30 December 2005

and the annual report for 2005/06, TK Development A/S and

six individuals have been charged by the public prosecutor

for serious economic crime with fraudulent income recogni-

tion and price manipulation concerning periods covering the

2000/01, 2001/02, 2002/03 and 2003/04 financial years.

The charge from the autumn of 2005 covers 16 projects. On

14 June 2006, the charge against TK Development and the six

individuals was supplemented; see stock exchange announce-

ment no. 7/2006. The charge still concerns fraudulent income

recognition and price manipulation and also relates to periods

covering the 2000/01 to 2003/04 financial years. The charge

from June 2006 covers an additional 13 projects, located in

both Denmark and Central Europe, bringing up the total to

29 projects.


Company’s auditors from Deloitte and Nielsen & Christensen,

who no longer serve as auditors for the Group. The charges

were brought because, according to the public prosecutor for

serious economic crime, the conditions for the Group’s use of

the percentage of completion method for the relevant finan-

cial years had not been met, and the financial statements of

TK Development A/S for the 2000/01 to 2003/04 financial

years were therefore incorrect on some points.

Management still believes that the charges brought are based

on misconceptions concerning the Group’s accounting poli-

cies. For a more detailed description of the charge, including

the exact wording of the charge from October 2005, please see

the prospectus published on 30 December 2005, the Group’s

Annual Report for 2005/06 and stock exchange announce-

ment no. 3/2006.

The matters covered by the charges have no impact on the

Group’s current financial position.

If the charges lead to the Company being indicted on the

counts set out in the charge sheets or for violation of other

accounting provisions and to subsequent conviction, the

Company may be fined. Assessing the size of such fine is sub-

ject to considerable uncertainty. Moreover, the risk exists that

investors who have bought or sold shares and/or bonds in TK

Development A/S during the relevant period will claim da-


Risk issues

mages from the Company. Whether such claims would lead

to the Company becoming liable for damages will depend on,

among other things, whether the investors in question can

prove a loss and document that such loss has occurred as a

result of unlawful actions taken by the Company or its emplo-

yees. It is not possible to assess the potential extent of any such

claims for damages. If convicted of misrepresentation for the

purpose of income recognition, the individuals charged may

be punished by imprisonment for up to 18 months and, in

aggravating circumstances, the punishment may be imprison-

ment for up to four years. If the charges, a potential indict-

ment and a potential trial continue for a lengthy period of

time, such period will put a strain on the Company’s resources

and the individuals charged, and this may have a material, ne-

gative indirect effect on the Group. In the event developments

in the case result in one or more of the individuals charged

having to resign, this could also have an adverse indirect effect

on the Group. A conviction might damage the Group’s repu-

tation and thus adversely affect its activities and earnings.

Financial risks

Property prices and rental income

The TK Development Group is affected by price fluctuations

on the various property markets on which the Group operates,

as well as general economic trends. This applies to the Group’s

portfolio of building sites, ongoing and completed projects

and the intake of new projects. Declining prices of land and

property and falling rent levels will impact negatively on the

Group’s earnings from project sales not finalized.

Carrying amounts of assets

Management believes that the net carrying amount of the

project portfolio at 31 January 2007, DKK 1,491.1 million,

provides a true and fair view.

In addition to the project portfolio, which is categorized as

current assets less prepayments received from customers,

the TK Development Group also holds property, plant and

equipment in the form of investment property. The value of

investment properties is measured at fair value, of which the

portfolio of investment properties in the Czech Republic was

carried at DKK 304.2 million at 31 January 2007 based on

a target rate of return of 7.0 % p.a. calculated using a dis-

counted cash-flow model. The portfolio of investment pro-

perties in Germany was carried at DKK 229.5 million at 31

January 2007 based on a target rate of return of 6.0 % p.a.

calculated using a discounted cash-flow model. Management

believes that the target rates of return are consistent with cur-

rent market levels. For example, the Group’s investment pro-

perties are exposed to the following risks:

General economic conditions in countries where the

Group has investment property holdings

Price fluctuations on the property market, including or-

dinary fluctuations in supply and demand

Interest-rate fluctuations

Legislative amendments, including tax rules applying to

investors

Tenants’ ability to pay

Foreign-exchange fluctuations, although the Group has

contracted to have the rent paid in euro. However, the

financial standing of tenants may weaken due to negative

exchange-rate movements between their local currencies

and the euro

Consumer confidence and behaviour and, by extension,

consumer purchasing power may have a significant influ-

ence on the shopping centre tenants’ ability to pay,

A change in market return requirements or in factors relating

to the properties’ rental situation would trigger changes in the

value of the investment properties. Such value adjustment

would be charged against the Group’s income statement. As

1.

2.

3.

4.

5.

6.

7.


the Group has access to a performance-driven share of the

value adjustments of some of these properties, changes in the

value could have a relatively stronger impact than what is re-

flected in the ownership interest and, by extension, in the va-

lue recognized in the consolidated financial statements.

The Group’s receivables primarily comprise trade receivables

totalling DKK 632.9 million at 31 January 2007. Any write-

downs are made on the basis of an assessment of each indivi-

dual receivable. This assessment may be subject to uncertainty,

involving a risk of insufficient writedowns and, in turn, los-

ses on receivables that will have to be charged to the income

statement.

Liquidity risks

Having sufficient cash resources is essential for the TK De-

velopment Group. In order to complete the development of

its planned projects and thereby achieve the expected results,

the Group must have or must be able to procure sufficient

cash resources to cover the costs and deposits required for the

projects, the capacity costs and other obligations. All factors

described in this section on risk factors may have an adverse

effect on the Group’s ability to generate such cash resources.

TKD Nordeuropa A/S has made a commitment to its banks

and itself regarding compliance with specific covenants. These

covenants may restrict opportunities to launch new business

activities. They also mean that cash resources cannot be freely

transferred from the TKD Nordeuropa Group to other parts

of the Group. In other words, the Group may experience li-

quidity difficulties, even when there are free cash resources in

the Group overall. See the section on financial targets for a

more detailed description.

Restrictions have also been agreed with respect to Euro Mall

Holding, preventing cash resources from being freely transfer-

red from Euro Mall Holding to other parts of the Group. See

the section on financial targets for a more detailed descrip-

tion.

To determine the required liquidity buffer, the Group draws

up both short- and long-term cash budgets. The Group has

concluded agreements with a number of banks regarding the

Company’s operating credit facilities and having continued

access to project financing. In addition, certain conditions

(covenants) attach to the operating credit facilities, which the

Group is under an obligation to observe, and in case the con-

ditions are not complied with, the project credit facilities may

be terminated. The Company seeks to use forward funding to

limit its cash requirements. It is essential that the Group ob-

tains third-party construction funding in cases where forward

funding is not available.

Interest-rate risks

As a main rule, the TK Development Group finances its pro-

jects in progress by way of short-term, floating-rate bank loans

and by forward funding, generally based on a fixed interest

rate. The Group’s other interest-bearing debt consists of both

fixed- and floating-rate loans. The main part of the Group’s

total interest-bearing debt consists of floating-rate loans. A

one percentage point increase in short-term interest rates will,

ceteris paribus, have a negative impact on the Group’s profit

before tax of around DKK 20 million per year. The policy

formulated for interest-rate risks is adhered to.

Foreign-exchange risks

The TK Development Group is an international group of

companies with operations in Denmark, Sweden, Finland,

Latvia, Lithuania, Germany, Russia, Poland, the Czech Repu-

blic and Bulgaria. In Denmark, the Group invoices revenue

from the project portfolio in Danish kroner, while outside

Denmark, the foreign subsidiaries generally invoice in their

local currency or in euro. The Group’s reporting currency is

Risk issues Risk issues


Risk issues

Danish kroner. Accordingly, movements in the exchange rates

of local currencies and euro relative to Danish kroner influ-

ence the Group’s revenue, earnings, total assets and equity. In

order to minimize the foreign-exchange risk on consolidated

earnings, the Group generally raises funding for individual

projects in the agreed invoicing currency. Similarly, construc-

tion contracts are generally concluded in the relevant project

invoicing currency. In the few cases where the Company gains

an advantage from concluding the construction contract in a

different currency than the relevant project’s invoicing cur-

rency, the Company generally hedges the foreign-exchange

risk through a forward agreement. The foreign subsidiaries

pay their staff costs and other administrative expenses in local

currencies.

Each Group subsidiary determines its functional currency

as the official currency of the primary financial environment

in which the entity operates. In determining its functional

currency, each unit takes account of which currency has the

strongest impact on selling prices, the official currency of the

country whose market forces and legislation have the strongest

impact on selling prices, and which currency has the strongest

impact on costs. All transactions of each unit are measured in

the functional currency in order to minimize the foreign-ex-

change risk of each subsidiary.

In spite of the above-mentioned initiatives to minimize the

foreign-exchange risk, changes in the local currencies of

foreign subsidiaries or in the euro against Danish kroner will

influence the future financial position and results of the TK

Development Group.

The policy formulated for foreign-exchange risks is adhered

to.

Cross liability between the Group’s companies

TK Development A/S has provided guarantees on a continu-

ing basis for the Group’s overall banking and guarantee com-

mitments. Also, in a few cases, TK Development has provi-

ded guarantees for group companies’ agreements, including

transactions, construction contracts and leases.

Risk issues


Posts held by Supervisory and Executive Board members

Posts held by the Supervisory and Executive Board members

Chairman Poul Lauritsen, Director

Born 16 February 1936Joined the Supervisory Board in 1992Term of office ends May 2007

Education:Commercial education and MSc in Economics and Business Administration from the Copenhagen Business School.

Employment:1961-1974: Management consultant, director and partner in T. Bak-Jensen A/S.1976-1989: Director and partner in BakConsult Gruppen A/S (managing partner 1984-1989). 1990-1992: Director in PA Consulting Group A/S. In addition to the below-mentioned supervisory board memberships, he has been Chairman of Spar Nord Bank A/S, Nowaco A/S and NOVI A/S.

Member of the supervisory boards of:Gangsø Møbler A/S (Chairman)Hedegaard A/S (Chairman)Aalborg Stiftstidende A/S (Deputy Chairman)Nordjyske Holding A/S (Deputy Chairman)Aa. S. F. Holding A/S (Deputy Chairman)House of Businesspartners A/S

Member of the executive board of: Poul Lauritsen Aalborg ApS

Poul Lauritsen is considered an independent member of the Supervisory Board. *)

Deputy Chairman Torsten Erik Rasmussen, MBA, Director

Born 29 June 1944Joined the Supervisory Board in 1998Term of office ends May 2007

Education: 1961-1964: Commercial education, Dalhoff Larsen & Horneman A/S, Denmark. 1964-1966: National service with the Royal Life Guards, discharged from military service as first lieutenant 1967 (R). 1972: MBA, IMEDE, Lausanne, Switzerland. 1985: International Senior Manager’s Program, Harvard Business School, Boston.

Employment: 1961-1971: Dalhoff Larsen & Hornemann, incl. as a director of Northern Soft- & Hardwood Co. Ltd., Congo. 1973: Executive secretary, LEGO System A/S, Denmark.1973-1997: Finance manager, LEGOLAND A/S, Denmark.1975-1977: Logistics manager, LEGO System A/S, Denmark.1977-1978: Assistant manager (logistics), LEGO System A/S, Denmark.1978-1980: President and CEO, LEGO Overseas A/S, Denmark.1981-1997: Manager and member of Group Management, LEGO A/S, Denmark.

Member of the supervisory boards of:Amadeus Invest A/S (Chairman)Best Buy Group A/S (Chairman)CPD Invest ApS (Chairman)A/S Det Østasiatiske Kompagni (Deputy Chairman)Bang & Olufsen A/S (Deputy Chairman)JAI A/S (Deputy Chairman)Vestas Wind Systems A/S (Deputy Chairman)Acadia Pharmaceuticals Inc. + one subsidiaryArvid Nilsson A/SColoplast A/SECCO Sko A/S + five subsidiariesMorgan Invest ApSNatImmune A/SOutdoor Holding A/S + one subsidiarySchur International A/SVola Holding A/S + one subsidiary

Member of the executive board of: Morgan Management ApS

Torsten Erik Rasmussen is considered an independent member of the Supervisory Board. *)

*) See section V.4 in the Corporate Governance Recommendations prepared by the Copenhagen Stock Exchange.


Posts held by the supervisory and Executive Board members

Jesper Jarlbæk

Born 9 March 1956Joined the Supervisory Board in 2006Term of office ends May 2007

Education:1981: Trained as a state-authorized public accountant.2006:Licence placed in inactive status.

Employment:1974-2002: Served with Arthur Andersen (most recently as managing partner). 2002-2006: Deloitte (executive vice president).

Member of the supervisory boards of:Groupcare Holding A/S (Chairman)Bakmann Holding A/S (Chairman)JAWS A/S (Chairman)Prospect A/S (Chairman)Julie Sandlau China ApS (Chairman)Southern Trident (Pty) Ltd. (Chairman)March IT A/S (Deputy Chairman)Laigaard & Partners A/S (Deputy Chairman)Oceanaut, Inc.Scan.jour A/SEarlbrook Holdings Ltd. A/SNordic Brand Capital Management ApST.P. Audit A/SEUM Holding ApS

Member of the executive board of:Earlbrook Holdings Ltd. A/S

Jesper Jarlbæk is considered an independent member of the Supervisory Board. *)

Per Søndergaard Pedersen, Director


Education:Trained with Sparekassen Nordjylland (Spar Nord Bank).

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.

Member of the supervisory boards of:Bjørk & Maigård ApS + three subsidiaries (Chairman)Eksport Akademiet Holding ApS + two subsidiaries (Chairman)Celenia Software A/S (Chairman) + two subsidiaries EIPE Holding A/S (Chairman)Ib Andersen A/S Øst (Chairman)J. A. Plastindustri A/S (Chairman)JMI A/S + three subsidiaries (Chairman)Lindgaard A/S – Rådgivende Ingeniører (Chairman)Nowaco Group A/S + one subsidiary (Chairman)PL-Holding Aalborg A/S + two subsidiaries (Chairman)TBP Invest Aalborg A/S (Chairman)VICH 4305 ApS (Chairman)Aalborg Boldspilklub A/S + six subsidiaries (Chairman)Dansk Reservekraft ApSFonden Musikkens Hus i NordjyllandHedegaard A/SKollegiefonden BikubenMarius A/SOKF Holding A/S + two subsidiariesScanmach A/S + one subsidiarySkandia Kalk International Trading A/S + one subsidiarySmall Cap Danmark A/S + one subsidiarySpar Nord Bank A/SToppenberg Maskinfabrik A/S + one subsidiary9000 LUX A/S

Medlem af direktionen i:A.S.P. Ejendom ApSPSP Holding ApS

Per Søndergaard Pedersen is not considered an independent member of the Supervisory Board. *)



Kurt Daell, Attorney-at-Law


Education:1976: MA (Law). 1988: Practising certificate placed in inactive status on the roll of attorneys.

Employment:1983-1986: Chairman of the supervisory board of A/S Daells Varehus, (served as the CEO 1988-92). 1983-1993: Chairman of the supervisory board of A/S Daells Discount. 1993-1999: Chairman of the supervisory board of A/S Madeleine. 1985-1987: Member of the supervisory board of Dagligvare Gruppen K/S, Vejle. 1987-1991: Member of the supervisory board of Dansk Fryse Økonomi, Osted. 1977-1987: Secretary General for Denmark in AEVPC (Association Européenne de Vente par Correspondance – European Mail Order and Distance Selling Trade Association). 1981-1987: Member of the International Advisory Board of DMA (Direct Marketing Association), USA.

Member of the supervisory boards of: A/S Harald Nyborg + 39 subsidiaries (Chairman)DORADE A/SKD Parat 1 ApSKD Parat 2 ApSSB af 10. marts 2005 A/SStressmeter A/S

Member of the executive boards of:DAVA Holding ApSB. Junk ApSSpringforbi A/SDirect Nyt ApSJunk & Co. ApS

Kurt Daell is considered an independent member of the Supervisory Board. *)





Frede Clausen, President and CEO

Born on 30 July 1959Member of the Executive Board of TK Development since 1992.

Member of the supervisory boards of:Euro Mall Holding A/S + three subsidiaries (Chairman)Kommanditaktieselskabet DLU nr. 1 + general partner (Chairman)Ringsted Outlet Center P/S + general partner (Chair-man)Udviklingsselskabet Nordkranen A/S + three subsidiaries (Chairman)K/S Købmagergade 59, st. (Deputy Chairman)Kommanditaktieselskabet Pakhus D+E + general partnerKommanditaktieselskabet Danlink-Udvikling + general partnerAmerikakaj I/SEjendomsselskabet Klampenborgvej I/SStep RE CSP A/SPalma Ejendomme A/S

Member of the executive board of: Frede Clausen Holding ApS

Robert Andersen, direktør

Born 3 April 1965Executive Vice President of TK Development since 2002

Member of the supervisory boards of:Udviklingsselskabet Nordkranen A/S + three subsidiariesKommanditaktieselskabet DLU nr. 1 + general partnerKommanditaktieselskabet Pakhus D + E + general partnerKommanditaktieselskabet Danlink-Udvikling +general partnerKommanditaktieselskabet Østre Havn + general partnerByggesocietetet, Aalborg branch Euro Mall Poland Holding A/SRingsted Outlet Center P/S + general partner

Member of the executive board of: Ringsted Outlet Center P/S + general partnerPalma Ejendomme A/S



Statement by the Executive Board and Supervisory Board

Aalborg 25 April 2007

Executive Board

Supervisory Board

Frede Clausen Robert Andersen

Poul Lauritsen Torsten Erik Rasmussen

Kurt Daell Per Søndergaard Pedersen

Jesper Jarlbæk

Statement by the Executive Board and Supervisory Board

The Supervisory Board and Executive Board have today con-

sidered and adopted the 2006/07 Annual Report of TK De-

velopment A/S. The Annual Report is presented in compliance

with the International Financial Reporting Standards (IFRS),

as approved by the EU, and additional Danish disclosure re-

quirements regarding annual reports for listed companies. We

consider the accounting policies applied to be appropriate,

and, in our opinion, the Annual Report gives a true and fair

view of the Group’s assets, liabilities, equity and financial po-

sition at 31 January 2007 and of the results of the Group’s

operations and cash flows for the 2006/07 financial year.

Independent Auditors’ Report


Independent auditors’ report

Independent Auditors’ Report

Independent auditors’ report

To the shareholders of TK Development A/S

We have audited the annual report of TK Development A/S for the financial year 1 February 2006 to 31 January 2007, which comprises the statement by Management on the an-nual report, Management’s review, income statement, balance sheet, statement of changes in equity, cash flow statement and notes, including the accounting policies, for the Group as well as the Parent. The annual report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure re-quirements for listed companies.

Management’s responsibility for the annual report

Management is responsible for the preparation and fair pre-sentation of an annual report in accordance with International Financial Reporting Standards as adopted by the EU and ad-ditional Danish disclosure requirements for listed companies. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of an annual report that is free from ma-terial misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making ac-counting estimates that are reasonable in the circumstances.

Auditor’s responsibility and basis of opinion

Our responsibility is to express an opinion on this annual re-port based on our audit. We conducted our audit in accor-dance with Danish and International Standards on Auditing. Those Standards require that we comply with ethical require-ments and plan and perform the audit to obtain reasonable

assurance whether the annual report is free from material mis-statement.

An audit involves performing procedures to obtain audit evi-dence about the amounts and disclosures in the annual report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the annual report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of an annual report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s inter-nal control. An audit also includes evaluating the appropria-teness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evalua-ting the overall presentation of the annual report.

We believe that the audit evidence we have obtained is suf-ficient and appropriate to provide a basis for our audit opi-nion.

Our audit has not resulted in any qualification.

Opinion

In our opinion, the annual report gives a true and fair view of the Group’s and the Parent’s financial position at 31 January 2007, and of their financial performance and their cash flows for the financial year 1 February 2006 to 31 January 2007 in accordance with International Financial Reporting Standards as adopted by the EU and additional Danish disclosure re-quirements for listed companies.

Copenhagen, 25 April 2007

DELOITTE

Statsautoriseret Revisionsaktieselskab

Lars Andersen Jesper Jørgensen

State-authorized public accountant State-authorized public accountant

Aalborg, 25 April 2007

NIELSEN & CHRISTENSEN

Statsautoriseret Revisionspartnerselskab

Marian Fruergaard Per Laursen

State-authorized public accountant State-authorized public accountant


Accounting policies

Accounting policies

TK Development A/S presents its Annual Report for 2006/07,

including financial statements for the Parent Company and

for the Group, in compliance with the International Financial

Reporting Standards (IFRS), as approved by the EU, and in

accordance with Danish disclosure requirements for annual

reports prepared by listed companies; see the requirements

made by the Copenhagen Stock Exchange as to the financial

reporting by listed companies and the Executive Order on

IFRS issued in pursuance of the Danish Financial Statements

Act.

The Annual Report also complies with the International Fi-

nancial Reporting Standards (IFRS) issued by IASB.

All figures in the Financial Statements are presented in DKK

million, unless otherwise stated.

Implementation of new and amended financial reporting standards and interpretations issued by IFRIC

Changed accounting policies

The 2006/07 Annual Report has been presented in accordan-

ce with the new and amended financial reporting standards

(IFRS/IAS) and new IFRIC interpretations applicable for fi-

nancial years beginning at 1 February 2006 or later. The im-

plementation of new and amended financial reporting stan-

dards and interpretations into the Annual Report for 2006/07

has resulted in changes to the accounting policies as regards

the accounting treatment of foreign-exchange adjustments of

intercompany accounts with foreign subsidiaries.

With effect for financial years beginning on 1 January 2006

or later, IAS 21 has been amended such that foreign-exchange

adjustments of intercompany accounts with foreign subsidia-

ries that are considered additions to/deductions from the net

investment are posted directly to equity, regardless of whether

the account is denominated in the Parent Company’s or the

foreign subsidiary’s functional currency or not. According to

previous standards, foreign-exchange adjustments of inter-

company accounts with foreign subsidiaries could only be

posted directly to equity if the account was denominated in

the Parent Company’s or the foreign subsidiary’s functional

currency.

The monetary effect of the changed accounting policies is spe-

cified below:

Group(DKK million)

Equity at 1 Feb. 2005

Income statement

2005/06

Equity at 31 Jan.

2006

Income statement

2006/07

Equity at 31 Jan.

2007

Amount according to previous accounting policies 343.7 88.5 986.7 295.4 1,290.9

Foreign-exchange adjustments under financial income/expenses transferred to equity -1.0 -20.5 20.5 4.8 -4.8

Tax effect of this transfer 0.0 4.6 -4.6 -1.7 1.7

Change in results for the year 1.0 - -15.9 - 3.1

Amount according to changed accounting policies 343,7 72.6 986.7 298.5 1,290.9

Accounting policies


Accounting policies

The change has no effect on the Parent Company’s Annual

Report.

The effect of the change on earnings per share and diluted

earnings per share is shown in note 12.

Financial reporting standards and IFRIC interpretations not

yet in effect

The implementation of financial reporting standards and

IFRIC interpretations that have not yet entered into force is

not expected to materially affect the Annual Report for future

financial years, with the exception of the further disclosure

requirements for financial instruments and business segments

that follow from the implementation of IFRS 7 and IFRS 8.

Reference is also made to note 33 on page 108 in this present

Annual Report.

General comments on recognition and measu-rement

Assets are recognized in the balance sheet if it is probable that

future economic benefits will flow to the Group and the value

of the assets can be measured reliably. Liabilities are recogni-

zed in the balance sheet if they are probable and their value

can be measured reliably. Upon initial recognition, assets and

liabilities are measured at cost. Subsequently, assets and liabi-

lities are measured as appears from the following description

of the individual items.

On recognition and measurement, allowance is made for all

gains, losses and risks that arise before the Annual Report is

presented and which prove or disprove matters arising on or

before the balance sheet date.

Income is recognized in the income statement as and when it

is earned and includes the recognition of value adjustments of

financial assets and liabilities, which are measured at fair value

or amortized cost. In addition, costs incurred to generate the

year’s earnings are recognized in the income statement, inclu-

ding depreciation, amortization, writedowns and provisions

as well as reversals of such items resulting from changed ac-

counting estimates.

Consolidated financial statements

The consolidated financial statements comprise the Parent

Company, TK Development A/S, and the enterprises control-

led by the Parent Company. The Parent Company is conside-

red to exercise control when it holds more than 50 % of the

voting rights, whether directly or indirectly, or otherwise has

a controlling interest.

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

considered associates. Enterprises that are controlled jointly

with other investors are considered joint ventures.

In preparing the consolidated financial statements, the finan-

cial statements of the Parent Company and subsidiaries are

combined on a line by line basis by adding together like items

of assets and liabilities, income and expenses. The financial

statements on which the consolidated financial statements are

based are presented in accordance with the accounting poli-

cies applied by the Group. Intercompany balances, income

and expenses as well as unrealized profits resulting from inter-

company transactions are eliminated. The consolidated finan-

cial statements include subsidiaries and associates throughout

the period of ownership. Comparative figures are not adjusted

for newly acquired, sold or wound-up enterprises.

Business combinations

Upon the acquisition of subsidiaries, the purchase method is

used, which means that the difference between the cost of the

Accounting policies


enterprise and the fair value of identifiable assets, liabilities and

contingent liabilities in the acquired enterprise is calculated at

the acquisition date. Restructuring provisions regarding the

acquired enterprise are only recognized in the transfer balance

sheet if they constitute a liability for the enterprise acquired.

The tax effect of revaluations made is taken into account. Po-

sitive balances are recognized as goodwill in the balance sheet

under intangible assets, and the goodwill amount is subjected

to impairment tests on a continuing basis.

For business combinations effected before 1 February 2004,

the accounting classification according to the previous ac-

counting policies has been retained. Thus, goodwill deriving

from such business combinations is recognized on the basis

of the cost recognized according to the previous accounting

policies (the Danish Financial Statements Act and Danish

accounting standards), net of amortization and writedowns

until 31 January 2004. Goodwill recognized in the opening

balance sheet was tested for impairment at 1 February 2004

and continues to be subjected to impairment tests on an on-

going basis.

Gains or losses on the sale or winding-up of subsidiaries are

determined as the difference between the selling price or the

disposal sum and the carrying amount of the net assets at the

date of sale or winding-up, including goodwill, accumulated

foreign-exchange adjustments posted directly to equity and

the expected costs of the sale or winding-up. The selling price

is measured at the fair value of the consideration received.

Minority interests

The minority interests’ share of results and of equity is inclu-

ded in the consolidated results for the year and as a separate

item under equity, respectively.

Associates/joint ventures in the consolidated fi-

nancial statements

In the consolidated financial statements, associates are recog-

nized and measured according to the equity method, which

means that investments are measured at the proportionate

share of the associates’ carrying amount, determined accor-

ding the Group’s accounting policies, with the addition of

goodwill and plus or less proportionate intercompany profits

or losses.

The proportionate share of the associate’s results after tax and

the proportionate elimination of unrealized intercompany

profits and losses are recognized in the income statement. The

proportionate share of all transactions and events recognized

directly in the associate’s equity is recognized in consolidated

equity. Investments in associates with a negative equity value

are measured at DKK 0. Receivables and other long-term fi-

nancial assets considered to be part of the overall investment

in the associate are written down by any remaining negative

equity value. Trade receivables and other receivables are writ-

ten down only to the extent that they are considered uncol-

lectible. A provision for the remaining negative equity value is

only recognized if the Group has a legal or constructive obli-

gation to meet the relevant associate’s liabilities.

Associates whose activities comprise projects within the

Group’s primary sphere of activity, i.e. development and

contract work, and which are managed together with other

investors (joint ventures), are included in the consolidated fi-

nancial statements by pro rata consolidation of the associates’

accounting items, so that a proportionate share, equal to the

participation in the associates, is included in the correspon-

ding items in the consolidated financial statements.

Translation of foreign-currency items

A functional currency is determined for each of the reporting

Accounting policies Accounting policies


Accounting policies

enterprises in the Group. The functional currency is the cur-

rency used in the primary economic environment in which

the independent reporting enterprise operates. Transactions in

currencies other than the functional currency are considered

foreign-currency transactions. On initial recognition, transac-

tions in foreign currencies are translated into the functional

currency at the exchange rate ruling at the date of the transac-

tion. Exchange differences arising between the exchange rate

on the transaction date and the exchange rate on the payment

date are recognized in the income statement under financial

items.

Receivables, liabilities other than provisions and other mone-

tary items in foreign currencies that have not been settled by

the balance sheet date are translated according the exchange

rates ruling at the balance sheet date. Realized and unrealized

foreign-exchange gains and losses are recognized in the in-

come statement as financial items. Property, plant and equip-

ment, intangible assets, projects in progress or completed and

other non-monetary assets that have been bought in foreign

currencies and are measured on the basis of historical cost are

translated at the exchange rate ruling on the transaction date.

Non-monetary items that are revalued at fair value are trans-

lated at the exchange rate ruling on the date of revaluation.

When enterprises that present financial statements in a func-

tional currency other than Danish kroner (DKK) are recog-

nized in the consolidated financial statements, items in the

income statement are translated on the basis of the average

exchange rates for the period under review, and items in the

balance sheet (including goodwill) are translated on the basis

of the exchange rates ruling at the balance sheet date. If the

average exchange rates for the period under review deviate sig-

nificantly from the actual exchange rates at the transaction

dates, the actual exchange rates are used instead. Exchange

differences arising on translating foreign enterprises’ equity at

the beginning of the year at the exchange rate ruling at the

balance sheet date and on translating the income statement

items at the average exchange rates for the period under review

are recognized directly in equity under a special reserve for

foreign-exchange adjustments. Exchange differences arising as

a result of changes recognized directly in the equity of the

foreign reporting enterprise are also posted to equity. Foreign-

exchange adjustments of intercompany accounts with foreign

subsidiaries that are considered additions to/deductions from

the net investment are posted directly to equity under a spe-

cial reserve for foreign-exchange adjustments.

When associates/joint ventures that present financial state-

ments in a functional currency other than DKK are recog-

nized in the consolidated financial statements, items in the

income statement are translated on the basis of the average

exchange rates for the period under review, and items in the

balance sheet are translated on the basis of the exchange rates

ruling at the balance sheet date. Exchange differences arising

on translating foreign enterprises’ equity at the beginning of

the year at the exchange rate ruling at the balance sheet date

and on translating the income statement items at the average

exchange rates for the period under review are recognized di-

rectly in equity under a special reserve for foreign-exchange

adjustments. Exchange differences arising as a result of chan-

ges recognized directly in the equity of the foreign reporting

enterprise are also posted to equity.

In connection with the Group’s transition to the presenta-

tion of financial statements according to IFRS, accumulated

foreign-exchange differences on the translation of foreign sub-

sidiaries posted to equity were reset to zero in the opening

balance sheet at 1 February 2004, such that only exchange

differences arising after 1 February 2004 appear from the item

“Reserve for foreign-exchange adjustments” under equity.

Accounting policies


Derivative financial instruments

The Group regularly enters into derivatives contracts as a

means of hedging business transactions in foreign currencies.

On initial recognition, derivative financial instruments are

measured at fair value at the settlement date and subsequently

at fair value at the balance sheet date. Derivative financial in-

struments are recognized under other receivables and other

debt.

Changes in the fair value of derivative financial instruments

that are classified as and meet the conditions for the hedging

of the fair value of a recognized asset or liability are recognized

in the income statement together with changes in the value of

the hedged asset or liability.


that are classified as and meet the conditions for effective hed-

ging of future transactions are recognized directly in equity.

When the hedged transactions are realized, the accumulated

changes are recognized as part of the cost of the relevant

transactions.


that are used to hedge net investments in foreign subsidiaries

are recognized directly in equity to the extent that the hedging

is effective. When the relevant foreign enterprise is sold, the

accumulated changes in value are transferred to the income

statement.

As regards derivative financial instruments that do not meet

the conditions for treatment as hedging instruments, changes

in the fair value are recognized as financial items in the in-

come statement on a continuing basis.

Share-based incentive scheme

The Group’s incentive scheme is an equity-based warrants

scheme. The equity-based incentive scheme is measured at the

fair value of the options at the time of allocation and is recog-

nized in the income statement under staff costs over the pe-

riod when the relevant employees gain final ownership of the

options. The offsetting amount is taken directly to equity.

In connection with initial recognition of the share options,

an estimate is made of the number of options to which the

employees are expected to become entitled. Subsequently, ad-

justments are made to reflect changes in the estimated number

of vested options, such that the overall recognition is based on

the actual number of vested options.

The fair value of the options allocated is estimated by using

the Black-Scholes formula.

Income statement

Net revenue

The completed contract method is used to recognize income

on projects sold; see IAS 18, Revenue. Thus, profits on sold

projects are recognized once construction has been completed

and all essential elements of the sales agreement fulfilled.

Where the Group is in charge of development, letting and

construction management, etc. on behalf of investors and re-

ceives fee income for such services, the fee income is recogni-

zed as income on a continuous basis in step with the provision

of services.

Where a sold project consists of several instalment deliveries

that can be segregated and the financial effect can be assessed

separately, the profit on the individual instalment delivery is

recognized when all essential elements of the agreement have

been fulfilled.

Rental income on completed projects and investment proper-

ties is accrued and recognized in accordance with the lease



Accounting policies

agreements concluded.

For other income, the completed contract method is used.

External direct project costs

This item consists of all costs relating to projects incurred to

generate the year’s revenue and includes direct project costs, as

well as interest during the construction period, plus a share of

the indirect project costs, determined as a percentage of staff

costs, project materials, cost of premises and maintenance and

depreciation resulting from the project development activity

and proportionately attributable to the project development

capacity utilized.

Moreover, this item includes any writedowns of projects in

progress or completed and the expensing of project develop-

ment costs to the extent that the relevant projects are not ex-

pected to be realized.

Value adjustment of investment properties, etc.

Changes in the fair values of investment properties and as-

sociated derivative financial instruments are recognized in the

income statement under the item “Value adjustment of inve-

stment properties, net”.

Realized gains and losses on the sale of investment properties

are determined as the difference between the carrying amount

and the selling price and are also recognized in the income

statement under the item ”Value adjustment of investment

properties, net”.

Other external expenses

The item ”Other external expenses” includes costs for admini-

stration, cost of premises and operating expenses for cars.

Income from investments in associates in the consolidated

financial statements

The proportionate share of the associates’ results after tax and

the proportionate elimination of unrealized intercompany

profits and losses are recognized in the consolidated income

statement.

Dividend on investments in subsidiaries and associates in

the Parent Company’s financial statements

Dividend on investments in subsidiaries and associates is re-

cognized in the Parent Company’s income statement under

financial income in the financial year in which the dividend is

declared. To the extent that distributed dividend exceeds the

accumulated earnings after the acquisition date, the dividend

is not recognized in the income statement, however, but re-

cognized as a writedown on the cost of the investment.

Financial income and expenses

Financial income and expenses include interest income and

expenses, gains and losses on foreign-currency transactions,

debt and securities as well as the amortization of liabilities

other than provisions, and derivative financial instruments

relating to investment properties. In addition, any dividends

on investments in subsidiaries and associates, see above, are

included in the Parent Company’s income statement under

financial income.

Tax on net profit or loss for the year

The tax for the year, which consists of the year’s current tax

and changes in deferred tax, is recognized in the income state-

ment as follows: the portion attributable to the profit or loss

for the year is recognized in the income statement, and the

portion attributable to items under equity is posted directly

to equity.

Deferred tax is calculated on the basis of all timing differences

between carrying amounts and tax values, based on the plan-

ned use of the individual assets and liabilities. Deferred tax as-

sets, including the tax value of tax losses allowed for carryfor-

ward, are recognized in the balance sheet at the value at which

Accounting policies


the asset is expected to be realized, either by setoff against de-

ferred tax liabilities or as net tax assets for setoff against future

positive taxable income within the same legal tax entity. At

each balance sheet date, it is reconsidered whether it is likely

that sufficient future taxable income will be generated to uti-

lize the deferred tax asset, based on an individual and specific

assessment and taking into account existing budgets and pro-

fit forecasts for a five-year period. If it is considered that an

individual tax asset cannot be utilized, it is written down in

the income statement.

Deferred tax is measured according to the tax rules and tax

rates that will be applicable in the respective countries at the

time when the deferred tax is expected to become payable,

based on the legislation in force at the balance sheet date. Any

changes in deferred tax resulting from changed tax rates are

recognized in the income statement.

The Parent Company is taxed on a pooled basis with all

Danish subsidiaries. The total income taxes payable by the

companies subject to group pooling are distributed between

the Danish companies taxed on a pooled basis on the basis of

their taxable income.

Balance sheet

Goodwill

The carrying amount of goodwill is allocated to the Group’s

cash-flow-generating units at the date of acquisition. Cash-

flow-generating units are defined on the basis of the manage-

ment structure and internal financial control and reporting

in the Group.

Goodwill is not amortized. The amount of goodwill is sub-

jected to impairment tests on a continuous basis to ensure

that the asset is written down to the extent that the carrying

amount exceeds the recoverable amount. The recoverable

amount is determined as the higher of the fair value less selling

costs and the present value of estimated future net cash flows

from the cash-flow-generating unit to which the goodwill re-

lates. Writedowns of goodwill are recognized in a separate line

in the income statement.


Investment properties are properties that are held to obtain

rental income and/or capital gains. On initial recognition,

Investment properties are measured at cost, consisting of the

acquisition cost of the property and any directly associated

costs. Subsequently, investment properties are measured at

fair value. The valuation is made on the basis of a discounted

cash-flow model, where future cash flows are discounted to

net present value on the basis of a given rate of return. The rate

of return is determined for each individual property. Changes

in the fair value are recognized in the income statement under

“Value adjustment of investment properties, net” in the finan-

cial year in which the change occurs.

Positive value adjustments of investment properties net of de-

ferred tax are carried to the “Reserve for adjustment to fair

value” under equity. On the sale of investment properties, this

reserve is reduced by the accumulated amount of value adjust-

ments recognized in respect of the sold investment property.

Other fixtures and fittings, tools and equipment

Other fixtures and fittings, tools and equipment are measured

at cost less accumulated depreciation and writedowns. The

cost consists of the acquisition cost and costs directly asso-

ciated with the acquisition until the date when the asset is

ready for use.

These assets are depreciated according to the straight-line

method over their expected useful lives, viz. a period of 5-10

years. Leasehold improvements are amortized according to the

straight-line method over the term of the lease.



Accounting policies

Investments in subsidiaries and associates in the Parent

Company’s financial statements

The Parent Company’s investments in subsidiaries and asso-

ciates are measured at cost. If the cost exceeds the recoverable

amount, it is written down to the lower value. Moreover, the

cost is written down to the extent that the dividend distri-

buted exceeds total earnings from the subsidiary or associate

since its acquisition.

Other long-term assets

Other securities and investments consist of mortgage deeds

and instruments of indebtedness created in connection with

project sales and are measured at amortized cost.

Projects in progress or completed

Project in progress or completed consist of real property pro-

jects.

The project portfolio is recognized on the basis of the direct

costs attributable to the projects, including interest during the

project period, plus a share of the indirect project costs. Whe-

re considered necessary, the projects have been written down

to a lower value, and the capitalized amounts are subjected to

impairment tests on a continuous basis to ensure that the as-

sets are written down to the extent that the carrying amount

exceeds the recoverable amount.

Additions for indirect project costs are calculated as a percen-

tage of staff costs, project materials, the cost and maintenance

of premises and depreciation resulting from project develop-

ment and proportionately attributable to the project develop-

ment capacity utilized.

Prepayments from customers on sold projects in progress

(forward funding) are deducted from the carrying amount of

the project portfolio, and any negative net amount, determi-

ned for each individual project, is included in the item “Pre-

payments received from customers”.

Receivables

Receivables are measured at amortized cost, usually equal to

the nominal value, or at the net realizable value where this is

lower. Writedowns in respect of losses are calculated on the

basis of an assessment of the individual receivables.

Financial assets and liabilities are charged against the balance

sheet if the Company has a right of setoff and at the same time

intends or is under a contractual obligation to realize assets

and liabilities simultaneously.

Prepayments, recognized under assets, consist of paid expenses

relating to subsequent financial years. Prepayments are measu-

red at cost in the balance sheet.

Securities

Securities under short-term assets consist of listed and unlisted

shares available for sale as well as mortgage deeds with a term

to maturity of less than one year. Securities available for sale

are measured at cost on initial recognition and subsequently

at fair value. Fair-value adjustments are recognized directly in

equity and are recognized in the income statement on the sale

or settlement of the securities. Listed securities are measured

at their official listed price, and unlisted securities are mea-

sured at their fair value, based on the calculated value in use.

Equity interests that are not traded in an active market, and

where the fair value cannot be determined with a sufficient

degree of reliability, are measured at cost. Mortgage deeds are

measured at amortized cost.

Equity

Dividend is recognized as a liability at the time of its adop-

tion at the Annual General Meeting. Dividend expected to be

paid for the financial year is shown as a separate item under

Accounting policies


equity.

The acquisition of treasury shares is recognized at cost and in-

cluded in retained earnings under equity. If treasury shares are

sold, the pertinent consideration received is recognized direct-

ly in equity. A capital reduction effected by the cancellation

of treasury shares will reduce the share capital and increase

retained earnings. Dividend on treasury shares is recognized

directly in equity under retained earnings.

Reserve for adjustment to fair value

The reserve for the adjustment of investment assets to fair va-

lue is determined as the net revaluation of investment proper-

ties after providing for any deferred tax. The reserve is reduced

or eliminated if the revalued assets are disposed of or no longer

form part of the operating assets, are adjusted to a lower fair

value, are adjusted due to changed tax liabilities or are reversed

on account of changed accounting estimates.

Provisions

Provisions are recognized when a legal or constructive obli-

gation is incurred due to events before or at the balance sheet

date, and meeting the obligation is likely to result in an out-

flow of economic benefits.

This item includes:

Provisions for rent guarantees. These provisions are ba-

sed on experience with rent guarantees and on a specific

assessment of the individual leases. The amount of the

provision is carried to income over the term of the gua-

rantees.

Negative equity of associates, etc. to the extent that the

Group has a legal or constructive obligation to meet the

relevant associate’s liabilities.

Provisions to meet contingent liabilities pertaining to

finished projects are based on experience with previous,

•

•

•

corresponding projects.

Provisions are measured as the best estimate of the costs re-

quired to settle the relevant liabilities at the balance sheet.

Provisions for liabilities with an expected term to maturity of

more than one year are classified as long-term liabilities.

Liabilities other than provisions

Long-term liabilities other than provisions are measured at

cost at the time the relevant loans are raised, equivalent to the

proceeds received after transaction costs. Subsequently, liabi-

lities other than provisions are measured at amortized cost,

such that the difference between the proceeds and nominal

value is recognized as an interest expense in the income state-

ment over the term of the loan.

Other liabilities are recognized at amortized cost, which usu-

ally corresponds to the nominal value.

Lease payments on operating leases are recognized in the in-

come statement over the term of the lease, using the straight-

line method.

Deferred income, recognized under liabilities, consists of in-

come received that relates to subsequent financial years. De-

ferred income is measured at cost in the balance sheet.

Cash flow statement

The cash flow statement for the Parent Company and for the

Group is presented according to the indirect method, based on

the results of ordinary activities before financing, and shows

cash flows generated from operating, investing and financing

activities, as well as cash and cash equivalents at the beginning

and end of the financial year.

Cash flows from operating activities are calculated as the ope-



Accounting policies

rating profit or loss, adjusted for non-cash operating items and

changes in the working capital, less the corporate income tax

paid during the financial year. Cash flows for investing activi-

ties comprise payments made in connection with the purchase

and sale of enterprises, property, plant and equipment and

other long-term assets. Cash flows from financing activities

consist of changes in the Parent Company’s share capital and

associated costs, the raising and repayment of loans, other re-

payments on long-term financing as well as the payment of

dividend.

In preparing the consolidated cash flow statement, opening

balance sheets and cash flows in foreign currencies are trans-

lated on the basis of the foreign-exchange rates ruling at the

balance sheet date. This eliminates the effect of exchange dif-

ferences 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 state-

ments.

Cash and cash equivalents comprise free liquid reserves and

amounts deposited in escrow accounts.

Segment information

Segment information is shown by geographical market (pri-

mary segment) and by business segment (secondary segment).

The segment information complies with the Group’s ac-

counting policies and internal financial control.

Segment income and expenses and segment assets and liabi-

lities comprise the items directly allocable to the individual

segment, as well as the items that can be allocated to the in-

dividual segments on a reliable basis. The unallocated items

relate mainly to assets and liabilities as well as income and

expenses associated with the Group’s administrative functions,

corporate income tax, and the like.

Long-term assets in the segments comprise the assets used di-

rectly in the operation of the segments, including intangible

assets, property, plant and equipment and investments in as-

sociates and group enterprises.

Short-term assets in the segments comprise the assets directly

allocable to the operating activities in the segment, including

project portfolios, trade receivables, other receivables, pre-

payments, cash and cash equivalents.

Liabilities in the segments comprise the liabilities allocable

to the operating activities in the segment, including trade

payables, payables to credit institutions, subordinated bond

loan, other debt and the like.

Accounting policies


Ratiodefinitions

Return on equity:Results for analytical purposes x 100

Average equity excluding minority interests

Profit margin: Profit/loss from operating activities x 100

Net revenue

Solvency ratio (based on equity):Equity including minority interests x 100

Total equity and liabilities

Solvency ratio (based on total capital resources):Equity including minority interests and plus subordinated loans x 100

Total equity and liabilities

Equity value:Equity excluding minority interests x 100

Number of shares

Earnings per share: Results attributable to the Parent Company’s shareholders

Average number of shares in circulation

Diluted earnings per share:Diluted results attributable to the Parent Company’s shareholders

Diluted average number of shares in circulation, including the average dilutive effect of

outstanding share options

Dividend per share: The Parent Company’s dividend per share

Accounting policies


Accounting policies Income statement for the TK Development Group for 2006/07

Consolidated Financial State-ments

All amounts in DKKm Note 2006/07 2005/06

Net revenue 3 2,719.1 1,623.3External direct project costs -2,206.2 -1,401.4Value adjustment of investment properties, net 14 111.0 157.1

Gross profit/loss 623.9 379.0

Other external expenses 4 -47.7 -53.4Staff costs 5 -102.2 -90.7

Total -149.9 -144.1

Profit/loss from ordinary activities before financing, depreciation and amortization 474.0 234.9

Depreciation, amortization and writedowns of long-term assets -11.5 -10.0

Profit/loss from ordinary activities before financing 462.5 224.9

Income from investments in associates 7 -0.5 -2.6Financial income 9 86.6 92.6Financial expenses 10 -212.9 -270.3

Total -126.8 -180.3

Profit/loss before tax 335.7 44.6

Tax on profit/loss for the year 11 -37.2 28.0

Profit/loss for the year 298.5 72.6

Allocated as followsShareholders of TK Development A/S 249.4 28.3Minority interests 49.1 44.3Profit/loss for the year 298.5 72.6

Earnings per share in DKKEarnings per share (EPS) of nom. DKK 20 12 8.9 2.0Diluted earnings per share (EPS-D) of nom. DKK 20 12 8.9 2.0


Balance sheet for the TK Development Group at 31 January 2007

All amounts in DKKm Note 1/31/2007 1/31/2006

ASSETSLong-term assets

Goodwill 13 29.1 29.1Intangible assets 29.1 29.1

Investment properties 14 533.7 761.6Other fixtures and fittings, tools and equipment 15 18.0 25.6Property, plant and equipment 551.7 787.2

Investments in associates 7 26.9 25.5Other securities and investments 16 31.1 53.4Deferred tax assets 17 291.0 269.3Other long-term assets 349.0 348.2

Total long-term assets 929.8 1,164.5

Short-term assets

Projects in progress or completed 18 1,491.1 2,260.4

Trade receivables 19 401.4 594.8Receivables from associates 1.0 101.7Other receivables 231.5 241.1Prepayments 8.3 8.7Total receivables 642.2 946.3

Securities 20 21.6 4.1Cash and cash equivalents 21 601.1 363.8Total short-term assets 2,756.0 3,574.6

ASSETS 3,685.8 4,739.1


Balance sheet for the TK Development Group at 31 January 2007


EQUITY AND LIABILITIESEquityShare capital 22 560.9 560.9Reserve for adjustment to fair value 133.5 165.5Reserve for foreign-exchange adjustments 23.6 21.9Retained earnings 435.7 150.8Shareholders' share of equity 1,153.7 899.1

Minority interests 137.2 87.6

Total equity 1,290.9 986.7

Short- and long-term liabilities

Subordinated loan capital 23 0.0 12.4Credit institutions 24 279.6 457.4Provisions 25 50.9 38.3Instrument of indebtedness 0.0 3.1Deferred tax liabilities 27 59.9 38.6Total long-term liabilities 390.4 549.8

Subordinated bond loan 23 0.0 494.4Credit institutions 24 1,500.3 2,133.6Trade payables 269.6 277.9Prepayments received from customers 41.7 35.5Corporate income tax 41.6 36.5Provisions 25 17.8 25.1Other debt 28 129.6 190.0Deferred income 3.9 9.6Total short-term liabilities 2,004.5 3,202.6

Total short- and long-term liabilities 2,394.9 3,752.4

EQUITY AND LIABILITIES 3,685.8 4,739.1


Statement of changes in equity for the TK Development Group for 2006/07

All amounts in DKKm Share capital

Reserve for fair-value

adjustment

Reserve for foreign-exchange

adjustments

Retained earnings Total Minority

interestsTotal

equity

Equity at 1 February 2005 280.4 8.4 3.6 18.4 310.8 32.9 343.7Effect of changed accounting policies, IAS 21 0.0 0.0 -1.0 1.0 0.0 0.0 0.0Equity at 1 February 2005 after changes to accounting policies 280.4 8.4 2.6 19.4 310.8 32.9 343.7

Profit/loss for the year 0.0 157.1 0.0 -128.8 28.3 44.3 72.6Foreign-exchange adjustment, foreign operations 0.0 0.0 24.7 0.0 24.7 9.4 34.1Deferred tax on changes in equity for the year 0.0 0.0 -5.4 0.0 -5.4 -1.7 -7.1Total income 0.0 157.1 19.3 -128.8 47.6 52.0 99.6

Share-based remuneration (warrants) 0.0 0.0 0.0 0.2 0.2 0.0 0.2Capital increase 280.5 0.0 0.0 280.4 560.9 2.7 563.6Costs of capital increase 0.0 0.0 0.0 -20.8 -20.8 0.0 -20.8Sale of subscription rights in connection with capital increase 0.0 0.0 0.0 0.4 0.4 0.0 0.4

Changes in equity 2005/06 280.5 157.1 19.3 131.4 588.3 54.7 643.0

Equity at 31 January 2006 560.9 165.5 21.9 150.8 899.1 87.6 986.7

Profit/loss for the year 0.0 111.0 0.0 138.4 249.4 49.1 298.5Disposals relating to sale of property 0.0 -143.0 0.0 143.0 0.0 0.0 0.0Foreign-exchange adjustment, foreign operations 0.0 0.0 0.2 0.0 0.2 0.4 0.6Deferred tax on changes in equity for the year 0.0 0.0 1.5 0.0 1.5 0.0 1.5Total income 0.0 -32.0 1.7 281.4 251.1 49.5 300.6

Share-based remuneration (warrants) 0.0 0.0 0.0 1.9 1.9 0.1 2.0Sale of treasury shares 0.0 0.0 0.0 1.6 1.6 0.0 1.6

Changes in equity 2006/07 0.0 -32.0 1.7 284.9 254.6 49.6 304.2

Equity at 31 January 2007 560.9 133.5 23.6 435.7 1,153.7 137.2 1,290.9


Cash flow statement for the TK Development Group for 2006/07

All amounts in DKKm 2006/07 2005/06

Profit/loss before financing 462.5 224.9Adjustments for non-cash items Value adjustments, investment properties -111.0 -157.1 Depreciation and amortization 11.2 8.2 Provisions 3.8 9.9 Market-value adjustments 3.8 -26.0Increase/decrease in investments in projects, etc. 786.5 570.4Increase/decrease in receivables 302.4 157.8Increase/decrease in payables and other debt -29.2 -38.5

Cash flows from operating activities before net financials and tax 1,430.0 749.5

Interest paid, etc. -231.9 -271.4Interest received, etc. 50.6 58.4Corporate income tax paid -28.8 -30.3

Cash flows from operating activities 1,219.9 506.1

Investments in property, plant and equipment -3.0 -4.4Investments in investment properties 338.5 -4.8Purchase of securities and investments -2.4 -17.4Sale of own subscription rights 0.0 0.4

Cash flows from investing activities 333.1 -26.2

Repayments, subordinated loan capital -506.8 -272.0Repayments, long-term financing -212.2 -21.8Raising of long-term financing 31.3 0.0Raising of project financing 487.7 412.7Reduction of project financing/repayments, credit institutions -1,117.6 -1,315.7Capital increase 0.0 560.9Costs of share issue 0.0 -20.8Sale of treasury shares 1.6 0.0

Cash flows from financing activities -1,316.0 -656.8

Cash flows for the year 237.0 -176.9Cash and cash equivalents, beginning of year 363.8 533.7Market-value adjustment of cash and cash equivalents 0.3 7.0Cash and cash equivalents at year-end 601.1 363.8

Cash and cash equivalents include temporary deposits related to the sale of the Group's projects, as well as other cash and cash equivalents to which the Group does not have a full right of disposal, a total of DKK 454.0 million.

The figures in the cash flow statement cannot be inferred from the consolidated financial statements alone.


Table of contents, notes - the Group

Note 1. Accounting estimates and assessments 90

Note 2. Segment information for the Group 91

Note 3. Net revenue 92

Note 4. Other external expenses 92

Note 5. Staff costs 93

Note 6. Fees payable to the auditors elected at the General Meeting 94

Note 7. Investments in associates 94

Note 8. Investments in joint ventures 95

Note 9. Financial income 95

Note 10. Financial expenses 95

Note 11. Corporate income tax 96

Note 12. Earnings per share 96

Note 13. Goodwill 97

Note 14. Investment properties 97

Note 15. Other fixtures and fittings, tools and equipment 99

Note 16. Other securities and investments 99

Note 17. Deferred tax asset 100

Note 18. Projects in progress or completed 100

Note 19. Trade receivables 101

Note 20. Securities 101

Note 21. Cash and cash equivalents 101

Note 22. Share capital 102

Note 23. Subordinated loan capital and subordinated bond loan 102

Note 24. Payables to credit institutions 103

Note 25. Provisions 104

Note 26. Operating leases 104

Note 27. Deferred tax liabilities 105

Note 28. Other debt 105

Note 29. Contingent assets and liabilities as well as security furnished 106

Note 30. Foreign-exchange, interest-rate and credit risks and the use of derivative financial instruments 107

Note 31. Transactions with related parties 108

Note 32. Post-balance sheet events 108

Note 33. New IFRS and IFRIC interpretations 108


The TK Development Group - Notes to the Annual Report for 2006/07

Note 1. Accounting estimates and assessments

Many account items cannot be measured with certainty, but only estimated. Such estimates consist of assessments based on the most recent information available at the time of presenting the financial statements. It may be necessary to change previous estimates based on changes in the assumptions underlying the estimate or based on supplementary information, additional experience or subsequent events.

In connection with the practical application of the accounting policies described, Management has made a number of significant accounting estimates and assessments that have materially affected this Annual Report:

Recognition of revenueAs stated in the accounting policies concerning sold projects that consist of several instalment deliveries which can be segregated and where the financial effect can be assessed separately, the profit on the individual instalment delivery is recognized when all essential elements of the agreement have been fulfilled. In this connection, Management assesses whether the individual instalment deliveries of a sold project can be segregated and valued separately.

Investment propertiesThe Group’s investment properties are measured at their fair value in the balance sheet. The valuation is made on the basis of a discounted cash-flow model, where expected future cash flows are discounted to net present value on the basis of a given rate of return. In the event of changes to the assumptions used, the value may be either higher or lower than the carrying amount at 31 January 2007.

Projects in progress or completedThe need for writing down projects in progress or completed is based on a specific assessment of each individual project, including existing project budgets and expectations for future development opportunities. If the actual course of a project deviates from the expected development, this may necessitate adjustments to the writedowns recognized.

Deferred tax assetsThe valuation has been based on the existing possibilities for carrying forward losses and for group pooling or group contributions. A change in the conditions for carrying forward losses and group pooling/group contributions could result in the value of the tax assets being either higher or lower than the carrying amount computed at 31 January 2007. Moreover, the valuation has been based on existing budgets and profit forecasts for a five-year period. The carrying amount of deferred tax assets totalled DKK 291.0 million at 31 January 2007.

GoodwillTo assess the need for amortizing the goodwill amounts recognized, the values in use of the cash-flow-generating units to which the goodwill amount is attributable must be calculated. Calculating the value in use assumes that an estimate of future expected cash flows in the individual cash-flow-generating unit has been made and that a reasonable discount rate has been determined. The goodwill amount recognized in the balance sheet has not been written down. The carrying amount of goodwill totalled DKK 29.1 million at 31 January 2007.

Reference is also made to the section “Risk issues” on page 58 in this present Annual Report.


All amounts in DKKm Northern Europe

Central Europe Unallocated Total

Note 2. Segment information for the Group

Primary segment 2006/07

Net revenue 1,953.8 765.3 0.0 2,719.1

Value adjustment of investment properties, net 1.3 109.7 0.0 111.0

Profit/loss, associates -1.0 0.5 0.0 -0.5

Profit/loss from ordinary activities before financing 156.9 305.6 0.0 462.5

Investments in associates 26.7 0.2 0.0 26.9

Segment assets 2,173.6 1,212.8 299.4 3,685.8

Segment liabilities 2,003.7 316.3 74.9 2,394.9

Capital expenditure 5.5 1.7 0.0 7.2

Depreciation and amortization 8.8 2.7 0.0 11.5

Other major non-cash costs 149.9 6.6 0.0 156.5

Primary segment 2005/06

Net revenue 931.6 691.7 0.0 1,623.3

Value adjustment of investment properties, net 2.1 155.0 0.0 157.1

Profit/loss, associates -2.6 0.0 0.0 -2.6

Profit/loss from ordinary activities before financing -39.9 264.8 0.0 224.9

Investments in associates 25.5 0.0 0.0 25.5

Segment assets 3,010.9 1,450.8 277.4 4,739.1

Segment liabilities 3,145.3 522.6 84.5 3,752.4

Capital expenditure 5.1 1.8 0.0 6.9

Depreciation and amortization 7.3 2.7 0.0 10.0

Other major non-cash costs 116.5 25.9 0.0 142.4




All amounts in DKKm

Note 2. Segment information for the Group (continued)

Retail Office Segment mix Unallocated Total

Secondary segment 2006/07

Net revenue 1,544.6 320.3 854.2 0.0 2,719.1

Segment assets 920.6 126.8 1,610.4 1,028.0 3,685.8

Capital expenditure 0.0 0.0 0.0 7.2 7.2

Secondary segment 2005/06

Net revenue 1,077.1 280.2 266.0 0.0 1,623.3

Segment assets 1,163.0 344.7 2,350.2 881.2 4,739.1

Capital expenditure 0.0 0.0 0.0 6.9 6.9

2006/07 2005/06

Note 3. Net revenue

Sale of projects and properties 2,610.0 1,484.7Rental income 73.0 96.3Sale of services 36.1 42.3

Total net revenue 2,719.1 1,623.3

Note 4. Other external expenses

Administrative expenses 33.5 35.7Cost of premises 10.5 14.4Cars, operating expenses 3.7 3.3

Other external expenses, total 47.7 53.4




Note 5. Staff costs

Fees for Supervisory Board 1.8 1.8Salaries, etc. for the Parent Company's Executive Board 8.1 6.3Retention bonus, the Executive Board 1.7 0.3Retention bonus, other employees 0.5 0.0Social security costs 8.3 7.2Costs of incentive scheme, the Executive Board 0.7 0.0Costs of incentive scheme, other employees 1.3 0.2Other salaries and staff costs 79.8 74.9

Total staff costs 102.2 90.7

Average number of employees 190 195

Number of employees at year-end 143 212

The Executive Board receives a retention bonus that is accrued over the term of the bonus agreement.

The share-based incentive schemes are described in more detail in the Management's review.

Share-based remuneration - incentive schemes

On 30 December 2005, the Supervisory Board issued warrants to the Executive Board and other executive staff for the subscription of 826,000 shares, each with a nominal value of DKK 20 Subsequently, 122,000 warrants have lapsed, leaving a total of 704,000 active warrants at the balance sheet date.

The above-mentioned warrants can be exercised in three six-week periods (windows) placed as follows:

following publication of the full-year profit announcement for the 2008/2009 financial year (from around 30 April 2009)following publication of the interim report for the six months ending 31 July 2009 (from around 30 September 2009)following publication of the full-year profit announcement for the 2009/10 financial year (from around 30 April 2010)

The allocation of warrants is subject to the relevant employees still being employed at the time of exercising the warrants.

The subscription price per share of nominally DKK 20, before any deduction for dividend, has been fixed at DKK 74.54 in the first exercise window, DKK 77.05 in the second window and DKK 80.63 in the third window.

Based on a share price of DKK 57.81 and a dividend of DKK 0 per share per year, the value of the options has been calculated at DKK 6.7 million, using the Black-Scholes formula. The amount. will be expensed currently over the period until May 2009. The calculation has been based on an expected future volatility of 30 % and an interest level of 3 %. In addition, it has been assumed that the options will be exercised in the intermediate exercise period.

Active warrants break down as follows: 240,000 to the Executive Board and 464,000 to other executive staff members.

•••




Note 6. Fees payable to the auditors elected at the General Meeting

Total fees, Deloitte 2.7 6.1Total fees, Nielsen & Christensen 2.6 3.7

Total fees 5.3 9.8

Fees break down as follows:

Audit services, Deloitte 1.6 2.6Audit services, Nielsen & Christensen 0.7 0.9Other services, including tax and VAT, Deloitte 1.1 3.5Other services, including tax and VAT, Nielsen & Christensen 1.9 2.8

Note 7. Investments in associates

Cost at 1 February 22.8 22.5Additions for the year 0.0 0.0Capital investments 0.6 0.3Disposals for the year 0.0 0.0

Cost at 31 January 23.4 22.8

Revaluations and writedowns at 1 February -3.2 -0.6Profit/loss for the year after tax -0.5 -2.6Writedowns 0.0 0.0Distribution 0.0 0.0

Revaluations and writedowns at 31 January -3.7 -3.2

Transferred for setoff against receivables/provisions 7.2 5.9

Carrying amount at 31 January 26.9 25.5

For an overview of associates measured in the consolidated balance sheet according to the equity method, please see the overview of group companies.

Financial disclosures for associates:

Revenue 17.7 2.6

Profit/loss for the year -2.9 -7.3

Assets 97.9 98.4

Liabilities 40.0 39.2

The Group's share of profits/losses for the year -0.5 -2.6

The Group's share of equity 21.5 21.5




Note 8. Investments in joint ventures

For an overview of the Group's investments in joint ventures, please see note 34, which also shows the accounting treatment of each individualcompany in the consolidated financial statements.

Revenue 187.3 76.7

Expenses -134.0 -22.3

Short-term assets 513.8 692.8

Long-term assets 132.9 145.9

Short-term liabilities 329.7 458.1

Long-term liabilities 117.2 118.0

Note 9. Financial income

Interest, cash, cash equivalents and securities etc. 12.1 8.8Interest income from associates 12.2 12.5Interest income from joint ventures 19.3 29.5Foreign-exchange gains 3.4 5.7Gain on sale of short term securities 0.4 0.0Capital gain on shares 0.4 0.5Other financial income 38.8 35.6

Total financial income 86.6 92.6

Note 10. Financial expenses

Interest expenses, credit institutions 111.1 133.7Interest expenses, associates 21.1 33.0Interest expenses, subordinated loans 79.0 92.4Foreign-exchange losses and capital losses on securities 6.8 9.2Other financial expenses 11.8 28.4Financing of projects in progress -16.9 -26.4

Total financial expenses 212.9 270.3

An interest rate of 6-8 % is used to capitalize interest on projects in progress




Note 11. Corporate income tax

Accrued corporate income tax 36.8 32.5Adjustment regarding accrued tax relating to prior years 0.3 0.0Change in deferred tax 0.1 -60.5

Tax on profit/loss for the year 37.2 -28.0

The tax on the profit/loss for the year results as follows:

Danish tax rate 94.0 12.5Difference in tax rate, foreign subsidiaries -1.8 -10.7Adjustment relating to prior years 0.3 -19.5Tax effect of:Non-taxable income -53.5 -46.6Change of tax rate 0.0 18.4Change in non-capitalized tax asset relating to:Losses in foreign subsidiaries 0.0 18.5Other -1.8 -0.6

Tax on profit/loss for the year 37.2 -28.0

Note 12. Earnings per share

Earnings per share (EPS) of nom. DKK 20 8.9 2.0Earnings per share (EPS) of nom. DKK 20 - previous accounting policies* 8.8 2.7

Diluted earnings per share (EPS-D) of nom. DKK 20 8.9 2.0Diluted earnings per share (EPS-D) of nom. DKK 20 - previous accounting policies* 8.8 2.7

Profit/loss for the year 298.5 72.6Share of consolidated profit/loss attributable to minority interests 49.1 44.3Shareholders' share of profit/loss for the year 249.4 28.3

Average number of shares of nom. DKK 20 number 28,043,810 14,216,654Average number of treasury shares of nom. DKK 20 number -5,596 -23,080Average number of shares in circulation number 28,038,214 14,193,574

The outstanding warrants do not have a dilutive effect, as the average market price of ordinary shares in the financial year did not exceed the subscription price in the first window.

This means that the outstanding warrants are "out-of-the-money" and therefore not included in the diluted average number of shares in circulation. In the longer term, the outstanding warrants may have an effect on earnings per share.

* Reference is made to the section about changed accounting policies in "Accounting policies" on page 73.



All amounts in DKKm 1/31/2007 1/31/2006

Note 13. Goodwill

Cost at 1 February 43.6 43.6Additions 0.0 0.0Disposals 0.0 0.0


Depreciation, amortization and writedowns at 1 February 14.5 14.5Writedowns for the year 0.0 0.0

Depreciation, amortization and writedowns at 31 January 14.5 14.5


Goodwill relates to the purchase of a business partner's activities in Central Europe.

At 31 January 2007, Management carried out an impairment test of the carrying amount of goodwill.

The recoverable amount is based on the value in use, determined by means of expected cash flows on the basis of budgets for the 2007/08 through 2009/10 financial years, approved by Management, and a discount rate fixed by Management.

The impairment test did not give rise to any writedowns.

Note 14. Investment properties

Cost at 1 February 596.1 590.3Foreign-exchange adjustments, beginning of year -0.3 1.0Costs of improvements 0.2 4.8Disposals -195.8 0.0


Revaluations at 1 February 232.2 77.2Revaluations for the year 109.7 155.0Revaluations reversed on disposals -143.0 0.0

Revaluations at 31 January 198.9 232.2

Writedowns at 1 February 66.7 68.8Revaluations reversed -1.3 -2.1

Writedowns at 31 January 65.4 66.7

Revaluations and writedowns at 31 January 133.5 165.5





Note 14. Investment properties (continued)

Broken down as follows:

Central European investment properties 304.2 533.1German investment properties 229.5 228.5

Total 533.7 761.6

Revaluations and writedowns, investment properties 133.5 165.5

Total value adjustments, investment properties, net 133.5 165.5

Rental income, investment properties 35.4 46.2Direct operating expenses, premises let -2.8 -7.4Direct operating expenses, unlet premises -0.5 -0.8

Net income from investment properties 32.1 38.0

Investment properties Location Ownership interest

Required return

Year acquired sq.m.

Futurum Shopping Centre, Ostrava Czech Rep. 20% 7,0% 2000 23,600Futurum Multifunctional Centre, Hradec Kralové Czech Rep. 20% 7,0% 2000 18,300Haná Shopping Centre, Olomouc Czech Rep. 20% 7,0% 2002 10,100Lüdenscheid/Berlin Germany 100% 6,0% 1994-1998 26,000

The three Czech investment properties are owned through a joint venture with GE Capital and Heitman, in which the Group has access to a performance-driven share of the value adjustments of some of the properties. This is included in the carrying amount at 31 January 2007.

The valuation of investment properties is based on a discounted cash-flow model where future cash flows are discounted to net present value on the basis of the above-mentioned rates of return. Moreover, reference is made to the more detailed description in the Management's review on page 38.

The services of an external valuer have not been used to value the Group's investment properties.

As part of the development of the overall area, an agreement has been made with GE/Heitman regarding a 3.000 sq.m. extension of Futurum Shopping Centre, Ostrava.The subsidiary of TK Development A/S, Euro Mall Holding A/S, will be in charge of developing and implementing the project. Construction is expected to start in spring 2007, and the opening is scheduled for end-2007.




Note 15. Other fixtures and fittings, tools and equipment

Cost at 1 February 61.7 64.8Market-value adjustment of purchase price, beginning of year 0.1 2.5Additions 7.2 6.9Disposals -7.7 -12.5


Depreciation and writedowns at 1 February 36.1 35.5Market-value adjustments of depreciation and writedowns, beginning of year -0.2 0.8Depreciation and writedowns for the year 10.9 7.9Depreciation and writedowns, assets disposed of -3.5 -8.1

Depreciation and writedowns at 31 January 43.3 36.1


Other fixtures and fittings, tools and equipment are depreciated over a term of five years.

Note 16. Other securities and investments

Cost at 1 February 68.4 39.5Additions for the year 1.9 34.8Disposals for the year -24.2 -5.9


Revaluations and writedowns at 1 February -15.0 -13.2Revaluations and writedowns for the year 0.0 -1.8

Revaluations and writedowns at 31 January -15.0 -15.0


Other securities and investments consist mainly of instruments of indebtedness with mortgages on real property.




Note 17. Deferred tax asset

Deferred tax asset at 1 February 319.5 271.5Change in tax rate 0.0 -20.1Additions for the year 62.8 65.3Disposals for the year -34.3 0.0Tax on changes in equity 1.5 2.1Foreign-exchange adjustments -0.4 0.7

Deferred tax asset at 31 January 349.1 319.5

Value adjustment at 1 February -50.2 -40.1Value adjustment for the year -7.9 -10.1

Value adjustments at 31 January -58.1 -50.2


The deferred tax asset relates to:

Property, plant and equipment -1.5 -2.9Other long-term assets 0.0 1.3Short-term assets 80.6 46.7Provisions 29.7 22.3Value of tax loss(es) 240.3 252.1Writedown of tax asset -58.1 -50.2

Total 291.0 269.3

The writedown of the tax asset is mainly attributable to Danish tax losses that have no expiry date. Reference is also made to the section under the "Financial review".

Note 18. Projects in progress or completed

Projects in progress or completed excl. interest, etc. 2,149.1 2,924.0Capitalized interest, etc. 268.0 409.6Payments received on account -590.4 -638.1Writedowns -335.6 -435.1

Total projects in progress or completed 1,491.1 2,260.4




Note 19. Trade receivables

Receivables relating to re-invoiced construction contracts 27.7 10.2Other trade receivables before setoff of financial liabilities 406.2 691.9Setoff of financial liabilities -32.5 -107.3

Total trade receivables 401.4 594.8

Any writedown is made to the net realizable value, equal to the sum total of future net cash flows that the receivables are expected to generate.Writedowns for bad and doubtful debts are made on the basis of an individual assessment of each receivable.

The carrying amount of the receivables corresponds to the fair value.

Note 20. Securities

Listed securities 0.1 0.1Unlisted securities 21.5 4.0

Total securities 21.6 4.1

Listed securities consist of shares and bonds listed on the Copenhagen Stock Exchange and are stated at the prices ruling on the balance sheet date.

Unlisted securities include mortgage deeds that are recorded at cost on initial recognition and subsequently at amortized cost.

Note 21. Cash and cash equivalents

Free cash and cash equivalents 147.1 100.6Escrow accounts and other accounts that the Group cannot fully dispose of 888.6 443.4Setoff of financial liabilities -434.6 -180.2

Total cash and cash equivalents 601.1 363.8

The Group's cash and cash equivalents consist mainly of deposits with well-reputed banks. Thus, it is assessed that they are not subject to a credit risk.



All amounts in DKKm

Note 22. Share capital

The share capital consists of 28,043,810 shares of DKK 20 each (nom. DKK 560,876,200). No shares carry any special rights.

At an Extraordinary General Meeting, the Supervisory Board was authorized to issue warrants up to a total nominal value of DKK 18.2 million (910,000 shares of DKK 20). The Supervisory Board has allocated warrants to the Executive Board and other executive staff entitling them to subscribe for 826,000 shares of DKK 20, of which 704,000 warrants were active at the balance sheet date.

For a more detailed description of the allocation and exercising of options, etc., reference is made to the section under "Shareholders".

Changes in the share capital over the past five years: Number in thousands Nominal value (DKKm)

Changes Year-end Changes Year-end

2002/03 0.0 14,021.9 0.0 280.42003/04 0.0 14,021.9 0.0 280.42004/05 0.0 14,021.9 0.0 280.42005/06 14,021.9 28,043.8 280.4 560.92006/07 0.0 28,043.8 280.4 560.9

In connection with previous incentive schemes, shares were bought for subsequent allotment in the event that employees decided to exercise their options. The Company sold its remaining portfolio of treasury shares in the financial year for a total selling price of DKK 1.6 million, as it is not the Company's policy to hold treasury shares.

Number of shares Nominal value (DKK million) % of share capitalTreasury shares 2006/07 2005/06 2006/07 2005/06 2006/07 2005/061 February 22,382 30,757 0.4 0.6 0.08% 0.22%Allotted upon the exercise of share options 0 -8,375 0.0 -0.2 0.00% -0.06%Dilution in connection with capital increase 0 0 0.0 0.0 0.00% -0.08%Sale of treasury shares -22,382 0 -0.4 0.0 -0.08% 0.00%

31 January 0 22,382 0.0 0.4 0.00% 0.08%

1/31/2007 1/31/2006

Note 23. Subordinated loan capital and subordinated bond loan

Subordinated loan capital and the subordinated bond loan have been recognized in the balance sheet as follows:

Long-term subordinated bond loan 0.0 0.0Long-term subordinated loan capital 0.0 12.4Short-term subordinated bond loan 0.0 494.4

Total fair value 0.0 506.8

Total nominal value 0.0 509.2

Interest at the rate of 10.8 % to 15.0 % was paid on the subordinated bond loan. Interest was paid on the subordinated loan capital in the form of a share of any net gain on the sale of shares.

The subordinated loan capital and subordinated bond loan were repaid in the financial year.



Note 24. Payables to credit institutions

Payables to credit institutions are recognized as follows in the balance sheet:

Long-term liabilities 279.6 457.4Short-term liabilities before setoffs 1,967.4 2,421.1

Total payables to credit institutions 2,247.0 2,878.5

Offset against assetsReceivables -32.5 -107.3Cash and cash equivalents -434.6 -180.2

Payables to credit institutions after setoff against assets 1,779.9 2,591.0

Financial liabilities have been offset against trade receivables and tied-up cash and cash equivalents, to the extent that the Company has a right of setoff and also intends or is contractually obliged to realize assets and liabilities at the same time.

Fair value 1,779.9 2,591.0

Carrying amount 1,779.9 2,591.0

At 31 January, the Group had the following loans and credits:

Effective rate Carrying amount Fair value

Loans Maturity Fixed/ variable 2006/07 2005/06 2006/07 2005/06 2006/07 2005/06

% %Mortgage credit DKK 2023 variable 2 - 3 % 2 - 3 % 3.7 3.9 3.7 3.9Bank DKK 2007-2008 variable 3 - 7 % 3 - 7 % 1,348.7 1,888.0 1,348.7 1,888.0Bank SEK 2007-2008 variable 3 - 5 % 3 - 5 % 6.6 102.8 6.6 102.8Bank PLN 2009 variable 5 - 7 % - 30.4 0.0 30.4 0.0Bank EUR 2007-2012 variable 3 - 7 % 3 - 7 % 390.5 596.3 390.5 596.3

1,779.9 2,591.0 1,779.9 2,591.0




Note 25. Provisions

Rent guarantees for properties sold at 1 February 34.9 25.5Applied during the year -11.2 -13.5Reversed rent guarantees -1.7 0.0Provisions for the year 26.0 22.9

Rent guarantees for properties sold at 31 January 48.0 34.9

Other provisions at 1 February 28.5 25.8Applied during the year -4.1 2.3Reversed provisions -5.1 0.0Provisions for the year 1.4 0.4

Other provisions at 31 January 20.7 28.5

Provisions at 31 January 68.7 63.4

Expected maturity dates of the liabilities provided for:0 - 1 year 17.8 25.11 - 5 years 50.9 38.3> 5 years 0.0 0.0


Rent guarantee liabilities for sold properties have been calculated based on experience with rent guarantees and on an individual assessment of the individual leases. The amount of the provision is carried to income over the term of the guarantees.

Other provisions consist of provisions for contingent liabilities pertaining to finished projects, calculated on the basis of experience with previous, corresponding projects, as well as negative equity in associates, etc.

Note 26. Operating leases

For the years 2006-2010, operating leases for the rental of office premises, office machines and operating equipment have been concluded. The leases have been concluded for a three- to five-year period with fixed lease payments that are index-adjusted annually. The leases are non-terminable for the period mentioned, after which they can be renewed for three to five- year periods. The annual lease payments are expensed in the income statement.

Future, minimum lease payments according to non-terminable lease contracts break down as follows: Within 1 year 8.4 7.6

Within 1-5 years 11.1 17.1After 5 years 0.0 0.0




Note 27. Deferred tax liabilities

Deferred tax liability at 1 February 38.6 55.1Change in tax rate 0.0 -1.7Additions for the year 30.5 0.0Disposals for the year -9.9 -14.5Foreign-exchange adjustments 0.7 -0.3

Deferred tax liabilities at 31 January 59.9 38.6

The deferred tax liabilities relate to:

Property, plant and equipment -0.3 28,9Short-term assets 41.6 22,7Provisions 23.8 -7,4Value of tax losses -5.2 -5.6

Total 59.9 38.6

Note 28. Other debt

Salaries, A-tax, social security contributions, holiday pay, etc. payable 4.3 5.2Holiday pay obligations, etc. 6.6 6.1Project-related costs payable 51.6 106.0Other costs payable 67.1 72.7

Other debt, total 129.6 190.0

The carrying amount of payables relating to salaries, A-tax, social security contributions, holiday pay, etc., project-related costs and other costs is equal to the fair value of these payables.

Holiday pay obligations represent the Group's obligation to pay salary during holiday periods to which employees had earned the entitlement by the balance sheet date and which are to be taken in the following financial year.



Note 29. Contingent assets and liabilities as well as security furnished

Contingent assets

The contingent asset in the form of a deferred tax asset not recognized appears from note 17.

The Group is party to a lawsuit in which the Group has won a case regarding an unfulfilled lease agreement. The opposing party appealed the case, but has offered to settle the case after the balance sheet date.

The settlement amount is estimated at DKK 5 million. The Group did not recognize this contingent asset in the balance sheet as at the balance sheet date.


Contingent liabilities and security furnished

Surety and guarantee commitments on behalf of joint ventures 5.1 0.0Surety and guarantee commitments on behalf of associates 28.5 28.5Other surety and guarantee commitments 61.4 67.3Carrying amount of project portfolio furnished as security to credit institutions 856.6 1,979.4Carrying amount of escrow account deposits, etc., investments, receivables and fixed assetsfurnished as security to credit institutions 999.5 1,252.7

The amounts stated for surety and guarantee commitments on behalf of group enterprises and joint ventures are the upper limits.

The amounts shown below in brackets are comparative figures for 2005/06.

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 1,491.1 million (DKK 2,260.4 million), of which DKK 856.6 million (DKK 1,979.4 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., receivables and fixed assets, totalling DKK 999.5 million (DKK 1,252.7 million), consists of security furnished in the form of receivables of DKK 117.8 million (DKK 470.5 million), as well as escrow accounts, securities, etc. amounting to DKK 295.3 million (DKK 210.2 million), mortgage deeds amounting to DKK 52.7 million (DKK 35.9 million) and investment properties amounting to DKK 533.7 million (DKK 536.1 million).

At 31 January 2007, the Group had a commitment to take over a property portfolio totalling DKK 141.3 million by 1 April 2007. After the balance sheet date, the Group has taken over properties for an amount of DKK 90.5 million, and the remaining commitment no longer exists.

At 31 January 2007, the Group had a commitment, through a joint venture, to take over an underground car park upon completion, amounting to DKK 29.0 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.

From time to time, the Group is involved in disputes and lawsuits. Any negative outcome of pending disputes and lawsuits is not expected to materially affect an assessment of the Group's financial position.



Note 30. Foreign-exchange, interest-rate and credit risks and the use of derivative financial instruments

The Group's risk management policyThe overall objective of the Group's risk policy is to carry out risk management by keeping a broad perspective of risks and exposures and thus minimizing the negative effects on earnings and cash flows in the short term. This policy concerns financial risks:

Foreign-exchange risksIn order to minimize the foreign-exchange risk on consolidated earnings, the Group generally raises funding for individual projects in the agreed invoicing currency. Similarly, construction contracts are generally concluded in the relevant project invoicing currency. In the few cases where the Group gains an advantage from concluding the construction contract in a different currency than the relevant project’s invoicing currency, the Group generally hedges the foreign-exchange risk through a forward agreement.

No forward contracts had been entered into at 31 January 2007.

Interest-rate risksAs a main rule, the TK Development Group finances its projects in progress by way of short-term, floating-rate bank loans and by forward funding, generally based on a fixed interest rate. The Group’s other interest-bearing debt consists of both fixed- and floating-rate loans. The main part of the Group’s total interest-bearing debt consists of floating-rate loans. A one percentage point increase in short-term interest rates will, ceteris paribus, have a negative impact on the Group’s profit before tax of around DKK 20 million per year.

Based on its risk policy, the Company regularly considers whether a larger portion of its loans should be hedged by financial instruments.

There were no derivative financial instruments at 31 January 2007.

Credit risksIn connection with the sale of the TKD Group's development projects, the title does not pass to the investor until the date of payment. Thus, the TKD Group'ssale of projects does not generate actual credit risks. Each receivable is assessed individually, after which any necessary writedowns are made.

Reference is also made to the section "Risk issues" in the Annual Report.

Interest-rate risks and the dates of revaluation or maturity regarding financial assets and liabilities:

All amounts in DKKm.Date of revaluation/maturity Effective

rate in %2006/07 0 - 1 year 1 - 5 years > 5 years Total

Other securities and investments 6.6 24.5 0.0 31.1 3 - 8 %Securities 21.6 0.0 0.0 21.6 0 - 7 %Trade receivables 401.4 0.0 0.0 401.4 0 %Other receivables 231.5 0.0 0.0 231.5 0 %Deposits with credit institutions 601.1 0.0 0.0 601.1 2 - 4 %Receivables from associates 1.0 0.0 0.0 1.0 6 - 8 %Trade payables -269.6 0.0 0.0 -269.6 0 %Other payables -129.6 0.0 0.0 -129.6 0 %Payables to credit institutions -1,500.3 -83.5 -196.1 -1,779.9 4 - 8 %

Total at 31 January 2007 -636.3 -59.0 -196.1 -891.4

2005/06

Other securities and investments 0.0 53.4 0.0 53.4 5 - 7 %Securities 4.1 0.0 0.0 4.1 0 - 7 %Trade receivables 594.8 0.0 0.0 594.8 0 %Other receivables 241.1 0.0 0.0 241.1 0 %Deposits with credit institutions 363.8 0.0 0.0 363.8 1 - 3 %Receivables from associates 0.0 101.7 0.0 101.7 8.0%Subordinated bond loan TK Development A/S -296.8 0.0 0.0 -296.8 10.8%Subordinated bond loan TKD Nordeuropa A/S -197.6 0.0 0.0 -197.6 15.0%Subordinated loan capital 0.0 -12.4 0.0 -12.4 0 %Trade payables -277.9 0.0 0.0 -277.9 0 %Other payables -190.0 0.0 0.0 -190.0 0 %Payables to credit institutions -2,133.6 -244.7 -212.7 -2,591.0 3 - 7 %Instrument of indebtedness 0.0 -3.1 0.0 -3.1 3 - 7 %

Total at 31 January 2006 -1,892.1 -105.1 -212.7 -2,209.9



Note 31. Transactions with related parties

The Company has no related parties with a controlling interest.

Related parties with significant influence in the Company and the Group are specified below:

Supervisory Board and Executive Board

Subsidiaries. joint ventures, associates and group enterprises; see the overview of group companies on page 109.

Supervisory Board and Executive Board (and their related parties) 2006/07 2005/06

Holding of shares, in terms of number 1,880,934 1,931,950Number of warrants allocated (exercisable after 3½ years, at the earliest) 0 240.000Holding of subordinated bond loan of nom. 550 million, in DKKm 0.0 2.2Share of interest payments on the above loan, in DKKm 0.2 0.2Holding of subordinated bond loan of nom. 220 million, in DKKm 0.0 43.4Share of interest payments on the above loan, in DKKm 6.5 6.5Indirect holding of instrument of indebtedness redeemed in the 2005/06 financial year, in DKKm 0.0 2.6Share of interest payments on the above instrument, in DKKm 0.0 0.5

Remuneration, etc. to the Supervisory Board and Executive Board, see note 5.

Joint ventures, associates and group enterprises

Interest income, joint ventures 12.2 12.5Interest expenses, joint ventures -21.1 -33.0Interest income, associates 19.3 29.5Receivables from associates 1.0 101.7

Fees from joint ventures 93.3 126.0

Apart from the above, there were no transactions with related parties in the year under review.

Note 32. Post-balance sheet events

No major events have occurred after the balance sheet date other than those mentioned in the Management's review.

Note 33. New IFRS and IFRIC interpretations

The IASB has issued the following new IFRS that was not mandatory for the purpose of TK Development's preparation of the 2006/07 Annual Report.

IFRS 7 "Financial instruments: Disclosures" and an amendment to IAS 1 regardiing a capital disclosure requirement apply to financial years beginning on 1 January 2007 or later. The implementation of this standard will not affect the recognition and measurement of financial instruments. IFRS 7 has been approved by the EU.

The IASB has issued new IFRIC interpretations that were not mandatory for the purpose of TK Development's preparation of the 2006/07 Annual Report. IFRIC 7 - 12 are not expected to result in changes to the Group's accounting policies.

TK Development intends to implement these IFRS and IFRIC interpretations from the mandatory commencement date.



Overview of group companies

The TKD Group's subsidiaries

Name Reg. office Ownership interest Name Reg. office Ownershio

interest

TK Bygge-Holding A/S Aalborg 100% Euro Mall Czech Holding AB Stockholm 100%

TKD Nordeuropa A/S Aalborg 100% TK Development Czech Holding AB Stockholm 100%

TK Ørestaden A/S Aalborg 100% TK Development Sweden Holding AB Stockholm 100%

TK Bygge-Holding Russia A/S Aalborg 100% TK Projekt AB Stockholm 100%

TK Development Danmark A/S Aalborg 100% EMÖ Projekt AB Stockholm 100%

TK Development Baltics Holding A/S Aalborg 100% EMÖ Center AB Stockholm 100%

TKD Milgravis ApS Aalborg 100% TK Utveckling AB Stockholm 100%

TK Development Finland A/S Aalborg 100% TK Sverige AB Stockholm 100%

TKD Projekt A/S Aalborg 100% TKD Suomi OY Helsinki 100%

TK Valby Torvene A/S Aalborg 100% Fastighets AB TK Finnoo Helsinki 100%

TK Amerika Plads H A/S Aalborg 100% OY TKD Construction AB Helsinki 100%

K/S Tampere IV, Finland Copenhagen 100% OY TKD Holding Finland AB Helsinki 100%

ApS Komplementarselskabet Tampere retail IV, Finland Copenhagen 100% Fastighets AB TK Laune Helsinki 100%

K/S Lohja Retail Park Copenhagen 100% Rekola Holding Properties Ltd. OY Helsinki 100%

Komplementarselskabet Lohja Retail Park ApS Copenhagen 100% Pohjois-Tiriön Investointi OY Helsinki 100%

K/S Rosendal, Finland Copenhagen 100% D & V Properties Sp. Z.o.o. Warsaw 100%

Komplementarselskabet Rosendal, Finland ApS Copenhagen 100% TK Development Polska Sp. Z o.o Warsaw 100%

TK Development Bau GmbH Berlin 100% Euro Mall Bytom Sp. Z o.o Warsaw 100%

TK Development GmbH Berlin 100% Centrum Handlowe Reduta Sp. Z o.o. Warsaw 100%

TKH Datzeberg Grundstücksgesellschaft mbH Berlin 100% Centrum Handlowe Targowek Sp. Z o.o Warsaw 100%

TKH Wismar Grundstücksgesellschaft mbH Berlin 100% Euro Mall Polska XXI Sp. z o.o. Warsaw 100%

TKH Projektbeteiligungsgesellschaft mbH Berlin 100% Euro Mall Polska III Sp. Z o.o Warsaw 100%

TKD Oranienburg Grundstücksgesellschaft mbH Berlin 100% Euro Mall Czech - Ostrava s.r.o. Prague 100%

TKH Mahlow Wohnungsbaugesellschaft mbH Berlin 100% UAB TK Development Vilnius 100%

TKH Bauprojekt Weissensee GmbH Berlin 100% SIA Aila RG Riga 100%

TKH Ferienwohnungsgesellschaft mbH Berlin 100% SIA TK Development Latvia Riga 100%

TKH ABS Bauentwicklung GmbH Berlin 100% SIA "KK" Riga 100%

EKZ Datzeberg Scan-Car GmbH Berlin 100%

EKZ Datzeberg Scan-Car GmbH & Co. KG Berlin 100%

TKH Bauprojekt Gäblerstrasse GmbH Berlin 100%

The companies are included in the consolidated financial statements by full consolidation

The TKD Group's subsidiaries/joint ventures with minority interests

Euro Mall Holding A/S Aalborg 80% Noise Consulting s.r.o. Prague 80%

Euro Mall Poland Holding A/S Aalborg 80% TK Czech Operations s.r.o. Prague 80%

Euro Mall Czech Holding A/S Aalborg 80% Euro Mall Czech VI s.r.o. Prague 80%

Euro Mall Slovakia Holding A/S Aalborg 80% Euro Mall Brno South Retail Park s.r.o. Prague 80%

TK Polske Operations S.A. Warsaw 80% TK Development Czech II s.r.o. Prague 80%

Euro Mall Polska X Sp. Z.o.o. Warsaw 80% Euro Mall Ceske Budejovice s.r.o. Prague 80%

Euro Mall Targówek III Sp. Z.o.o. Warsaw 80% TK Sites s.r.o. Prague 80%

Euro Mall Targówek Sp. Z.o.o. Warsaw 80% TK Czech Development III s.r.o. Prague 80%

Jero II Sp. Z.o.o. Warsaw 80% Euro Mall Project s.r.o. Prague 80%

Euro Mall Polska XIV Sp. Z.o.o. Warsaw 80% Euro Mall Ruzyne Development a.s. Prague 80%

Euro Mall Polska XV Sp. Z.o.o. Warsaw 80% EM Bohemia s.r.o. Prague 80%

Euro Mall Polska XVI Sp. Z.o.o. Warsaw 80% Euro Mall City s.r.o. Prague 80%

Euro Mall Polska XVIII Sp. Z.o.o. Warsaw 80% Euro Mall Delta s.r.o. Prague 80%

Euro Mall Polska XIX Sp. Z.o.o. Warsaw 80% Euro Mall Event s.r.o. Prague 80%

Euro Mall Polska XX Sp. Z.o.o. Warsaw 80% TK Development Slovakia s.r.o. Bratislava 80%

Euro Mall Wroclaw Sp. Z.o.o. Warsaw 80% Saprex s.r.o. Bratislava 80%



Name Reg. office Ownership interest Name Reg. office Ownership

interest

Euro Mall Sosnowiec Retail Sp. Z.o.o. in liquidation Warsaw 80% Targest s.r.o. Bratislava 80%

Euro Mall Chorzow Sp. Z.o.o. in liquidation Warsaw 80% Euro Mall Poland Invest B.V. Amsterdam 80%

Euro Mall Poznan Sp. Z.o.o. Warsaw 80% Euro Mall Torun Holding B.V. Amsterdam 80%

Euro Mall Sosnowiec Dev. Sp Z.o.o. in liquidation Warsaw 80% Euro Mall Czech & Slovakia Invest B.V. Amsterdam 80%

Euro Mall Bydgoszcz Dev. Sp. Z.o.o. in liquidation Warsaw 80% Euro Mall Czech Invest B.V. Amsterdam 80%

Euro Mall Torun Sp. Z.o.o. Warsaw 80% Euro Mall Karlovy Vary Holding B.V. Amsterdam 80%

TK Polska Development II Sp. Z.o.o. Warsaw 80% Euro Mall Sterboholy Holding B.V. Amsterdam 80%

* TK Development Sp. Z.o.o. Warsaw 0% Euro Mall Luxembourg S.A. Luxembourg 80%

The companies are included in the consolidated financial statements by full consolidation, and minority interests are subsequently deducted.* The Group has a de facto controlling interest in these companies.

Galeria Bialystok Sp. Z.o.o Warsaw 19,2% Euro Mall Ventures S.á.r.l. Luxembourg 16%

Euro Mall Hradec Kralove real Estate s.r.o. Prague 16% Edenska s.r.o. Prague 40%

Euro Mall Ostrava Real Estate s.r.o. Prague 16% Euro Mall Sterboholy SC a.s. Prague 60%

Euro Mall Olomouc a.s. Prague 16% Euro Mall Kolin s.r.o. Prague 53%

The companies are included in the consolidated financial statements by pro-rata consolidation, and minority interests are subsequently deducted.

The TKD Group's joint ventures

Udviklingsselskabet Nordkranen A/S Copenhagen 50% Ejendomsselskabet Klampenborgvej I/S Aalborg 50%

Kommanditaktieselskabet Danlink - Udvikling Copenhagen 50% Amerikakaj I/S Copenhagen 50%

Komplementarselskabet DLU ApS Copenhagen 50% Nordkranen Vandtårnsvej ApS Copenhagen 50%

Kommanditaktieselskabet Pakhus D+E Copenhagen 50% Ejendomsanpartsselskabet matr. Nr. 1 ACN

ApS PDE Copenhagen 50% Vestermarken, Odense Jorder Copenhagen 50%

Kommanditaktieselskabet Østre Havn P/S Aalborg 50% Sukkerlageret i Odense ApS Copenhagen 50%

Østre Havn ApS Aalborg 50% Ringsted Outlet Center P/S Aalborg 50%

Kommanditaktieselskabet DLU nr. 1 Copenhagen 50% SPV Ringsted ApS Aalborg 50%

ApS Komplementarselskabet DLU nr. 1 Copenhagen 50% Kiinteistö OY Pakkalanrinne Helsinki 50%

The companies are included in the consolidated financial statements by pro-rata consolidation

Associates

Pedersen Fritscheshof Neubrandenburg KG Hamburg 35% I/S Fritscheshof Aalborg 35%

Step RE CSP A/S Herning 26%

The companies are included in the consolidated financial statements according to the equity method

I/S Margretheparken Aalborg 60%

The company is included in the consolidated financial statements according to the equity method. The company is excluded from consolidation because the Group does not have a controlling interest.



All amounts in DKKm Note 2006/07 2005/06

Net revenue 0.0 0.0External direct project costs -2.8 -11.1

Gross profit/loss -2.8 -11.1

Other external expenses 2 -7.2 -5.5Staff costs 3 -4.3 -2.9

Total -11.5 -8.4

Profit/loss from ordinary activities before financing, depreciation and amortization -14.3 -19.5

Depreciation, amortization and writedowns of long-term assets 0.0 -0.2

Profit/loss from ordinary activities before financing -14.3 -19.7

Income from investments in group enterprises 5 -28.0 -7.1Financial income 6 198.3 213.5Financial expenses 7 -136.8 -143.7

Total 33.5 62.7

Profit/loss before tax 19.2 43.0

Tax on profit/loss for the year 8 -19.2 -10.3

Profit/loss for the year 0.0 32.7

Proposal for distribution of net profitRetained earnings 0.0 32.7

TK Development A/S - Income statement for 2006/07

Financial statements for TK Development A/S


TK Development A/S - Balance sheet at 31 January 2007


ASSETSLong-term assets

Goodwill 9 5.1 5.1Intangible assets 5.1 5.1

Other fixtures and fittings, tools and equipment 10 0.0 0.9Property, plant and equipment 0.0 0.9

Investments in group enterprises 5 777.7 780.2Receivables from group enterprises 1,867.7 2,015.9Deferred tax assets 12 0.9 8.8Other long-term assets 2,646.3 2,804.9

Total long-term assets 2,651.4 2,810.9

Short-term assets

Other receivables 21.4 10.5Prepayments 0.4 0.3Total receivables 21.8 10.8

Securities 13 4.1 24.0Cash and cash equivalents 14 13.7 14.8Total short-term assets 39.6 49.6

ASSETS 2,691.0 2,860.5


TK Development A/S - Balance sheet at 31 January 2007


EQUITY AND LIABILITIESEquity

Share capital 15 560.9 560.9Reserve for foreign-exchange adjustments 0.0 3.1Retained earnings 1,100.7 1,095.9Total equity 1,661.6 1,659.9

Short- and long-term liabilities

Credit institutions 17 51.0 68.0Provisions 18 22.0 21.3Total long-term liabilities 73.0 89.3

Subordinated bond loan 16 0.0 296.6Credit institutions 17 741.5 603.7Trade payables 2.3 9.7Payables to group enterprises 174.1 162.4Corporate income tax 10.9 13.3Provisions 18 1.8 6.7Other debt 20 25.8 18.9Total short-term liabilities 956.4 1,111.3

Total short- and long-term liabilities 1,029.4 1,200.6

EQUITY AND LIABILITIES 2,691.0 2,860.5


TK Development A/S - Statement of changes in equity for 2006/07

All amounts in DKKm Share capital

Reserve for foreign-

exchange adjustments

Retained earnings

Total

Equity at 1 February 2005 280.4 2.6 879.8 1,162.8

Adjustment to beginning-of-year retained earnings on transition to IFRS 0.0 0.0 12.4 12.4Profit/loss for the year 0.0 0.0 32.7 32.7Foreign-exchange adjustment, foreign operations 0.0 0.5 0.0 0.5Adjustment relating to full allocation method (tax) 0.0 0.0 -89.1 -89.1Total income 0.0 0.5 -44.0 -43.5

Share-based remuneration (warrants) 0.0 0.0 0.0 0.0Capital increase 280.5 0.0 280.4 560.9Costs of capital increase 0.0 0.0 -20.8 -20.8Sale of subscription rights in connection with capital increase 0.0 0.0 0.4 0.4

Changes in equity 2005/06 280.5 0.5 216.0 497.0

Equity at 31 January 2006 560.9 3.1 1,095.8 1,659.8

Adjustment to beginning-of-year retained earnings on transition to IFRS 0.0 -3.1 3.1 0.0Profit/loss for the year 0.0 0.0 0.0 0.0Total income 0.0 -3.1 3.1 0.0

Share-based remuneration (warrants) 0.0 0.0 0.2 0.2Sale of treasury shares 0.0 0.0 1.6 1.6

Changes in equity 2006/07 0.0 -3.1 4.9 1.8

Equity at 31 January 2007 560.9 0.0 1,100.7 1,661.6


TK Development A/S - Cash flow statement for 2006/07


Profit/loss before financing -14.3 -19.7Adjustments for non-cash items Depreciation and amortization 0.0 -0.2 Provisions -4.2 -22.9 Market-value adjustments 0.0 -8.4Increase/decrease in receivables 134.4 -147.2Increase/decrease in payables and other debt 6.2 -80.3

Cash flows from operating activities before net financials and tax 122.1 -278.7

Interest paid, etc. -130.0 -113.7Interest received, etc. 183.9 187.3Corporate income tax paid -13.6 0.0

Cash flows from operating activities 162.4 -205.1

Investments in equipment 1.0 -1.1Purchase of securities and investments -9.5 0.0Sale of securities and investments 19.2 353.8Sale of own subscription rights 0.0 0.4

Cash flows from investing activities 10.7 353.1

Dividend paid 0.0 -0.8Increase/decrease in long-term financing -313.6 -268.4Increase/decrease in credit institutions -25.5 -422.2Raising of financing, credit institutions 163.3 0.0Capital increase 0.0 560.9Costs of share issue 0.0 -20.7Sale of treasury shares 1.6 0.0

Cash flows from financing activities -174.2 -151.2

Cash flows for the year -1.1 -3.2Cash and cash equivalents, beginning of year 14.8 17.9Market-value adjustment of cash and cash equivalents 0.0 0.1Cash and cash equivalents at year-end 13.7 14.8

Cash and cash equivalents include temporary deposits related to the sale of projects, as well as other cash and cash equivalents to which the Group does not have a full right of disposal, a total of DKK 13.6 million.

The figures in the cash flow statement cannot be inferred from the consolidated financial statements alone.


Note 1. Accounting estimates and assessments 117

Note 2. Other external expenses 117

Note 3. Staff costs 118

Note 4. Fees payable to the auditors elected at the General Meeting 118

Note 5. Investments in group enterprises 119

Note 6. Financial income 120

Note 7. Financial expenses 120

Note 8. Corporate income tax 120

Note 9. Goodwill 121

Note 10. Other fixtures and fittings, tools and equipment 121

Note 11. Other securities and investments 122

Note 12. Deferred tax asset 122

Note 13. Securities 122

Note 14. Cash and cash equivalents 123

Note 15. Share capital 123

Note 16. Subordinated loan capital and subordinated bond loan 123

Note 17. Payables to credit institutions 124

Note 18. Provisions 125

Note 19. Operating leases 125

Note 20. Other debt 126

Note 21. Contingent assets and liabilities as well as security furnished 126

Note 22. Foreign-exchange, interest-rate and credit risks and the use of derivative financial instruments 127

Note 23. Transactions with related parties 128

Note 24. Post-balance sheet events 128

Note 25. Accounting policies 128

Note 26. New IFRS and IFRIC interpretations 128

Table of contents, notes - TK Development A/S


TK Development A/S - Notes to the 2006/07 Annual Report

Note 1. Accounting estimates and assessments

Many account items cannot be measured with certainty, but only estimated. Such estimates consist of assessments based on the most recent information available at the time of presenting the financial statements. It may be necessary to change previous estimates based on changes in the assumptions underlying the estimate or based on supplementary information, additional experience or subsequent events.

In connection with the practical application of the accounting policies described, Management has made a number of significant accounting estimates and assessments that have materially affected this Annual Report:

ReceivablesThe need for writing down receivables is based on a specific assessment of each individual receivable.

Deferred tax assetsThe valuation has been based on the existing possibilities for carrying forward losses and for group pooling or group contributions. A change in the conditions for carrying forward losses and group pooling/group contributions could result in the value of the tax assets being either higher or lower than the carrying amount computed at 31 January 2007. Moreover, the valuation has been based on existing budgets and profit forecasts for a five-year period. The carrying amount of deferred tax assets totalled DKK 0.9 million at 31 January 2007.

GoodwillTo assess the need for amortizing the goodwill amounts recognized, the values in use of the cash-flow-generating units to which the goodwill amount is attributable must be calculated. Calculating the value in use assumes that an estimate of future expected cash flows in the individual cash-flow-generating unit has been made and that a reasonable discount rate has been determined. The goodwill amount recognized in the balance sheet has not been written down. The carrying amount of goodwill totalled DKK 5.1 million at 31 January 2007.

Valuation of investments in group enterprisesTo assess the need for writing down investments in group enterprises in the Parent Company’s financial statements, the values in use of the cash-flow-generating units to which the investment relates must be calculated. Calculating the value in use assumes that an estimate of future expected cash flows in the individual cash-flow-generating unit has been made and that a reasonable discount rate has been determined. If the actual course of an investment deviates from the expected development, this may necessitate adjustments to the writedowns recognized.

Reference is also made to the section “Risk issues” on page 58 in this present Annual Report.


Note 2. Other external expenses

Administrative expenses 6.9 5.3Cost of premises 0.0 0.0Cars, operating expenses 0.3 0.2

Other external expenses, total 7.2 5.5



Note 3. Staff costs

Fees for Supervisory Board 1.0 1.0Salaries, etc. for the Parent Company’s Executive Board 8.1 6.3Retention bonus, the Executive Board 0.2 0.3Social security costs 0.7 0.7Costs of incentive scheme 0.1 0.0Other salaries and staff costs 1.2 3.5Reinvoiced via service agreements -7.0 -8.9

Total staff costs 4.3 2.9

Average number of employees 3 4

Number of employees at year-end 2 4

The Executive Board receives a retention bonus that is accrued over the term of the bonus agreement.

The share-based incentive schemes are described in more detail in the Management’s review.

Share-based remuneration - incentive schemesOn 30 December 2005, the Supervisory Board issued warrants to the Executive Board and other executive staff for the subscription of 826,000 shares, each with a nominal value of DKK 20 Subsequently, 122,000 warrants have lapsed, leaving a total of 704,000 active warrants at the balance sheet date.

The above-mentioned warrants can be exercised in three six-week periods (windows) placed as follows: - following publication of the full-year profit announcement for the 2008/2009 financial year (from around 30 April 2009) - following publication of the interim report for the six months ending 31 July 2009 (from around 30 September 2009) - following publication of the full-year profit announcement for the 2009/10 financial year (from around 30 April 2010)

The allocation of warrants is subject to the relevant employees still being employed at the time of exercising the warrants.

The subscription price per share of nominally DKK 20, before any deduction for dividend, has been fixed at DKK 74.54 in the first exercise window, DKK 77.05 in the second window and DKK 80.63 in the third window.

Based on a share price of DKK 57.81 and a dividend of DKK 0 per share per year, the value of the options has been calculated at DKK 6.7 million, using the Black-Scholes formula. The amount. will be expensed currently over the period until May 2009. The calculation has been based on an expected future volatility of 30 % and an interest level of 3 %. In addition, it has been assumed that the options will be exercised in the intermediate exercise period.

Active warrants break down as follows: 240,000 to the Executive Board and 464,000 to other executive staff members.

Note 4. Fees payable to the auditors elected at the General Meeting

Total fees, Deloitte 1.1 4.0Total fees, Nielsen & Christensen 1.1 2.6

Total fees 2.2 6.6

Fees break down as follows:

Audit services, Deloitte 0.1 1.0Audit services, Nielsen & Christensen 0.1 0.1Other services, including tax and VAT, Deloitte 1.0 3.0Other services, including tax and VAT, Nielsen & Christensen 1.0 2.5




Note 5. Investments in group enterprises

Cost at 1 February 839.1 307.5Additions for the year 0.0 625.7Capital investments 9.5 0.0Disposals for the year -19.6 -94.1Adjustment of capital, etc. 0.0 0.0


Writedowns at 1 February -462.4 -533.9Writedowns for the year -14.7 -8.0Reversal relating to disposals 28.4 79.5

Writedowns at 31 January -448.7 -462.4

Setoffs at 1 February 403.5 412.6Writedowns offset against receivables/provisions -6.1 -9.1Setoffs at 31 January 397.4 403.5


Investments in group enterprises are recognized at cost. An impairment test was made at 31 January. In case the cost exceeds the recoverable amount, it is written down to such lower figure.

Writedowns are included in the line ”Income from investments in group enterprises”.

A few of the subsidiaries have no operating activities and are intended to be liquidated, for which reason they will generate no future cash flows other than the expected liquidation proceeds. The investments in these subsidiaries have been written down to the expected liquidation proceeds.

Income from investments:

Writedowns for the year, see above -14.7 -8.0Gains on sale and liquidation -13.3 0.9

Total income from investments -28.0 -7.1

Overview of group enterprisesOwnership Ownership

Name Reg, office interest Name Reg, office interestTK Bygge-Holding A/S Aalborg 100% TKD Nordeuropa A/S Aalborg 48%TK Development Bau GmbH Berlin 100% Euro Mall Czech Holding AB Stockholm 100%TK Development GmbH Berlin 100% TK Development Czech Holding AB Stockholm 100%

The ownership interests shown above are the Company’s direct holdings.




Note 6. Financial income

Interest, cash, cash equivalents and securities etc. 0.5 0.3Interest income from group enterprises 151.6 189.9Interest income from group enterprises, bonds 26.2 0.0Interest income, instruments of indebtedness 18.2 20.3Other financial income 1.8 3.0

Total financial income 198.3 213.5Note 7. Financial expenses

Interest expenses, credit institutions 44.2 49.7Interest expenses, group enterprises 39.9 23.2Interest expenses, subordinated loans 51.6 62.2Foreign-exchange losses and capital losses on securities 0.1 8.2Other financial expenses 1.0 0.4

Total financial expenses 136.8 143.7

An interest rate of 6-8 % is used to capitalize interest on projects in progress

Note 8. Corporate income taxAccrued corporate income tax 10.9 13.3Adjustment regarding accrued tax relating to prior years 0.3 0.0Change in deferred tax 8.0 -3.0

Tax on profit/loss for the year 19.2 10.3

The tax on the profit/loss for the year results as follows:

Danish tax rate 5.4 12.0Adjustment relating to prior years 0.3 -5.7Tax effect of:Non-taxable income 9.1 -9.5Change of tax rate 0.0 5.3Change in non-capitalized tax asset relating to:Losses in foreign subsidiaries 0.0 6.5Other 4.4 1.7

Tax on profit/loss for the year 19.2 10.3




Note 9. Goodwill

Cost at 1 February 7.7 7.7Additions 0.0 0.0Disposals 0.0 0.0


Depreciation, amortization and writedowns at 1 February 2.6 2.6Writedowns for the year 0.0 0.0

Depreciation, amortization and writedowns at 31 January 2.6 2.6


Goodwill relates to the purchase of a business partner’s activities in Central Europe.

At 31 January 2007, Management carried out an impairment test of the carrying amount of goodwill.

The recoverable amount is based on the value in use, determined by means of expected cash flows on the basis of budgets for the 2007/08 through 2009/10 financial years, approved by Management, and a discount rate fixed by Management.

The impairment test did not give rise to any writedowns.

Note 10. Other fixtures and fittings, tools and equipment

Cost at 1 February 1.1 0.2Additions 0.0 1.1Disposals -1.1 -0.2


Depreciation and writedowns at 1 February 0.2 0.2Depreciation and writedowns for the year 0.1 0.2Depreciation and writedowns, assets disposed of -0.3 -0.2

Depreciation and writedowns at 31 January 0.0 0.2


Other fixtures and fittings, tools and equipment are depreciated over a term of five years.




Note 11. Other securities and investments

Cost at 1 February 0.0 13.4Additions for the year 0.0 0.0Disposals for the year 0.0 -13.4


Revaluations and writedowns at 1 February 0.0 13.0Reversal relating to disposals for the year 0.0 -13.0Revaluations and writedowns for the year 0.0 0.0

Revaluations and writedowns at 31 January 0.0 0.0


Note 12. Deferred tax asset

Deferred tax asset at 1 February 16.5 95.1Tax on a pooled basis transferred 0.0 -89.1Change in tax rate 0.0 -0.4Additions for the year 0.0 10.9Disposals for the year -15.5 0.0

Deferred tax asset at 31 January 1.0 16.5

Value adjustment at 1 February -7.7 0.0Value adjustment for the year 7.6 -7.7

Value adjustments at 31 January -0.1 -7.7


The deferred tax asset relates to:

Property, plant and equipment -1.3 -1.2Short-term assets 0.6 0.0Provisions 1.7 17.7Writedown of tax asset -0.1 -7.7

Total 0.9 8.8

Note 13. Securities

Listed securities 0.1 20.0Unlisted securities 4.0 4.0

Total securities 4.1 24.0

Listed securities consist of shares and bonds listed on the Copenhagen Stock Exchange and are stated at the prices ruling on the balance sheet date. Unlisted securities include mortgage deeds that are recorded at cost on initial recognition and subsequently at amortized cost.




Note 14. Cash and cash equivalents

Free cash and cash equivalents 0.1 0.2Escrow accounts and other accounts that the Group cannot fully dispose of Setoff of financial liabilities 13.6 14.6

Total cash and cash equivalents 13.7 14.8

The Group’s cash and cash equivalents consist mainly of deposits with well-reputed banks. Thus, it is assessed that they are not subject to a credit risk.

Note 15. Share capital

The share capital consists of 28,043,810 shares of DKK 20 each (nom. DKK 560,876,200). No shares carry any special rights.

At an Extraordinary General Meeting, the Supervisory Board was authorized to issue warrants up to a total nominal value of DKK 18.2 million (910,000 shares of DKK 20). The Supervisory Board has allocated warrants to the Executive Board and other executive staff entitling them to subscribe for 826,000 shares of DKK 20, of which 704,000 warrants were active at the balance sheet date. For a more detailed description of the allocation and exercising of options, etc., reference is made to the section under ”Shareholders”.

Number in thousands Nominal value (DKKm)Changes in the share capital over the past five years: Changes Year-end Changes Year-end

2002/03 0.0 14,021.9 0.0 280.42003/04 0.0 14,021.9 0.0 280.42004/05 0.0 14,021.9 0.0 280.42005/06 14,021.9 28,043.8 280.4 560.92006/07 0.0 28,043.8 280.4 560.9

In connection with previous incentive schemes, shares were bought for subsequent allotment in the event that employees decided to exercise their options. The Company sold its remaining portfolio of treasury shares in the financial year for a total selling price of DKK 1.6 million, as it is not the Company’s policy to hold treasury shares.

Number of shares Nominal value (DKK million) % of share capital

Treasury shares 2006/07 2005/06 2006/07 2005/06 2006/07 2005/061 February 22,382 30,757 0.4 0.6 0.08% 0.22%Allotted upon the exercise of share options 0 -8,375 0.0 -0.2 0.00% -0.06%Dilution in connection with capital increase 0 0 0.0 0.0 0.00% -0.08%Sale of treasury shares -22,382 0 -0.4 0.0 -0.08% 0.00%

31 January 0 22,382 0.0 0.4 0.00% 0.08%

Note 16. Subordinated loan capital and subordinated bond loan

Subordinated loan capital and the subordinated bond loan have been recognized in the balance sheet as follows:

Short-term subordinated bond loan 0.0 296.6

Total fair value 0.0 296.6

Total nominal value 0.0 296.6

Interest at the rate of 10.8 % to 15.0 % was paid on the subordinated bond loan. Interest was paid on the subordinated loan capital in the form of a share of any net gain on the sale of shares. The subordinated loan capital and subordinated bond loan were repaid in the financial year.




Note 17. Payables to credit institutions

Payables to credit institutions are recognized as follows in the balance sheet:

Long-term liabilities 51.0 68.0Short-term liabilities before setoffs 741.5 603.7

Total payables to credit institutions 792.5 671.7

Financial liabilities have been offset against trade receivables and tied-up cash and cash equivalents, to the extent that the Company has a right of setoff and also intends or is contractually obliged to realize assets and liabilities at the same time.

Fair value 792.5 671.7

Carrying amount 792.5 671.7

At 31 January, the Parent Company had the following loans and credits:

Effective rate Carrying amount Fair value

Loans MaturityFixed/

variable2006/07 2005/06 2006/07 2005/06 2006/07 2005/06

Bank DKK 2007-2008 variable 3 - 7 % 3 - 7 % 792.5 671.7 792.5 671.7




Note 18. Provisions

Rent guarantees for properties sold at 1 February 8.4 0.0Applied during the year -2.5 0.0Provisions for the year 0.0 8.4

Rent guarantees for properties sold at 31 January 5.9 8.4

Other provisions at 1 February 19.6 19.2Applied during the year -4.5 0.0Provisions for the year 2.8 0.4

Other provisions at 31 January 17.9 19.6


Expected maturity dates of the liabilities provided for:0 - 1 year 1.8 6.71 - 5 years 22.0 21.3> 5 years 0.0 0.0


Rent guarantee liabilities for sold properties have been calculated based on experience with rent guarantees and on an individual assessment of the individual leases. The amount of the provision is carried to income over the term of the guarantees.

Other provisions consist of provisions for contingent liabilities pertaining to finished projects, calculated on the basis of experience with previous, corresponding projects, as well as negative equity in associates, etc.

Note 19. Operating leases

For the years 2006-2010, operating leases for the rental of office machines and operating equipment have been concluded. The leases have been concluded for a three-to five-year period with fixed lease payments that are index-adjusted annually. The leases are non-terminable for the period mentioned, after which they can be renewed for three to five-year periods. The annual lease payments are expensed in the income statement.

Future, minimum lease payments according to non-terminable lease contracts break down as follows: Within 1 year 0.1 0.0

Within 1-5 years 0.3 0.0After 5 years 0.0 0.0

Total 0.4 0.0




Note 20. Other debt

Salaries, A-tax, social security contributions, holiday pay, etc. payable 2.9 0.0Holiday pay obligations, etc. 0.9 1.3Other costs payable 22.0 17.6

Other debt, total 25.8 18.9

The carrying amount of payables relating to salaries, A-tax, social security contributions, holiday pay, etc., project-related costs and other costs is equal to the fair value of these payables.

Holiday pay obligations represent the Group’s obligation to pay salary during holiday periods to which employees had earned the entitlement by the balance sheet date and which are to be taken in the following financial year.

Note 21. Contingent assets and liabilities as well as security furnished

Contingent assets

The Company has no contingent assets.

Contingent liabilities and security furnished

Surety and guarantee commitments on behalf of group enterprises and associates 1,921.0 2,525.2Other surety and guarantee commitments 0.0 18.6Property, plant and equipment furnished as security to credit institutions 1,975.1 2,594.2

The amounts stated for surety and guarantee commitments on behalf of group enterprises are the upper limits.

The amounts shown below in brackets are comparative figures for 2005/06.

At 31 January 2007, the subsidiaries had drawn an amount of DKK 1,884.1 million (DKK 1,836.5 million) on their credit facilities, while the amount drawn by joint ventures totalled DKK 13.1 million (DKK 50.0 million).

In addition, the Company has issued guarantees for its group enterprises’ and joint ventures’ ongoing and completed projects.Moreover, the Company is liable for any commitments relating to the agreement on the sale of Field’s.

Other surety and guarantee commitments consist primarily of the Company’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 carrying amount of property, plant and equipment furnished as security to credit institutions totals DKK 1,975.1 million (2,594.2 DKKm), consisting of security furnished in the form ofreceivables, DKK 1,818.0 million (2,450.7 DKKm), and escrow accounts, securities, etc., DKK 13.6 million (0.0 DKKm), as well as investments in group enterprises provided as security, DKK 143.5 million (143.5 DKKm).



All amounts in DKKm

Note 22. Foreign-exchange, interest-rate and credit risks and the use of derivative financial instruments

Foreign-exchange, interest-rate and credit risks and the use of derivative financial instruments appear from note 30 in the consolidated financial statements.

Interest-rate risks and the dates of revaluation or maturity regarding financial assets and liabilities:

Date of revaluation/maturity Effective2006/07 0 - 1 year 1 - 5 years > 5 years Total rate in %

Securities 4.1 0.0 0.0 4.1 0 - 7 %Receivables from group enterprises 0.0 1,693.6 0.0 1,693.6 6 - 8 %Other receivables 21.4 0.0 0.0 21.4 0 %Deposits with credit institutions 13.7 0.0 0.0 13.7 2.0 %Payables to credit institutions -741.5 -51.0 0.0 -792.5 3 - 7 %Trade payables -2.3 0.0 0.0 -2.3 0 %Other debt -25.8 0.0 0.0 -25.8 0 %

Total at 31 January 2006 -730.4 1,642.6 0.0 912.2

2005/06

Securities 24.0 0.0 0.0 24.0 0 - 10.8 %Receivables from group enterprises 0.0 1,853.5 0.0 1,853.5 6 - 8 %Other receivables 10.5 0.0 0.0 10.5 0 %Deposits with credit institutions 14.8 0.0 0.0 14.8 2.0 %Subordinated bond loan, TK Development A/S 0.0 -296.6 0.0 -296.6 10.8 %Payables to credit institutions -603.7 -68.0 0.0 -671.7 3 - 7 %Trade payables -9.7 0.0 0.0 -9.7 0 %Other debt -18.9 0.0 0.0 -18.9 0 %

Total at 31 January 2006 -583.0 1,488.9 0.0 905.9




Note 23. Transactions with related parties

The Company has no related parties with a controlling interest.

Related parties with significant influence in the Company and the Group are specified below:

Supervisory Board and Executive Board

Subsidiaries. joint ventures, associates and group enterprises; see the overview of group companies on page 109.

Supervisory Board and Executive Board (and their related parties)

Holding of shares, in terms of number 1,880,934 1,931,950Number of warrants allocated (exercisable after 3½ years, at the earliest) 0 240,000Holding of subordinated bond loan of nom. 550 million, in DKKm 0.0 2.2Share of interest payments on the above loan, in DKKm 0.2 0.2Indirect holding of instrument of indebtedness redeemed in the 2005/06 financial year, in DKKm 0.0 2.6Share of interest payments on the above instrument, in DKKm 0.0 0.5

Remuneration, etc. to the Supervisory Board and Executive Board, see note 3.

Joint ventures, associates and group enterprises

Interest income, group enterprises 151.6 189.9Interest expenses, group enterprises -39.9 -23.2Interest income, instruments of indebtedness 18.2 20.3Interest income, bonds, group enterprises 26.2 0.0Receivables from group enterprises 1,867.7 2,015.9

Costs allocated to group enterprises according to service agreements concluded 6.8 8.5Property management and administrative fees from group enterprises -0.4 0.7

The Company has received no dividends from subsidiaries.

Apart from the above, there were no transactions with related parties in the year under review.

Note 24. Post-balance sheet events

No major events have occurred after the balance sheet date other than those mentioned in the Management’s review.

Note 25. Accounting policies

Reference is made to the description of accounting policies for the Group and the Parent Company on page 73,.

Note 26. New IFRS and IFRIC interpretations

Reference is made to note 33 in the consolidated financial statements.


tk_development_annual_report_2006_07

Documents

tk development group

financial year

annual report

profit of dkk

financial review

development of real

fiscial year

executive board members