Västerås Karlstad

(1)

Uppsala

Täby Kista Nyköping

Stockholm Norrköping Linköping Borås

Västerås Karlstad

Örebro

Klövern is a real estate company that with availability, and commitment shall meet the customer’s needs of premises and services in Swedish growth regions. Klövern is one of the larger listed real estate companies in Sweden focusing on commercial premises.

Closeness to the customer in two senses Klövern is represented by its own staff in all ten prioritized cities. Our own staff, who are physically present at the customer’s chosen location, are a guarantee of swift service and good knowledge of the market. Being close also means having good knowledge about the tenant and their day-to-day situation. We can then provide that something extra and personal as landlord and owner of the property.

Creating the communities of tomorrow Klövern’s vision is to be an active property owner in all cities. We do not only care about the tenants and the buildings but also the development of the cities where they are located. We make a contribution to the growth of city neighbourhoods, participate in business sector and other community organizations, and have a close dialogue with municipalities and other authorities. If things go well for the Commitment above the ordinary

Klövern’s employees are not just anybody. We consider that we have unusually good and committed personnel, who really care about both the tenants and the company. Klövern’s motto – Making the customer’s day easier every day – is firmly anchored in the company.

Making easier means, of course, doing one’s best to solve the problems that crop up, but also being proactive, being a step ahead.

ANNUAL REPORT 09

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Uppsala

Täby Kista Nyköping

Stockholm Norrköping Linköping Borås

Västerås Karlstad

Örebro

Klövern is a real estate company that with availability and commitment shall meet the customer’s needs of premises and services in Swedish growth regions. Klövern is one of the larger listed real estate companies in Sweden focusing on commercial premises.

Closeness to the customer in two senses Klövern is represented by its own staff in all ten prioritized cities. Our own staff, who are physically present at the customer’s chosen location, are a guarantee of swift service and good knowledge of the market. Being close also means having good knowledge about the tenant and their day-to-day situation. We can then provide that something extra and personal as landlord and owner of the property.

Creating the communities of tomorrow Klövern’s vision is to be an active property owner in all cities. We do not only care about the tenants and the buildings but also the development of the cities where they are located. We make a contribution to the growth of city neighbourhoods, participate in business sector and other community organizations, and have a close dialogue with municipalities and other authorities. If things go well for the city, they go well for us. One plus one can make Commitment above the ordinary

Klövern’s employees are not just anybody. We consider that we have unusually good and committed personnel, who really care about both the tenants and the company. Klövern’s motto – Making the customer’s day easier every day – is firmly anchored in the company.

Making easier means, of course, doing one’s best to solve the problems that crop up, but also being proactive, being a step ahead.

ANNUAL REPORT 09

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2006

Klövern acquires Pfizer’s head office and production facility in Uppsala for SEK 235 million. In June, seven properties are acquired in Nyköping for SEK 245 million, inter alia. At the end of 2006, Klövern acquires 46 properties in Kista and Täby for a property value of SEK 4.1 billion.

2002

In May, the then IT company Adcore splits its operations and Adcore AB changes name to Klövern AB focusing on real estate operations.

Klövern acquires Postfastigheter for SEK 1.3 billion as well as properties in Nyköping and Norrköping for SEK 620 million. Gustaf Hermelin takes up post as CEO.

The Klövern share

2003

Klövern is listed on the stock exchange’s “O” list. Properties in Kalmar, Karlstad, Linköping and Norrköping, Örebro and Kumla are acquired in August for SEK 1,107 million. During the year, 15 properties are sold at unprioritized locations for SEK 185 million.

2004

In January, Klövern becomes established in Borås through acquisition of properties for SEK 210 million. During the year, establish- ment also takes place in Västerås through acquisition of 41 properties with a value of SEK 1 billion. Sale of 20 properties for SEK 307 million.

2005

Altogether 36 properties are sold for a price of SEK 557 million. Klövern acquires properties, mainly in Linköping for SEK 1,350 million. In December, six properties are acquired in Norrköping for SEK 355 million, the majority of the properties being in the industrial landscape.

The Klövern share has produced an average total return of 10.9 per cent in the past five years in comparison with the risk-free rate of 3.4 per cent. Dividend amounts to an average of 55 per cent of the profit from property management and the direct yield to 4.7 per cent during the same period.

Klövern’s unique working method, based on availability and commitment, is one of many important explanations for the good yield.

A financial investment always requires striking a balance between the risk an investor is prepared to take and the desired yield. Different types of investments bear risk to a varying extent, but also, correspondingly, provide opportunities for yield. The least risky investment, government bonds, provides a yield that is referred to as the risk-free rate. In particular years, the yield on an investment can vary both upwards and downwards compared with other equivalent investments. There may be various explanations for deviations over longer periods of time. In the case of the Klövern share, the good yield depends largely on shared basic values of availability and commitment. We have local presence with our own staff dedicated to their work and their customers. This provides a good basis for being able to deliver a good yield in the future.

The total return to the shareholder consists of dividend and the change in price of the share. When dividend is measured in per cent, direct yield, the proposed dividend for a year is set in relation to the price at the year-end.

There are no goals for the development of share price although it is implicitly understood that the company and its profit shall develop better than comparable real estate

companies and that Klövern should be able to communi- cate this in such a good way that share price development over time is also better than for equivalent real estate companies.

Real estate companies generally provide relatively even dividend and thus also even direct yield. The explanation is that profit from property management is even over time relative to other industries and thus the variations in dividend are not so great. The proposed dividend for the 2009 financial year of SEK 1.25 would mean a direct yield of 5.5 per cent.

During 2009, the price of the Klövern share rose by 25.8 per cent and the dividend paid was equivalent to a direct yield of 5.5 per cent. For 2009, direct yield will thus be 31.3 per cent. Direct yield, measured as actual dividend, for the Klövern share has amounted to 4.7 per cent on average over the past five years. The Klövern share has increased annually by an average of 6.2 per cent in the period from 2005 to 2009. Together, dividend and the share price provide an average total return of 10.9 per cent during the past five-year period.

2007

Klövern starts construction of the exhibition and conference facility Kista-mässan as well as renegotiating existing and entering into new leases with Ericsson for around 50,000 sq.m. The Kalmar and Eskilstuna units and another twelve properties are sold for SEK 1,236 million. Acquisitions totalling 47 properties in, among other places, Karlstad, Västerås

Klövern’s goal is for return on equity over a business cycle to amount to the risk-free rate plus seven percentage points. The risk-free rate has been 3.4 per cent on average from 2005 to 2009. It was 2.5 per cent in 2009.

Accordingly, the aim has been for Klövern’s return on equity to have been at least 10.4 per cent on average in the past five years and this goal has been exceeded.

Return on equity has averaged 12.6 per cent.

Klövern’s policy is that dividend over time shall amount to at least 50 per cent of the profit from property manage- ment. The dividend for the financial years 2005 to 2009 has been SEK 1.20 per year on average in comparison with the profit from property management which has been SEK 2.26 on average. Dividend has amounted to 55 per cent* on average during the past five years. For 2009, the proposal is equivalent to 41 per cent* of the profit from property management.

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2008

Kistamässan opens in early September. Sale of three properties in Karlstad, Kista and Nyköping for SEK 327 million. Three properties, one of which is a freehold purchase of a site leasehold, are acquired in Kista for a total of SEK 135 million.

2009

Kistamässan is completed in May and the first sod is cut for Victoria Tower adjacent to the exhibition and conference facility.

Klövern sells four properties in Karlstad, Linköping and Nyköping for SEK 162 million and acquires five properties in Borås, Kista and Nyköping as well as 17 site leaseholds in Karlstad for a total of SEK 179 million.

* Total dividend in SEKm in relation to total profit from property management in SEKm.

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2006

Klövern acquires Pfizer’s head office and production facility in Uppsala for SEK 235 million. In June, seven properties are acquired in Nyköping for SEK 245 million, inter alia. At the end of 2006, Klövern acquires 46 properties in Kista and Täby for a property value of SEK 4.1 billion.

2002

In May, the then IT company Adcore splits its operations and Adcore AB changes name to Klövern AB focusing on real estate operations.

Klövern acquires Postfastigheter for SEK 1.3 billion as well as properties in Nyköping and Norrköping for SEK 620 million. Gustaf Hermelin takes up post as CEO.

The Klövern share

2003

Klövern is listed on the stock exchange’s “O” list. Properties in Kalmar, Karlstad, Linköping and Norrköping, Örebro and Kumla are acquired in August for SEK 1,107 million. During the year, 15 properties are sold at unprioritized locations for SEK 185 million.

2004

In January, Klövern becomes established in Borås through acquisition of properties for SEK 210 million. During the year, establish- ment also takes place in Västerås through acquisition of 41 properties with a value of SEK 1 billion. Sale of 20 properties for SEK 307 million.

2005

Altogether 36 properties are sold for a price of SEK 557 million. Klövern acquires properties, mainly in Linköping for SEK 1,350 million. In December, six properties are acquired in Norrköping for SEK 355 million, the majority of the properties being in the industrial landscape.

The Klövern share has produced an average total return of 10.9 per cent in the past five years in comparison with the risk-free rate of 3.4 per cent. Dividend amounts to an average of 55 per cent of the profit from property management and the direct yield to 4.7 per cent during the same period.

Klövern’s unique working method, based on availability and commitment, is one of many important explanations for the good yield.

A financial investment always requires striking a balance between the risk an investor is prepared to take and the desired yield. Different types of investments bear risk to a varying extent, but also, correspondingly, provide opportunities for yield. The least risky investment, government bonds, provides a yield that is referred to as the risk-free rate. In particular years, the yield on an investment can vary both upwards and downwards compared with other equivalent investments. There may be various explanations for deviations over longer periods of time. In the case of the Klövern share, the good yield depends largely on shared basic values of availability and commitment. We have local presence with our own staff dedicated to their work and their customers. This provides a good basis for being able to deliver a good yield in the future.

The total return to the shareholder consists of dividend and the change in price of the share. When dividend is measured in per cent, direct yield, the proposed dividend for a year is set in relation to the price at the year-end.

There are no goals for the development of share price although it is implicitly understood that the company and its profit shall develop better than comparable real estate

companies and that Klövern should be able to communi- cate this in such a good way that share price development over time is also better than for equivalent real estate companies.

Real estate companies generally provide relatively even dividend and thus also even direct yield. The explanation is that profit from property management is even over time relative to other industries and thus the variations in dividend are not so great. The proposed dividend for the 2009 financial year of SEK 1.25 would mean a direct yield of 5.5 per cent.

During 2009, the price of the Klövern share rose by 25.8 per cent and the dividend paid was equivalent to a direct yield of 5.5 per cent. For 2009, direct yield will thus be 31.3 per cent. Direct yield, measured as actual dividend, for the Klövern share has amounted to 4.7 per cent on average over the past five years. The Klövern share has increased annually by an average of 6.2 per cent in the period from 2005 to 2009. Together, dividend and the share price provide an average total return of 10.9 per cent during the past five-year period.

2007

Klövern starts construction of the exhibition and conference facility Kista-mässan as well as renegotiating existing and entering into new leases with Ericsson for around 50,000 sq.m. The Kalmar and Eskilstuna units and another twelve properties are sold for SEK 1,236 million. Acquisitions totalling 47 properties in, among other places, Karlstad, Västerås and Nyköping for SEK 989 million.

Klövern’s goal is for return on equity over a business cycle to amount to the risk-free rate plus seven percentage points. The risk-free rate has been 3.4 per cent on average from 2005 to 2009. It was 2.5 per cent in 2009.

Accordingly, the aim has been for Klövern’s return on equity to have been at least 10.4 per cent on average in the past five years and this goal has been exceeded.

Return on equity has averaged 12.6 per cent.

Klövern’s policy is that dividend over time shall amount to at least 50 per cent of the profit from property manage- ment. The dividend for the financial years 2005 to 2009 has been SEK 1.20 per year on average in comparison with the profit from property management which has been SEK 2.26 on average. Dividend has amounted to 55 per cent* on average during the past five years. For 2009, the proposal is equivalent to 41 per cent* of the profit from property management.

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2008

Kistamässan opens in early September. Sale of three properties in Karlstad, Kista and Nyköping for SEK 327 million. Three properties, one of which is a freehold purchase of a site leasehold, are acquired in Kista for a total of SEK 135 million.

2009

Kistamässan is completed in May and the first sod is cut for Victoria Tower adjacent to the exhibition and conference facility.

Klövern sells four properties in Karlstad, Linköping and Nyköping for SEK 162 million and acquires five properties in Borås, Kista and Nyköping as well as 17 site leaseholds in Karlstad for a total of SEK 179 million.

* Total dividend in SEKm in relation to total profit from property management in SEKm.

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Introduction 2

Statement by the CEO 2

Business plan – goals and outcomes 4 The Klövern share and the shareholders 8 Responsible entrepreneurship 10

Personnel 10

Environment 12

Real estate operations & finance 15

Property portfolio 16

Business Parks and Science Parks 18

Property development 20

Property valuation 24

Risk and sensitivity 26

Financing 30

Markets & specification of properties 33 Market overview and customers 34

Borås 36

Karlstad 38

Kista 41

Linköping 44

Norrköping 46

Nyköping 48

Täby 50

Uppsala 52

Västerås 54

Örebro 56

Financial Reports 59

Administration Report 60

Consolidated Statement of Income 64 Consolidated Balance Sheet 65 Change in Group’s Shareholders’ Equity 66 Consolidated Statement of Cash Flow 67 Parent Company Statement of Income 68 Parent Company Balance Sheet 69 Change in Parent Company’s

Shareholders’ Equity

70 Parent Company Statement of Cash Flow 71

Notes 72

Audit Report 89

Corporate Governance Report & review 91 Corporate Governance Report 92

Board of Directors 94

Executive Management 96

Auditors 99

Internal Control 100

Articles of Association 101

Five-year review 102

Definitions 105

Pages 60–88 have been audited by Klövern’s auditors in accordance with the Audit Report on page 89.

The Year 2009

Profit from property management increased by 39 per cent to

● SEK 3.07 per share (2.17)

The value of the Klövern share rose by 26 per cent (–29) to SEK 22.90.

● The Board is proposing a dividend of SEK 1.25 per share (1.00)

● Equity per share increased to SEK 25.58 (25.09)

● The equity ratio increased to 33 per cent (32)

● The economic occupancy rate was 89 per cent (90)

● The property value increased to SEK 12,032 million (11,895)

● The lettable area amounted to 1,392,000 sq.m. (1,382,000).

● Net profit for the year, SEKm 2009 2008

Rental income 1,231 1,178

Other income 23 42

Operating and central costs –540 –519

Net financial income –221 –346

Profit from property management 493 355

Changes in value, properties and derivatives –197 –915

Deferred and current tax –59 84

Net profit for the year 237 –476

CALENDAR

Interim Report for January to March published on Tuesday, 20 April 2010 Interim Report for January to June published on Thursday, 8 July 2010 Interim Report for January to September published on Thursday, 21 October 2010

Year-end Report for 2010 published on Thursday, 17 February 2011

ANNUAL GENERAL MEETING 2010

The shareholders of Klövern AB are warmly welcomed to the Annual General Meeting at 4pm on Tuesday, 20 April 2010 at Kistamässan, Kistagången 1 in Kista, Stockholm.

Notification of participation may be made at the address:

Klövern AB, Box 1024, SE-611 29 Nyköping, Sweden, by telephone to +46 155-44 33 00 or via Klövern’s website www.klovern.se

The Year 2010

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Statement by the CEO

With a profit from property management of SEK 493 million (335), there is every reason to be very satisfied.

The major part of this year’s improvement in profit is attributable to the low interest rates and our having posi- tioned the company to take advantage of this. Despite the downturn, significant changes in value and tough times, we have not been compelled to resort to short-term emer- gency solutions and rescue actions, but have been able to act sensibly and make decisions which provide a good basis for the company in the long term. I have in mind everything from carrying out normal planned mainte- nance to investment in energy-saving measures and con- structive dialogue with customers on construction of new, modern offices. We have been able to continue with these activities, which are self-evident in good times, thanks to our business activity being fundamentally profitable and stable.

Through focused sales work, we have succeeded in almost retaining our occupancy rate during the year. A drop of one percentage point from 90 to 89 per cent must be con- sidered as acceptable in the current economic situation.

The rental market in most of our regional cities is stable with generally low vacancies and unchanged market rents.

This, in combination with practically no new production, leads us to conclude that there is no great risk of a wide- spread decrease in market rents during 2010, even if the general level of vacancies can be expected to increase slightly. However, as an effect of this, the difference between rental levels in modern spaces in good locations and less modern offices in less attractive locations will probably increase somewhat. Our single largest market Kista has coped well, partly due to Ericsson deciding to concentrate their activities there. Here we see indications that rental levels for older offices in B locations have fallen slightly, since vacancy in this segment is relatively high.

Kista with its good communications continues at the same time to attract new types of businesses in other industries than the traditionally dominant telecom sector.

Accordingly, there are good prospects for a start to be made during 2010 on our new city neighbourhood Kista Gardens with improvement and building rights of 150,000 sq.m.

Klövern’s focus on environmental issues is about sustaina- bility in a broad sense and we have come a long way with efficiency improvements and reduction in consumption of energy for heating. This reduction amounted to 5 per cent during 2009 and the average annual consumption of energy for heating with district heating has been reduced by 46 per cent since 2002. We have deliberately chosen to focus on reducing energy consumption since it accounts for 30–40 per cent of a building’s operating costs.

Unfortunately, reduced consumption of district heating has not always had the full financial impact since certain energy companies have opted to increase their fixed charges.

The valuation of our property portfolio is based on an average required yield of 7.2 per cent. The value per square metre amounts to a reasonable SEK 8,600. Based on external valuations, we have adjusted the value of our properties downwards in 2009 by SEK 267 million. At the same time, the direct yield requirements have stabi- lised although with a greater difference between proper- ties in A and B locations. We feel comfortable with the current values and yield levels although it is important that we succeed in retaining our customers to justify the value of the properties in the long term.

For Klövern, the present low interest rates lead to the business achieving fine results and cash flows as long as

Sharp increase in profit during 2009

Thanks to our low risk profile, dedicated organization and, above all, low interest rates, profit from

property management increased by almost 40 per cent in 2009. Despite tougher times, we have been

able to act and make decisions which are good for the company in the long-term. We have increased the

reserve capital, and hopefully also the confidence, needed to cope with the strains and also benefit from

the opportunities that will com with the downturn.

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Introduction

we retain our customers. This is possible with a dedicated and competent organisation with local roots, which is able to have a close dialogue with tenants and actively meet potential changes customer needs and thus create more satisfied customers. What can be more inspiring than our task of creating the communities of the future by offering attractive environments and efficient offices and thus ensuring that people are stimulated and develop at their work- place? Well-motivated staff create competitive and profitable busi- nesses, which in turn creates the prerequisites for local and regional growth.

Although it looks like we have a couple of tough years ahead, the prospects for 2010 are good thanks to our fundamentally stable business. Hopefully, we will be able to continue to invest in value-creating projects, to further develop existing properties and start investments in new, modern flexible and environmentally friendly office premises in attractive locations.

Furthermore, attractive busi- ness opportunities will undoubtedley emerge in the wake of the downturn.

Nyköping, 25 February 2010 Gustaf Hermelin

CEO

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Klövern’s business concept to work for the customer with its own personnel and with availability and commitment has been successful during 2009. The ambition is to grow by at least SEK 1 billion a year through acquisition, improvement and new construction.

Business plan – goals and outcomes

Klövern has chosen to concentrate its property portfolio to ten growth cities in central Sweden. The majority of these have required yield that are above the general required yield in Stockholm, Gothenburg and Malmö.

In the cities where Klövern is present, rental levels have been rather stable over time, which very often means that the location of premises as well as quality and confidence in the landlord, has had greater weight than the rental level when selecting premises. Another factor, which has characterized the majority of the cities where Klövern owns properties, is that there has hardly been any new construction of commercial premises for a relatively long period of time. This has led to a falling vacancy rate during the first decade of the new century. In these cities, the prerequisites also exist to become a large and impor- tant player, which, among other things, creates better conditions to take new market shares and influence market rents.

Certain types of properties have been avoided in Klövern’s portfolio, for example, purely housing properties, mainly logistics properties and, with a few exceptions, out-of- town retail properties. When making new acquisitions, Klövern especially seeks properties at Business and Science Parks, city properties with offices and properties in small business parks, “gated buildings”.

Klövern’s business model entails being “the local property company”. With its own personnel at the location close to the customer, Klövern can quickly react to the wishes of existing and new customers. Klövern works continuously with development and further training of personnel to stimulate commitment to the company and its customers.

Klövern’s ambition is to have a property portfolio with a rental value of at least SEK 100 million at every business unit to be able to offer broad and comprehensive service.

During 2007, a new business plan and goals for the period 2008 to 2012 were decided upon. In 2009, the financial crisis has affected Klövern’s ability to achieve some of the targets set, including the growth target. The Board and Executive Management have, however, not adjusted the business plan on this account, alhough other minor adjustments have been made.

Growth and finances

Klövern should have a net growth through acquisition, improvement and new construction of at least SEK 1 billion per year.

Net growth in 2009 amounts to SEK 368 million, which is below the target of SEK 1,000 million. The average growth in the past five years amounts to SEK 1,467 mil- lion.

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(9)

Return on equity shall amount to at least the risk-free rate plus seven percentage points.

This goal shall be regarded as an average over a number of years, since the required yield is partly affected by factors over which Klövern has no control. Return on equity amounted to 5.8 per cent in 2009. During the past five years, the average yield has been 12.6 per cent, which is above the long-term goal.

The equity ratio shall be in the interval 25 to 35 per cent.

At the same time as making optimal use of equity, it is important to secure long-term survival and make attrac- tive investments possible.

The equity ratio has not been below the lower thresh- old in any year but has, on the contrary, been in the upper part or even above this interval as a rule.

The interest coverage ratio shall be at least 1.5 multiples.

Interest expense is the single largest cost item for Klövern, and it is therefore important that earning capacity covers the current interest rate level by a broad margin.

The interest coverage ratio has exceeded the goal every year. It amounted to 3.2 multiples during 2009.

The dividend shall exceed 50 per cent of the profit from property management in the long term.

When assessing the size of the dividend, consideration shall be given to the company’s investment alternatives, financial position and capital structure.

During the past five years, Klövern has distributed an average of 55 per cent of the profit from property management.

Introduction

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(10)

Real estate operations

The occupancy rate shall be at least 90 per cent in the long term.

Klövern has in the past often purchased properties with a high level of vacancies. It has been an important part of the company’s business development to improve proper- ties and then get them fully let. The long-term occupancy rate should not be less than 90 per cent in the future although it has to be permitted to drop below that in the short term as part of business development.

The occupancy rate fell slightly during 2009, partly due to bankruptcies and acquisition of properties with vacan- cies. Net moving out amounted to only SEK 1 million.

At the year-end, the occupancy rate was 89 per cent (90).

Heat consumption shall be reduced by 20 per cent for the period 2008–2012.

Since the start, Klövern has worked actively to reduce energy consumption at the properties. Consumption of heat decreased by a total of 9.8 per cent during 2008–2009.

Accumulated change in heat consumption, %

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Reduced heat consumption

Klövern should be market leader at all prioritized locations and the aim is for all to have a rental value of at least SEK 100 million.

With a rental value of over SEK 100 million per business unit, Klövern will be able to have a broad organisation and to be “the local property company”.

Six out of ten business units had a rental value exceed- ing SEK 100 million at the end of 2009.

The operating margin including one-off effects shall increase at least one percentage point a year.

An important key ratio in Klövern’s internal valuation of real estate operations is the operating margin, the share of income attributable to the operating surplus, which is calculated continuously for every property. The operating margin was 62 per cent (62), including one-off effects at the end of 2009.

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Vision

Klövern is creating

the communities of tomorrow.

Business concept

Klövern shall with availability and commitment meet the customer’s needs of premises and services in Swedish growth regions.

Motto

Making the customer’s day easier every day.

Borås Katrinehill 8

Introduction

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Carnegie’s property index (CREX) rose by 26 per cent (–27) and Nasdaq OMX Stockholm’s -all-share index (OMXSPI) by 47 per cent (–42) during the year. Klövern’s capitalization at the end of 2009 was SEK 3,682 million, compared with SEK 2,927 million at the end of 2008. The highest price paid during the year was SEK 24.30 and the lowest SEK 15.80. During 2009, 64.2 million (75.7) Klövern shares, corresponding to 256,000 shares (302,000) per day were traded for a total of SEK 1,277 million (1,449), which is an indication of high liquidity.

On 31 December 2009, the share capital of Klövern amounted to SEK 832,721,630. The total number of registered shares was 166,544,326, with a quota value of SEK 5 per share. Each share, except repurchased shares,

confers one vote. The share’s ID on Nasdaq OMX Stockholm is SSE 19459 and the ISIN code is SE0000331225.

Dividend and yield

According to Klövern’s policy, dividend shall amount in the long term to at least 50 per cent of profit from property management. The Board of Directors proposes that divi- dend on 2009’s result shall be SEK 1.25 per share (1.00).

If the Annual General Meeting on 20 April 2010 decides in accordance with the Board’s proposal, the dividend is expected to be paid on 28 April, the record date being 14 April. This proposal would mean that 41 per cent (46) of profit from property management would be distributed to shareholders. The proposed dividend is equivalent to a direct yield of 5.5 per cent (5.5), calculated on the basis of the share price on 31 December 2009. During the year, the total return of share, including a dividend of SEK 1.00, was 31 per cent (–23).

The Klövern share during a five-year period

2009 2008 2007 2006 2005 Share price at year-end, SEK 22.9 18.2 25.5 30.0 24.5 Capitalization, SEKm 3,682 2,929 4,227 4,996 2,949 Profit from property

management per share, SEK 3.07 2.17 2.32 2.25 1.49 Earnings per share, SEK 1.48 –2.92 7.36 5.04 3.27 Equity per share, SEK 25.58 25.09 29.36 23.23 18.81

Dividend, SEK 1.25* 1.00 1.50 1.25 1.00

Direct yield, % 5.5 5.5 5.9 4.2 4.1

Total return, % 31.3 –22.7 –10.8 26.5 30.2

* Proposed dividend

The Klövern share and the shareholders

The Klövern share, which is listed on Nasdaq OMX Stockholm list for medium-sized companies, was priced at SEK 22.90 (18.20) at the end of the year. During the year, the value of the Klövern share increased by SEK 4.70 (–7.30), corresponding to a rise of 26 per cent (–29). The total return, i.e. the change in the share price and actual dividend, amounted to 31 per cent in 2009.

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(13)

Equity and net worth

Assets and liabilities are valued at fair value and net worth can accordingly be calculated on the basis of equity in the balance sheet. Equity per share amounted at year-end to SEK 25.58 (25.09) after an increase of SEK 0.49 during the year.

Repurchase

The Board of Directors of Klövern has been authorized since the 2007 Annual General Meeting to repurchase Klövern’s shares up to maximum of ten per cent of the total number of registered shares. Accordingly, a total of 5,741,463 shares have been repurchased, corresponding to 3.4 per cent of the shares.

Contact with investors and analysts

Regular meetings are arranged with shareholders, poten- tial investors and analysts both in Sweden and other countries to present the company. During the year, Klövern has, among other activities, participated in capital market days in Båstad, arranged breakfast meetings in connection with quarterly reports and carried out a number of journeys to Belgium, the UK., The Netherlands and Switzerland for meetings with investors.

The following analysts have monitored the company:

Fredrik Cyon – ABG

● Simon Mortensen – Dnb Nor

● Tobias Kaj – Handelsbanken

● Olof Nyström – HQ Bank

● Jonas Andersson – Nordea

● Bengt Claesson – SEB Enskilda

● Erik Nyman – Ålandsbanken

● David Zaudy – Öhmans

● Distribution of shareholdings

Shareholding No. of

shareholders Holding,

%

Change in holding 2009, %

10,000,001 – 4 41.9 3.7

1,000,001 – 10,000,000 18 28.0 –4.0

100,001 – 1,000,000 84 16.3 –1.1

10,001 – 100,000 360 6.8 0.9

1,001 – 10,000 2,478 4.5 0.4

1 –1,000 26,999 2.5 0.1

Total 29,943 100.0 0.0

Ownership

At the end of 2009, there were 29,943 shareholders (30,372) in Klövern. The ten largest shareholders repre- sented 61.1 per cent (57.4) of the total share capital. 85.7 per cent of the total number of shares were held by Swedish shareholders.

Klövern has a profit-sharing foundation which includes all personnel. At year-end 2009, the foundation held 665,000 shares in Klövern, corresponding to 0.4 per cent.

Ownership and major shareholders Shareholder

No. of shares, thousands

Shares of votes and equity, %

Change 2009, %

points

Corem Property Group 20,170 12.5 1.7

Federation of Swedish Farmers* 17,117 10.6 0.0

Arvid Svensson Invest 17,017 10.6 0.0

Investment AB Öresund 15,404 9.6 1.8

Brinova Inter 6,856 4.3 0.4

Länsförsäkringar fonder* 5,387 3.3 –0.1

Swedbank Robur fonder* 4,913 3.1 0.3

HQ fonder* 4,295 2.7 –0.9

Länsförsäkringar Södermanland 4,130 2.5 0.1

Skandia Liv 2,989 1.9 –1.7

Total major shareholders 98,278 61.1 1.6

Other shareholders 62,525 38.9

Total no. of outstanding shares 160,803 100.0

Repurchased own shares 5,741

Total no. of registered shares 166,544

* Owner group

Sweden ��.� % UK �.� % Ireland �.� %

Norway �.� % Switzerland �.� %

Luxembourg �.� % USA �.� %

Others �.� %

Distribution of shares by country

Private owners ��.� % Public sector �.� %

Financial companies ��.� %

Other ﬁnancial companies �.� %

Interest

organizations �.� % Repurchased own shares �.� %

Shareholder category

Introduction

(14)

Responsible entrepreneurship

Klövern works for a sustainable development for the benefit of its shareholders, customers and co-workers as well as for the environment and the community. Klövern’s personnel manage and develop properties where 45,000 people have their place of work.

Participating in the development of the community by working closely with the municipalities, the business sec- tor and organizations and with the vision of creating the communities of tomorrow, Klövern is a committed and driving partner at prioritized locations.

As examples of Klövern’s participation in the creation of communities may be mentioned the co-operation with the Municipality of Norrköping to build a cinema, Cnema, in Norrköping Science Park, the hotel building Victoria Tower in Kista which will be Stockholm’s second tallest building and the County Council’s need of inte- grated premises in Linköping.

PERSONNEL

Klövern shall be an attractive employer with competent and committed staff.

Klövern works for a secure and stable working environ- ment where personnel feel satisfaction and togetherness.

Personnel shall be able to influence their work tasks and feel that they are participating in the business and the development of the company.

Organization

Klövern’s local ties are of crucial importance to the relationship with the customer in the respective city. The staff know their customers, they are available and able to respond quickly to customer needs. A decentralized organization and committed staff who take good care of their customers and strive for mutual benefit in their relations is one of Klövern’s factors for success.

The Klövern Group is organized in a service office, which is also the head office, situated in Nyköping, and business units in all prioritized cities. The service office is responsible for management functions, economy and financing, acquisitions and sales, rental administration, information and investor relations, as well as for providing business support to the units. The local units handle oper- ation of the properties and the day-to-day contacts with the tenants. Each unit has a manager in charge who, working closely together with Klövern’s management, sets guidelines for the operations of the unit. At year-end, Klövern had a total of 123 employees (121).

Working environment

The motto for the work of Klövern’s personnel is “to make the customer’s day easier every day”. Work is based on guiding words such as availability and commitment.

Every member of staff has a defined area of responsibility with the ability to influence everyday work.

During the year, Klövern has worked systematically with working environment issues. Together with the safety representative, safety inspections have taken place at all properties.

The Executive Management have carried out a crisis exercise which is to lead to the drawing up of a crisis man- agement plan.

During 2009, Klövern has also made an effort to raise health awareness among its staff by providing training in diet and exercise. During the year, a number of people have been assisted in weight reduction and smoking cessation through the company’s programme of action.

Health profile and staff surveys have been offered to all staff for the fifth consecutive year. The 2009 survey showed a good feeling of community and well-being and a high work speed.

All employees are covered by health insurance with attractive terms and receive an annual grant for keep-fit activities of SEK 2,000 per employee.

All employees are offered a subsidized lunch, which makes possible informal meetings and good collaboration at the same time as providing important breaks.

Marie, Gunilla and Marie-Louise at the service office.

(15)

Personnel 2009 2008

No, of employees as at 31 December 123 121

Number of women 48 51

Number of men 75 70

Average age, years 44 44

– Of which, men 46 46

– Of which, women 42 41

Personnel turnover, % 6 9

Added value per employee, SEKm 6.6 6.4

Competence development cost per employee,

SEK thousand 18 18

Sick leave, % 2009 2008

Total sick leave 3.3 2.9

– of which short-term sick leave, percentage points 38 65 – of which long-term sick leave, percentage points 62 35

Sick leave for men 4.0 3.6

Sick leave for women 2.2 1.8

The profit-sharing foundation

In order for employees to feel even greater participation in the business and the development of the company, all per- sonnel received units in Klövern’s profit-sharing founda- tion. Transfers to the foundation are based on a combina- tion of Klövern’s result, required return and dividend to shareholders. The allocation may amount to at most one price base amount per employee per year.

Personnel development

To be able to retain staff, it is important to make available development opportunities in the company. Klövern therefore carries out a personal development programme with a follow-up for every member of staff. All staff con- tinuously undergo personal profile analyses to increase insight into their own personal qualities as well as improving collaboration between them and the various departments at the company.

Recruitment takes place in accordance with a well- planned process consisting of in-depth interviews and personal profile analyses. All new employees participate in an introductory programme which also gives a personal presentation of service office staff.

The company has an internal training programme – the Klövern academy – where staff have the opportunity of education, competence development and opportunities to share knowledge and experience. During 2009, the Klövern academy has, among other activities, arranged courses in automatic control systems, personal efficiency, management development, teambuilding, law relating to leases and energy saving systems.

IT environment

IT is the most important business tool and shall support Klövern’s business concept and vision in the best way. A virtual IT environment with the focus on availability,

security and stability enables Klövern to develop IT for increased mobility and simplicity in communications with tenants, properties and within its own organization.

The future

In 2010, personnel work will be directed at further increasing the health awareness of personnel, increasing management competence as well as working to retain the good work satisfaction and “the Klövern spirit”.

Theresa in Norrköping.

Introduction

(16)

Klövern works for sustainable growth in the society by managing, developing and constructing with long-term consideration for people and the environment.

Properties consume large amounts of energy and more efficient use of energy is the most important parameter in a sustainability perspective. For Klövern, the energy issue is one of the most important environmental issues and thus given the highest priority in environmental work.

Through targeted work with efficiency improvements, Klövern has succeeded for the second consecutive year in reducing its consumption of heating by almost 5 per cent.

A high level of commitment to these issues has contrib- uted to the good result.

Klövern’s environmental group, which includes staff from different business units, has worked intensively with the environmental goals. A water saving project, which has been carried out has already after only six months led to a reduction of water consumption of 15 per cent, corre- sponding to 132,000 cu.m.

Environmental work in 2009

Klövern works to reduce the burdens on the environment.

The following measures have been undertaken during 2009:

Phasing out of six, of a total of seven, oil plants.

● During 2010, the final plant will be phased out. This has reduced the burden of carbon dioxide by 536 tonnes.

An investment in competence in energy and technol-

● ogy during recruitment of new personnel has increased awareness of environmental and energy issues.

Energy declarations have been made for the proper-

● ties. These serve as a tool in energy optimization.

In order to obtain greater commitment by tenants,

● waste management has been handed over to suppliers specializing in waste who have direct contact with tenants in a number of cities by a well-developed system.

During 2009, a water saving project was carried out at

● all properties. To reduce water consumption and thus the impact on the environment, all nozzles of kitchen mixer taps, showers and wash basins were replaced This lead to a reduced carbon dioxide burden of 280 tonnes.

Heat consumption has been further reduced by almost

● five per cent, corresponding to 3.25 GWh compared with last year through training, support and follow-up.

After evaluation, a decision has been made to intro-

● duce a hand-held computer system in the whole com- pany during 2010. This will lead to reduced travel for property engineers as well as increased awareness and more reliable meter readings.

To reduce fuel consumption when driving, the

● Norrköping unit has been the first to carry out train- ing in ECO driving for all property engineers. Some business units have also purchased biogas cars for more environmentally friendly driving.

The plan for phasing out PCB has been carried out at

● all units.

Continued work with green IT through an increased

● proportion of telephone and web meetings.

ENVIRONMENT

* From 2008 onwards, consumption is measured in total heated area according to the accounting requirements in energy declarations (EU Directive on Energy End-use Efficiency).

kWh/sq.m.

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(17)

Mari in Nyköping.

District heating ��.� % Ground heating �.� %

Oil �.� %

Electricity �.� % Heat pumps �.� %

Type of heating

cu.m/sq.m.

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* As from 2008, consumption is measured in total heated area according to the accounting requirements in energy declarations (EU Directive on Energy-use Efficiency).

Introduction

Environmental goals 2008–2012

The following goals have been set based on Klövern’s environmental policy:

Reduce heating by 20 per cent

● Environmental inventory of all properties

● New construction in accordance with Klövern’s

● environmentally friendly concept building

New construction and refurbishment in accordance

● with the Green Building requirement*

Environmental report with the annual report

● Continued green IT efforts

● Stop using oil for heating of properties

● Continued reduction in water consumption

● Continued efficiency improvements in handling

● waste.

* Green Building, EU’s programme to reduce the energy consumption of premises with the aim of encouraging construction of more energy-efficient office and industrial buildings by information and good examples. To be certified, new buildings must use 25 per cent less energy than that stated in the National Board of Residential, Building and Planning’s standards for new construction. In refurbishment, consumption shall decrease by at least 25 per cent. A property owner with a portfolio where at least 30 per cent of the buildings comply with the requirements can become a certified partner.

Uppsala is not included in the figure since they have a

large quantity of process water.

(18)

The future

In 2010, the Environmental Group will continue its efforts to involve all personnel in environmental work.

A new project with lighting is being started with the intention of changing over to environmentally friendly sources of light.

To further heat consumption, the focus will be placed on the properties where there is the greatest potential for lower energy use. Energy efficiency improvements will be facilitated by the introduction of a hand-held computer system at all business units. This will provide increased awareness among operating personnel as well as the possibility of swifter measures.

Klövern plans to start construction of its first environ- mentally friendly concept building with a clear focus on the interaction between human beings and the environ- ment. – from choice of building materials to design, content and energy consumption during 2010 or 2011.

For Klövern, environmental work is a long-term commit- ment. The strategy of making use of society’s resources by improving existing properties to create developing envi- ronments for both old and new tenants with a minimal input is therefore being maintained.

Patrik, Robert and Christer in Norrköping.

(19)

Real estate operations

& finance

Property portfolio 16

Business Parks and Science Parks 18

Property development 20

Property valuation 24

Risk and sensitivity 26

Financing 30

Real estate operations & finance

Tobias in Nyköping. Borås Näckrosen 3

(20)

Property portfolio

At year-end 2009, Klövern had a total of 217 properties (217) located in 14 municipalities (14). Ninety-nine per cent of the portfolio of properties is concentrated in ten cities: Borås, Karlstad, Kista, Linköping, Norrköping, Nyköping, Täby, Uppsala, Västerås and Örebro.

The total property value was SEK 12,032 million (11,895) and the lettable area was 1,392,000 sq.m.

(1,382,000). The number of properties was unchanged (–3) while the lettable area increased by 10,000 sq.m.

(–12,000). The economic occupancy rate was 89 per cent (90), a decrease of one percentage point compared with the previous year-end. This decrease is mainly due to bankruptcies and transactions made during the year where properties with a lower occupancy rate have been acquired. Net moving in amounted to SEK –1 million (47) measured on an annual basis. Six of Klövern’s ten business units have achieved the goal of a rental value of at least SEK 100 million.

Profit and key ratios

The table below shows the result of operating activities for the respective business unit, including properties acquired during the year and investments made.

The key ratios per business unit show the situation at the respective year-end, however, and the figures in the two parts of the table are therefore not wholly compara- ble. Income from rental guarantees and redemption o f leases is shown under the heading “Other”. The reduction of other income has been more than compensated for by index increases and moving in during 2008, which has had a full effect in 2009. At year-end, the remaining rental guarantees amounted to SEK 4 million per year.

The development of CPI up to the end of October 2009 will affect the rental value below by approximately SEK –10 million as from 2010.

Rental value per business unit

Borås � % Örebro � %

Kista �� %

Karlstad �� % Uppsala � %

Täby � %

Linköping �� % Västerås �� % Nyköping � %

Norrköping � %

Rental value per type of premises

Ofﬁces �� % Retail �� %

Industrial/warehouse �� % Education/

health care/other �� %

Profit and key ratios per business unit

Profit Key ratios, 31 December

Income, SEKm

Costs, SEKm

Operating surplus, SEKm

Operating margin, SEKm

Recorded investments, SEKm

Fair value, SEKm

Required yield, %

Area, 000 sq.m.

Rental value, SEKm

Occupancy rate, % 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

Kista 342 314 –109 –100 233 214 68 68 173 297 4,199 3,965 6.6 6.5 252 245 372 353 94 95

Karlstad 179 175 –63 –65 116 110 65 63 50 41 1,525 1,501 7.4 7.4 203 207 191 193 93 95

Västerås 134 130 –60 –55 74 75 56 57 46 165 1,221 1,270 7.5 7.3 220 217 163 157 84 87

Linköping 144 137 –47 –49 97 88 67 64 14 61 1,354 1,459 7.3 7.2 166 175 160 170 89 90

Nyköping 102 94 –36 –33 66 61 65 65 14 28 889 887 7.9 7.7 133 124 111 103 94 95

Norrköping 89 85 –46 –47 43 38 48 45 17 51 842 854 7.4 7.3 142 145 106 106 83 82

Uppsala 66 73 –49 –50 17 23 26 31 15 23 538 514 8.6 8.8 66 66 98 94 66 59

Täby 64 62 –23 –24 41 38 64 62 8 14 536 528 7.6 7.5 68 67 68 69 94 95

Örebro 66 61 –24 –26 42 35 63 57 12 7 541 546 7.0 7.0 62 62 65 67 93 97

Borås 45 44 –18 –18 27 26 60 59 2 5 387 371 7.9 7.7 80 74 51 48 88 95

Other* 23 45 1 5 24 50 – – 0 0 – – – – – – – – – –

Total 1,254 1,220 –474 –462 780 758 62 62 351 692 12,032 11,895 7.2 7.1 1,392 1,382 1,385 1,360 89 90

* Rental guarantees and redemption of leases

The total number of properties was the same at the end of the year as at the beginning. The operating

margin was 62 per cent and the rental value increased by SEK 25 million during the year.

(21)

Lease contract structure

In all, Klövern has 4,100 lease contracts (3,800). Of the commercial leases, measured as a proportion of lease value, 21 per cent (24) fall due for renegotiation during 2010. The average lease term was 3.0 years (3.1).

The average rent for let premises amounted to SEK 1,066 per sq.m. The average rent varies between the dif- ferent business units depending on the type of properties, the location of properties and the local rental market.

Sixty-nine per cent (69) of the total contract value, including supplements, was indexed in relation to the consumer price index (CPI).

Operating margin

Klövern’s operating margin including one-off effects was 62 per cent (62). The operating margin is measured as the operating surplus in relation to rental income. An increased occupancy rate normally leads to an increase in the operating margin since operating costs do not increase proportionally with the occupancy rate. The change in the operating margin at the different business units is also greatly affected by changes in the property portfolio and the investments made in the properties.

Lease contract structure

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Area and average rent per type of premises

Offices Industrial/warehouse Retail Education/health care/other* Total

Business unit Total area, 000 sq.m.

Average rent**, SEK per sq.m.

Total area, 000 sq.m.

Kista 186 1,632 64 1,091 2 732 – – 252 1,476

Karlstad 108 1,053 49 628 16 1,108 30 1,116 203 971

Västerås 47 976 110 592 39 1,197 24 872 220 853

Linköping 79 1,186 64 501 12 2,496 11 1,029 166 1,058

Nyköping 48 1,000 48 502 19 1,276 18 932 133 853

Norrköping 50 1,243 59 546 22 837 11 845 142 905

Uppsala 24 1,500 9 1,216 2 821 31 2,879 66 2,003

Täby 42 1,135 18 874 4 743 4 1,127 68 1,038

Örebro 39 1,095 6 328 9 1,379 8 1,018 62 1,085

Borås 24 880 46 487 4 1,083 6 771 80 666

Total 647 1,254 473 662 129 1,239 143 1,195 1,392 1,066

* Consists of laboratories, recreation and residential.

** Calculated on the basis of contract value and let area.

Real estate operations & finance

(22)

The concept Business Parks and Science Parks character- izes an area where companies active in research, educa- tion, high technology and IT are offered attractive premises at a good price in a creative and dynamic envi- ronment.

Concentrating many developing companies within the same area produces good conditions for joint develop- ment projects, new companies, network building and technology transfer.

There is added value for the customer in being located in a network among other creative, expansive companies in the same niche, which gives a good image since every park has a clear vision and specialization. In recent years, Klövern has deliberately increased its property portfolio in the parks and also participated in their development.

The value for Klövern lies partly in the possibility of new long-term relationships with expanding companies and partly in the relatively high demands made by the parks’

tenants which drive development in Klövern forwards.

New requests for more advanced technology can be developed and tested in a “technology-wise” environment to be then spread to Klövern’s other tenants.

The parks also offer a broad range of services which sim- plify the customer’s daily work. All parks have “office hotels” where expanding companies operate and grow.

Klövern regards office hotels as a development and sup- port for local business, and a possibility to meet new cus- tomers. The office hotels are developing very positively at certain locations and will expand further.

At the parks, Klövern offers various solutions in the sphere of services.

Internet service means that Klövern offers broadband solutions for all of the companies’ various requirements.

Telephone service offers the possibility of both mobile and fixed connection with a personal telephone operator and a broad range of telephones and accessories.

Postal and administrative service is, together with recep- tion and conference facilities, a part of the concept for the parks.

Parking and restaurant facilities are offered by external partners at all parks.

Business Parks and Science Parks

Future visualization centre in Norrköping Science Park.