The Annual Report

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The Annual Report

Wihlborgs Fastigheter AB

January–December 2007

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The Annual General Meeting of Wihlborgs Fastigheter AB (publ) will take place at 17 p.m. on Wednesday 23 April 2008 at Slagthuset, Jörgen Kocksgatan 7A, Malmö.

Shareholders wishing to attend the meeting must be included in the register of shareholders maintained by VPC AB by 17 April 2008 at the latest, and must also send notification of their participation by letter to Wihlborgs Fastigheter AB, Box 97, 201 20 Malmö, or by e-mail to annika.nordbeck@wihlborgs.se or phone on

+46 40 690 57 70 or fax on +46 40 23 45 52.

Notification must reach Wihlborgs by 4 p.m. on Thursday 17 April 2008.

The notification must state the shareholders’ name, civic

pate must re-register their shares in their own name with VPC AB.

A request for such re-registration must be made in good time before Thursday 17 April 2008.

The shareholders are invited to participate in a sight- seeing tour at Dockan. We will assemble at 14.00 in the restaurant Glasklart with address Dockplatsen 1.

The tour will be finished no later than 16.00.

Notification to attend the tour shall be made in the same way as the notification to attend the annual general meeting.

Financial information 2008

Wihlborgs is the leading property company in the Öresund region. The properties’ book value totals SEK 13.4 billion with a lettable area of approximately 1.2 million sq.m. and an annual rental value of SEK 1.2 billion.

Wihlborgs shares are listed on the Stockholm Stock Exchange, Mid cap segment.

Invitation to the Annual General Meeting

CONTENTS

1 The year in summary 2 CEo’s review 4 history 5 operations 6 organisation and

employees 8 The environment 12 The share 14 Market overview 17 Property portfolio 34 Projects and development 36 Valuation principles 38 list of property

acquisitions and sales 40 list of properties

48 risk factors and Tax situation

50 Administration report FINANCIAl rEPorTs 53 Profit and loss account 54 Balance sheet

56 Changes in equity 57 Cash flow statement 58 Accounting principles 63 Notes

70 signing of the Annual report 71 Audit report

72 Corporate governance report

80 Five-year summary and definitions

81 Articles of Association

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The year in summary

The profit for the year after tax was SEK 1,114m (850m) Rental income for 2007 amounted SEK 1,035m (909m)

The Board of Directors are proposing a dividend of SEK 6,25 (5,50) per share The leasing level during the year increased by 1 per cent to 93 per cent (92) Equity/assets ratio was 32.6 (32.7).

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Key ratios¹ 2007 2006

rental income, sEKm 1,035 909

Net operating income, sEKm 723 627

Profit after financial items, sEKm 1,502 1,064

return on equity, % 27.6 26.6

Equity/assets ratio, % 32.6 32.7

Interest coverage ratio, multiple 2.7 3.3

Earnings per share, sEK 29,08 22,12

Cash flow per share, sEK 11,36 10,93

Dividend per share, sEK² 6,25 5,50

1. For definitions, see page 80.

2. This refers to the Board of Directors proposal of dividend for 2007.

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”We have unique opportunities to develop our property stock and thereby our business structure in the region since good premises are important to the growth of business and commerce..”

Active property development strengthens business and com- merce as well as us

■ Dear Shareholders,

2007 was a good year for Wihlborgs. We have further increased our level of leases. Today the vacancy level is almost non-existent. We increased lease income by 14 per cent and profit after tax by 31 per cent. The value of our properties after project development, renegotiation and good lease pros-

pects increased by more than SEK 1 billion. Behind these successes are skilled employees in a focused organisation. And, not least, the fact that we have con- centrated our stock of properties in carefully-selected markets in the Öresund region’s strongest locations.

As we develop in this way, and by employing effective and flexible management, we can attract tenants.

Another reason is the positive growth in the Öresund region that is also continuing. We see how the structure of business and commerce is improving and that more and more companies, and not least head offices, are becoming established in the region. Of course, we can

perceive a certain lower rate of growth. But the Øresund Institute’s forecast shows that even if Skåne’s growth will decline somewhat, the GRP will reach 2.7 per cent during

2008. This is higher than Sweden as a whole, with an expected 2.4 per cent, and that of Själland with 1.6 per cent.

Our leading position in the Öresund region together with our active management and financial strength provides us with unique opportunities to develop our property stock and thereby our business structure in the region since good premises are important to the growth of business and commerce. This is something that both we and society benefit from.

We have, for example, been successful in attracting Mercedes’ new Nordic head office to Malmö. This is thanks to the fact that we have been able to actively offer good premises in the right area - Dockan at Västra hamnen. But also because we had the strength to acquire their present office in Copenhagen. This is a property that we expect to be able to lease as

soon as it becomes vacant.

We have participated to a very high degree in developing Dockan and will continue to do so. In the beginning of 2008 we started the construction of a new office property covering 8,700 m2. This is where Ångpanneföreningen is marking its investment in the Öresund region by signing a lease agreement for 4,000 m2 of effective office space. But we also offer premises and attract restaurateurs, hotels and other services

”2007 was a good year for Wihlborgs.”

”The positive growth in the Öresund region

is also continuing.”

”We have participated to a very high degree in developing Dockan and

will continue to do so."

CEO’S rEvIEW

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3

Anders Jarl

Chief Executive officer

Just outside Copenhagen we are also developing a number of properties in collaboration with Herlev local authority. During the year, the local authority purchased one of our buildings that will now become a school. At the same time we acquired the adjacent building to one of our existing properties. We are now improving the infrastructure in the area with parking and connections and thus the property.

We are also collaborating with the local authority in Helsingborg. This is where we have strengthened our leading position through the acquisition of a number of properties at Berga. This was achieved primarily by purchasing the old Polishuset in the centre. This was done in 2006. This was strategically-correct since the centre of Helsingborg is wedged between the sea and the promontory and cannot offer any sites that can be developed.

Furthermore, we own the entire block in question as a result of the acquisition. We are now renovating Polishuset by retaining only the concrete shell so that it will become a completely new building with a fantastic view of Denmark.

We will also continue our investment in Lund and in 2007 we opened an office in the Ideon area. We also acquired more of the Ideon research vil- lage and now own half. Subject to approval by the local authority we will develop this so that it becomes an attractive area with space for double as many tenants. Our ambition is to convert an area that comprises buildings on large parking sites to an area with an urban character, walkways and pleasant outdoor areas. We will resolve the parking prob-

lem with light and secure parking buildings that blend with the environment.

We have the capacity to continue developing properties in selected markets and thereby business and commerce in the Öresund region. With all the challenges this presents. But we will concentrate and consolidate in a small number of areas in the respective town.

Concern in the financial market driven by fears of a national depression and the US financial crisis has not affected our financing opportunities. A lower interest rate could possible benefit properties in the Öresund region which is expected to achieve higher growth than elsewhere. Increased interest driven by good business prospects is compensated for by lower vacancy levels and higher lease levels. High interest rates can also provide interesting business opportunities.

Another challenge is the environment that occupies more of our and our clients’ con- sciousness. We work actively with environmentally-friendly alternatives and reduced energy consumption and, for this reason, we have been ranked as Sweden’s best property company in Folksam’s Climate Index.

But what is most important is that we have both the financial resources and competent employees whom I would like to thank for their excellent endeavours during the year, and for the commitment to further develop Wihlborgs’ business.

” subject to approval by the local authority we will develop Ideon so that it becomes

an attractive area with space for double as many tenants.”

CEO’S rEvIEW

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4 1924 In 1924, master builder O P Wihlborg estab-

lished a building company in Malmö that provided the name for Wihlborgs Fastigheter AB.

For a protracted period, the Company built, owned and administrated properties in Malmö.

1985 Building operations are sold to the Active Group, based in Malmö, and the Company becomes a traditional property company.

1990 Wihlborgs Fastigheter AB is listed on the Stock- holm Stock Exchange’s O-List. Peab AB becomes the new majority shareholder in Wihlborgs.

1993 In conjunction with a new share issue of SEK 371m, Wihlborgs Fastigheter AB acquires 33 properties in Sweden, of which 22 properties are located in Malmö and Helsingborg. Bergaliden becomes the new major shareholder in

Wihlborgs Fastigheter AB.

1995 Fastighets AB Stillman is acquired and Wihlborgs Fastigheter AB gains properties in Malmö, Lund and Landskrona with an area of 44,000 sq.m.

1996 Wihlborgs Fastigheter AB acquires 76 properties with a lettable area of 178,000 sq.m. from Retriva (currently Kungsleden). Wihlborgs and Fastig- hets AB Storheden conduct an exchange of properties, through which the Company takes over 35 properties in Skåne with 78,100 sq.m. The Board of Directors in Wihlborgs makes a public offer to acquire M2 Fastigheter AB on 22 Novem- ber 1996, involving the acquisition of properties with an area of 364,000 sq.m. The company establishes a presence in Denmark through the acquisition of two properties.

1997 During the spring, Wihlborgs Fastigheter AB

1998 Wihlborgs Fastigheter AB completes the acquisi- tion of Klövern Fastigheter AB and gains properties in Malmö and Helsingborg, as well as in other parts of Sweden and the Netherlands, with total lettable area of 934,000 sq.m. On 14 April 1998, Wihlborgs Fastigheter AB makes an offer for Fastighets AB Storheden. As a result, the Stockholm area becomes a key part of the Com- pany’s operations.

2000 JM, Peab and Wihlborgs Fastigheter AB establish a new joint development company for the development of the Dockan district in Western Har- bour, Malmö.

2004 Wihlborgs Fastigheter AB acquires the Stockholm- based property company, Fabege AB. In Decem- ber, the Board of Directors in Wihlborgs Fastig- heter AB proposes that the Annual General Meeting of 9 May 2005 approve the distribution and separate listing in accordance with Lex ASEA of the property portfolio in the Öresund region.

2005 The distributed company is given the name Wihlborgs Fastigheter AB and the distributing company changes its name to Fabege AB.

2006 Wihlborgs acquires 14 properties in Malmö with a total lettable area of 182,000 sq.m. from Tornet.

Wihlborgs acquires Ideon AB in Lund by purchasing 40 per cent of the shares. The acquisition of the remaining shares is subject to government approval. The purchase includes the property Betahuset at Ideon (Vätet 1) totalling 24,000 sq.m.

During May Wihlborgs implements a 2:1 share split, one old share was replaced with two new shares.

History

The Annual General Meeting of 9 May 2005 decided in accordance with the Board’s proposal to change the name of the Company from Wihlborgs Fastigheter AB to Fabege AB. This occured as a result of the impending distribution of the Company’s portfolio in the Öresund region under the Company Wihlborgs Fastigheter AB. The following section presents the history underlying the development of the property portfolio in the Öresund region. The company referred to below up to the year 2004 as Wihlborgs Fastigheter AB is the current Fabege AB.

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HISTOrY

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5 Business concept

Wihlborgs shall own, manage and develop commercial properties with a focus on well-functioning sub-markets in the Öresund region.

Overall objectives and strategies

Wihlborgs aims to be the leading and most profitable property company in the Öresund market. To attain this, Wihlborgs must:

Consolidate and further strengthen its market posi- tions in the Öresund region by concentrating on selected sub-markets.

Actively improve the property portfolio by purchasing, developing and divesting properties. Realisa- tion of value growth will form a key part of the operations.

Actively and efficiently manage the property portfolio with the focus on high cost-effectiveness and a high occupancy rate by being a market leader in each sub-market.

Strengthen customer relations by active involve- ment and offering a high level of service in order to create the necessary conditions for long-term rental relationships.

Actively cultivate the rental market to obtain new customers and strengthen the brand in order to become the preferred choice for customers.

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Financial goals Wihlborgs is to show:

A return on shareholders’ equity that exceeds the risk-free interest rate by at least four percentage points¹.

An equity/assets ratio of a minimum 25 per cent and a maximum of 35 per cent.

An interest coverage ratio to at least 2.0.

The above financial goals have to be achieved through the active development of assets and liabilities and capital structure. Wihlborgs shall always have a capital structure that gives the maximum return to shareholders, with due consideration of risk.

Dividend policy

Wihlborgs’ dividend policy is based, firstly, on transferring part of the profit generated by property management and, secondly, on transferring realized value growth:

The dividend is to amount to 50 per cent of profit from ongoing property management².

In addition, 50 per cent of realised profits from property sales are to be distributed³.

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Business concept, overall objectives and strategies

Wihlborgs is a property company focusing on commercial property in the Öresund region. The criteria for long-term and acceptable value growth are created by activities being characterised by a clear, cashflow-oriented strategy where the creation and realisation of added value are important factors.

Together with a clear dividend policy the overriding objective is to create a good overall yield for the shareholders.

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1. The risk-free rate of interest is defined as the rate on a 5-year Swedish government bond.

2. Pre-tax profit, excluding realised and unrealised changes in value, charged with 28 per cent standard tax.

OPErATIONS

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Organisation and employees

Wihlborgs is characterised by a flat organisation with short decision paths.

Wihlborgs’ organisation is designed to increase profit from day-to-day management while creating new business at the same time.

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Legal structure

Wihlborgs Fastigheter AB (publ), corporate ID number 556367- 0230, is the parent company of a group with a total of 120 group companies and four joint ventures.

Joint ventures

Wihlborgs owns 40 per cent of Medeon AB. This is a marketing company that is operated together with Malmö Stad.

Wihlborgs also owns 33.3 per cent of Dockan Exploatering AB.

The company is engaged in the production of detailed plans and infrastructure investments for the new Dockan district located at Västra Hamnen in Malmö. JM and Peab each own equal shares in Dockan Exploatering.

Operating structure

The operating organisation comprises the Management and the Business Development function.

Management is adapted according to local market criteria and is organised as seven geographically-distributed management units. The purpose is to create the criteria for management that is effective and close to clients.

All management is provided by the company’s own staff so that is can be close to clients and can quickly respond to their expectations and demands. It is important that employees know their regular clients and are available.

Each management unit has a manager with a clear profit responsibility. The manager sets up the guidelines for his activity in close collaboration with group management.

Business development comprises two parts – Projects and Development, and Transactions. Projects and Development has a central role for improvements to the property portfolio and is responsible for new and redevelopment projects as well as procure- ment and monitoring. Investments in properties are prepared and evaluated by the respective manager together with a project manager. Investments in excess of SEK 10m shall be approved by

tation with Administration to make the most of skills it has in terms of local market knowledge etc. When assessing property acquisitions the analyses conducted include the property’s long-term yield, technical standard, development potential and ten- ant structure.

In addition to the operative organisation there are the group functions Economy/

Finance as well as Communication and IT.

Group Management comprises the CEO, economy and finance director, property director, information director and assistant to the CEO. The responsibilities of group management include overall responsibility for strategy issues and business development, economic control and profit monitoring as well as issues concerning information.

System support

Wihlborgs employs different system supports to effectivise its activities. The Vitec Nova lease system is used within lease administration. This is where all lease contracts are registered. All administration that applies to tenants is managed from Vitec. The Visma Control economy system is used for day-today accounting while Ocra is used for con- solidated accounting. All invoicing is proc- essed digitally with scanned invoices in the Baltzar invoice processing system.

Wihlborgs has developed its own tool to support property management and administration. This is integrated with the lease

OrGANISATION AND EMPLOYEES

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Group Management Purchase

Environment

Business Development Economy/Finance

Communication/IT Management

Projects and

Development Transactions Malmö 2 management units

Lund 1 management unit Helsingborg 3 management units Köpenhamn 1 management unit

7 dealing with operating costs, income reports

and analysis of lease contracts.

Hemborgen also contains an archive of all documents that concern properties. This is where all information can be entered in order to monitor and follow up due dates and updates.

Employees

The skills and commitment of the employees are vital to the group’s development and for the quality of the service offered to customers. Staff policy is structured and strongly linked to the company’s activities.

As at 1 January 2008, the number of employees was 84. The proportion of employees with an academic qualification was 29 per cent. The average age of the employees was 49 and the proportion of women amounted to 31 per cent. The company’s staff turnover in 2007 amounted to 6.5 per cent.

Sickness absence

Wihlborgs has a low level of sickness absence which in 2007 amounted to 2.8 (3.5) per cent. The proportion of long-term sickness absence of the total sickness absence for 2007 was 31.5 (58.1) per cent. All employees are covered by health care insurance.

Wellness

Good health is a resource for the individual as well as the company. This is why wellness is of significant importance to Wihlborgs’ activities and profitability. All employees are offered keep fit training in the form of differ- ence exercise programmes provided through Friskis&Svettis.

Skills development

Wihlborgs encourages initiatives from employees for competence development. It is important to have the opportunity for development at work in order to satisfy customer demands with knowledge and an individual sense of work satisfaction. Since 2006, Wihlborgs has participated in the Växtkraft Mål 3 (Growth Objec- tive 3) project that was completed on 31 May 2007.

All company car and service vehicle drivers underwent training in EcoDriving in the autumn of 2007 in collaboration with an authorised driving school.

Incentive programme

Employees in the group, with the exception of the CEO, benefit from the profit-sharing fund. The purpose of the profit-sharing fund is to stimulate employees to achieve predetermined objectives that are part of the company’s activities.

A whole proportion in the event of maximum allocation corresponds to shares in Wihlborgs to a value of one base amount which is currently SEK 41,000. All employees receive equal shares in the fund irrespective of their position in the company.

The share amount in the case of part-time employees or those who work only part of the year is adjusted.

All funds that are allocated to the profit-sharing foundation shall be invested in shares in Wihlborgs. Dividends are also rein- vested in Wihlborgs shares.

All management is provided by the company’s

own staff so that is can be close to clients and can quickly respond to their expectations and demands.

OrGANISATION AND EMPLOYEES

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Ecological sustainability

Economic sustainability

Sustainability development

Social sustainability

8 ment through economic, ecological and

social factors being applied to our long- term environmental commitment.

We endeavour to achieve environmentally-harmonised solutions during all pro- curement of products and services from contractors and suppliers.

We shall be receptive to innovations in the environmental area and shall keep up to date with current environmental information. External information to tenants and the public concerning our environmental work shall be characterised by openness.

Environmental competence within the company shall be developed continuously.

Legislation shall be considered a minimum requirement.

Environmental objectives for 2007 Wihlborgs’ principal environmental aspect shall lie within the framework of energy effectivisation. Obviously we also work with other aspects as part of our environmental objectives. An audit took place in 2007 of the properties in which there was a risk of PCB.

Environmental objectives for 2007:

Reducing electricity and heat consumption (kWh/m²) by 2 per cent in comparison with 2006.

All properties from between 1956 and 1973 shall be checked for PCB.

Long-term environmental objectives from

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Wihlborgs environmental commitment – taking responsibility

A further environmental year has passed at Wihlborgs and, for us, our commitment to the environment is continuous and long-term. Today’s growth has meant an increased awareness of the private sector’s important role in contributing to a sus- tainable society. The term sustainable business development is often used in these contexts. Wihlborgs’ environmental work is managed as an integral component of property management and business development.

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Sustainable development

The term “sustainable development” was coined by the Brunt- land Commission in 1987. This defined the term as “a form of sustainable development which meets the needs of the present without compromising the ability of future generations to meet their own needs”. For us, working with sustainable business development is being aware of our impact on the environment (ecological sustainability) without disregarding health aspects and human needs (social sustainability) and ensuring that we secure our use of resources in the most efficient manner possible (economic sustainability).

Wihlborgs’ new Environmental policy

Wihlborg’s previous environmental policy has been updated and modernised since June 2007 and is as follows:

Wihlborgs’ environmental commitment shall be a natural

THE ENvIrONMENT

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9 Environmental objectives for 2007 concern-

ing energy-effectivisation were achieved by 31 December. Other objectives continued into 2008.

Environmental objectives for 2008 During 2008 we will continue to work on energy-effectivisation methods and meas- ures related to PCB since PCB auditing shall be completed by 30 June 2008. This means that environmental objectives for 2007 and 2008 are somewhat similar. But in 2008 when we are sure that we are running according to plan in terms of PCB we will renew our environmental objectives for future years.

Environmental objectives for 2008:

Reducing electricity and heat consumption (kWh/m²) by 2 per cent in comparison with 2007

All properties from between 1956 and 1973 shall be checked for PCB.

Compile a redevelopment plan on the basis of this PCB inventory.

Long-term environmental objectives from 2007 to 2009. Reducing the consumption of electricity and heating (kWh/m²) by 6 per cent.

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As a gold sponsor of The Swedish Society for Nature Conservation we take responsibility for the future and contribute to the society’s important

work on sustainable development and a better environment.

Carbon Disclosure Project (CDP)

CDP is an independent, not-for-profit organisation whose purpose is to collaborate with a company and demonstrate to its shareholders which driving forces within the specific company can bring about climate change. CDP makes it possible in a broader perspective to openly give an account of direct and indirect emissions of carbon dioxide and other substances, and contingencies for dealing with environmental issues. Reporting to CDP is voluntary and is made to the Nordic body of the organisation. Wihlborgs became aware of the report after the expiration of the reporting date. We did, however, decide to submit give an account of our information to CDP but Wihlborgs will not be included in the 2007 report. It is our intention to take part in future years and, through open dia- logue, we will give an account of environmental opportunities and risks associated with our activities.

Folksam’s Climate index 2007

The purpose of Folksam’s Climate index is to encourage Swedish companies to work towards more systematic climate activities and highlight the companies who are most successful in their climate endeavours. Participating companies will give an account of activities to Folksam who will then compile a holistic view of the company’s climate work. For the second year in a row, Wihlborgs tops the list in the property industry by achieving no less than 82 out of 100 points. This, in turn, means that we are among the ten best companies in Sweden.

New in the environmental area 2007

Documenting a company’s environmental work is one thing – taking action is another. Our environmental work is characterised by something new happening all the time in the environment.

THE ENvIrONMENT

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10 The following happened in 2007:

The purchase of green electricity promotes renewable fuels – In its negotiations as of and including 2009, Wihlborgs has different conditions for the purchase of electricity. This means that we will purchase what is referred to as “Electricity that is a good environmental choice” from Vattenfall. This source of electricity produces 95 per cent hydroelectric power and 5 per cent wind power. These sources comply with The Swedish Socie- ty for Nature Conservation’s criteria for environmentally-friendly electricity generation. In other words, Wihlborgs purchases shares that correspond to 100 per cent “Electricity that is a good environmental choice”.

New company car policy – Wihlborgs has adopted a new compa- ny car policy which permits only what are referred to as environmental vehicles. The Swedish National Road Administration’s definition of an environmental vehicle means that the emissions of the greenhouse gas carbon dioxide from cars that run on petrol or diesel (or hybrid vehicles) shall be less than 120 g/km.

Vehicles that are run on renewable fuel are permitted to have a fuel consumption corresponding to 9.2 litres petrol per 100 km.

EcoDriving – A kick-off with EcoDriving was arranged in connec- tion with Wihlborgs’ new company car policy. Briefly, EcoDriving concerns technology, the environment and economy working together. By practicing EcoDriving, you can reduce the costs of servicing and maintenance, your fuel consumption, and your carbon dioxide emissions. To learn EcoDriving you need to drive over the same stretch twice – firstly without comments from your driving instructor and secondly with your driving instructor’s comments.

Wihlborgs’ average improvement amounted to 10 per cent.

To give an example, a car that runs on petrol and is driven 40,000 km/year can make savings of SEK 4,800 by practicing EcoDriving. In addition to economic savings you can also reduce your impact on the environment by making a savings in carbon dioxide emissions of 940 kg/year.

Company bicycles – Wihlborgs is one of the companies which, together with the city of Malmö, has been invited to participate in the “Företag på cyckel” campaign (Companies on bikes). The project will last for a year and its purpose is to reduce emissions such as carbon dioxide by choosing to travel by bike instead of the car. In total we are 53 companies that participate and also compete with each other. Since companies are of different sizes, the distance travelled by bike counts. The company that travels the furthest distance per bike by the end of April 2008 will win first prize.

Wihlborg Miljönytt – This is Wihlborgs’ environmental newslet-

SNF Gold sponsor, The Swedish Society for Nature Conservation – Wihlborgs decided at the end of 2007 to sponsor SNF as from the beginning of January 2008. SNF has the knowledge and competence to perceive threats and to develop solutions to environmental problems. As a gold sponsor of The Swedish Society for Nature Conser- vation we take responsibility for the future and contribute to the society’s important work on sustainable development and a better environment.

The purchase and choice of materials during rebuilding and new constructions Those responsible at Wihlborgs for the environment and purchasing work continuously on developing methods which can ensure that our suppliers and contractors are con- scious that they can affect our environment and can offer products and services that cause the least possible environmental impact. A checklist has been compiled to identify as early as the bidding stage wheth- er a contractor or supplier is engaged in any form of environmental work. When choosing materials for rebuilding, we work on the basis of Folksams Byggmiljöguide (Folk- sam’s Building Environment Guide) since this provides guidelines on what can be used from an environmental perspective. In the case of new constructions, we compile an environmental programme for the specific property.

This programme considers energy efficiency, moisture protection, choice of material, light quality and good acoustics in detail.

Environmental handbook and environ- mental database

To facilitate day-to-day work, strict demands are made to ensure that environment-related information is available to employees. This information can be found in Wihlborgs’ environmental handbook and is continuously updated. Wihlborgs has even developed an environmental database that contains information on PCB, refrigerants,

THE ENvIrONMENT

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Acoustics

For the second year in a row, Wihlborgs tops the Folksam’s Climate index 2007 list in the property industry

green electricity from 2009

light quality

Environment sponsor

Energy efficiency

Environmental handbook and environmental database

Moisture protection

Choice of material

EcoDriving Environmental programme

for new constructions

Company car=environmental vehicles

Company bicycles

11

THE ENvIrONMENT

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Number of shares (’000)

12

The share

Wihlborgs’ shares were listed on the Stockholm Stock Exchange’s O list on 23 May 2005. Wihlborgs have been on the Nordic Mid Cap list since October 2006. At the end of the year the share capital amounted to SEK 192m distributed across 38,428,364 shares and 37,431,014 remaining shares. Each share is entitled to one vote and each person entitled to vote at the annual general meeting may vote for the full number of shares held and represented by this person. All shares are entitled to an equal share in Wihlborgs’ profit. The company has repurchased 997,350 of its own shares. The board has not exercised its authority to decide on a new issue of no more than 10 per cent of the remaining shares.

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Market capitalisation and turnover

In 2007 there was a turnover of a total of 36.8 million shares which corresponds to 147,000 shares per day. This corresponds to a turnover rate of 99 per cent of the average number of outstanding shares. At the year end the price of a Wilhlborgs’ share was SEK 115.75 which, with all outstanding shares, corresponds to a share value of SEK 4.3 billion. The highest and lowest quota- tion for the Wihlborgs’ share in 2007 was SEK 173.00 and SEK 103.00 respectively.

Total return during the year, inclusive dividend of SEK 5.5, was -15.1 per cent.

Net worth in the balance sheet

The balance sheet’s assets and liabilities shall reflect the market value. Consequently, the net worth is calculated on the basis of the balance sheet’s equity adjusted for the minority share that amounts to SEK 120 million. In this context, it shall be observed

that Wihlborgs’ actual tax is lower that the nominal tax rate of 28 per cent. This is because the sale of properties is usually done without a tax cost and that the group receives a tax credit through different meas- ures. This is primarily through the use of maximum tax write-downs which result in tax discounting.

Shareholders’ equity per share, different tax rates

28 % 14 % 10 % 5 % 0 %

116.29 130.89 135.07 140.28 145.49

Dividend and dividend policy

Wihlborgs’ dividend policy is based partly on transferring 50 per cent of the current investment result, and partly 50 per cent of

■ swedish private ■ Financial companies,

shares development 2007 shareholders, 31 Dec 2007

THE SHArE

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13 the realised result from property sales. Both

were reduced by a standard tax rate of 28 per cent. The board’s dividend proposal for 2007 is SEK 6.25 (5.50). This corresponds to a direct yield of 5.4 per cent based on the share price at the end of the year.

If the annual general meeting approves the board’s proposal for a dividend of SEK 6.25 and the record day of 28 April, the dividend will be paid on 2 May 2008. The Wil- hlborgs’ share will be traded including the dividend up to and including the day of the annual general meeting, Wednesday 23 April 2008.

Ownership structure

The largest shareholders in Wihlborgs are Maths O Sundqvist and Brinova Fastigheter AB who own 11.0 and 10.3 per cent of the shares respectively. At the end of 2007, the ten largest shareholders held 41.8 per cent of the shares and the number of shareholders amounted to 27,505, an decrease with approximately 2,000 shareholders. The proportion of foreign owners at the end of December amounted to 25.2 per cent, an decrease of 5.0 per cent since the previous year end. Of the foreign owners, 35 per cent are from the USA, 27 per cent from Great Britain, 9 per cent from Luxemburg and 4 per cent from The Netherlands.

Largest shareholders in Wihlborgs at 31 december 2007

Number of shares thousands

Percentage of shares and capital, %

Maths O Sundqvist 4,110 11.0

Brinova Fastigheter AB 3,867 10.3

Investment AB Öresund 2,110 5.6

Länsförsäkringar Funds 1,327 3.5

Robur Funds 1,026 2.7

Handelsbanken Funds 1,017 2.7

SEB Funds 698 1.9

Mats Qviberg including family 661 1.8

Förvaltnings AB Färgax 450 1.2

Skandia Funds 395 1.1

Other shareholders reg. in Sweden 12,334 25.2

Shareholders reg. abroad 9,436 33.0

Total outstanding shares 37,431 100.0

Share buy-backs 997

Total registered shares 38,428

stock symbol WIhl listed since 2005

Traded oMX Nordic list

segment Mid Cap

sector Financial

round lot 100 shares

W I H L B O r G S ’ F A C T S / S H A r E

The share/Key figures 2007 2006 2005

share price at year-end, sEK 115.75 142.75 96.00

Development of share price during

the year, % -22.18 48.70

Profit per share, sEK 29.08 22.12 12.33

P/E ratio, times 4.0 6.6 7.8

P/E ratio current management, times 13.9 17.8 16.0

shareholders equity per share, sEK 116.29 92.30 73.96

Dividend per share, sEK 6.25 5.5 3.5

Yield, % ¹ 5.4 3.9 3.6

Total return during the year, % ² -15.1 52.3

Number of shares at year-end 37,431 38,428 38,428

Average number of shares 38,304 38,428 38,428

1. Dividend related to share price at year-end. 2. Development of share price in addition to dividend

THE SHArE

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5 4,5 4 3,5 3 2,5 2 1,5 1

Sweden Denmark Öresund Skåne

14

Skåne is expected to cope with a recession better

There are an increasing number of signs that business activity in Sweden will decline.

At the same time, there is considerable evidence that Skåne will experience a lesser decline than the rest of Sweden thanks to the Öresund region. According to the Øresund Institute’s forecast, Skånes’ gross regional product will grow by 2.7 per cent in 2008.

This can be compared with 2.4 per cent for Sweden as a whole and 1.6 percent for Själland in Denmark. The growth in the region will result in the expectation that the level of vacancies in properties will decrease..

■

International impact

There is a lot to indicate that the business cycle in Sweden is facing a downturn. The international guide interest rates reached their lowest level in 2005 and have increased since then by approximately two percentage points within the EU, the Unit- ed Kingdom, Denmark and Sweden. The increased interest levels make it more advantageous to invest in interest-bearing secu- rities while, at the same time, it will become more expensive for consumers to borrow. This, in turn, is expected to break the 13- year price growth of housing which will instead go into decline.

When property prices fall, households will feel less affluent and this will impact on private consumption.

The decline is seen most clearly in the USA where house sales are on the decline while increases in employment have come to a halt. Despite the Federal Bank having successively reduced the interest rates and stimulation packages have been launched, there are still expectations that the price of houses will continue to fall and credit losses will increase. This can reduce the availability of capital. Disquiet can also cause credit providers to be more cautious and this will increase risk premi- ums on the market.

Where Sweden is concerned, this will result in a weakening of the export sector through a lower demand and a strengthening of the currency against the US dollar. At the same time, Sweden is experiencing a similar risk scenario on the housing market as in the USA. The effects of this include a fall in house prices since the peak prices of Sum- mer 2007.

Sweden is still experiencing a high rate of growth in employment, private consumption and GNP but the rate of inflation reached 2.7 per cent in October 2007. At the time of writing, the Riksbank increased the interest rate by 0.25 per cent despite concern in the credit and housing market.

The justification behind the decision is that the Riksbank considers that the business cycle remains good and wishes to maintain its inflation target despite considerable uncertainty.

A rising interest rate that points to a favourable business cycle has, of course, a favourable impact on all property companies. A falling interest rate indicates the opposite. This can result in interesting effects for Scania where growth is expected to remain higher than the country as a whole. The Riksbank’s decision is based on the development of general growth in Swe- den and can result in Scania benefiting from a position where the interest rate is reduced despite improving business and commerce.

Balanced decline in the Öresund region

Forecast gross regional product Source: Øresundsinstituttet

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Skåne Öresund Själland 120

115

110

105

100

95

90 2008 2011 2014 2017 2020 2023 2026

25

15

5

-5

-15

-25

-35 2001 2002 2003 2004 2005 2006 2007

Sweden Malmö Denmark Copenhagen

15

Unemployment in sweden and Denmark 2000-2007, per cent/year Source: Nordea

Forecast increase in population 2008-2026, per cent/year Source: Nordea

before Sweden in the business cycle, has begun to sense slowing-down trends. This is attributed partly to higher capacity usage limiting growth and partly that demand is beginning to decline. This will lead to more moderate growth in consumption.

The Øresund Institute’s forecast shows that even if Skåne is experiencing a reduced increase in growth, the gross regional product (GRP) will grow by 2.7 per cent during 2008. This is higher than both Sweden as a whole (2.4%) and Själland in Denmark (1.6%).

The differences in business cycles between Själland and Skåne will also mean that a number of Danish companies will enjoy increased interest and an increased capacity to develop the market in the south of Sweden.

As a consequence, Skåne will probably experience a milder slowdown in its business cycle compared with Sweden as a whole. Other factors that indicate this are that Skåne has a broad business and commerce structure, an increasing population and an increase in employment.

An increasing number of companies are choosing to move their head office to Malmö which, in turn strengthens the positive view of the region. Of the Danish companies that have chosen to become established in Swe- den, 25 per cent chose Skåne and primarily Malmö. This is a proportion which, according to the Øresund Institute, is increasing steadily. Since the Öresund bridge was opened in 2000, 28 Nordic head offices have been established or located in the Öresund region.

This can be compared with 26 in the Stock- holm region, 3 in Gothenburg, 3 in Oslo and 1 in Helsinki.

Unemployment in Skåne in 2007 was 2.6 per cent compared with 4.6 per cent for Sweden as a whole. AMS forecasts that unemployment in 2008 will fall to 2.3 per cent in Skåne and 4.3 per cent in Sweden as a whole. Furthermore, it is expected that an additional 12,200 people will gain employment in Skåne in 2008.

The proportion of Swedes who take up employment in

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18

16

14

12 1 950

1 750

1 550

1 350

1 150

950

750 2000 2002 2004 2006 2008E

CBD Western Harbour Secundary location Prime suburb

16

office rent history Malmö 2000-2008, SEK per sq.m./year.

Source: Newsec

Vacancy rate Malmö 2000-2008, per cent/year Source: Newsec

Copenhagen continues to be high and is steadily increasing. In the first eight months of 2007, the number of Swedes employed in Denmark rose from 1,600 to 4,400. This represents an increase of 178 per cent. In total an average of 6,330 Swedes work in Copenhagen. As the Swedish labour market strengthens, the demand for manpower will also increase in Sweden. This can create a more rapid increase in wages which, in turn, can have an impact of companies’ profitability. At the same time, a decline in business in Själland will probably balance growth and create a flow in the other direction. The number of employees on the Danish side of Öresund is more than 1,200,000 people. This can be compared with 1,100,000 in Stockholm despite the larger population of the latter.

According to Ørestat, the population of the Öresund region is expected to increase from 3.6 million in 2007 to approximately 4 million in 2027. The increase will be greatest over the next 10 years and will be more on the Swedish side. Over the last year, the increase in population has been greater on the Swedish part of the region. In 2006, the population increased on the Danish side by 7,800 and by 15,000 on the Swedish side. The forecast points to the population continuing to increase faster on the Swedish side both in absolute and relative terms.

Low vacancy level in an expansive region

The growth in the region and companies moving to Malmö will result in the level of vacancies in properties continuing to decrease. This is despite a large number of properties being planned and constructed.

This will lead in turn to lease costs increasing. In Malmö, lease costs have exceeded SEK 2,000 per sq.m. for the first time and, in some areas such as Västra Hamnen, the current level is SEK 2,150 per sq.m.

Malmö is expected to contribute a total office space of 65,000 sq.m. up to 2009. The demand is expected to increase by 30,000 sq.m.

per annum over the next three years. This is pure growth that excludes inward movements.

This means that the planned newbuilding is still at a lower level than the anticipated demand. If the business cycle declines more rapidly than expected there is also the option of postponing planned projects.

Over the last 10 years, Lund has experience growth of 7.3 per cent per annum.

This can be compared with 3 per cent for Sweden as a whole. This makes Lund Swe- den’s fastest growing major local authority according to Nordea’s report. The growth is driven by companies such as Sony Ericsson, Ericsson Mobile Platforms and Axis. These alone are expected to grow by just under 700 people in 2008.

In Copenhagen, the property market has for some time focused on housing but now that this market is starting to cool, attention is being directed at commercial projects where lease levels have been low compared with the rest of Europe. Where industry premises are concerned, the levels have even been lower than in Malmö. Compared with other European cities, yields on properties in Malmö have been high whereas in Copenhagen they have been among the lowest. Over the last year and a half, the level of vacancies for commercial properties in Copenhagen has however fallen from 8 to 3.7 per cent. This creates the potential for higher leases, primarily in newly-constructed modern office properties. These are still

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17

ProPerty Portfolio

1. Wihlborgs reports its investment properties (in accordance with IAS Investment Property) at their market value, which means that the book value corresponds to the market value of the investment properties. Properties classified as project properties (according to IAS) are reported at their acquisition value. With the exception of a land site in Malmö, all Wihlborgs properties are classified as investment properties.

Helsingborg, 30 % Malmö, 52 %

Rest of Öresund, 18 %

rental value Per region

Industrial/

Warehouse, 28 %

Office/Retail, 71 % Project

& land, 1 %

rental value Per ProPerty category

Rest of Öresund, 20 %

Malmö, 52 % Helsingborg,

28 %

Book value

By region Book value

By ProPerty category Project & land,

4 % Office/Retail,

75 % Industrial/

Warehouse, 21 %

Wihlborgs’ property portfolio is located in the Öresund region – the most densely populated region in the Nordic region with 3,6 million inhabitants, of whom 2,4 million live in Denmark and 1,2 million in Sweden.

Wihlborgs property portfolio as of 31 December 2007

Wihlborgs’ property portfolio consists of commercial properties in the Öresund region, located in Malmö, Helsingborg, Lund and Copenhagen. As of 31 December 2007, the property portfolio comprised 245 properties with a total lettable area of some 1,241,000 sq.m. Fifteen of these properties have a site leasehold right. The book value of the properties was SEK 13,397m, which corresponds to the properties’ assessed market value

¹

. The total rental value was SEK 1,224m and the contracted rental income was SEK 1,135m on an annual basis. The economic occupancy rate was 93 per cent.

■

The properties in Malmö and Helsingborg accounted for 82 per cent of the total rental value and 80 per cent of the properties’

book value. The rental value of office and retail properties, in addition to industrial and warehouse properties, totalled 71 and 28 per cent of the total rental value respectively.

The properties in Malmö and Helsing- borg, where Wihlborgs is one of the leading property companies, are divided into sub- markets with different market conditions.

Malmö is divided into the sub-markets of Centre & Western Harbour, Fosie & Lim- hamn and Northern Harbour & Arlöv. Cen- tre & Western Harbour, with a lettable area of 272,000 sq.m., is Wihlborgs’ largest sin- gle sub-market.

Helsingborg is divided into sub-markets of Centre, South and Berga. The Centre sub-market is Wihlborgs’ largest sub-market in Helsingborg.

In the rest of the Öresund region,

Wihlborgs primarily owns properties in Copenhagen and Lund with a property value of SEK 2,720m.

Wihlborgs implements regular value-creating project within the existing property portfolio by conversion, extension and new production. Projects & land account for SEK 508m of the total book value of the properties. Wihlborgs’ largest development area is the Dockan area, in Western Harbour in Malmö.

Wihlborgs current and future building rights in the Dockan area are estimated at 70,000 sq.m.

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18

ProPerty Portfolio

DistriBution By region anD ProPerty category Number of

properties Lettable area Book value Rental value Economic

occupancy Rental

income Net op.

income Yield Surplus ratio

sq.m. SEK M SEK/sq.m. SEK M SEK/sq.m. % SEK M % % %

Distribution by region

Malmö 122 570,889 6,990 12,243 634 1,110 92 585 411 5.9 70

Helsingborg 87 456,480 3,687 8,077 374 818 95 355 250 6.8 71

Rest of the Öresund region.¹ 36 214,077 2,720 12,707 217 1,012 90 195 146 5.4 75

Total Wihlborgs 245 1,241,445 13,397 10,791 1,224 986 93 1,135 807 6.0 71

Distribution by category

Offices /retail² 96 643,948 10,042 15,594 865 1,343 93 806 586 5.8 73

Industrial/warehouse 108 560,325 2,847 5,081 347 618 92 320 220 7.7 69

Projects & land³ 41 37,173 508 13,669 13 341 65 8 2 0.3 21

Total Wihlborgs 245 1,241,445 13,397 10,791 1,224 986 93 1,135 807 6.0 71

DistriBution By ProPerty category By region Region/

property category Number of

properties Lettable area Book value Rental value Economic

occupancy Rental

income Net op.

income Yield Surplus ratio

sq.m. SEK M SEK/sq.m. SEK M SEK/sq.m. % SEK M % % %

Malmö

Offices /retail 44 325,927 5,543 17,006 482 1,478 94 452 327 5.9 72

Projects & land 28 25,335 321 12,687 9 363 52 5 0 0.1 4

Total Malmö 122 570,889 6,990 12,243 634 1,110 92 585 411 5.9 70

Helsingborg

Offices /retail² 36 164,361 2,176 13,240 195 1,185 96 187 134 6,1 71

Projects & land 4 10,104 66 6,542 1 119 100 1 0 0.0 -2

Total Helsingborg 87 456,480 3,687 8,077 374 818 95 355 250 6.8 71

Rest of the Öresund region

Offices /retail 16 153,660 2,323 15,118 188 1,226 89 167 126 5.4 75

Industrial/warehouse 11 58,683 277 4,715 26 442 98 25 19 6.8 74

Projects & land 9 1,734 121 69 555 2 1,314 98 2 2 1.3 71

Total rest of the Öresund 36 214,077 2,720 12,707 217 1,012 90 195 146 5.4 75

Total Wihlborgs 245 1,241,445 13,397 10,791 1,224 986 93 1,135 807 6.0 71

DistriBution of lettaBle area By region anD tyPe of Premises

Lettable area by type of premises

Region Offices Retail Hotel Residential Other Total Proportion

sq.m. sq.m. sq.m. SEK/sq.m. sq.m. sq.m. sq.m. %

Malmö 288,650 37,278 231,117 2,947 6,023 4,874 570,889 46.0

Helsingborg 153,141 42,310 226,830 20,799 5,322 8,078 456,480 36.8

Rest of the Öresund region¹ 133,289 4,529 76,007 253 214,077 17.2

ProPerty Portfolio as of 31 DecemBer 2007

The schedule presented below is based on Wihlborgs’ property portfolio as per 31 December 2007. Rental income refers to contractual rental income on an annual basis as of 31 December 2007. Net operating income is based the earnings capacity on an

annual basis as of 31 December 2007, pro- ceeding on the basis of the contractual rental income, operating and maintenance costs and property administration over a rolling twelve months and property tax and ground rent.

Industrial/warehouse