no_14_tkd_interim_report_fo

Interim report for the first six months 2006/07

TK Development A/S

Announcement No. 14/2006

CVR 24256782

2/36 Interim report for the first six month 2006/07 for TK Development A/S

Contents

Summary 3

Company information 6

Consolidated financial highlights and key katios 7

Management’s review 8

First six months of the 2006/07 financial year 8

Outlook 18

Project portfolio 20

Project portfolio status 20

TKD Nordeuropa 22

Euro Mall Holding 26

TK Development, the Parent Company 28

Investment properties 29

Statement by the Executuve Board and Supervisory Board 30

Consolidated financial statements 31

Income statement 31

Balance sheet 32

Statement of changes in equity 34

Cash flow statement 35

Segment information 36

Interim report for the first six month 2006/07 for TK Development A/S 3/36

During the first six months of the 2006/07 financial year,

TK Development recorded a profit of DKK 2.5 million

after tax and minority interests against DKK -11.7 mil-

lion in the first half of 2005/06.

Management considers the performance for the period

to be acceptable.

Consolidated equity amounted to DKK 1,011.8 million

at 31 July 2006, corresponding to a solvency ratio of

22.9 % based on a balance sheet total of DKK 4,422.3

million at 31 July 2006.

The profit estimate for the 2006/07 financial year has

been revised upwards to about DKK 240 million after

tax and minority interests, compared to the previously

published profit forecast of DKK 200 million.

TKD Nordeuropa-continued strengthening of the project portfolio


TKD Nordeuropa recorded a profit of DKK 7.4 million after

tax. The profit after tax for the first half of 2005/06 amounted

to DKK 12.7 million. Management considers the perform-

ance for the period to be acceptable.

During the period under review, TKD Nordeuropa continued

to focus on improving the quality of its project portfolio and

also sold a number of projects developed and completed in

previous financial years. Further, TKD Nordeuropa developed,

sold and handed over a number of minor projects during the

period under review.

•

•

•

•

Project developments

Entré shopping centre, Malmö, Sweden

Since the balance sheet date, the project has been sold

to CGI – Commerz Grundbesitz Investmentgesellschaft

mbH on the basis of a rate of return of 6 %. The price is

expected to total about SEK 1.5 billion, and the sale is

based on forward funding.

Galerija Azur, Riga, Latvia

This is the Group’s first shopping centre project in the

Baltic States. Construction is completed, and the shop-

ping centre opened on 24 August 2006. The centre has

been sold to Meinl European Land Ltd., and all premises

have been fully let.

Euro Mall Holding-highly satisfactory performance

Euro Mall Holding continued the positive development from

the year before, realizing a profit after tax of DKK 110.6 mil-

lion in the first six months of 2006/07. The profit after tax for

the first half of 2005/06 amounted to DKK 114.7 million.

Management considers the performance for the period to be

highly satisfactory.

Euro Mall Holding’s earnings during the period were gener-

ated from fee income on sold development projects and sites.

In addition, continuing price increases in Central Europe gave

rise to a positive DKK 89.5 million revaluation of Euro Mall

Holding’s investment properties before tax and minority in-

terests.

Euro Mall Holding recorded satisfactory development in its

project portfolio during the period under review.

•

•

Summary

Summary



Galeria Biala, Bialystok, Poland

This project is being developed in a joint venture with

Meinl European Land Ltd. Construction has been initi-

ated, and the shopping centre is expected to be com-

pleted in autumn 2007. The current occupancy rate is

about 80 %.

The Plejada shopping centre, Sosnowiec, Poland

Since the balance sheet date, this shopping centre has

been sold to a company owned by the UK property in-

vestment company St. Martins Property Corporation

Limited based on a rate of return for the investor of 6.75

%. In addition, TK Development is developing an ex-

tension to the centre, also sold to an investor at a 6.75 %

rate of return based on forward funding. Construction

start is scheduled for autumn 2006.

Targówek Retail Park, Warsaw, Poland

This project consists of a 24,100 m² retail park for which

a building permit has been obtained. The current occu-

pancy rate exceeds 75 %. A letter of intent for sale of the

project to an investor has been signed, based on forward

funding.

Prague Outlet Center, Prague, Czech Republic

This project consists of the development of a 25,000 m²

factory outlet centre. An agreement regarding the sale of

25 % of the project was made during the period under

review. A local plan has been obtained for the project.

•

•

•

•

Summary

TK Development, the Parent Company

The half-year results for this part of the Group total DKK

-115.5 million after tax and minority interests, of which DKK

-22.2 million is attributable to minority interests. Manage-

ment considers the performance for the period to be unsat-

isfactory.

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

St. Petersburg, Russia.

Writedown of the receivable from the Field’s project

Management’s reassessment of the outstanding selling price

receivable resulted in a further writedown of DKK 110.0 mil-

lion before tax in the first half of 2006/07. This reassessment

may still be subject to uncertainty.

Revaluation of the Group’s German investment properties

During the period under review, the Group revalued its Ger-

man investment properties upwards by DKK 2.8 million be-

fore tax and minority interests.


Słoneczne Centrum Handlowe, Szczecin, Poland

This 4,500 m² shopping centre has been sold to a UK

investor after the balance sheet date.

•


31 Jan. 05 31 Jan. 06 31 July 06Gross project portfolio (DKK m.) 2,843 2,862 3,077Forward funding (DKK m.) 191 638 981Carrying amount of project portfolio (DKK m.) 2,652 2,224 2,096

Development potential in ’000 m²:Projects sold (’000 m²) 242 289 270Other projects (’000 m²) 778 720 791Total project portfolio (’000 m²) 1,020 1,009 1,061

Number of projects 90 90 96

Summary

Project portfolio

The earnings potential of the Group’s Project portfolio re-

mains satisfactory high.

Senior Vice President charged by the Polish po-lice

In June 2006, the Senior Vice President in charge of the

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

and charged by the Polish police with irregularities related

to obtaining regulatory approval (zoning permission) for the

Polish Galeria Biala shopping centre project in Bialystok.

The charge has been upheld, and the Senior Vice President

continues to be detained.

Charges brought by the public prosecutor for serious economic crimes

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

dividuals were charged by the public prosecutor for serious

economic crimes with fraudulent income recognition and

price manipulation concerning periods covering the 2000/01,

2001/02, 2002/03 and 2003/04 financial years, and in June

2006 another 13 projects were added to the charge. Manage-

ment still considers that the charges are based on misconcep-

tions concerning the Group’s accounting policies.

The issues covered by the charge do not affect the Company’s

current financial position.

Outlook

The profit estimate for the 2006/07 financial year has been

revised upwards to about DKK 240 million after tax and mi-

nority interests, compared to the previously published profit

forecast of DKK 200 million.

The revised profit estimate is underpinned by the profit gen-

erated in the first half of 2006/07, the expected completion

during the second half of 2006/07 of a number of projects in

progress that have already been sold, and the ongoing nego-

tiations regarding the sale of some of the Group’s completed

projects.

TKD Nordeuropa still expects to report a profit after tax of

around DKK 120 million. For more details, please refer to

stock exchange announcement no. 7/2006 for TKD Nordeu-

ropa A/S, dated today.

This interim report is available on the TK Development

Group’s website, www.tk-development.dk.

Further information regarding the 2006/07 interim report is

available from Frede Clausen, President and CEO, tel. +45 88

96 10 10.

The most important elements related to the Group’s project portfolio are shown below.


Company information

TK Development A/SCVR 24256782

ISIN code 0010258995Municipality of registered office: Aalborg

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

Tel: (+45) 8896 1010

Euro Mall Holding A/S

CVR 20114800

TKD Nordeuropa A/S

CVR 26681006

Supervisory board Poul LauritsenTorsten Erik RasmussenPer Søndergaard PedersenKurt DaellJesper Jarlbæk

Executive boardFrede Clausen

Robert Andersen

AalborgVestre Havnepromenade 7

DK-9000 AaborgTel: (+45) 8896 1010

KøbenhavnArne Jacobsens Allé 16, 3. t.v.

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

Warszawaul. Mszczonowska 2

PL-02-337 WarszawaTel: (+48) 22 572 2910

PragKarolinská 650/1CZ-186 00 Prag 8

Tel: (+420 2) 8401 1010

BerlinAhornstraße 16D-14163 Berlin

Tel: (+49) 30 802 10 21

VilniusA. Gostauto 40

LT-01112 VilniusTel: (+370) 5231 2222

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

StockholmGamla Brogatan 36-38S-101 27 Stockholm

Tel: (+46) 8 751 37 30

RigaLacplesa 20a

LV-1010 RigaTel: (+371) 7 821 811

100 %80 %


Consolidated financial highlights and key ratios

Consolidated financial high-lights and key katios

Financial highlights and key ratios

(DKK million.) Half-year 2005/06

Half-year 2006/07

Financial highlights:Net revenue 630.0 437.1Value adjustment. investment properties 93.7 92.3Gross profit/loss 143.0 157.9Profit/loss from ordinary activities before financing 70.7 82.8Financing, etc. -85.7 -76.8Profit/loss before tax -15.0 6.0Consolidated profit/loss 12.3 24.7Shareholders’ share of profit/loss for the year -11.7 2.5

Balance sheet total 4,836.8 4,422.3Property, plant and equipment 721.0 877.7of which investment properties 693.2 853.6Total project portfolio 2,563.6 2,131.7Equity excl. minority interests 289.7 900.9Equity 350.3 1,011.8Total capital resources* 1,128.8 1,507.7

Cash flows from operating activities** 352.4 149.1Net interest-bearing debt, end of year 3,252.2 2,406.7

Key ratios:Return on equity (ROE)*** -7.8 % 0.5 %Earnings before interest and tax (EBIT margin) 11.2 % 18.9 %Solvency ratio (based on equity) 7.2 % 22.9 %Solvency ratio (based on capital resources) 23.3 % 34.1 %Equity value (nom. DKK 20) 20.7 32.1Earnings per share (EPS-D) of nom. DKK 20 -0.8 0.1Dividend (in DKK per share) 0.0 0.0Listed price of shares (nom. DKK 20) 57 62

Key ratios adjusted for the issue of convertible bonds:Return on equity (ROE)*** -7.8% 0.8%Solvency ratio (based on equity) 7.2% 23.9%Solvency ratio (based on capital resources) 23.3% 35.0%Equity value (nom. DKK 20) 20.7 33.3Earnings per share (EPS-D) of nom. DKK 20 -0.8 0.1

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

*) According to IFRS. total capital resources include minority interests.

**) Calculated as cash flows from operating activities, corrected for increase/decrease in credit institutions.

***) Annualized.


Management’s review

First six months of the 2006/07 financial year

During the first six months of the 2006/07 financial year, TK

Development A/S recorded a profit of DKK 2.5 million after

tax and minority interests, which Management considers ac-

ceptable.

Income statement

Net revenue

The revenue for the first half of 2006/07 totalled DKK 437.1

million. Total revenue for the same period the year before

amounted to DKK 630.0 million.

The breakdown of net revenue by geographical segment is as

follows: 78.7 % in Northern Europe and 21.3 % in Central

Europe. Net revenue breaks down on the following business

segments: 82.4 % on the retail segment, 1.2 % on the office

segment and 16.4 % on mixed-segment projects.

Gross margin

The gross margin for the first half of 2006/07 amounted to

DKK 157.9 million, against DKK 143.0 million in the first

half of 2005/06. The gross margin was affected by a posi-

tive revaluation of the Group’s investment properties in the

amount of DKK 92.3 million as a consequence of improved

letting activity and a continued positive market development

in Central Europe, resulting in declining return requirements.

In addition, the gross margin was affected by a DKK 110.0

million writedown on the Group’s outstanding selling price

receivable for the Field’s project.

Staff costs and other external expenses

Staff costs and other external expenses amounted to DKK

70.1 million for the first half of 2006/07, the same level as the

first half of 2005/06.

Staff costs totalled DKK 47.8 million in the first half of

2006/07, thus up 12.7 % on the first half of 2005/06. The

number of employees in the Group increased from 190 at 31

July 2005 to 212 at 31 January 2006, and to 231 during the

period ended 31 July 2006. This increase is partly attribut-

able to new recruitments in Euro Mall Centre Management

(EMCM). The staff costs associated with these recruitments

are fully reimbursed by the owners of the shopping centres

managed by EMCM. In addition, new employees were re-

cruited for the strong reinforcement of the Group’s project

development activities. Moreover, compared to the first half

of 2005/06, staff costs were augmented by the costs of the

warrants scheme set up at the end of 2005.

Other external expenses totalled DKK 22.3 million against

DKK 25.7 million in the first half of 2005/06. In the pe-

riod under review, other external expenses were affected by

the reimbursement of costs defrayed in previous years. After

adjustment for this reimbursement, other external expenses

remained at the same level as in the comparable period in

2005/06.

Financing, etc.

In the first half of 2006/07, net financing expenses of DKK

76.8 million were recorded. This is a reduction of about

10 % compared to the first half of 2005/06. Financing ex-

penses were positively impacted by the rights issue that TK

Development A/S carried out in the 2005/06 financial year,

with the payment of net proceeds to TK Development A/S of

DKK 540.1 million at end-January 2006.

Tax on net profit or loss for the period

Estimated tax on the profit for the period constitutes a posi-

tive amount of DKK 18.7 million, which should be viewed

in light of the fact that a major part of the Group’s earnings

in Central Europe were realized as tax-free capital gains in the

interim financial statements.




Profit after tax

The Group’s profit after tax amounted to DKK 24.7 million,

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

DKK 2.5 million.

Balance sheet

The Group’s balance sheet total amounted to DKK 4,422.3

million at 31 July 2006, a decline of DKK 414.5 million, or

8.6 %, compared to 31 July 2005. The balance sheet total at

31 July 2006 was DKK 316.8 million lower than at 31 Janu-

ary 2006, a 6.7 % decrease.

Assets

Goodwill

Goodwill totalled DKK 29.1 million at 31 July 2006. The

carrying amount of goodwill has been subjected to an im-

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

writedown.

Investment properties

The Group’s investment properties are valued on the basis of a

discounted cash-flow model, where future cash flows are dis-

counted to net present value on the basis of a given rate of

return.

The valuation of the Group’s German investment properties at

31 July 2006 was based on a rate of return of 6 %. A positive

revaluation of DKK 2.8 million was made for these properties

during the period under review.

As a consequence of the improved letting situation for the

Group’s investment properties and sustained positive market

development in Central Europe, which led to declining re-

turn requirements, Management made a DKK 89.5 million

revaluation of the Group’s investment properties in the Czech

Republic and Poland, thus affecting the profit for the period

before tax and minority interests. The revaluation is based on

a rate of return of 7.0 % for Czech investment properties,

where the valuation at 31 January 2006 was based on a rate of

return of 8.0 %. The return requirement for the Group’s in-

vestment property in Poland declined from 7.5 % at 31 Janu-

ary 2006 to 6.75 %, corresponding to the return requirement

agreed when the property was sold; see the description below.

At 31 July 2006, the total value of the Group’s investment

properties constituted DKK 853.6 million, of which DKK

622.4 million relates to the Central European investment

properties in Euro Mall Holding, and DKK 231.2 million

relates to the German investment properties.

Deferred tax asset

The deferred tax asset in the balance sheet amounted to DKK

294.3 million at 31 July 2006, up DKK 25.0 million from 31

January 2006. Based on existing budgets and profit forecasts

for a five-year period, Management made a specific assessment

of the valuation of the deferred tax asset. Thus, Management

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

losses underlying the deferred tax asset.

Project portfolio

The total project portfolio declined by DKK 431.9 million,

from DKK 2,563.7 million at 31 July 2005 to DKK 2,131.7

million at 31 July 2006. At 31 January 2006, the project

portfolio amounted to DKK 2,260.4 million. This decline is

attributable to the growing use of forward funding for sold

projects. Moreover, in the first half of 2006/07, the Group

sold and handed over several completed projects that had been

part of its portfolio for some time.

Total prepayments based on forward-funding agreements

amounted to DKK 980.7 million at 31 July 2006 against

DKK 638.1 million at 31 January 2006, equal to an increase

of 53.7 %. At 31 July 2005, prepayments based on forward



funding amounted to DKK 449.9 million.

For a more detailed description of the Group’s project port-

folio, reference is made to the separate section on page 20 in

this interim report.

Receivables

Total receivables amounted to DKK 682.3 million, equal to

a DKK 121.5 million reduction compared to 31 July 2005

and a DKK 264.0 million reduction compared to 31 Janu-

ary 2006. This reduction was triggered mainly by a decline in

trade receivables.

Cash and cash equivalents

Cash and cash equivalents declined from DKK 363.8 million

at 31 January 2006 to DKK 323.6 million at 31 July 2006.

This decline is attributable to a reduction of the Group’s net

interest-bearing debt.

Liabilities and equity

Equity

Consolidated equity totalled DKK 1,011.8 million at 31 July

2006, of which DKK 110.9 million is attributable to minority

interests. At 31 January 2006, consolidated equity amounted

to DKK 986.7 million, of which DKK 87.6 million was at-

tributable to minority interests.

The increase in equity is largely attributable to the profit gen-

erated for the period.

Total capital resources amounted to DKK 1,507.7 million at

31 July 2006, equal to a solvency ratio of 34.1 %. Based on

equity alone, the solvency ratio is 22.9 %.

Long-term liabilities

The Group’s long-term liabilities represented DKK 302.7 mil-

lion at 31 July 2006, a DKK 247.1 million reduction from 31

January 2006. As a result of the sale of the Group’s investment

property in Sosnowiec, Poland (see detailed description be-

low), the pertinent liabilities were transferred from long-term

to short-term liabilities.

Short-term liabilities

Short-term liabilities declined by DKK 94.8 million from

31 January 2006 to DKK 3,107.8 million at 31 July 2006.

This decline is due to a combination of a DKK 48.3 million

increase in payables to credit institutions and a DKK 143.2

million reduction of trade payables and other debt.

Financial liabilities have been offset against trade receivables

and tied-up cash and cash equivalents, to the extent that the

Company has a right of setoff and also intends or is contrac-

tually obliged to realize assets and liabilities at the same time.

The amount offset against trade receivables totals DKK 89.6

million, and the amount offset against tied-up cash and cash

equivalents totals DKK 83.4 million, a total of DKK 173.0

million.

Cash flow statement

The cash flow statement shows positive cash flows from oper-

ating activities of DKK 206.1 million and negative cash flows

from financing activities of DKK 245.8 million. In the period

under review, the Group substantially reduced trade payables

and other debt.

DKK millionFirst 6

months 2006/07

2005/06 2004/05

Cashflows from operations *) 149.1 506.1 1,507.5

Net interest-bearing debt, end of period 2,406.7 2,577.9 3,603.7

*) Determined as cash flows from operating activities adjusted for changes in credit institutions



TKD Nordeuropa


TKD Nordeuropa recorded a profit of DKK 7.4 million after

tax. The profit after tax for the first half of 2005/06 amounted

to DKK 12.7 million. The gross margin amounted to DKK

84.2 million, against DKK 81.7 million in the same period

the year before. Management considers the performance for

the period to be acceptable.

TKD Nordeuropa continued to focus on improving the qual-

ity of its project portfolio during the period under review. In

addition, the half-year period saw the sale of projects devel-

oped and completed in previous financial years, including

commercial property for CMC at Vandtårnsvej in Copenha-

gen and the untenanted Daells retail premises in Copenhagen.

Further, TKD Nordeuropa developed, sold and handed over a

number of minor projects in the first half of the year.

Major projects contributing to the profit for the period in-

clude the following:

CMC, Vandtårnsvej, Denmark

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

ment and Nordkranen A/S have sold this property of about

8,300 m2, tenanted by CMC Biopharmaceuticals A/S. The

investor is a Luxemburg fund consisting of institutional inves-

tors and managed by Aberdeen Property Investors. The total

selling price amounts to DKK 182.0 million.

Daells, Copenhagen, Denmark

The untenanted retail premises in the converted building

housing the former Daells Varehus department store were

sold and handed over to a private investor during the period

under review.

AaB College, Hadsundvej, Aalborg, Denmark

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

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

college with course and conference facilities as well as accom-

modation for students. The total project area will cover about

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

6,610 m2 has been handed over to AaB, thus contributing

positively to the profit for the period.

Barkarby, Sweden

In July 2006, the first of four phases in total was handed over

to the investor. The first phase covers about 4,000 m2, and the

premises have been let to Jula and Färgtema. The investor buy-

ing the total project is the German investment fund Commerz

Grundbesitz Spezialfondsgesellschaft mbH.

Kristianstad, Sweden

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

which has been let to Intersport, was completed and handed

over to a private investor during the period under review. The

last phase was handed over to a private investor in September

2006, and the premises have been let to Pay C.


The Group’s first shopping centre project in Riga, Latvia, cov-

ers about 20,500 m2 and has been sold to Meinl European

Land Ltd. based on forward funding. The Group will receive

fee income, to be invoiced and settled on a continuous basis.

The fee income earned during the period under review has

been recognized in the profit for the period. The shopping

centre was completed after the balance sheet date and opened

on 24 August 2006. All centre premises have been fully let.



Since the balance sheet date, TKD Nordeuropa has sold the

Entré shopping centre project in Malmö to CGI – Commerz

/


CMC, Vandtårnsvej, Denmark. Daells, Copenhagen, Denmark.

Barkarby, Sweden


Shoppingcenter Entré, Malmö, Sweden


/


Grundbesitz Investmentgesellschaft mbH. The agreed selling

price reflects a return requirement of 6 %, based on forward

funding, and is expected to total about SEK 1.5 billion. TKD

Nordeuropa has entered into a turnkey contract with Skanska

for construction of the centre. The necessary regulatory ap-

provals have been obtained, construction has started and the

occupancy rate exceeds 50 %. The centre is scheduled to open

in the autumn of 2008. Moreover, during the period under re-

view, TKD Nordeuropa bought its joint venture partner out,

thus increasing its interest in the project to 100 %.

Storegade, Esbjerg, Denmark

This project consists of a 2,500 m² retail park, and lease

agreements have been concluded with Arca and Bileksperten.

The planning basis for the project has been approved, and

construction is expected to start at the beginning of 2007,

with handing-over scheduled for autumn 2007. The project

has been sold on the basis of forward funding.

Århus Syd, Denmark

In Århus, the Group is preparing construction of a 5,400 m²

retail park. The project will consist of two phases, the first

covering about 2,500 m². An approval in principle has been

obtained for the first phase, and construction is expected to

start at the beginning of 2007, with handing-over scheduled

for autumn 2007. The total project has been sold on the basis

of forward funding.

Tammisto Retail Park, Helsinki, Finland

In Tammisto, Finland, the Group commenced construction

of a 5,000 m2 retail park, whose tenants include TOYS”R”US.

Completion is scheduled for spring 2007. The project has

been sold to a private investor based on forward funding.

Further major project developments and a more detailed de-

scription of the Group’s largest projects appear from the sec-

tion on the project portfolio.

The development potential of the total project portfolio repre-

sents about 188,000 m² for sold projects and 466,000 m² for

other projects, a total of 654,000 m².

Euro Mall Holding

Euro Mall Holding continued the positive development from

the year before, realizing a profit after tax of DKK 110.6 mil-

lion in the first half of 2006/07. The profit after tax for the

first half of 2005/06 amounted to DKK 114.7 million.

The gross margin amounted to DKK 169.4 million, against

DKK 178.2 million in the same period the year before. Euro

Mall Holding recorded satisfactory development in its project

portfolio during the period under review.

Management considers the profit for the period to be highly

satisfactory.

Major projects contributing to the profit for the period in-

clude the following:

Šestka, Prague, Czech Republic

The Group’s Šestka shopping centre project, covering 26,500

m², has been sold to Europolis based on forward funding.

Construction has started, and the centre is expected to open

in November 2006. The Group will receive fee income, to be

invoiced and settled on a continuous basis. The fee income al-

ready earned has been recognized in the profit for the period.


This project covers a total of about 46,000 m2 and will com-

prise an 11,000 m2 hypermarket, about 90 specialty stores

and leisure facilities. The project is being developed in a joint

venture with the Central European investment company

Meinl European Land Ltd. The current occupancy rate is

about 80 %. Euro Mall Holding obtained a building permit



for the project in September 2006. Construction has been ini-

tiated and is expected to be completed in autumn 2007.

Sale of land, Wroclaw, Poland

The Group sold its development site in Wroclaw, Poland, to a

Polish investor in the first half of 2006/07.

Revaluation of the Group’s Central European investment

properties

The Group’s investment properties in Central Europe consist

of a shopping centre in Sosnowiec, Poland, and the Group’s

20 % ownership interests in three shopping centres in the

Czech Republic, situated in Hradec Králové, Ostrava and

Olomouc, respectively.

The total value of the Group’s Central European investment

properties amounted to DKK 622.4 million at 31 July 2006.

As a consequence of the improved letting situation for the

Group’s investment properties and sustained positive market

development in Central Europe, which led to declining return

requirements, Management made a positive DKK 89.5 mil-

lion revaluation of the Group’s investment properties in the

Czech Republic and Poland before tax and minority interests.

The Group’s investment property in Sosnowiec, Poland, ac-

counts for about DKK 30 million of this amount. The re-

valuation is based on a rate of return of 7.0 % for the Czech

investment properties, where the valuation at 31 January 2006

was based on a rate of return of 8.0 %. The return require-

ment for the Group’s investment property in Poland declined

from 7.5 % at 31 January 2006 to 6.75 %, corresponding to

the return requirement agreed when the property was sold; see

the description below.


Plejada shopping centre, Sosnowiec, Poland

In September 2006, TK Development made an agreement to

sell the Plejada shopping centre in the Polish town Sosnowiec

to St. Martins Europe BV, the Netherlands, owned by the UK

property investment company St. Martins Property Corpora-

tion Limited; see stock exchange announcement no. 11/2006.

The selling price is based on a rate of return for the investor of

6.75 %. As part of the sales agreement, it has been agreed that

TK Development’s subsidiary Euro Mall Holding is to begin

constructing a 5,000 m² extension of the centre in autumn

2006. The extension will accommodate about 19 new spe-

cialty and brand stores. The completion and opening of the

centre are scheduled for mid-2007.


Euro Mall Holding has obtained a building permit for this

project, which comprises a 24,100 m2 retail park situated at

the Targówek shopping centre. The current occupancy rate

exceeds 75 %. A letter of intent for sale of the project to an in-

vestor has been signed, based on forward funding. Construc-

tion start is scheduled for autumn 2006.

Prague Outlet Centre, Prague, Czech Republic

This project consists of the development of a factory outlet

centre of about 25,000 m2. During the period under review,

an agreement for the sale of 25 % of the project was made,

and a local plan has been obtained for the project. Euro Mall

Holding expects a building permit to be issued at the end of

2006.

Further major project developments and a more detailed de-

scription of the Group’s largest projects appear from the sec-

tion on the project portfolio.

At 31 July 2006, the development potential of the project



portfolio represented 73,000 m² for sold projects and 305,000

m² for other projects, a total of 378,000 m².

Euro Mall Centre Management

The business areas of Euro Mall Centre Management

(EMCM) comprise shopping centre management and associ-

ated services in the Czech Republic, Slovakia, Poland and the

Baltic States. In the first half of 2006/07, EMCM increased

its activity level and today manages a total of 17 shopping

centres. The management activities comprise shopping cen-

tre premises of about 416,000 m2 and approximately 1,200

tenancies.


TK Development, the Parent Company, is a holding company

for TKD Nordeuropa and Euro Mall Holding. Moreover, this

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

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

The half-year results for this part of the Group total DKK

–115.5 million after tax and minority interests, of which

DKK -22.2 million is attributable to minority interests. Man-

agement considers the performance for the period to be un-

satisfactory.

Writedown of the receivable from the Field’s project

The Group sold its stake in the Field’s project to the Steen

& Strøm Group on 1 December 2004, receiving an amount

of DKK 1.1 billion as payment on account. The outstanding

selling price will be determined on 1 March 2007, based on

the performance of the centre. The crucial element will be

the rent payments received in the period from March 2006

through February 2007, including the revenue-driven rent

obtainable in addition to the agreed-upon minimum rent

from the individual tenants Based on the available data

regarding centre operations, Management’s reassessment of

the outstanding selling price receivable resulted in a further

writedown of DKK 110.0 million in the first half of 2006/07,

with a corresponding impact on pre-tax results. Thus, as the

outstanding selling price will be determined as at 1 March

2007, and will be based in part on the revenue-driven rent

received, the valuation of the outstanding selling price

receivable may still be subject to uncertainty.

Revaluation of the Group’s German investment properties

The Group’s investment properties in Germany consist of

commercial and residential rental properties, all situated

on the outskirts of Berlin, apart from a property located in

Lüdenscheid. The value of these properties aggregated DKK

231.3 million at 31 July 2006. A positive revaluation of DKK

2.8 million before tax and minority interests was made in the

first half of 2006/07.

The revaluation is based on a 6 % rate of return, calculated on

the basis of a discounted cash-flow model. In the period under

review, satisfactory net rent payments were received for these

properties, which are almost fully let and generate a positive

cash flow.

Current assets

The project portfolio of current assets in TK Development,

the Parent Company, principally comprises building land in

Germany, residential units in Russia and a minor shopping

centre in Szczecin, Poland.

Germany

During the period under review, TK Development sold the

remaining 18 holiday units on the island of Usedom in north-

ern Germany. After the sale of these holiday units, the Group’s

project portfolio in Germany consists of four development

sites, and negotiations about the sale of one of these sites are



Targówek Retail Park, Warsaw, Poland. Shoppingcenter Plejada, Sosnowiec, Poland.


Prague Outlet Center, Prague, Czech Republic

Šestka, Prague, Czech Republic. Galeria Biala, Bialystok, Poland.


currently ongoing.

Russia

The Group’s housing project close to the Summer Palace in

St. Petersburg was sold to a Swedish investor during the pe-

riod under review. Following this sale, the project portfolio

in Russia consists of a residential project in Moscow with 11

detached houses in Scandinavian style.

Poland

The Group has held the shopping centre in Szczecin, Poland,

for a number of years. The 4,500 m² property, now almost

fully let, was sold to a UK investor after the balance sheet

date.

Lawsuits

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

with the Polish Government regarding incorrect VAT declara-

tion, the consequence of which was the erroneous payment of

a major VAT amount to the Polish authorities. The District

Administrative Court in Poland found for the Group in its

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

pay the amount to the Group. The amount was repaid during

the period under review.

In addition, experts’ opinions have been commissioned for a

few of the Group’s projects, but they are not expected to ma-

terially affect the Group’s earnings, neither individually nor

collectively.

Financial targets

To provide for sufficient future financial resources, TK Devel-

opment has adopted liquidity targets for the subgroups with

active projects, TKD Nordeuropa and Euro Mall Holding. In

addition, Management has adopted a solvency target for the

Group corresponding to a solvency ratio of 25 % based on

total capital resources. Liquidity targets and a group solvency

ratio of not less than 21 % based on the total capital resources

are also used as covenants in respect of the Group’s bankers

providing operating credit facilities. Moreover, covenants are

used vis-à-vis the holders of bonds in TK Development A/S

and TKD Nordeuropa A/S.

Throughout the period under review, the Group complied

with its liquidity targets and covenants, in relation to both

banks and holders of bonds.

With a solvency ratio of 34.1 % based on total capital re-

sources and a solvency ratio of 22.9 % based on equity alone,

the Group has also met the solvency target adopted.

Another of Management’s previously adopted targets was to

reduce the balance sheet total to a figure below DKK 4.5 bil-

lion. With a balance sheet total of DKK 4,422.3 million at 31

July 2006, this target has also been met.

Post-balance sheet events

No major events other than those mentioned in the Manage-

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

Senior Vice President charged by the Polish po-lice

In June 2006, the Senior Vice President in charge of the

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

and charged by the Polish police with irregularities related

to obtaining regulatory approval (zoning permission) for the

Polish Galeria Biala shopping centre project in Bialystok.



The Polish court in Bialystok had not previously found grounds

for extending the period of detention, which prompted expec-

tations that the Senior Vice President would be released; see

stock exchange announcement no. 10/2006.

The Polish prosecution service appealed against the court or-

der, and after a hearing the court decided to uphold the charge

and extend the period of detention; see stock exchange an-

nouncement no. 13/2006.

Group Management has been unable to find any irregularities

in connection with the project in Bialystok, for which a build-

ing permit has been issued and constructed initiated.

Group Management still finds it incomprehensible that the

Senior Vice President could be involved in any irregularities,

and Management therefore continues its efforts to have the

Senior Vice President released from detention.

Charges brought by the public prosecutor for serious economic crimes

Based on information published in stock exchange announce-

ment no. 19/2005, no. 20/2005 and the prospectus of 30

December 2005 as well as other information, the public pros-

ecutor for serious economic crimes has charged TK Develop-

ment A/S and six individuals with fraudulent income recog-

nition and price manipulation concerning periods covering

the 2000/01 to 2003/04 financial years. The charge from the

autumn of 2005 covers 16 projects.

On 14 June 2006, the charge against TK Development A/S

and the six individuals was supplemented. The charge still con-

cerns fraudulent income recognition and price manipulation

and still relates to periods covering the 2000/01 to 2003/04

financial years. The charge was supplemented in June 2006

because several of the alleged offences would otherwise have

become statute-barred shortly. The charge now covers an ad-

ditional 13 projects located in Denmark and Central Europe.

The police suspect that there was no basis for recognizing in-

come at the times in question, and that income could thus not

be recognized according to applicable accounting principles or

the accounting policies disclosed by TK Development A/S.

Management still considers that the charges are based on

misconceptions concerning the Group’s accounting policies.

Reference is also made to stock exchange announcement no.

3/2006.

The issues covered by the charge do not affect the Company’s

current financial position.

Outlook

Management has revised the profit estimate for the 2006/07

financial year upwards to about DKK 240 million after tax

and minority interests, compared to the previously published

profit forecast of DKK 200 million.

The revised profit estimate is underpinned by the profit gen-

erated in the first half of 2006/07, the expected completion

during the second half of 2006/07 of a number of projects in

progress that have already been sold, and the ongoing nego-

tiations regarding the sale of some of the Group’s completed

projects.

The Group also expects the operation of Euro Mall Holding’s

activities to proceed completely satisfactorily. Northern Eu-

ropean activities, under TKD Nordeuropa, are progressing

according to plan. TKD Nordeuropa still expects to report a

profit after tax of around DKK 120 million. For more details,

please refer to stock exchange announcement no. 7/2006 for

TKD Nordeuropa A/S, dated today.



Viewed in isolation, the remaining activities in TK Devel-

opment A/S, the Parent Company, are expected to have a

negative impact on the performance for the 2006/07 finan-

cial year, primarily due to the writedown regarding Field’s.

Despite this impact, Management has revised the previously

announced profit estimate upwards to about DKK 240 mil-

lion; see above.



Projects at 31 July 2006 TKD Nordeuropa *)

Euro Mall Holding

TK DevelopmentParent Company *) Group, total

(DKK million) (DKK million) (DKK million) (DKK million) Percentage of totalSoldCompleted 110 0 85 195 9.3 %In progress 395 34 0 429 20.5 %Not initiated 33 0 0 33 1.6 %Total 538 34 85 657 31.4 %

UnsoldCompleted 405 0 60 465 22.2 %In progress 255 0 0 255 12.2 %Not initiated 197 483 39 719 34.4 %Total 857 483 99 1,439 66.6 %

Total project portfolio 1,395 517 184 2,096 100.0 %*) Adjusted for intercompany eliminations.

Projects at 31 July 2006 TKD Nordeuropa Euro Mall Holding

TK Development Parent Company Group, total

m² ('000) m² ('000) m² ('000) m² ('000) Percentage of totalSoldCompleted 12 0 9 21 2.0 %In progress 127 73 0 200 18.9 %Not initiated 49 0 0 49 4.6 %Total 188 73 9 270 25.5 %

UnsoldCompleted 33 0 6 39 3.7 %In progress 82 0 0 82 7.7 %Not initiated 351 305 14 670 63.1 %Total 466 305 20 791 74.5 %

Total project portfolio 654 378 29 1,061 100.0

Project portfolio status

The Group’s project portfolio comprised 1,061,000 m² at 31

July 2006, of which projects sold account for 270,000 m²

and the remaining projects for 791,000 m². The remaining

projects are distributed on 466,000 m² in TKD Nordeuropa,

305,000 m² in Euro Mall Holding and 20,000 m² in the Par-

ent Company, TK Development A/S. At 31 January 2006,

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

Project portfolio

Project portfolio

the Group’s project portfolio represented a total floor space

of 1,009,000 m2.

The table below shows the distribution of the carrying amount

of the projects in the portfolio at 31 July 2006, for the Com-

pany and the two subgroups. The projects are divided into

sold and unsold at 31 July 2006 and sub-divided into com-

pleted, in progress and not initiated.


DKK million 31 Jan. 2005 31 Jan. 2006 31 July 2006

SoldCompleted 126 185 195In progress 97 350 429Not initiated 337 78 40

Total 560 613 664

UnsoldCompleted 1,037 643 465In progress 242 88 255Not initiated 813 880 719

Total 2,092 1,611 1,439

Total project portfolio 2,652 2,224 2,096

Number of projects 90 90 96

Forward funding 191 638 981In % of gross carrying amount of sold projects 25.4 % 51.0 % 59.6 %

m² (’000) 31 Jan. 2005 31 Jan. 2006 31 July 2006

SoldCompleted 14 21 21In progress 98 188 200Not initiated 130 80 49

Total 242 289 270

UnsoldCompleted 83 58 39In progress 51 30 82Not initiated 644 632 670

Total 778 720 791

Total project portfolio 1,020 1,009 1,061

The development at group level is outlined below:

The Company has succeeded in reducing the carrying amount of the project portfolio by means of forward funding. At 31 July 2006, forward funding represented 59.9 % of the gross carrying amount of sold projects.

Development in the Group’s project portfolio in square metres:

Project portfolio


Project portfolio

TKD Nordeuropa

TKD Nordeuropa recorded satisfactory development in its

project portfolio in the first half of 2006/07.

In addition, TKD Nordeuropa has developed and sold a

number of projects, including some properties held by the

Group for a long-term period. At the same time, a number

of new projects have been added to the portfolio, which now

comprises a total of 60 projects, and this level has remained

unchanged for the past two to three years. At 31 July 2006, the

development potential of the portfolio represented 188,000

m² for sold projects and 466,000 m² for other projects, a total

of 654,000 m².

Projects with a project value of more than DKK 50 million

The table below shows the projects that either represent or

are expected to represent a project value exceeding DKK 50

million. The carrying amounts of the projects listed below ac-

counted for more than 95 % of the total carrying amount of

the project portfolio of TKD Nordeuropa at 31 July 2006.

Based on an assessment of materiality, the table below does

not include the projects that either represent or are expected

to represent a project value of less than DKK 50 million. In

terms of carrying amount, TKD Nordeuropa’s five largest

projects represented a total of DKK 1,076 million at 31 July

2006.

Project name City/town SegmentFloor space (m²)

TKD’s ownership

interest

Construction start/Expected

construction start

Opening/ Expected opening

DenmarkDaells Varehus, retail section Copenhagen Retail 2,600 100 % Early 2002 Mid-2003Kennedy Arcade, retail section Aalborg Retail 30,000 100 % Mid-2002 Early 2004Ringsted factory outlet Ringsted Retail 12,000 50 % Autumn 2006 Autumn 2007Corporate headquarters, KMD Aalborg Office 26,000 50 % 1) End-2004 End-2006Selma Lagerløfsvej Aalborg Office 11,200 50 % Early 2007 Early 2007

Østre Teglgade Copenhagen Office /residential 24,000 100 % 2) 2007 2008

Amerika Plads, underground car park Copenhagen Underground car park 30,000 50 % 2004 As sections are completed

Spinderiet Valby Mixed 40,000 100 % Early 2005 Autumn 2007Ejby Industrivej Copenhagen Mixed 10,000 100 % Early 2008 End-2008Vandtårnsvej Copenhagen Mixed 18,000 50 % Mid-2007 As units are completedHadsundvej Aalborg Mixed 24,800 100 % Early 2007 As units are completedAaB College Aalborg Mixed 8,850 100 % Mid-2006 Mid-2007Østre Havn Aalborg Mixed 81,000 50 % 2) As units are

completed As units are completedAmerika Plads, lot C Copenhagen Mixed 11,500 50 % Mid-2007 Mid-2008Amerika Plads, lot A Copenhagen Mixed 13,000 50 % Mid-2007 Mid-2008SwedenEntré shopping centre Malmö Mixed 39,500 100 % Mid-2006 Autumn 2008Karlstad Retail Park Karlstad Retail 30,000 100 % Early 2007 End-2007Barkarby Retail Park Barkarby Retail 19,350 100 % Mid-2005 Phases 2 + 3: Autumn 2007

Phase 4: Early 2008FinlandVantaa – Phase II Vantaa Retail 11,650 100 % Mid-2006 End-2006Lohja Lohja Retail 4,800 100 % Early 2007 Early 2008Tammisto Tammisto Retail 5,000 100 % Mid-2006 Spring 2007Tammerfors – Phase II Tammerfors Retail 5,300 100 % Early 2007 Early 2008Baltic countriesGalerija Azur Riga Retail 20,500 24 % 3) Mid-2005 August 2006Milgravja Street Riga Retail 21,000 100 % Early 2007 End-2007

TKD Nordeuropa, total floor space approx. 500,0001) TKD Nordeuropa’s share of profit on development amounts to 80 % 3) TKD Nordeuropa’s share of profit on development amounts to 90 % 2) TKD Nordeuropa’s share of profit on development amounts to 70 %


Project portfolio


The key projects of the project portfolio are listed below. Each

project represented a project value in excess of DKK 100 mil-

lion at 31 July 2006.

Spinderiet, Valby, Denmark

The centre is a multi-functional shopping and metropolitan

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

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

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

facilities and about 550 parking spaces. Construction com-

menced in the spring of 2005, and the project is scheduled for

handing-over to the investor in autumn 2007. The project,

excl. housing, has been sold to Dades, a property investment

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

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

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

present, the occupancy rate is 81 % for the part that has been

sold to Dades, which is currently not sufficient to meet the

terms for a sale of the project to Dades. Management expects

the terms to be fulfilled by the opening date.

Corporate headquarters for KMD – Stuhrs Brygge, Aalborg,

Denmark

At the former Aalborg Shipyard, the Company is building

26,000 m² of corporate headquarters for KMD (Kommune-

data). The project has been sold to KMD based on forward

funding and is expected to be handed over at the end of 2006

according to schedule. The project forms part of a future

business and residential park at Stuhrs Brygge of more than

100,000 m², for which TKD Nordeuropa regularly buys land

for developing new projects.

Kennedy Arcade, Aalborg, Denmark

This multi-functional centre in Aalborg, housing a traffic ter-

minal, a cinema, offices and a shopping centre, was completed

and opened on 21 March 2004. Of the 34,500 m² of space

in the centre, the cinema covers 4,500 m². The office section

covers 13,100 m², and some of the premises have been let to

the Social and Health Services, NT, Artros - Aalborg Priva-

thospital A/S and Finanshuset Farsø. The tenants renting the

remaining premises, mainly consisting of the retail section, in-

clude the Dreisler Group. At present, the Arcade is being con-

verted to offer more, smaller tenancies, and various initiatives,

including better signage, are being introduced to sharpen the

centre profile. Letting has proceeded satisfactorily, and only

a few tenancies remain vacant. Sales negotiations regarding

both the office section and the retail section are ongoing.


The centre will be developed as a multi-functional project of

39,500 m², of which 25,000 m² has been allocated for retail

stores, 10,700 m² for restaurants, cinema, fitness and bowling

facilities, 1,100 m² for offices and 2,700 m² for residential

accommodation. In addition, the centre will have common

areas and underground parking facilities with 900 spaces.

Regulatory approval has been obtained for the project, and

the necessary properties and land required for the project have

been bought. The occupancy rate is just above 50 %. The an-

chor tenants include Hennes & Mauritz, Lindex, Hemköp,

Intersport and Svensk Film och Sats. A turnkey contract has

been concluded with Skanska regarding construction of the

centre, which is expected to open in autumn 2008. Since the

balance sheet date, the project has been sold to CGI – Com-

merz Grundbesitz Investmentgesellschaft mbH on the basis

of a rate of return of 6 % p.a. The selling price is expected to

amount to about SEK 1.5 billion. The sale is based on a for-

ward-funding agreement, and thus payment will be made by

instalments as construction is completed. Moreover, during

the period under review, the Group bought its joint venture

partner out, thus increasing its interest in the project to 100

%.


Barkarby, Stockholm, Sweden

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

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

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

of 4,000 m² has been fully let, sold and handed over. The

construction of the second and third phases of 6,300 m² and

7,150 m², which have been fully let, started in autumn 2005

and at end-2005, respectively. Both phases are expected to be

handed over to the investor in autumn 2006. The fourth and

last phase is expected to be completed and handed over to the

investor at the beginning of 2008. The total project has been

sold to the German investment fund Commerz Grundbesitz

Spezialfondsgesellschaft mbH on the basis of forward fund-

ing.

Vantaa – Phase II, Helsinki, Finland

Fully developed, Vantaa Retail Park will cover a total area of

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

which is fully let, was sold in a previous financial year. Phase

II of the retail park has been sold and, when fully developed,

will cover 11,650 m². A lease agreement has been concluded

for about 4,000 m2 of the remaining 5,000 m2 that may be

built under the option to build. The tenant is EVE Megastore,

a Finnish company selling health and beauty products and

associated services. Construction has started and is scheduled

for completion at the end of 2006.


The Group’s first project in the Baltic Region consists of the

20,500 m² Galerija Azur shopping centre. The centre opened

on 24 August 2006 and includes a hypermarket operated by

RIMI, which is owned by ICA and KESKO. The centre has

been sold to Meinl European Land Ltd. on the basis of for-

ward funding. The centre premises have been fully let and are

expected to be handed over to an investor shortly.

Projects with a current project value of less than DKK 100 million, but an expected sales value in excess of DKK 100 million

Listed below are some other large projects that have been initi-

ated or are expected to be initiated over the next few years. At

31 July 2006, they each represented a project value of less than

DKK 100 million in the project portfolio, but are expected to

have a sales value of more than DKK 100 million.

Amerika Plads, Copenhagen, Denmark

Kommanditaktieselskabet Danlink Udvikling (DLU), which

is owned 50/50 by the Port of Copenhagen and TKD Nor-

deuropa, owns three projects at Amerika Plads: Lot A, lot C

and underground parking facilities, which have not been sold.

A building complex with about 13,000 m² of office space is to

be built on lot A, and a building complex with about 11,500

m² of commercial and residential space on lot C. Construc-

tion will take place as the space is let. Part of the underground

car park in the Amerika Plads area has been built, and is oper-

ated by Europark.

Factory outlet, Ringsted, Denmark

TKD Nordeuropa has entered into a 50/50 joint venture

agreement with Miller Developments, an experienced factory

outlet developer, concerning the development of a new fac-

tory outlet on the site owned in Ringsted. This project consists

of a 12,000 m² factory outlet centre as well as restaurant facili-

ties and about 1,000 parking spaces. This will be the first ma-

jor factory outlet centre project in Denmark, and the letting

process is underway. Construction work commenced in au-

tumn 2006, with completion scheduled for autumn 2007. Af-

ter start-up and maturing, the centre is expected to be sold.

Hadsundvej, Aalborg, Denmark

KMD is planning to move to new corporate headquarters

at Stuhrs Brygge in Aalborg at the end of 2006, and in this

Project portfolio


Project portfolio

connection TKD Nordeuropa will take over the company’s

existing headquarters property at Hadsundvej in Aalborg. The

site is located close to the city centre and the university. The

project area covers 24,800 m², and the planned project will

consist of residential and office space, with construction ex-

pected to start at the beginning of 2007. The development

of residential and office premises will be phased in step with

letting or sale.

AaB College, Aalborg, Denmark

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

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

college with course and conference facilities as well as accom-

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

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

has been handed over, and the second phase is scheduled for

handing-over in mid-2007.

Østre Teglgade, Copenhagen, Denmark

This project area covers 24,000 m² attractively located at Tegl-

holmen. Owned by TKD Nordeuropa, the land is well-suited

for a housing or office project. Construction may be phased in

step with letting and/or sale. At present, it is being attempted

to change the current zoning status and obtain regulatory ap-

proval for constructing residential property on the site.

Karlstad, Sweden

In Karlstad, regulatory approval has been obtained to build a

retail park in a new commercial district with direct motorway

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

project area covers 30,000 m², and construction of the project

will be phased in step with letting. The first leases have been

signed, and construction is scheduled to commence at the be-

ginning of 2007. Now that the regulatory approval is in place,

letting activities have been intensified. The project has been

sold to an intermediary on the basis of forward funding.


Project name City/town Segment Floor space (m²)

TKD’s ownership

interest

Construction start/Expected

construction startOpening/ Expected

opening

Czech RepublicŠestka Shopping Centre Prague Retail 26,500 24 % 1) End-2005 November 2006Prague Airport Ruzyne II Prague Retail 13,000 100 % 2009 2010Prague Outlet Center Prague Retail 25,000 100 % Early 2007 1st phase: End-2007Ostrava Retail Park Ostrava Retail 10,300 100 % Early 2007 End-2007Ostrava – extension Ostrava Retail 3,500 100 % Early 2007 End-2007Liberec Retail Park Liberec Retail 18,500 100 % Mid-2007 Early 2008PolandGaleria Biala Bialystok Retail 46,000 24 % 2) Autumn 2006 Autumn 2007Targówek Retail Park Warsaw Retail 24,100 100 % Autumn 2006 Mid-2007Bytom Retail Park Bytom Retail 25,800 100 % Mid-2007 As units are completedTivoli Residential Park, Targówek Warsaw Residential/

Service 25,300 100 % Autumn 2006 As units are completed

Poznan Warta Poznan Retail/Residential 50,000 100 % End-2007 As units are completed

Reduta III Warsaw Mixed 9,800 100 % Mid-2007 As units are completedSosnowiec – extension Sosnowiec Retail 5,000 100 % End-2006 Mid-2007

Euro Mall Holding total floor space approx. 280,0001) Euro Mall Holding´s share of profit on development amounts to 100%2) Euro Mall Holding´s share of profit on development amounts to 50%

Project portfolio

Euro Mall Holding

Euro Mall Holding recorded satisfactory development in its

project portfolio in the first half of 2006/07.

At 31 July 2006, the development potential of the portfolio

represented 73,000 m² for sold projects and 305,000 m² for

other projects/project opportunities, a total of 378,000 m².

Investment properties are described in a separate section on

page 29.


The table below shows the projects that either represent or

are expected to represent a project value exceeding DKK 50

million. The carrying amounts of the projects listed below ac-

counted for more than 90 % of the total carrying amount of

the project portfolio of Euro Mall Holding at 31 July 2006.

Based on an assessment of materiality, the table below does

not include the projects that either represent or are expected

to represent a project value of less than DKK 50 million. In

terms of carrying amount, Euro Mall Holding’s five largest

projects represented a total of DKK 397 million at 31 July

2006.



The key projects of the project portfolio are listed below. Each

project represented a project value in excess of DKK 100 mil-

lion at 31 July 2006.

Šestka, Prague, Czech Republic

Euro Mall Holding has entered into an agreement to sell and

develop the Šestka shopping centre in Prague. The shopping

centre will cover 26,500 m², and the 10,400 m² hypermar-

ket has been let to Hypernova, owned by Dutch hypermarket

operator Royal Ahold. The remaining part of the centre will

consist of about 100 stores. The Šestka shopping centre will

be built on land owned by Euro Mall Holding in the Prague 6

district, one of the largest and most attractive residential areas

in Prague, with more than 100,000 inhabitants. The buyer

is Europolis, an Austrian investment company investing in

the Eastern and Central European property markets. For-

ward funding has been agreed for the project as construction

progresses. The current occupancy rate is 90 %. Construction

started at the end of 2005, the shopping centre being sched-

uled to open in November 2006.

Prague Outlet Centre, Prague, Czech Republic

On Euro Mall Holding’s centrally located land, Best Plot in

Prague, preparations are underway for a factory outlet centre

of approximately 25,000 m2. The project is being developed

in a joint venture with an international collaboration partner

with factory outlet experience. A local plan has been obtained

for the project, and a building permit is expected to be is-

sued at the end of 2006. The first phase will consist of about

18,000 m2, and construction is expected to start at the begin-

ning of 2007, with the opening scheduled for end-2007. An

agreement regarding the sale of 25 % of the project was made

during the period under review.


The retail park, which will be constructed on Euro Mall Hold-

ing’s land at the Targówek shopping centre, will have a total

floor space of 24,100 m² when fully developed. A building

permit has been obtained for the project, and the current oc-

cupancy rate is 77 %. A letter of intent for sale of the project

to an investor has been signed, based on forward funding.

Construction is scheduled to commence in autumn 2006.

Projects with a current project value of less than DKK 100 million, but an expected sales value in excess of DKK 100 million

Listed below are some other large projects that have been initi-

ated or are expected to be initiated over the next few years. At

31 July 2006, they each represented a project value of less than

DKK 100 million in the project portfolio, but are expected to

have a sales value of more than DKK 100 million.

Ostrava Retail Park, Czech Republic

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

the Futurum shopping centre in Ostrava. The site includes an

option to build 10,300 m². Letting efforts are ongoing, and

tenants have committed themselves to renting about 70 %.

Construction will start once a satisfactory occupancy rate has

been obtained, based on binding lease agreements.

Liberec Retail Park, Czech Republic

This project consists of an 18,500 m² retail park. The project

will be built in phases, the first covering about 11,500 m².

Letting has started, and an application has been submitted

for an approval in principle. Construction is expected to start

mid-2007, with handing-over scheduled for the beginning of

2008.


An agreement has been reached with Meinl European Land

Ltd. regarding the development of a shopping and leisure

Project portfolio


Project portfolio

centre in Bialystok in Poland. Meinl has acquired the neces-

sary sites and obtained the necessary regulatory approvals. The

continued development and construction of the centre will be

managed by Euro Mall Holding and funded by Meinl Euro-

pean Land Ltd. Covering 46,000 m², the shopping centre will

comprise a hypermarket, about 90 specialty stores and leisure

facilities. Construction of the shopping centre started in Sep-

tember 2006. The current occupancy rate is 80 %.

Bytom Retail Park, Poland

The retail park will be constructed on Euro Mall Holding’s

site at the Plejada shopping centre in Bytom, which offers a

central location in the Katowice region. The site includes an

option to build 25,800 m². Construction of the project will

be phased in step with letting. Letting efforts are ongoing, and

construction will be started as space is let.

Tivoli Residential Park, Targówek, Warsaw, Poland

Euro Mall Holding is planning to develop a housing project

on its land in the Targówek area in Warsaw. When fully de-

veloped, the multi-phase project will consist of 300 residen-

tial units and ground-floor premises for service trades. The

project is expected to be sold as owner-occupied residential

units. Construction is expected to start in autumn 2006. The

advance sale of the owner-occupied units has started.

Reduta III, Warsaw Poland

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

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

sold and subsequently let to the French sporting goods chain

Decathlon. A 9,800 m² office property is being planned, with

construction to begin upon completion of the letting proc-

ess.


TK Development owns the receivable from the Field’s project,

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

The letting of TK Development’s projects in Russia and Ger-

many proceeded satisfactorily during the period under re-

view.

Projects

The project portfolio of current assets in TK Development,

the Parent Company, principally comprises building land in

Germany, residential units in Russia and a minor shopping

centre in Szczecin, Poland.

Germany

During the period under review, TK Development sold the

remaining 18 holiday units on the island of Usedom in north-

ern Germany. After the sale of these holiday units, the Group’s

project portfolio in Germany consists of four development

sites, and negotiations about the sale of one of these sites are

currently ongoing.

Russia

The Group’s housing project close to the Summer Palace in

St. Petersburg was sold to a Swedish investor during the pe-

riod under review. Following this sale, the project portfolio

in Russia consists of a residential project in Moscow with 11

detached houses in Scandinavian style.

Poland

The Group has owned a shopping centre in Szczecin, Poland,

for a number of years. The centre has a floor space of about

4,500 m² and has almost been fully let. In September 2006,

the project was sold to a UK investor.

The investment properties of TK Development, the Parent


Company, are described in the section below.

Investment properties

The Group’s investment properties are included in the balance

sheet under property, plant and equipment. Investment prop-

erties are measured at fair value on the basis of a discounted

cash-flow model, where future cash flows are discounted to

net present value on the basis of a given rate of return. At 31

July 2006, the Group’s investment properties stood at DKK

853.6 million.

Central Europe

Euro Mall Holding’s investment properties were recognized at

DKK 622.4 million at 31 July 2006 based on a rate of return

of 7.0 % p.a. for the Czech investment properties, calculated

on the basis of a discounted cash-flow model. As mentioned

above, the Group has sold its investment property in Poland

after the balance sheet date. The return requirement for the

Group’s Polish investment property is based on the selling

price, corresponding to a return of 6.75 %.

Germany

The Group has five investment properties in Germany owned

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

and residential property is located in Lüdenscheid in the west-

ern part of the country, whereas the four remaining properties

are residential rental properties on the outskirts of Berlin.

In the first half of 2006/07, the letting situation was satisfac-

tory. The properties are almost fully let and generate a positive

cash flow.

The investment properties were recognized at DKK 231.2

million at 31 July 2006 based on a rate of return of 6.0 % p.a.,

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

Project name City/town Segment Floor space * (m²)

TKD’s ownership

interestOpening

Czech RepublicFuturum Shopping Centre Ostrava Retail 23,600 20 % 1) May 2000Futurum Multifunctional Centre Hradec Králové Retail 18,300 20 % 1) Nov. 2000Haná Shopping Centre Olomouc Retail 10,100 20 % 1) Sept. 2002PolandShopping Centre Plejada Sosnowiec Retail 21,200 100 % Nov. 2001

Total floor space, Central Europe 73,200

Germany Lüdenscheid/Berlin Residential/ Mixed 26,000 100 % 1996-1998

Total floor space, investment properties 99,200* Floor space denotes the floor space owned by TK Development, including common areas.1) GE/Heitman is to receive a preferred return, after which TK is to receive a preferred return. Subsequently profit is to be shared 50/50.

Project portfolio

Below is a list of the Group’s investment properties.


The Supervisory Board and the Executive Board have to-

day considered and adopted the interim report for the pe-

riod 1 February 2006 - 31 July 2006 for TK Development

A/S. The interim report, which has not been audited, is

presented in compliance with the recognition and measure-

ment requirements of the International Financial Reporting

Standards (IFRS), and in accordance with Danish disclosure

Statement by the Executuve Board and Supervisory Board

Aalborg 26 September, 2006

EXECUTIVE BOARD

SUPERVISORY BOARD

Frede Clausen Robert Andersen

Poul Lauritsen Torsten Erik Rasmussen

Kurt Daell Per Søndergaard Pedersen

Jesper Jarlbæk

Statement by the Executive Board and Supervisory Board

requirements for half-year interim reports prepared by listed

companies. We consider the accounting policies applied to be

appropriate, and, in our opinion, the interim report gives a

true and fair view of the Group’s assets, liabilities, equity and

financial position, as well as the results of the Group’s activi-

ties and cash flows.


Income statement

Consolidated financial state-ments

Income statement

All amounts in DKKm GroupHalf-year 2006/07

Half-year 2005/06

Net revenue 437.1 630.0External direct project costs -371.5 -580.7Value adjustment of investment properties. net 92.3 93.7

Gross profit/loss 157.9 143.0

Other external expenses -22.3 25.7Staff costs -47.8 42.4

Total -70.1 68.1

Profit/loss from ordinary activities before financing, depreciation and amortization 87.8 74.9

Depreciation. amortization and writedowns of long-term assets -5.0 4.2

Profit/loss from ordinary activities before financing 82.8 70.7

Income from investments in associates 0.1 0.2Income from investments in group enterprises -0.1 -0.1Financial income 39.1 56.6Financial expenses -115.9 -142.4

Total -76.8 -85.7

Profit/loss before tax 6.0 -15.0

Tax on profit/loss for the year -18.7 -27.3

Profit/loss for the year 24.7 12.3

Allocated as followsShareholders of TK Development A/S 2.5 -11.7Minority interests 22.2 24.0

24.7 12.3

Earnings per share in DKKEarnings per share (EPS) of nom, DKK 20 0.1 -0.8Diluted earnings per share (EPS-D) of nom. DKK 20 0,1 -0,8


Balance sheet

Balance sheet

All amounts in DKKm Group31.07.06 31.01.06 31.07.05

ASSETSLong-term assets

Goodwill 29.1 29.1 29.1Intangible assets 29.1 29.1 29.1

Investment properties 853.6 761.6 693.2Other fixtures and fittings. tools and equipment 24.1 25.6 27.8Property. plant and equipment 877.7 787.2 721.0

Investments in group enterprises 1.8 1.9 2.1Investments in associates 23.6 23.6 23.6Other securities and investments 50.2 53.4 23.0Deferred tax assets 294.3 269.3 271.2Other long-term assets 369.9 348.2 319.9

Total long-term assets 1,276.7 1,164.5 1,070.0

Short-term assets

Projects in progress or completed 2,131.7 2,260.4 2,563.6

Trade receivables 371.2 594.8 443.0Receivables from associates 116.2 101.7 98.6Other receivables 188.7 241.1 253.6Prepayments 6.2 8.7 8.6Total receivables 682.3 946.3 803.8

Securities 8.0 4.1 4.0Cash and cash equivalents 323.6 363.8 395.4Total short-term assets 3,145.6 3,574.6 3,766.8

ASSETS 4,422.3 4,739.1 4,836.8


Balance sheet


LIABILITIES AND EQUITYEquityShare capital 560.9 560.9 280.4Reserve for adjustment to fair value 257.8 165.5 102.1Reserve for foreign-exchange adjustments 9.7 13.2 -5.5Retained earnings 72.5 159.5 -87.3Shareholders’ share of equity 900.9 899.1 289.7

Minority interests 110.9 87.6 60.6

Total equity 1,011.8 986.7 350.3

Short- and long-term liabilities

Subordinated loan capital 0.0 12.4 12.4Subordinated bond loan 0.0 0.0 766.2Credit institutions 227.1 457.4 461.3Provisions 37.5 38.3 0.0Instrument of indebtedness 0.0 3.1 18.0Deferred tax liabilities 38.1 38.6 63.1Total long-term liabilities 302.7 549.8 1,321.0

Subordinated bond loan 495.9 494.4 0.0Credit institutions 2,181.9 2,133.6 2,515.5Trade payables 220.5 277.9 301.1Prepayments received from customers 35.8 35.5 91.3Corporate income tax 25.8 36.5 30.0Provisions 9.6 25.1 52.7Other debt 131.3 190.0 167.5Deferred income 7.0 9.6 7.4Total short-term liabilities 3,107.8 3,202.6 3,165.5

Total short- and long-term liabilities 3,410.5 3,752.4 4,486.5

TOTAL LIABILITIES AND EQUITY 4,422.3 4,739.1 4,836.8


Statement of changes in equity

Statement of changes in equity

Equity

The share capital of TK Devlopment A/S is not divided into classes of shares and consists of 28,043,810 shares of DKK 20 each. (nom, DKK 560,876,200)


Share capitalShare capital beginning of the year 560.9 280.4 280.4Capital increase 0.0 280.5 0.0

Total share capital 560.9 560.9 280.4

Reserve for adjustments to fair valueReserve for adjustments to fair value. beginning of the year 165.5 8.4 8.4Result for the period 92.3 157.1 93.7

Total reserve for adjustments to fair value 257.8 165.5 102.1

Reserve for foreign exch, adjustmentsReserve for foreign exch, Adjustments. beginning of the year 13.2 3.6 3.6Foreign-exchange adjustment. foreign operations -3.5 12.1 -8.1Tax on changes in equity for the year 0.0 -2.5 -1.0

Total reserve for foreign exch, adjustments 9.7 13.2 -5.5

Retained earningsRetainde earnings. beginning of ther year 159.5 18.4 18.4Profit/loss for the year -89.7 -119.1 -105.7Share-based remuneration (warrants) 1.1 0.2 0.0Capital increase 0.0 280.4 0.0Cost of capital increase 0.0 -20.8 0.0Sale of own shares or subscription rightd in connection with captial increase 1.6 0.4 0.0

Total retained earnings 72.5 159.5 -87.3

Total 900.9 899.1 289.7

Minority interestsMinority interests beginning of the year 87.6 32.9 32.9Disposals for the year 0.2 0.0 0.0Result for the period 22.2 50.5 24.0Foreign-exchange adjustment. foreign operations 0.8 1.5 3.7Share-based remuneration (warrants) 0.1 0.0 0.0Capital increase 0.0 2.7 0.0

Total minority interests 110.9 87.6 60.6

Total equity 1,011.8 986.7 350.3


Cash flow statement

Cash flow statement

All amounts in DKKm GroupHalf-year 2006/07

Half-year2005/06

Profit/loss before financing 82.8 70.7Adjustments for non-cash items Value adjustments. investment properties -92.4 -93.7 Depreciation and amortization 5.0 4.5 Provisions -16.3 1.6 Market-value adjustments 1.0 -8.6Increase/decrease in investments in projects, etc. 120.5 289.4Increase/decrease in receivables 271.3 307.5Increase/decrease in credit institutions 57.0 -521.2Increase/decrease in payables and other debt -114.9 -86.9

Cash flows from operating activities before net financials and tax 314.1 -36.7

Interest paid, etc. -121.9 -104.3Interest received, etc. 28.5 24.1Corporate income tax paid -14.6 -15.4

Cash flows from operating activities 206.1 -132.3

Investments in equipment. fixtures and fittings, net -2.7 -1.9Investment in leasehold improvements -0.1 -0.1Purchase of securities and investments 0.0 0.4Sale of own shares 2.8 0.0

Cash flows from investing activities 0.0 -1.6

Increase/decrease in subordinated loan capital -12.4 -1.4Increase/decrease in long-term financing -233.4 -3.1

Cash flows from financing activities -245.8 -4.4

Cash flows for the year -39.7 -138.3Cash and cash equivalents, beginning of year 363.8 533.9Market-value adjustment of cash and cash equivalents -0.5 -0.2Cash and cash equivalents at year-end 323.6 395.4

Cash and cash equivalents include temporary deposits related to the sale of the Group’s projects. as well as other cash and cash equivalents to which the Group does not have a full right of disposal. a total of DKK 191,3 million.

The figures in the cash flow statement cannot be inferred from the Consolidated Financial Statements alone.


Segment information

Segment information

All amounts in DKKm Group

Northern Europe

Central Europe Unallocated Total

Primary segment 2006/07

Net revenue 348.8 93.2 0.0 437.0

Value adjustment of investment properties, net 2.8 89.5 0.0 92.3

Profit/loss, associates 0.1 0.0 0.0 0.1

Profit/loss from ordinary activities before financing -64.5 147.3 0.0 82.8

Investments in associates 23.6 0.0 0.0 23.6

Segment assets 2,752.5 1,388.2 281.6 4,422.3

Segment liabilities 2,784.7 555.1 70.6 3,410.4

Capital expenditure 3.4 0.0 0.0 3.4

Depreciation and amortization 3.9 1.1 0.0 5.0

Other major non-cash costs 107.0 0.4 0.0 107.4

All amounts in DKKm Group

Northern Europe

Central Europe Unallocated Total

Primary segment 2005/06

Net revenue 348.1 281.9 0.0 630.0

Value adjustment of investment properties, net 0.0 93.7 0.0 93.7

Profit/loss, associates 0.2 0.0 0.0 0.2

Profit/loss from ordinary activities before financing -75.5 146.2 0.0 70.7

Investments in associates 23.6 0.0 0.0 23.6

Segment assets 3,150.7 1,406.5 279.6 4,836.8

Segment liabilities 3,818.0 574.4 94.1 4,486.5

Capital expenditure 2.4 1.8 0.0 4.2

Depreciation and amortization 3.5 0.7 0.0 4.2

Other major non-cash costs 101.3 0.1 0.0 101.4

All amounts in DKKm GroupRetail Office Segment

mix Unallocated TotalSecondary segment 2006/07

Net revenue 360.0 5.3 71.7 0.0 437.0

Segment assets 1,000.6 524.5 1,184.8 1,712.4 4,422.3

Capital expenditure 0.0 0.0 0.0 3.4 3.4

Secondary segment 2005/06

Net revenue 388.9 102.0 139.1 0.0 630.0

Segment assets 1,665.5 455.2 1,139.5 1,576.6 4,836.8

Capital expenditure 0.0 0.0 0.0 4.2 4.2

no_14_tkd_interim_report_fo

Documents

profit of dkk

tax of dkk

development projects

tkd nordeuropa

balance sheet total

shopping centre project

tk development asannouncement

positive development