Report on operations in 1999

REPORT ON OPERATIONS IN 1999 * Profit before tax totaled SEK 1,247 M (672) * of which, capital gains on property sales accounted for SEK 511 M (487) * Earnings per share after tax amounted to SEK 10.41 (4.35) * Cash flow from current property management operations was up 29% * cash flow per share rose 45% to SEK 8.22 (5.68) * Rental revenues increased 4% and the operating surplus advanced 8% for the comparable portfolio * Total value of real estate amounted to 24.8 billion * value growth for the year was 2.1 billion, or 10% * Offer for Fastighets AB Balder * on February 9, 2000 Drott made an offer to acquire all shares in Balder * Proposals to the Annual General Meeting * dividend of SEK 3.50 /share (3.00) * mandate for repurchase of own shares Contents Page I. Comments 2 II. Financial Statements for 1999 8 III. Key data and definitions 10 IV. Market value of real estate 12 V. The Drott share 13 Drott AB (publ) Drott is a dedicated real estate company which focuses on the Swedish market. The Company's mission is to acquire, develop and manage commercial and residential real estate in growth areas and to realize the value growth in completed properties on appropriate occasions. With satisfied tenants, profitable properties and a strong local position in growth markets - primarily in office and residential real estate - Drott seeks to achieve a rising real operating surplus per property as well as increased cash flow per share. Drott is the largest real estate company listed on the Stockholm Stock Exchange. The number of shareholders amounts to 50,600. I. Comments Income statement for 1999 1 Figures in parentheses refer to 1998 * Rental revenues and operating surplus Rental revenues amounted to 2,498 M (2,439). The change was affected by acquisitions, sales and completed properties, as well as by changes in the comparable portfolio (renegotiated leases and new leasing). * Rental revenues in the comparable portfolio increased by SEK 79 M from 1998, or 4 percent. The increase is mainly attributable to the renegotiation of leases on premises, and by a higher occupancy ratio. The Stockholm office market is very buoyant, while Drott's residential portfolio noted a higher occupancy ratio and fewer tenant relocations. * The occupancy ratio amounted to 94 percent (93) at December 31, 1999. Drott gained a large number of new tenants on January 1, 2000, which raised the occupancy rate to 95 percent by the end of January. * Drott's operating surplus increased to SEK 1,519 M (1,438). The operating surplus in the comparable portfolio rose by SEK 95 M, corresponding to 8 percent. In addition to changes in the comparable portfolio, total reported rental revenues were also affected by restructuring programs - in 1999 Drott's net property acquisitions amounted to some SEK 0.5 billion (acquisitions of SEK 2.6 billion, sales of SEK 2.1 billion). On average, acquisitions were completed at a lower yield than sales. Operating surplus in the acquired properties is expected to progress far better than in those sold. 1 Drott acquired Näckebro in 1998 for SEK 3.4 billion. Näckebro was consolidated as of Jan. 1, 1999. The 1998 results include Näckebro's income statement in its entirety, with deductions for acquired profit through Sept. 30, 1998. @ Operating profit Operating profit increased to SEK 1,783 M (1,566), of which capital gains from property sales accounted for SEK 511 M (487). @ Net financial items 2 Interest expense totaled SEK 597 M (584 ). Drott's average loan volume was higher in 1999 than in 1998, but the average interest rate was lower. At December 31, 1999 Drott's average rate of interest was 4.7 percent, with an average period of fixed interest of 1.8 years. Interest subsidy declined to SEK 51 M (55). @ Net profit before tax Net profit before tax rose SEK 575 M to SEK 1,247 M (672). The improvement is attributable to higher capital gains on property sales, superior 3 earnings from current property management operations , plus the fact that 1998 profit was affected by non-recurring costs. Earnings from current property management operations increased by SEK 84 M to 736 M (652). @ Net profit for the year Net profit for the year amounted to SEK 1,059 M (495) after tax expense of SEK 188 M (177). Capital gains on property sales accounted for SEK 424 M of profit after tax. Balance sheet as of December 31, 1999 Figures in parentheses refer to December 31, 1998 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/02/16/20000216BIT00920/bit0001.doc http://www.bit.se/bitonline/2000/02/16/20000216BIT00920/bit0002.pdf