CITYCON OYJ Stock Exchange Release 8 Feb. 2007 at 12.00 a.m. Citycon Oyj's Financial Results for 1 January-31 December 2006 Year 2006 in Brief Key Figures - Turnover increased by 29.5 per cent to EUR 119.4 million (2005: EUR 92.2 million), mainly as a consequence of new acquisitions. - Profit before tax increased to EUR 165.6 million (EUR 74.2 million), including a EUR 120.1 million (EUR 45.9 million) increase in the fair value of investment properties. - Earnings per share were EUR 0.78 (EUR 0.47). - Earnings per share excluding the effects of changes in fair value, gains on sale and other extraordinary items were EUR 0.20 (EUR 0.20). - Net cash from operations per share amounted to EUR 0.20 (EUR 0.19). - Per-share net asset value (EPRA NAV) increased to EUR 3.38 (EUR 2.45). - Average net yield requirement for the investment properties on 31 December 2006 according to the external appraiser was 6.6 per cent. - The Board of Directors proposes a per-share dividend of EUR 0.14 (EUR 0.14). - Equity ratio improved to 39.1 per cent (36.7%). Citycon continued to implement its growth strategy in 2006 by acquiring new shopping and retail centres for the total sum of EUR 400.9 million in Finland, Sweden and Lithuania, and investing a further EUR 35.4 million in currently-owned properties. The market value of Citycon's property portfolio was EUR 1,447.9 million at the year end, with foreign properties accounting for 30.3 per cent. As part of the implementation of its growth strategy, Citycon reorganised its operations by introducing new regional business organisations towards the end of the year. This affected Citycon Group's financial reporting, entailing that the Financial Statements for 2006 are the first to be prepared on the basis of the new regional structure. Key Figures 1-12 2006 1-12 2005 Turnover, EUR million 119.4 92.2 Operating profit, EUR million 196.5 105.2 % of turnover 164.6 114.1 Profit before taxes, EUR million 165.6 74.2 Profit attributable to parent company shareholders, EUR million 126.4 59.8 Fair market value of investment properties, EUR million 1,447.9 956.6 Earnings per share (basic), EUR 0.78 0.47 Earnings per share (diluted), EUR (EPRA EPS) 0.74 0.46 Earnings per share (basic), excluding the effects of changes in fair value, gains on sale and other extraordinary items, EUR 0.20 0.20 Dividend per share, EUR 0,14* 0.14 Net cash from operating activities per share, EUR 0.20 0.19 Equity per share, EUR (EPRA NAV) 3.38 2.45 EPRA NNNAV 3.22 2.45 P/E (price / earnings) ratio 6 7 P/E ratio, excluding the effects of changes in fair value, gains on sale and other extraordinary items 25 15 Return on equity (ROE), % 25.8 22.5 Return on investment (ROI), % 16.8 13.5 Equity ratio, % 39.1 36.7 Gearing, % 136.6 156.8 Net interest-bearing debt (fair value), EUR million 811.2 564.9 Net rental yield, % 7.6 8.5 Occupancy rate, % 97.1 97.2 Personnel (average for the period) 62 43 Personnel (at the end of the period) 73 57 *) Proposal by the Board of Directors CEO Petri Olkinuora comments on the financial year as follows: "For Citycon, 2006 marked a year of continued growth. The company strengthened the balance sheet and improved the cash-flow per share. Earnings per share (excluding extraordinary items) remained the same with reduced gearing. Despite intensifying competition, we were able to maintain our leading market position in Finland, to strengthen our property portfolio in Sweden and to enter Lithuania. The disposal of non-core properties during the financial year, with an aim to recycle capital to higher growth areas and higher quality properties, has further sharpened the Group's strategy of focusing on shopping centres and other large retail units. Towards the end of the year, Citycon introduced a regional organisation structure in order to take the special characteristics of the local market areas in consideration as effectively as possible. Citycon will continue to pursue its growth strategy in 2007. The strengthened organisation and resources will enable us to focus more on the commercial management, development and modernisation of our retail sites. We will respond to the toughening international competition by developing more customer-focused and more competitive retail properties." Business - On 31 December 2006, Citycon owned 26 shopping centres and 53 other retail properties. The market value of Citycon's property portfolio totalled EUR 1,447.9 million (EUR 956.6 million), of which the property portfolio in Finland accounted for EUR 1,009.7 million, that in Sweden EUR 354.8 million and that in the Baltic countries, EUR 83.3 million. - Citycon's net rental income improved by 23.5 per cent to EUR 82.8 million (EUR 67.0 million). Net rental income for like-for-like properties rose by 3.0 per cent. - On 31 December 2006, Citycon had a total of 3,083 (2,109) leases with 2,107(1,120) lessees. The year-end occupancy rate of the property portfolio stood at 97.1 per cent (97.2 per cent) and net yield at 7.6 per cent (8.5 per cent). The leasable area rose by 23.3 per cent to 735 029 square metres. Capital expenditure and divestments - In the spring, Citycon expanded into Lithuania by acquiring the Mandarinas shopping centre in Vilnius. - The year saw several acquisitions in Finland and Sweden, the most significant shopping centre investments in Sweden being Jakobsberg, Stenungs Torg, Liljeholmen and Tumba, announced in December (the transaction finalised on 31 January 2007). In Finland, Citycon made several acquisitions, including the shopping centre Columbus and the remaining minority share of Myyrmanni, making Citycon the sole owner. - Citycon sold 75 non-core properties in Finland, recognising pre-tax gain on sale of EUR 5.9 million after purchase price adjustment. - The most significant development projects underway were the refurbishment and extension projects of the shopping centres Trio, Åkersberga, Duo and Lippulaiva. - Capital expenditure totalled EUR 436.4 million, of which EUR 400.9 million was allocated to new investments, EUR 35.4 million to development and refurbishment projects and EUR 0.2 million to other investments. Financial position - The Group's equity ratio stood at 39.1 per cent (36.7 per cent) at the year end. - During the financial year, Citycon carried out two successful capital market transactions: subordinated convertible bonds issue of EUR 110 million placed with institutional investors and a rights issue of EUR 75 million. - Citycon signed a new commercial paper programme worth EUR 100 million, replacing its previous commercial paper programmes worth EUR 60 million. - Citycon restructured its financing by signing a syndicated credit facility of EUR 600 million with an international banking group. - Due to the new financing arrangements, the company's average loan maturity was extended to 4.8 years (2.7 years). - Citycon increased the hedging ratio with 81.6 per cent (70.0 per cent) of the interest-bearing liabilities at fixed rates at period-end. Share performance - Share performance was highly positive during the period: the trade-weighted average share price rose to EUR 3.86 (EUR 2.95) and the company's market capitalisation increased by 99.1 per cent to EUR 844.3 million (EUR 424.1 million). The EPRA Best Practices Policy Recommendations In January 2006, the European Public Real Estate Association (EPRA), which represents listed European property investment companies, published financial reporting recommendations for these companies, and completed the recommendations in November 2006. Citycon adheres to these recommendations in its financial reporting, which supplement the IAS/IFRS standards, not replace them. The recommendations are available in their entirety on EPRA's website at www.epra.com. In conjunction with the adoption of the EPRA recommendations, Citycon Group has changed its income statement presentation so that information is presented by function instead of expense type. Thus, the income statement includes gross and net rental income. Citycon is confident that the adoption of the EPRA recommendations will help investors evaluate its earning power and will increase the transparency of its investor information. Since Citycon applies the fair-value model in the measurement of its investment properties under IAS 40, Citycon's IFRS profit equals EPRA profit. IFRS diluted earnings per share equal EPRA earnings per share. EPRA NAV corresponds to Citycon's reported IFRS-compliant shareholders' equity attributable to parent company owners. Key Figures in Accordance with EPRA Recommendations EUR million per share (diluted), EUR 1-12 2006 1-12 2005 1-12 2006 1-12 2005 EPRA NAV 565.3 356.6 3.38 2.45 (iv) Fair value gains/losses of financial instruments in the income statement - - - - (iv) Mark-to-market adjustment on fair value of debt -26.9 0.5 -0.16 0.00 (iii) Deferred taxes - - - - EPRA NNNAV 538.5 357.1 3.22 2.45 Citycon's NNNAV rose by 50.8 per cent to EUR 538.5 million during the financial year. NNNAV per share was EUR 3.22. Business Environment In 2006, brisk demand continued for retail premises in Citycon's operating areas, i.e. Finland, Sweden and the Baltic countries, with high occupancy rates, sustained growth in the retail business contributing to these favourable market developments. Market growth in countries in which Citycon operates is largely due to favourable economic development and increases in households' purchasing power and consumer spending. The favourable market situation has increased the interest of international investors in properties in Citycon's operating areas, resulting in tougher competition and extremely brisk demand for attractive retail properties. Competition has improved market liquidity and raised prices, as consequence of which yield requirements for properties have decreased. Business and Property Portfolio in Summary Specialising in shopping centres and other large retail units, Citycon is a property investment company operating in Finland, Sweden and the Baltic countries. Citycon is the leading shopping centre operator in Finland and it has also established a firm foothold in its other operating regions. Citycon's business is based on expertise and active involvement throughout the property's ownership chain. It does not only own retail properties but it also leases, markets, manages and develops the properties it owns. At the year end, the company owned 26 (20) shopping centres and 53 (128) other retail properties. At the end of 2006, the market value of Citycon's property portfolio totalled EUR 1,447.9 million, of which its property portfolio in Finland accounted for 69.7 per cent (85.7 per cent), that in Sweden 24.5 per cent (8.0 per cent) and that in other countries, 5.8 per cent (6.3 per cent). The reporting period saw the disposal of 75 non-core properties at a debt-free price of EUR 73.9 million after purchase price adjustment. The sold properties' fair value recognised in the balance sheet of 31 December 2005 totalled EUR 65.3 million. Their sale generated EUR 5.9 million in pre-tax gain on sale, improving Citycon's earnings per share for 2006 by around EUR 0.01 and its profit by approximately EUR 2.1 million, taking account of gain on sale, transaction costs, lost net rental income for the fourth quarter and taxes. All of the sold properties, with a combined area of around 77,000 square metres, are located in Finland. A list of the sold properties is available on the company's website. In 2006, the company entered the Lithuanian market and pursued a strong growth policy in Sweden. The table below gives more details on the 2006 real estate and share transactions. Major acquisitions 2006 Property Company Location Dept free Post- purchase acqui- price with sition transaction holdings, expenses % (acquisition date exchange rates), MEUR Finland Shopping KOy Myyrmanni Vantaa 35.6 100.0 Centre (26% of shares) Myyrmanni Shopping Real estate Kouvola 2.0 100.0 Centre transaction Valtari Shopping Tullintori KOy Tampere 8.8 100.0 Centre (57.4% shares) Tullintori Shopping Vuosaari Helsinki 75.3 1) 100.0 Centre Investor Ab Columbus Sweden Lindome Real estate Mölndal, 8.0 100.0 retail transaction Greater centre Gothenburg Backa, Real estate Greater 25.7 100.0 Hindås, transaction Gothenburg Landvetter and Floda retail centres Shopping Stenungs Torg Stenungsund, 37.2 70.0 Centre Fastighets AB Greater Stenungs Torg Gothenburg Shopping BHM Järfälla, 106.6 100.0 Centre Centrumfastig- Greater Jakobsbergs heter AB Stockholm Centrum Shopping Liljeholmsplan Stockholm 60.6 100.0 centre Fastighets AB project Liljeholmsplan Bostadsfastig- heter AB Liljeholmstorget Development Services AB Shopping Tumba Botkyrka, 60.5 100.0 Centre Centrumfastig- Greater Tumba Centrum hets AB Stockholm 2) Lithuania Shopping UAB Prekybos Vilnius 14.9 100.0 Centre Centras Mandarinas Mandarinas (formerly UAB Rimvesta) 1) The previously announced purchase price of EUR 80.1 million includes the investments in the extension project carried out after the acquisition. 2) Transaction finalised on 31 January 2007. Maintaining its properties as attractive and dynamic retail centres in the eyes both of customers and lessees forms the key element in Citycon's business. Citycon's key refurbishment and development projects, launched in 2006 or earlier, are listed in the table below. Citycon will present development projects in greater detail in its Annual Report for 2006. Development projects Property Location Estimated Realised Estimated total costs capital date of MEUR expenditure final by the end comple- of 2006 tion Lippulaiva Espoo, Finland 60-70 1) 6.6 2008 Trio Lahti, Finland 50.5 0.6 2009 Duo Tampere, Finland 25.0 17.6 2007 Lentola Kangasala, Finland 16.6 - 2007 Piispanristi Kaarina, Finland 8.2 - 2007 Torikeskus Seinäjoki, Finland 4.0 0.6 2008 Åkersberga Österåker, Sweden 40.0 2) 3.4 2009 1)Both stages included in the figure. The 2nd stage is subject to a positive decision by Citycon's Board of Directors. 2)With a holding of 75 per cent in the Åkersberga shopping centre, Citycon accounts for around EUR 27 million of the development investment. Changes in Property Portfolio Fair Value Citycon measures its investment property at fair value, under IAS 40, according to which changes in its fair value are recognised through profit or loss. Using International Valuation Standards (IVS), an external professional valuer conducts the valuation of the company's property at least once a year. However, 2006 saw quarterly valuations by an external appraiser, due to the active market. A Property Valuation Statement prepared by Aberdeen Property Investors Finland Oy on the situation on 31 December 2006 is available at www.citycon.fi. During the financial year, the fair value of Citycon's property portfolio rose by EUR 120.1 million, as a result of changes in general market conditions and the leasing business. The year saw a total increase in the fair value of EUR 131.3 million and a total decrease of EUR 11.2 million. The average net yield requirement defined by Aberdeen Property Investors Finland Oy for Citycon's property portfolio decreased to 6.6 per cent. This decrease was mainly due to the very active property market. The most significant change in the market was intensifying international interest in the Finnish property market, particularly towards retail properties. Increasing demand lowers yield requirements set by investors and creates upward pressure on property prices, particularly in the liveliest growth centres. Lease Portfolio and Occupancy Rate At the end of the financial year, Citycon had a total of 3,080 (2,109) leases with 2,107 (1,120) lessees. The average length of the leases was 2.9 (3.2) years. The year-end occupancy rate of the property portfolio stood at 97.1 per cent (97.2 per cent) and net rental yield at 7.6 per cent (8.5 per cent). Reported net rental income increased by 23.5 per cent, to EUR 82.8 million, and the gross leasable area (GLA) grew by 23.3 per cent, to 735,029 square metres. Net rental income for like-for-like properties grew by 3.0 per cent. Like-for- like properties refer to properties held by Citycon throughout the 24-month reference period, excluding properties under development and extension as well as lots. The calculation method for net yield and standing (like-for-like) investments is based on the guidelines issued by the KTI Institute for Real Estate Economics and the Investment Property Databank (IPD). Lease portfolio summary 1-12 2006 1-12 2005 Number of leases started during the period 369 314 Total area of leases started, sq.m. 73,300 34,240 Occupancy rate at end of the period,% 97.1 97.2 Average length of lease portfolio at the end of the period, year 2.9 3.2 Business areas Citycon reorganised its operations towards the end of the year by introducing a regional organisation based on operating countries in place of the former divisions based on property types (Shopping Centres, Supermarkets and Shops and Property Development). This new regional organisation divides Citycon's operations into three business areas, Finland, Sweden and the Baltic Countries, and each is further divided into Retail Properties and Property Development. Finland Citycon is the Finnish market leader for shopping centre business. Reported net rental income increased by 8.2 per cent, to EUR 68.8 million while net rental income for like-for-like properties rose by 3.0 per cent. Finland accounted for 83.1 per cent of Citycon's total net rental income. Lease portfolio summary 1-12 2006 1-12 2005 Number of leases started during the period 321 298 Total area of leases started, sq.m. 66,500 31,480 Occupancy rate at end of the period,% 97.2 96.8 Average length of lease portfolio at the end of the period, year 3.1 3.3 Financial performance 1-12 2006 1-12 2005 Turnover, EUR million 95.8 87.4 Net fair value gains on investment property, EUR million 104.8 45.4 Operating profit, EUR million 176.1 106.6 Gross rental income, EUR million 93.1 84.8 Net rental income, EUR million 68.8 63.6 Net rental yield, % 7.6 8.7 Net rental yield, like-for-like properties, % 7.9 8.7 Market value of property portfolio, EUR million 1,009.7 820.1 Capital expenditure, EUR million 152.8 38.9 In Finland, the company acquired the Columbus shopping centre in Vuosaari, Helsinki, for EUR 75.3 million. Columbus's extension project was completed in early October, increasing the shopping centre's gross leasable area to around 20,000 square metres. Other major investments in Finland included the Myyrmanni shopping centre in Vantaa, now wholly owned by Citycon, the acquisition of the Tullintori shopping centre in Tampere and that of the Valtari shopping centre in Kouvola, the related capital expenditure totalling approximately EUR 46.4 million. In July, Citycon sold 75 non-core properties in Finland, recognising gain on sale of EUR 5.9 million before tax in Q3. The largest-scale development projects in Finland include the extension and refurbishment of the Trio shopping centre in Lahti, the Duo shopping centre in Hervanta, Tampere, and the Lippulaiva shopping centre in Espoo. Of these, the Duo project is progressing on schedule, and the first stage of the Lippulaiva shopping centre development project has been completed. The second stage is due to start as soon as the related alteration to the city plan has become legally valid. The modernisation project for the Trio shopping centre is expected to commence in February 2007. In addition, the company is building a new retail centre in Kaarina, some five kilometres from downtown Turku, and is modernising the Torikeskus shopping centre in Seinäjoki. In December 2006, Citycon decided to build a completely new retail centre in Lentola, Kangasala, close to Tampere, due for completion in the autumn of 2007. The new acquisitions made in Finland in 2006 were worth a total of EUR 124.3 million, while development investments totalled EUR 28.5 million. At year-end, the company owned 19 (16) shopping centres and 46 (127) other retail properties in Finland. The acquisitions and development projects listed above will further strengthen Citycon's position as Finland's market leader in the shopping centre business. Sweden In 2006, Citycon's new acquisitions strengthened its market position especially in Sweden. Reported net rental income increased by 422.4 per cent, to EUR 9.3 million. Net rental income in Sweden accounted for 11.2 per cent of Citycon's total net rental income. Lease portfolio summary 1-12 2006 1-12 2005 Number of leases started during the period 32 2 Total area of leases started, sq.m. 3,900 130 Occupancy rate at end of the period, % 96.3 99.6 Average length of lease portfolio at the end of the period, year 2.2 2.3 Financial performance 1-12 2006 1-12 2005 Turnover, EUR million 17.3 2.7 Net fair value gains on investment property, EUR million 8.7 1.7 Operating profit, EUR million 16.8 3.5 Gross rental income, EUR million 15.9 2.5 Net rental income, EUR million 9.3 1.8 Net rental yield, % 5.2 3.2 Market value of property portfolio, EUR million 354.8 76.1 Capital expenditure, EUR million 267.2 77.9 At the beginning of the reporting period, Citycon acquired retail centres in Lindome, Backa, Hindås, Landvetter and Floda in the Greater Gothenburg Area in Sweden, for an approximate total of EUR 25.7 million. In September, Citycon acquired the majority of shares in the Stenungs Torg shopping centre north of Gothenburg, for EUR 37.2 million. Investments include the transaction costs related to the acquisitions. In the Greater Stockholm Area, Citycon acquired the Jakobsbergs Centrum shopping centre for EUR 106.6 million in September. In August, the company acquired a shopping centre project in Liljeholmen, Stockholm, for EUR 60.6 million, comprising a 20,000-square-metre office and commercial building and a substantial permitted building volume for constructing a new shopping centre. The company is planning to extend the building's leasable area to four to fivefold. Also in the Greater Stockholm Area, Citycon is developing and refurbishing the Åkersberga shopping centre. Citycon's share of this investment project totals about SEK 247 million (around EUR 27 million) and includes modernisation and an extension of 9,000 square metres. The project will be completed during the spring of 2009. Citycon has undertaken to buy the remaining holding in the shopping centre once the development project has been completed. The new acquisitions made in Sweden in 2006 were worth a total of EUR 260.7 million, while development investments totalled EUR 6.5 million. Close to the end of the financial year, Citycon announced the acquisition of the Tumba Centrum shopping centre, located south of Stockholm, for approximately EUR 60.8 million. The transaction was finalised in January 2007. After closing of the Tumba Centrum acquisition, Citycon owns 6 (3) shopping centres and 7 (1) other retail properties in Sweden, all of them located in the Greater Stockholm and Gothenburg areas. Baltic Countries Citycon owns two shopping centres in the Baltic countries, Rocca al Mare in Tallinn, Estonia, and Mandarinas in Vilnius, Lithuania. Citycon expanded its operations in the Baltic countries, to Lithuania in 2006 by acquiring the shopping centre Mandarinas at a debt-free purchase price of approximately EUR 14.9 million with the acquisition costs. Completed in September 2005, the Mandarinas shopping centre has a leasable area of approximately 7,900 square metres. Reported net rental income from operations in the Baltic countries increased by 191.1 per cent, to EUR 4.8 million and net rental income in the region accounted for 5.7 per cent of Citycon's total net rental income. Lease portfolio summary 1-12 2006 1-12 2005 Number of leases started during the period 16 14 Total area of leases started, sq.m. 2,900 2,630 Occupancy rate at end of the period, % 100.0 100.0 Average length of lease portfolio at the end of the period, year 3.3 3.4 Financial performance, Baltic Countries 1-12 2006 1-12 2005 Turnover, EUR million 6.2 2.1 Net fair value gains on investment property, EUR million 6.6 -1.2 Operating profit, EUR million 10.9 0.3 Gross rental income, EUR million 6.1 1.8 Net rental income, EUR million 4.8 1.6 Net rental yield, % 8.4 9.1 Market value of property portfolio, EUR million 83.3 60.5 Capital expenditure, EUR million 16.2 61.6 The new acquisitions made in the Baltic countries in 2006 were worth a total of EUR 15.9 million, while development investments totalled EUR 0.4 million. The company is planning to extend the shopping centre Rocca al Mare by some 25,000 sq.m. The extension project is due to start in 2007. Due to the limited size, competition and limited availability of suitable properties in the Baltic market, Citycon has proceeded with caution in making investments. However, the company is constantly searching for potential acquisition opportunities in the region. Human Resources and Administrative Expenses At period-end, Citycon Group had a total of 73 (52) employees, 59 of whom worked in Finland, eight in Sweden, five in Estonia and one in Lithuania. Administrative expenses grew to EUR 12.9 million (EUR 8.3 million), including EUR 0.9 million (EUR 0.2 million) share-based non-cash calculatory expenses related to employee stock options, and EUR 0.6 million in transaction costs related to the disposal of non-core properties. Expenses also increased due to the expansion of company operations. Wages and salaries paid by the Group totalled EUR 4.6 million (EUR 3.1 million), of which those paid to Chief Executive Officer accounted for EUR 0.3 million (EUR 0.2 million) and Board members EUR 0.5 million (EUR 0.3 million). Wages and salaries paid by the parent company totalled EUR 4.2 million (EUR 2.8 million), of which those paid to the CEO accounted for EUR 0.3 million (EUR 0.2 million) and Board members EUR 0.5 million (EUR 0.3 million). Turnover and Profit Turnover for the period came to EUR 119.4 million (EUR 92.2 million), mainly comprising the rental income generated by Citycon's retail properties, of which gross rental income accounted for 96.5 per cent (96.6 per cent). Operating profit rose to EUR 196.5 million (EUR 105.2 million). Profit before tax came to EUR 165.6 million (EUR 74.2 million) and profit after tax was EUR 126.4 million (EUR 59.8 million). The increase in operating profit was mainly due to changes in the fair value of the property portfolio, and the operating profit generated by acquired properties. The effect of fair value gains and gains on sale of investment properties and other non-recurring items with the related tax effect on the profit for the period attributable to parent company shareholders was EUR 92.5 million (EUR 33.5 million). Taking this into account, the profit for the period attributable to parent company shareholders after tax is EUR 6.7 million above the previous year's level. Greater earnings resulted mainly from increase in net rental income. Earnings per share came to EUR 0.78 (EUR 0.47). Earnings per share excluding the fair value gains and gains on sale of investment property and other non-recurring items and the related tax effect were EUR 0.20 (EUR 0.20). Net cash from operating activities per share amounted to EUR 0.20 (EUR 0.19). Capital Expenditure Citycon's gross capital expenditure totalled EUR 436.4 million (EUR 178.5 million), of which property acquisitions accounted for EUR 400.9 million (EUR 171.0 million), property development for EUR 35.4 million (EUR 7.4 million) and other investments for EUR 0.2 million (EUR 0.1 million). Capital expenditure during the reporting period were financed mainly through the EUR 75 million rights issue, by issuing convertible bonds of EUR 110 million, using approximately EUR 74 million of proceeds from disposal of non-core properties and raising new interest-bearing debt of approximately EUR 143 million. Balance Sheet and Financial Position The year-end balance sheet total stood at EUR 1,486.4 million (EUR 983.1 million), and liabilities totalled EUR 906.1 million (EUR 622.9 million), with short-term liabilities accounting for EUR 134.4 million (EUR 74.4 million). The Group's financial position remained at a healthy level. Year on year, reported interest-bearing liabilities increased by EUR 233.4 million to EUR 814.0 million (EUR 580.5 million). The fair value of the Group's interest-bearing liabilities stood at EUR 832.5 million (EUR 580.5 million) while the cash and cash equivalents were EUR 21.3 million (EUR 15.6 million) leading to fair value of net interest-bearing liabilities of EUR 811.2 million (EUR 564.9 million) as of 31 December 2006. The weighted average interest rate of the interest-bearing liabilities was 4.35 per cent (4.83 per cent) during 2006. The average loan maturity, weighted according to loan principals, extended to 4.8 years (2.7 years) while the average time to fixing was 4.1 years (2.5 years). The Group's equity ratio was 39.1 per cent (36.7 per cent). Interest cover, i.e. the previous 12 months' profit before interest expenses, tax, depreciation, changes in fair value and non-recurring items relative to net financial expenses, was 2.3. Period-end gearing stood at 136.6 per cent (156.8 per cent). This fall was due to the company's strong financial performance and equity financing transactions carried out during the reporting period. During 2006 Citycon increased the interest hedging ratio of its debt portfolio and, at the end of 2006, its interest-bearing liabilities included 77.5 per cent (87.3 per cent) in floating-rate loans, of which 76.2 per cent (69.8 per cent) had been converted to fixed-rate ones by means of interest rate swaps. Taking into account the interest rate swaps, 81.6 per cent (70.0 per cent) of the company's period-end interest-bearing liabilities were at fixed interest rates. On 31 December 2006, the nominal amount of interest rate swaps totalled EUR 541.7 million (EUR 336.5 million) while the fair value of derivatives came to EUR -2.0 million (EUR -14.7 million). Citycon applies hedge accounting and, thus, fair value changes of interest rate swaps are recognised under equity. Net financial expenses decreased by EUR 0.2 million, to EUR 30.9 million (EUR 31.1 million), which include EUR 0.9 million (EUR 5.7 million) in non-recurring expenses relating to the refinancing of a bank loan. The growth in like-for-like net financial expenses was mainly due to an increase in interest-bearing liabilities. Net financial expenses in income statement for 2006 include EUR 0.7 million (EUR 0.0 million) in non-cash expenses related to the option component in the convertible bonds. Capital Market Transactions During the financial year, Citycon carried out the following two capital market transactions successfully: subordinated convertible bonds placed with institutional investors and a rights issue. These operations strengthened the company's balance sheet and will support the implementation of its growth strategy. In July, Citycon's Board of Directors decided to offer EUR 110 million worth of subordinated convertible bonds to international institutional investors. The convertible bonds have been listed on the Helsinki Stock Exchange since 22 August 2006. With a maturity of seven years (the maturity date on 2 August 2013), they bear an annual fixed interest rate of 4.5 per cent and their initial conversion price is EUR 4.3432, the conversion period being from 12 September 2006 until 27 July 2013. Waiving the shareholders' pre-emptive rights, the issue of the convertible bonds was based on the authorisation given by Citycon's Annual General Meeting on 14 March 2006. The conversion of the convertible bonds may increase the company's share capital by a maximum of EUR 34,191,378.45 and the number of shares by a maximum of 25,326,947. In March/April, Citycon carried out a rights issue, through which the company raised a total of approximately EUR 75 million, offering shareholders the right to subscribe for one new share against every five shares they hold. A total of 27,274,949 new shares were subscribed at a subscription price of EUR 2.75 per share, equalling approximately 99.4 per cent of the shares offered. More detailed information on the convertible bonds and the rights issue is given in Citycon's stock exchange releases published during the financial year and available on the company's website at www.citycon.fi. Debt-financing Transactions During the reporting period, the company renegotiated better terms and conditions for its debt financing by prolonging the loan portfolio's average maturity and increasing the amount of debt in its disposal. The new debt financing transactions will allow the company to invest flexibly in line with its strategy. In February 2006, the company signed a new commercial paper programme worth EUR 100 million, replacing its previous commercial paper programmes worth EUR 60 million. In August, the company signed a EUR 600 million credit agreement with an international banking group. The loan was used to re-finance a bank loan worth EUR 450 million raised in 2004 and maturing in 2009, and to finance property acquisitions. This credit facility will reduce the company's annual finance costs, in comparison with the equivalent refinanced loan, by around EUR 0.7 million. Risk Management and Environmental Responsibility Risk management aims to help ensure that Citycon meets its strategic and operational goals. The company's risk-management process involves identifying business-related risks, analysing their significance, planning and implementing risk-management measures, reporting on risks on a regular basis and controlling risks. In the autumn of 2006, Citycon carried out an extensive risk analysis, involving the identification of risks and their management before their entry in a risk register. Citycon is continuously perfecting its risk-management process and aims to adopt an Enterprise Risk Management (ERM) programme during 2007. The company updates its guidelines for risk-management principles, approved by the Board of Directors, on a regular basis in response to possible changes in its business. Citycon's major business-critical risks relate to those associated with its lessees' ability to pay rents and those associated with its property portfolio, retail properties' value development and business expansion, as well as financial risks. Energy-use management forms an integral part of property companies' operating- cost control and environmental responsibility. Citycon is involved in KRESS, the energy conservation agreement for the property and construction sector, aimed at reducing properties' energy consumption. Other major environmental effects relate to land use, property maintenance and waste management. Citycon's operations are guided by a lifecycle approach that pays particular attention to the timing of renovation and other types of property repair. In its property development projects, Citycon strives, for instance, to recycle demolition and construction waste as efficiently as possible. Legal Proceedings In early 2006, based on competitive tendering, Citycon Oyj submitted a joint tender with Skanska Talonrakennus Oy for the construction of a new shopping centre and the related areas, in accordance with a general plan for the Ratina region in Tampere. On 3 April 2006, the City of Tampere made the decision to opt for a consortium comprising Kapiteeli and Sponda to implement the project. Citycon Oyj's and Skanska Talonrakennus Oy's quotation for this project totalled over EUR 31 million while the selected consortium quoted EUR 20 million. On 27 April 2006, Citycon submitted a claim for correction to the City Board of Tampere, demanding a reversal of the decision and requesting that Citycon Oyj and Skanska Talonrakennus Oy be selected to develop the project. Citycon has also filed a petition with the Market Court, whereby it is demanding that, in the first instance, the decision be reversed and, secondarily, the City of Tampere carry out a new comparison of tenders. In addition, the petition requests a ban on signing the project contract and a discontinuance of the project procurement process. In June, the Market Court imposed a temporary preservation order and a conditional fine on the City of Tampere. The City of Tampere filed a complaint with the Supreme Administrative Court, which upheld the Market Court's decision by a ruling issued in November. The Market Court's ruling on the actual petition is pending. Annual General Meeting Citycon's Annual General Meeting (AGM), held in Helsinki on 14 March 2006, adopted the financial statements of Citycon Oyj and the Citycon Group for 2005 and discharged the Board of Directors and the CEO from liability. The AGM decided that a per-share dividend of EUR 0.14 be paid for 2005. The dividends were paid out on 24 March 2006. Board of Directors With the number of Board members remaining at eight, the AGM re-elected the following Board members for a one-year term: Amir Gal, Raimo Korpinen, Tuomo Lähdesmäki, Carl G. Nordman, Claes Ottosson, Dor J. Segal and Thomas W. Wernink. Gideon Bolotowsky (58), M.Sc. (Eng.), Finnish citizen, was elected a new Board member. As a Board member from 2000 and Board Chairman from 2002, Stig-Erik Bergström was not available for re-election. At its first meeting, the Board elected Thomas W. Wernink Chairman and Tuomo Lähdesmäki Deputy Chairman. Auditor The AGM decided to alter Article 9 of the Articles of Association, regarding company auditors, in such a way that Citycon has one auditor, which must be a firm of authorised public accountants certified by the Central Chamber of Commerce of Finland. Accordingly, the AGM elected Ernst & Young Oy, Authorised Public Accountants, as the company's auditor for 2006, with Tuija Korpelainen acting as chief auditor, as notified by Ernst & Young Oy. Board Authorisations The AGM authorised the Board of Directors to decide to increase the share capital through one or several rights issues by offering a maximum of 50 million new shares at a nominal per-share value of EUR 1.35 for subscription by shareholders. The Board exercised this authorisation in March when it decided on a share issue based on the shareholders' pre-emptive subscription right. A total of 27.3 million shares were subscribed. In addition, the AGM authorised the Board to decide to issue one or several convertible bonds, issue stock options and increase the company's share capital through one or several share issues, waiving the shareholders' pre-emptive subscription right, by issuing a maximum of 27.4 million new shares. The Board exercised this authorisation in July when it decided to issue subordinated convertible bonds placed with institutional investors. Based on the bonds, maturing in August 2013, the company's share capital may increase by EUR 34.2 million at the most, through the issue of a maximum of 25.3 million shares. At the end of the reporting period, the Board had no other authorisations. Shareholders, Share Capital and Shares Citycon is a Mid Cap company under the Financial sector on the OMX Nordic Exchange its shares being listed on the Helsinki Stock Exchange since November 1988. Its trading code is CTY1S and shares are traded in euros. The ISIN code used in international securities clearing is FI0009002471. Shareholders On 31 December 2006, Citycon had a total of 1,721 (1,402) registered shareholders, of which nine were account managers of nominee-registered shares. Nominee-registered shareholders, mainly international investors, held 155.6 million (125.5 million) shares, or 93.1 per cent (92.0 per cent) of shares and voting rights. In 2006, the company did not receive any statutory notices regarding changes in shareholdings. Trading and share performance In 2006, the number of Citycon shares traded on the Helsinki Stock Exchange totalled 51.2 million (40.7 million) at a total value of EUR 197.6 million (EUR 119.2 million). The highest quotation was EUR 5.09 (EUR 3.50) and the lowest EUR 3.02 (EUR 2.36). The reported trade-weighted average price was EUR 3.86 (EUR 2.95), and the share closed at EUR 5.05 (EUR 3.11). The company's market capitalisation at the end of the financial year totalled EUR 844.3 million (EUR 424.1 million). Share Capital Under the Articles of Association, Citycon's minimum share capital totals EUR 100 million and maximum share capital EUR 500 million, within which limits the company may reduce or increase its share capital without altering its Articles of Association. The company has a single series of shares, with each share entitling its holder to one vote at the shareholders' meeting. At the beginning of 2006, Citycon had a share capital of EUR 184.1 million and the number of shares totalled 136.4 million. The reporting period saw Citycon increase its share capital through a rights issue and share subscriptions based on stock options by a total of EUR 41.6 million and 30.8 million shares. The table below shows the changes in share capital in more detail. The company's period-end registered share capital amounted to EUR 225.7 million and the number of shares totalled 167.2 million, each share bearing a nominal value of EUR 1.35. Changes in share capital from 1 January to 31 December 2006 Date 2006/Reason Change, Change Share Number EUR in no. capital of shares of shares in EUR 1 Jan. 184,115,724.30 136,382,018 16 Feb. Increase 1,012,945.50 750,330 185,128,669.80 137,132,348 (stock options) 28 March Increase 20,250.00 15,000 185,148,919.80 137,147,348 (stock options) 18 April Increase 737,572.50 546,350 185,886,492.30 137,693,698 (stock options) 28 April Increase 36,821,181.15 27,274,949 222,707,673.45 164,968,647 (rights issue) 4 May Increase 51,629.40 38,244 222,759,302.85 165,006,891 (stock options) 20 June Increase 22,126.50 16,390 222,781,429.35 165,023,281 (stock options) 27 July Increase 363,734.55 269,433 223,145,163.90 165,292,714 (stock options) 21 Sept. Increase 1,619,391.15 1,199,549 224,764,555.05 166,492,263 (stock options) 25 Oct. Increase 100,934.10 74,766 224,865,489.15 166,567,029 (stock options) 14 Dec. Increase 831,803.85 616,151 225,697,293.00 167,183,180 (stock options) 31 Dec. 225,697,293.00 167,183,180 Shares Not Transferred into the Book-entry Securities System At the end of August, Citycon Oyj sold the company's shares not transferred into the book-entry securities system, for the benefit of their holders. The resulting income, less expenses incurred by the company due to notifications and sales, was lodged with the State Provincial Office of Southern Finland on 1 September 2006. A holder of the sold shares or another assignee is entitled to a share of this income in proportion to his/her shareholding, at EUR 3.52 per share. In order to receive his/her share of this income, the shareholder or another assignee must present a claim for it and hand over his/her share certificates and any proof of title to a Nordea Bank Finland Plc branch no later than 31 August 2016. Treasury shares During the financial year, Citycon Oyj held no treasury shares. Stock Options Citycon has two stock-option schemes in force, the 1999 A/B/C scheme and the 2004 A/B/C scheme, which form part of the Group-wide employee incentive and motivation programme. In 2006, the 2004 stock options were transferred to the book-entry securities system and 2004 A stock options were listed on the Helsinki Stock Exchange as their share subscription period began on 1 September 2006. The 1999 stock options are also listed on the Helsinki Stock Exchange. Moreover, the Board of Directors decided to issue C stock options under the 2004 stock-option scheme to Group employees. A total of 1,250,000 options were granted to 60 persons. Citycon has amended the terms and conditions of its stock-option schemes due to the rights issue carried out during the period. Amendments made to the share subscription ratios and prices also apply to the maximum numbers of shares and increases in the share capital with respect to shares subscribed under option rights. The new subscription ratios and prices and numbers of option rights are listed in the tables below. 1999 Stock Options The Extraordinary General Meeting (EGM) of 4 November 1999 decided to grant a maximum of 5,500,000 stock options to Citycon employees (5,327,500 stock options) and to Veniamo-Invest Oy, a Citycon subsidiary (172,500 stock options). 1999 Number Subscription Subscription Share Share Stock ratio price subscription subscription Options option/share per share, period period in EUR begins ends 1999A 1,800,000 1:1.0927 1.35 1 Sept. 2000 30 Sept. 2007 1999B 1,800,000 1:1.0927 1.35 1 Sept. 2002 30 Sept. 2007 1999C 1,727,500 1:1.0927 1.35 1 Sept. 2004 30 Sept. 2007 Veniamo-Invest Oy 172,500 1:1.0927 1.35 1 Sept. 2004 30 Sept. 2007 Total 5,500,000 In accordance with the amended terms and conditions, the 1999 stock options entitle their holders to subscribe for a maximum of 5,820,418 shares, with the result that the company's share capital may increase by a maximum of EUR 7,857,564.30. By the end of 2006, a total of 4,805,930 shares had been subscribed based on these options including 63,525 new shares subscribed in December 2006. In 2006, the total number of 1999 stock options traded on the Helsinki Stock Exchange came to 2.4 million (2.8 million), their value totalling EUR 6.2 million (EUR 4.4 million). The highest quotation was EUR 4.00 (EUR 2.09) and the lowest EUR 1.81 (EUR 0.88). During the financial year, the number of new Citycon shares subscribed on the basis of the 1999 stock-option scheme totalled 1,078,509 at a per-share subscription price of EUR 1.35. The new shares entitle their holders to a dividend for the financial year 2006. The share capital increase corresponding to the shares subscribed in December has not yet been registered with the Finnish Trade Register. 2004 Stock Options The Extraordinary General Meeting (EGM) of 15 March 2004 decided to grant a maximum of 3,900,000 stock options. At the end of the financial year, personnel held 3,380,000 A/B/C stock options and Veniamo-Invest Oy 520,000. 2004 Number Subscription Subscription Share Share Stock ratio price subscription subscription Options option/share per share, period period in EUR(* begins ends 2004A 1,040,000 1:1.0611 2.2336 1 Sept. 2006 31 March 2009 2004B 1,090,000 1:1.0611 2.6766 1 Sept. 2007 31 March 2010 2004C 1,250,000 1:1.0611 4.62 1 Sept. 2008 31 March 2011 2004A 260,000 1:1.0611 2.2336 1 Sept. 2006 31 March 2009 Veniamo-Invest Oy 2004B 210,000 1:1.0611 2.6766 1 Sept. 2007 31 March 2010 Veniamo-Invest Oy 2004C 50,000 1:1.0611 4.62 1 Sept. 2008 31 March 2011 Veniamo-Invest Oy Total 3,900,000 *) The subscription price is reduced by 50 per cent of the amount of annual dividends paid. However, the share subscription price will always amount to at least the share's par value of EUR 1.35. In accordance with the amended terms and conditions, the 2004 stock options entitle their holders to subscribe for a maximum of 4,138,290 shares, with the result that the company's share capital may increase by a maximum of EUR 5,586,691.50. During the financial year, the number of new Citycon shares subscribed on the basis of the 2004A stock-option scheme totalled 89,715 at a per- share subscription price of EUR 2.2336. This figure comprises the 27,747 new shares subscribed in December. The new shares entitle their holders to a dividend for the financial year 2006. The share capital increase corresponding to the shares subscribed in December has not yet been registered with the Finnish Trade Register. In September-December, the total number of 2004A stock options, listed in early September and traded on the Helsinki Stock Exchange, came to 0.2 million, their value totalling EUR 0.4 million. The highest quotation was EUR 2.93 and the lowest EUR 1.66. Shares and Stock Options held by the Board of Directors and Management On 31 December 2006, members of the Board of Directors, the CEO and other members of the Corporate Management Committee, and their related parties held a total of 223,871 Citycon shares, accounting for 0.13 per cent of all shares and voting rights. On 31 December 2006, Citycon's CEO held 73,214 1999A/B/C stock options, 150,000 2004A stock options, 140,000 2004B stock options and 140,000 2004C stock options. Other members of the Corporate Management Committee held a total of 32,000 1999A/B/C stock options, 150,000 2004A stock options, 280,000 2004B stock options and 280,000 2004C stock options. Board members are not included in the company's stock option schemes. Up-to-date information on the share and stock option holdings of the members of Citycon's Board of Directors and Corporate Management Committee is available on the company's website at www.citycon.fi. Events after the Financial Year Extraordinary General Meeting (EGM) Citycon's EGM, held in Helsinki on 26 January 2007, authorised the Board of Directors to decide on a directed share issue and the terms and conditions thereof. The total number of shares to be issued may not exceed 25,000,000 shares. The authorisation will remain valid for 5 years as of the date of said EGM. The authorisation was registered with the Finnish Trade Register on 2 February 2007 with the result that the authorisations granted to the Board of Directors by the AGM of 14 March 2006 became ineffective. Acquisition of a Shopping Centre In December 2006, Citycon announced that it had signed an agreement for the acquisition of the Tumba Centrum shopping centre, located in the municipality of Botkyrka in the Greater Stockholm Area. The transaction was finalised on 31 January 2007 at a debt-free purchase price of SEK 547.7 million (approximately EUR 60.5 million). Board proposal for dividend payment The Board of Directors proposes to the Annual General Meeting of 13 March 2007 that a per-share dividend of EUR 0.14 be paid out for the financial year ending on 31 December 2006, that the dividend record date be 16 March 2007 and that the dividend payment date be 23 March 2007. Outlook While competition for properties intensifies Citycon continues to seek acquisition and development opportunities and to pursue its expansion strategy. Due to the acquisitions and development projects planned and underway during 2006, Citycon expects the operating profit excluding fair value gains and gains on sale of investment properties to increase during 2007. Helsinki, 8 February 2007 Citycon Oyj Board of Directors Condensed Consolidated Income Statement, IFRS EUR MILLION 10-12 10-12 1-12 % 1-12 % 2006 2005 2006 2005 Gross rental income 31.7 24.6 115.1 96.5 89.1 96.6 Service charge income 1.3 1.2 4.2 3.5 3.1 3.4 Turnover 33.0 25.7 119.4 100.0 92.2 100.0 Property operating expenses 10.6 6.8 36.0 30.2 24.7 26.8 Other expenses from leasing operations 0.2 0.1 0.6 0.5 0.5 0.5 Net rental income 22.1 18.8 82.8 69.3 67.0 72.7 Administrative expenses 3.2 2.4 12.9 10.8 8.3 9.0 Other operating income and expenses 0.3 0.1 0.6 0.5 0.3 0.3 Net fair value gains on investment property 23.1 29.9 120.1 100.6 45.9 49.8 Net gains on sale of investment property 0.1 - 5.9 0.0 0.3 0.0 Operating profit 42.5 46.4 196.5 164.6 105.2 114.1 Net financial income and expenses 8.7 5.6 30.9 25.9 31.1 33.7 Profit before taxes 33.8 40.8 165.6 138.8 74.2 80.4 Current taxes -1.0 -1.3 -7.4 -6.2 -3.5 -3.8 Change in deferred taxes -6.3 -4.7 -31.8 -26.7 -10.8 -11.8 Profit for the period 26.4 34.8 126.4 105.9 59.8 64.8 Attributable to Parent company shareholders 24.9 34.3 124.9 59.2 Minority interest 1.5 0.5 1.5 0.6 Earnings per share (basic), EUR 0.15 0.24 0.78 0.47 Earnings per share (diluted), EUR 0.14 0.24 0.74 0.46 Condensed Consolidated Balance Sheet, IFRS EUR MILLION 31 Dec. 2006 31 Dec. 2005 Assets Non-current assets Investment property 1,447.9 956.6 Property, plant and equipment 0.6 0.7 Other non-current assets 4.8 0.2 Total non-current assets 1,453.3 957.6 Current assets Trade and other receivables 11.8 9.9 Cash and cash equivalents 21.3 15.6 Total current assets 33.1 25.5 Total assets 1,486.4 983.1 Liabilities and Shareholders' Equity Equity attributable to parent company shareholders Share capital 225.7 184.1 Share issue 0.1 1.1 Share premium fund and other reserves 131.1 85.4 Fair value reserve -1.3 -10.5 Retained earnings 209.7 96.5 Total equity attributable to parent company shareholders 565.3 356.6 Minority interest 15.0 3.6 Total shareholders' equity 580.3 360.2 Liabilities Long-term interest-bearing liabilities 726.3 528.5 Long-term non-interest bearing liabilities 4.9 14.2 Deferred tax liabilities 40.4 5.8 Total long-term liabilities 771.7 548.4 Short-term interest-bearing liabilities 87.6 52.1 Trade and other payables 46.8 22.3 Total short-term liabilities 134.4 74.4 Total liabilities 906.1 622.9 Total liabilities and shareholders' equity 1,486.4 983.1 Equity attributable to parent company shareholders Share Share Share Fair Treasury Retained capital issue premium value shares earnings fund reserve and other reserves Balance at 1 Jan. 2005 156.8 - 41.5 -13.3 -4.7 57.4 Cash flow hedges 2.8 Profit for the period 59.2 Total recognized income and expense for the period 2.8 59.2 Change in share capital -5.2 5.2 4.7 -4.7 Dividends -15.7 Share issue 31.3 38.6 Share subscriptions based on stock options 1.2 1.1 0.2 Other changes 0.2 Balance at 31 Dec. 2005 184.1 1.1 85.4 -10.5 - 96.5 Balance at 1 Jan. 2006 184.1 1.1 85.4 -10.5 - 96.5 Cash flow hedges 9.2 Profit for the period 124.9 Total recognized income and expense for the period Change in share capital 36.8 37.1 Dividends -6.6 -12.6 Share subscriptions based on stock options 4.8 -0.9 0.1 Equity instrument of convertible bond 15.1 Other changes 0.9 Balance at 31 Dec. 2006 225.7 0.1 131.1 -1.3 0.0 209.7 Equity Minority Shareholders' attributable interest equity, to parent company total shareholders Balance at 1 Jan. 2005 237.7 - 237.7 Cash flow hedges 2.8 2.8 Profit for the period 59.2 0.6 59.8 Total recognized income and expense for the period 62.0 0.6 62.6 Change in share capital 0.0 0.0 Dividends -15.7 -15.7 Share issue 69.9 69.9 Share subscriptions based on stock options 2.5 2.5 Other changes 0.2 3.0 3.2 Balance at 31 Dec. 2005 356.6 3.6 360.2 Balance at 1 Jan. 2006 356.6 3.6 360.2 Cash flow hedges 9.2 9.2 Profit for the period 124.9 1.5 126.4 Total recognized income and expense for the period 0.0 0.0 Change in share capital 73.9 73.9 Dividends -19.2 -19.2 Share subscriptions based on stock options 3.9 3.9 Equity instrument of convertible bond 15.1 15.1 Other changes 0.9 9.9 10.7 Balance at 31 Dec. 2006 565.3 15.0 580.3 Condensed Consolidated Cash Flow Statement, IFRS EUR MILLION 1-12 2006 1-12 2005 Cash flow from operating activities Profit before taxes 165.6 74.2 Adjustments -94.0 -14.1 Cash flow before change in working capital 71.6 60.1 Change in working capital -0.5 1.9 Cash generated from operations 71.1 62.0 Paid interest and other financial charges -34.1 -32.3 Received interest and other financial income 0.9 0.4 Taxes paid -5.9 -5.2 Net cash from operating activities 32.0 24.8 Cash flow from investing activities Acquisition of subsidiaries, less cash acquired -331.8 -92.6 Acquisition of investment property -33.6 - Capital expenditure on investment properties, PP&E and intangible assets -35.6 -7.2 Sale of investment property 73.9 2.8 Proceeds from sale of other investments - 1.0 Net cash used in investing activities -327.1 -96.1 Cash flow from financing activities Proceeds from share issue 77.4 74.4 Proceeds from short-term loans 421.2 134.6 Repayments of short-term loans -392.2 -108.6 Proceeds from long-term loans 675.3 199.7 Repayments of long-term loans -461.8 -205.6 Dividends paid -19.2 -15.7 Net cash from/used in financing activities 300.8 78.9 Net change in cash and cash equivalents 5.7 7.7 Cash and cash equivalents at period-start 15.6 7.9 Effects of exchange rate changes - - Cash and cash equivalents at period-end 21.3 15.6 Segment Information EUR MILLION 10-12 2006 10-12 2005 1-12 2006 1-12 2005 Turnover Finland 24.0 23.0 95.8 87.4 Sweden 7.2 1.5 17.3 2.7 Baltic Countries 1.8 1.3 6.2 2.1 Total 33.0 25.7 119.4 92.2 Operating Profit Finland 30.2 43.8 176.1 106.6 Sweden 11.9 2.5 16.8 3.5 Baltic Countries 2.2 2.1 10.9 0.3 Unallocated -1.8 -1.9 -7.2 -5.2 Total 42.5 46.4 196.5 105.2 Key Figures 1-12 2006 1-12 2005 Earnings per share (basic), EUR 0.78 0.47 Earnings per share (diluted), EUR (EPRA EPS) 0.74 0.46 Equity per share, EUR (EPRA NAV) 3.38 2.45 Return on equity (ROE), % 25.8 22.5 Return on investment (ROI), % 16.8 13.5 Equity ratio, % 39.1 36.7 Investment property 31 Dec. 2006 31 Dec. 2005 At period-start 956.6 738.7 Additions 436.2 175.4 Disposals -67.9 -3.4 Net fair value gains 120.1 45.9 Exchange differences 2.9 - At period-end 1447.9 956.6 Consolidated Contingent Liabilities EUR MILLION 31 Dec. 2006 31 Dec. 2005 Mortgages on land and buildings 21.1 7.8 Bank guarantees 37.1 - Group's Derivative Financial Instruments EUR MILLION 31 Dec. 2006 31 Dec. 2005 Nominal Fair Nominal Fair amount value amount value Interest rate derivatives Interest rate swaps Maturity: less than 1 year 50.0 0.5 78.2 -0.1 1-2 years 40.0 0.0 50.0 -1.5 2-3 years 86.0 -2.6 125.3 -6.3 3-4 years 83.0 -2.7 83.0 -6.8 4-5 years 40.0 -0.8 0.0 0.0 over 5 years 242.7 3.8 0.0 0.0 Total 541.7 -2.0 336.5 -14.7 Foreign exchange derivatives Forward agreements Maturity: less than 1 year 14.8 0.0 0.0 0.0 Total 14.8 0.0 0.0 0.0 The fair value of derivative financial instruments represents the market value of the instrument with prices prevailing on the balance sheet date. Derivative financial instruments are used in hedging the interest rate risk of the interest bearing liabilities and foreign currency risk. The fair values include accrued interest expenses of EUR 0.2 million (EUR 0.5 million) which are recognized in the interest expenses in income statement. The fair values include foreign exchange loss of EUR -1.9 million (EUR 0.0 million) which is recognized in income statement. Hedge accounting is applied for interest rates swaps which have nominal amount of EUR 491.7 million (EUR 336.5 million). The fair value loss recognized in the fair value reserve under shareholders' equity taking account the tax effect totals EUR -1.3 million (EUR -10.5 million). The figures are unaudited. Financial reports in 2007 Citycon will publish its Annual Report for 2006, including the Financial Statements, on its website in week 9 and its printed version in week 10. Citycon will issue three interim reports during the financial year 2007 as follows: January-March 2007 on Thursday, 26 April, noon, January-June 2007 on Friday, 20 July, noon, and January-September 2007 on Thursday, 18 October, noon. Annual General Meeting Citycon Oyj will hold its AGM at Hall B in Finlandia Hall, Mannerheimintie 13e, Helsinki, Finland, on 13 March 2007, starting at 2.00 p.m. Further information for investors is available on Citycon's website at www.citycon.fi. For further information, please contact: Mr Petri Olkinuora, CEO Tel. +358 9 6803 6738 or +358 400 333 256 petri.olkinuora@citycon.fi Mr Eero Sihvonen, CFO Tel. +358 9 6803 6730 or +358 50 557 9137 eero.sihvonen@citycon.fi Distribution: Helsinki Stock Exchange Major media www.citycon.fi