Retail. VastNed Annual report 2006

Transcription

1 Retail VastNed Annual report 2006 L Alkmaar Almelo Amersfoort Amsterdam Apeldoorn Arnhem Assen Baarn Bemmel Bennekom Bergen op Zoom Beverwijk Bilthoven Bodegraven oxmeer Boxtel Breda Brielle Brunssum Bussum Capelle a/d IJssel Coevorden Culemborg Dalfsen Dedemsvaart Delft Deventer Didam Dinteloord oetinchem Doorwerth Dordrecht Drachten Ede Eerbeek Eindhoven Elst Emmeloord Enschede Ermelo Geldermalsen Goes Goor Gouda Groesbeek roningen Haaksbergen Haarlem The Hague Hardenberg Harderwijk Harlingen Harmelen Heemstede Heerde Heerlen Helden-Panningen Helmond H s-hertogenbosch Hillegom Hilversum Hoensbroek Hoogeveen Hoogezand Hoorn Houten Joure Kerkrade Krimpen a/d IJssel Leek Leeuwarden Leide eidschendam Lelystad Leusden Maastricht Meppel Middelburg Middelharnis Mijdrecht Neede Nijkerk Nijmegen Oldenzaal Oosterhout Oss Oude Purmerend Renkum Ridderkerk Rijswijk Roden Roermond Roosendaal Rotterdam Scheveningen Schiedam Schoonhoven Schoorl Sittard Sliedrech Soest Stadskanaal St. Oedenrode Steenwijk Tiel Tilburg Uden Utrecht Vaassen Veenendaal Veghel Velp Venlo Venray Vianen Vlaardingen Voorb Since we see ourselves as a niche player, and we are trying to enter new markets without having to compete directly with the bigger players, we expect to be able to realise the same level of investment as last year. oorschoten Vriezenveen Wageningen Weesp Winschoten Winterswijk Woudenberg IJmuiden IJsselstein Zaandam Zeewolde Zeist Zierikzee Zoeter uidhorn Zundert Zutphen Zwolle E Alicante Badalona Barcelona Burgos Castellón de la Plana León Madrid Malaga Murcia F Agen Alençon A ngers Annecy Arras Besançon Boulogne-sur-Mer Bourges Brest Cannes Carcassonne Chambéry Charleville Mézières Chaumont Dax Dieppe Dijo unkirk Frouard Grenoble Laval Limoges Lyon Mâcon Nancy Nice Paris Plaisir Roanne Saint-Étienne Soissons Thoiry Thonon-les-Bains Toulon Tr alence Vichy B Aalst Aartselaar Andenne Ans Antwerp Balen Bastogne Beaumont Boechout Borgloon Bree Brugge Brussels Charleroi Chêne ilsen-stokkem Flémalle Froyennes Genk Ghent Grivegnée Hasselt Heusden-Zolder Hoboken Kampenhout La Louvière Leopoldsburg Leuven LiÈge echelen Merksem Messancy Moeskroen Mons Mortsel Olen Overpelt Philippeville Schelle Scherpenheuvel Sint-Job-in- t-goor Tielt-Winge Tienen urnhout Vilvoorde Waterloo Waver Wilrijk P Barcelos Braga Lisbon Porto NL Alkmaar Almelo Amersfoort Amsterdam Apeldoorn Arnhem As aarn Bemmel Bennekom Bergen op Zoom Beverwijk Bilthoven Bodegraven Boxmeer Boxtel Breda Brielle Brunssum Bussum Capelle a/d IJssel Coe ulemborg Dalfsen Dedemsvaart Delft Deventer Didam Dinteloord Doetinchem Doorwerth Dordrecht Drachten Ede Eerbeek Eindhoven Elst Emm nschede Ermelo Geldermalsen Goes Goor Gouda Groesbeek Groningen Haaksbergen Haarlem The Hague Hardenberg Harderwijk Harlingen Harm eemstede Heerde Heerlen Helden-Panningen Helmond Hengelo s-hertogenbosch Hillegom Hilversum Hoensbroek Hoogeveen Hoogezand Hoorn H oure Kerkrade Krimpen a/d IJssel Leek Leeuwarden Leiden Leidschendam Lelystad Leusden Maastricht Meppel Middelburg Middelharnis Mijdrech Nijkerk Nijmegen Oldenzaal Oosterhout Oss Oudenbosch Purmerend Renkum Ridderkerk Rijswijk Roden Roermond Roosendaal Rotterdam Schev Schiedam Schoonhoven Schoorl Sittard Sliedrecht Sneek Soest Stadskanaal St. Oedenrode Steenwijk Tiel Tilburg Uden Utrecht Vaassen Veenen Veghel Velp Venlo Venray Vianen Vlaardingen Voorburg Voorschoten Vriezenveen Wageningen Weesp Winschoten Winterswijk Woudenberg IJmu Jsselstein Zaandam Zeewolde Zeist Zierikzee Zoetermeer Zuidhorn Zundert Zutphen Zwolle E Alicante Badalona Barcelona Burgos Castellón d lana León Madrid Malaga Murcia F Agen Alençon Amiens Angers Annecy Arras Besançon Boulogne-sur-Mer Bourges Brest Cannes Carcasson hambéry Charleville Mézières Chaumont Dax Dieppe Dijon Dunkirk Frouard Grenoble Laval Limoges Lyon Mâcon Nancy Nice Paris Plaisir Roanne tienne Soissons Thoiry Thonon-les-Bains Toulon Troyes Valence Vichy B Aalst Aartselaar Andenne Ans Antwerp Balen Bastogne Beaumont B orgloon Bree Brugge Brussels Charleroi Chêneé Diest Dilsen-Stokkem Flémalle Froyennes Genk Ghent Grivegnée Hasselt Heusden-Zolder Hobo ampenhout La Louvière Leopoldsburg Leuven LiÈge Malmédy Mechelen Merksem Messancy Moeskroen Mons Mortsel Olen Overpelt Philippeville cherpenheuvel Sint-Job-in- t-goor Tielt-Winge Tienen Turnhout Vilvoorde Waterloo Waver Wilrijk P Barcelos Braga Lisbon Porto NL Alkmaar mersfoort Amsterdam Apeldoorn Arnhem Assen Baarn Bemmel Bennekom Bergen op Zoom Beverwijk Bilthoven Bodegraven Boxmeer Boxtel Bred rielle Brunssum Bussum Capelle a/d IJssel Coevorden Culemborg Dalfsen Dedemsvaart Delft Deventer Didam Dinteloord Doetinchem Doorwert ordrecht Drachten Ede Eerbeek Eindhoven Elst Emmeloord Enschede Ermelo Geldermalsen Goes Goor Gouda Groesbeek Groningen Haaksberge aarlem The Hague Hardenberg Harderwijk Harlingen Harmelen Heemstede Heerde Heerlen Helden-Panningen Helmond Hengelo s-hertogenbosc illegom Hilversum Hoensbroek Hoogeveen Hoogezand Hoorn Houten Joure Kerkrade Krimpen a/d IJssel Leek Leeuwarden Leiden Leidschendam Le eusden Maastricht Meppel Middelburg Middelharnis Mijdrecht Neede Nijkerk Nijmegen Oldenzaal Oosterhout Oss Oudenbosch Purmerend Renk Ridderkerk Rijswijk Roden Roermond Roosendaal Rotterdam Scheveningen Schiedam Schoonhoven Schoorl Sittard Sliedrecht Sneek Soest Stad St. Oedenrode Steenwijk Tiel Tilburg Uden Utrecht Vaassen Veenendaal Veghel Velp Venlo Venray Vianen Vlaardingen Voorburg Voorschoten Vriezenveen Wageningen Weesp Winschoten Winterswijk Woudenberg IJmuiden IJsselstein Zaandam Zeewolde Zeist Zierikzee Zoetermeer Zuidhor Zundert Zutphen Zwolle E Alicante Badalona Barcelona Burgos Castellón de la Plana León Madrid Malaga Murcia F Agen Alençon Amiens Ang nnecy Arras Besançon Boulogne-sur-Mer Bourges Brest Cannes Carcassonne Chambéry Charleville Mézières Chaumont Dax Dieppe Dijon Dunki rouard Grenoble Laval Limoges Lyon Mâcon Nancy Nice Paris Plaisir Roanne Saint-Étienne Soissons Thoiry Thonon-les-Bains Toulon Troyes Va

2 Key figures Results (x 1 million) Gross rental income Direct investment result Indirect investment result (21.1) (9.9) Investment result Balance sheet (x 1 million) Investment properties 1, , , , ,589.2 Equity 1, Equity VastNed Retail shareholders Long-term liabilities Average number of ordinary shares in issue 1) 16,892,880 16,851,120 16,585,999 15,980,734 15,487,896 Number of ordinary shares in issue (at year-end) 1) 16,876,183 16,903,156 16,746,189 16,146,747 15,645,964 Per share (x 1) Equity VastNed Retail shareholders at beginning of year (including dividend) Final dividend previous financial year (2.47) (3.74) (4.24) (4.15) (4.01) Equity VastNed Retail shareholders at beginning of year (excluding dividend) Direct investment result Indirect investment result (1.32) (0.64) Investment result Other movements 0.25 (0.02) (0.02) (0.30) (0.19) Interim dividend (1.10) (1.07) Equity VastNed Retail shareholders at year-end Share price (at year-end) Dividend in cash or in cash and in shares charged to the share premium reserve 2) 1.55% 2.63% 4.00% 4.17% Dividend return expressed as a percentage of equity VastNed Retail shareholders at beginning of year (excluding dividend) Ratio equity / investment properties (in %) Ratio long-term loan capital / short-term loan capital (in %) 67/33 69/31 80/20 75/25 61/39 As from 2005, VastNed Retail publishes its figures based on IFRS. The key figures for 2004 have been adjusted accordingly. The key figures for 2002 and 2003 have not been adjusted. 1 Taking account of share buyback. 2 A percentage in shares yet to be determined to the charge of the share premium reserve.

3 VastNed Retail Annual Report 2006

4 VastNed Retail N.V. Max Euwelaan 1, 3062 MA Rotterdam PO box 4444, 3006 AK Rotterdam Telephone Fax Supervisory board W.J. Kolff, chairman* N.J. Westdijk MBA**, vice-chairman F.W. Mulder*** P.M. Verboom W. Nijman**** (until April 4, 2006) D. van den Bos (until April 4, 2006) R.K. Jacobson (until April 4, 2006) * Chairman supervisory board as from April 4, 2006 ** Chairman remuneration committee *** Chairman audit committee as from April 4, 2006 **** Chairman supervisory board until April 4, 2006 Board of management VastNed Management B.V. Represented by: R.A. van Gerrevink, CEO T.M. de Witte, CFO J. Pars, CIO Financial calender 2007 Tuesday April 3, 2007 General meeting of shareholders Thursday April 5, 2007 Ex final dividend trading Wednesday May 2, 2007 Payment date of final dividend Monday May 14, 2007 First three months result 2007 (before trading)* Friday August 10, 2007 Semi-annual results 2007 (before trading)* Monday August 13, 2007 Ex interim dividend trading Monday September 3, 2007 Payment date interim dividend Friday November 9, 2007 Nine months results 2007 (before trading)* Friday February 22, 2008 Annual results 2007 (before trading)* This is an English language version of the 2006 Dutch annual report. In case of inconsistencies, the latter shall prevail. * Followed by webcast via VastNed Retail share Quotation: Euronext Amsterdam and Euronext Paris ISIN: NL Ticker: VASTN.NL

5 Annual Report 2006 VastNed Retail N.V.

6 Dear readers of this annual report, Preface CEO Reinier A. van Gerrevink In the 2005 report I wrote: Your fund is performing well! And so it has proved. Indeed, it is performing excellently. For the full year 2006, VastNed Retail has achieved a total return of almost 50%, which shows that investors in general and VastNed Retail shareholders in particular have regained full confidence in the fund. Our market capitalisation has meanwhile increased to over F 1.25 billion! Unfortunately, the fund s liquidity lags behind other new players on the Amsterdam stock exchange, and are we no longer included in the AMX index. The market has been far from easy, particularly on the investment side; the reason for this was the strong yield compression. Lower initial yields are often in eminent contrast to our relatively highly yielding property portfolio. On the one hand, we benefited from the described development, resulting in significant mark-ups of the existing property portfolio, on the other we do not want to get involved with today s market frenzy, by acquiring property with yields far below the portfolio s average. We have decided to continue investing in relatively small-scale retail property, high street shops and smaller shopping centres, and we have also been active in pipeline projects (in Roermond, Tongeren and Houten). We keep investigating opportunities in this area. We also invest more and more in our standing portfolio. Furthermore, we are actively seeking to invest in new markets; after extensive research we have decided to designate Turkey, Greece and Rumania as new markets. You may have read that we have meanwhile set our first steps into Turkey by acquiring the Elysium Shops shopping centre in the district of Şişli in Istanbul. This is our first investment outside the eurozone. Our reason for investing in Turkey is that in this big country yields are still relatively high, certainly compared to the rest of Europe. We have largely hedged the currency risks by means of an adequate loan structure. In terms of price per square metre, our first investment is modest. We have found that Turkey is a fast developing market in which, despite this difference in yield, international players are already (trying to) make an impact. Our intention is to invest approximately 10% of the invested capital in Turkey. We will be aiming for the typical VastNed product: high street shops and small to medium-sized shopping centres. Otherwise, we will continue to focus on our four core countries: the Netherlands, Belgium, France and Spain. Last year, we invested over F 220 million in these countries. The occupancy rate improved further,

7 and appraisals have once again led to sharp upward revaluations in the various countries totalling almost F 130 million. Only Belgium lags behind, which is partly due to Factory Shopping Messancy. While a great deal of effort has gone into trying to make the centre perform better, it remains problematic. A positive development was that we succeeded renewing the contract with Nike (a major tenant). Otherwise, business in Belgium is healthy. Various attempts have been made to expand the portfolio, which has resulted in the acquisition of the Tongeren pipeline project. In Belgium, too, there is serious yield compression; to our astonishment, projects are sometimes acquired on paper, almost blindly. In the Netherlands we are growing steadily; we have bid for various projects and are reasonably confident of success. In France we have bought various shops, some with vacancy, for which we have meanwhile found good tenants. Here, too, we are investigating various new opportunities. Growth in Spain is relatively the highest. We have built up over F 500 million in invested capital there. We have realised good results, both on the letting side as on the valuation side. For the time being, we will focus on various (re)development opportunities in Spain (expansion, refurbishment). Everything taken together, we achieved a limitedly higher direct investment result per share in Partly as a result of the revaluations, your fund s solvency is solid at over 60%; there is plenty of room for growth. We have endeavoured to give some of this back to our shareholders by buying back shares, but the share price development was such that we have limited that to just over 25,000 shares. We expect 2007 to be another good year, and we anticipate a further increase of the direct investment result per share. divestments), and the organisation has been further professionalised in many respects. Research has become a major element, as well as adequate and up-to-date information provision in the shape of all kinds of reports, which the board of management need in order to make quick decisions. We were delighted to win first prize for the best annual report from EPRA. In the same category, VastNed Offices/Industrial came third. Other nominees included CLS Holdings (2nd), Rodamco Europe (4th) and British Land (5th). This confirmed our sense that transparency in business and financial reporting is of crucial importance. All in all, 2006 was a very good year, and the outlook for 2007 is very positive. When making acquisitions, we are eager not to hurt the fine return that the present portfolio produces. We expect ongoing pressure on returns to continue this year, even though factors like the interest rate level(s) will undoubtedly start to affect them. However, the current global economic climate does not show any signs of that. Since we see ourselves as a niche player, and we are trying to enter new markets without directly competing with the bigger players, we expect to be able to realise the same level of investment as last year. Going forward, we will be using our new slogan Balanced Growth in European Property as our guideline. Yours sincerely, Reinier A. van Gerrevink, CEO Our shareholder base has become more international, with new shareholders joining from countries like Australia and Japan. Our regular visits to investors all over the world were one reason for that; another is the great interest for property funds in general. It does remain important to look for new opportunities to create additional value; the Dutch fiscal regime for fiscal investment institutions is expected to be liberalised somewhat (concerning property development), but the limitations remain considerable, which does not make a move towards property development easy. There is abundant core quality (asset selection and management including timely

8 Bilthoven The Hague Murcia Antwerp Arnhem Tiel Oosterhout Antwerp

9 The Hague Rotterdam Our shareholder base has become more international, with new shareholders joining from countries like Australia and Japan.

10 AFM Bevak CEO CFO CIO Code EPRA GPR IAS IFRS IRS IVBN SIIC US List of terms Authority for the Financial Markets (Belgian) investment company with fixed capital Chief Executive Officer Chief Financial Officer Chief Investment Officer The Dutch corporate governance code European Public Real Estate Association Global Property Research International Accounting Standards International Financial Reporting Standards Interest Rate Swap Association of institutional property investors Société d Investissements Immobiliers Cotées United States Definitions Average (financial) occupancy rate 100% less the average financial vacancy rate. Average (financial) vacancy rate The market rent applicable for a particular period of vacant properties, expressed as a percentage of the theoretical rental income for the same period. Gross rent Contractually agreed rent for a particular property, taking the effect of straightlining of lease incentives into account. Net initial yield Net rental income expressed as a percentage of the acquisition price (including transaction costs) of the respective investment property. Net rental income Gross rental income less net service charge expenses and operating expenses attributable to the respective period, such as maintenance costs, management expenses, insurance, letting costs and property tax. Net yield Net rental income expressed as a percentage of the market value of the respective investment property. Occupancy rate 100% less the vacancy rate. Theoretical annual rent The annual gross rent at a given time, excluding the effects of straightlining of lease incentives and such, plus the annual market rent of any vacant properties. Theoretical rental income The gross rent attributable to a particular period excluding the effects of straightlining of lease incentives and such, plus the market rent of any vacant properties applicable to the same period. Vacancy rate The annual market rent of unleased properties at a certain point in time expressed as a percentage of the theoretical annual rent at the same point in time. Gross rental income The gross rent recognised for a certain period after deduction of the effects of straightlining of lease incentives. Gross yield Theoretical annual rent expressed as a percentage of the market value of the property. Lease incentive Any compensation, temporary lease discount or expense for a lessee upon the conclusion or renewal of a lease agreement. Market rent The estimated amount for which a particular property may be leased at a given time by well-informed parties who are prepared to make a transaction, who are independent and who act prudently and free from duress. Market value The estimated amount for which a particular investment property might be traded between well-informed parties who are prepared to make a transaction, who are independent and who act prudently and free from duress.

11 Key figures Preface CEO 4 Profile and strategy 10 Report of the supervisory board 13 Introduction 13 Corporate governance supervisory board 13 Annual accounts Dividend and reservation policy 15 Dividend proposal 15 Composition of the supervisory board 16 Committees of the supervisory board 16 Changes on the supervisory board 16 Profile of the supervisory board 16 Retirement roster 17 Appointments 17 Personnel 17 Contents Report of the board of management 18 Economy and markets in general 18 Netherlands 25 Spain 26 France 27 Belgium 28 Property portfolio 29 Personnel and organisation 41 Sustainability 41 Risk management 41 Financial results 42 Dividend proposal 45 Outlook for The share and the stock exchange listing 46 Annual accounts Consolidated profit and loss account 50 Direct and indirect investment result 51 Consolidated balance sheet as per December Consolidated statement of movements in equity 54 Consolidated cash flow statement 55 Notes to the consolidated annual accounts 56 Company balance sheet as per December Company profit and loss account 87 Notes to the company annual accounts 87 Other information 90 Corporate governance 93 Risk management 108 Property portfolio Investment properties in operation 114 Other investment properties 132 Key figures property portfolio

12 Antwerp Amsterdam Profile and strategy History VastNed Retail N.V., founded in 1986, is a (closed-end) property investment company with variable capital which makes long-term investments in well-let individual retail properties, shopping centres and retail warehouses, primarily in the eurozone. The issuing and purchasing of shares takes place at the decision of the board of management, taking into account the margins and conditions set by the supervisory board. The shares have been listed on Euronext Amsterdam since November 9, 1987, and on Euronext Paris since December 20, 2004, and are included in the Amsterdam AScX index since March 2, VastNed Retail is part of the VastNed Group. Vision Investing in retail property is clearly linked to the retailers who run their business in these shops. This means that in the long run the rent is dependent on the retailer s profits. The retailer s success and the competitiveness of the location, therefore, are major factors in the long-term success of the retail property investor. Mission and strategic objective VastNed Retail offers private and institutional shareholders an investment product which is primarily focused on retail property. This offers investors the opportunity to profit from the dynamics of the retail markets, striving for a high total return. The total return consists of a combination of direct return based on rental income and indirect return based on value growth of the property portfolio. In the longer term, the objective is to achieve an increasing dividend per share through active management of the portfolio. 10

13 Profile and strategy Investment product and investment methodology VastNed Retail pursues its strategic objective by focusing on the following investment products and by using the following investment methodology: a mix of individual retail properties, shopping centres and retail warehouses, striving for a balanced investment mix. A ratio of high street shops of between 35% and 60%, of shopping centres of between 20% and 50% and of retail warehouses of between 10% and 30% is aimed for; focus on shopping areas and tenants who distinguish themselves through dynamism and competitiveness; a balanced risk return profile of the investments; focus on four core countries: the Netherlands, Spain, France and Belgium; striving to develop Turkey into a core country in the property portfolio with a desired volume of 10% of the total property portfolio in the near future; a detailed assessment of potential new markets. Currently, Turkey, Greece and Rumania are designated as new markets; aiming for sufficient critical mass in the core countries, so that local management disposes of a sufficient number of functionalities, and; focus on an optimum spread within the property portfolio, using the following spread criteria: countries, regions, cities, spreading in categories, number of properties, number of tenants, limitation of the size of the property and limitation of the size of individual tenants. Size At year-end 2006, VastNed Retail s property portfolio represented a value of F 1,731 million and at that time was composed as follows: 47% high street shops; 40% shopping centres; 8% retail warehouses; 5% other. Fiscal structure VastNed Retail qualifies as a fiscal investment institution as meant in Section 28 of the Dutch 1969 Corporate Income Tax Act. This means that no corporate income tax is due in the Netherlands. In view of its status as a fiscal investment institution, VastNed Retail does not engage in property development for third parties. In Belgium all investments have been incorporated in the property Bevak Intervest Retail, which is also exempt from income tax. The French property portfolio equally is exempted from corporate income tax under the locally applicable SIIC regime. For investment selection, an attractive fiscal climate is an important factor. The investments in Spain, Portugal and Turkey are subject to regular taxation. Financing policy The starting point is that the financing of the property portfolio with loan capital remains limited to approximately 40 to 45% of the market value of the property. This principle can temporarily be deviated from should interesting acquisition or sales opportunities present themselves, and provided the interest rate is at an acceptable level compared to the yield on the property. In this context VastNed Retail will always stay within the financing limits as meant in Section 28 of the Netherlands 1969 Corporate Income Tax Act. Also, a balance is aimed for between financing with short-term and long-term fixed interest periods. In prevailing circumstances interest derivatives can be used. In times when the VastNed Retail share price trades at a premium compared to net asset value, it may be attractive to issue new shares. The starting point for this is that the issuing of new shares will only take place if in the foreseeable future there are investment opportunities. Currency policy VastNed Retail aims to avoid currency risks by investing primarily in the eurozone. When currency risks do occur, their scope is limited by careful matching of the currencies of assets and liabilities on the one hand and income and expenditure on the other. Please refer to the chapter on risk management included elsewhere in this annual report. Dividend policy VastNed Retail s dividend policy is aimed at putting the direct investment result fully at the disposal of the shareholders. In order to comply with the fiscal conditions for fiscal investment institutions, at least the fiscal result must be paid out in cash. The dividend is placed at the shareholders disposal in the form of an interim dividend of 60% of the direct investment result for the first six months of the financial year, and a final dividend after conclusion of the financial year. Acquisition policy VastNed Retail pursues an active acquisition policy. New investment opportunities are constantly being assessed. Our policy is that acquisitions will only take place if the market conditions are favourable, if the risk return profile is balanced and if the capital ratios permit it. In this context, acquisition opportunities are constantly weighed against financial alternatives such as share buybacks. 11

14 Profile and strategy Risk management VastNed Retail pursues an active policy in the area of assessing and if necessary taking appropriate action regarding the risks that are associated with investing in property. In this context, a distinction is made between strategic risks, operational risks, financial risks, reporting risks and compliance risks. Organisation VastNed Retail pursues an active management of its property portfolio; in the countries in which it operates or will operate, fully-fledged local management is aimed for. With approximately 90 employees in total, VastNed Management in Rotterdam, VastNed Management España in Madrid, VastNed Management France in Paris, Intervest Retail and Intervest Offices, both in Antwerp, manage the investments of VastNed Retail and VastNed Offices/Industrial. VastNed Management has no profit objective, but facilitates the funds with directory board and management. A cost allocation agreement applies on the collaboration between VastNed Retail, VastNed Offices/Industrial and VastNed Management. Costs incurred are charged on, without mark-up for profit, based on causation. 67% of the shares in VastNed Management are held by VastNed Retail, and 33% by VastNed Offices/ Industrial. Independent management is the best condition for optimum leasing to creditworthy tenants and for guarding the state in which the properties are kept. Carrying out commercial and administrative management ourselves where possible makes for direct contact with the tenants and the property market, so that market developments can be alertly responded to and operating expenses can be responsibly controlled. Technical management is largely subcontracted to local specialists. By maintenance, renovation and sale of objects that no longer fit in with the property portfolio, an optimum state and value of the property is secured in relation to the return for shareholders. In this context, the aim is to build a dedicated management organisation in Turkey, in order to create the right conditions for the expansion of the Turkish property portfolio. The property markets in the various countries are subject to locally applicable legislation and regulations. A local network as well as specialised know-how in the area of financing and of local culture lead to a head start in terms of operating the property. VastNed Retail strives to undertake these efforts from within the country itself where possible. 12

15 Uden The Hague Report of the supervisory board Introduction The supervisory board of VastNed Retail held six regular meetings in The members of the board of management took part in these meetings. The supervisory board also met in the absence of the board of management, and there were also other meetings of the supervisory board. The topics discussed at these meetings included the state of affairs and risks in the property portfolio, the strategy and risks of the company as a whole, as well as aspects thereof, such as entering new markets, the financial results and their reporting in press releases, changes on the supervisory board, the structure of the supervisory board, the appointment of a new chairman of the supervisory board and a new chairman of the audit committee, the supervisory board s own functioning and the functioning of the board of management, the functioning of the external auditor, the supervisory board s remuneration and the remuneration of the board of management, corporate governance and the functioning of the subcommittees of the supervisory board, including the reporting by these committees. The supervisory board has been provided with sufficient information by the board of management at all times, so that the supervisory board was able to properly fulfil its supervisory role. None of the members of the board was frequently absent. Corporate governance supervisory board A major component of the corporate governance structure is the structure of the supervisory board as an organ of the company. Until April 4, 2006, its composition was the same as the composition of the supervisory boards of VastNed Offices/Industrial and VastNed Management. In the context of continuous improvement of the corporate governance structure of the company, it has been decided to separate the supervisory boards of VastNed Retail and VastNed Offices/Industrial. This entails that none of the supervisory directors of VastNed Retail will also be on the supervisory board of VastNed Offices/Industrial. This is to reinforce the independence of the supervisory board. 13

16 Bussum Capelle aan den IJssel Paris Doorwerth Alicante Rotterdam Turnhout Breda Houten 14

17 In the context of continuous improvement of the corporate governance structure of the company, it has been decided to separate the supervisory boards of VastNed Retail and VastNed Offices/Industrial. Annual accounts 2006 Madrid The annual report drawn up by the board of management includes the 2006 annual accounts audited by Deloitte Accountants B.V. We are in agreement with this report and with the 2006 annual accounts. We recommend that you adopt the annual accounts 2006 in the form as presented. Dividend and reservation policy In line with previous years, VastNed Retail will distribute the direct investment result fully to its shareholders. Part of the dividend can be paid out to the shareholders as stock dividend, charged to the share premium reserve. The supervisory board has granted the board of management the authority to buy back shares in the company in order to prevent dilution of the direct investment result per share, while at the same time guaranteeing the fiscally favourable character of the payout. Dividend proposal We are in agreement with the proposal of the board of management to distribute a final dividend per share of F 5.- nominal value as follows: 5% in cash on the priority shares; a payout on the ordinary shares, after deduction of the interim dividend of F 1.10, of F 2.60, of which: F 2.60 in cash less 15% dividend withholding tax, or F 2.20 in cash less 15% dividend withholding tax, plus a percentage in shares yet to be determined, depending on the share price, but approaching a cash equivalent of F 0.40, charged to the share premium reserve, without deduction of dividend tax. 15

18 Report of the supervisory board Composition of the supervisory board The supervisory board is composed as follows: W.J. Kolff, chairman N.J. Westdijk MBA, vice-chairman F.W. Mulder, member P.M. Verboom, member The curricula vitae of the supervisory board members are included in the chapter on corporate governance included elsewhere in this annual report. Committees of the supervisory board The supervisory board has three active committees. The audit committee and the remuneration committee each have two members. The selection and appointment committee is comprised of the chairman and the vice-chairman of the supervisory board. Audit committee During 2006, the composition of this committee changed due to the aforementioned separation of the supervisory board. Until April 4, 2006, the audit committee consisted of Mr R.K. Jacobson (chairman), Mr W. Nijman, Mr D. van den Bos and Mr F.W. Mulder. On April 4, 2006, Messrs Jacobson, Nijman and Van den Bos stepped down. Mr Mulder was appointed as chairman and Mr Verboom became a member. In 2006 the audit committee met on four occasions. It is the task of the audit committee to advise the supervisory board in the area of finance. Topics that were addressed included financial reporting, budgeting, the role of the external auditor, tax law, compliance (inter alia with the Authority for the Financial Markets), IFRS, interest rate and financing risks, letting risks, catastrophe and liability risks, debtor risks, internal control, IT systems, legal risks and the follow-up of recommendations of the external auditor as well as the findings of the audit by the external auditor. All audit committee reports have been made available to all members of the supervisory board and were discussed at the following meeting of the supervisory board. Remuneration committee Until April 4, 2006, the remuneration committee was comprised of Mr N.J. Westdijk (chairman), Mr F.W. Mulder and Mr W. Nijman. On that date, Messrs Mulder and Nijman stepped down and Mr W.J. Kolff joined the remuneration committee as a member. It is the task of the remuneration committee to advise the supervisory board in the area of the remuneration policy to be pursued for the directors. This committee met on four occasions in The remuneration committee has prepared the 2006 remuneration report, which will be discussed by the general meeting of shareholders on April 3, In this report the committee has formulated proposals for the remuneration of the individual directors. The document includes a report on the personal bonuses to be awarded to the directors in All members of the remuneration committee are also members of the supervisory board of VastNed Management. Coordination with the remuneration committee of VastNed Offices/Industrial takes place in the meetings of the supervisory board of VastNed Management, since the directors manage both funds and their remuneration reflects their activities for both funds. Selection and appointment committee As stated before, the selection and appointment committee is comprised of the chairman and the vice-chairman of the supervisory board. The supervisory board met four times for discussions in the area of selection and appointments. On behalf of the supervisory board, the selection and appointment committee made proposals to the holders of priority shares concerning appointments to the supervisory board, including proposals for the replacement of its member Mr F.W. Mulder, who will retire on April 3, 2007 in accordance with the retirement roster. Changes on the supervisory board The general meeting of shareholders reappointed Mr N.J. Westdijk effective from April 4, 2006, retaining his valuable expertise and experience for VastNed Retail. At the same meeting, Mr W.J. Kolff was appointed as a member of the supervisory board, which then appointed him as chairman, and Messrs Nijman, Van den Bos and Jacobson stepped down in connection with the aforementioned change of the structure of the supervisory board. Profile of the supervisory board The supervisory board profile guarantees that the supervisory board is composed properly, meaning that based on available knowledge and experience effective supervision can be exerted of the board of management of the company. This profile is available on the website of the company; copies can be obtained at the office of the company. The supervisory board certifies that all its members are independent as defined in the Dutch corporate governance code. 16

19 Report of the supervisory board Retirement roster The retirement roster for the next few years is as follows: F.W. Mulder, 2007 (not eligible for re-election) P.M. Verboom, 2008 (eligible for re-election) N.J. Westdijk, 2009 (eligible for re-election) W.J. Kolff, 2010 (eligible for re-election) The articles of association stipulate that a term of office is limited to three terms of four years. In this context it has been decided that Mr F.W. Mulder will not be available for reappointment at the general meeting of shareholders of April 3, Thus, VastNed Retail acts in accordance with best practice provision III.3.5 of the Code. Appointments In accordance with the retirement roster, Mr F.W. Mulder will step down. The supervisory board is grateful to Mr Mulder for his contributions to the supervisory board, which he joined in During this time, Mr Mulder has on many occasions provided the company and the supervisory board with his wise counsel. The Stichting Prioriteit will nominate Mr J.B.J.M. Hunfeld for membership of the supervisory board. The agenda of the general meeting of shareholders and the shareholders circular will in mid-march provide more extensive information about the appointment of the new member of the supervisory board. Personnel The supervisory board is grateful to the board of management and the company s employees for their efforts, loyalty and the results realised during the year under review. Rotterdam, February 22, 2007 For the supervisory board, W.J. Kolff, Chairman 17

20 The Hague Report of the board of management Economy and markets in general Economy The world economy s growth is on average over 1% above that of the eurozone. This is unlikely to change in the next few years. In recent years, economic growth recovered in the eurozone; the world economy had for some time been growing at over 3% per year. The economic recovery of the eurozone was fuelled by exports and has now gained more internal momentum, as consumers are tentatively beginning to join in. Economic growth in the eurozone has gained a more solid basis. At this stage of the economic cycle, an intermediate correction of economic growth might be expected, but there has been no sign of it. Despite increased short-term interest rates, growth forecasts for the world economy remain high. In view of the rapid economic developments in countries like China and India, any growth correction is likely to be mild, or may even fail to appear. Slow adaptation to the globalisation of the economy continues to affect the eurozone s growth potential. A desired social character is poised against competition and innovation in political discussions. Social unrest spilled out on to the streets of for instance France, but also during the elections in the Netherlands. In the other countries of the eurozone, too, both these themes continue to curry political discussion and affect the outcome of elections. There is no clear direction, though it is beginning to appear that the social character is now higher on the agenda. One issue that has gained momentum is sustainability of economic growth in the face of the supposed impact of climate change. The rise of the oil price is a negative factor, because higher energy prices hurt many. It is up to politics to turn sustainability into growth opportunities for the economy. Interest in the eurozone has gone up. The rise affected short-term interest more than long-term interest. This reveals the pattern of a flat to inverted interest rate curve, which traditionally precedes a slowdown of growth. Economic growth forecasts for the eurozone already factor this in. In view of the strength of the world economy, these growth forecasts are likely to be too pessimistic. 18

21 Report of the board of management The interest rate on government bonds with long durations has fallen dramatically since the early eighties. In recent years, the 10-year interest rate on government bonds has been around 4%. The European Central Bank (ECB) has committed itself to keeping inflation in the eurozone below 2%. Since the introduction of the euro, the ECB has built up a solid reputation in terms of this commitment by keeping inflation close to that 2%. Extrapolating this commitment into the future, there is little cause to expect that the 10-year interest rate in the eurozone will on average range very far from the aforementioned 4%. Due to the cyclical nature of the economy, the actual interest rate may temporarily be a little higher or lower, but it appears to be a realistic prediction that the 10-year interest rate will stay around 4%. Retail market The value growth of the property in Europe arises from the dynamics of supply and demand of investment properties. Demand outstrips supply. The majority of the value growth is due to the popularity of property investments among both private and institutional investors. Private equity, too, is interested in property. Direct returns on property portfolios tend to be higher than the costs of loan capital, making leverage of the returns possible. This would seem to support further value increases. When leverage opportunities fade due to rising interest rates, a major factor in the strong demand for property will be gone. However, a retail investment in a top location in the larger cities of Europe is in fact, in terms of return, a more attractive investment than government bonds. Rents at these locations rise by at least inflation, and there are always retailers who want to lease these locations. A retail property portfolio is also attractive because of the spreading. Initial yields of retail property mostly fell in 2006 in the periphery of Europe. This decrease was especially strong in countries in the north and east of Europe, but countries like France and Spain also profited. The decrease of initial yields in Germany was limited. The other European countries registered decreases of varying extent. Real growth of GDP (in %) Source: Consensus Forecasts Eurozone World Total annual return (in %) Source: Global Property Research (GPR), Bloomberg GPR 250 Europe GPR 250 Netherlands VastNed Retail E 2007E 2008E The present value growth of retail property is much less the result of underlying trends in the retail market itself than of the popularity of property as an investment. For the retail property investor, the success of the retailer is ultimately the most important driver of long-term rent and value increases. Understanding retail trends therefore remains of the greatest importance year 3 years 5 years 7 years 19

22 Report of the board of management Next to the retailer s success, the major engines of the retail trade are economic growth and growth of disposable income per capita. If these factors are lacking, weak spots become visible in the retail landscape. Currently, the eurozone economy is in the recovery part of the cycle, and the retail trade can profit from improved income prospects among consumers. Dutch property funds Development premium (discount) (in %) In Europe s periphery, economic growth prospects are at a higher level, and there is more scope for improving the consumer s disposable income. VastNed Retail sees attractive opportunities for the retail trade and retail property in South-eastern Europe, including Turkey. Modernisation of the retail trade is a major theme in South-east European countries. New shopping centres replace local markets and dispersed shops. Existing central shopping streets change through redevelopment from old shops to modern retail properties where major retail chains can do business. In the countries of South-eastern Europe, a risk premium is available in terms of higher initial yields compared to the countries where VastNed Retail has operated for years. In Turkey, there is also high population growth, and the relatively young population is attractive for long-term economic growth. This distinguishes Turkey from the countries in which VastNed Retail currently invests, where ageing of the economy is a growing issue. Additionally, Istanbul is a metropolis in the same league as London and Paris, but retail development is lagging behind. For the time being, our preference within South-eastern Europe is currently for Turkey, and particularly Istanbul Modernisation of the retail trade structure is also ongoing in the eurozone, which offers opportunities to update the retail portfolio there too. The trends are: expansion of shopping centres at neighbourhood or district level, often through addition of anchors in the daily groceries segment and extension of choice in the fashion segment. Extension of choice is popular with consumers. Modernisation is also taking place in inner cities by creating larger retail units. Demand from the retail trade has been focused on large retail floor areas in order to be able to offer consumers a broad and deep assortment. Retail parks are also in the ascendant. These peripherally located often along a motorway retail parks are concentrations of large shops around a central parking facility. Daily grocery facilities are also increasingly establishing themselves in these retail parks. The market share of food discounters has been increasing for years. The old guard in the form of service supermarkets and hypermarkets have adjusted their prices and strategy in response to the 20

23 Report of the board of management economic decline. This appears to have halted the rise of the food discount shop for the time being. The battle now seems to focus on the strength of own brands versus top brands and discount brands. Consumers appear to have a great deal of confidence in the major supermarket chains own brands, as is evident from the increasing market share of these own brands. Fresh products from the service supermarkets also increasingly find favour with consumers. In other words, consumers appear to have found a new appreciation for the service supermarket. Vastned retail Industry spread total property portfolio (in %) Non-food 49% Food 16% Living and leisure 23% Other 12% 12% In the fashion sector, rapid and frequent collection renewal is crucial for retail formulas survival. Such a strategy enabled chains like H&M and Zara to flourish, as it took other retail formulas too long to adapt. A few years ago, H&M introduced special clothing lines designed by famous designers. They never fail to be a resounding success. It is an opportunity for consumers to buy designer clothes relatively cheaply. Others retail formulas have quickly picked up this trend. The underlying trend is that ordinary consumers also want design and are prepared to spend more to attain it. The growing trend of renting jewellery and other accessories illustrates this view. 23% 16% 49% The home decoration industry is also developing strongly. A large group of consumers has emerged who regularly put parts or all of the contents of their home up for sale on ebay or comparable websites, and subsequently replaces the sold items either through the same channel or from the regular retail trade. Some consumers have become serious and are now selling home products in their spare time. These small-scale supply operations have translated into a number of new home decoration retail formulas, such as leasing space in a megastore to small entrepreneurs who specialise in all kinds of home decoration products. Barriers for starting a business have been reduced, and the retail business is booming accordingly. Choice for the consumer has widened and all kinds of trends in the fields of design, but also of furniture and accessories manufactured on a micro scale have come within reach of the consumer. As a result, the home decoration market has become more competitive, and is forced to become more innovative. All this benefits the consumer. Risks The dollar weakened versus the euro in Little has changed in the situation of the government budget deficits and the trade balance in the United States, nor in the high level of consumer debt. 21

24 Zierikzee Arnhem Winterswijk The Hague 22

25 Amsterdam Investing in property in general is popular among investors due to the good diversification characteristics compared to investment in shares and bonds. 23

26 Report of the board of management The political leadership of the US in the world came under great pressure in This sentiment can easily turn against the dollar and bring about a further weakening of the dollar versus the euro and impact growth in the eurozone. A significant fall of the dollar would seriously affect growth in the eurozone, with side effects such as low inflation and falling interest rates. vastned retail Sector spread total property portfolio (in %) Shopping centres 40% Retail warehouses 8% High street shops 47% Other 5% The oil price rose further in 2006 and was at a historical high. The supply and demand situation in the oil markets remains unstable. The background of this lack of stability is the mismatch between increasing demand from the Asian countries and low oil exploration activity due to a long period of low oil prices in combination with the fact that many oil reserves are located in politically unstable areas. Despite the high oil price, due to the mismatch of supply and demand just mentioned there is a risk in the next few years that the oil price will rise to new highs. This may disrupt the present stability of interest rate and inflation, which may negatively impact economic growth. 47% 5% 8% 40% House prices in the eurozone rose further in This is a global phenomenon, which is due to strong demand arising from strongly decreased interest rates and limited supply. In many countries, it is near to impossible for first-time buyers to get on the property ladder. In some countries mortgage durations have been extended from 30 to 50 years to enable people to buy homes. The high level of house prices is a threat to consumer spending. When monthly mortgage payments start to rise due to an increase in the interest rate, it will impact consumer spending. Retail spending comprises only a part of that, but will surely be affected. Limited population growth in the eurozone has become a structural factor. This matter has gained importance as admission policies for economic refugees have been tightened up all over the eurozone. Limited population growth means that the property market must focus on quality over quantity. That requires more focus on regulating the property market. At the present population growth level, a policy focusing on quantity will eventually lead to structural vacancy in the weaker shopping areas. Disappointing economic growth may put pressure on the retail market and push up vacancy. 24

27 Report of the board of management Stock exchange Historically, the share prices of listed property funds are subject to cyclical movements. Periods in which the share trades at a premium compared to net asset value are followed by periods of discounts. In 2006, the share prices of property funds on Euronext Amsterdam on average traded at a sharp premium compared to net asset value. Investing in property in general is popular among investors due to the good diversification characteristics compared to investment in shares and bonds. Additionally, demand for investment properties outstrips supply. The underlying trend is for net asset values to rise, and the stock exchange prices are rising in anticipation. Meanwhile, net asset value is developing positively, following in the footsteps of the share price of property funds. Interest for property is high among both institutional and private investors. Internationalisation is a major theme. While in the past shareholders of property funds tended to stem from the same country, shareholders now come from far and wide. And not only institutional investors look beyond their national borders, but also private investors. The latter group increasingly shuns the many available property funds and invests in international property at its own initiative, like Spaniards investing in Eastern Europe and Irish people who invest all across Europe. The enormous demand for property pushes up prices, which will unlock further supply and encourage development. Companies will increasingly sell their property and thus contribute to expanding the property market and to further professionalisation. The increased property values are also enabling property funds to invest more and increase earnings per share. Many property funds have set limits on leverage on the property portfolio, but do not approach those limits due to the current ongoing value growth. Netherlands Economy The past year was a positive year for the Dutch economy with economic growth of 2.9%, just above the 2.7% growth rate of the eurozone. The competitiveness of the economy has recovered, employment is growing rapidly, producer and consumer confidence is rising and consumer spending is increasing. The lean years are over, and the future is bright. Of course the Dutch economy will remain sensitive to international economic cycles and cyclical fluctuations will continue to Netherlands Industry spread (in %) Non-food 46% Food 23% Living and leisure 19% Other 12% 19% 12% 23% Netherlands Sector spread (in %) Shopping centres 23% Retail warehouses 2% High street shops 74% Other 1% 74% 1% 23% 46% 2% 25

28 Report of the board of management Spain occur, but times of painful structural adjustments are past. There has been a shift in the political landscape. Voters appear to favour more social policies. After the elections, however, relations between political parties are unclear. There is no explicit support in parliament for one direction or another. It may be expected that some kind of compromise with a social complexion will be found between parties of the centre. Retail market The retail trade in the Netherlands has also surmounted hard times. Fashion shops have had an excellent year. However, the gap between good and bad entrepreneurs appears to have widened. For part of these retailers, the recovery may have set in too late. Last year, Laurus threw in the towel. This company had no answer to the price war which market leader Albert Heijn had started. Supermarket formulas Edah and Konmar folded, and the shops were sold to existing supermarket chains, including Albert Heijn. Edah s and Konmar s old shops under new management now generate far higher turnover than in the past and so start to threaten other supermarkets in the area. For Albert Heijn, the provisional winner, the price war does not appear to be over. Recently, a further round of price reductions was announced, which few competitors will be able to match. The investment market was marked by falling initial yields. Not just prime locations were in demand; many kinds and types of retail property were. Economy The Spanish economy continues to show fantastic growth figures. Growth of 3.7% in 2006 again was above the eurozone average of 2.7%. For the next few years economists continue to predict good economic figures and continue to do significantly better than other countries in the eurozone. The main growth factors remain a high influx of immigrants and strong construction activity. Besides economic growth, inflation is also significantly higher than in the eurozone. This is gradually reducing Spain s competitiveness, which will eventually cause the economy to cool down. It will be no surprise if economic growth in the next few years should fall below expectations. Spain Industry spread (in %) Non-food 37% Food 20% Living and leisure 29% Other 14% 29% 14% 20% Spain Sector spread (in %) Shopping centres 80% Retail warehouses 3% High street shops 7% Other 10% 3% 7% 10% 37% 80% 26

29 Report of the board of management Retail market Retail spending has developed well in Spain driven by the economic boom. Even so, like other markets this country is experiencing strong growth of discounters in both food and non-food. A major factor driving this development is high housing costs due to increased house prices. Provisional retail trade figures for 2006 show that growth in retail spending is less than in previous years, which is not surprising since in addition to high house prices, fuel prices are also impacting consumer spending. Demand for retail property remains high, and focused on prime inner city locations. Spain has one of the highest rates of retail floor area per head in Europe, but a large proportion of this floor area is inefficient. The renovation of the retail supply is marked by a rapid development of shopping centres and retail parks. In some parts of the country this development is somewhat hasty, so that a relatively high volume floods the market, increasing the risk of vacancy. In places, this development has been restricted by government regulations, but the number of shopping centres planned for development is still high. Inner city shopping areas are not well developed in every city, but when they have, there is great interest from national and international retailers. Rents in these locations have risen strongly in recent years. Investor demand for retail property in Spain, especially in inner cities, shopping centres and retail parks continued to affect initial yields, which were already among the lowest in Europe. France Economy The 2.0% growth rate of the French economy in 2006 continued to lag behind the 2.7% of the eurozone. Even so, economic growth was primarily consumer driven. Consumers are supported by positive developments in the employment market as a result of falling unemployment. The positive development of house prices strongly influenced consumer retail spending. At this point, the French economy is shored up primarily by consumer spending. There is concern that of all the economies in the eurozone the French economy has profited least from the recovery of global trade in recent years. France, in particular, has recently shown to favour social issues over competitiveness and innovation. Parliament has great difficulty in carrying through real reforms, and is often confronted with protest on the streets. France Industry spread (in %) Non-food 65% Food 5% Living and leisure 20% Other 10% 20% 5% 10% France Sector spread (in %) Shopping centres 44% Retail warehouses 3% High street shops 53% Other 0% 53% 3% 65% 44% 27

30 Report of the board of management Retail market Price is currently an important factor in the French retail market. The big retailers use price as a weapon to support their market share. This has ended the strong rise of discount retailers. In the home decoration retail sector, many new concepts are being introduced, like Zara Home and many other formulas. Also, retail chains in France have become more critical in their expansion. Inner cities and retail parks continue to be in strong demand. Demand for retail parks now also comes from retailers who traditionally concentrated their retail activities in inner cities and shopping centres. The main issue here is market share. Both nationally and internationally there is strong investment demand for retail property, which has put further pressure on initial yields. Institutional investors are predominantly interested in shopping centres with potential for expansion, since construction of new shopping centres is difficult under the present planning regime. Attention for inner city shopping centres has increased sharply; there is indeed more scope in this area for developers since there is a wish to strengthen inner cities. Retail parks, too, are in strong demand from investors from far and wide. Belgium Economy On average, the Belgian economy grows marginally stronger than the eurozone. In 2006, economic growth in Belgium at 2.8% just tipped that of the eurozone, at 2.7%. Growth is expected to rise year-on-year in the next few years. Consumer confidence has clearly improved due to improved economic prospects and low interest rate. This positively influences Belgian consumers willingness to buy and so retail spending. Belgium, too, of course continues to be sensitive to international economic cycles, and is traditionally a pre-cyclical economy, but economic results in recent years have been good. Retail market Demand for retail property remains high. New retail formulas are entering the Belgian market; especially retail formulas aimed at female accessories are expanding fast. International and national retail chains particularly want to expand in the better retail locations. Multiple branches of the same retail formula in a popular retail area are no longer exceptions. The bigger players like H&M are now also rolling out their expansion to smaller cities in Belgium. Belgium Industry spread (in %) Non-food 66% Food 4% Living and leisure 25% Other 5% 25% 4% 5% Belgium Sector spread (in %) Shopping centres 0% Retail warehouses 39% High street shops 50% Other 11% 50% 11% 66% 39% 28

31 Report of the board of management The new IKEA act has brought decision-making regarding property closer to local authorities. Property development clearly has stepped up a gear. In 2008 and 2009, many new shopping centres, especially, will come on the market, but there are also retail parks on the drawing board. There are considerable regional differences. More development is taking place in Wallonia than in Flanders. Vastned retail Composition property portfolio (in %) Netherlands 36% Spain 30% France 19% Belgium 14% Portugal 1% The retail property market is still a relatively small market for investors. Finding investment properties is hard, since in the past few shopping centres were developed, and many prime inner city shops are privately owned. As development begins to get under way, the tide appears to be turning. The enormous demand from investors puts constant downward pressure on initial yields. 19% 14% 1% 36% Property portfolio The 2006 financial year was a successful year in several respects. The occupancy rate of the property portfolio improved to a level where only frictional vacancy remains. Many lease improvements were realised through indexations, new leases and (re)negotiation of lease contracts, and finally appraisals resulted in significant positive value movements. Additionally, the acquisition process gained the expected momentum. While VastNed Retail was a net seller up to 2005, in 2006 the company made over F 220 million in acquisitions. Some of these were standing investments, which immediately contribute to operational cash flows, and some concerned pipeline projects, projects which are not yet finished, but will be delivered for letting in the course of 2007 and Also, we have kept our eye on the improvement of the risk return profile of the property portfolio, which led to disposals totalling F 23.6 million. The good results were achieved partly by focusing on the property portfolios in the core countries the Netherlands, Spain, France and Belgium. In addition, efforts were made to expand the property portfolio to a number of new countries. The countries which, based on extensive research, are candidates for such an expansion are Turkey, Greece and Rumania. After balance sheet date, one acquisition has already been finalised in Turkey. The investment process for the other two countries is still at an earlier (exploratory) stage. Reporting continues to be a major factor, and in that context this annual report has implemented the best practice principles concerning reporting as formulated by the industry organisations IVBN and EPRA. The board of management wholeheartedly supports the continuous revision and occasional 30% vastned retail Development gross rental income (x 1 million) Netherlands Spain France Belgium Portugal Italy Total Gross rental income 2005 Indexation and movements rent level Rent discounts, rent-free and incentives Turnover rent and other Vacancy Acquisitions Disposals Gross rental income (0.2) 0.4 (0.4) (0.3) (0.1) (0.1) (0.1) (1.6) (0.5) (2.6)

32 Report of the board of management updating of such principles since they contribute to a better mutual comparability of property funds and to increased transparency of the reporting in general. VastNed Retail s property portfolio is characterised by spreading in terms of countries and regions, types and numbers of tenants, as well as types of investment properties. Properties The property portfolio consists for the greater part of individual retail properties; in addition, investments are made in small and medium-sized shopping centres and retail warehouses. At year-end 2006 the total property portfolio consisted of 570 properties. The holdings are spread over five countries and have a total lettable floor area of 672,049 square metres. The size of the property portfolio in operation amounted year-end 2006 to F 1,710 million. This is substantial higher than as per the beginning of 2006, which is attributable to considerable value movements and earlier mentioned acquisitions, together with limited disposals. rate was impacted especially by the large number of lettings in the factory outlet in Messancy during 2006 and the letting of the shop on the Boulevard St. Germain in Paris. At year-end 2006 the occupancy rate amounted to 96.8% (2005: 98.3%). This decrease was due to a number of acquisitions with a lower average occupancy rate in the fourth quarter of The occupancy rate of the total property portfolio and its different segments at year-end 2006 and the 2006 and 2005 average are as follows: Occupancy rate (in %) (annual averages and year-end 2006) Year-end Average Average Netherlands Spain France Belgium Portugal Total Letting and occupancy rate During 2006 the leasing in the property portfolio generally developed in the desired direction. The average occupancy rate in 2006 improved by 110 basis points to 97.4% (2005: 96.3%). This average occupancy Leidschendam 30

33 Alicante Antwerp Amsterdam VastNed Retail s property portfolio is characterised by spreading in terms of countries and regions, types and numbers of tenants, as well as types of investment properties. Winterswijk Uden 31

34 Report of the board of management The total of rent-free periods, rent discounts and lease incentives as a percentage of gross rental income decreased to 1.6% (2005: 2.4%). This is not thought to represent a trend, since the decrease predominantly concerns the factory outlet in Messancy, for which lease discounts could be reclaimed due to a favourable arbitration decision. Apart from that effect, the board feels that these levels are in line with the market. Tenants VastNed Retail leases its properties to a large number of tenants. The total number of tenants excluding apartment tenants at year-end 2006 amounted to 1,914. A list of the larger tenants is presented in the graph on the right. None of the tenants is so dominant as to constitute a risk to VastNed Retail s rental income. Market rent VastNed Retail s property portfolio is leased on average at 100.0% of market rent. For this calculation, market rents are defined as determined by independent appraisers, augmented in prevailing cases by mall income, compared to the theoretical rental income of the property portfolio. The latter consists of gross rental income as at year-end 2006, including mall income and the estimated turnover rent, augmented by vacancy at market rent level. This neutral position is the result of cases of overrent and underrent in various countries. The board of management does not see a risk for future rent levels in the market rent estimates made by appraisers. Rent developments Due to change in the size of the portfolio as a result of the acquisitions and disposals made in 2005 and 2006, a comparison between the 2006 and 2005 gross rental income is not instructive. Considering autonomous growth of gross rental income offers a more insightful picture. Growth in 2006 consisted largely of indexation and lease improvements. The graph on page 29 presents an overview of the evolution of gross rental income during Rent developments of the property portfolio in pipeline are not specified. The reason for this is the limited size of the pipeline and the fact that determining market rents for shopping centres yet to be delivered is a rather theoretical exercise. Expiry dates of lease contracts vastned retail Ten largest tenants Percentage of theoretical rental income as at December 31, H&M 5.2 Inditex 2.4 Auchan 2.3 Eroski 1.4 Maxeda 1.4 Ahold 1.3 Blokker 1.3 A.S. Watson 1.3 Media markt 1.2 Charles Vögele 1.1 Total 18.9 vastned retail Expiry dates lease contracts total property portfolio (in %) Expiry dates and renewal dates of lease contracts (weighted for gross rental income). Average duration is 3.4 years VastNed Retail is active in five counties, with different types and durations of lease contracts resulting from local legislation and customs. The graph on the right

35 Report of the board of management presents an overview of the expiry dates of the total property portfolio. The average duration is 3.4 years (2005: 3.4 years). VastNed Retail considers the expiry dates of the lease contracts to be well spread. Acquisitions In 2006 acquisitions took place in the Netherlands, Spain, France and Belgium for a total amount of F million. Disposals A number of disposals were made in This concerned disposals in the Netherlands, Belgium and France. The proceeds of these disposals totalled F 23.6 million. The result on disposals compared to the latest appraisal value was F 1.0 million positive. Value movements investment properties The appraisals by independent appraisers in general showed a very favourable picture with a total value movement of F million positive (2005: F million positive). These positive value movements are largely the result of lower initial yields of the property investments (yield compression). The net yield on the property portfolio (theoretical net rental income divided by the appraisal value of the property portfolio) at year-end 2006 amounted to 6.2% against 6.7% a year earlier. Value movements property (x F 1 million) Netherlands Spain France Belgium Portugal Total Appraisal methodology VastNed Retail s property portfolio is appraised four times per year. The larger properties, with a (expected) value of at least F 2.5 million, make up approximately 75% of the portfolio and are appraised quarterly by internationally renowned appraisers (please refer to the overview Property portfolio 2006 included elsewhere in this annual report). Smaller properties are appraised externally once a year, spread evenly across the quarters. After external appraisal, these properties are appraised internally in the following three quarters by extrapolation of the external appraisal. VastNed Retail ensures that the appraisers dispose of all relevant information needed to arrive at a balanced assessment. Netherlands Properties The Dutch property portfolio at year-end 2006 made up 36% of VastNed Retail s total property portfolio. The Dutch property portfolio is characterised by a large number of properties, 412, and 908 tenants (excluding apartment tenants). The larger part consists of high street shops. Letting and occupancy rate The letting of the Dutch property portfolio is proceeding according to plan. The occupancy rate at year-end 2006 amounted to 97.4% (2005: 98.7%). The granting of rent-free periods in the Dutch property portfolio is very limited and in 2006 amounted to 0.3% (2005: 0.3%) of gross rental income. This is considerably below the average of VastNed Retail s total property portfolio. Rent levels can be characterised as competitive. Theoretical rental income at year-end 2006 was at 101.8% of the market rent as determined by the external appraisers. In 2006 during lease contract renewals the existing rent levels were generally continued or agreed at a slightly higher level. VastNed Retail found that in 2006, too, the retail landscape was highly dynamic. Certain retail formulas continue to be under pressure. They may disappear, creating room for new formulas of a more innovative nature. This continuous development can lead to bankruptcies, which need not carry risk for VastNed Retail, since retail space vacated by bankruptcies can be taken up by other, stronger retailers. Expiry dates of lease contracts Lease contracts are generally concluded for a period of five years, with a mutual option of termination. Other durations also occur. The chart on page 34 presents an overview of the existing lease contracts at year-end Acquisitions VastNed Retail made a number of acquisitions in This partly concerned investment properties in operations and partly properties in pipeline. Property acquisitions in the Netherlands (x F 1 million) Houten, De Spil 30.8 Houten, 3-13 Onderdoor 4.1 Hengelo, 4 Wegtersweg 5.3 Roermond, Retail Park Roermond 55.2 Amsterdam, 7 Rembrandtplein

36 Report of the board of management Houten Concerning De Spil in Houten, VastNed Retail and Altera Vastgoed have concluded a turnkey purchase agreement with property developer Van Wijnen for the expansion of the shopping centre Het Rond in Houten, which is held by VastNed Retail and Altera Vastgoed, for F 30.8 million (effective investment VastNed Retail: F 16.4 million and Altera Vastgoed F 14.4 million). The expansion will add a total of approximately 8,300 square metres of retail space, divided over 33 shops, to the existing centre of approximately 20,000 square metres. The expansion will also comprise an underground car park with approximately 400 parking spaces and a cinema with catering facilities on the first floor. Annual gross rental income is expected to amount to approximately F 2.3 million. VastNed Retail s anticipated net initial yield amounts to 7.2%. The new part of the shopping centre is set to be opened in the middle of Letting the retail space and the cinema is progressing well. (Pre)letting agreements have already been concluded with (inter)national chains. The four-screen multiplex will accommodate 500 guests (seats) and is leased, together with the catering space of 400 square metres, to a nationally operating cinema chain. Netherlands Ten largest tenants Percentage of theoretical rental income as at December 31, Maxeda 3.6 Ahold 3.4 Blokker 3.4 A.S. Watson 3.3 Laurus 2.5 Sligro 2.1 Miss Etam 1.7 Free Record Shop 1.4 Sperwer 1.1 Charles Vögele 1.1 Total 23.6 VastNed Retail has also expanded its position in the Het Rond shopping centre in Houten by acquiring the property 3-13 Onderdoor for F 4.1 million including purchase costs. The net initial yield amounts to 6.5%. The property has a lettable floor area of approximately 2,300 square metres and an annual gross rental income of F 0.3 million. Hengelo In mid-2006 VastNed Retail acquired ownership of a DIY store on the Wegtersweg in Hengelo for F 5.3 million including purchase costs. The net initial yield on this investment is 6.0%. Annual gross rental income amounts to approximately F 0.3 million. The property has a lettable floor area of 4,600 square metres with 103 on-site parking spaces. The property is let for a period of 10 years to a nationally operating DIY chain. Netherlands Expiry dates lease contracts property portfolio (in %) Expiry dates and renewal dates of lease contracts (weighted for gross rental income). Average duration is 3.6 years. Roermond In December 2006 the agreement for the acquisition of Retail Park Roermond was signed. This concerns a retail park to be realised by Van Pol and TCN on the north-eastern side of Roermond, with a great range of retail warehouses. The park has a gross floor area of 36,200 square metres and has 1,250 parking spaces. Construction has already started. For the larger part of the lettable area, serious commitments and/or lease contracts have already been entered into with international and national retail chains. The average rent level is expected to be F 105 per square metre,

37 Report of the board of management taking the total annual gross rental income to F 3.6 million. The net initial yield on this investment will be approximately 6.0%. Delivery of the project is expected to take place in the first half year of Amsterdam This concerns the acquisition of a high street shop in a prime location, 7 Rembrandtplein Amsterdam, for an amount of F 3.6 million. Annual rental income amounts to F 0.2 million. The net initial yield amounts to 5.2%. Disposals During 2006 a number of properties were disposed of. The reason for these sales was that by selling the properties listed below, the risk return profile could be improved. This concerned the following disposals: Amsterdam, 75 Stadionweg; De Bilt, 160 and 162 Hessenweg; Groningen, 32 Nieuwe Ebbingestraat; Sneek, Gedempte Pol; Soest, Van Weedestraat; Weesp, 26 Herengracht, and; Wolvega, 4 and 4a-c Van Harenstraat. These disposals were made at F 4.1 million in total. Altogether, the abovementioned properties were sold at F 0.5 million above the latest appraisal value. Spain Ten largest tenants Percentage of theoretical rental income as at December 31, Inditex 7.5 Eroski 5.0 Auchan 4.7 Media markt 4.3 Abaco 2.3 Cortefiel 2.1 McDonald s 2.0 Cinesa 1.7 Virgin Gymn 1.7 Mango 1.6 Total 32.9 Value movements investment properties During 2006 the unrealised value movements amounted to F 40.2 million positive (2005: F 23.7 million), or approximately 7.1% of the value of the property portfolio as at the beginning of This took net yield at year-end 2006 to 6.6% (2005: 6.8%). Spain Properties The Spanish property portfolio at 30% is VastNed Retail s second largest market. The portfolio consists mainly of medium-sized shopping centres. The company has also invested in a number of retail warehouses and high street shops. Spain Expiry dates lease contracts property portfolio (in %) Expiry dates and renewal dates of lease contracts (weighted for gross rental income). Average duration is 4.4 years. Letting and occupancy rate The occupancy rate in the Spanish portfolio at year-end 2006 amounted to 96.6% (2005: 98.3%). Taking the rent guarantee concerning the Getafe III shopping centre into account, the occupancy rate amounts to 97.4%. In 2006 rent-free periods, rent discounts and lease incentives were provided for 2.2% (2005: 2.7%). Theoretical rental income at year-end 2006 was 3.2% below market rent. Expiry dates of lease contracts In Spain, lease contracts are generally concluded for a period of five years. Deviations from this standard sometimes occur. For instance, in the Spanish property

38 Report of the board of management portfolio lease contracts with the fashion conglomerate Inditex are concluded with a duration of one year. We do not consider this to present any great risk, since the short term of notice is compensated by the tenant being highly solvent and successful. The average duration of lease contracts in VastNed Retail s Spanish property portfolio is 4.4 years, i.e. above the average in VastNed Retail s total property portfolio. Acquisitions Property acquisitions in Spain (x F 1 million) Madrid, CC Getafe III 55.2 Madrid, Calle de Fuencarral 9.8 Madrid, CC Getafe III The acquisition of the expansion of the Getafe III shopping centre comprises 20,000 square metres of retail space, which is leased to strong international and national retail enterprises. It is connected to an existing shopping centre in south Madrid. It involves a F 55.2 million investment at an initial yield of 5.9%. France Ten largest tenants Percentage of theoretical rental income as at December 31, H&M 20.2 Armand Thiery 6.3 Auchan 5.6 PPR 3.5 DARTY 3.1 Vivarte 2.2 Rallye 1.9 LVMH 1.9 ETAM 1.9 Célio 1.9 Total 48.5 Madrid, Calle de Fuencarral Two properties were acquired in Madrid on 23 and 25 Calle de Fuencarral. This is a very prominent shopping street which joins Gran Via, one of Madrid s top locations. Number 23, with a total floor area of 256 square metres, is let to the Italian fashion chain Replay. The other property of 120 square metres is currently vacant. In view of the top location of the street, this shop is expected to be let soon. When fully let, these properties generate an annual rental income of F 0.5 million. The net initial yield amounts to 5.1%. Disposals No disposals were made in Value movements investment properties During 2006 the unrealised value movements amounted to F 46.6 million (2005: F 59.2 million). This brought down net yield from 6.3% at year-end 2005 to 6.0% at year-end France Properties At 19%, the French property portfolio is the third largest of VastNed Retail s property portfolios, and consists of 49 properties. These are mostly high street shops. In addition, investments have also been made in a number of medium-sized shopping centres, such as in Limoges, Plaisir, Thoiry and Dunkirk. The portfolio is spread throughout the country, with 22% of the value concentrated in Paris. 36

39 Report of the board of management Letting and occupancy rate The average occupancy rate amounted to 98.4% (2005: 94.8%). At year-end 2006 the occupancy rate amounted to 97.3% (2005: 99.4%). This decrease is attributable to the acquisition of the Carrefour Limoges-Corgnac shopping centre with an occupancy rate of approximately 75%. The occupancy rate is expected to improve in the course of 2007 due to VastNed Retail taking the letting into its own hands as from mid-february The remaining, very marginal, vacancy can be characterised as frictional vacancy. The amounts provided as rent-free periods and rent discounts remained limited to 1.0% (2005: 1.0%). The current theoretical rental income at year-end 2006 was 2.3% above market rent. France Expiry dates lease contracts property portfolio (in %) Expiry dates and renewal dates of lease contracts (weighted for gross rental income). Average duration is 1.7 years Expiry dates of lease contracts Lease contracts in France are usually agreed under the system. The overview of expiry dates in the graph on the right shows that a large number of contracts expires in 2007 and could be terminated. This is not considered to be of great concern since the retail properties are in competitive locations, making it unlikely that many tenants will terminate their contract. The average duration of rent contracts was 1.7 years Acquisitions Property acquisitions in France (x F 1 million) Limoges, unit in CC Beaubreuil 0.5 Limoges, CC Carrefour Limoges-Corgnac 17.8 Paris, 17 Rue Montmartre 3.0 Marseille, 29 Rue Saint Ferréol 3.1 Troyes, 113 Rue Émile Zola 2.5 Arras, Rue Ernestale 6.3 Frouard, 12 Rue de Bois 1.9 Paris, 123 Rue d Alésia 3.9 Limoges VastNed Retail has acquired an interest in the shopping centre Carrefour Limoges-Corgnac in France for F 17.8 million. The net initial yield on this investment when fully let is 7.0%. The shopping centre Carrefour Limoges-Corgnac is located in a strong neighbourhood shopping centre in the west of Limoges. The centre has a total floor area of 22,800 square metres and was recently fully renovated and expanded. A Carrefour hypermarket of 6,800 square metres anchors the centre. The rest of the shopping centre consists of 53 retail units with a lettable floor area of 11,837 square metres, a petrol station and parking facilities for 950 cars, 500 of which are covered. VastNed Retail has acquired ownership of 26 retail units with a total floor area of 5,587 square metres, representing 47.1% of the centre excluding the hypermarket. 37

40 Annual report 2006 VastNed Retail N.V. Alicante At 19%, the French property portfolio is the third largest of VastNed Retail s property portfolios, and consists of 49 properties. These are mostly high street shops. In addition, investments have also been made in a number of medium-sized shopping centres, such as in Limoges, Plaisir, Thoiry and Dunkirk. Malaga Breda The Hague 38

41 Thoiry Annual report 2006 VastNed Retail N.V. All six high street shops are in top locations in Paris, Marseille, Troyes and Arras, and are let to retail companies like Promod, Nocibé, Célio, Marlboro Classics and Made in Sport. The retail warehouse is located in the periphery of Nancy and is let to Intersport. The total lettable floor area amounts to 3,022 square metres, with an annual gross rental income of F 0.9 million. This takes the net initial yield to 5.1%. Disposals Alençon, Rue aux Sieurs (apartments) Sens, 43 Grande Rue Cannes These disposals were made in view of limited prospects at their appraisal value of F 0.4 million in total. Value movements investment properties The unrealised value movements in the French portfolio in 2006 amounted to F 35.1 million positive (2005: F 23.5 million positive). The net yield of the property portfolio thus came to 5.7% (2005: 6.9%). Murcia Belgium Properties At year-end 2006 the Belgian property portfolio consisted of 85 properties in the categories high street shops (50%), retail warehouses (39%) and other (11%). The Belgian property portfolio at year-end 2006 made up 14% of VastNed Retail s total property portfolio. The part of the centre acquired by VastNed Retail offers room to a number of successful international and national retail chains such as Armand Thiery, Okaidi, Nocibé and Internity. The average rent level amounts to approximately F 250 per square metre. This part is let for 75% and generates a theoretical annual rental income of F 1.3 million. In view of the quality of the shopping centre, the board of management expects to let the vacant units in the near future. Paris A high street shop was acquired on 123 Rue d Alésia for an amount of F 3.9 million. It was vacant at the time of acquisition. After conclusion of the financial year, a lease agreement was concluded with the fashion chain Camaieu. Other acquisitions VastNed Retail has strengthened its French retail portfolio with the acquisition of a portfolio of six high street shops and a retail warehouse for F 16.8 million in total. Letting and occupancy rate The occupancy rate of the Belgian property portfolio in 2006 improved in comparison to previous years. The average occupancy rate in 2006 amounted to 95.4% (2005: 91.4%). At year-end the occupancy rate amounted to 95.3%. This was due in particular to the succes of the renewed efforts for the Messancy factory outlet. At year-end 2006, the occupancy rate of this factory outlet amounted to 76%. This is lower than the occupancy rate as per year-end 2005 (82%) due to the increased number of square meters of retail space. VastNed Retail s Belgian property portfolio is let at 99.2% of market rent. This relative underleasing was due inter alia to actual rents being lower than the market rents as estimated by the appraiser for the factory outlet in Messancy. Expiry dates of lease contracts Lease contracts in Belgium are usually concluded under the regime. This means that the tenant can terminate the lease contract after three years. 39

42 Report of the board of management This rarely occurs, as the tenant earns his living with the specific location of the shop. In the overview of expiry dates, however, a conservative approach has been taken by taking this first expiry date into account. The graph on the right presents an overview of the expiry dates of the Belgian property portfolio. The average duration is 2.0 years (2005: 2.3 years). Acquisitions In January 2006, Intervest Retail signed a purchase agreement for the shopping centre Julianus in Tongeren of approximately 8,900 square metres. The developer and seller of the project is IBC Vastgoed, a subsidiary of Heijmans Belgium. The project is located on the Maastrichterstraat, the main shopping street of Tongeren. The total project consists of the redevelopment of a former hospital into shops and a hotel, as well as the construction of shops, apartments and an underground car park. Intervest Retail will acquire the retail part, consisting of 22 shops and one supermarket. Intervest Retail s total investment amounts to approximately F 18.0 million (no additional costs payable). The net initial yield amounts to 6.7%. Construction started at the end of October The centre is set to be opened in the last quarter of Disposals A number of disposals were made in 2006 in order to improve the risk return profile. This concerned the following properties or parts thereof: Aalst, 3 Kalfstraat; Dinant, Tienne de l Europe; Gerpinnes, 99 Rue de Bertransart; Glain, 572 Rue Saint-Nicolas; Hannut, 63 Rue de Huy; Kapellen, 5 Eikendreef; Oostende, 610 Torhoutsesteenweg; Roeselare, 524 Brugsesteenweg; Seraing, 47 Boulevard Pasteur; Sint-Niklaas, 119 Kapelstraat; Sint-Truiden, 69 Hasseltsesteenweg, and; Sint-Truiden, 25 Kattestraat. The proceeds of these disposals totalled F 19.1 million, netting a book profit of F 0.4 million. Value movements investment properties The unrealised value movements in 2006 amounted to F 3.6 million positive (2005: F 5.9 million positive). The net yield of the property portfolio thus came to 6.7% (2005: 7.0%). Belgium Ten largest tenants Percentage of theoretical rental income as at December 31, H&M 11.4 Aldi 5.7 Charles Vögele 4.2 Euro Shoe Unie 4.0 IC Companys 2.3 Piocheur 2.2 Inditex 2.1 Het Genoegen 2.1 Mitiska 2.0 Van Neerbos 1.9 Belgium Expiry dates lease contracts property portfolio (in %) Expiry dates and renewal dates of lease contracts (weighted for gross rental income). Average duration is 2.0 years Total

43 Report of the board of management Portugal Properties The Portuguese property portfolio consists of nine shops which are let to the optician s chain MultiOpticas. In 2006 the occupancy rate was 100% (2005: 100%). Value movements investment properties External appraisals led to a positive value movement of F 2.2 million (2005: F 0.8 million positive). Personnel and organisation VastNed Retail attaches great importance to a balanced personnel policy. In that context the company focuses on matching tasks to employees capacities. Employees are assessed annually; based on that assessment objectives for the coming year are formulated in mutual discussions; when necessary a training programme is set up. The organisation devolves many responsibilities on the country teams, but based on a clear VastNed Group spirit. The country teams, which may be supported from head office, are composed of a country manager, portfolio or asset management, property management, financial administration, sales and acquisition and (technical) project management. In 2006, the external property management activities for the Val Thoiry shopping centre in Thoiry, France were taken over by VastNed Management France. Sustainability VastNed Retail aims for sustainable business practices. In that context, attention is devoted to labour relations, the environment and ethics. As stated under Personnel and organisation, VastNed Retail attaches great importance to a balanced personnel policy. Environmental aspects are carefully considered in the pursuit of the investment policy. Risk management Dutch corporate governance code Since the publication of the Dutch corporate governance code (the Code ) in December 2003, the annual report must contain a statement from the board of management that the risk management and control systems are adequate and effective. VastNed Retail has complied with this as from its 2004 annual report, indicating, however, that in the absence of a frame of reference, it is difficult to substantiate compliance after the fact. In December 2006, the Monitoring Commission published its second report on the compliance with the Dutch corporate governance code. In this report, the Monitoring Commission indeed highlights that many parties feel a need for more guidance, but that nonetheless it does not yet wish to provide further guidelines concerning the statement by the board of management concerning the internal risk management and control systems. The commission feels it will only be able to assess the need for these properly on the basis of the 2006 annual reports. It is a positive development that the commission emphasises that the system of the Code must remain principle-based, and therefore will avoid Sabanes-Oxley-type regulations, in which it appears that the external auditor determines whether a board of management is allowed to make this statement. Risk management and control systems VastNed Retail In 2006, too, VastNed Retail has devoted a great deal of attention to risk management. Based on a plan of action that is drawn up annually, a number of major risks is now addressed by the board of management and in meetings of both the audit committee and the supervisory board, focusing in particular on the set-up and functioning of the associated risk management procedures. During 2006, on the basis of this plan of action, inter alia strategic risks (in particular country choice), catastrophe risks (insurance), compliance risks (AFM and Euronext regulations, as well as permits and safety regulations), (re)financing and interest rate risks, IT risks and fiscal and legal risks were discussed extensively. Significant adjustment of the internal risk management and control systems in respect of these risks was not deemed necessary. However, proposals were made on a limited number of issues for further improvement of the internal risk management and control systems. Some of these recommendations have already been implemented in The follow-up of the remaining recommendations will be addressed in the current financial year. The chapter on Risk management includes an overview of the risks identified by VastNed Retail, which also describes how these risks are controlled. A major element of the internal risk management and control system is the complex of internal control measures and administrative and organisational procedures as laid down in the Administrative Organisation manual. This manual complies with the requirements of the Act on the Supervision of Investment Institutions and the 2005 Investment Institutions (Supervision) Decree. The board of management is of the opinion that the organisation of the risk management and control 41

44 Report of the board of management systems provides a reasonable degree of certainty that the financial reporting does not contain material misstatements. In addition, it is of the opinion that these risk management and control systems have functioned adequately during the reporting year and that there are no indications that they should not function adequately during the current financial year. During the reporting year a number of administrative and organisational procedures were updated. Furthermore, extra attention was devoted to improving the contents of and the procedures for drawing up internal business reports. No material shortcomings have been observed in the risk management and control systems focused on controlling the financial reporting risks. Financial results Investment result 2006 attributable to VastNed Retail shareholders vastned retail Loan portfolio (x 1 million, year-end 2006) Fixed Floating % of interest interest Total total Long-term Short-term Total % of total In 2006, the investment result increased by over 9.5% from F million in 2005 to F million. The investment result for 2006 consisted of a direct investment result of F 62.5 million and an indirect investment result of F million. Direct investment result The direct investment result rose by almost 5% from F 59.6 million in 2005 to F 62.5 million. This increase could be attributed in particular to increased net rental income due to lease indexations and lease renewals, as well as to the improved occupancy rate of the portfolio. The acquisitions made in 2005 and 2006, less the disposals made in the same period, also contributed positively to the 2006 net rental income. Further optimising of the fiscal structure resulted in largely one-off tax assets, which also had a positive impact on the direct investment result Indirect investment result The indirect investment result rose from F 98.3 million in 2005 to F million, an increase of 12%. This increase was due to continued strong demand for retail investments, with buyers being prepared to acquire property at markedly lower initial yields. This strong demand has arisen from the considerable amount of capital from around the world that is looking for investment opportunities, partly as a result of continuing relatively low interest rates, and from an appreciation of the risk profile of (retail) property investments, which has led to a shift in investment preferences towards (retail) property investments. The increase of the indirect investment result was reduced somewhat by tax rate adjustments 42

45 Report of the board of management in Spain. As a result, a higher effective tax rate had to be applied to the provision for deferred tax liabilities, resulting in an additional expense of F 6.6 million in Net income from investment properties Gross rental income Total gross rental income increased from F million in 2005 to F million in Gross rental income of the standing portfolio, excluding that of the factory outlet in Messancy, increased by approximately F 2.2 million compared to 2005, particularly as a result of indexation and renegotiation of lease contracts. The gross rental income of the factory outlet in Messancy rose by F 1.3 million due to a one-off compensation from the property developer of the factory outlet of over F 1.0 million, which was recognised under lease incentives in 2006, and by the increased financial occupancy rate of the factory outlet compared to Partly as a result of this, the financial occupancy rate of the entire portfolio increased from 96.3% to 97.4%. The shopping centre Centre Marine in Dunkirk, which was acquired at the end of 2005, generated a rise of the gross rental income of over F 1.8 million. The other acquisitions, of which the shopping centre Getafe III at the end of October 2006 made up the larger part, brought a further rise of the gross rental income of F 1.0 million. The increase of the gross rental income was reduced by over F 2.5 million due to disposals made in 2005 and 2006, of which the sale of a number of Belgian properties had the greatest impact. Net service charge expenses Total net service charge expenses increased from F 2.1 million in 2005 to F 3.1 million in This sharp increase in 2006 was mainly due to the factory outlet in Messancy, which required higher than anticipated promotion, marketing and management costs in order to attract visitors and increase sales, which could not be charged on fully to the tenants. This entry also rose due to the fact that some of the units in the Plaisir Sablons shopping centre near Paris were intentionally kept vacant in anticipation of the planned redevelopment of this shopping centre. Operating expenses Operating expenses expressed as a percentage of gross rental income decreased compared to 2005 by 1.0% to 9.5% and thus came to F 10.5 million (2005: F 11.2 million). This improvement was primarily due to lower maintenance costs and other operating expenses (including a lower allocation to the provision for doubtful debtors). Value movements investment properties The value movements of the property investments in 2006 increased to F million positive ( 2005: F million positive). These higher value movements were due to positive revaluations based on external appraisal of the investment properties in operation. As a result of the increased demand for property investments, ever tighter initial yields are taken into account, which appraisers factor in. In all countries this has resulted in markedly higher market values of the investment properties. The value increase of the Belgian portfolio fell compared to 2005 due to write-down of approximately F 7.0 million on the factory outlet in Messancy. Net result on disposals of investment properties The net result on disposals amounted to F 0.1 million positive (2005: F 1.4 million negative) and comprises the net result of over F 1.0 million positive realised on disposals in 2006 of a total amount of F 23.6 million, and a deferred correction of the result on the disposal of the German property portfolio in 2004 of F 0.9 million negative. The deferred correction concerns an adjustment of the provision for the five-year rentguarantee provided at the sale of the German portfolio regarding the vacancy as at July 1, 2004 and associated vacancy costs of F 3.3 million per year. In the first two and a half years only a limited number of leases have been agreed; the buyer of this property portfolio has so far hardly managed to reduce the vacancy level of July 1, In fact, the occupancy rate of this portfolio fell even further. In view of this, the provision was raised by F 0.9 million. Expenditure Net financing costs Net financing costs increased from F 20.8 million in 2005 to F 22.7 million in This increase was due to the rise of the interest-bearing debts due to the net acquisitions made in 2005 and The average interest rate on the total interest-bearing loan capital rose marginally to 4.31% (2005: 4.28%). This marginal rise of the average interest rate could be realised despite a significant rise of the short-term interest rate as the acquisitions were temporarily financed at variable interest rates. General expenses General expenses rose by 4.0% to F 6.7 million (2005: F 6.4 million). This rise was mainly due to increased personnel costs. 43

46 Report of the board of management Income tax expense Income tax due on the reporting period decreased from F 1.8 million in 2005 to F 0.9 million in This one-off sharp decrease was due to exploiting tax-offsettable losses of F 0.4 million and to the release of a provision of F 0.3 million for withholding tax on the result of Intervest Retail to be paid to VastNed Retail as dividend. Based on external tax advice, withholding tax is no longer taken into account on the Intervest Retail result to be paid to VastNed Retail. Movement deferred tax liabilities The increase in the allocations to the deferred tax liabilities of F 9.3 million in 2005 to F 15.2 million in 2006 is related to an increase of the tax rate in Spain, as a result of which an effective tax rate of 18% had to be taken into account in the calculation of the deferred tax liabilities, compared to 15% in This resulted in a one-off allocation to the deferred tax liabilities of F 6.6 million. The value movements in the Netherlands, Belgium and France do not result in movements in deferred tax liabilities due to the locally applicable favourable tax regimes. Investment result attributable to minority interests The investment result attributable to minority interests of F 6.6 million (2005: F 9.0 million) consisted of the direct and indirect investment results attributable to minority interests of F 4.4 million (2005: F 5.0 million) and F 2.2 million (2005: F 4.0 million) respectively. The decrease of the direct investment result attributable to minority interests was due in particular to the acquisition as per July 1, 2005 of the remaining interest in the Spanish shopping centre Madrid Sur, held jointly with Lar-Grosvenor. The interest in Intervest Retail held by VastNed Retail remained unchanged in 2006 at 72.4%. The decrease of the indirect investment result attributable to minority interests was also related, in addition to the acquisition of the minority interest in Madrid Sur, to lower positive value movements of the Belgian property portfolio held by Intervest Retail. Financing with equity and loan capital At the shareholders meeting of April 4, 2006, the total dividend for the 2005 financial year was declared at F 3.54 per share, of which an interim dividend of F 1.07 per share was already distributed in September The final dividend so came to F 2.47, of which the mandatory cash part amounted to F 1.47 and the optional part of F 1.00 in cash or 2 new shares per 129 shares. In this context, holders of 33.9% (2005: 35.6%) of the number of shares in issue opted for stock dividend, increasing the total number of shares by 88,853 shares. In anticipation of the increase of the total number of shares due to stock dividend, 90,000 shares were bought back to limit dilution. In the context of the share buyback programme announced in September, another 25,826 shares were bought at an average price of F per share. Equity expressed as a percentage of the investment properties at year-end 2006 came to 60.6% (year-end 2005: 62.6%). In the longer term, VastNed Retail aims for a solvency ratio of between 55% and 60%, which, based on the balance sheet at year-end 2006, leaves room for net investments of approximately F 170 million without new share issues. The ratio between long-term loan capital (more than one year) and short-term loan capital (less than one year) came to 67/33 at year-end 2006 (69/31 at year-end 2005), which is consistent with VastNed Retail s financial policy objectives. The loan portfolio increased to F million in 2006 (year-end 2005: F million). The loan portfolio with a duration of more than one year increased from F million to F million. This increase was mainly due to the taking out of a F 57.0 million loan with a duration of 7 years (with the option to extend it by another 3 years) in connection with the acquisition of the Getafe III shopping centre. The average duration of the long-term loans in years remained almost unchanged at 5.1 (year-end 2005: 5.2). In order to limit the interest rate risk of the loan portfolio, a number of interest rate swaps were entered into, fixing the interest rate on a number of loans of over F 80 million in total for the remainder of their duration. The average duration of the long-term loans with fixed-interest periods in years thus decreased to 4.5 (year-end 2005: 4.7). These ratios are consistent with the objectives of VastNed Retail s stated financing policy. The average interest rate of the long-term loans for 2006 amounted to 4.55% (2005: 4.51%). The short-term loans had a significantly higher average interest rate in 2006 of 3.50% (2005: 2.96%). Results and equity VastNed Retail shareholders per share The investment result per share increased by over 9% from F 9.37 per share in 2005 to F per share in The direct investment result per share came to F 3.70 (2005: F 3.54). The indirect investment result per share was impressive once again in 2006 at F 6.53 (2005: F 5.83). Equity per share, including the final dividend to be distributed for 2006, increased by 13.5% from F to F per share. 44

47 Report of the board of management Dividend proposal VastNed Retail s dividend policy in principle consists of distributing the direct investment result to the shareholders in full. As from 2005, an interim dividend is also distributed based on 60% of the direct investment result as disclosed in the semi-annual figures. In this context, on September 4, 2006 an interim dividend was distributed of F 1.10 per share in cash. In line with previous years, an optional dividend is proposed to the shareholders, giving the shareholders the option of receiving the final dividend either fully in cash or partly in cash and partly in stock dividend, charged to the share premium reserve. In order to fulfil the fiscal conditions for fiscal investment institutions, at least the fiscal result must be paid out in cash. In accordance with the dividend policy described above, it will be proposed to the general meeting of shareholders to be held on April 3, 2007 to declare a final dividend of F 2.60 per ordinary share, being the 2006 direct investment result per share of F 3.70 less the interim dividend of F 1.10 per share. Taking into account the fiscal distribution obligation and the share price at that time, it will be possible to receive the dividend either fully in cash or F 2.20 in cash and a percentage of VastNed Retail shares, charged to the share premium reserve, which will approach a value of F 0.40 per share. The final dividend will be made payable on May 2, The board of management will consider buying back shares approaching the number of new shares to be issued as stock dividend in order to mitigate the dilutive effect on the direct investment result per share. Outlook for 2007 Forecasts for economic growth in the countries in which VastNed Retail operates, are positive. This is reflected in increased producer and consumer confidence. Economic growth in 2007 will result, aside from exports and investments, from stronger growth of domestic consumer spending. Incidentally, the economic climates in the different countries in which VastNed Retail operates vary. In Spain the strong economic growth of the past few years appears to be levelling off, allowing the relatively high inflation of the past few years to approach those of the countries in North-western Europe. While economic growth in the Netherlands was among the lowest in the eurozone, a clear recovery is now taking place, by means of which the Netherlands appears to be quickly catching up on other countries in the eurozone. Economic forecasts for Belgium and France are in between those for Spain and the Netherlands. Short-term interest is expected to rise further in 2007, while long-term interest will stabilise at around the current level. The interest rate that is relatively still at a historical low and the glut, partly as a result, of (especially international) liquidities seeking investment keep interest among investors for property high, particularly in the retail sector. This has since 2004 resulted in a tight investment market with falling initial yields and correspondingly rising property prices. This trend is expected to continue in 2007, albeit at a slower rate. Despite the fact that VastNed Retail has hired or released employees for acquisitions and investments in new markets (especially Turkey) are actively being investigated, it will remain difficult, also in 2007, due to the tight investment market to invest the full extent of the available financing capacity. The investment property in pipeline in Tongeren is expected to start to contribute to the direct investment result at the end of It is anticipated that on balance additional investments in property of over F 150 million can be made in Additionally, in view of the current extensive leasing efforts for the factory outlet in Messancy, and the one-off gain of F 0.7 million (share VastNed Retail) due to the decision in the arbitration, recognised in 2006, it will be difficult to improve this property s contribution to the direct investment result. Based on the stated developments and barring extraordinary circumstances, including global tensions and the associated unpredictable economic consequences, on balance a limited rise of the direct investment result per share is expected for 2007 compared to Rotterdam, February 22, 2007 The board of management 45

48 Utrecht Oss The share and the stock exchange listing Listing on Euronext The VastNed Retail share has been listed on Euronext Amsterdam since November 9, 1987 and on Euronext Paris since December 20, Since March 2003 the share has been included in the AMX index (MidCap). As from March 2, 2007 VastNed Retail will be listed in the AscX index (SmallCap). This is due to the fact that a number of other companies achieved higher trading volumes during Daily average turnover in 2006 was 37,943 shares, which represents an increase compared to 2005 (35,410 shares per day). VastNed Retail makes use of various liquidity providers to guarantee the continuous liquidity of the share. During 2006 Kempen & Co, ABN AMRO and Rabobank acted as liquidity providers for VastNed Retail, with Kempen & Co acting as paid liquidity provider. Indices VastNed Retail is included in a number of indices. These indices serve as aids to investors for the composition of their share portfolio. As stated above, VastNed Retail is included in the AScX index. Our impression is that investors make limited use of this index for the composition of their share portfolios. Other indices, like Global Property Research (GPR) and the European Public Real Estate Association (EPRA) play a more important role, especially for international institutional investors. As per December 31, 2006 the weighting in the GPR indices was as follows: GPR 250 Europe 0.63% GPR 250 Netherlands 7.59% With EPRA, VastNed Retail is included in the following indices: EPRA/NAREIT Global 0.19% EPRA/NAREIT Global ex Asia 0.28% EPRA/NAREIT Global ex North America 0.34% EPRA/NAREIT Europe 0.84% EPRA/NAREIT Europe (UK restricted) 1.10% EPRA/NAREIT Europe ex UK 1.65% EPRA/NAREIT Liquid % EPRA/NAREIT Liquid 40 ex UK 2.35% EPRA/NAREIT Eurozone 1.98% EPRA/NAREIT Netherlands 7.21% 46

49 The share and the stock exchange listing Return VastNed Retail realised in 2006 the following return, expressed in euros and as a percentage of the 2005 closing price of F Closing price Closing price Movement share price % Dividend May 2, % Interim dividend September 4, % Total return % Assuming immediate reinvestment of the dividends, the total return for 2006 amounts to 51.4%. Share price At the beginning of 2006 the share price quoted a 5.4% premium on net asset value per share. The premium was justified by positive expectations regarding the property portfolio. Equity per share attributable to VastNed Retail shareholders including the 2006 investment result increased significantly from F to F In addition to this increase of the underlying value, the premium rose to 32.9% due to the global influx of capital. Similar developments were observed in 2006 among other European property investment funds. Those funds, too, saw the 2005 rise of the share price Closing prices VastNed Retail share in 2006 (in ) January February March April May June July August September October November December 47

50 The share and the stock exchange listing continue in 2006, with a concurrent rise of the appraisal values of the property portfolio. Market capitalisation based on the share price at year-end 2006 amounted to F 1,299.5 million, compared to F million at year-end The lowest share price of F was listed on January 3, 2006, while the highest share price of F was listed on December 29, The following shareholders can be characterised as major investors (>5%): Stichting pensioenfonds PGGM 21.08% Capital Research and Management Company 6.77% Nomura Asset Management Co.Ltd 5.93% Investor relations In 2006, VastNed Retail continued its active investor relations policy. In this context the fund is brought to the attention of institutional and private investors in various ways. It was decided to change the design of the various forms of communication with investors, such as press releases, presentations and advertisements. This new style focuses on the theme Couleur Locale. The various publications, including the newsletter Behind the Facade, emphasises the typical local atmosphere of the countries and cities in which VastNed Retail invests. Also, a new slogan, Balanced Growth in European Property was introduced to highlight VastNed Retail s strategy. Annual report Roadshows Furthermore, discussions were held in 2006 at investor road shows with a large number of international institutional investors, both at home and abroad. Investors were visited in the Netherlands, Belgium, Germany, Britain, France, Switzerland and the United States. Price sensitive information is always disclosed to the general public by means of press releases, reported to the financial authorities (Authority for the Financial Markets in Amsterdam, Euronext Amsterdam and Autorité des Marchés Financiers in Paris) and placed on the company s website ( Previously published information only is commented upon in contacts with the press, with individual investors and analysts. At the publication of annual and semiannual figures, VastNed Retail holds an analysts meeting. At the publication of the first quarter results and nine months results, a conference call is used to comment on these results to analysts. Both the analysts meetings and the conference calls can be followed through an audio webcast on No analysts meetings, presentations to or direct meetings with investors take place shortly before publication of financial reports. Analysts reports are not evaluated in advance nor corrected other than for factual correctness. VastNed Retail does not provide fees to any party for the drawing up of analysts reports. Currently, VastNed Retail is being followed by some eleven (sell-side) analysts of Dutch and foreign banks. In September 2006, EPRA awarded VastNed Retail first prize for the best annual report. The jury judged 80 annual reports of listed companies. VastNed Offices/Industrial won third prize in the same category. Other nominees included CLS Holdings (2nd), Rodamco Europe (4th) and British Land (5th). 48

51 Annual accounts 2006

52 Consolidated profit and loss account (x 1,000.-) Net income from investment properties Note Gross rental income 4, , ,814 Net service charge expenses 4 (3,095) (2,080) Operating expenses 4 (10,462) (11,199) Net rental income 97,172 93,535 Value movements investment properties in operation 5 128, ,214 Value movements investment properties under renovation 5 (1,223) (1,096) Total value movements investment properties 127, ,118 Net result on disposals of investment properties 6 73 (1,415) Total net income from investment properties 224, ,238 Expenditure Financial income Financial expenses 7 (23,110) (21,170) Value movements financial derivatives 7 (2) (27) Net financing costs (22,744) (20,781) General expenses 8 (6,684) (6,428) Total expenditure (29,428) (27,209) Investment result before taxes 195, ,029 Income tax expense 9 (872) (1,783) Movement deferred tax liabilities 9 (15,150) (9,349) (16,022) (11,132) Investment result after taxes 179, ,897 Investment result attributable to minority interests (6,621) (9,039) Investment result attributable to VastNed Retail shareholders 172, ,858 Per share (x 1) Investment result attributable to VastNed Retail shareholders Diluted investment result attributable to VastNed Retail shareholders

53 Direct and indirect investment result (x 1,000.-) Direct investment result Gross rental income 110, ,814 Net service charge expenses (3,095) (2,080) Operating expenses (10,462) (11,199) Net rental income 97,172 93,535 Financial income Financial expenses (23,110) (21,170) Net financing costs (22,742) (20,754) General expenses (6,684) (6,428) Direct investment result before taxes 67,746 66,353 Income tax expense (872) (1,783) Direct investment result after taxes 66,874 64,570 Direct investment result attributable to minority interests (4,422) (4,992) Direct investment result attributable to VastNed Retail shareholders 62,452 59,578 Indirect investment result Value movements investment properties in operation 128, ,214 Value movements investment properties under renovation (1,223) (1,096) Total value movements investment properties 127, ,118 Net result on disposals of investment properties 73 (1,415) Value movements financial derivatives (2) (27) Indirect investment result before taxes 127, ,676 Movement deferred tax liabilities (15,150) (9,349) Indirect investment result after taxes 112, ,327 Indirect investment result attributable to minority interests (2,199) (4,047) Indirect investment result attributable to VastNed Retail shareholders 110,420 98,280 Investment result attributable to VastNed Retail shareholders 172, ,858 Per share (x 1) Direct investment result attributable to VastNed Retail shareholders Indirect investment result attributable to VastNed Retail shareholders

54 Consolidated balance sheet as at December 31 (x 1,000.-) Assets Note Investment properties in operation 12 1,706,337 1,478,786 Investment properties under renovation 12 3,054 3,054 Other assets in respect of lease incentives 12 3,260 3,797 1,712,651 1,485,637 Investment properties in pipeline 12 18,054 1,841 Total investment properties 1,730,705 1,487,478 Tangible fixed assets 1,119 1,152 Financial derivatives 24 4,597 2 Total fixed assets 1,736,421 1,488,632 Debtors and other receivables 13, 15 22,230 18,028 Income tax Cash and cash equivalents 14, 15 7,007 14,430 Total currents assets 29,912 32,927 Total assets 1,766,333 1,521,559 52

55 Equity and liabilities Note Capital paid-up and called 16 84,516 84,516 Share premium reserve , ,125 Hedging reserve in respect of financial derivatives 16 3,119 (1,274) Other reserves , ,254 Investment result attributable to VastNed Retail shareholders , ,858 Equity VastNed Retail shareholders 977, ,479 Equity minority interests 16 70,368 68,339 Total equity 1,048, ,818 Deferred tax liabilities 17 43,076 26,501 Provisions in respect of employee benefits 18 1,575 1,494 Long-term interest-bearing loans , ,410 Long-term tax liabilities 20 3,684 6,395 Guarantee deposits and other long-term liabilities 21 10,278 11,684 Total long-term liabilities 478, ,484 Payable to banks , ,521 Redemption long-term liabilities 25,374 44,704 Financial derivatives ,464 Income tax 4,544 5,318 Other liabilities and accruals 23 75,431 25,250 Total short-term liabilities 239, ,257 Total equity and liabilities 1,766,333 1,521,559 53

56 Consolidated statement of movements in equity (x 1,000.-) Equity as per January 1 930, ,571 Value movements financial derivatives 4,558 (985) Direct investment result 66,874 64,570 Indirect investment result 112, ,327 Investment result 179, ,897 Share buyback (7,395) Acquisitions and disposals of shares in subsidiaries 101 (3,565) (7,294) (3,565) Final dividend previous financial year in cash (36,019) (54,638) Interim dividend in cash (18,593) (18,087) Dividend paid to minority interests (4,858) (5,319) Costs stock dividend (24) (56) Dividend payment in cash (59,494) (78,100) Equity as per December 31 1,048, ,818 Value movements financial derivatives directly recognised in equity 4,558 (985) Investment result 179, ,897 Total result 184, ,912 Attributable to: VastNed Retail shareholders 177, ,931 Minority interests 6,786 8, , ,912 54

57 Consolidated cash flow statement (x 1,000.-) Cash flow from operating activities Investment result 179, ,897 Adjustments for: Value movements investment properties (127,699) (113,118) Net result on disposals of investment properties (73) 1,415 Net financing costs 22,744 20,781 Income tax 16,022 11,132 Cash flow from operating activities before changes in working capital and provisions 90,487 87,107 Movement current assets (3,670) (5,014) Movement short-term liabilities 6,368 (551) Movement provisions ,266 81,759 Interest paid (on balance) (20,917) (20,484) Income tax paid (4,548) (7,170) Cash flow from operating activities 67,801 54,105 Cash flow from investment activities Acquisition of investment properties and investments in existing properties (95,784) (45,072) Disposal of investment properties 23,601 27,297 Cash flow from property (72,183) (17,775) Movement tangible fixed assets 33 (369) Cash flow from investment activities (72,150) (18,144) Cash flow from financing activities Share buyback (7,395) Dividend paid (54,633) (72,778) Dividend paid to minority interests (4,858) (5,319) Interest-bearing loans drawn down 112,171 61,135 Interest-bearing loans redeemed (48,359) (41,785) Cash flow from financing activities (3,074) (58,747) Movement in cash and cash equivalents (7,423) (22,786) Cash and cash equivalents as at January 1 14,430 37,216 Cash and cash equivalents as at December 31 7,007 14,430 55

58 Notes to the consolidated annual accounts (x 1,000.-) 1 General information VastNed Retail N.V. ( the Company ), with its registered office in Rotterdam, the Netherlands, is a (closed-end) property investment company with variable capital which makes long-term investments primarily in individual retail properties, shopping centres and retail warehouses. At year-end 2006 the investments were concentrated in the four core countries: the Netherlands, Spain, Belgium and France. In the context of the revised Act on the Supervision of Investment Institutions, which came into force on September 1, 2005, a licence was granted by the AFM to VastNed Management B.V. on October 20, 2006 pursuant to Section 5 of the Act on the Supervision of Investment Institutions to act as manager of the Company in the sense of Section 1(c) of the Act on the Supervision of Investment Institutions. The consolidated annual accounts of the Company comprise the Company and its subsidiaries (jointly referred to as the Group ) and the interests the Group has in associates and entities over which it has joint control. 2 Significant principles for financial reporting a Statement of compliance The consolidated annual accounts of the Company are presented in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. These standards comprise all new and revised Standards and Interpretations as published by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), as far as they apply to the Group s activities, effective on the financial years starting from January 1, A number of new standards, amended standards and interpretations had not yet taken effect in 2006, but can be applied prematurely. The Group has not done so. To the extent that these new standards, amended standards and interpretations are relevant to the Group, the effect their application might have on the consolidated accounts for 2007 and beyond is set out below. IFRS 7 Financial Instruments: Disclosures This new standard, effective as from January 1, 2007, prescribes somewhat elaborated additional notes on financial instruments. The Group will apply this standard in the 2007 annual accounts. IFRS 8 Operating Segments This new standard, effective as from January 1, 2009, replaces IAS 14 Segment Reporting. This standard introduces new guidelines regarding the information on distinct segments to be commented on. It appears to be allowed to match the choice of the distinct segments and the related notes to the segments currently in use in internal reports. Adjustment IAS 1 Capital Disclosures This adjustment is related to the additional information requirements as included in IFRS 7. The Group will apply this adjustment to the 2007 annual accounts. 56

59 Notes to the consolidated annual accounts IFRIC 7 Applying the restatement approach under IAS 29, Financial Reporting in Hyperinflationary Economies This interpretation mainly applies to situations in which an entity has to adjust its annual accounts in the year in which it is first confronted with hyperinflation, and primarily applies to the recognition of deferred taxes. This standard must be applied as from the financial years which start on or after March 1, This interpretation is not expected to affect the 2007 annual accounts of the Group. IFRIC 8 Scope of IFRS 2 This interpretation concerns the recognition of payments related to shares in which goods or services received can (partly) not be determined specifically. This interpretation applies to financial years starting on or after May 1, If applicable, the Group will apply this interpretation as from the 2007 annual accounts. IFRIC 9 Reassessment of Embedded Derivatives This interpretation, effective on financial years starting on or after June 1, 2006, requires companies to reassess whether in the contract a derivative should be separated from the basic contract in case of changes in the contract. This interpretation is not expected to affect the Group s 2007 annual accounts. IFRIC 10 Interim Financial Reporting and Impairment This interpretation applies to financial years starting on or after November 1, It prohibits reversing impairments of goodwill, investments in an equity instrument or financial assets valued at cost recognised in a prior interim period. This interpretation is not expected to affect the Group s 2007 annual accounts. IFRIC 11 Group and Treasury Share Transactions This interpretation will affect financial years starting on or after March 1, 2007 and provides, supplementary to IFRS 2, an interpretation of the recognition of payments on or based on shares to the company s employees. The Group will apply this interpretation as from the 2007 annual accounts. b Principles applied in the presentation of the financial reporting The financial statements are presented in euros; amounts are rounded off to thousands of euros, unless stated differently. Investment properties are valued at fair value. Financial derivatives are valued at fair value. The other items in the financial statements are valued at historical cost, unless stated differently. Interim financial reports in the form of quarterly reports are presented in compliance with IAS 34 Interim financial reporting. The accounting principles for financial reporting under IFRS set out below have been applied consistently within the Group and for all periods presented in these consolidated financial statements. In the presentation of the annual accounts in compliance with IFRS the board of management has made judgements concerning estimates and assumptions which impact the figures included in the annual accounts. The estimates and underlying assumptions concerning the future are based on historical experience and other relevant factors, given the circumstances at balance sheet date. The actual results may deviate from these estimates. The estimates and underlying assumptions are evaluated regularly. Any adjustments are recognised in the period in which the estimate was reviewed, or if the estimate also impacts future periods, also in these future periods. The principal estimates and assumptions concerning the future and other important sources of estimate uncertainties at balance sheet date which have a material impact on the annual accounts and which present a significant risk of material adjustment of book values in the subsequent financial year are included in 30 Accounting estimates and judgements. 57

60 Notes to the consolidated annual accounts c Principles for consolidation Subsidiaries Subsidiaries are entities in which the Company has control. Control of an entity entails that the Company has the authority, either directly or indirectly, to determine the financial and operational policies of the entity in order to obtain benefits from the operations of this entity. In the assessment of whether this is the case, potential exercisable or convertible voting rights are taken into account. The financial statements of the subsidiaries are included in the consolidated statements as from the date at which control is obtained until such time when control ceases. Minority interests are separately recognised in the balance sheet under equity. Minority interests in the result of the Group are also recognised separately in the profit and loss account. Transactions eliminated on consolidation Balances within the Group and possible unrealised profits and losses on transactions within the Group, or income and expenditure from such transactions are eliminated in the presentation of the financial statements. Unrealised profits in respect of transactions with associates and joint ventures are eliminated proportionally to the interest that the Group has in the entity. Unrealised losses are eliminated in the same way as unrealised profits, but only to the extent that there is no evidence of impairment. Goodwill Goodwill is the amount by which at its first recognition the cost price of an acquired entity exceeds the net fair value of the identifiable assets, liabilities and contingent liabilities. The value of the assets, liabilities and contingent liabilities of entities acquired before January 1, 2004 is based on the previously applied accounting principles. After first recognition, the goodwill is valued at cost less any cumulative impairment losses. Goodwill is attributed to cash generating entities and is not amortised. Annually, or earlier if circumstances give cause, goodwill is assessed for impairment. For associates, the book value of the goodwill is included in the book value of the investments in the associates. Negative goodwill resulting from an acquisition is recognised directly in the profit and loss account. d Investment properties in operation and under renovation Investment properties are property held in order to realise rental income, value increases or both. Investment properties are classified as investment properties in operation when they are available for letting. Acquisitions and disposals of property available for letting are included in the balance sheet as investment properties at the time when the obligation to buy or sell is entered into by means of a signed agreement, at which time the conditions of the transaction can be identified unequivocally and any contingent conditions included in the agreement can no longer be invoked, or the chance that they will be invoked is small. Investment properties are classified as investment properties under renovation at such time when it is decided that for continued future use, an existing investment property must first be renovated and as a consequence is no longer available for letting during renovation. Both investment properties in operation and under renovation are stated at fair value, corrected for any balance sheet items in respect of lease incentives (see under p Gross rental income ). The fair value is based on market value (costs borne by the purchaser), i.e. the estimated value at which an investment property could be traded at balance sheet date between well-informed and independent parties who are prepared to enter into a transaction, both parties operating prudently and without compulsion. Account is taken of differences between market rent and contractual rent, operating 58

61 Notes to the consolidated annual accounts expenses, vacancy, maintenance and future developments. All investment properties in operation and under renovation are appraised at least once per year by independent certified appraisers. The valuation methodology is based on international appraisal guidelines (RICS Appraisal and Valuation Standards). In order to present the fair value at balance sheet date in (interim) financial statements as accurately as possible the following system is used: All investment properties in operation and under renovation with an expected individual value exceeding 2.5 million are appraised externally every quarter. Once a year, evenly spread across the various quarters, an extensive appraisal report is drawn up by the external appraiser. In the other quarters an update of the most recent extensive report by the external appraiser is considered sufficient. Investment properties with an expected individual value of 2.5 million or less are appraised externally at least once per year, evenly spread across the different quarters. Based on the outcome of these appraisals (each quarter approximately 25% of all investment properties with an individual value of 2.5 million or less) the fair value of the part not externally appraised in that quarter is determined internally by extrapolation. For the selection of the external appraisers, reputation, independence, relevant experience with the location and the type of investment property are taken into account. For every investment property, the external appraiser is replaced in principle every three years. The remuneration of the external appraisers is based on a permillage of the value of the properties to be appraised. Profits and losses resulting from a change in the fair value of an investment property in operation or under renovation are entered in the profit and loss account under Value movements investment properties in operation/under renovation in the period in which they occur. Profits and losses resulting from disposal of an investment property are determined as the difference between net income from disposal and the latest published book value of the investment property and are recognised in the period in which the disposal takes place, and entered under Net result on disposals of investment properties. e Investment properties in pipeline Investment properties in pipeline concern property under construction or development for future use as investment property in operation. Investment properties in pipeline are valued at cost less any cumulative impairment losses until such time when the construction or development is completed. At the time of transition to investment property in operation, the difference between the fair value at that time and the book value is recognised in the profit and loss account. Financing costs directly attributable to the acquisition or construction of the investment property are capitalised as part of the cost price of the investment property. Capitalisation of financing costs starts at the time when the preparations for construction or renovation have started, expenditure is made and financing costs are incurred. Capitalisation of financing costs is terminated at such time when construction or renovation is complete and the investment property in pipeline is recognised as investment property in operation. For the determination of financing costs a capitalisation percentage is applied to the expenditure that is equal to the weighted average of the financing costs of the loans that are outstanding during the period concerned, excluding loans specifically taken out in connection with the investment properties in pipeline. The financing costs relating to these loans specifically taken out are capitalised in full. 59

62 Notes to the consolidated annual accounts f Tangible fixed assets Tangible fixed assets particularly comprise assets held by the Group in the context of supporting business operations, such as office furniture, computer equipment and vehicles. Tangible fixed assets are valued at cost less any cumulative depreciation and any cumulative impairment losses. Depreciation is recognised in the profit and loss account using the straight-line method, taking account of the expected useful life and residual value of the respective assets. The expected useful life is estimated as follows: Office furniture and such 5 years Computer equipment 2 years Vehicles 4 years g Financial derivatives The Group uses financial derivatives for hedging interest rate risks resulting from its operating, financing and investing activities. In accordance with the treasury policy set by the board of management and the supervisory board, the Group neither holds nor issues derivatives for trading purposes. At first recognition, financial derivatives are valued at cost. After first recognition, financial derivatives are valued at fair value. Profits and losses resulting from movements in the fair value of financial derivatives are recognised in the profit and loss account without delay, unless the derivative qualifies for hedge accounting (see under Hedging). The fair value of financial interest rate derivatives is the amount the Group expects to receive or to pay if the financial interest rate derivatives are terminated at balance sheet date, whereby the actual interest and the actual credit risk of the respective counterparty(ies) at balance sheet date are taken into account. The amount is determined based on information from reputed market parties. Hedging If a financial interest derivative can be characterised as an effective hedge of the possible variability in cash flows attributable to a certain risk associated with an asset or liability or a highly likely expected future transaction, the part of the result consequent on the value movement of the financial interest derivative which has been determined to be an effective hedge is recognised directly in equity. The ineffective part of the financial interest derivative is recognised in the profit and loss account. When an interest derivative expires or is sold, terminated or exercised, or when the entity revokes designation of the hedge relationship, but the hedged expected future transaction is still expected to take place, the cumulative gain or loss at that point remains in equity and is recognised when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss in equity is recognised immediately in the profit and loss account. h Debtors and other receivables Debtors and other receivables are stated at nominal value less a provision for possible bad debts. i Cash and cash equivalents Cash and cash equivalents comprises deposits, call money and bank account credit balances. j Capital paid-up and called, share premium reserve and other reserves Ordinary shares and priority shares are classified as equity VastNed Retail shareholders. External costs directly attributable to the issuing of new shares, such as issuing costs, are deducted from the proceeds and therefore recognised in the 60

63 Notes to the consolidated annual accounts share premium reserve. In the issuing price of shares, account is taken of the estimated investment result for the current financial year attributable to the shareholders of the Company up to the issuing date. The investment result included in the issuing price is added to the share premium reserve. The increase of the capital paid-up and called associated with the issuing of ordinary shares in respect of stock dividend is recognised to the charge of the share premium reserve, as are the costs in respect of stock dividend. At the purchase of share capital recognised in the balance sheet as equity VastNed Retail shareholders, the balance of the compensation paid, including costs directly attributable, is recognised as movement in equity. Dividends in cash to holders of ordinary and priority shares are charged to other reserves in the period in which the dividends are declared by the Company. k Deferred tax liabilities and deferred tax assets Deferred tax liabilities are recognised for income tax payable in future periods on taxable temporary differences between the book value of assets and liabilities and their fiscal book value. For the valuation of deferred tax liabilities, tax rates are taken into account which are expected to apply to the period in which the liability is settled based on tax rates for which the legislative process is (materially) complete at balance sheet date. For the valuation of deferred tax liabilities, the fiscal consequences of the way in which the Group expects to realise or settle the book value of its assets and liabilities is taken into account. Deferred tax liabilities are not discounted. Deferred tax assets are recognised for income tax to be reclaimed in future periods relating to offsettable temporary differences between the book value of assets and liabilities and their fiscal book value, and for the carry forward of unused tax credits to the extent that it is probable that future taxable profits will be available against which the unused tax losses and tax credits can be utilised. l Provisions in respect of employee benefits Defined benefit pension plans The Groups net liability in respect of defined benefit pension plans is calculated separately for each plan by estimating the pension rights employees have built up in return for their service during the reporting period and preceding periods. The pension rights in respect of defined benefit pension plans are calculated at net present value at a discount rate less the fair value of the plan assets from which the liability is to be settled. For this calculation, the external actuary employs the so-called projected unit credit method. When the pension rights in respect of a plan are improved, the part of the improved pension benefit concerning past years of service of employees is recognised as an expense in the profit and loss account on a straight-line basis over the average period until the pension rights become vested. To the extent that the pension rights vest immediately, the expense is recognised in the profit and loss account immediately. All actuarial gains and losses as per January 1, 2004, the transition date to IFRS, have been recognised. Actuarial gains and losses arising after January 1, 2004 are recognised by the Group according to the so-called corridor approach. According to the corridor approach, any accumulated unrecognised actuarial gains and losses, exceeding 10% of the greater of the present value of the defined obligation and the fair value of the plan assets, that portion is recognised in the profit and loss account for the expected average remaining working lives of the employees who participate in the plan. Otherwise, the actuarial gain or actuarial loss is not recognised. 61

64 Notes to the consolidated annual accounts When the plan assets exceed the obligations, the asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. Defined contribution pension plans Obligations of the Group in respect of defined contribution pension plans are recognised as expenditure in the profit and loss account when the contributions become due. Long-term personnel benefits Obligations in respect of future jubilee benefits are also recognised in this provision. m Other provisions Provisions are recognised in the balance sheet if the Group has a legal or constructive obligation resulting from a past event, and it is probable that the settlement of that liability requires an outflow of funds. If the effect is material, provisions are entered to the present value of the expenditure that is expected to be required for the settlement of the liability. n Interest-bearing debts At first recognition, interest-bearing debts are stated at fair value less the costs associated with the incurring of the interest-bearing debt. After their first recognition, interest-bearing debts are stated at amortised cost, whereby a possible difference between the cost price and the debt to be repaid is recognised in the profit and loss account for the term of the debt based on the effective interest rate method. Interestbearing debts with a duration of more than one year are recognised under long-term liabilities. Any repayments on interest-bearing debts within one year are recognised under short-term liabilities. o 0ther liabilities and accruals Other liabilities and accruals are valued at nominal value. p Gross rental income Gross rental income from operational lease contracts are recognised on a timeproportionate basis over the duration of the lease contracts. Rent-free periods, rent discounts and other lease incentives are recognised as an integral part of total gross rental income. The resulting accruals are recognised under Other assets in respect of lease incentives. These accruals are corrected at the fair value of the respective investment properties in operation and under renovation. q Net service charge expenses Service charges relate to costs for energy, doormen, garden maintenance and such, which under the terms of the lease contract can be charged on to the tenant. The part of the service charges that cannot be charged on relates largely to vacant investment properties. The costs and recovery are not specified in the profit and loss account. r Operating expenses Operating expenses concern costs directly connected to the operation of the property, such as maintenance, management costs, insurance, allocation to the provision for doubtful debtors and property tax. These costs are attributed to the period to which they relate. Costs incurred when concluding operational lease contracts are recognised in the period in which they are incurred. 62

65 Notes to the consolidated annual accounts s Net financing costs Net financing costs consist of interest expenses on loans and debts attributable to the period, calculated on the basis of the effective interest rate method less capitalised financing costs on investment properties and interest income on outstanding loans and receivables. Net financing costs also include profits and losses resulting from changes in the fair value of the financial derivatives. These profits and losses are recognised immediately in the profit and loss account, unless a derivative fulfils the conditions for hedge accounting (see under g Financial derivatives ). t General expenses General expenses concern inter alia personnel costs, housing costs, IT costs, publicity costs and the costs of external consultants. Costs relating to the internal commercial, technical and administrative management of the property are attributed to operating costs. u Income tax Income tax consists of taxes actually payable and recoverable as attributable to the reporting period and of the movement in deferred tax liabilities and deferred tax assets (see under k Deferred tax liabilities and deferred tax assets ). Income tax is recognised in the profit and loss account, except to the extent that it concerns items that are taken directly to equity, in which case the taxes are recognised under equity. Taxes actually payable and offsettable on the reporting period are taxes that are expected to be payable on taxable profit in the financial year, calculated based on tax rates and tax legislation enacted or substantively enacted at balance sheet date, and corrections for taxes payable on previous years. Additional income tax in respect of dividend payments by subsidiaries are recognised at the same time as the obligation to pay out the dividend concerned. v Direct investment result The direct investment result attributable to VastNed Retail shareholders consists of net rental income less net financing costs (excluding value movements financial derivatives), general expenses, income tax expense and the part of this income and expenditure attributable to minority interests. w Indirect investment result The indirect investment result attributable to VastNed Retail shareholders consists of the value movements and the net result on disposals of investment properties, movements in deferred tax liabilities or deferred tax assets, and the value movements of financial derivatives that do not qualify as an effective hedge, less the part of these items attributable to minority interests. x Cash flow statement The cash flow statement is presented based on the indirect method. The funds in the cash flow statement consist of cash and cash equivalents. Income and expenditure in respect of interest are recognised under cash flow from operating activities. Expenditure in respect of dividend is recognised under cash flow from financing activities. y Segment information The segment information is presented based on the countries where the investment properties are located. 63

66 Notes to the consolidated annual accounts 3 Segment information Netherlands Spain France Net rental income 38,716 38,070 26,065 24,622 16,152 13,940 Value movements investment properties in operation 40,176 24,059 46,556 59,214 35,152 23,534 Value movements investment properties under renovation (346) Net result on disposals of investment properties (64) Total net income from investment properties 79,355 62,051 72,621 83,772 51,304 37,474 Net financing costs General expenses Income tax Minority interests Investment result attributable to VastNed Retail shareholders Netherlands Spain France Investment properties in operation Balance as at January 1 566, , , , , ,337 Acquisitions 12,979 65,066 38,958 30,119 Investments in existing properties 2,566 2, (339) Transferred to investment properties in pipeline (2,241) Disposals (3,647) (1,947) (385) (1,050) 576, , , , , ,645 Value movements 40,176 24,059 46,556 59,214 35,152 23,534 Balance as at December , , , , , ,179 Other assets in respect of lease incentives ,575 2, Appraisal value as at December , , , , , ,311 Investment properties under renovation Investment properties in pipeline 8,764 1,841 Investment properties 625, , , , , ,311 Other assets 1, ,737 1,569 3,511 7,846 Not attributed to segments Total assets Liabilities 12,091 8,412 46,797 31,143 16,307 14,388 Not attributed to segments Total liabilities 64

67 Notes to the consolidated annual accounts Belgium Portugal Italy Germany Total ,242 15, ,172 93,535 4,797 6,649 2, , ,214 (1,223) (750) (1,223) (1,096) (5) (928) (1,827) 73 (1,415) 19,354 21,530 3,237 1, (928) (1,827) 224, ,238 (22,744) (20,781) (6,684) (6,428) (16,022) (11,132) (6,621) (9,039) 172, ,858 Belgium Portugal Italy Germany Total , ,711 11,853 11,120 16,400 1,478,786 1,353, ,003 30,119 3,143 6,083 (25) (25) 6,468 8,315 (2,241) (18,568) (7,939) (16,400) (22,600) (27,336) 238, ,855 11,828 11,095 1,577,416 1,364,572 4,797 6,649 2, , , , ,504 14,068 11,853 1,706,337 1,478,786 1,145 1,353 3,260 3, , ,857 14,068 11,853 1,709,597 1,482,583 3,054 3,054 3,054 3,054 9,290 18,054 1, , ,911 14,068 11,853 1,730,705 1,487,478 1,947 2, ,813 13,162 18,815 20,919. 1,766,333 1,521,559 5,351 3,026 1, ,595 10,614 89,314 68, , , , ,741 65

68 Notes to the consolidated annual accounts 4 Net rental income Gross rental income Net service charge expenses Operating expenses Net rental income Netherlands 44,669 44,003 (51) (151) (5,902) (5,782) 38,716 38,070 Spain 28,831 27,482 (1,034) (771) (1,732) (2,089) 26,065 24,622 France 17,784 15,331 (386) (165) (1,246) (1,226) 16,152 13,940 Belgium 18,405 18,436 (1,624) (993) (1,539) (2,025) 15,242 15,418 Portugal 1,040 1,017 (43) (42) Italy 545 (35) , ,814 (3,095) (2,080) (10,462) (11,199) 97,172 93,535 Net service charge expenses Attributable to leased properties Attributable to vacant properties 2,361 2,041 3,095 2,080 Operating expenses Attributable to leased properties 10,191 10,829 Attributable to vacant properties ,462 11,199 Operating expenses Maintenance 2,457 2,992 Administrative and commercial management 1) 4,429 4,273 Insurance Property tax and such 1,494 1,582 Letting costs Other operating expenses 989 1,431 10,462 11,199 Other operating expenses includes inter alia the allocation to the provision for doubtful debtors. 1 4% of gross rental income, consisting of external and general expenses, attributable to operating expenses. 66

69 Notes to the consolidated annual accounts 5 Value movements investment properties Positive Negative Total Positive Negative Total Investment properties in operation 142,733 (13,812) 128, ,821 (14,607) 114,214 Investment properties under renovation (1,223) (1,223) (1,096) (1,096) 142,733 (15,035) 127, ,821 (15,703) 113,118 6 Net result on disposals of investment properties Sales price 24,008 29,167 Book value at time of disposal (22,600) (28,413) 1, Sales costs (407) (327) 1, Result on disposal of Intervest Retail shares 49 Adjustment result on disposal of the German property portfolio (928) (1,827) Other (64) 73 (1,415) 7 Net financing costs Interest received (218) (372) Interest paid 23,110 21,170 22,892 20,798 Capitalised financing costs (150) (44) Total interest 22,742 20,754 Value movements financial derivatives ,744 20,781 67

70 Notes to the consolidated annual accounts 8 General expenses Personnel costs 6,155 5,085 Remuneration supervisory board Consultancy and audit costs 956 1,316 Appraisal costs Other expenses 2,252 2,487 10,056 9,553 Attributed to operating expenses (3,372) (3,125) 6,684 6,428 Consultancy and audit costs include an amount of 0.3 million (2005: 0.3 million) for audit costs. These costs concern virtually all the costs of the audit of the annual accounts, as well as the costs for the audit of the statutory annual accounts of subsidiaries. The external auditor has performed virtually no separate consultancy commissions in 2005 and Other expenses includes inter alia publicity costs, housing costs, office costs and IT costs. During 2006, on average 90 (2005: 86) employees (full-time equivalents) were employed by VastNed Retail and VastNed Offices/Industrial jointly, of whom 47 in the Netherlands and 43 abroad. Personnel costs of the employees working in the Netherlands are attributed to VastNed Retail based on actual work done. VastNed Retail has no employees. In the year under review, VastNed Retail accounted for wages and salaries 6.1 million (2005: 5.3 million), social security charges 0.7 million (2005: 0.6 million) and pension premiums 0.7 million (2005: 0.7 million). After allocation to VastNed Offices/Industrial, the following amounts remain: wages and salaries 4.1 million (2005: 3.4 million), social security charges 0.6 million (2005: 0.5 million) and pension premiums 0.4 million (2005: 0.4 million). 9 Income tax Income tax expense Current financial year 1,961 1,921 Recognition offsettable losses (377) Adjustment previous financial years (712) (138) 872 1,783 Movement deferred tax liabilities In respect of: Value movements investment properties 8,511 9,802 Change in tax rates 6,639 (80) Adjustment in respect of disposal (373) 15,150 9,349 Total income tax 16,022 11,132 68

71 Notes to the consolidated annual accounts Reconciliation of effective tax rate Investment result before taxes 195, ,029 Income tax at domestic tax rate 0,0% 0,0% Effect of tax rates of subsidiaries operating in other jurisdictions 8,8% 17,104 6,6% 11,751 Recognition offsettable losses (0,2%) (377) 0,0% Adjustment in respect of disposal 0,0% (0,2%) (373) Withholding tax on dividend foreign subsidiaries 0,0% 7 0,1% 81 Adjustment previous financial years (0,4%) (712) (0,2%) (327) 8,2% 16,022 6,3% 11,132 VastNed Retail qualifies as a fiscal investment institution as referred to in section 28 of the Netherlands Corporate Income Tax Act This implies that conditional on compliance with specific conditions, the company is exempted from the obligation to pay income tax. These conditions mainly concern equity composition and the distribution of the fiscal result as cash dividend. In Belgium the property is held by the Bevak Intervest Retail, which is listed on Euronext Brussels. A Bevak materially has a tax-free status, so that no tax is payable on its profits. In France VastNed Retail has been subject to the SIIC regime since January 1, Under this regime, VastNed Retail is not liable for taxation on its French net rental income nor on capital gains realised locally. Certain aspects of the SIIC regime will be amended on January 1, For further details on these amendments, please refer to the remarks under 30 Accounting estimates and judgements. The conditions of the Bevak and the SIIC regime are comparable to those of the Dutch fiscal investment institution. Other profits realised in France are taxed at a rate of 33.33%. In Spain and Portugal, the property is held by taxable companies. In Spain the nominal tax rate is 35% (as from January 1, 2007: 32.5%) and in Portugal 27.5% (as from January 1, 2007: 26.5%). The taxable net rental income realised in these countries is reduced by depreciation and interest. In Spain,when capital gains realised are reinvested in Spain within three years, income tax paid is refunded at 20% of the capital gains realised (as from January 1, 2007: 14.5%). In that case the effective tax rate is 15% (as from January 1, 2007: 18%). The calculations of deferred tax liabilities in Spain and Portugal are based on the tax rates as effective on January 1,

72 Notes to the consolidated annual accounts 10 Investment result per share Basic Diluted Basic Diluted Direct investment result 62,452 62,452 59,578 59,578 Indirect investment result 110, ,420 98,280 98,280 Investment result 172, , , ,858 Average number of ordinary shares in issue Basic Diluted Basic Diluted Balance as at January 1 16,903,156 16,903,156 16,746,189 16,746,189 Effect of share buybacks (69,673) (69,673) Effect of stock dividend 59,397 59, , ,931 Average number of ordinary shares in issue 16,892,880 16,892,880 16,851,120 16,851,120 Per share (x 1): Direct investment result Indirect investment result Investment result Dividend VastNed Retail s dividend policy is aimed at distributing the direct investment result to shareholders in full. On May 2, 2006 the final dividend for the 2005 financial year was made payable, consisting of 5% in cash on the priority shares and an optional dividend on the ordinary shares of 2.47 in cash or 1.47 in cash and 1.55% in shares charged to the share premium reserve. This dividend payment totalled 36.0 million. On September 4, 2006 the interim dividend for the 2006 financial year was made payable. The interim dividend amounted to 1.10 per share in cash (total payout: 18.6 million). The board of management proposes the following final dividend for the 2006 financial year: 5% in cash on the priority shares; an optional dividend on the ordinary shares of: 2.20 in cash plus a percentage in shares yet to be determined, depending on the share price, charged to the share premium reserve, or 2.60 in cash. If the general meeting of shareholders approves the dividend proposal, the dividend will be made payable to shareholders on May 2, The dividend to be paid has not been entered in the balance sheet as a liability. 70

73 Notes to the consolidated annual accounts 12 Investment properties Investment properties in operation and under renovation In operation Under renovation Total In operation Under renovation Total Balance as at January 1 1,478,786 3,054 1,481,840 1,353,474 3,494 1,356,968 Acquisitions 117, ,003 30,119 30,119 Investments in existing properties 6,468 1,223 7,691 8,315 1,085 9,400 Transferred to investment properties in pipeline (2,241) (2,241) Disposals (22,600) (22,600) (27,336) (429) (27,765) 1,577,416 4,277 1,581,693 1,364,572 4,150 1,368,722 Value movements 128,921 (1,223) 127, ,214 (1,096) 113,118 Balance as at December 31 1,706,337 3,054 1,709,391 1,478,786 3,054 1,481,840 Other assets in respect of lease incentives 3,260 3,260 3,797 3,797 Appraisal value as at December 31 1,709,597 3,054 1,712,651 1,482,583 3,054 1,485,637 82% of the investment property in operation and under renovation was appraised by independent certified appraisers as per December 31, The remaining property was appraised earlier in the financial year by independent certified appraisers. The fair value of this property is determined internally by means of extrapolation as per December 31. Property to a value of million (2005: million) serves as security for loans contracted (see also 19 Long-term interest-bearing loans ). For further details on the investment properties in operation, reference is made to the overview Property portfolio 2006 included elsewhere in this annual report. Investment properties in pipeline Balance as at January 1 1, Aquisitions and investments 13,972 1,841 Transferred from investment properties in operation 2,241 Disposals (648) Balance as at December 31 18,054 1,841 For further details on the investment properties in pipeline, reference is made to the overview Property portfolio 2006 included elsewhere in this annual report. 71

74 Notes to the consolidated annual accounts 13 Debtors and other receivables Debtors 4,960 3,452 Taxes 9,503 7,710 Interest Service charges Other receivables and prepayments 6,978 5,982 22,230 18,028 Under receivables, items have been entered with a term in excess of one year with a total of 0.2 million (2005: 0.2 million). 14 Cash and cash equivalents Cash and cash equivalents concerns deposits, call money and bank account credit balances with a duration of less than three months. The cash and cash equivalents are freely available to the company. 15 Credit risk VastNed Retail s principal financial assets consist of cash and cash equivalents, debtors and other receivables. The credit risk on cash and cash equivalents is very small, since the cash and cash equivalents are held at reputed banks. The credit risk is primarily attributable to debtors. This credit risk is limited by prior careful screening of potential tenants. Also, security is required from tenants in the form of guarantee deposits or bank guarantees. Receivables are recognised less a provision for bad debts. Since the tenant base consists of a large number of different parties, there is no credit risk concentration. 72

75 Notes to the consolidated annual accounts 16 Equity Hedging reserve Investment Capital in respect of attributable to Equity Equity paid-up and Share premium financial Other VastNed Retail VastNed Retail minority Total called reserve derivatives reserves shareholders shareholders interests equity Balance as at January 1, , ,966 (347) 180,756 70, ,329 68, ,571 result Acquisition of shares in subsidiaries (3,756) (3,756) Disposal of shares in subsidiaries Investment result 157, ,858 9, ,897 Stock dividend 785 (785) Costs of stock dividend (56) (56) (56) Final dividend previous financial year in cash (54,638) (54,638) (54,638) Interim dividend 2005 in cash (18,087) (18,087) (18,087) Dividend paid to minority interests (5,319) (5,319) Contribution from profit appropriation 15,585 (15,585) Value movements financial derivatives (927) (927) (58) (985) Balance as at December 31, , ,125 (1,274) 178, , ,479 68, ,818 Acquisition of shares in subsidiaries Share buyback (7,395) (7,395) (7,395) Investment result 172, ,872 6, ,493 Costs of stock dividend (24) (24) (24) Final dividend previous financial year in cash (36,019) (36,019) (36,019) Interim dividend 2006 in cash (18,593) (18,593) (18,593) Dividend paid to minority interests (4,858) (4,858) Contribution from profit appropriation 121,839 (121,839) Value movements financial derivatives 4,393 4, ,558 Balance as at December 31, , ,706 3, , , ,713 70,368 1,048,081 The authorized share capital amounts to million and is divided into 74,999,990 ordinary shares of 5.- par value and 10 priority shares of 5.- par value. Equity VastNed Retail shareholders amounted to per share as at December 31, 2006 (December 31, 2005: per share). 73

76 Notes to the consolidated annual accounts Number of shares in issue Ordinary Priority Ordinary Priority shares shares shares shares Balance as at January 1 16,903, ,746, Share buyback (115,826) Stock dividend 88, ,967 16,876, ,903, The holders of ordinary shares are entitled to receive the dividend declared by the company and are entitled to cast one vote per share at the shareholders meetings. In case of a share buyback by VastNed Retail, these are suspended until such time when they are reissued. The company s articles of association confer special controlling rights on the priority shares. The priority shares have been placed on par with the Stichting Prioriteit VastNed Retail. The objective of this foundation is to acquire ownership of the priority shares in the company and to exercise all rights vested in such shares, including the voting right, the receipt of dividend and other distributions and all that which is related thereto in the broadest sense. The board of management of the Stichting Prioriteit VastNed Retail consists of the members of the board of management and of the supervisory board of VastNed Retail; they are the directors A and directors B respectively of the Stichting Prioriteit VastNed Retail. Directors A are not entitled by the articles of association to cast more votes than directors B. Thus the requirements of appendix X, article 10 of the Stock Exchange Regulations are complied with. In 2006, VastNed Retail bought back 115,826 shares for a total of 7.4 million. 88,853 of these shares were issued in the context of stock dividend. Anticipating the cancellation of the remaining shares bought back in the first half year of 2007, the amount was charged to the share premium reserve. 17 Deferred tax liabilities Balance as at January 1 26,501 18,710 Addition charged to the profit and loss account 15,150 9,349 Addition charged to equity 1,410 Acquisition of subsidiaries 593 Disposal of subsidiaries (1,558) Transferred to long-term tax liabilities in connection with obtaining SIIC status (578) Balance as at December 31 43,076 26,501 The deferred tax liabilities as at December 31, 2006 concern Spain and Portugal. As at balance sheet date, unused fiscal losses totalled 7.2 million. In view of the expectation that based on the present structure these unused tax losses cannot be set off against taxable profits in the near future, no deferred tax asset is recognised. 74

77 Notes to the consolidated annual accounts 18 Provisions in respect of employee benefits On behalf of its employees in the Netherlands, the VastNed Group has pension plans in place which qualify as defined benefit pension plans. The pension plans for the employees in other countries where the VastNed Group has branches can be qualified as defined contribution pension plans. The external actuary has made the following assumptions for the actuarial calculations: Discount rate 4.50% 4.25% Expected return on plan assets 4.50% 4.50% Expected rate of salary increases (dependent on age and including inflation correction) 2.00% % 2.00% % Future pension increases 0.325% % 0.325% % Present value of defined benefit pension obligations 10,845 10,709 Fair value of plan assets (9,546) (7,983) 1,299 2,726 Unrecognised actuarial losses 180 (1,322) Obligations in respect of employee benefits 1,479 1,404 Long-term employee benefits ,575 1,494 Movements in the provisions were as follows: Balance as at January 1 1,494 1,277 Contribution charged to the profit and loss account Contributions paid (on balance) (605) (479) Movement provision long-term employee benefits 6 19 Balance as at December 31 1,575 1,494 Amounts recognised under general expenses in the profit and loss account in respect of the defined benefit plan are as follows: Employer service cost Interest Expected return on plan assets (402) (382) Actuarial losses recognised in the year 14 1 Past service recognised The VastNed Group expects to contribute a total of 0.6 million to the defined benefit pension plans in An amount of less than 0.1 million was recognised in the profit and loss account in 2006 in respect of defined contribution plans (2005: less than 0.1 million). 75

78 Notes to the consolidated annual accounts 19 Long-term interest-bearing loans Remaining term Average Remaining term Average More than interest rate More than interest rate 2-5 years 5 years Total at year-end 2-5 years 5 years Total at year-end Mortgages: Fixed interest 1) 72, , , , , , Floating interest 30,000 30, ,632 24,403 29, , , , , , , Other loans: Fixed interest 1) 112,500 82, , ,500 87, Floating interest 25,000 25, ,500 82, , , , Total: Fixed interest 185, , , , , , Floating interest 30,000 30, ,632 24,403 54, , , , , , , The right of mortgage has been granted as security for the mortgages on property with a value of million (2005: million). For the other loans a positive/negative mortgage covenant has been issued. A number of providers of loans have set conditions regarding the Company s solvency and interest coverage. The part of the long-term interest-bearing loans due within one year of 25.4 million (2005: 44.7 million) is recognised under short-term liabilities. The average duration in years of the long-term interest-bearing loans is 5.1 (2005: 5.2). The fair value of the long-term interest-bearing loans is calculated as the present value of the cash flows based on the historical interest rate curve. The fair value as at December 31 of the long-term interest-bearing loans, including the part due within one year, based on the historical interest rate curve at year-end 2006 and year-end 2005 respectively, is as follows: Carrying Carrying Market value amount Market value amount 446, , , ,114 The average interest rate in 2006 was 4.55% (2005: 4.51%). 1 Including the part that was fixed by means of interest derivatives. 76

79 Notes to the consolidated annual accounts 20 Long-term tax liabilities Balance as at January 1 6,395 9,696 Short-term portion as at January 1 3,197 3,230 9,592 12,926 Allocation 578 (91) Payments (3,244) (3,243) 6,926 9,592 Short-term portion as at December 31 (3,242) (3,197) Balance as at December 31 3,684 6,395 This concerns the long-term portion of the exit tax payable in France, payable in connection to the obtaining of the SIIC status. 21 Guarantee deposits and other long-term liabilities The guarantee deposits received from tenants amounted to 6.4 million (2005: 5.9 million) as at December 31. Other long-term liabilities includes amongst other things the long-term portion of the rent guarantee provided at the disposal of the German property portfolio in Movements in this item were as follows: Balance as at January 1 5,808 6,777 Short-term portion as at January 1 4,173 4,155 9,981 10,932 Adjustment rent guarantees provided 928 1,827 Interest Payments (3,647) (3,158) 7,595 9,981 Short-term portion as at December 31 (3,717) (4,173) Balance as at December 31 3,878 5,808 77

80 Notes to the consolidated annual accounts 22 Payable to banks Credit facility 238, ,195 Of which undrawn (104,413) (138,674) Drawn as at December , ,521 Payable to banks concern short-term credits and cash loans. By way of security for the credit facilities, it has been agreed with the lenders that property will only be mortgaged on behalf of third parties subject to the lender s approval. Payable to banks are reclaimable at the lenders request. The average interest rate in 2006 was 3.50% (2005: 2.96%). The fair value of the payable to banks is deemed to be equal to the balance sheet value. 23 Other liabilities and accruals Accounts payable 6,352 4,087 Investment creditors 5,590 Dividend Taxes 1,431 1,102 Prepaid rent 6,008 4,517 Interest 4,431 2,795 Operating expenses 3,484 3,533 Short-term portion of rent guarantees provided 3,717 4,173 Payable in respect of acquisitions 37,040 Other liabilities and accruals 7,263 4,931 75,431 25,250 The item Payable in respect of acquisitions concerns the acquisition of a French retail portfolio, the acquisition of the French shopping centre Carrefour Limoges-Corgnac and the acquisition of the property on Rembrandtplein 7 in Amsterdam. The purchase contracts were signed in The legal transfer of the retail portfolio and the property Rembrandtplein 7 was effected in early 2007 and the transfer of the shopping centre in February These liabilities were then paid to the sellers. The properties will contribute to net rental income as from the time of the legal transfer. 78

81 Notes to the consolidated annual accounts 24 Financial derivatives Assets Liabilities Assets Liabilities Interest rate swaps 4, ,464 Interest rate caps 2 4, ,464 VastNed Retail limits its interest rate risk by using financial interest derivatives. For loans with a nominal value of million, the interest rate risk is hedged by entering into (forward) interest rate swaps (IRS). VastNed Retail limits its interest rate risk by swapping the floating interest rate it pays on part of its loans for a fixed interest rate. In this context, contracts have been concluded with fixed interest rates ranging from 3.37% to 4.12% and expiry dates ranging from 2010 up to and including The average duration in years of the long-term interest-bearing loans calculated in fixed interest periods amounted to 4.5 (2005: 4.7). The interest rate swaps are classified as cash flow hedges. Value movements of these interest rate swaps are recognised in equity. For loans totalling 29.0 million the interest rate risk is hedged using an interest rate cap. The interest rate to be paid up to December 31, 2007 is maximised at 5.50%. The value movements of these interest rate caps are recognised in the profit and loss account. All transactions involving financial derivatives are effected with reputed banks as counterparties. For this reason, it is not expected that the counterparties should not be able to fulfil their obligations. Interest rate sensitivity As per December 31, 2006 the impact on the investment result of a (hypothetical) 1% increase of the interest rates amounted to 2.3 million negative. Should interest rates decrease by 1% as per this date, the impact on the investment result will be 2.3 million positive. In the calculations the financial derivatives entered into have been taken into account. 79

82 Notes to the consolidated annual accounts 25 Rights and obligations not recorded in the balance sheet A long-term alliance exists between VastNed Retail, VastNed Offices/Industrial and VastNed Management, as well as a long-term agreement for the allocation of expenses. Mutual rights and obligations are laid down in this agreement. In 2005, a dispute arose with the buyer of the larger part of the German property portfolio concerning the definitive determination of the selling price. The buyer has submitted the dispute to the court and has claimed a sum of 3.0 million from VastNed Retail. VastNed Retail and its legal advisors are of the opinion that this claim is unfounded. VastNed Retail deems it unnecessary to make a provision for this claim. At the end of September 2006 a VAT inspection was started at the Belgian subsidiary Intervest Retail, concerning VAT deduction on the construction costs of the property Factory Shopping Messancy. In the past, a ruling was made concerning VAT deduction. Currently, the Belgian tax inspector is checking the VAT deduction rate applied so far based on an actual audit of all the elements. At present, no indication can be given as to whether this audit will lead to an additional assessment being imposed. The Dutch tax inspector on December 30, 2006 imposed an additional tax assessment for the retention of rights on (former subsidiary) Immocorp S.A. concerning a profit on the disposal of an object in The taxable amount has been set at 10.0 million. The company tax payable based on the assessment and accrued interest amounts to approximately 4.0 million. The tax office has so far not provided any substantiation of the additional assessment. The board of management of VastNed Retail believes that the assessment is incorrect and deems making a provision unnecessary. VastNed Retail s Belgian subsidiary Intervest Retail has signed a turnkey purchase agreement concerning the shopping centre under development Julianus in Tongeren, Belgium. The centre is expected to be delivered in the fourth quarter of 2007 and will contribute positively to the direct investment result as from Total investment will amount to approximately 18.0 million, of which 9.3 million had been invested as per December 31. VastNed Retail and Altera have signed a turnkey purchase agreement for the acquisition of the expansion of shopping centre Het Rond in Houten, the Netherlands. Delivery of the expansion is planned for mid-2008 and will contribute positively to the direct investment result as from that time. The investment is expected to total 30.8 million, VastNed Retail s share being approximately 16.4 million. In the fourth quarter of 2006, VastNed Retail signed a turnkey purchase agreement for the acquisition of the retail park Retail Park Roermond in the Netherlands. The retail park is planned for delivery in the first quarter of 2008, and will contribute positively to the direct investment result as from that time. The investment totals approximately 55.2 million, of which 3.1 million had been invested as at December

83 Notes to the consolidated annual accounts 26 Operational lease contracts VastNed Retail leases its property investments in the form of non-cancellable operational lease contracts. The future minimum income from non-cancellable lease contracts is as follows: Within one year 103,256 97,595 One to five years 212, ,709 More than five years 81,341 70, , ,352 In the Netherlands virtually all lease contracts are concluded for a period of five years, the tenant having the option of extending the lease by five years. Annual rent increases are based on the cost-of-living index. In Spain virtually all lease contracts are concluded for a minimum period of five years. Annual rent increases are based on the cost-of-living index. In France, lease contracts are normally concluded for a period of nine or twelve years, the tenant having the option of renewing the lease every three years. Annual rent increases take place based on the construction cost index, unless agreed otherwise. In Belgium lease contracts are normally concluded for a period of nine years, with a mutual termination option after three and six years. Annual rent increases are based on the cost-of-living index. In Portugal there are two kinds of lease legislation. Under the old legislation lease contracts are concluded for an indefinite period and can only be terminated by the tenant. The new legislation has regulations similar to those in Spain. 27 Events after balance sheet date In January 2007, a Turkish subsidiary of VastNed Retail signed a purchase agreement for the acquisition of a district shopping centre in Istanbul for an amount of 9.7 million at a net initial yield of approximately 7.0% (excluding turnover rent and after taxes). The legal transfer has taken place in February Related parties transactions Related parties constitute: major shareholders, subsidiaries, supervisory board members and members of the board of management. To the company s best knowledge, no property transactions were effected during the year under review involving persons or institutions that could be regarded as related parties. 81

84 Notes to the consolidated annual accounts Interests of major investors The Authority for the Financial Markets received the following reports from shareholders with an interest exceeding five percent in the company: Stichting pensioenfonds PGGM 21.08% Capital Research and Management Company 6.77% Nomura Asset Management Co. Ltd. 5.93% Subsidiaries For an overview of major subsidiaries, please refer to 29 Subsidiaries. Transactions as well as internal balances and income and expenditure between the company and its subsidiaries are eliminated in the consolidation and not commented upon. The subsidiary VastNed Management has a cost allocation agreement with VastNed Retail and VastNed Offices/Industrial. Costs relating directly to the company or the property of the company or its subsidiaries are recognised directly there. Other costs that cannot be allocated directly are borne by VastNed Management and are charged on to VastNed Retail and VastNed Offices/Industrial based on causation without mark-up for profit. Supervisory board members and members of the board of management During the 2006 financial year none of the members of the supervisory board and board of management of VastNed Retail had a personal interest in the investments of the company. Remuneration of the supervisory board Remuneration Shareholding at 2006 year-end 2006 W.J. Kolff (as from April 4, 2006) 23 W. Nijman (until April 4, 2006) 4 n.a. N.J. Westdijk 23 D. van den Bos (until April 4, 2006) 3 n.a. R.K. Jacobson (until April 4, 2006) 3 n.a. F.W. Mulder 22 P.M. Verboom 22 Until April 4, 2006, the supervisory board of VastNed Retail was also the supervisory board of VastNed Offices/Industrial. The remuneration for the supervisory board was divided equally between VastNed Retail and VastNed Offices/Industrial. During the shareholders meeting of April 4, 2006, it was resolved to separate the supervisory board so that none of the members of the supervisory board of VastNed Retail would also be on the supervisory board of VastNed Offices/Industrial. The remuneration presented in the table above include until April 4, 2006 the remuneration less the part charged on to VastNed Offices/Industrial

85 Notes to the consolidated annual accounts Remuneration of statutory directors Salaries (including Shareholding social security Bonus for 2005 Pension at year-end charges) paid in 2006 premiums Total 2006 R.A. van Gerrevink T.M. de Witte J. Pars , Of which allocated to VastNed Offices/Industrial (405) (36) (93) (534) No option rights have been granted to the managing directors nor to the supervisory board members. Nor have any loans or advances been provided, nor guarantees on their behalf. The VastNed Retail shares stated above held by the supervisory board members and the statutory directors have all been acquired at their own cost. 29 Subsidiaries The most important subsidiaries are: Interest and Established in voting right in % Foram International Holding B.V. Netherlands 100 Hispania Retail Properties S.L. Spain 100 VastNed Lusitania Investimentos Imobiliarios S.A. Portugal 100 VastNed France Holding S.A.R.L. France 100 S.C.I. Centre Marine Dunkerque France 100 S.C.I. Limoges Corgnac France 100 Jeancy S.A.R.L. France 100 Val Thoiry S.A.R.L. France 100 Lenepveu S.A.R.L. France 100 Palocaux S.A.R.L. France 100 Parivolis S.A.R.L. France 100 Icopro S.A.R.L. France 100 Plaisimmo S.A.R.L. France 100 S.A.R.L. Salle Des Ventes Alésia France 100 Intervest Retail N.V. Belgium 72 C.V. Winkelcentrum Het Rond Netherlands 50 VastNed Retail Monumenten B.V. Netherlands 100 VastNed Management B.V. Netherlands 67 VastNed Management France S.A.R.L. France 100 Foram Management B.V. Netherlands 100 VastNed Management España S.L. Spain

86 Notes to the consolidated annual accounts 30 Accounting estimates and judgements In discussions with the audit committee, the board of management has applied the following essential estimates and judgements which have a material effect on the amounts included in the annual accounts. Key sources of estimation uncertainty Assumptions concerning pensions The board has made a number of assumptions concerning the calculation of the provision for pension obligations. These assumptions involve inter alia assumptions about the future return to be realised on investments and about future salary rises. If the realisation should prove to deviate materially, an actuarial result might ensue involving the risk that this actuarial result might fall outside the corridor and would have to be included in the investment result for Assumptions for the valuation of the factory outlet in Messancy The valuation of this property is based on the going concern value. The board of management is of the opinion that the prospects for this property are good. An important assumption in this context is that the positive trend in visitor numbers to the factory outlet will continue. If in the future this should prove not to be the case, this will have a significant impact on tenants turnover and consequently on the value of the property. The book value of this property as per December 31, 2006 was 25.0 million. Assumption regarding pending legal proceedings Under 25 Rights and obligations not recorded in the balance sheet the most important pending legal proceedings have been expounded. If the outcome of these legal proceedings should differ from what is presented there, this might have a negative impact on the investment result. Critical judgements in applying the company s accounting policies Deferred tax liabilities If the possibility exists of effecting the disposal of property through the disposal of shares in a (taxable) company which has ownership of the respective property, no income tax is payable on the disposal. The transfer of the deferred tax liability to the seller will in that case normally take place through a reduction of the acquisition price of the shares, whereby (usually) a deferred tax liability of 50% of the nominal tax rate is taken into account. The board of management of VastNed Retail is of the opinion that in these cases the deferred tax liabilities must be valued at 50% of the nominal tax rate. The board of management of VastNed Retail has applied this valuation method to the deferred tax liabilities concerning the Portuguese property. If these deferred tax liabilities should be valued at 100% of the nominal tax rate, the effect on equity as per December 31, 2006 would amount to 0.9 negative. Deferred tax liabilities in Spain As from January 1, 2007 the nominal tax rate in Spain is 32.5% (as from January 1, 2008: 30%). If, however, the capital gains realised on a sale are reinvested in Spain within three years, income tax on the capital gains realised in the sale is refunded. The effective tax rate then amounts to 18% (previously: 15%). The board of management of VastNed Retail is of the opinion that this effective tax rate should be applied in the determination of the deferred tax liability. If the deferred tax liability should be valued at the 32.5% tax rate, the impact on equity as per December 31, 2006 would amount to 32.8 million negative. 84

87 Notes to the consolidated annual accounts Adjustments SIIC regime in France Since January 1, 2005 all property in France is held by companies for which the effectively tax-free SIIC regime has been opted. The SIIC regime applies to revenues from the operation and disposal of property. Certain aspects of the SIIC regimes have been adjusted effective from January 1, 2007 in order to prevent abuse (SIIC4). The French tax office has introduced additional requirements regarding the shareholder base and a punitive levy (prélèvement) on dividend payments by SIICs. The prélèvement is a levy of French company tax of 20% at the level of publicly listed SIIC (VastNed Retail N.V.) to the extent that as from July 1, 2007 dividend payments are made to shareholders who are not subject to French company tax or a comparable levy and who hold, directly or indirectly, at least 10% of the shares of the SIIC. Due to the interest of the Stichting pensioenfonds PGGM (21.08%), VastNed Retail strictly comes under the scope of the prélèvement. This might affect the tax burden on future profits to be paid from France. It is presently unclear whether the French legislator specifically had the position of the Dutch investment institution in mind in the creation of SIIC4, and whether it conflicts with existing tax treaties. In view of the uncertainties, any consequences of this levy have not been recognised in the annual accounts. 31 Total expense ratio The total expense ratio for 2006 amounts to 3.82% (2005: 3.60%). The total expense ratio is calculated by dividing the total costs for the reporting period by the average equity VastNed Retail shareholders. The costs include net service charge expenses, operating expenses, general expenses and income tax. These costs are corrected for the share of these costs attributable to third parties. 32 Approval of the consolidated annual accounts The consolidated annual accounts have been drawn up by the board of management and authorised for publication by the supervisory board on February 22,

88 Company balance sheet as per December 31 (x 1,000.-) Assets Investment properties in operation 573, ,083 Other assets in respect of lease incentives , ,328 Investment properties in pipeline 3,114 Total investment properties 577, ,328 Participations in group companies 484, ,761 Financial derivatives 318 Total fixed assets 1,062, ,089 Group companies 160, ,450 Debtors and other receivables 5,391 4,357 Income tax 80 Cash and cash equivalents Total currents assets 166, ,920 Total assets 1,228,232 1,099,009 Equity and liabilities Capital paid-up and called 84,516 84,516 Share premium reserve 435, ,125 Hedging reserve in respect of financial derivatives 3,119 (1,274) Statutory revaluation reserve 472, ,239 Other reserves (190,940) (167,985) Investment result attributable to shareholders VastNed Retail 172, ,858 Equity VastNed Retail shareholders 977, ,479 Long-term interest-bearing loans 92,692 90,998 Guarantee deposits and other long-term liabilities 3,109 8,594 Total long-term liabilities 95,801 99,592 Payable to banks 97,387 88,275 Redemption long-term liabilities 23,646 36,779 Group companies 720 Financial derivatives 774 Income tax 539 Other liabilities and accruals 32,965 10,571 Total short-term liabilities 154, ,938 Total equity and liabilities 1,228,232 1,099,009 86

89 Company profit and loss account (x 1,000.-) Company result 71,293 46,272 Result from participations in group companies 101, ,586 Investment result 172, ,858 Notes to the company annual accounts General The company profit and loss account has been rendered in abbreviated form pursuant to Book 2, Section 402 of the Netherlands Civil Code. The company annual accounts are part of the 2006 annual accounts, which also include the consolidated annual accounts. The company has availed itself of the provisions of Article 379, subsection 5 of Book 2 of the Netherlands Civil Code. The list as referred to in this article has been filed at the offices of the Commercial Register in Rotterdam. The company has issued certificates of guarantee for a number of group companies in accordance with Article 403, Book 2 of the Netherlands Civil Code. Principles for the valuation of assets and liabilities and the determination of the result The company annual accounts have been prepared in accordance with Part 9, Book 2 of the Netherlands Civil Code. In the preparation of the company annual accounts, the provisions of Article 362, subsection 8 of Book 2 of the Netherlands Civil Code have been used. The valuation principles for assets and liabilities and the method of determining the result are identical to those used in the consolidated annual accounts. Reference is therefore made to the notes thereto. The participating interests in group companies have been stated at net asset value. Rights and obligations not recorded in the balance sheet The company heads a fiscal entity for the purposes of company tax and turnover tax, and is consequently jointly and severally liable for the tax liability of the fiscal entity as a whole. 87

90 Notes to the company annual accounts Investment properties In operation Under renovation In pipeline Total In operation Under renovation In pipeline Total Balance as at January 1 513, , , ,308 Acquisitions 26,191 3,114 29,305 Investments in existing properties 1,864 1,864 2, ,953 Transferred to investment properties in pipeline (1,367) (1,367) Disposals (3,647) (3,647) (1,947) (452) (648) (3,047) 536,124 3, , , ,214 Value movements 37,757 37,757 21,348 (479) 20,869 Balance as at December ,881 3, , , ,083 Other assets in respect of lease incentives Appraisal value as at December ,173 3, , , ,328 Participations in group companies Balance as at January 1 411, ,744 Acquisition and expansion of interest 220 Capital refunded (7,518) (112,455) Share in investment result 101, ,586 Disposals (9) (191) Payments received (25,049) (45,771) Other movements 3,474 (152) Balance as at December , ,761 As per December 31, VastNed Retail held 3,675,960 Intervest Retail shares (December 31, 2005: 3,675,960 shares), whose net asset value per share as at December 31 amounted to (December 31, 2005: per share). The share price of Intervest Retail shares amounted to per share as per December 31 (December 31, 2005: per share). 88

91 Notes to the company annual accounts Equity Hedging reserve Investment Capital Share in respect Statutory result Equity paid-up premium of financial revaluation Other VastNed Retail VastNed Retail and called reserve derivatives reserve reserves shareholders shareholders Balance as at January 1, , ,966 (347) 238,107 (57,351) 70, ,329 Investment result 157, ,858 Stock dividend 785 (785) Costs of stock dividend (56) (56) Final dividend previous financial year in cash (54,638) (54,638) Interim dividend 2005 in cash (18,087) (18,087) Contribution from profit appropriation 15,585 (15,585) Value movements financial derivatives (927) (927) Allocation to revaluation reserve 108,132 (108,132) Balance as at December 31, , ,125 (1,274) 346,239 (167,985) 157, ,479 Share buyback (7,395) (7,395) Investment result 172, ,872 Costs of stock dividend (24) (24) Final dividend previous financial year in cash (36,019) (36,019) Interim dividend 2006 in cash (18,593) (18,593) Contribution from profit appropriation 121,839 (121,839) Value movements financial derivatives 4,393 4,393 Allocation to revaluation reserve 126,201 (126,201) Balance as at December 31, , ,706 3, ,440 (190,940) 172, ,713 The authorized share capital amounts to million, and is divided into 74,999,990 ordinary shares of 5.- par value and 10 priority shares of 5.- par value. On January 1, 2005 a reallocation took place between the statutory revaluation reserve and the other reserves. The effect of this reallocation on the 2005 investment result and on equity as at December 31, 2005 was nil. Approval of the company annual accounts The company annual accounts have been drawn up by the board of management and authorised for publication by the supervisory board on February 22,

92 Other information Special controlling rights The company s articles of association confer special controlling rights on the priority shares. The priority shares have been placed on par with the Stichting Prioriteit VastNed Retail. The objective of this foundation is to acquire ownership of the priority shares in the company and to exercise all rights vested in such shares, including the voting right, the receipt of dividend and other distributions and all that which is related thereto in the broadest sense. The board of management of the Stichting Prioriteit VastNed Retail consists of the members of the board of management and of the supervisory board of VastNed Retail; they are the directors A and directors B respectively of the Stichting Prioriteit VastNed Retail. Directors A are not entitled by the Articles of Association to cast more votes than directors B. Thus the requirements of appendix X, article 10 of the Stock Exchange Regulations are complied with. Profit distribution The company s articles of association stipulate that a dividend is paid out on the priority shares of 5% of the nominal amount. The remaining profit is placed at the disposal of the general meeting of shareholders. The company may only make distributions to shareholders insofar as equity VastNed Retail shareholders exceeds the sum of the capital paid-up and called augmented by the reserves required by law to be maintained. In order to retain its fiscal status of an investment institution, the company must distribute the fiscal profit, after making permitted reservations, within eight months after the end of the reporting year. Profit appropriation The board of management proposes to distribute the investment result as follows (x 1,000.-): Investment result attributable to VastNed Retail shareholders 172,872 Allocation of indirect investment result to reserves (110,420) Available for dividend payment 62,452 Distributed earlier as interim dividend (18,593) Available for final dividend payment 43,859 The board of management proposes to distribute the final dividend as follows: 5% in cash on the priority shares; an optional dividend on the ordinary shares of: 2.20 in cash, plus a percentage in shares yet to be determined, depending on the share price, charged of the share premium reserve, or 2.60 in cash; and to add the remainder of the distributable profit to the other reserves. Shareholders opting for distribution in cash plus shares must ensure that this is effected prior to April 20, As from this date, they can only claim the cash dividend within the parameters as laid down in the articles of association. 90

93 Other information To the shareholders of VastNed Retail N.V. Auditor s report Report on the financial statements We have audited the accompanying financial statements 2006 of VastNed Retail N.V., Rotterdam. The financial statements consist of the consolidated financial statements and the company financial statements. The consolidated financial statements comprise the consolidated balance sheet as at December 31, 2006, profit and loss account, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. The company financial statements comprise the company balance sheet as at December 31, 2006, the company profit and loss account for the year then ended and the notes Management s responsibility Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Netherlands Civil Code. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion with respect to the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position of VastNed Retail N.V. as at December 31, 2006, and of its result and its cash flow for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code and with the Act on the Supervision of Investment Institutions. 91

94 Other information Opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of VastNed Retail N.V. as at December 31, 2006, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code and with the Act on the Supervision of Investment Institutions. Report on other legal and regulatory requirements Pursuant to the legal requirement under 2:393 sub 5 part e of the Netherlands Civil Code, we report, to the extent of our competence, that the management board report is consistent with the financial statements as required by 2:391 sub 4 of the Netherlands Civil Code. Amsterdam, February 22, 2007 Deloitte Accountants B.V. Drs L. Albers RA 92

95 Corporate governance Introduction The issue of corporate governance received less attention in the Dutch press in 2006 than in preceding years. However, implicitly the issue has lost none of its immediacy, judging from the confrontations which various funds have had with activist shareholders. VastNed Retail confirms the importance of good corporate governance as a basis of trust between the company and its shareholders. The wish to keep improving the structure has resulted in the supervisory board s independence being even better guaranteed than in the past. This has been achieved by a separation of the supervisory board, as a result of which none of the supervisory directors of VastNed Retail will also be on the supervisory board of VastNed Offices/Industrial. In the interests of the transparency that is inextricably linked to corporate governance, VastNed Retail continues the extensive report in this annual report on the way in which its corporate governance functions, and the extent to which the company complies with the Dutch corporate governance code (the Code). Statement of compliance and deviations from the Code VastNed Retail subscribes to the Code and its principles and currently complies virtually all the best practice principles of the Code. At present, VastNed Retail deviates from the principles and best practice principles as formulated in the Code on two points. They are: Appointment of members of the board of management for a period of four years: Explain: all current members of the board of management were appointed before the publication of the (draft) Code. All of the existing employment contracts have an indefinite term. Limitation of dismissal pay to a maximum of one year s salary: Explain: all current members of the board of management were appointed before the publication of the (draft) Code. When concluding these contracts, dismissal schemes were agreed which took account of the years of service with previous employers. These schemes can result in compensation of more than one year s salary. Availability corporate governance documents The documents that determine the corporate governance structure, such as the articles of association and the regulations of the supervisory board, as well as the registration document in the context of the Act on the Supervision of Investment Institutions, have been made available on the company s website Organisational structure VastNed Group VastNed Retail is part of the VastNed Group. The VastNed Group, which is not a legal entity in itself, consists of VastNed Retail, VastNed Offices/Industrial and their respective subsidiaries. Management, as well as asset management and property management, are carried out by VastNed Management. The shares in this company are held by VastNed Retail and VastNed Offices/Industrial. As a result of this joint management, cost benefits are realised and synergic knowledge exchange takes place. 93

96 Corporate governance Legal structure As a publicly listed investment institution, VastNed Retail is a public company with limited liability founded under Dutch law, which has the status of investment company with variable capital pursuant to article 2:76a of the Netherlands Civil Code. An investment company with variable capital is a public limited company: which exclusively aims to invest its capital in such a way that the risks are spread, in order to let its shareholders share in the profits; whose management has the authority pursuant to the articles of association to issue, acquire and dispose of shares in its capital; whose shares, with the exception of shares to which the articles of association grant extraordinary rights regarding control of the company, are included in the price list of a stock exchange and; whose articles of association stipulate that the company is an investment company with variable capital. VastNed Management VastNed Management has no independent profit objective and has entered into an agreement with VastNed Retail and VastNed Offices/Industrial for a distribution of costs (cost allocation agreement). Costs relating directly to the company or the property of the company or its subsidiaries are recognised there. Other costs that cannot be allocated directly are borne by VastNed Management and charged on to VastNed Retail and VastNed Offices/Industrial based on actual work done. The shares in VastNed Management are held for two-thirds by VastNed Retail and for one-third by VastNed Offices/Industrial. This ratio originates in the size of the property portfolios at the time of the conclusion of the cost allocation agreement in January 1996, and does not affect the results or the equity position of the two shareholders. The agreement has a 10-year term and has been extended by a period of five years, which started on January 1, The cost allocation agreement includes specific change of control clauses, meaning that in case of a public offer on VastNed Offices/ Industrial, VastNed Retail s functioning is not affected, and vice versa. In the context of amended regulations, VastNed Management has received the licence as referred to in Article 5 of the Investment Institutions (Supervision) Act. Based on this licence, VastNed Management is authorised to carry out management of VastNed Retail and VastNed Offices/Industrial. VastNed Retail and its subsidiaries The legal structure of VastNed Retail, its major subsidiaries and participations, is presented below. VastNed Retail VastNed Retail is a publicly listed company (Euronext Amsterdam and Euronext Paris), which has direct ownership of the Dutch portfolio with the exception of Het Rond Houten and Rembrandtplein 7, and which acts as an (international) holding company. VastNed Retail has the status of a fiscal investment institution and in France as from January 1, 2005 it is included in the SIIC regime. Het Rond, Houten The limited partnership Winkelcentrum Het Rond holds VastNed Retail s investment in Winkelcentrum Het Rond in Houten. As a limited partner, VastNed Retail holds an interest of 49.5% in the profits of this limited partnership. Due to the fiscally transparent structure of this limited partnership, the income from this interest is subjected to the regime of the fiscal investment institution. Het Rond Houten, a 50% subsidiary of VastNed Retail, acts as managing partner. This company is entitled to 1% of the profits 94

97 Corporate governance of this limited partnership. VastNed management is one of the managing directors of Het Rond Houten and carries out the daily property management. VastNed Retail consolidates this subsidiary and the limited partnership fully and recognises the minority interest under equity. Foram International Holdings Foram International Holdings is the holding company for the Spanish and Portuguese investments of VastNed Retail. These investments are held by local companies. This company is not a fiscal investment institution and is taxed normally in the Netherlands. Since the activities are limited to holding participations, the income generally will be subject to the participation exemption, so that effectively this company is not liable for tax. French permanent establishment The French property investments are held directly and indirectly by the VastNed Retail s French permanent establishment. The majority of the property itself is held by a number of local subsidiaries. As from January 1, 2005 VastNed Retail is subject to the so-called SIIC regime. Under this French fiscal regime, VastNed Retail is not liable for tax on its French income from the operation of property, nor on the capital gains realised locally. All French subsidiaries are subject to the SIIC regime. Intervest Retail As per December 31, 2006, VastNed Retail had a 72.4% interest in the Bevak Intervest Retail, which is listed on Euronext Brussels. A Bevak materially has a tax-free status and as such is comparable to a Dutch fiscal investment institution. On behalf of VastNed Retail, Mr R.A. van Gerrevink and Mr H.K.M. Roovers, in addition to three independent members, are on the board of management of Intervest Retail. VastNed Retail consolidates this subsidiary fully and recognises the minority interest under equity. Intervest Retail carries out its own asset and property management. This means that all employees have employment contracts with Intervest Retail without the intervention of a joint management company. The directors perform their duties through the intervention of a separate company. Board of management Introduction VastNed Management is statutory and sole director of VastNed Retail. This company is represented by its statutory board of management. The board of management carries out the daily management of the company within margins agreed with the supervisory board. The board of management puts the operational and financial objectives, the strategy and the margins to be observed to the supervisory board for approval. The statutory board of management, the special projects adviser and the company secretary jointly make up the management team. This management team as a rule meets every fortnight. The board of management is responsible for having full and correct information at its disposal. 95

98 Corporate governance Curricula vitae of the management team members Reinier A. van Gerrevink (March 3, 1950) Nationality: Dutch Position: Statutory director, CEO Joined the company: July 1, 2002 Appointed as CEO: September 1, 2002 Previous positions: various management positions with: ABN AMRO; Rodamco, and; Robeco (Weiss Peck & Greer). Other positions: member of the supervisory board of the foundation Stadsherstel Rotterdam Education: Dutch law, Utrecht university. Tom M. de Witte (September 7, 1966) Nationality: Dutch Position: Statutory director, CFO Joined the company: June 16, 2003 Appointed as CFO: June 16, 2003 Previous positions: auditor with Deloitte Education: business economics, Dutch law and accountancy, Erasmus university Rotterdam. J. (Hans) Pars (August 16, 1962) Nationality: Dutch Position: Statutory director, CIO Joined the company: June 1, 2003 Appointed as CIO: July 1, 2004 Previous positions: various management positions with: Zadelvast Beheer; Stichting Pensioenfonds Hoogovens; Rodamco Europe and; director Southern Europe VastNed Retail. Education: building and architecture, Technical university Eindhoven; real estate, university of Amsterdam. Huub K.M. Roovers (November 20, 1943) Nationality: Dutch Position: Special projects adviser Joined the company: June 1, 1989 Previous positions: various management positions with Blauwhoed; various management positions with Rodamco, and; CIO of VastNed Retail and VastNed Offices/Industrial. Arnaud G.H. du Pont (May 25, 1966) Nationality: Dutch Position: Company secretary Joined the company: January 1, 2000 Previous positions: tax adviser with BDO, and; tax adviser with PricewaterhouseCoopers. Education: tax law, Erasmus university Rotterdam. All members of the board of management have disclosed their significant other positions. None are members of the supervisory board of any other publicly listed company. Acceptance of such a position would require approval from the supervisory board. 96

99 Corporate governance Remuneration of the board of management The directors of VastNed Management receive for their activities a remuneration of a level and structure that are such that qualified and expert directors can be attracted and retained. Part of the fixed salary is pensionable. On the remainder of the fixed salary no pension rights are built up. The general meeting of shareholders of April 6, 2004 approved the remuneration policy proposed by the supervisory board and prepared by the remuneration committee. The execution of the remuneration policy is reported annually in the remuneration report. This report is discussed in the general meeting of shareholders. The remuneration policy also contains regulations for the composition of the variable part of the remuneration. In the composition of the variable part of the remuneration a link is sought between performance and short-term and long-term objectives. These objectives are determined in advance; they are measurable and the directors have influence on their realisation. Bonus structure statutory board of management Next to the fixed annual salary, a bonus can be awarded of a maximum of 100,000 for each member of the statutory board of management and 200,000 for the chairman of the board (CEO). These sums apply to the activities on behalf of VastNed Retail and VastNed Offices/Industrial jointly. Per fund no more than 50% of the abovementioned sums can be awarded. The bonus consists of a bonus related to the investment result and a personal bonus. Bonus related to the investment result The bonus related to the investment result provides for a bonus of 2,500 ( 5,000 for the CEO) for every 10 basis points increase of the direct investment result per share above the average weighted inflation in the countries in which VastNed Retail invests. This bonus has a maximum of 37,500 (CEO 75,000). This bonus is awarded conditionally (contigent condition) in the form of VastNed Retail shares. The contingent condition of this bonus is cancelled if two years after the awarding of the bonus the direct investment result per share is at least equal to the time of the awarding of the shares. After two years the board member is entitled to sell 50% of the shares awarded to him. The income can be used to settle the income tax due as per that date on the awarding of the shares becoming unconditional. The other shares must be held for an additional period of at least three years. With this system VastNed Retail acts in accordance with the Code. For further details, please refer to the remuneration report on www. vastned.nl. Personal bonus The personal bonus provides for a maximum sum of 25,000 ( 50,000 for the CEO). This bonus is awarded based on an assessment by the supervisory board of VastNed Retail of the personal performance of the member of the board of management concerned. This assessment will be based on the degree to which during the financial year the member of the board of management concerned has realised qualitative and/or quantitative objectives defined previously. This bonus is paid out in cash. For the 2006 financial year the bonuses listed in the table on page 98 are proposed. Overview remuneration On page 98, an overview is presented of the annual remuneration of the statutory board of management of VastNed Management. The annual accounts include an overview of the remuneration as recognised in the investment result. 97

100 Corporate governance Remuneration 2006 (x 1) Years Pensionable Non-pensionable Personal of service salary salary bonus for 2006 R.A. van Gerrevink 5 330,000 95,000 24,000 T.M. de Witte 4 162,000 30,000 22,000 J. Pars 4 201,000 29,000 22,000 Total 693, ,000 68,000 The 2006 bonus related to the result will be paid out in full, as the increase of the direct investment result per share amounted to 4.52%, which is 2.04% above the average weighted inflation in the countries in which VastNed Retail operates. Therefore, the maximum bonus of 37,500 ( 75,000 for the CEO) will be granted in the form of VastNed Retail shares. Summary of employment contracts of the board of management Reinier A. Van Gerrevink Mr Van Gerrevink is entitled to a fixed annual salary of 425,000 (level 2006), of which 330,000 is pensionable. Mr Van Gerrevink joined VastNed Management on July 1, In case of involuntary dismissal by the general meeting of shareholders of VastNed Management, Mr Van Gerrevink is entitled to a compensation of at least 600,000. If the employment contract is terminated due to a merger or take-over a compensation of at least 400,000 (for each fund) will be paid. These arrangements were stipulated at the conclusion of the employment contract. Mr Van Gerrevink was appointed for an indefinite term. Mr Van Gerrevink s retirement age is 63. His pension is determined in accordance with the so-called final pay formula, with the provision that the pension will come into force at the age of 63, and will amount to 176,000 based on the 2006 pensionable salary. This is related to the pensionable salary of 300,000 at the time of the agreement of the employment contract and the pension of 160,000 (= 53¹ ³ %) agreed as a wage-index-linked pension. Should the basic salary be raised, the pension will be raised accordingly. For this arrangement there is no own contribution. Tom M. de Witte Mr De Witte is entitled to a fixed annual salary of 192,000 (level 2006), of which 162,000 is pensionable. Mr De Witte joined VastNed Management and was appointed as CFO on June 16, His retirement age is 65. The pension is premium free. Mr De Witte s pension is determined in accordance with the so-called career average pension plan. In case of involuntary dismissal, Mr De Witte is entitled to a compensation to be determined in accordance with the kantonrechtersformule system, taking account of his 12 years of service at the time of appointment. This arrangement was stipulated at the conclusion of the employment contract. If the employment contract is terminated in case of a merger or take-over of one of the VastNed funds on the initiative of VastNed Management, a compensation of at least 15 months salary will be paid. Mr De Witte was appointed for an indefinite term. Hans Pars Mr Pars joined the company on July 1, 2003 and was appointed as statutory director and CIO on July 1, His basic salary is 230,000 (level 2006), of which 201,000 is pensionable. His retirement age is 65. During a period of 10 years starting from the time of his appointment, VastNed Management will pay an additional annual pension contribution of 7,000 over and above the normal contribution. The pension is premium free. Mr Pars pension is determined in accordance with the so-called career average pension plan. In case of involuntary dismissal, Mr Pars is entitled to a compensation to be determined in accordance with the kantonrechtersformule system, taking account of his 10 years of service at the time of appointment. This arrangement was stipulated at the conclusion of the employment contract. Mr Pars was appointed for an indefinite period. 98

101 Corporate governance In view of the above, the maximum dismissal pay can amount to more than one year s salary. VastNed Management will respect the employment contracts agreed with the members of the board of management and the dismissal schemes included therein. Share ownership Overview of share ownership of the members of the board of management R.A. van Gerrevink Number of shares as per January 1, Movements Number of shares as per December 31, Mr Van Gerrevink has acquired all shares at his own cost. VastNed Retail has not provided any guarantees with regard to these shares. The above shareholding has been reported to the Authority for the Financial Markets at the time of acquisition and can be referred to on The other members of statutory the board of management did not hold any shares in VastNed Retail during VastNed Retail has drawn up regulations as referred to in Article 5:65 of the Act on Financial Supervision. These regulations determine during which periods the members of the supervisory board, members of the board of management and employees of VastNed Management can trade shares of VastNed Retail (open periods). The closed periods, during which trade is not permitted, concern the periods preceding the publication of the financial reports. The full text can be viewed on Other information Transactions of members of the board of management VastNed Retail has not entered into any transactions with any of the members of the board of management, other than those that result from their employment contract. Conflicting interests of members of the board of management None of the members of the board of management has entered into competition with VastNed Retail in any way. No donations were made by VastNed Retail to the members of the board of management or their family members, no unjustified benefits were provided to third parties by any member of the board of management, nor were any business opportunities provided by VastNed Retail to either himself or his family. In the context of the corporate governance pursued by VastNed Retail, the members of the board of management declare to comply with the Code in all abovementioned cases. No (potential) conflicts of interest have occurred. If such should occur, the respective member of the board of management reports it to the chairman of the supervisory board and will refrain from participation in the discussion of and decision on the matter in which the member of the board of management has a conflict of interest. In addition, transactions with a conflicting interest will be agreed under conditions customary in the industry. Loans to members of the board of management VastNed Retail has not provided loans to its members of the board of management, nor have the members of the board of management provided loans to VastNed Retail. Country boards of management Netherlands Next to the management team, which from the Netherlands exerts central management of and coordination for the various country portfolios, the Dutch team of property specialists is headed by Mrs Jacqueline van der Mispel. The team consists of 13 employees. These activities are carried out from the Rotterdam head office. 99

102 Corporate governance Belgium The Belgian activities, incorporated in Intervest Retail in Antwerp, are under the daily management of Mr Jean-Paul Sols (CEO) and Mr Rudi Taelemans (CIO). In the spring of 2006, Mr Sols succeeded Mr Gert Cowé, who left Intervest Retail to set up a new property fund. The Belgian team of property specialists consists of 8 employees. Mr Van Gerrevink and Mr Roovers, in addition to three independent directors, are on the board of management of Intervest Retail. The activities are carried out from the Antwerp office. Spain and Portugal The Spanish organisation, VastNed Management España, is headed by Mr Luis Vila Barron. VastNed Management España has seven employees in total, and performs activities in the areas of asset management and administration. The property management has been largely subcontracted to third parties and is managed by VastNed Management España. This company has its offices in Madrid, and moved into its new office on 141 Paseo de la Castellana in the autumn of From this location the activities in Portugal are also controlled. These activities are too limited for a local branch organisation to be set up. France The French organisation, VastNed Management France, is headed by Mr Benoît Dantec. VastNed Management France has nine employees in total, who are responsible for asset management, for the property management of part of the portfolio, and for administration. Most of the property management has been subcontracted to third parties. Turkey After balance sheet date, VastNed Retail finalised its first acquisition in Istanbul, Turkey. Property management is carried out locally by an internationally operating real estate agent. Asset management is temporarily carried out from the Netherlands. VastNed Retail intends to establish its own asset management organisation in Turkey, which will be done in line with the expansion of the local property portfolio. Supervisory board Introduction and change of structure Until April 4, 2006, the supervisory board of VastNed Retail consisted of the same members as the supervisory boards of VastNed Offices/Industrial and VastNed Management. They were a personal union. After approval from the general meeting of shareholders of April 4, 2006, the structure of the supervisory board was changed so that none of the members of the supervisory board of VastNed Retail is also on the board of the supervisory board of VastNed Offices/Industrial. The chairman and the vice-chairman are also members of the supervisory board of VastNed Management. The reason for this change is the ambition to further enhance the independence of the supervisory directors. In specific cases, their independence might not be 100% guaranteed as there might be a conflict of interest. Since April 4, 2006, the supervisory board consists of four members. 100

103 Corporate governance Tasks The supervisory board supervises the daily policy of the board of management of VastNed Retail and provides the board with advice. In the fulfilment of its task, the supervisory board considers the interests of VastNed Retail. In that, the board weighs all relevant interests of all stakeholders in VastNed Retail (including the shareholders). The supervisory board bears responsibility for the quality of its own functioning. VastNed Retail provides the supervisory board with the necessary means for the execution of its task. In case his functioning should be inadequate, structural incompatibility of interests and other problems, a supervisory director will tender his resignation. The tasks of the supervisory board include: supervision and monitoring of, and advising the board of management on: the realisation of the objectives of the company, the strategy and the risks associated with the business operations, the structure and functioning of the internal risk management and control systems, the financial reporting process, and compliance with legislation and regulations; the publication of, compliance with and upholding of the corporate governance structure of the company; the approval of the annual accounts and the approval of the annual budget and major investments and divestments of the company; the selection and nomination of the external auditor of the company; the selection of the board of management, at present VastNed Management, including the members of the board of management of VastNed Management (hereinafter: board of management), the proposal for the adoption by the general meeting of shareholders of VastNed Retail of the remuneration policy for members of the board of management, the adoption of the remuneration (taking account of the stated remuneration policy) and the contractual employment conditions of the members of the board of management; the selection of the members of the supervisory board and the proposal regarding the remuneration of its members to be adopted by the general meeting; the evaluation and assessment of the functioning of the board of management and the supervisory board as well as their individual members (including an assessment of the profile of the supervisory board and the induction, education and training programme); the handling of and decisions regarding reported potential conflicts of interest between VastNed Retail on the one hand and members of the board of management, the external auditor and the major shareholder(s) on the other; the handling of and decisions regarding reported alleged irregularities that concern the functioning of members of the board of management. The supervisory board will annually draw up and publish a report after the conclusion of the financial year on the functioning and the activities of the supervisory board and its committees in that financial year. For a full list of the tasks of the supervisory board, reference is made to the regulations drawn up by the supervisory board, which are available on Chairman of the supervisory board The chairman of the supervisory board has a coordinating task. The chairman ensures compliance with the requirements of best practice principle III.4.1 of the Code. He is supported in this by the company secretary. The company secretary is appointed and dismissed by the board of management, either on the initiative of the supervisory board or otherwise, subject to supervisory board approval. The chairman is neither a former member of the board of management nor a former employee of VastNed Retail or one of its subsidiaries. 101

104 Corporate governance Profile of the supervisory board The profile of the supervisory board of VastNed Retail, VastNed Offices/Industrial and VastNed Management is part of the regulations of the supervisory board, and is available on Composition of the supervisory board W.J. Kolff, chairman N.J. Westdijk MBA, vice-chairman F.W. Mulder P.M. Verboom The curricula vitae of the supervisory board members are presented below: W.J. Kolff (July 23, 1945) Nationality: Dutch Position: retired Appointment: April 4, 2006 (also as chairman) Previous positions: various management and board positions with ABN AMRO ( ), most recently as chairman of the board of ABN Belgium, and; various management and board positions with Rabobank, most recently as vice-chairman of the board of Rabobank International ( ). Other positions: member of the supervisory board of Fetim B.V., Amsterdam; chairman of the supervisory board of Bioz B.V., Vlissingen; executive partner SAC Private Equity, Stanford, Connecticut, US, and; member board of directors of Yes Bank, India. Education: economics, Erasmus university Rotterdam. N.J. Westdijk MBA (June 20, 1941) Nationality: Dutch Position: retired Appointment: April 19, 2000; vice-chairman since April 6, 2004 Previous positions: president of the board of management of Koninklijke Pakhoed, and; president of the board of management Connexxion Holding. Other positions: non-executive member of the board of management of Fortis; chairman of the supervisory board of Connexxion Holding; chairman of the supervisory board of Eneco Energie, and; member of the supervisory board of FD Mediagroep. Education: Dutch law, Utrecht university and MBA, university of Chicago. F.W. Mulder (May 31, 1940) Nationality: Dutch Position: retired Appointment: January 1, 1996 Previous positions: management positions with Koninklijke Wegenbouw Stevin and; management positions with Avéro Verzekeringen. Other positions: member of the supervisory board of De Hypothekers Associatie; member of the supervisory board of the Nassau Bergen Holding; member of the board of management of the Stichting Preferente Aandelen Arcadis; member of the board of management of the Stichting Beheer Faciliteiten NijSmellinghe (hospital); chairman of the district De Friese Wouden of the Dutch Red Cross; 102

105 Corporate governance member of the board of management of Devereux Capital Holding Stichting, Amsterdam and; director of Citrosuco Europa, part of Citrosuco Paulista, Matao, Brazil. Education: Dutch law, university of Leiden. P.M. Verboom (April 20, 1950) Nationality: Dutch Position: CFO Schiphol Group Appointment: April 6, 2004 Previous positions: lecturer Erasmus university Rotterdam, and; various management positions with Philips, inter alia CFO of the board of management Argentina, Hong Kong and the Far East. Other positions: non-executive member of the board of directors of Brisbane Airport Corporation. Education: econometrics, Erasmus university Rotterdam; PhD from university of Amsterdam. Retirement roster F.W. Mulder 2007 P.M. Verboom 2008 N.J. Westdijk 2009 W.J. Kolff 2010 Audit committee Tasks The audit committee is charged with supervising the financial affairs of VastNed Retail in the broadest sense. For a complete list of the tasks, please refer to Procedural tasks Four times per year the audit committee draws up a report of its deliberations and findings. At least once a year the committee will report on the developments in the relation with the external auditor. Once every four years a thorough assessment is made of the functioning of the external auditor. The external auditor receives the financial information on which the quarterly and semi-annual figures are based and is given the opportunity to comment on it. The audit committee is the first point of contact for the external auditor when irregularities are observed. The committee decides whether members of the board of management and the external auditor are present at its meetings. The committee meets at least once a year with the external auditor in the absence of the members of the board of management. Composition The audit committee consists of two independent members. Mr Mulder is chairman. Mr Verboom is a member. Mr Verboom can be characterised as a financial expert. The supervisory board appointed Mr Mulder as chairman on April 4, 2006, since when he has fulfilled this position. Remuneration committee Tasks The remuneration committee is charged with advising the supervisory board on the remuneration policy in the broadest sense. For a complete list of the tasks, please refer to Its tasks include making a proposal to the supervisory board regarding the remuneration policy to be pursued for members of the board of management to be adopted by the general meeting of shareholders, and the same for individual members of the board of management. 103

106 Corporate governance Procedural tasks In addition, the remuneration committee draws up the remuneration report to be adopted by the supervisory board. The remuneration report of the supervisory board is placed on the website of the company and contains information as meant by best practice principles II.2.10 and II.2.12 of the Code. Composition The remuneration committee consists of two independent members. Neither are members of the board of management of another Dutch publicly listed company. Mr Westdijk is chairman. Mr Kolff is a member of the remuneration committee. Selection and appointment committee VastNed Retail s selection and appointment committee consists of Messrs Kolff and Westdijk. Tasks The tasks of the selection and appointment committee include drawing up selection and appointment criteria, the periodical assessment of the size and composition of the supervisory board and the board of management as well as the functioning of the members of the supervisory board and the board of management, supervising the board of management concerning the appointment of senior management and taking concrete decisions with regard to selection and appointments. The supervisory board receives reports of the meetings of the three committees. Remuneration of the members of the supervisory board The members of the supervisory board receive a remuneration of 21,000 annually. The chairman receives a remuneration of 27,000 annually. In view of the labour intensive character, members of the audit committee receive an additional remuneration of 4,000 annually. The members of the remuneration committee receive an additional 3,000 annually. The vice-chairman receives a remuneration of 24,000. The members of the remuneration committee are also members of the supervisory board of VastNed Management, which also includes the members of the remuneration committee of VastNed Offices/Industrial. For the membership of the supervisory board of VastNed Management, no separate remuneration is paid. The members do not receive further compensation in addition to those mentioned, other than reimbursement of costs as incurred. Share ownership None of the supervisory directors holds any shares in VastNed Retail. Statement of share ownership (principle) Members of the supervisory board hold shares in VastNed Retail only for long-term investment; the shares have been purchased at their own cost. When purchasing and selling shares, they shall act in accordance with the regulations adopted by the company as meant to in Article 5:65 of the Act on Financial Supervision. Transactions are also reported to the Authority for the Financial Markets ( in accordance with the relevant regulations. VastNed Retail has also drawn up regulations to regulate trading in publicly listed securities. Transactions by members of the supervisory board and the board of management are reported at the end of each quarter to the compliance officer of VastNed Retail. 104

107 Corporate governance Conflicting interests of members of the supervisory board A member of the supervisory board reports a material conflicting interest to the chairman of the supervisory board. In the context of the corporate governance pursued by VastNed Retail, the members of the supervisory board state that they shall comply with the Code and the respective member shall refrain from participation in the discussion of and decisions on the matter in which the member has a conflicting interest. In addition, transactions with a conflicting interest will be agreed under conditions customary in the industry. Decisions on entering into transactions with major shareholders, i.e. shareholders holding more than 10% of the share capital in issue, must be approved by the supervisory board and shall be entered into under the conditions as customary in the industry. VastNed Retail at present does not have a delegated supervisory board member. In prevailing cases, the supervisory board shall confirm the best practice principles III.6.6 and III.6.7. Loans to members of the supervisory board VastNed Retail has not supplied loans to any member of the supervisory board, nor has any member of the supervisory board supplied loans to VastNed Retail. Independence None of the members of the supervisory board is or has been a member of the board of management or employee of VastNed Retail or of any company associated with it. Neither has any member received fees other than for his membership of the supervisory board, nor has any member had a major business relationship with VastNed Retail or any associated company during one year preceding his appointment. None of the members of the board of management is a shareholder, member of the board of management or supervisory board member of a company that holds at least 10% of the shares in VastNed Retail. The above also applies to the direct family members of the respective member. Stichting Prioriteit VastNed Retail and protection measures The Stichting Prioriteit VastNed Retail holds the priority shares and has specific authority regarding the appointment of members of the supervisory board and the board of management, as well as regarding extraordinary decisions such as changes to the articles of association, the winding up or liquidation of VastNed Retail. On the board of the Stichting are the members of the supervisory board and the managing directors of VastNed Management. General meeting of shareholders and voting rights At the general meeting of shareholders in VastNed Retail, the state of affairs is commented upon and the general meeting is asked for approval on subjects determined by law and in the articles of association. The board of management and the supervisory board supply the general meeting of shareholders with all information required unless a material interest is opposed to that. VastNed Retail will announce the meeting by placing an announcement in the Officiële Prijscourant of Euronext and at least one Dutch nationwide daily newspaper. It will also announce the meeting in one French nationwide daily newspaper. The agenda and shareholders circular are available at the offices of VastNed Retail in Rotterdam and Paris and from In these announcements, inter alia the ultimate registration date is given for exercising voting rights on the share. The minutes of the general meeting of shareholders will be made available after the meeting in accordance with best practice principle IV

108 Corporate governance Financial reporting and the external auditor Financial reports are drawn up in accordance with internal procedures. The board of management is responsible for the correctness, completeness and timeliness of the financial reports. The external auditor is also involved in the content and publication of the semi-annual report and the annual accounts and the press releases thereof. The external auditor will attend the general meeting of shareholders and can be asked to comment on the correctness of the annual accounts. The external auditor will in any case attend the meetings of the supervisory board and of the audit committee in which the annual accounts are discussed. Code of conduct and whistleblower s code VastNed Retail has drawn up a code of conduct, which applies to all employees including the board of management. A whistleblower s code has also been implemented, which allows employees and members of the board of management to report abuses within the company without fear for their own employment. The texts of these regulations have been published on 106

109 Corporate governance Supervisory board W.J. Kolff N.J. Westdijk MBA F.W. Mulder P.M. Verboom Management team R.A. van Gerrevink T.M. de Witte J. Pars H.K.M. Roovers A.G.H. du Pont Country managers Netherlands S.J. van der Mispel Spain L. Vila Barron France B. Dantec Belgium J.P. Sols 107

110 Risk management Taking the recommendations of the Monitoring Commission published in December 2005 into account and making use of the so-called COSO (The Committee of Sponsoring Organisations of the Treadway Commission) Risk Management framework, VastNed Retail has broken down the risks into the following risk categories: financial reporting risks, strategic risks, operational risks, financial risks and compliance risks. Hereafter, for every risk category it will be stated which significant risks are included in that category and how VastNed Retail endeavors to control those risks. Financial reporting risks This risk concerns late reporting or reporting of incorrect information, as a result of which incorrect decisions are taken or external parties are misinformed. VastNed Retail has a comprehensive package of internal control measures and administrative and organisational measures in place for limiting this risk as much as possible. These measures and procedures are laid down in the Administrative Organisation manual. The quality of the reports, most of which are drawn up quarterly, is guaranteed by extensive analyses by inter alia the Control department and by periodic business report meetings, in which the contents of the reports are discussed in detail with the country managers, the board of management, the audit committee and the supervisory board. Strategic risks These risks are determined to an important degree by the strategic choices VastNed Retail has made to limit its sensitivity to external factors. Examples are risks associated with developing local economies, among which growth estimates, inflation, interest rate development and currency fluctuations, the political climate, possible amendments to legislation and regulations (permit policies, environmental standards, and lease and tax legislation and regulations). The extent of these risks is determined to a significant degree by strategic investment policy choices. This concerns the question as to in which countries/regions VastNed Retail will invest at a certain time, and how much it will invest (spreading and leverage) in a certain type of property. The strategic plan contains criteria concerning the investment and financing policy, which aim to limit these risks as much as possible: Choice of country: A choice has been made in principle to invest in four core countries: the Netherlands, Spain, Belgium and France. These countries are part of the eurozone, so that currency risks are excluded. In addition, these countries have relatively stable economic and political climates. In addition, after careful consideration, three possible countries may be added to those core countries, namely Turkey, Greece and Rumania, limiting the invested capital in those countries for the time being to a maximum of 10% of the total investment portfolio. By limiting ourselves to a number of core countries, we feel we are able to keep up with the local developments in these countries based on our own research and with the knowledge of the local organisations. In the strategy, research is viewed as an important factor for successfully assessing risks and opportunities. Type of property: A choice has been made in principle for investments in the retail sector, striving for a good spread across high street shops, shopping centres and retail warehouses, maximum exposure of investments in a certain city/region and an optimum risk return ratio. Critical size per country: A certain minimum size of the property portfolio per country is aimed for, so that an adequate local organisation can be set up which disposes of sufficient local knowledge of the country, the developments in the property sector, legislation and regulations and so on. At such a size, the risk of dependence on a number of key employees is limited. 108

111 Risk management Time of investment: efforts are made to take advantage of (local) knowledge of the economic and property cycles. This is done both to achieve a healthy circulation of the existing property portfolio and growth of the property portfolio. The underlying principle, however, remains that new investment will only be attracted when investment opportunities present themselves or will present themselves shortly. The strategic risks associated with interest rate fluctuations are discussed under Financial risks. Operational risks These risks ensue from everyday transactions and (external) events which are effected within the strategic framework. Examples are investment risks, leasing risks, cost control risks, debtor risk, legal and fiscal risks, catastrophe risks and IT risks. Investment risks VastNed Retail has taken internal administrative and organisational measures to limit the risk of incorrect investment decisions. These measures are to ensure careful investment analysis: careful evaluation of the risk return profile based on thorough market research, accurate forecasting of future returns, inter alia by evaluating investments by way of an internal return model, screening of tenants, studying local regulations, maintenance standards, environmental and safety standards, permit requirements and such, assessment of possible fiscal risks, following set approval procedures for making investments, checking whether the investment is consistent with the strategic framework and whether all required procedures have been followed. An internal checklist has been drawn up for making investments in order to guarantee that all points of attention are adequately taken into account. Leasing risks An important factor in this risk is the nature and location of the property, the degree to which it competes with adjacent properties, the quality of the property (state of maintenance, obsolescence), the quality of the tenant and the lease contract. After all, a financially weak tenant can negatively impact cash flow and eventually lead to vacancy as the property cannot be re-let, which can also negatively impact the value of the property. During the investment period, VastNed Retail continuously assesses the development of the foregoing factors. Based on the best possible evaluation of these risk factors (based on own local knowledge, data from the research department and data from external appraisers and such), a risk profile is drawn up for every property at least once a year. Depending on the risk profile, a certain return must be realised over a certain period. This is set off against the expected return based on the internal return model. Based on that, a timely analysis is made as to which properties need additional investment, where the tenant mix should be adjusted and which properties are candidates for divestment. In addition, at least once per quarter reports are drawn up on vacancy and the vacancy risk, taking the lease contract expiry calendar into account. Within the margins of applicable rent legislation, a balanced spread of the durations of the lease contracts is aimed for. In this way, future lease terminations and lease reviews can be timely anticipated. Cost control risks There is a risk that the net return on property is negatively impacted by high operating expenses or investments. Various administrative and organisational measures are in place at VastNed Retail for limiting this risk, such as periodical checking of maintenance budgets against realisation and approval procedures concerning taking on maintenance and investment obligations. 109

112 Risk management Debtor risk VastNed Retail has clear guidelines in place regarding the screening of tenants before concluding new lease contracts. Furthermore, at the conclusion of lease contracts guarantee deposits or bank guarantees are generally provided. In addition, administrative and organisational procedures have been drawn up in order to guarantee timely collection of rent receivables and to ensure that rent arrears are reported timely. The financial administration keeps a close eye on limiting rent arrears. Legal and fiscal risks If complexity requires it, contracts to be agreed with third parties are checked by an internal company lawyer, if necessary supported by external consultants, in order to limit the risk of financial loss and reputation damage resulting from qualitatively inadequate contracts. Furthermore, VastNed Retail is insured for liability arising from its operations or its investments. Tax law is of great importance when investing in property. Examples are income tax, transfer tax, turnover tax and local levies. These financial risks are continuously being assessed by an internal tax lawyer, if necessary supported by external consultants. Income tax: VastNed Retail is a fiscal investment institution, so that under certain conditions it is not liable for corporate income tax on the result realised in the Netherlands. A comparable structure applies to the Belgian property portfolio (Bevak), and for the French property portfolio (SIIC). There is a risk that VastNed Retail or its subsidiaries can no longer meet the conditions for a fiscal investment institution, so that they would become liable for corporate income tax on both their direct and indirect results. The conditions mainly concern the composition of the shareholder base, the fiscal financing ratios and the fiscal distribution obligation. VastNed Retail limits this risk by regular and careful monitoring of the fulfilment of the conditions mentioned above by the board of management and the supervisory board, assisted by expert internal and external tax lawyers. Transfer tax: Particularly when acquiring property, the transfer can be structured in such a way that transfer tax or comparable levies due will be limited. It is possible that the tax authorities take the view that transfer tax or a comparable levy is due. VastNed Retail aims to limit these risks by prior careful analysis of the fiscal risks by the board of management, assisted by expert internal and external tax lawyers. In certain cases, guarantees can also be sought from the (creditworthy) seller of the property. Catastrophe risks The portfolios are locally insured for damage to and loss of the properties and for loss of rent. With regard to inter alia flooding, storm and earthquakes, the coverage is limited. Since the events of September 11, 2001, insurers have adjusted the coverage for damage as a result of terrorism. IT risks VastNed Retail s IT infrastructure is centralised at the Rotterdam head office. The Antwerp system operates entirely independently and was modernised considerably in The offices in Paris and Madrid are connected to the Rotterdam network through fixed lines. Significant investments have been made over the past few years in the IT infrastructure, with particular focus on guaranteeing continuity and security of the information systems. In 2006, key documents have been digitised and an in-house Wide Area Network has been implemented. 110

113 Risk management Financial risks The principal financial risks are (re)financing risks, relating to equity as well as to loan capital, interest rate risks, liquidity risks and currency risks. (Re)financing risks The property portfolio can be financed partly with equity and partly with loan capital. A relative increase of loan capital in relation to equity can result in a higher return (so-called leverage), but also carries on increased risk. When returns from property fail and values decrease, a high rate of leverage carries the risk that interest and repayment obligations on loan capital and other liabilities can no longer be met. Financing with new loan capital then cannot be obtained or only at very unfavourable conditions. In order to continue to be able to meet the payment obligations, property must then be sold, which carries the risk that this cannot be achieved at the most favourable conditions. To limit this risk, VastNed Retail s principle is to limit loan capital financing to approximately 40 45% of the market value of the property. This principle may temporarily be deviated from in case of interesting acquisition opportunities and an acceptable interest rate in relation to the yield of the property. In addition, VastNed Retail aims to secure access to the capital market through transparent information provision, regular contacts with financiers and (potential) shareholders, and by increasing the liquidity of the VastNed Retail share. Finally, with regard to long-term financing, a balanced spread of refinancing dates and a weighted average duration of at least 5.0 years are aimed for. Liquidity risks VastNed Retail must generate sufficient cash flows in order to be able to meet its daily payment obligations. This risk is limited on the one hand by the measures stated under operational risks, which limit the risk of cash flow disruption due to for instance vacancy or tenant bankruptcy. On the other hand, VastNed Retail must have sufficient credit facilities at its disposal to compensate fluctuations in liquidity needs. To this end, cash flow prognoses are made daily. In addition, VastNed Retail has secured sufficient credit facilities from its financiers to absorb fluctuations. In order to make use of those credit facilities, the conditions of the credit facilities must constantly be met. Compliance with these conditions is carefully monitored, and once per quarter a report is drawn up. Interest rate risks Due to the financing with loan capital, return also becomes dependent on interest rate developments. In order to limit this risk, in the composition of the loan portfolio a ratio of one-third short-term loan capital (with floating interest) and two-thirds long-term loan capital (with fixed interest) is aimed for. Depending on the developments of the interest rate, this principle can be temporarily deviated from. Furthermore, within the long-term loan capital portfolio a balanced spread of the interest rate review dates and a typical minimum interest rate duration of 3 years is sought. At least once per quarter a report is drawn up on the interest rate and refinancing risks. During 2006 a number of interest rate swaps were entered into in order to limit the interest rate risk in the future. As an indication of the sensitivity to the interest rate, a 1% increase of the interest rate as per January 1, 2007 would increase VastNed Retail s interest expenses for 2007 by approximately 2.3 million. Currency risks In principle, currency risks are limited as a result of the strategic choice to invest primarily in the eurozone. The newly selected countries Turkey and Rumania are not (yet) part of the eurozone, so that investments in those countries do carry a currency risk. The risks will be limited as much as possible by limiting the size of the portfolio in those countries to a maximum of 10% of the total portfolio, and by attempting to agree payment of rents in euros or American dollars, and by financing in the same currency as the investment so that the exposure is considerable reduced. In the latter case, the dollar risk will be hedged as far as possible. 111

114 Risk management Compliance risks These include the risks that legislation and regulations are not or incompletely complied with and that employees do not act with integrity. VastNed Retail endeavours to limit this risk by creating adequate awareness of this risk among employees within the organisation and by having adequate knowledge of changes to applicable legislation and regulations, supported by an internal company lawyer and external legal advisors. In addition, VastNed Retail performs annual checks, inter alia by using a self-assessment procedure as included in the contribution model of the Authority for the Financial Markets (AFM) regarding compliance with relevant legislation and regulations. In order to guarantee an in-house culture of integrity, VastNed Retail has an internal code of conduct in place as well as a whistleblowers code in place. Employees must indicate annually whether they have complied with this code of conduct. The aspect of integrity is also part of the procedure concerning recruitment of staff. As indicated above, VastNed Retail devotes a great deal of attention to risk management. However, VastNed Retail is an organisation of limited size, which is spread across various countries. Activities in the areas of financing, cash management, taxation, legal affairs, IT, research, budgeting and budgetary control are executed at group level in Rotterdam, which also benefits the local country organisations. VastNed Retail does not have a separate internal audit department. In everyday practice the informal character of the organisation is relied on. In view of the limited complexity of daily transactions and the short internal communication lines, we consider this to be acceptable in terms of risk management. 112

115 Property portfolio 2006

116 Investment properties in operation Country City Location Netherlands Type of property Alkmaar Laat Shop Payglop 6 Shop Payglop 14 Shop Almelo Grotestraat Shop Grotestraat 32 / Hof van Gülick 10 Shop Grotestraat 35a-37 Shop Grotestraat 36 Shop Grotestraat Shop Grotestraat 97a / Koornmarkt 3-5 and 9-11 / Werfstraat 1 Shop , Amersfoort Achter de Kamp 92 Shop , Arnhemsestraat Shop Julianaplein 7-10 Shop , Langestraat 8 Shop Amsterdam Bos en-lommerweg ) Shop Buikslotermeerplein ) Shopping centre Buikslotermeerplein 123 1) Shopping centre , Ceintuurbaan 133 Shop Ferdinand Bolstraat 65 Shop Ferdinand Bolstraat 79 Shop Ferdinand Bolstraat 81 Shop Ferdinand Bolstraat 88 Shop Ferdinand Bolstraat 92 / G. Flinckstraat 118 Shop Ferdinand Bolstraat / 1 e Jan v.d. Heydenstraat 88a and 90 Shop Ferdinand Bolstraat 101 Shop Ferdinand Bolstraat 109 Shop Ferdinand Bolstraat 120 / 1 e Jan v.d. Heydenstraat 88 Shop Ferdinand Bolstraat 122 Shop Ferdinand Bolstraat 124 Shop Ferdinand Bolstraat 126 Shop Heiligeweg 47 Shop Jan Evertsenstraat 100 Shop Jan Evertsenstraat 106 Shop Jan Evertsenstraat 108 Shop Kalverstraat 9 Shop Kalverstraat Shop Kalverstraat 182 Shop Kalverstraat 208 Shop Kinkerstraat 115 1) Shop Leidsestraat 5 Shop Leidsestraat / Kerkstraat 44 Shop Osdorpplein ) Shopping centre Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) 114

117 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Osdorpplein and ) Shopping centre , Paleisstraat 21 Shop Reguliersbreestraat 9 / Amstel 8 Shop Reguliersdwarsstraat Shop Rembrandtplein 7 1) Shop Van Baerlestraat 86 Shop Van Baerlestraat Shop Apeldoorn Adelaarslaan / Talingweg 54 Shopping centre , De Eglantier 409 Shop Deventerstraat 5 Shop Deventerstraat 6 Shop Deventerstraat 14-14b Shop Arnhem Bakkerstraat 3a and 4 / Wielakkerstraat 8 Shop Bakkerstraat 6 Shop Koningstraat / Beekstraat 105, Shop , Koningstraat / Beekstraat 98 / Klarestraat Shop , Looierstraat Shop Rijnstraat 23 / Varkensstraat 34 Shop Vijzelstraat 24 Shop Assen Gedempte Singel / Mulderstraat 8 Shop Baarn Brinkstraat 34 Shop Bemmel Dorpsstraat 31 and 31a-e / Kloosterplaats 1 / Dr Poellstraat 1 Shop , Bennekom Dorpsstraat 8 Shop Bergen op Zoom Wouwsestraat 48 Shop Beverwijk Breestraat 11 Shop Nieuwstraat 9-11 / Breestraat 65 Shop , Bilthoven Julianalaan 53 Shop Bodegraven Kerkstraat Shop Boxmeer Hoogkoorpassage and 22 Shop Steenstraat 110 / D n entrepot Shop Boxtel Rechterstraat Shop Stationstraat Shop Breda Eindstraat Shop Ginnekenstraat 3 Shop Ginnekenstraat 19 Shop Ginnekenstraat 80-80a Shop Grote Markt 29 / Korte Brugstraat 2 Shop Karnemelkstraat 14 Shop Karrestraat 25 Shop

118 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Ridderstraat 19 Shop Torenstraat 2 / Korte Brugstraat 14 Shop Veemarktstraat 30 Shop Veemarktstraat 32 Shop Brielle De Reede ) Shopping centre , Brunssum Kerkstraat 45 / Schiffelerstraat 1 Shop Bussum Havenstraat / Kapelstraat 2 Shop Kerkstraat 1 / Brinklaan Shop , Nassaulaan 12 / Nassaustraat 1a and 1g Shop Nassaustraat Shop Veerstraat 11 and 11d Shop Capelle a/d IJssel De Wingerd Shopping centre , Lylantse Baan 7 Retail warehouse , Coevorden Friesestraat 14 / Weeshuisstraat 9 Shop Culemborg Everwijnstraat 6-14 / Markt 53 Shop Dalfsen Van Bloemendalstraat 6-8 / Wilhelminastraat 5 Shop Dedemsvaart Julianastraat Shop , Delft Hippolytusbuurt 1 / Nieuwstraat Shop Markt 23 Shop Oude Langendijk 2 Shop Oude Langendijk 11 Shop Wijnhaven 9 / Oude Delft 92 Shop Deventer Brink 95 / Spijkerboorsteeg Shop Lange Bisschopstraat 7 Shop Lange Bisschopstraat Shop Lange Bisschopstraat 34 Shop Lange Bisschopstraat 50 Shop Didam Hoofdstraat 5-7 Shop Oranjestraat 6-10 Shop Dinteloord Raadhuisplein 7-9 Shop Doetinchem Dr. Huber Noodstraat 2 Shop , Korte Heezenstraat 6 / Heezenpoort and 21 Shop Nieuwstad Shop , Terborgseweg 27 Shop Doorwerth Mozartlaan / van der Molenallee Shopping centre , Dordrecht Voorstraat 262 Shop Voorstraat 276 / Vriesestraat 1 Shop Voorstraat 305 Shop

119 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Voorstraat 341 Shop Voorstraat 343 Shop Drachten Zuidkade 2 Shop Ede Molenstraat Shop Eerbeek Stuyvenburchstraat 44 Shop Stuyvenburchstraat 141 Shop Eindhoven Franz Leharplein 3 Shop Franz Leharplein 5-7 / Willaertplein Shop Frederiklaan / Schootsestraat Shop , Orionstraat Shopping centre , Rechtestraat 25 Shop Rechtestraat Shop , Shopping centre Woensel 113 Shopping centre Woenselse Markt Shop Elst Kleine Molenstraat 6 Shop Emmeloord Lange Nering 65 Shop Lange Nering 92 Shop Enschede Boulevard 1945 nr. 372 Shop , Dotterbloemstraat 10 Shop Haverstraatpassage 14 Shop Kalanderstraat 6 Shop Langestraat 9-17a / Achter het Hofje 2 Shop , Raadhuisstraat 9 Shop Ermelo Stationsstraat Shop Geldermalsen Geldersestraat 15 Shop t Hooghuys 1-6 Shop Goes Lange Kerkstraat 9 Shop Goor Grotestraat and 63 Shop Gouda Hoogstraat 5 Shop Kleiweg Shop , Kleiweg 103 / Regentesseplantsoen Shop Markt 52 Shop Groesbeek Spoorlaan 1 Shop , Groningen Brugstraat 2-6 / Schuitemakersstraat 1 Shop Dierenriemstraat 198/2 Shop Herestraat 41 Shop Stoeldraaierstraat 17 Shop Vismarkt 31 and 31a-c Shop

120 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Zwanestraat 22 Shop Zwanestraat Shop Haaksbergen Spoorstraat 45 Shop Haarlem Gen. Cronjéstraat / Kloosterstraat 10 Shop Grote Houtstraat 90 Shop Hardenberg Fortuinstraat 6-6a / Middenpad 3-7 Shop Fortuinstraat 21 Shop Voorstraat 10 Shop , Harderwijk Markt 14 Shop Shopping centre Vuldersbrink Shopping centre , Harlingen Kleine Bredeplaats 8a-10a / Grote Bredeplaats 26-26b Shop Voorstraat 71 Shop Harmelen Dorpsstraat and 154a-f Shop , Heemstede Binnenweg Shop Binnenweg 167 / Binnendoor 1-13 Shop Binnenweg 181 / Binnendoor 6 Shop Heerde Dorpsstraat Shop , Heerlen Akerstraat 20 Shop Saroleastraat 38 Shop Helden Panningen Kepringelehof 3-5 and 9-11 Shop , Helmond Markt / Veestraat 2a Shop , Veestraat 1 Shop Veestraat 39 Shop Hengelo De Telgen 9 Shop Marktstraat 2-6 Shop Molenstraat 4 Shop Wegtersweg 4 Retail warehouse , s-hertogenbosch Hinthamerstraat 48 / Hinthamerpromenade 48 Shop Hoge Steenweg Shop Schapenmarkt Shop Hillegom Hoofdstraat 66 Shop Hilversum Kerkstraat 55 Shop Kerkstraat 87 Shop Kerkstraat 91 Shop Kerkstraat 98 Shop Schoutenstraat 6 Shop Schoutenstraat 8 Shop

121 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Hoensbroek Kouvenderstraat Shop Hoogeveen Hoofdstraat 157 Shop Hoogezand Gorecht Oost Shop Hoorn Grote Noord 114 Shop Grote Noord 118 Shop Nieuwsteeg 24 Shop Houten Onderdoor 3-13 Other , Shopping centre Het Rond 2) Shopping centre , ,965 Joure Midstraat Shop , Kerkrade Hoofdstraat 13 Shop Krimpen a/d IJssel Brink 1-7 Shop , Leek Tolberterstraat 3-5 Shop Leeuwarden Ruiterskwartier 127 Shop Ruiterskwartier 135 Shop Wirdumerdijk 7 / Weaze 16 Shop Leiden Botermarkt 4-5 Shop Haarlemmerstraat 53 Shop Haarlemmerstraat Shop Haarlemmerstraat 202 / v.d. Werfstraat 39 Shop Haarlemmerstraat 208 / Duizenddraadsteeg 2 Shop Haarlemmerstraat 213 Shop Haarlemmerstraat 218 Shop Haarlemmerstraat 239 Shop Korevaarstraat 2e-f Shop Maarsmansteeg 2 Shop Vismarkt 2-3 Shop Leidschendam Berkenhove 9 Shopping centre Eglantier 9 Shopping centre Eglantier Shopping centre Rozemarijnhof 7 Shopping centre Weigelia Shopping centre Lelystad Stadhuisplein 75 1) Shop , Stadhuisstraat 2 1) Shop Stadhuisstraat 68 1) Shop Leusden Grutterij 6 Shopping centre Maastricht Muntstraat 16 Shop Muntstraat Shop Wolfstraat 8 / Minckelersstraat 1 Shop

122 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Meppel Hoofdstraat 50 Shop Hoofdstraat Shop Middelburg Korte Delft 1 Shop Lange Delft 59 Shop Middelharnis Westdijk Shop Mijdrecht Prinses Margrietlaan Shopping centre , Neede Oudestraat / Es 26a Shop Nijkerk Oosterstraat 2-2a and 4-4a Shop Nijmegen Broerstraat 26 / Scheidemakershof 37 Shop Broerstraat 70 / Plein 1944 nr. 151 Shop , Houtstraat 35 / T. Brandsmastraat 1-3 Shop Molenstraat / Piersonstraat Shop , Molenstraat 136 Shop Molenstraat 140 / 1 e Walstraat 2 Shop Plein 1944 nr. 2 Shop Oldenzaal Bisschopstraat 37-37a Shop Oosterhout Arendshof Shopping centre Arendstraat 9-11 Shop Arendstraat 13 Shop Oss Heschepad / Molenstraat Shop , Kerkstraat 8 Shop Oudenbosch Prof. van Ginnekenstraat 35 Shop Prof. van Ginnekenstraat 40 / Kade 4 Shop Purmerend Hoogstraat 19 / Zuidersteeg 16 Shop Kaasmarkt 7 / Westersteeg 1 Shop Padjedijk 4 / Barak 1 Shop Padjedijk 6-8 Shop Renkum Dorpsstraat Shop Ridderkerk St. Jorisplein 30 Shop Rijswijk Herenstraat Shop Roden Heerestraat 94 Shop Roermond Hamstraat / Veldstraat 19 Shop , Schoenmakersstraat 2 Shop Steenweg 1 / Schoenmakersstraat 6-18 Shop , Roosendaal Nieuwe Markt 51 Shop

123 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Rotterdam Beijerlandselaan / Slaghekstraat 60 Shop Groene Hilledijk 217 / Meerdervoortstraat Shop Groene Hilledijk 218 Shop Keizerswaard 73 Shopping centre Korte Hoogstraat 15 Shop , Korte Hoogstraat / Soetensteeg 1 Shop Lijnbaan Shop Noordmolenstraat Shop Westblaak 27 Shop Zuidplein Hoog 587 Shopping centre Zuidplein Hoog 611 Shopping centre Zuidplein Hoog 731 Shopping centre Zwart Janstraat 4 Shop Zwart Janstraat 8 Shop Zwart Janstraat 24 Shop Zwart Janstraat 34 Shop Zwart Janstraat Shop Zwart Janstraat Shop Zwart Janstraat Shop Zwart Janstraat 63 Shop Zwart Janstraat Shop Zwart Janstraat 72 Shop Zwart Janstraat 84 Shop Zwart Janstraat 136 Shop Scheveningen Keizerstraat 183 Shop Schiedam Broersvest Shop s-gravelandseweg and ) Shop Hof van Spaland 35 1) Shopping centre Hof van Spaland 36 1) Shopping centre Hof van Spaland 40 1) Shopping centre Hoogstraat 93 Shop Schoonhoven Lopikerstraat Shop Schoorl Heerweg 3-5 / Duinvoetweg 2-4 Shop , Sittard Bergerweg Retail warehouse , De Kemperkoul Shopping centre , Sliedrecht Kerkbuurt 148 Shop Sneek Oosterdijk 58 Shop Schaapmarktplein 4 Shop Soest Dillenburglaan 2 / Van Weedestraat Shop , St.Oedenrode Heuvel 32 Shop Stadskanaal Europaplein 3 Shop Europaplein 20 Shop

124 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Europaplein 53 Shop Europaplein 60 and 73 Shop Navolaan 12 Shop Steenwijk Oosterstraat Shop The Hague Dierenselaan 11 Shop Dierenselaan 161 Shop Fahrenheitstraat Shop Frederik Hendriklaan Shop Frederik Hendriklaan 128 / v. Beuningenstraat 48 Shop Gravenstraat 1 Shop Grote Markt 4 Shop Herengracht 40-40a Shop Hoogstraat Shop Hoogstraat 27-27a Shop Korte Poten 10 Shop Korte Poten 13 Shop Korte Poten 42 Shop Korte Poten 46 / Bleyenburg Shop Lange Poten 7 Shop Lange Poten 21 Shop Noordeinde 9 / Hartogstraat 1 Shop Noordeinde Shop Noordeinde 48 Shop Noordeinde 54 / Molenstraat 1 Shop Plaats 17 and Shop Plaats 25 Shop Plein 10 Shop Plein 11 Shop Spuistraat 13 Shop Venestraat 43 Shop Vlamingstraat 43 Shop Tiel Waterstraat 29 / Kerkstraat 2b Shop Waterstraat 51a Shop Tilburg Heuvel / J. v. Stolbergstraat 2-6 Shop Westermarkt and Shopping centre , Westermarkt 38 Shopping centre , Westermarkt Shopping centre Uden Marktstraat 32 Shop St. Janstraat 60 Shop Utrecht Achter Clarenburg 19 Shop Choorstraat 13 Shop Lange Elisabethstraat 6 Shop Lange Elisabethstraat 36 Shop Nachtegaalstraat 55 Shop , Oudegracht Shop Oudegracht / Vinkenburgstraat 8 and Shop , Oudegracht 153 Shop

125 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Oudegracht 161 Shop , Rijnlaan 6 Shop Roelantdreef 249 1) Shopping centre Steenweg 9 / Choorstraat 9-9bis Shop Vaassen Dorpsstraat 22 Shop Veenendaal Hoofdstraat 25 Shop Hoofdstraat / Tuinstraat Shop , Schoolstraat Retail warehouse , Veghel Kalverstraat 8-16 Shop Velp Hoofdstraat Shop Venlo Lomstraat Shop Lomstraat 33 Shop Vleesstraat 74 Shop Venray Grotestraat 2-4 / Grote Markt 2a-4 Shop , Vianen Voorstraat 84 Shop Vlaardingen Hoogstraat 165 Shop Voorburg Herenstraat Shop Voorschoten Schoolstraat 30 Shop Vriezenveen Westeinde Shop , Wageningen Stadsbrink 2-42 and Shopping centre , Wassenaar Langstraat Shop Winschoten Langestraat 22 / Venne 109 Shop Langestraat 24 Shop Winterswijk Dingstraat 1-3 Shop , Misterstraat 8-10 / Torenstraat 5a-c Shop Misterstraat 12 / Torenstraat 5b Shop Misterstraat 14 Shop Misterstraat 33 Shop Misterstraat / Tuinstraat Shop Weurden 2-4 Shop Wooldstraat 26 Shop Woudenberg Voorstraat 26 Shop IJmuiden Lange Nieuwstraat Shop IJsselstein Utrechtsestraat 75 Shop

126 Country Property portfolio 2006 City Location Type of property Zaandam Gedempte Gracht 37 / Rozengracht 90 Shop Gedempte Gracht 80 / Vinkenstraat 41 Shop Westzijde Shop , Zeewolde Flevoplein 1-6 Shopping centre , Kerkplein 23 / Torenstraat 3 Shop Kerkstraat 6-18 Shop Torenstraat 6-8 Shop Zeist Scheeperslaan 1 and 1a-c / Steijnlaan 24-24a Shop Slotlaan 194 / Huydecoperweg 9a Shop Zierikzee Dam 12 Shop Verre Nieuwstraat 2-4 Shop Zoetermeer Lijnbaan Shopping centre , Zuidhorn Hoofdstraat 21 / Overtuinen 4-16 Shop , Zundert Markt 16a and Shop , Zutphen Beukerstraat 28 Shop Beukerstraat 40 Shop Zwolle Broerenstraat 7 Shop Diezerstraat 62 Shop Diezerstraat 78 Shop Kleine A / Broerenkerkplein 2-6 Shop , Luttekestraat 26 / Ossenmarkt 1a Shop Roggenstraat 3 Shop Roggenstraat 6 Shop Total investment properties in operation the Netherlands 271, ,371 46,669 Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Spain Alicante Parque Vistahermosa Other , ,400 4,987 Badalona Centro Comercial Montigalá Passeig Olof Palme Shopping centre , ,618 3,787 Barcelona Ronda de Universidad 35 Shop 2000 < Burgos Centro Comercial El Mirador Carretera de Santener km. 2,5 Shopping centre 99/ , ,500 1,889 Castellón de la Plana Calle Grecia 4 Retail warehouse ,

127 Country Property portfolio 2006 City Location Type of property Léon Avenida Ordoño II, no. 18 Shop 2001 < Madrid Calle Tetuân 19 / Calle Carmen 3 Shop 2002 < Calle Serrano 36 Shop 1999 < Centro Comercial Getafe III Avenida Juan Carlos I, 1 Shopping centre , ,200 3,754 Centro Comercial Las Rosas Avenida Guadalajara s/no Shopping centre 99/ , ,800 4,160 Centro Comercial Madrid Sur Avenida Pablo Neruda Shopping centre , ,500 5,347 Calle de Fuencarral 23 Shop 2006 < Calle de Fuencarral 25 Shop 2006 < Malaga Centro Comercial La Rosaleda Avenida Simon Bolivar Shopping centre , ,200 4,566 Murcia Centro Comercial Las Atalayas C/Molina de Segura s/no Shopping centre 99/ , ,222 2,807 Total investment properties in operation Spain 141, ,440 33,880 Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) France Agen Boulevard de la République 36 Shop 2001 < Alençon Rue de la Cave aux Boeufs 1-7 / Rue de Cygre 12 Shop 2001 <1950 2, Amiens Rue des Trois Cailloux 7-9 Shop 2000 < Angers Rue d Alsace 9 Shop 2001 < Rue Lenepveu Shop , Annecy Rue Vaugelas 22 Shop 2001 < Arras Rue Ernestale Shop Besançon Grande Rue 22 / Place Pasteur 3 Shop 2001 < Boulogne-sur-Mer Rue Adolphe Thiers 29 Shop 2001 < Bourges Rue Mirebeau 14 Shop 2001 < Rue Mirebeau 16 Shop 2001 < Brest Rue de Siam 70 Shop 2000 < Cannes Rue d Antibes 40 Shop 2000 < Carcasonne Place Carnot 16 Shop 2001 < Chambéry Place Saint-Léger 228 Shop 2001 <

128 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Charleville-Mézières Rue de la République Shop 2001 < Chaumont Rue Victoire de la Marne Shop 2001 <1950 1, Dax Rue des Carmes 7-9 Shop 2001 < Dieppe Grande-Rue Shop 2001 < Dijon Rue du Bourg 39 bis / Rue Jules Mercier 20 bis Shop 2001 < Dunkirk Centre Commercial Centre Marine Place Emile Bollaert 1) Shopping centre , ,961 Frouard Rue de Bois 12 Retail warehouse , Grenoble Grande Rue 11 Shop 2001 < Rue des Clercs 18 Shop 2001 < Laval Rue du Général de Gaulle 41 / Rue de Rennes 14 Shop 2001 < Limoges Centre Commercial Beaubreuil Place de Beaubreuil Shopping centre 01/ , Centre Commercial Carrefour Limoges-Corgnac Shopping centre , ,319 Lyon Rue Victor Hugo 5 Shop 2001 < Mâcon Rue Carnot 111 / Rue Rameau 39 and Shop 2001 < Rue Philibert Laguiche / Place aux Herbes Shop 2001 <1950 1, Marseille Rue Saint Ferréol 29 Shop Nancy Rue Saint-Jean Shop , ,779 Nice Route de Grenoble 604 Retail warehouse , Avenue Jean Médecin 8 bis / Rue Gustave Deloye 5 Shop 2001 < Paris Boulevard Saint-Germain 104 Shop 1998 <1950 1, Rue d Alésia 123 Shop Rue Montmartre 17 Shop Rue de Rivoli Shop 1998 <1950 3, ,784 Plaisir Centre Commercial Plaisir-Sablons Shopping centre , ,816 Roanne Rue Bourgneuf 18 / Passage Bourgneuf 7 / Rue de Charles de Gaulle Shop 2001 <1950 1, Saint Étienne Rue Saint-Jean 27 Shop 2001 < Soissons Rue Saint-Martin 57 Shop 2001 < Thoiry Centre Commercial Val Thoiry Shopping centre , ,

129 Country Property portfolio 2006 City Location Type of property Thonon-les-Bains Rue des Arts 16 Shop 2001 < Toulon Rue de Jean Jaures 82 / Rue Racine 11 Shop 2000 <1950 1, Troyes Rue Émile Zola 113 / Rue Larivey 1-3 Shop Rue Émile Zola 117 / Rue Larivey Shop 2001 < Valence Rue Victor Hugo 25 / Rue Pasteur 1-3 Shop 2001 < Vichy Rue Georges Clemenceau 12 / Rue Ravy-Breton 2 Shop 2001 <1950 1, Total investment properties in operation France 87, ,212 20,178 Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Belgium 3) Aalst Albrechtlaan 56 1) Retail warehouse 2000 >1980 1, Nieuwstraat 10 Shop 1998 < Aartselaar Antwerpsesteenweg 13/4 Retail warehouse 2000 > Andenne Avenue Roi Albert 39 Retail warehouse 1999 >1980 4, Ans Rue de Français 393 Retail warehouse 1999 >1980 3, Antwerp Abdijstraat 29 Shop 1995 < Abdijstraat Shop 1995 < Breydelstraat 33 Shop 2000 < Carnotstraat Shop 2000 <1950 1, De Keyserlei 47 Shop 2000 < De Keyserlei 49 Shop 2000 < Frankrijklei 27 Shop 1993 < Groendalstraat 11 Shop 2000 < Huidevettersstraat 12 Shop 1994 < Korte Gasthuisstraat 27 Shop 2000 < Leysstraat 17 Shop 2000 < Leysstraat Shop 1997 <1950 1, Meir 99 Shop 1996 < Schuttershofstraat 24 / Kelderstraat 7 Shop 2000 < Schuttershofstraat 30 Shop 2000 < Schuttershofstraat 32 / Arme Duivelstraat 2 Shop 2000 < Balen Molsesteenweg 56 Retail warehouse 1999 >1980 1, Bastogne Route de Marche 104 Retail warehouse 1999 > Beaumont Rue G. Michiels 40 Retail warehouse 1998 >1980 1, Boechout Hovesesteenweg Retail warehouse 2002 >1980 1,

130 Property portfolio 2006 Country City Location Type of property Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Borgloon Sittardstraat 10 Retail warehouse 1999 > Bree Toleikstraat 30 Retail warehouse 1999 > Bruges Steenstraat 80 Shop 1998 <1950 2, Brussels Elsensesteenweg 16 Shop 1996 <1950 1, Elsensesteenweg Shop 1998 <1950 5, ,263 Leuvenseweg Retail warehouse 1999 >1980 2, Louizalaan 7 Shop 2000 < Nieuwstraat 98 Shop 2001 < Charleroi Rue de la Montagne 5-7 Shop 2001 < Chênée Rue de la Station 23 Retail warehouse /80 2, Diest Hasseltsestraat 15 Shop 1998 < Dilsen-Stokkem Rijksweg 17 nr. 770 Retail warehouse 1999 > Flémalle Rue de la Fabrique 6 Retail warehouse 2002 >1980 2, Froyennes Rue des Roselières 6 Retail warehouse 2000 > Genk Guillaume Lambertlaan 115 Retail warehouse 1999 >1980 3, Hasseltweg 74 Retail warehouse 2002 >1980 2, Ghent Veldstraat 81 / Zonnestraat 6-10 Shop 1998 <1950 3, Volderstraat 15 Shop 1993 < Grivegnée Rue Servais Malaise Retail warehouse 2002 >1980 2, Hasselt Genkersteenweg 76 Retail warehouse 1999 >1980 1, Genkersteenweg 282 Retail warehouse 2000 >1980 2, Heusden-Zolder Inakker Retail warehouse 2002 >1980 1, Hoboken Zeelandstraat 6-8 Retail warehouse 2002 >1980 2, Kampenhout Mechelsesteenweg Retail warehouse 1999 >1980 3, La Louvière Rue Albert 1 er Shop 2000 < Leopoldsburg Lidostraat 7 Retail warehouse 1999 >1980 1, Leuven Bondgenotenlaan Shop 2001 <1950 1, Liège Rue Pont d Ile 35 Shop 1998 < Rue Pont d Ile 45 Shop 1998 < Rue Pont d Ile 49 Shop 1998 < Malmédy Avenue des Alliés 14b Retail warehouse 1999 >

131 Country Property portfolio 2006 City Location Type of property Mechelen Bruul Shop 2000 < Bruul Shop 2001 <1950 1, Yzerenleen 30 Shop 1998 < Merksem Bredabaan Shop / Messancy Route d Arlon 199 Other , ,529 Rue de l Institut 44 Retail warehouse 1999 >1980 1, Moeskroen Petite Rue 18 Shop 1998 < Mons Chaussée de Binche 101 Retail warehouse 2000 >1980 1, Grand Rue 19 Shop 2000 < Rue de la Chaussée Shop 1998 < Mortsel Statielei Shop / Olen Lammerdries 6 Retail warehouse /80 13, Overpelt Burgermeester Misottenstraat 3 Retail warehouse 2002 > Philippeville Rue de France Retail warehouse 1999 >1980 3, Schelle Provinciale Steenweg Retail warehouse 99/02 >1980 2, Scherpenheuvel Mannenberg 26 Retail warehouse 1999 > Sint-Job-in- t-goor Handelslei 10 Retail warehouse 2002 > Tielt-Winge Aarschotsesteenweg 1-6 Retail warehouse 99/02 > , ,484 Tienen Slachthuisstraat 36 Retail warehouse 2002 >1980 4, Turnhout Gasthuisstraat 5-7 Shop 2001 <1950 1, Gasthuisstraat 32 Shop 1996 <1950 1, Vilvoorde Leuvensestraat / Nowélaan 41 Shop 1998 < Luchthavenlaan 5 Retail warehouse 1999 >1980 6, Mechelsesteenweg 30 Retail warehouse 1999 >1980 8, Waterloo Chaussée de Bruxelles 284 Retail warehouse /80 1, Waver Rue du Commerce 26 Shop 1998 < Rue du Pont du Christ 46 / Rue Barbier 15 Shop 1998 < Wilrijk Boomsesteenweg Retail warehouse /80 1, Boomsesteenweg Retail warehouse 2000 >1980 4, Total investment properties in operation Belgium 168, ,676 Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) 129

132 Country Property portfolio 2006 City Location Type of property Portugal Barcelos Rua Porta Nova 41 Shop 2002 < Braga Avenida Central Shop 2002 < Lisbon Rua Damiao de Gois 41 Shop 2002 < Rua do Carmo / Rua do Ouro 287, 291, Shop 2002 <1950 1, Rua Morais Soares 93 Shop 2002 < Porto Marq. de Pombal 152 Shop 2002 < Praça Mouzinho de Alburquerque Shop 2002 < Rua de Brito Capelo 160 Shop 2002 < Rua Santa Caterina Shop 2002 < Year of acquisition Year of construction/ renovation Lettable floor space (sqm) Number of tenants Number of apartments Number of parking spaces Theoretical rental income (x 1,000.-) Total investment properties in operation Portugal 3, ,040 Total investment properties in operation 672,049 1, , ,443 1 Land on long lease. 2 VastNed Retail holds a 50% interest. 3 All Belgian properties are held by Intervest Retail, in which VastNed Retail has a 72% interest as at year-end

133 Property portfolio 2006 Notes to the property portfolio in operation Theoretical rental income as at December 31, 2006 (including turnover rent, mall income and other) relates to full occupancy. In the Netherlands, virtually all lease contracts are concluded for a five-year period, granting the tenant the option of renewing the lease by another five years. Annual rent increases are based on the cost-of-living index; In Spain virtually all lease contracts are concluded for a minimum period of five years. Annual rent increases are based on the cost-of-living index. In France, lease contracts are normally concluded for a period of 9 or 12 years, the tenant having the option of terminating or renewing the lease every 3 years. Annual rent increases take place based on the construction cost index, unless agreed otherwise. In Belgium lease contracts are normally concluded for a period of 9 years, with a mutual termination option after 3 and 6 years. Annual rent increases are based on the cost-of-living index. In Portugal there are two kinds of lease legislation. Under the old legislation lease contracts are concluded for an indefinite period and can only be terminated by the tenant. The new legislation has regulations similar to those in Spain, meaning that lease contracts are usually concluded for a period of five years and that annual rent increases are based on the cost of living. These rules are being applied more and more, especially for internationally oriented tenants. Appraisers CBRE in Amsterdam Cushman & Wakefield in Amsterdam, Brussels, Madrid and Paris Jones Lang LaSalle in Lisbon and Madrid Kroese en Paternotte in Amsterdam Retail Consulting Group in Paris 131

134 Other investment properties Investment properties under renovation Country City Location Belgium Olen Lammerdries 6 Retail warehouse Type of property Year of completion Lettable floor space (sqm) Investment (x 1 million) Net initial yield Investment properties in pipeline Country City Location Type of property Year of completion Lettable floor space (sqm) Investment (x 1 million) Net initial yield Netherlands Houten De Spil Shopping centre , % Roermond Retail Park Roermond Retail warehouse , % Belgium Tongeren Julianus Shopping centre , % 132

135 Key figures property portfolio (in operation) Netherlands Spain France Belgium Portugal Total Number of tenants 1) ,898 Ten largest tenants (in %) Theoretical annual rent (x 1 million) Market rent 2) (x 1 million) Over/underrent (in %) Average occupancy rate (in %) Occupancy rate at year-end (in %) Rent-free periods/rent discounts (in %) Number of properties Investments properties in operation (x 1 million) ,710 Investments properties in operation (in %) Average size of property (x 1 million) Gross yield (in %) Net yield (in %) Lettable floor space (x 1,000 sqm) Lettable floor space (in %) Sector spread (in %) Shopping centres Retail warehouses High street shops Other Average rent per sqm (x 1) Shopping centres Retail warehouses High street shops Other Regional spread per country (in %) Super cities Large cities Medium-sized cities Small cities Industry spread (in %) Non-food Food Living and leisure Other Average occupancy rate (in %) Shopping centres n.a. n.a Retail warehouses n.a High street shops Other n.a n.a n.a Excluding apartments and parking spaces. 2 Including other income (leasing public areas shopping centres).

136