Sonae Sierra SGPS, SA Lugar do Espido Via Norte Apartado Maia Portugal

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1 Sonae Sierra SGPS, SA Lugar do Espido Via Norte Apartado Maia Portugal Tel (+351) (+351) Geral (+351) FAX (+351) SONAE SIERRA Consolidated Financial Statements - 1 st Half 2005 INTRODUCTION Sonae Sierra Net Consolidated Profit (after minority interests) reached 40 million for the first six months of 2005, an increase of 24% compared to the same period of last year. In consolidated terms, Sonae Sierra ended the first six months of 2005 with Direct Profits of million, which represent an increase of 48%, compared with the first six months of Indirect profits were million, an increase of 44% compared with the same period of last year. This growth was basically due to the increase in value of assets owned as result of a general decrease in yields in Spain and Portugal. All of Sonae Sierra s real estate fixed assets were independently valued at Open Market Value (OMV) as at 30 June 2005, and totalled 3,646 million ( 3,341 million as at 31/12/2004), of which 2,236 million ( 1,908 million as at 31/12/2004, an increase of 17%) are controlled by Sonae Sierra. On a like-for-like basis, the attributable value increased by 5%. As of June , the NAV per share ( Net Asset Value ) of the attributable property portfolio stood at ( as of 31/12/2004), an increase of 8%. MAIN EVENTS DURING THE FIRST HALF OF 2005 The main events during the first half of 2005 were the following: February: Change of name from Sonae Imobiliária to Sonae Sierra, associated with a repositioning of the company, based on a set of values - Innovative, Modern e Spirited and a greater involvement with its different stakeholders, and sustained by the multi-cultural activity and strong international expansion strategy that it is currently implementing. March: Opening on 15 March of the Plaza Éboli Shopping Centre (Pinto-Madrid). This Shopping Centre represents an investment of 56.1 million, in partnership with the Éroski Group, with 101 stores and a Gross Lettable Area (GLA) of 32,030m 2. The promotion of this Shopping Centre is being undertaken by Sonae Sierra (65%) and the Éroski Group (35%). The Plaza Éboli is the eleventh Shopping Centre of Sonae Sierra in Spain and the second in the Madrid region after Avenida M40. Share Capital ; Commercial Registry Nº Maia 2252 A; Fiscal Numes Pág. 1 / 16

2 April: The Sierra Fund announces that an agreement has been signed for the acquisitions of two Shopping Centres. One was the Shopping Centre Valecenter, located in Marcon (Venice), with a GLA of 54,800 m² and a hypermarket owned and operated by Carrefour as the anchor store. The entertainment complex has Warner Village Multiplex cinema as anchor with twelve cinemas and a GLA of 11,700 m². The second was the Shopping Centre Airone, located in Monselice (Padova), with a GLA of around 16,200 m² and the supermarket Cityper as anchor store. Acquisition of the shareholdings of the Eroski Group in the Shopping and Leisure Centres: Dos Mares (Múrcia), Luz del Tajo (Toledo), Plaza Éboli (Madrid) and Avenida M40 (Madrid). It was an operation that had already been planned in agreements made between the two companies in which, after the development and opening of these centres, Sonae Sierra could acquire the shareholding of the Eroski Group in them within two years of their opening to the public. With this investment, amounting to 99.3 million, Sonae Sierra now owns 100% of all these centres, through the acquisition of the 40% shareholding held by the Eroski Group in Avenida M40 (Madrid) and the 35% held by Eroski in the remaining three shopping centres: Dos Mares (Murcia), Luz del Tajo (Toledo) and Plaza Éboli (Madrid). Sonae Sierra has won various Awards from the International Council of Shopping Centres (ICSC): Estação Viana won the Louvor prize, while six merit prizes were won in the marketing area. May: Publication of the first Sonae Sierra Corporate Responsibility Report. With 410 million visitors to its Shopping Centres each year and more than 6,100 contracts with tenants across the world, this report arises out of the company s recognition of the significant impact of its activities on the environment, the economy and local communities, and with a view to responding to our stakeholders concerning transparency and disclosure. Ceremony to hand over store keys to tenants at Mediterranean Cosmos, in Thessalonica, the first Shopping and Leisure Centre in Greece, the opening of which is planned for 19 October. June: The inauguration of LoureShopping, in Loures, was announced for October 27. Also, promotion of the key handing over ceremony to tenants was carried out. Page. 2 / 16

3 Sale to the SIERRA Fund of 50% of Principado (Oviedo, Spain) for 131 million and 100% of Dos Mares (Murcia, Spain) for 39.3 million. The SIERRA Fund and Miller Development sold Coimbra Retail Park to the Scottish Widows Fund, for 19.3 million. BUSINESSES SIERRA INVESTMENTS In the first half of 2005, the performance of Sierra Investments shopping centres continued above expectations despite the slow economic recovery, due to a general fall in yields that led to an increase in the valuation of assets owned. Portugal Sonae Sierra is the owner (or co-owner) of 14 Shopping Centres in Portugal, with a total of 631,550 m2 of GLA. During the first half of 2005, the total rental income of these centres was 76 millions, an increase of 3,9%, compared to the same period of This increase was due to a positive movement in fixed rents as a result of contract renegotiations with tenants. Spain Sierra Investments is the owner (or co-owner) of 11 shopping centres, with a total of 478,490 m2 of GLA. During the period, total rental income increased by 54.2% compared to the same period of This increase is explained by: the increase in the property portfolio (Luz del Tajo (Toledo), Zubiarte (Bilbau) and Plaza Éboli (Madrid); the fact that the results for Dos Mares (opening in April 2004) and Avenida M40 (opening in May 2004) were included for the entire first six months of 2005 (they opened in the middle of the first half of 2004); and by the increase in the occupancy rate of the more recent Shopping Centres. On a like for like basis, total rental income increased by 5.3%. Italy In Italy, Sierra Investments is owner of 2 Shopping Centres with a total GLA of 82,700 m2: Valecenter (Marcon) and Airone (Monselice). This acquisition was the first step of Sierra Investments in the Italian market, being part of Sonae Sierra s internacionalization policy. Italy is one of the company s target markets for developing new shopping centres. Page. 3 / 16

4 SIERRA DEVELOPMENTS Portugal LoureShopping (Loures), currently under development by Sierra Development and with planned opening on 27 October, represents an investment of around 67 million. With a GLA of 38,630 m2, this Centre is the first Shopping Centre in Portugal to have been awarded environmental certification during the construction phase (ISO 14001) and to have included in its surface area a Leisure Garden of 52,000 m2. The official opening of Serra Shopping (Covilhã) is planned for November This new shopping centre, owned 100% by Sierra Developments, which is the result of an expansion plan of Modelo in Covilhã, represents an investment of 28 million and will have a total of 89 stores with a GLA of 17,830 m2. The future shopping and leisure centre RioSul Shopping (Seixal), owned and promoted by Sonae Sierra, is planned for opening in the spring of This innovative building represents an investment of 65.3 million, and with a GLA of 40,000 m2 constitutes a decisive step towards modernising the shopping and leisure offer in the South Tejo region. RioSul was also awarded environmental certification for the construction phase. Setúbal Retail Park is the third investment of this kind by Sonae Sierra in Portugal, in partnership with Miller Developments. It is forecast that this investment will total around 23 million. Sonae Sierra won a public tender offer for the purchase of land in S. João da Madeira for the construction of a shopping and leisure centre. This centre represents an investment of around 49 million with a GLA of around 17,500 m2. Construction is planned to commence in March 2006 with opening expected in the autumn of Spain In Malaga, we expect to begin construction of Plaza Mayor Shopping during the second half of 2005, immediately after obtaining a construction licence. This project, in partnership with Castle Management (75/25), represents an investment of 45 million with 18,600 m2 of GLA. An agreement was made with the Town Council of Ponferrada for the construction of the Las Médulas shopping and leisure centre. This project, in partnership with Mall Inversiones (70/30), will represent an investment of 110 million, with 49,400 m2 of GLA. Page. 4 / 16

5 Italy We expect to begin construction of Freccia Rossa (Brescia) in the second half of the year, immediately after obtaining a construction licence. This project represents an investment of 114 million, in partnership with AIG (40%) and Coimpredil (10%) while Sonae Sierra will own 50% of the Centre. With a GLA of 29,530 m2 and 130 stores, opening is planned for the spring of The future shopping and leisure centre Caselle, located in an area next to Turin airport, is a project wholly owned by Sonae Sierra, will represent an investment of 248 million and will be one of the largest in Italy with a GLA of 85,705 m2. The start of construction is dependent on obtaining the necessary licences. The third investment in Italy, a shopping and leisure centre in Biella, arose as a result of a partnership with NovaCoop, and should represent an investment of 72 million. The new complex with opening planned for the second half of 2007, will have a GLA of 35,000 m2, including a hypermarket operated by Nova Coop with 13,500 m2. Sonae Sierra and ING Real Estate Development have established a partnership (50/50) for the promotion of a new shopping and leisure centre in La Spezia, with opening planned for the autumn of With a GLA of 38,000 m2 and representing an investment of 130 million, the centre will have a hypermarket operated by Coop Liguria as its main anchor store. Germany Construction and commercialisation continued of the modern Alexa Shopping Centre in Berlin. This partnership with the Foncière Euris Group (50/50) is a project involving an investment of 266 million and a GLA of 54,650 m2. The Centre is expected to be completed in the autumn of Construction work should begin at 3DO in Dortmund during 2006, immediately following the finalisation of an agreement with Deutsche Bahn. With a total investment of 272 million, this centre will have a GLA of 63,340 m2 Greece The shopping and leisure centre Mediterranean Cosmos in Thessalonica will open to the public on October 19, and has been developed as a partnership between Sierra Charagionis (39.9%) and LAMDA Developments (60.1%). This centre represents an investment of 100 million, will have a GLA of 46,560 m2., and is an important step in Sonae Sierra s international expansion plan, since it is the first shopping and leisure centre of the company in Greece. Through Sierra Charagionis, - the company set up for the joint-venture with the Charagionis Group (50/50) efforts continue to obtain the necessary licences to promote and build the Page. 5 / 16

6 Aegean Park, in Athens. This shopping and leisure centre represents an investment of around 152 million and GLA of 53,000 m2. SIERRA MANAGEMENT The Management business is currently setting up management structures in Greece and Germany and strengthening them in Italy, in order to respond to the constant increase in the portfolio under management and commercialisation. The business now manages contracts covering 1,725 thousand m2 of GLA. Portugal During the first six months of 2005, Sonae Sierra managed 932 thousand m2 of GLA, equal to 3,390 tenant contracts. The commercialisation of LoureShopping and RioSul began while 90% of Serra Shopping was already sold. This portfolio performed well, receiving more than million visits, while sales reached 893 million increasing by 4.2%. The occupancy rate of the portfolio was 96.1%. Spain During the first half of 2005, Sonae Sierra began management of Plaza Éboli (Madrid). The portfolio under management now consists of 12 shopping centres and 2 galleries. Sierra Management currently manages leasing contracts in 574 thousand m2 of GLA. Performance was positive during the first six months with a 42.8% increase in sales and 30.7% increase in visits. On a like-for-like basis, sales increased by 7.8% while occupancy reached 92.3%. Italy During the first half of 2005, Sonae Sierra began management of 2 Shopping Centres, Valecenter e Airone, and strengthened its management structure in this country. Valecenter is a shopping centre in the Marcon region (Venice), with a catchment area of 1 million people. Airone is located in Moselice (Padova), with a catchment area of 143 thousand people. Together, these two shopping centres represent an effective increase in GLA of 82,700 m 2. Page. 6 / 16

7 GLA in Italy now totals 219 thousand m 2, more than double the GLA of the same period last year. The business now manages 322 contracts. SONAE SIERRA BRASIL In Brazil, Sonae Sierra Brasil is owner (or co-owner) of 7 shopping and leisure centres, equal to a total of 245 thousand m2 of GLA. During the six months, total rental income from the Brazilian portfolio increased by 21.9% in Reais, compared to the same period last year. On a like-for-like basis, growth was 18.8%. The Brazilian business manages 1,221 contracts with tenants. The portfolio received 35,3 million visits (an increase of 20.6% over the same period of last year), with sales of more than R$ million ( million) an increase of 31.2% (in Reais) comparing with the same period of last year. On a like-for-like basis, visits increased by 10.8% and sales increased by 23.1%. The occupancy in this portfolio reached 82.3%. Exercising due prudence and caution, Sonae Sierra will continue to analyse other investment opportunities in the Brazilian market. Page. 7 / 16

8 FINANCIAL POSITION AND RESULTS Consolidated Financial Performance The Company closed the first half of 2005 with Direct Income from Investments of 99.7 million, compared to million in the first half of 2004, an increase of 19%. EBITDA reached 56.7 million compared to 46.2 million in the first six months of 2004, an increase of 22.6%. EBITDA was positively influenced by: 1) the openings of Luz de Tajo, Zubiarte and Plaza Éboli in Spain, reflecting the increase in total rental income; 2) the renewal of contracts with tenants in some Shopping Centres in Portugal; and 3) the increase in rental income in Brazil due to an increase in the occupancy rate at Parque D. Pedro, the contribution of Boavista Shopping and the opening of the Penha Shopping expansion. Indirect Profit totalled million, equal to an increase of 44% compared to the same period of last year. The Value created on investments was 54.5 million, of which: 1) 48.1 million relates to the value created by shopping and leisure centres already operating at the end of 2004; 2) 9.6 million to shopping and leisure centres opened during the first half of 2005; and 3) -3.9 million resulting from the acquisition price difference on Eroski shareholding in the Spanish centres. The property gains are related to the sale of Coimbra Retail Park to Scottish Widows and of Dos Mares to the Sierra Fund. Net profits before minority interests were million compared to 49.9 million in the first half of Minorities include the 49.9% minority interest of the Sierra Fund. Analysis of the consolidated Balance Sheet demonstrates the continued sound financial position of Sonae Sierra. Gearing (measured as net indebtedness as a percentage of total assets less cash and equivalents) was 34.4% as of June 2005, a very comfortable percentage for this type of business Page. 8 / 16

9 Sonae Sierra Consolidated Profit and Loss Account 1 st semester 1 st semester ( 000) % 05/04 Direct Income from Investments ,1% Operating costs % Other costs % Direct costs from investments % EBITDA ,6% Depreciation % Recurrent net financial costs % Direct profit before taxes % Corporate tax % Direct profit % Realized on properties % Value created on investments % Indirect income % Deferred tax % Indirect profit % Net profit before minorities % Attributable to : Equity holders % Minority interests % Sonae Sierra Consolidated Balance Sheet Var ( 000) (05-04) Investment properties Properties under development and others Goodwill Deferred taxes Other assets Deposits Total assets Net worth Minorities Bank loans Shareholder loans from minorities Deferred taxes Other liabilities Total liabilities Net worth, minorities and liabilities Page. 9 / 16

10 Management Financial Statements by business (un-audited) We resent pro-forma financial statements (un-audited) by business in accordance with International Accounting Standards (IAS). Sierra Investments This business contributed 42.3 million to Consolidated Profits compared to 27.8 million in the first six months of 2004, an increase of 52%. Retail operating income increased compared to the same period of last year, mainly due to the increase in the portfolio of Sonae Sierra (Luz del Tajo, Zubiarte and Plaza Éboli, Dos Mares e Avenida M40, all shopping centres located in Spain), the increase in the occupancy rates of new Shopping Centres in Spain and the renewal of tenant contracts in some Shopping Centres in Portugal. EBITDA totalled million, a 20% increase compared with same period of last year. Financial costs increased by 41% compared to the first half of 2004, due to the increase in the portfolio in 2004 and 2005 and the refinancing of the Vasco da Gama and NorteShopping Shopping Centres (both in Portugal). The property gains are result of price adjustments made between Sierra Developments and Sierra Investments for the transactions of assets to the Sierra Fund. Value created on properties amounted to 57.1 million during the period compared to 26.7 million in the same period of 2004, a result of a general fall in yields in Spain and Portugal, leading to an increase in OMVs of the assets owned. Page. 10 / 16

11 Sierra Investments Profit & Loss Account 1 st semester 1 st semester ( 000) % 05/04 Fixed rental income % Turnover rental income % Key-money % Other income % Retail operating income % Property management services % Letting & promotion % Capital expenditure % Other costs % Retail operating costs % Retail operating margin % Parking operating margin % Co-generation operating margin % Shopping centre net operating margin % Offices operating margin % Overheads % EBITDA % Depreciation and Provisions % Recurrent net financial costs/(income) % Non-recuring costs/(income) % Direct profit before taxes % Corporate tax % Direct profit % Gain on sale of properties % Value created on properties % Indirect income % Deferred tax % Indirect profit % Net profit before minorities % Attributable to : Equity holders % Minority interests % Sierra Investments Consolidated Balance Sheet Var ( 000) (05-04) Investment properties & others Goodwill Tenants Deferred taxes Other assets Deposits & short term investments Total assets Net worth Minorities Bank loans Shareholder loans Deferred taxes Other liabilities Total liabilities Net Worth, minorities and liabilities Page. 11 / 16

12 Sierra Developments This business made a positive contribution to Consolidated Profits of 5.2 million, compared to a loss of 296 thousand for the same period of last year. The positive performance shown by Sierra Developments in 2005 is due to the significant increase in value created on properties under development, and justified by the investments in projects under development and by the general decrease in yields. Sierra Developments Profit & Loss Account 1 st semester 1 st semester ( 000) % 05/04 Development services rendered % Operating costs % EBITDA (4.850) (5.731) 15% Depreciation and provisions % Net financial costs/(income) % Non-recuring costs/(income) (527) Direct profit before taxes (4.546) (6.207) 27% Corporate tax (872) (936) 7% Direct profit (3.674) (5.270) 30% Realized on investments (7.608) 62 - Value created on properties under development Indirect profit % Deferred tax (221) Net profit before minorities (357) - Attributable to : Equity holders (296) - Minority interests (1) (62) 98% Sierra Developments Consolidated Balance Sheet Var ( 000) (05-04) Properties under development Tenants Other assets Deposits Total assets Net worth Minorities Bank loans Shareholder loans Deferred taxes Other liabilities Total liabilities Net worth, minorities and liabilities Page. 12 / 16

13 Sierra Management This business contributed 1.7 million to Consolidated Profits compared to 2.6 million in the same period of last year. Total income increased 9% compared to the first half of 2004, due to the increase in the portfolio of Shopping Centres under management and commercialisation, and the renewal of contracts with tenants in some Shopping Centres in Portugal. On the other hand, operating costs increased by 16%, due to investment in setting up management structures in Greece and Germany and strengthening them in Italy, which justifies the decrease in results in the period, comparing with last year. Sierra Management Profit & Loss Account 1 st semester 1 st semester ( 000) % 05/04 Property management fees % Letting fees % Other income % Income from prop. management services % Operating costs % EBITDA % Depreciation % Net financial costs/(income) (388) (373) -4% Non-recuring costs/(income) % Profit before taxes % Corporate tax % Net profit before minorities % Attributable to : Equity holders % Minority interests % Sierra Management Consolidated Balance Sheet Var ( 000) (05-04) Net fixed assets Goodwill Tenants Deferred taxes Other assets Deposits Total assets Net worth Minorities Shareholder loans Other liabilities Total liabilities Net worth, minorities and liabilities Page. 13 / 16

14 Sonae Sierra Brasil Sonae Sierra Brasil comprises the Development, Investment and Property Management businesses in Brazil. Retail operating income amounted to 7.5 million, an increase of 22% compared to the same period of last year, due mainly to the expansion of Penha Shopping in the fourth quarter of 2004 and an increase in occupancy rates at Parque D.Pedro and Boavista Shopping. Operating profits of Shopping Centres increased from 3.7 million to 4.6 million, an increase of 25% compared to the first half of Net financial costs fell, compared to last year, since in 2004 a withholding tax on interests on equity in Parque Dom Pedro was treated as a cost. The Value created on properties was negative for the first half of 2005, totalling 8.2 million, as a result of valuation adjustments of Parque D. Pedro ( 6.5 million), Boavista Shopping ( 1.2 million) and Penha Shopping São Paulo ( 700 thousand). Sonae Sierra Brasil Profit & Loss Account 1 st semester 1 st semester ( 000) % 05/04 Fixed rental income % Turnover rental income % Key-money % Other income % Retail operating income % Property management services % Letting & promotion services % Other costs % Retail operating costs % Parking operating margin (11) (3) -235% Shopping centre net operating margin % Income from project development services % Income from property management services % Income from services rendered % Overheads % EBITDA % Depreciation % Provisions % Net financial costs/(income) % Non-recuring costs/(income) % Direct profit before taxes (430) - Corporate tax 410 (763) 154% Direct Profit % Value created on properties (8.249) Value created on properties under development 0 (1.836) - Indirect income (8.249) Deferred tax (11.104) Indirect profit (222) - Net profit before minorities Attributable to : Equity holders Minority interests % Page. 14 / 16

15 Sonae Sierra Brasil Consolidated Balance Sheet Var ( 000) (05-04) Properties investments under development Tenants Deferred taxes Other assets Deposits Total assets Net worth Minorities Bank loans Shareholder loans Deferred taxes Other liabilities Total liabilities Net worth, minorities and liabilities Maia, 6 September The Board of Directors Belmiro Mendes de Azevedo Non-Executive Chairman Jeremy Henry Moore Newsum Non-Executive Director Neil Leslie Jones Non- Executive Director Page. 15 / 16

16 Ângelo Ribeirinho Paupério Non-Executive Director Benoit Prat-Stanford Non-Executive Director Álvaro Carmona e Costa Portela Chairman João Gonçalo Sassetti Pessoa Jorge Director José Edmundo Medina Barroso de Figueiredo Director Pedro José D Hommée Caupers Director Fernando Maria Guedes Machado Antunes Oliveira Director António José Santos Silva Casanova Director Page. 16 / 16