Contents. Annual Report 2006

Transcription

1 Annual Report 2006 Contents Key figures of past 5 years 2 Consolidated annual report of the Board of Directors of the Management Company 3 - Organisation, structure, decision-making entities 4 - Financial agenda 5 - Strategy outline 6 - Report to the shareholders 7 - Results 7 - Equity and debt 8 - Stock market development 8 - Important events occurred after the financial year 8 - Financial instruments 8 - Research and development 8 - Development of the property portfolio 9 - The Belgian property market 10 - Prospects 10 Portfolio summary 13 Description of the portfolio 14 Outline expansion shopping centres 16 Development projects 17 Real estate expert report 18 Consolidated annual accounts 2006 (contents) 23 - Consolidated balance sheet 24 - Consolidated income statement 25 - Consolidated statement of movements in equity 26 - Consolidated cash flow statement 27 - Notes to the consolidated annual accounts (1 to 33) 28 Auditors report 48 Pro forma balance sheet and income statement 52 Other information 56

2 Consolidated annual report and consolidated annual accounts 2006

3 Key figures past 5 years 1) Results (x R 1,000) Net rental income 21,805 20,874 21,201 21,830 22,958 Profit 41,375 19,357 22,271 28,688 44,088 Direct result 19,648 19,485 19,989 20,182 20,411 Indirect result 21, ,282 8,506 23,677 Balance sheet (x R 1,000) Investment properties² ) 303, , , , ,959 Development projects 6,847 Shareholders equity 320, , , , ,428 Number of shares 5,331,947 5,331,947 5,331,947 5,331,947 5,331,947 Fair value investment properties ² ) (x R 1,000) Retail 146, , , , ,275 Offices 157, , , , , , , , , ,675 Share data (x R 1) Direct result Indirect result Gross dividend Net dividend Net asset value before profit distribution Direct result per share Profit per share ) Figures before 2004 are based on Belgian GAAP. As from 2004, consolidated figures are based on IFRS; figures up to 2004 have been recalculated by adding realised and not realised gains or losses to the profit. ²) Fair value has been computed after deduction of the transaction costs incurred at the sales process; transaction costs contain mainly registration taxes of 10%-12.5%. The independent appraiser has carried out the valuation in conformity with International Valuation Standards and European Valuation Standards. Profit and dividend per share (x e 1 ) Share Price/net asset value at December 31 (before distribution of profit, x e 1) Dividend per share g Profit per share g g Net asset value g Share Price 0 0 Consolidated key figures 2006

4 Consolidated annual report of the Board of Directors of the Management Company 2006

5 General / Corporate Governance Organisation Wereldhave Belgium comprises an integrated organisation for the investment in and management of commercial property. Wereldhave Belgium has permanent access to reliable and up to date information on property markets, also in the international scope. This means that the company is in a position to react swiftly to changing circumstances. Structure Wereldhave Belgium has been a Real Estate Investment Fund (Sicafi) since January 15, The fund is governed by the Royal Decree of April 10, 1995 and June 21, 2006 and of the law of July 20, 2004 and is recognized as such by the Banking, Finance and Insurance Commission. The company has the fiscal status of a Real Estate Investment Fund and is, therefore, not subject to corporate tax, except on possible exceptional and favourable advantages and on rejected expenditures. Board of Directors The Board of Directors of the Management Company, Wereldhave Belgium, is composed of four members. Two are Executive Board members of Wereldhave N.V. and two have the legal position of Independent Director. In accordance with the Corporate Governance Charter, the independent directors watch, in particular, over the interest of all shareholders. The Board, presided by Mr. Benoit Graulich, met four times in Regular items on the agenda of these meetings were the company s results and asset performance, developments on the Belgian property markets, investments and disinvestments, financing and the dividend policy. The members of the Board were present at all meetings. Prior to the meeting of the Board of Directors, members of the Board receive all the documents to be treated as well as all the items on the agenda which need deciding. Wereldhave Belgium shares are traded at the Euronext continuous stock exchange in Brussels and are included in the Next Prime segment of Euronext. Wereldhave N.V., The Hague, held 68.2% of the shares directly or indirectly at December 31, Members of the Board of Directors do not derive any advantage in any other way from the activities of Wereldhave Belgium or its affiliated companies. The Board of Director members do not hold any shares or option rights in Wereldhave Belgium. No loans, advances or guarantees have been extended to the Board of Directors members by Wereldhave Belgium. Fortis Bank N.V. acts as deposit bank and ING Financial Markets as liquidity provider. In 2006 no business transactions took place between the members of the Board of Directors of the Management Company and the company. 4 Decision-making entities Management Company The company is managed by N.V. Wereldhave Belgium S.A. that acts as sole statutory Management Company. N.V. Wereldhave Belgium S.A. is a wholly-owned subsidiary of N.V. Wereldhave, Nassaulaan 23, The Hague, the Netherlands. The statutory management company is empowered to perform all actions deemed useful or necessary to fulfil the purpose of the sicafi except in matters which by law fall under the strict purview of the General Assembly of Shareholders. The Management Company is managed by the Board of Directors, which comprises a minimum of four natural persons. Composition Board of Directors G.C.J. Verweij (m, 61) Managing Director since 2005 Employed by Wereldhave since 1977 Manager Building Staff Department since 1981 Director Wereldhave Management Holding B.V. from 1982 Director Wereldhave N.V. from 1988 (chairman from 1994) J. Buijs (m, 41) Director since 2005 The annual remuneration of the Management Company is fixed on 55,000. Employed by Wereldhave since 2000 Head of Building Staff Department since 2000 Director Wereldhave Management Holding B.V. since 2005 Director Wereldhave N.V. from 2006 Consolidated annual report of the Board of Directors of the Management Company 2006

6 B. Graulich (m, 41) Director since 2001 and Chairman of the Board of Directors since 2005 Independent Director Board positions: Partner/Director of Bencis B.V. Omega Pharma, Sun Beverages Company a.o. B. De Corte (m, 62) Director since 1998 Independent Director Executive management The executive management is composed of the managing director and the manager of the management organisation. Deviations of the Corporate Governance Chapter with regard to the Code Lippens Comply or explain Composition of the Board of Directors/ Audit committee The manager s Board of Directors comprises four members, half of whom are independent directors within the meaning of the Belgian Corporate Governance Code. Consequently, the number of independent directors is not consistent with the recommendations in the Belgian Corporate Governance Code. The Board of Directors is anxious to have a limited number of Board members so as to guarantee the effectiveness of the deliberations and decision-making process. The limited number of Board members and of the audit committee is in keeping with the company s administrative simplicity, thereby helping to maintain the company s low cost structure. Term of the directors The term of the current directors runs for a period of six years. In conformity with Code Lippens, the term will be limited to four years as of P. Rasschaert (m, 47) General Manager Wereldhave Belgium since 2005 Audit committee The audit committee is composed of two independent members of the Board of Directors. It may ask for the assistance of the secretary of the company in order to fulfil its responsibilities. The audit committee s duty is to advise the Board of Directors about the functioning of the internal risk control and monitoring system, the communication of financial information of the company and the relationship with the auditor. In 2006, the audit committee, presided by Mr. Bernard De Corte, met two times. Corporate Governance Charter Wereldhave Belgium attaches great importance to achieving a balance between the interests of the providers of risk-bearing capital and those of other stakeholders in the company. Matters such as transparency, the adequate provision of forward-looking information and business ethics form a part of this philosophy. The recommendations of the Code Lippens were implemented per January 1, A detailed analysis in respect of each recommendation and best practice provision of the Corporate Governance Chapter can be found on our website. Appointments Committee/Remuneration Committee The Board of Directors has decided against setting up an Appointments Committee or a Remuneration Committee, thus Wereldhave Belgium is departing from the relevant recommendations in the Belgian Corporate Governance Code. The Board regards these tasks as those of the entire Board of Directors. As the limited number of Board members allows for an effective debate on these issues, the Board sees no need to create separate committees. Financial agenda April 11, 2007: Annual General Meeting of Shareholders April 20, 2007: Dividend payable May 9, 2007: First quarter results 2007 August 7, 2007: Half-year results 2007 November 6, 2007: Third quarter results 2007 March 2008: Annual Report 2007 Information Information is available from Wereldhave Belgium: Tel: investor.relations@wereldhavebelgium.com Website: 5 Consolidated annual report of the Board of Directors of the Management Company 2006

7 Strategy outline Mission and corporate aim The right accommodation at the right time and on the right spot Wereldhave Belgium s mission is to make available, when and where needed, the right type of commercial and residential property. Wereldhave Belgium offers an attractive yield combined with a low risk profile on its property portfolio. Strategy Portfolio renewal The end-user is Wereldhave Belgium s foremost consideration when making decisions on property investment. The strategic policy is to apply portfolio renewal for the optimal satisfaction of tenants changing demands. Wereldhave Belgium has a preference for investing in modern, adaptable and identifiable buildings in readily accessible locations in knowledge based areas, where there is a liquid property market. Wereldhave Belgium considers that this policy will engender both a continuous increase in earnings per share and an attractive growth in net asset value. In-house real estate management Through its in-house management, Wereldhave Belgium can recognise changes in the preferences of tenants, property maintenance requirements and marketability at an early stage and adopt a pro-active stance. This enables Wereldhave Belgium to react swiftly to the latest developments. The experience acquired by the management team clearly stimulates the portfolio renewal. Innovation and responsible corporate citizenship Wereldhave Belgium attaches great importance to durable innovative measures which lower total costs and raise tenant flexibility, while simultaneously relieving the pressure on the environment. Waste products will increasingly be taxed, making demolition and renovation increasingly expensive. Wereldhave Belgium anticipates this problem by applying its own environmental and durability criteria to the choice of materials and to its buildings energy and water requirements. Diversification by geographical area and type of property Wereldhave Belgium attempts to limit the risks of the cyclical property market. This is achieved both by geographical portfolio diversification between various Belgian locations and by investing in offices, shopping centres, industrial property and residential property. Shopping centers are preferred as future investments, complemented with other real estate. Diversification facilitates portfolio renewal. 6 Geographical breakdown (as a % of fair value) Geographical breakdown (as a % of fair value) Brussels g Brussels g Flanders g Wallonia g Vilvoorde g Berchem-Antwerp g Nivelles g Tournai g Liège g 9 11 Consolidated annual report of the Board of Directors of the Management Company 2006

8 Report to the shareholders Lettings and relettings In the office portfolio 17 new leases were signed in 2006 for a total area of 10,810 m². In retail a total of 6 new leases and 10 lease renewals were completed. The average increase in rents in the shopping centres amounted to 16%. The office market in the suburban area remained weak. Nevertheless, several contracts were signed during the 2nd half of 2006 confirming the quality of the property portfolio of Wereldhave Belgium. Portfolio In view of the expansion of the shopping centre in Tournai and of the proposed projects in Nivelles, Wereldhave Belgium acquired in June 2006 a plot of land of about 3 ha in Tournai ( 2.1 mln) and in October a plot of about 4.2 ha ( 6.8 mln) alongside the shopping centre in Nivelles. The sectoral diversification of the portfolio limits the risk within the portfolio. All three shopping centres represent a significant part of the portfolio. Due to the high demand for real estate, the valuation of the portfolio rose by 7.4% ( 23.7 mln). Results Profit The profit for 2006 rose to 44.1 mln (2005: 28.7 mln). This is the result of a higher positive revaluation ( 15.2 mln) and a higher operating result before result on the portfolio ( 0.2 mln). The profit consists of the direct and indirect result. Direct result The direct result of Wereldhave Belgium amounts to 20.4 mln (2005: 20.2 mln). This increase is the result of higher net rental income ( 1.1 mln) and higher property charges and general expenses ( 0.9 mln). This increase in costs is mainly due to a release of provisions in The direct result consists of the net result, adapted with the result on the portfolio. Indirect result The revaluation of the investment portfolio amounts to 23.7 mln (2005: 8.5 mln). On balance, this substantial increase is due to the positive revaluation of the investment property portfolio. During the year under review, no capital gains were realised. The indirect result is the result achieved primarily through realised and unrealised value increases of the property portfolio. Dividend In 2006 the direct result increased to 3.83 per share (2005: 3.79). A gross dividend for 2006 of 3.75 will be proposed to the General Meeting of Shareholders. Our strong-balance sheet enables us to continue with this high pay-out level. The dividend is payable at Fortis Bank, ING Bank and KBC Bank against delivery of coupon Guaranteed contracted rent compared to 2006 (as a %) Rental income vs. market rent (x e 1.000) Retail Offices g Rental income g Market rent Consolidated annual report of the Board of Directors of the Management Company 2006

9 Equity and Debt Shareholders equity at the end of 2006 before distribution of profit amounted to mln, i.e % of the balance total (2005: mln or 99.2 %). At December 31, 2006 the fair value of the portfolio investment properties amounted to mln, compared with at December 31, The increase of 29.1 mln net can be attributed to investments in buildings of 3.3 mln, the acquisition of a plot of land for an amount of 2.1 mln as part of the expansion of the shopping centre Les Bastions in Tournai and the positive revaluation of the portfolio of 23.7 mln. In accordance with the Royal Decree of June 21, 2006, the debt ratio on the total of assets to December 31, 2006, amounts to 2.6%. The disputed fiscal claim of 50.9 mln is not taken into account in the calculation. The total sum of the fiscal claim is guaranteed by Wereldhave NV, shareholder of Wereldhave Belgium. Important events occurred after the financial year After the year end no important events occurred which influenced the development of the company or the annual accounts of December 31, The Raadkamer / Chambre du Conseil decided on February 20, 2007 to postpone the case regarding the matter of a penal dispute arising from the sale of a company, later reclassified as a cash company, till March 23, 2007 (for more details, see note 29). Financial instruments The company does not make use of financial instruments. Research and development In view of the nature and specific activity of the company, no operations are connected to research and development. Stock market development In 2006, Wereldhave Belgium shareholders achieved a negative return (incl. dividend) of 13.0%. The price/direct result ratio at the end of 2006 was Share Price 2006 (x e 1 ) Breakdown of portfolio by age (as a % of fair value) jan feb march apr may june july aug sep oct nov dec g Offices g Retail < 5 years 5-10 years years Consolidated annual report of the Board of Directors of the Management Company 2006

10 Development of the property portfolio The shopping centres, Belle-Ile in Liège, Les Bastions in Tournai and the shopping centre in Nivelles maintain their status as popular shopping destination in their respective district. The combination of the following facilities: accessibility, free parking, safety, branche mix and animation, makes these shopping centres especially attractive. In the short/long term this guarantees added value to this kind of properties. Substantial rent increases were agreed during recent lease renewals. In accordance with Article 43 3, third line, of the Royal Decree of April 10, 1995 on Real Estate Investment Funds and in respect of the derogation granted to the sicafi upon its accreditation, from the prohibition to invest more than 20% of its assets under management in a single property, an extension has been approved by the Banking, Finance and Insurance Commission for the shopping centre Belle-Île until September 30, 2009, i.e. six months beyond the original deadline for reducing the share of assets under management invested in this project to below 20%. Wereldhave Belgium also wishes to emphasise that the rental risk associated with this project is spread over 99 commercial leases. Ultimo 2006, Wereldhave Belgium has a stake in the listed stock exchange real estate certificate Kortrijk Ring Shopping Centre of 16.2% (2005: 15.8%). The fair value amounted to 8.9 mln as per December 31, 2006 (2005: 8.2 mln). The average occupancy rate of the investment properties portfolio over 2006 amounted to 83.9% (2005: 82.9%). Due to an oversupply in the suburban area the vacancy rate end 2006 remains high. This concerns mainly the office building located at 28 Medialaan in Vilvoorde and those located at The Veldekens office park in Berchem-Antwerp. The value of the investment properties portfolio amounted to mln at December 31, Property valuation at 01/01/06 (in R) Retail 180,050,000 Offices 139,844, ,894,000 Property valuation at 31/12/06 (in R) Retail 202,275,000 Offices 147,400, ,675,000 Insured value of property portfolio at 31/12/06 (in R) Retail 137,417,530 Offices 126,531, ,948,879 Prospective theoretical rent (on the basis of 100% occupancy) for 2007 (in R) Retail 13,893,000 Offices 13,188,000 27,081,000 Average occupancy rate (as a % of rental income) Consolidated annual report of the Board of Directors of the Management Company 2006

11 The Belgian property market The Belgian economy grew 2.9% last year. Domestic demand largely boosted business activity. Household and business investment grew strongly and there was an increase in exports of goods and services as well. Despite strong economic growth, there was no reduction in unemployment. In 2007, economic growth in Belgium is expected to exceed 2%, i.e. somewhat above inflation. Gross take-up figures on the Brussels office market fell 10% in 2006 compared to average levels in previous years. Only in the Centre and Decentralised areas was there a decrease in vacancies. The most significant increases last year were in evidence in the Centre (13%) and Louise (8%) areas. In the Leopold area there was a slight rise for buildings of high quality. Rents reached 290/m²/y in 2006 despite higher vacancies, mainly in older buildings. Indeed, vacancies in the Leopold area have gone from 3.5% to almost 9% in the space of just a few years. Vacancies outside the CBD fell to 17%. Yields for new or prime offices in Brussels tightened up some more in 2006 and now vary between 5.8% in the Leopold area and 6.5% in the Suburbs. In Antwerp, rents are unchanged at 135/m²/y. Vacancies went up a trifle to 10.5%. Top yields are at 6.75%. Top retail rents on the Belgian high streets rose nearly 20% (Brussels Ghent). The highest applicable rents are still observed in Brussels (rue Neuve: 1,560/m²/y). Rents in suburban retail buildings rose up to 160/m²/y. Against the backdrop of sustained demand and low rents, commercial space yields dropped in 2006 to 4.50% on the high streets, 5.25% in shopping centres and 6.00% in suburban retail parks. Owing to sustained economic growth, business space was at a premium in Physical distribution space was in high demand, in particular in the vicinity of Zaventem airport and near the port of Antwerp as well as along major motorways. Top rents are charged near Zaventem and Hasselt ( 47/m²/y). Conversely, the highest rents for semi-industrial space fell 10% to 60/m²/y in the Brussels Region but remained stable at 40/ m²/y in Ghent and Liège. The lowest initial rents are presently accepted along the Brussels-Antwerp thoroughfares (about 7%). Wereldhave Belgium is working on a 9,800 m² expansion of the Nivelles shopping centre. The investment required amounts to approximately e 38.5 million. The work will start at the end of In anticipation of the construction work, the roof is being changed to make use of daylight and all technical installations are being renewed. In Tournai, too, the local shopping centre is being expanded. The plans, which are currently being detailed, provide for a 4,500 m² expansion of the shopping centre and a retailpark of 10,000 m². The investment volume for the expansion amounts to approximately e 40 million. Prospects In 2007 the management expects a positive development of the direct result and a higher offices portfolio occupancy rate. In this regard, various rental agreements were already signed by the end of 2006 (e.g. Olieslagerslaan in Vilvoorde and the offices in Berchem). Substantial rent increases were agreed during lease renewals in the shopping centres. The start of the expansion of the shopping centre in Nivelles is planned end Statutory Management Company N.V. Wereldhave Belgium S.A. B. Graulich, chairman B. De Corte G.C.J. Verweij J. Buijs Vilvoorde, February 21, Breakdown of portfolio by sector (as a % of rental income) Breakdown by sector (as a % of fair value) Catering g Food g Shoes/leatherwear g Ladieswear g Mens wear g Childrens wear g Mixed wear g Gifts g Interior decoration g Leasure and miscellaneous g Beauty & Bodycare g Services g Supermarkets g Financials g Multinationals g IT sector g Government g Offices g Retail g Consolidated annual report of the Board of Directors of the Management Company 2006

12 Real estate portfolio 2006

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14 Portfolio summary on December 31, 2006 Location Diversifi- Rentable Parking Number Rental Average cation area spaces of income occupaof the (in m 2 ) (number) tenants in 2006 tion 2006 portfolio (in E) (in % of (in % of rental valuation) income) Commercial Shopping Centre 4020 Liège 37 31,252 2, ,318, Belle-Ile ** 1 Quai des Vennes Shopping Centre 1400 Nivelles 11 19, ,728, Nivelles 18 Chaussée de Mons Shopping Centre 7500 Tournai 9 14,178 1, ,245, Les Bastions 22 Bd. W. de Marvis Winkelpand 4000 Liège 1 3, , Rue de l Université 84/86 Rue Cathédrale Offices Madou Center 1000 Brussels 11 12, ,748, Bischoffsheimlaan 302* Regent Brussels 2 3, , Regentlaan 49* Orion Centre 1000 Brussels 4 5, ,166, Bischoffsheimlaan 25* Jan Olieslagerslaan 1800 Vilvoorde 1 3, , J. Olieslagerslaan 29* Business- & Mediapark 1800 Vilvoorde 3 5, , Medialaan 201* Business- & Mediapark 1800 Vilvoorde 2 3, , Medialaan 120* Business- & Mediapark 1800 Vilvoorde 4 12, Medialaan 246* De Veldekens I 2600 Berchem 5 11, ,604, Roderveldlaan 368* De Veldekens II 2600 Berchem 6 16, ,150, Roderveldlaan 1,119* De Veldekens III 2600 Berchem 4 11, , Berchemstadionstraat * Total ,584 22,603, * archives ** concerning the risk of seizure of the shopping centre, see note 29. Portfolio 2006

15 Investment Properties Business- & Mediapark, 28 Medialaan, 1800 Vilvoorde Year of construction: 2002 Location: in the immediate vicinity of the Brussels Ring Road (exit 6) and the airport Rentable area: 12,743 m² offices Business- & Mediapark, Medialaan, 1800 Vilvoorde Year of construction: 1999 Location: in the immediate vicinity of the Brussels Ring Road (exit 6) and the airport Rentable area: : Medialaan 30: 5,495 m² offices Medialaan 32: 3,932 m² offices Office building 58 Boulevard du Régent, 1000 Brussels Year of construction: 1975 Renovation: 1997 Location: along the inner ring road, in the Art-Loi quarter Rentable area: 3,246 m² offices Madou Centre, 1-8 Boulevard Bischoffsheim, 1000 Brussels Year of construction: 1975 Renovation: 2002 Location: along the inner ring road, in the Art-Loi quarter Rentable area: 12,364 m² offices Hainaut Orion Centre, Boulevard Bischoffsheim, 1000 Brussels Year of construction: 1990 Location: along the inner ring road, in the Art-Loi quarter Rentable area: 5,205 m² offices 14 Les Bastions Shopping Centre 22 Boulevard Walter de Marvis, 7500 Tournai Year of construction: 1979 Renovation: 1996 Location: The Les Bastions shopping centre is situated along the ring road around Tournai Rentable area: 14,178 m² rentable floor area (including 2,997 m² retail warehouses). The shopping centre houses 58 shops Parking: 1,260 spaces

16 Office building Jan Olieslagerslaan, 1800 Vilvoorde Year of construction: 1998 Location: in the Business Class office park, just near the station of Vilvoorde Rentable area: 3,012 m² offices Veldekens I 1-2 Roderveldlaan, 2600 Berchem - Antwerp Year of construction: 2001 Location: alongside the Antwerp ring road Rentable area: 11,976 m² offices Brussels Brabant wallon Veldekens II Roderveldlaan, 2600 Berchem - Antwerp Year of construction: 1999 Location: alongside the Antwerp ring road Rentable area: 16,020 m² offices Namur Liège Veldekens III Berchemstadionstraat, 2600 Berchem - Antwerp Year of construction: 2002 Location: alongside the Antwerp ring road Rentable area: 11,192 m² offices Luxembourg 15 Shopping centre in Nivelles 18 Chaussée de Mons, 1400 Nivelles Year of construction: 1974 Renovation: 1995 Location: The Nivelles Shopping Centre is located on the outskirts of Nivelles, at the Nivelles-Sud exit of the E19 motorway between Brussels and Paris Rentable area: 19,501 m² rentable floor area (including 3,998 m² retail warehouses) The shopping centre houses 61 shops Parking: 802 spaces Belle-Ile Shopping Centre 1 Quai des Vennes, 4020 Liege Year of construction: 1994 Location: Belle-Ile is located to the Southeast of Liege, by the Autoroute des Ardennes - E25 Rentable area: 31,252 m² rentable floor area The shopping centre houses 99 shops Parking: 2,200 spaces

17 Outline expansion shopping centres Shopping centre in Nivelles Description The shopping centre is situated in Nivelles, between Brussels and Charleroi, alongside the motorway A7/E19. The existing centre is currently being renovated. Expansion of the shopping centre and upgrading of the existing façades will start end Size Existing shopping centre 15,503 m² ( excl. 4 commercial units), expansion 9,840 m 2 Sustainable items Energy-saving installations; collective heating and cooling system with separate heating pumps for each unit; special focus to the use of materials and routes for slow traffic. Investment E excl. VAT. Planning Renovation finished end of 2007, start of expansion end of 2007, finished «Les Bastions» shopping centre in Tournai Description A plot of land of 28,000 m² was acquired opposite the shopping centre. This allows an expansion of the existing shopping centre by approximately 4,500 m². On the plot of land purchased, an extension of the car park is planned, in combination with shops and a number of residential properties. Size Existing shopping centre 14,178 m 2, expansion by approximately 4,500 m 2 on existing car park, 10,000 m 2 retail, 500 parking spaces and approximately 26 residential properties. Sustainable items Subsequent planning will look at energy-saving measures, sustainable use of materials and a natural transition to the adjacent woodland. Investment > E excl. VAT. Planning Planning in 2007, preparation in 2008, construction in Portfolio 2006

18 Development projects Nivelles residential Description In Nivelles a plot of land by approximately 4.2 ha was acquired in order to realise an architectural master plan. Size A modern whole of about 250 apartments and 20 houses in a green surrounding will complete this project alongside the Chaussée de Mons. Sustainable items Subsequent planning will look at sustainable use of materials. Investment + E excl. VAT. Planning Planning in 2007, preparation in 2008, construction in Portfolio 2006

19 Real estate expert report Resolutions of the real estate expert TROOSTWIJK-ROUX C.V.B.A., prepared on December 31, 2006, following the valuation of the property portfolio at December 31, 2006, as referred to in article 56, paragraph 1, of the Royal Decree of April 10, 1995 with respect to real estate investment funds. Evaluation principles for the property portfolio The valuation has been carried out in conformity with IVS and EVS. Investment Properties Investment properties are valued at fair value. Fair value is based on the market rent minus the operating costs. To determine the fair value, the net capitalisation factor and the net present value of the difference between market rent and contractual rent, of forecasted vacancy and of necessary future investments are determined for each object. This value is reduced by the standard transaction costs (registration tax 10% %, estate agent s fees 1.2% and solicitor s fees 0.2%, i.e. 11.4% % in total). Property portfolio analysis 42% of the property holding consists of offices and 58% consists of commercial properties. At December 31, 2006 the fair value of the portfolio of Wereldhave Belgium amounted to 349,675,000 consisting of: Offices : E Retail : E Brussels, December 31, 2006 TROOSTWIJK ROUX C.V.B.A. Development portfolio The valuation of development portfolio is based on the cost price or the estimated lower fair value. The cost price includes the costs for contracted but not yet completed operations and capitalised interest. The value is based on an inspection carried out by one or more chartered surveyors, taking into account the location, construction type, zoning requirements and maintenance status at the time of assessment. The valuations are also based on data supplied by the client and/or third parties if necessary, which we assume to be correct. 18 Portfolio 2006

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22 Consolidated Annual Accounts 2006

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24 Consolidated Annual Accounts 2006 Contents Consolidated balance sheet at December 31, Consolidated income statement for Consolidated statement of movements in equity for Consolidated cash flow statement Notes to the consolidated annual accounts 1. General information Fiscal status Accounting policies Direct and indirect result Segment information Investment properties Development projects Other tangible assets Trade receivables and other non current assets Current financial assets Current receivables Cash and cash equivalents Share capital Change in fair value of financial assets and liabilities Loans Pension obligations Other long term liabilities Short term liabilities Securities Rental income Property charges General expenses Valuation differences Financial result Taxes on result Result per share Dividend Risks Claims Related Group companies Events occurred after the financial year Investment obligations Remuneration auditor 45 Consolidated Geconsolideerd Annual jaarverslag Accounts 2006

25 Consolidated balance sheet at December 31, 2006 (amounts x E 1.000) Notes Assets Non-current assets Investment properties 6 348, ,894 Development projects 7 6,847 Other tangible assets Trade receivables and other non-current assets 9 004, , , ,631 Current assets Current financial assets Financial assets available for sale Real estate certificates 10 8,936 8,197 Trade receivables Tax receivables and other current assets Cash and cash equivalents , , ,845 Total assets 0370, , Equity and liabilities Equity Shareholder s equity Capital , ,969 Reserves Reserves available for distribution 5,627 5,627 Result Retained result 81,355 72,662 Result of the financial year 44,088 28,688 Change in fair value of financial assets and liabilities On financial assets available for sale , , , ,824 Liabilities Non-current liabilities Pension obligations Other non-current liabilities 17 Rent guarantees received Current liabilities 18 Current financial debts Credit institutions 8,115 Trade debts Supplier 1, Other Taxes, salaries and social security Other Accrued charges and deferred income 001, , , ,417 Total equity and liabilities 0370, ,476 Equity per share (x 1) The consolidated annual accounts comprise the balance sheet, the profit and loss account, the statement of movements in equity and the cash flow statement together with the notes on pages 28 to 45. Consolidated Annual Accounts 2006

26 Consolidated income statement for 2006 (amounts x R 1.000) Notes Rental Income Rent 20 22,603 21,830 Rupture indemnities of rental agreements Net rental income 22,958 21,830 Recovery income of charges and taxes payable by tenants on let properties (+) 1,898 1,870 Charges and taxes payable by tenants on let properties (-).-2,093 0,-2, ,-353 Property result 22,763 21,477 Technical costs Commercial costs Property management costs ,-243 Property charges , ,-636 Property operating result 21,258 20,841 General costs 22 Staff costs Other Other operating charges , , ,099 Operating result before result on the portfolio 19,882 19,742 Gains or losses on disposals of other non financial assets 5 9 Change in fair value of the portfolio investment properties , ,506 Operating result 43,564 28,257 Financial income Interest charges Other financial charges ,-111 Financial result , 570 Pre-tax result 44,159 28, Corporate taxes ,-139 Taxes ,-139 Net result 0.44, ,688 Net result shares of the Group 0.44, ,688 Result per share Diluted result per share The consolidated annual accounts comprise the balance sheet, the profit and loss account, the statement of movements in equity and the cash flow statement together with the notes on pages 28 to 45. Consolidated Annual Accounts 2006

27 Consolidated statement of movements in equity for 2006 (amounts x E 1.000) Notes Shareholders Total Share Reserves Result Revaluation fair capital value of Toelichting financial assets Balance to January 1, ,969 5,627 92, ,231 Revaluation financial assets available for sale ,663 Profit book year 28,688 28,688 Other ,658 1,663 30,321 Dividend ,728-19,728 Balance to December 31, ,969 5, ,350 1, ,824 Balance to January 1, ,969 5, ,350 1, ,824 Revaluation financial assets available for sale a a Profit book year 44,088 44,088 44, ,599 Dividend 2005 bb -19,995-19,995 Balance to December 31, ,969 5, ,443 2, ,428 Notes 26 a Revaluation financial assets available for sale Real estate certificates Kortrijk Ring Shopping Centre b Dividend 2005 E 3,75 (net E 3,19) per share 0-19,995 The reserves can only be distributed by approval of the extraordinary general meeting of shareholders. The consolidated annual accounts comprise the balance sheet, the profit and loss account, the statement of movements in equity and the cash flow statement together with the notes on pages 28 to 45. Consolidated Annual Accounts 2006

28 Consolidated cash flow statement 2006 (amounts x E 1.000) Cash flow from operating activities Net result 44,088 28,688 Dividend received Result exclusive dividend received 43,595 28,250 Add: revaluation property -23, Movements in receivables 942 1,613 Movements in current liabilities * 0-22, ,862 Net cash flow from operating activities 0-20, ,388 Cash flow from investment activities Investments -12,074-4,221 Dividend received Net cash flow from investment activities -11,581-3,783 Cash flow from financing activities Credit institutions c/a 8,115 Dividend paid -19, ,728 * Net cash flow from financing activities 0-11, ,728 Net cash flow 0..-2, ,123 Cash and bank balances At January 1 3,135 6,258 Decrease cash and bank balances 0..-2, ,123 Balance at December ,135 * Reclassification dividend 2005 from Movements in current liabilities to Dividend paid 27 The consolidated annual accounts comprise the balance sheet, the profit and loss account, the statement of movements in equity and the cash flow statement together with the notes on pages 28 to 45. Consolidated Annual Accounts 2006

29 28 Notes to the consolidated annual accounts 1. General Information Wereldhave Belgium (the company) has the status of a Real Estate Investment Fund with fixed capital (sicafi). The company invests in offices, shopping centres, industrial property and residential property. Wereldhave Belgium has a preference for investing in modern, adaptable and identifiable buildings in readily accessible locations in knowledge based areas, where there is a liquid property market. The company is managed by the sole statutory Management Company, represented by the Board of Directors. The Board of Directors is composed of four members. Two are Executive Board members of Wereldhave N.V. and two have the legal position of Independent Director. The company quotes at the Euronext continuous stock exchange in Brussels and is included in the Next Prime segment of Euronext. Fortis Bank acts as deposit bank and ING Financial Markets as liquidity provider. The consolidated annual accounts are the result of the consolidation of Wereldhave Belgium with its only subsidiary company N.V. J-II. The consolidated annual accounts and consolidated annual report were approved of by the Board of Directors of the Management Company on February 21, The General Meeting of Shareholders will be held on April 11, 2007 at the registered offices of the company. The general Meeting of Shareholders is authorised to change the approbiation of the result within legal limits. 2. Fiscal status The company has the fiscal status of a Real Estate Investment Fund and is, therefore, not subject to corporate tax, except on possible exceptional and favourable advantages and on rejected expenditures. 3. Accounting policies 3.1. Basis of preparation The Group s functional currency is the euro and all transactions are presented in euro. The financial statements of Wereldhave Belgium have been presented in euros, rounded to the nearest thousand. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as approved by the EU. The consolidated financial statements and the company financial statements have been prepared on the historical cost basis, unless specified otherwise. Costs and loans issued and loans received are taken into account on amortised cost basis. Wereldhave Belgium has adopted IFRS rules and IFRIC interpretations applicable as of December 31, 2006, as approved by the EU. Wereldhave Belgium did not make use of any early application of any standards. The accounts have been prepared before distribution of profit. The consolidated balance sheet and the profit and loss account are established in accordance with the scheme applicable to all Belgian sicafis, in conformity with the Royal Decree of June 21, In 2006 a number of IFRS standards and interpretations became applicable. These new or adjusted standards and interpretations do not affect Wereldhave Belgium s report for the year This concerns the following standards and interpretations: Amendment to IAS 19, Actuarial gains and losses, group plans and disclosures, effective for annual periods beginning on or after 1 January The Group decided to retain its former accounting policy regarding the recognition of actuarial gains and losses; IAS 21 The effect of Changes in Foreign Exchange Rates: Amendment with regard to the inter-company loans in relation to net investment hedging; Amendment to IAS 39, Amendment to The fair value option, effective for annual periods beginning on or after 1 January This amendment does not have any impact on the classification and valuation of Wereldhave Belgium s financial instruments classified as at fair value through profit or loss prior to 1 January 2006 as the Group is able to comply with the amended criteria for the designation of financial instruments at fair value through profit and loss; IAS 39 Financial instruments, Recognition and Measurement: Amendment regarding the allowance of hedge accounting (cash flow hedges) on risks related to planned intra-group transactions. IFRIC 4, Determining whether an arrangement contains a lease, effective for annual periods beginning on or after 1 January This clause and current regulations to this respect do not have any influence on the classification of Wereldhave s leases and leasing income; IFRIC 9 Reassessment of Embedded Derivatives. This new interpretation gives further information with regard to embedded derivatives. Wereldhave Belgium has not chosen to early adopt the new standard IFRS 7 Financial Instruments: Disclosures, the amendment on IAS 1 with regard to the disclosure on capital. This new amendment to the standard is applicable on annual accounts commencing after January 1, Consolidated Annual Accounts 2006

30 3.2. Consolidation Subsidiaries are those entities, including special purpose entities, controlled by the company. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity. The financial statements of subsidiaries are included in the consolidated financial statements. Intra-group balances and unrealized gains and losses are eliminated. In case of control of less than 100 %, subsidiaries are consolidated on a 100 % basis. In these cases a minority share is shown in the balance sheet under equity as well as in the profit and loss account as a separate item. The purchase method is used to account for the acquisition of subsidiaries. The acquisition is measured at the fair value of the assets and liabilities at the date of acquisition. Re-measurement at subsequent balance sheet dates is based on fair value. As soon as control ceases to exist, subsidiaries are deconsolidated Investment property Investment properties are those properties which are held to earn rental income or for capital appreciation or for both. On acquisition, investment properties are recognised at cost, including transaction costs. Investment properties are stated at fair value at the balance sheet date. Fair values are based on the estimated amount for which a property could be exchanged on the date of valuation in an arm s length transaction Other tangible assets Property and equipment are stated at cost less depreciation. Depreciation is charged to the income statement on a straightline basis over the estimated useful lives of the assets: - Office furniture : 10 years - Equipment : 3-5 years - Cars (excl. residual value) : 4 years Gains and losses on disposal are recognised in the income statement Development projects Property that is being constructed or developed for future use as investment property is classified as a development project. Development projects are valued at cost or at estimated fair value if lower. Cost includes the works performed, the costs of staff directly related to technical supervision and project management on the basis of time spent, and capitalised interest costs on the basis of amounts spent and money market rates up to the date of completion. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount less costs to sell. Impairment losses are recognised in the income statement. Development projects are transferred to investment properties on the date of technical completion. Fair value is based on the capitalisation of market rents less operating costs like maintenance, insurances costs and fixed charges. The net capitalisation factor and the present value of the differences between market rent and contracted rent, of vacancies and of maintenance expenditure to be taken into account are calculated for each property individually. Transfer tax is deducted. After acquisition subsequent expenditure is added to the asset s carrying amount when it is probable that future economic benefits will flow to the entity. All other expenditure, such as repairs and maintenance, are charged to the income statement during the financial period in which they are incurred. The part property in own use is not significant and therefore not classified separately as property in own use. The portfolio is valued quarterly at fair value by an independent external valuer in conformity with International Valuation Standards and European Valuation Standards. Valuation differences are recognised in the income statement Trade receivables Trade receivables are recognised initially at fair value and valued on amortised cost basis, plus direct attributable transaction costs, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group company will not be able to collect all amounts due according to the original terms. The amount of the provision is the difference between the asset s carrying amount and the estimated future cash flows. The provision is recognised in the income statement Financial assets Financial assets will include items due after more than twelve months, unless mentioned otherwise. Financial assets are initially recognised at fair value, plus direct attributable transaction costs. Capital gains on disposals are accounted for under results on disposals. Acquisitions and sales are accounted for based upon transaction date. 29 Consolidated Annual Accounts 2006

31 Loans Loans issued and other receivables are taken into account, initially at fair value less transaction costs and subsequently on amortised cost basis. Movements are taken to the income statement under financial income and expenditure. Financial assets available for sale Financial assets available for sale are initially recognised at fair value plus direct attributable transaction costs and subsequently valued at market value. Valuation results are directly taken to the equity. Durable negative valuation results are taken to the profit and loss account under valuation results if market value is lower than market value and acquisition costs. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognized in equity are included in the income statement as results on disposal Employee benefit plans Defined contribution plans Defined contribution plans are pension schemes to which a group company makes a fixed annual contribution. The movement in obligations for defined contribution pension plans are recognised as an expense in the income statement. Defined benefit plans Defined benefit plans are pension schemes where participants can derive statutory benefits at the pension date. The net receivable or liability in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned for their service in the current and prior periods. That benefit is discounted to determine its present value and the fair value of any plan assets is deducted. Capitalised rent free periods and other leasing expenses These costs are initially recognised at cost and subsequently valued at amortised cost over the remaining term of the lease Cash and cash equivalents Cash and cash equivalents comprise cash balances and cash deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability. In markets where there is no deep market in such bonds, the market yields (at the balance sheet date) on government bonds are used Share capital Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction from the proceeds Provisions In accordance with IAS 37, a provision is recognised in the balance sheet when a legal or actual obligation would exist, as a result of a past event and when it is probable that an outflow of economic benefits will be required to settle the obligation Interest bearing debt Loans are initially recognised at fair value, less direct attributable transactions costs. Any difference between nominal and book value is recognised in the income statement over the period of the interest bearing liabilities on the basis of the effective interest per loan. The short term portion of loans outstanding to be repaid within twelve months is shown under current liabilities. Actuarial gains and losses arising from adjustments and changes in actuarial assumptions are recognised under financial income and expenditure, over the average remaining service period of employees, if and as far as the balance of these gains and losses exceeds 10% of the higher of the actuarial obligations or the value of assets Trade and other payables Trade and other payables are taken into account, initially at fair value less direct attributable transactions costs. Any difference between cost and book value is recognised in the income statement over the period of the issued amount. The short term portion of loans outstanding to be repaid within twelve months is shown under current liabilities. Consolidated Annual Accounts 2006

32 3.14. Leases A. If a group company is the lessee, operating and financial leases could occur: 1. Operating lease Leases in which substantially all risks and rewards of ownership are retained by another party, the lessor, are classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. 2. Finance lease Leases of assets where the group company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding obligations, net of finance charges, are included in long term liabilities. The interest element of the finance cost is charged to the income statement over the lease period. The investment properties acquired under finance leases are carried at their fair value. B. If a group company is the lessor, operating and financial leases could occur: 1. Operating lease Properties leased out under operating leases are included in investment property in the balance sheet. 2. Finance lease When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. When the present value of operational leases of a property equals its value, the property is reclassified to receivables financial leasing Revenue Rental income Rental income from investment property leased out under operating lease is recognised in the income statement on a straightline basis over the term of the lease. Lease incentives having the nature of rent free periods are recognised as an integral part of the rental income. The incentives are amortised over the term of the lease, limited to the first break of the lease. Amortizations are charged to rental income. Rental income does not include amounts charged to tenants in respect of common costs. Rental income is shown on an accrual basis. According to their nature, income from financial assets available for sale are recognised either as proceeds from interest or partial reimbursements Expenses Charges and taxes payable by tenants on let properties (+/-) These are shown on a gross basis when the property owner acts as a principal. In the presentation on a gross basis costs and charges are shown separately. Costs and charges are shown on an accrual basis. Property expenses The amount consists of operating cost for the account of the owner attributable to the accounting period, such as: technical costs charges and taxes of vacant properties insurance premiums property management commercial costs Commercial costs include the depreciation of expenditure in connection with a letting. The expenditure is depreciated over the term of the lease. Investment property depreciation charges are not recognised since investment properties are valued at fair value (see above under Investment properties). The fair value calculation takes into account technical and economical obsoles cence. General costs The amount comprises general costs attributable to the accounting period. Direct staff costs relating to property management are included in property expenses. Direct staff costs relating to supervising and monitoring development projects are capitalised on the basis of time spent Interest Interest comprises the total of interest attributable to the accounting period on loans, other debts, accounts receivable and cash and bank balances. Due to the amortised cost valuation of loans, interest will include interest addition to loans on the basis of effective interest rate per loan Corporate tax Income tax on profit and loss for a year comprises current tax. Current income tax is the expected tax payable or receivable on the taxable income or loss for the period using tax rates prevailing at the balance sheet date and any adjustment to taxation in respect of previous years. 31 Consolidated Annual Accounts 2006

33 3.19. Direct and indirect result Wereldhave Belgium presents results as direct and indirect results, enabling a better understanding of results. The direct result consists of rental income, general costs, other gains and losses and financial income and expense. The indirect result consists of the valuation results, results on disposals and other results not taken into account for the direct result. This presentation is not obligatory under IFRS (see note 4) Dividends Dividends are recognised as debts to shareholders in the year in which they are attributed Important assessments The company refers to notes 3.3, 3.6, 3.7, 3.10 and Segment reporting Segment reporting presents results, assets and liabilities primarily per region and secondarily per sector. Sectors reported are determined in accordance with the type of investment property, namely offices and shops. Segment results and assets include items directly attributable to these segments. Unallocated items comprise mainly financing and other unattributable items such as overheads. 32 Consolidated Annual Accounts 2006

34 4. Direct and indirect result (amounts x R 1.000) In accordance with note 3.19 and the Royal Decree of April 10, 1995, applicable to the sicafis, the company itemises hereafter the result. The direct investment result is retained and is the base for the distribution obligation. This itemization has been verified by the Auditor Direct result Indirect result Net rental income 22,958 22,958 Charges payable by tenants on let properties (+) (-) Property charges -1,505-1,505 General costs 0.-1, ,376 Operating result before result on the portfolio 19,882 19,882 Change in fair value of the investment property portfolio - positive 27,498 27,498 - negative 0.-3, ,821 23,677 23,677 Gains or losses on disposals of other non financial assets Net operating profit 43,564 19,887 23,677 Financial result Pre-tax result 44,159 20,482 23,677 Tax on result Profit 044,088.20, ,677 Profit per share Direct result Indirect result Net rental income 21,830 21,830 Charges payable by tenants on let properties (+) (-) Property charges General costs 0.-1, ,099 Operating result before result on the portfolio 19,742 19,742 Change in fair value of the investment property portfolio - positive 11,165 11,165 - negative 0.-2, ,659 8,506 8,506 Gains or losses on disposals of other non financial assets Net operating profit 28,257 19,751 8,506 Financial result Pre-tax result 28,827 20,321 8,506 Tax on result Profit.28,688.20,182.28,506 Profit per share Consolidated Annual Accounts 2006

35 5. Segment information (amounts x R 1.000) Primary segmentation (geographical) The segmentation of rental income, investment properties and revaluations are segmented to the following regions: 2006 Flanders Brussels Wallonia Total Rental income 4,657 4,411 13,535 22,603 Property operating result 3,897 4,293 13,068 21,258 Unallocated costs -1,376 Operating result before result on the portfolio 19,882 Revaluation of investment property portfolio 1,620 5,188 16,869 23,677 Sale non financial assets 5 Operating result 43,564 Financial result 595 Result before taxes 44,159 Taxes -71 Net result 44,088 Investment properties Balance at 01/01 88,350 51, , ,894 Purchases/investments 5,388 5,388 Revaluation 1,620 5,188 16,869 23,677 Balance at 31/12 89,970 56, , , Flanders Brussels Wallonia Total Rental income 4,425 4,363 13,042 21, Property operating result 4,025 4,216 12,600 20,841 Unallocated costs -1,099 Operating result before result on the portfolio 19,742 Revaluation of investment property portfolio ,576 8,506 Sale non financial assets 9 Operating result 28,257 Financial result 570 Result before taxes 28,827 Taxes -139 Net result 28,688 Investment properties Balance at 01/01 88,091 50, , ,194 Purchases/investments ,097 4,194 Revaluation ,576 8,506 Balance at 31/12 88,350 51, , ,894 Consolidated Annual Accounts 2006

36 Secondary segmentation (per sector) The segmentation of rental income, investment properties and revaluations are segmented to the following sectors: 2006 Offices Retail Total Rental income 9,068 13,535 22,603 Property operating result 8,190 13,068 21,258 Unallocated costs -1,376 Operating result before result on the portfolio 19,822 Revaluation of investment property portfolio 6,808 16,869 23,677 Sale non financial assets 5 Operating result 43,564 Financial result 595 Result before taxes 44,159 Taxes -71 Net result 44,088 Investment properties Balance at 01/01 139, , ,894 Purchases/investments 5,388 5,388 Revaluation 6,808 16,869 23,677 Balance at 31/12 146, , , Offices Retail Total Rental income 8,788 13,042 21,830 Property operating result 8,281 12,560 20,841 Unallocated costs -1,099 Operating result before result on the portfolio 19,742 Revaluation of investment property portfolio 930 7,576 8,506 Sale non financial assets 9 Operating result 28,257 Financial result 570 Result before taxes 28,827 Taxes -139 Net result 28, Investment properties Balance at 01/01 138, , ,194 Purchases/investments 97 4,097 4,194 Revaluation 930 7,576 8,506 Balance at 31/12 139, , ,894 Consolidated Annual Accounts 2006

37 6. Investment properties (x R 1.000) Balance at January 1 319, ,194 Purchases/investments 5,388 4,221 Other -27 Revaluations 23,677 8,506 Balance at December , ,894 The purchases and investments concern the shopping centres in Nivelles and Tournai. The investment properties portfolio valued at 66.7 mln has been charged by way of mortgage. The investment properties portfolio was valued by CVBA Troostwijk-Roux at December 31, Value investment properties according to the external valuation reports 349,675 Book value of rent free periods and other leasing expenses to be amortised -716 Balance sheet valuation 348, Development projects (x R 1.000) Purchases 6,776 - Capitalised interest 71 - Balance at December 31 6,847 - During the third quarter of 2006, Wereldhave Belgium acquired 2 plots of land (42,000m²) alongside the shopping centre in Nivelles. These plots have a residential destination. 36 Consolidated Annual Accounts 2006

38 8. Other tangible assets (x R 1.000) Office Cars Totaaal equipment Balance at January 1, Purchases (+/-) Depreciation (+/-) Balance at December 31, Balance at January 1, Disposals Depreciation Balance at December 31, December 31, 2006 December 31, 2005 Total costs of acquisition Total depreciation Net book value Trade receivables and other non current assets (x R 1.000) December 31, 2006 December 31, 2005 Loans 3,412 4,281 Capitalised rent investments Capitalised brokerage fees Capitalised rent free periods Total 4,128 4,627 Loans comprises mainly receivables from government institiutions. Consolidated Annual Accounts 2006

39 10. Current financial assets (x R 1.000) December 31, 2006 December 31, 2005 Current financial assets available for sale Balance at January 1 8,197 6,534 Acquisition real estate certificates Revaluation 511 1,663 Balance at December 31 8,936 8,197 An interest of 16.22% (18,382 Real Estate Certificates) is being maintained in the shopping centre at Kortrijk Kuurne. Fair value has been calculated taking into account the average quotation during the last fortnight of December ( 486,1). By the end of 2006, the closing price on Euronext, fixing market, amounted to 490. Real estate certificates are current assets representing a long term liability in a proportional share of the earnings of a specific real estate. Part of the value of the attached coupons is represented by said earnings and the balance by amortisation of capital. 11. Current receivables (x R 1.000) December 31, 2006 December 31, 2005 Trade receivables (tenants) Tax receivables and other current assets Total A provision for doubtful debtors ( 34) is comprised in the trade receivables. The property tax to be recovered due to vacancy amounts to 508 at December 31, 2006 (2005: 442). 12. Cash and cash equivalents (x R 1.000) December 31, 2006 December 31, 2005 Bank 468 3, Share capital (x R 1.000) Amounts Number of shares Issued capital At December 31, ,969 5,331,947 At December 31, ,969 5,331,947 Bearer shares and registered shares without nominal value Registered 3,636,218 Bearer 1,695,729 Total 5,331,947 Consolidated Annual Accounts 2006

40 Shareholder Of the 5,331,947 shares in circulation at December 31, 2006, 37.99% were held by Wereldhave N.V., 30.21% by N.V. Wereldhave International and 31.80% by the general public. The Statutory Management Company is entitled to increase the authorised capital in one or more issues by a maximum amount of 200,000,000. This authorisation has been approved on April 13, 2005, is valid for three years and is renewable. 14. Change in fair value of financial assets and liabilities Financial assets available for sale At January 1 1, Revaluation 511 1,663 At December 31 2,389 1,878 An interest of 16.22% (18,382 Real Estate Certificates) is being maintained in the shopping centre at Kortrijk Kuurne. Fair value has been calculated taking into account the average quotation during the last fortnight of December ( 486,1). By the end of 2006, the closing price on Euronext, fixing market, amounted to Loans At December 31, 2006 the company does not make use of external financing besides the external short term liabilities (< 1 year). The uses are taken at floating interest rate and are shown at fair value in the balance sheet. As the company does not make use of any hedging instruments, variations in interest charges may influence the result. The credit facilities comprise only non confirmed lines for which, as a consequence, there are no guarantees. Fair value does not differ significantly of the nominal value as it concerns short term financing at floating interest rate. 16. Pension obligations (x R 1.000) Net liability at January Movements in liabilities Net liability at December With reference to the Defined Benefit Plan in favour of the staff of the sicafi (7), a provision of 83 is foreseen. The provision has been recalculated by an external actuary. Consolidated Annual Accounts 2006

41 17. Other long term liabilities (x R 1.000) December 31, 2006 December 31, 2005 Guarantee tenants Short term liabilities (x R 1.000) December 31, 2006 December 31, 2005 Credit institutions 8,115 Trade debts 1, Taxes, salaries and social security Retained dividends Rents received in advance 1,006 1,228 Other Total 11,269 2, Securities Debt guaranteed by securities on company assets for an amount of 50.9 mln (2005: 50.9 mln). These securities are the subject of a legal mortgage with reference to the disputed tax claim. With reference to the above, a guarantee was submitted by Wereldhave NV. 20. Rental income (x R 1.000) Office and trade properties are subject to (trade)lettings with various expiry dates. Rents are adjusted yearly by the index of health. The leases define the rent, the rights and obligations of the lessor and the lessee, notice and renewal options and the common charges. Recovery income of charges and taxes are not included in the rental income. Rent loss as a result of vacancy, expressed as a percentage of theoretical rent amounted to 16.1% (2005: 17.1%) The future aggregate contractual rent from leases as to December 31, 2006 is shown in the following table: Year 1 22,327 20,740 Year 2 year 4 52,832 61,813 Year 5 13,135 12,107 Total 88,294 94,660 Consolidated Annual Accounts 2006

42 21. Property charges (x R 1.000) Technical costs Commercial costs Other operational costs Total 1, Technical costs comprise the costs of vacancy ( 512) of the investment properties portfolio. 22. General expenses (x R 1.000) Staff costs Salaries Social security Profit sharing 37 Pension and insurance costs Other staff costs Subtotal staff costs Allocated to real estate costs (22%) Staff costs Other costs Audit fees Advisory fees 74 3 Other costs Subtotal other costs Allocated to real estate costs (22%) Other costs Other operational costs Sicafi costs Real estate investment fund tax Subtotal ohter general costs Allocated to real estate costs (22%) Other operational costs Total 1,376 1, Apportionment key relating to the appropriation of general costs and property charges. Over 2006, 22% of the general costs ( 388) have been assigned to property charges (2005; 18%). This apportionment key has been computed considering the distribution of tasks inherent to the employees. Consolidated Annual Accounts 2006

43 Pension costs Pension costs comprise premiums relating to the employee pension plan. Employees During 2006 an average of 7 people (2005:7) were employed by the Sicafi. Management Company The remuneration of the Management Company is decided upon by the General Meeting of Shareholders and is fixed on 55,000. The Board of Directors of the Management Company members do not hold any shares or options in Wereldhave Belgium. No loans, advances or guarantees have been extended to the Board of Directors members by Wereldhave Belgium. 23. Valutation differences (x R 1.000) Valuation investment properties Gains 27,498 11,165 Losses -3,821-2,659 Total 23,677 8, Financial result (x R 1.000) Financial income: Coupon certificate Kortrijk Ring Shopping Centre Interest received Interest costs Other Taxes on result (x R 1.000) 42 Taxes are calculated on possible exceptional and favourable advantages and on rejected expenditures. Deferred taxes are not recognised as there are no differences between the accounting and the fiscal result Corporate taxes Consolidated Annual Accounts 2006

44 26. Result per share The result per share is calculated on the basis of the total profit after tax and the average number of outstanding shares during the year (2006: 8.27; 2005: 5.38). No financial instruments convertible into shares have been distributed. 27. Dividend The Board of Directors of the Management Company proposes a gross dividend per share of 3.75 (2005: 3.75), totalling to 20.0 mln (2005: 20.0 mln). The dividend is not foreseen in the consolidated financial statements. 28. Risks Wereldhave Belgium recognises business, financial, operational and strategic risks. knowledge center for technological developments reports regularly on these matters to the Management Company. The internal administrative organisation and internal control, as well as the financial system and its planning, have specifically been developed to comply with all legal and regulatory requirements regarding the timing and contents of the financial and non financial information. An internal compliance officer has been appointed, who is charged with supervision on compliance with regulations. The tenant performance risk consists of the risk of rents not being paid and the possibilities for recovering damages to leased property at the end of the lease. Prospective tenants are examined for their creditworthiness and reliability. Wereldhave Belgium s tenancy agreements stipulate payment guarantees. Wereldhave Belgium has a strict collection policy. Business risks These comprise the risks that Wereldhave Belgium considers that it incurs as part of its ordinary business operations,in particular on the field of rental market developments and the developments in the value of property. The development in the rental market, such as loss of rental income owing to vacancy, lettability and market changes are closely followed. The risk of a decrease in value of property relates to its negative impact on Wereldhave Belgium s capital position. The fair value of the portfolio is calculated at the end of every quarter and assessed every quarter by an external real estate expert. The supplier performance risk relates to the risk of the non-fulfilment of outsourced activities. Wereldhave Belgium s model agreements include extensive warranty and completion clauses. Financial risks These risks contain not only economic risks such as interest rate developments, foreign currency developments and inflation but also refinancing risks and risks related to financial transactions. Changes in interest rates may affect the results, the yield and the value of the property. The interest rate policy is determined by the Management Company based on parameters. The focus on shopping centres involves a higher geographical concentration, in the sense that the apportionment is implemented only on a limited number of real estates as well as a higher risk concentration, e.g. in case of technical problems or fire. The risk of the technical condition of the buildings relates to the whole of partial loss of buildings, the risk of hidden shortcomings and the risk of soil pollution. Wereldhave Belgium s property is covered for this risk by a buildings insurance. Terrorism has been excluded from coverage by the insurers. Any costs by soil pollution are recovered from the tenant if at all possible. If it becomes apparent that the soil or groundwater is polluted, land will not be purchased, or only after the soil has been thoroughly decontaminated (at the seller s expense). Technological developments may cause property to become obsolete before its time, which will have a negative effect on the lettability and the value of the property. Wereldhave Belgium s The rate of inflation is one of the parameters established by Management Company and used in determining its policy. Information about the actual inflation figures is included in the monthly management reports. The refinancing risk comprises the risk that loan agreements cannot be renewed, or can only be renewed subject to less favourable conditions. The risk is mitigated by maintaining solid equity ratios, maintaining relations with various international banks and maintaining sufficient credit facilities (both committed and uncommitted). Financial transactions are only concluded with the prior approval of the Management Company. Operational risks These risks stem from the fact that a business is a collaborative venture between people, in which fallability and vulnerability cannot be excluded from the processes. The risks related to 43 Consolidated Annual Accounts 2006

45 people can be broken into continuity and conduct. Succession for positions that are scheduled to become vacant within 5 years owing to retirement is considered in the annual business plan. The conduct risks concern primarily errors, fraud, embezzlement etc. Wereldhave Belgium has desigend and implemented its own specific accounting organisation with internal controls built in. The business processes and connected controls have been described and approved by the Management Company and are detailed in job descriptions for each job. secretary is responsible for ensuring complaints are registered. He will notify the complainant that his complaint has been received and give him an indication of when a decision in respect of the claim is expected to be taken. The Board of Directors of the Management Company will notify its decision to the complainant within 12 weeks after receiving the complaint. Investor relations For all Wereldhave Belgium stock related questions, visit our website: 44 The accounting system and its related internal controls are based on the greatest possible separation of jobs, and includes an automated information system whose access is based on the job descriptions referred to above. It is based on a strict separation of investment and management positions and accounting and payment positions. Holders of powers of attorney are only jointly authorised and within certain limits. Internally, a principle of two signatures and four eyes applies in all instances. In 2003 The Management Company of Wereldhave Belgium adopted a Code of Conduct, laying down the principles for conducting business and for behaviour of the Comapny s Board and employees. In December 2003, regulations for notification of abuse were adopted. These regualtions contain procedures for employees to properly and safely report any suspicions the may have of abuse within the Group. With respect to the risk of unsufficient availability and reliability of the information system, Wereldhave has its own Information Systems Department. Back-ups are made on the data files on a daily basis. These back-up files are stored every week in a safe. An agreement has been concluded with IBM for back-up systems. Strategic risks These are the risks attached to Wereldhave Belgium s strategic choices, such as the risk of retention of statute sicafi. Wereldhave Belgium has the status of a Real Estate Investment Fund with fixed capital under legislation of the Royal Decree of April 10, 1995 and July 10, One of the implications of that status is that no corporate tax need be paid if certain conditions are met. However, failure to meet all statutory requirements may result in the tax status being revoked. Retention of the tax status is a matter of continual attention of the Board of Directors. Complaints procedure Complaints about the financial reporting, internal risk management, control systems and the audit must be submitted to the secretary of the company, who will then inform the Board of Directors of the Management Company of the complaints. The 29. Claims On December 23, 1996 Wereldhave Belgium NV (former MLO NV and eligible party of Wereldhave Belgium) received a registered supplementary assessment in the amount of 35.9 mln for the 1994 tax year. This assessment relates to a notification of reorganization dated November 18, 1996, whereby the administration maintains that, in this case, the succession of a number of actions should be considered as a hidden distribution of dividends to the shareholders of MLO NV. The Management is of the opinion that the imposed supplementary assessment is by no means justified, as neither the company nor its shareholders were in any way involved in the transactions to witch the administration refers, and the company has always accepted all judicial consequences of the various legal transactions, and that any hidden distribution of dividends as described in the notification of reorganization was out of the question. On the basis of the above and advice obtained from an external fiscal advisor, the Manager is convinced that the company has strong arguments to contest the supplementary assessment successfully. For the 1993 tax year the tax administration has imposed a direct advance income tax assessment in the amount of mln, on (as the administration maintains) the hidden distribution of dividends to the shareholders of NV MLO on December 15. The notice of assessment relating to the above was sent on July 28, As the Manager contests the principle of hidden distribution of dividends, and has always observed all judicial consequences of the various transactions, he is of the opinion that this direct tax assessment is not justified. These assessments represent a legal mortgage inscription for an amount of 50.9 mln. With reference to the above, a guarantee was submitted by Wereldhave NV to the SICAFI covering the full registered amount of the disputed fiscal claim. This case is also the subject of a penal procedure. Wereldhave Belgium was summoned on December 5, 2006, to appear in court (before the Raadkamer / Chambre du Conseil) in the matter of a penal dispute arising from the sale of abovementioned cash company. On March 23, 2007, the Raadkamer/Chambre du Conseil will decide about a possible transfer to court. The prosecutor is demanding the liquidation of Wereldhave Consolidated Annual Accounts 2006

46 Belgium; the disqualification of several officials of the company and the seizure of Belle-Ile in Liège. On December 31, 2006 the fair value of the shopping centre amounts to million. Only the amount of the contested tax charges ( 50.9 million) has been guaranteed by the Dutch company Wereldhave N.V. The Board of Directors of the Management Company, advised by external consultants, confirms that both the administrative and the penal procedure can be disputed successfully. Following consultation with PricewaterhouseCoopers, a second opinion was obtained from an independent advisor concerning the risk of seizure of the shopping centre Belle-Ile. His findings confirm the opinion of the Board of Directors of the Management Company. As a result, no impairment provision has been made. For more information on this matter, consult our website. 30. Related Group companies The remuneration of the Management Company is decided upon by the General Meeting of Shareholders and is fixed on 55,000. Besides the decreed dividends and above mentioned remuneration to the Management Company, there have been no transactions with Group companies in Important events occurred after the financial year After the end of the financial year, no important events occurred which influenced the development of the company or the annual accounts of December 31, The Raadkamer / Chambre du Conseil decided February 20, 2007, to postpone the case regarding the matter of a penal dispute arising from the sale of a company, later reclassified as a cash company, till March 23, 2007 (for more details, see note 29). 32. Investment obligations Within the framework of the ongoing renovation project in Nivelles, a 9.6 million building contract was signed with the contractor. Invoiced amounts as at 31 December 2006 totalled 2.6 million, bringing the sicafi s total investment commitments to 7.0 million at that date. Regarding the development projects in Nivelles en Tournai, the company has the constructive obligation to perform investments, the amount of which can be estimated to 78,5 million. 33. Remuneration auditor The fees paid in connection with auditing activities over 2006 amounted to 36,169 excl. VAT. For checks on the consolidated statements, the auditor charged excl. VAT as fees. No other remunerations were paid. 45 Consolidated Annual Accounts 2006

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48 Statutory auditor s report on the consolidated accounts as of and for the year ended 31 December 2006

49 FREE TRANSLATION OF THE STATUTORY AUDITOR S REPORT TO THE GENERAL SHAREHOLDERS MEETING ON THE CONSOLIDATED ACCOUNTS OF THE COMPANY WERELDHAVE BELGIUM SCA AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2006 As required by law and the company s articles of association, we report to you in the context of our appointment as statutory auditors. This report includes our opinion on the consolidated accounts and the required additional disclosure. Unqualified opinion on the consolidated accounts, with an explanatory paragraph We have audited the consolidated accounts of Wereldhave Belgium SCA and its subsidiary (the Group ) as of and for the year ended 31 December 2006, prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. These consolidated accounts comprise the consolidated balance sheet as of 31 December 2006 and the consolidated statements of income, changes in shareholders equity and cash flows for the year then ended, as well as the summary of significant accounting policies and other explanatory notes. The total of the consolidated balance sheet amounts to (000) 370,030 and the consolidated statement of income shows a profit for the year (Group share) of (000) 44,088. In accordance with the auditing standards referred to above, we have carried out procedures to obtain audit evidence about the amounts and disclosures in the consolidated accounts. The selection of these procedures is a matter for our judgment, as is the assessment of the risk that the consolidated accounts contain material misstatements, whether due to fraud or error. In making those risk assessments, we have considered the Group s internal control relating to the preparation and fair presentation of the consolidated accounts, in order to design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. We have also evaluated the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management, as well as the presentation of the consolidated accounts taken as a whole. Finally, we have obtained from the manager and Group officials the explanations and information necessary for our audit. We believe that the audit evidence we have obtained provides a reasonable basis for our opinion. In our opinion, the consolidated accounts of give a true and fair view of the Group s net worth and financial position as of 31 December 2006 and of its results and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. 48 The company s manager is responsible for the preparation of the consolidated accounts. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated accounts 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. Our responsibility is to express an opinion on these consolidated accounts based on our audit. We conducted our audit in accordance with the legal requirements applicable in Belgium and with Belgian auditing standards, as issued by the Institut des Reviseurs d Entreprises/Instituut der Bedrijfsrevisoren. Those auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated accounts are free of material misstatement. Without qualifying our opinion, we draw the attention to the disclosure the statutory manager of the company has included in the consolidated accounts, regarding the convening of the company to appear for a hearing in chambers ( raadkamer/chambre du conseil), in the context of the penal dispute related to the sale of a company. The public prosecutor claims the confiscation of the commercial centre Belle-île and the forced liquidation of Wereldhave Belgium SCA. The statutory manager, assisted by the legal councils of the company, believes that both the administrative and the penal procedure can be disputed successfully. As a result, no adjustments were posted to the consolidate accounts, nor did the company post any impairment provision. Statutory auditor s report 2006

50 Additional remark The company s manager is responsible for the preparation and content of the management report on the consolidated accounts Our responsibility is to include in our report the following additional remark, which does not have any effect on our opinion on the consolidated accounts: The management report on the consolidated accounts deals with the information required by the law and is consistent with the consolidated accounts. However, we are not in a position to express an opinion on the description of the principal risks and uncertainties facing the companies included in the consolidation, the state of their affairs, their forecast development or the significant influence of certain events on their future development. Nevertheless, we can confirm that the information provided is not in obvious contradiction with the information we have acquired in the context of our appointment. Brussels 5 March 2007 The statutory auditor PricewaterhouseCoopers Reviseurs d Entreprises / Bedrijfsrevisoren Represented by: Luc Discry Reviseur d Entreprises 49 Statutory auditor s report 2006

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52 Pro forma balance sheet and income statement and other information

53 Pro forma balance sheet and income statement of Comm. VA Wereldhave Belgium SCA The following tables reflect the non consolidated balance sheet and income statement, including the appropriation account of Wereldhave Belgium. The presentation of these tables are in conformity with the consolidated annual accounts and does not necessarily reflect the scheme of the statutory annual accounts of the company. Pro forma balance sheet after profit distribution (amounts x E 1.000) Assets Fixed assets 360, ,138 Tangible fixed assets 354, ,756 Land and buildings 347, ,646 Furniture and vehicles Assets under construction 6,848 Financial fixed assets 6,609 6,382 Current assets 58,819 61,742 Amounts receivable after more than one year 5,376 6,033 Other amounts receivable 5,376 6,033 Amounts receivable within one year 52,619 52,453 Trade receivables Other receivables 52,495 52,382 Cash and bank balances 426 3,090 Deferred charges and accrued income Total assets 419, ,880 Liabilities Capital and reserves 336, ,331 Capital 224, ,969 Issued capital 224, ,969 Revaluation reserve 5,614 5,614 Reserves 63,597 39,499 Legal reserve Reserves not available for distribution 63,584 39,486 Retained profits 42,638 42, Debts 82,699 73,549 Amounts payable after more than one year Other debts Amounts payable within one year 80,707 71,470 Amounts payable after more than one year but payable within the year 33 Financial debts 8,115 Trade debts 1, Suppliers 1, Taxes, salaries and social security 51,234 51, Taxes 51,113 51, Salaries and social security Other debts 20,229 20,210 Accrued charges and deferred income 1,742 1,876 Total liabilities 419, ,880 Pro forma balance sheet and income statement and other information

54 Pro forma income statement (amounts x 1.000) Rental Income Rent 22,571 21,800 Rupture indemnities of rental agreements 355 Net rental income 22,926 21,800 Recovery income of charges and taxes payable by tenants on let properties (+) 1,898 1,870 Charges and taxes payable by tenants on let properties (-) -2,093-2, Property result 22,731 21,477 Technical costs Commercial costs Property management costs Property charges -1, Property operating result 21,226 20,811 General costs Staff costs Other Other operating charges ,376-1,081 Operating result before result on the portfolio 19,855 19,730 Gains or losses on disposals of other non financial assets 5 9 Revaluation of property investment 24,098 8,634 Operating result 43,958 28,373 Financial income Interest charges Other financial charges Financial result Pre-tax result 44,553 28,943 Corporate taxes Taxes Net result 44,482 28,804 Pro forma balance sheet and income statement and other information

55 D. Results for appropriation (x 1.000) Profit of financial year 44,482 28,804 Appropriation of the changes in market value of the portfolio components Transfer to reserves not available for distribution -24,098-8,634 Profit to be appropriated 20,384 20,170 Appropriation account (x 1.000) Profit to be appropriated 62,633 62,244 Profit for the year available for appropriation ,170 Retained profit 42,249 42,074 Result to be retained -42,638-42,249 Profit to be retained -42,638-42,249 Distribution of profit ,995 Dividend -19,995-19,995 The statutory annual accounts, the notes, the statutory report of the Management Company and the auditors report concerning the statutory annual accounts of Comm. VA Wereldhave Belgium SCA can be obtained, free of charge, at the company s Head Office. These documents are also available on our website: With regard to these documents, the auditor delivered a unqualified audit opinion on the financial statements. The statutory annual accounts, the notes, the annual report and the auditors report will, according to the legal regulations, be deposited at the National Bank of Belgium. 54 Pro forma balance sheet and income statement and other information

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