TIDMSPNV 
 
RNS Number : 5040P 
Spazio Investment NV 
26 March 2009 
 
? 
 
 
 
 
 
 
 
 
 
 
SPAZIO INVESTMENT N.V. ANNOUNCES 2008 RESULTS 
 
 
Amsterdam, 26 March 2009 - Spazio Investment N.V., ("Spazio" or the "Company"), 
a real estate investment company focused on the Italian industrial real estate 
market, today reports financial results for the twelve months ended 31 December 
2008. 
 
 
Key Details 
 
 
  *  Total portfolio open market value ("OMV") as at 31 December 2008 of EUR 730.6 m (EUR 
  757.5 m as at 30 June 2008), a decline of 3.9% in asset values1 
 
  *  Adjusted NAV2 per share of EUR 13.6 (EUR 15.8 as at 30 June 2008) 
 
  *  Constant rental income for the year of EUR 42.8 m (2007 EUR 42.6 m) 
 
  *  Net loss for the year of EUR 8.6 m (2007 net profit of EUR 44.9 m) 
 
  *  Total portfolio Loan to Value of 56.5% (53.2% as at 30 June 2008) 
 
  *  Completed asset sales of EUR 63.9 m at an average premium to OMV of 5.6% and at an 
  average gross exit yield of 6.2% for investment properties 
 
  *  Acquired EUR 63.9 m of assets at an average gross entry yield of 8.1% 
 
  *  Shareholder approval obtained for accelerated business plan and revised 
  arrangements with the external manager 
 
  *  Total cash returned to shareholders in the course of 2008 of EUR 38.4 m 
 
  *  Since December 2008 returned EUR 25 m of cash to shareholders via tender offer 
 
  *  No final dividend is proposed for H2 2008.Total dividend payments for the year 
  ended 31 December 2008 will therefore be EUR 0.59 per share (2007 EUR 1.03). 
 
 
 
 
 
John Duggan, Chairman of Spazio, commented: 
 
 
"2008 saw Spazio revise its business plan to focus on a strategy of generating 
cash for shareholders from asset disposals. The Board remains fully committed to 
the implementation of this business plan and the generation of significant cash 
returns for its shareholders. However, although the decrease in commercial 
property values experienced to date in Italy is not as marked as in other 
European markets, the outlook for the Italian real estate sector and asset 
values remains uncertain. In this context, the Board will also be focused on 
ensuring that Spazio continues to maintain adequate headroom against its banking 
covenants whilst this uncertainty remains". 
 
 
1 Equivalent to an overall asset devaluation of EUR 29.9 m as per 2H 2008 CBRE 
external appraisal. The 3.9% decrease is net of acquisitions, capital 
expenditures and disposals in 2H 2008 
2 It includes fair value adjustment on 
development projects 
 
-Ends- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A conference call for investors and analysts will be held today, 26 March 2009 
at 3.00 pm CET (2.00 pm UK time). John Duggan, Chairman, Fabrizio Lauro, COO and 
CFO and Alberto Iori, Fund Manager will be available to answer questions. 
 
 
Dial-in details: 
 
 
UK standard +44 (0) 1452 569 335 
UK toll free: 0808 238 0673 
Italy toll free: 8008 976 07 
USA toll free: 1866 655 1591 
Conf ID: 90980447 
 
 
Password: SPAZIO 
 
 
Enquiries 
 
 
Spazio Investment N.V. 
Fabrizio Lauro                            Tel: +39 02 6442 50844 
 
 
Deutsche Bank - Nominated Adviser 
Ben Lawrence                            Tel: +44 (0) 20 7545 8000 
 
 
Oriel Securities - Joint Broker 
Richard Crawley                            Tel: +44 (0) 20 7710 7600 
 
 
Brunswick Group LLP 
Justine McIlroy                         Tel: +44 (0) 20 7404 5959 
Roberta Governale 
 
RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2008 AND FULL YEAR DIVIDEND 
 
 
Net loss for the year was EUR 8.6 m compared with a net profit of EUR 44.9 m in 
2007. The net loss in 2008 primarily reflected a fall in asset values of EUR 11.7 
m and a decrease in the fair value of financial instruments of EUR 12.2 m during 
the year. Income available for distribution in 2008 was EUR 17.6 m compared with EUR 
28.9 m in 2007, with the decrease reflecting the lower gains realized on 
disposals in 2008. Rental income in 2008 remained broadly constant compared to 
2007 at EUR 42.8 m (2007 EUR 42.6 m). 
 
 
The decline in the open market value of the Company's investment portfolio was 
limited to 2.6% in the six months ending 31 December 2008, reflecting an average 
increase in cap rates between 10 and 20 basis points, a slight increase in the 
discount rate applied to future rental streams and a lengthening of the time 
required to lease vacant properties. However, there was a more substantial 
decline of 11.4% for the development projects, mainly due to a lengthening of 
the time required to either complete the scheme or to lease/sell the units. 
 
 
Spazio's Adjusted Net Asset Value per share of EUR 13.63 dropped 13.8% compared to 
Adjusted Net Asset Value at 30 June 2008.This primarily results from the payment 
of the interim dividend of EUR 16.2 m in October and from the net loss of EUR 30.0 m 
in the second half of the year (which was mainly driven by a fall in asset 
values of EUR 17.84 m and by a decrease in the fair value of financial instruments 
of EUR 18.3 m). 
 
 
In October 2008 Spazio paid an interim dividend of EUR 0.59 per share. However, 
given an unpredictable market outlook, at this time, we believe it is prudent 
for the Company to conserve capital and retain cash. Accordingly, the Board has 
determined not to pay a final dividend for the six months ended 31 December 
2008. 
 
 
ACCELERATED BUSINESS PLAN AND REVISED ARRANGEMENTS WITH THE EXTERNAL MANAGER 
 
 
In the statement accompanying the interim accounts for the six months to 30 June 
2008, Spazio indicated that it was reviewing its business plan with a view to 
generating more cash to return to shareholders. At the same time the Company 
stated its intention to revise arrangements with Pirelli RE, its external 
manager, to more closely align their interests with those of shareholders. 
Following the announcement, the Company had extensive and constructive 
discussions with major shareholders which resulted in the Company calling an EGM 
on 9 December 2008 to approve the following: 
 
 
  *  Target disposal of EUR 450 m of assets over a three-year period to 31 December 
  2010 
  *  Suspension of acquisitions and further development activities 
  *  Return excess capital to shareholders 
  *  Revised arrangements with Pirelli RE 
 
 
 
The revised arrangements with Pirelli RE, the external manager, were designed to 
incentivise them to deliver the accelerated business plan. For further details 
on the accelerated business plan, the revised arrangements with the external 
manager and the other resolutions which were passed at the Company's EGM of 9 
December 2008 please refer to the shareholder circular which was posted to 
shareholders on 21 November 2008 and which is also available on the Company's 
website www.spazioinvestment.com. 
 
 
TENDER OFFER 
 
 
In pursuit of its strategy of returning cash to shareholders, on 15 January 2009 
Spazio completed a tender offer. This resulted in the purchase by the Company of 
4,545,448 of its Depository Interests from tendering shareholders at a price of 
EUR 5.50 per Depository Interest at a cost of approximately EUR 25 m. 
 
 
The Depository Interests purchased by Spazio will be held by the Company and the 
cancellation of such securities shall be proposed at the next annual general 
meeting of shareholders to be held on 28 April 2009. 
 
 
 
 
 
 
3 This value is before cancellation of the 4,545,448 depository interests bought 
back by the Company following the tender offer which was completed on 15 January 
2009. The pro-forma Adjusted NAV post cancellation of the repurchased securities 
will be EUR 15.2 per share. 
4 EUR 17.8 m comprising EUR16.7 m of CBRE fair value adjustment and EUR 1.1 m of 
accrued capital loss on assets for which a binding offer has been accepted by 
the Fund at a price lower than the book value of the assets at year end. 
 
 
 
 
Business review 
 
 
REVIEW OF ACQUISITIONS AND DISPOSALS IN THE FULL YEAR 2008 
 
 
Spazio has completed EUR 63.9 m of acquisitions in the full year period: 
  *  acquisition from SMA S.p.A. (part of the Auchan Group) of a distribution centre 
  of 32,000 sq m and additional 14,500 sq m of land with development potential at 
  Segrate, 15 km east of Milan. Purchased for consideration of EUR 20 m with a gross 
  entry yield of 8.4% (sale and leaseback transaction); 
 
  *  acquisition from Immobiliare Capra S.r.l., a private Italian real estate 
  developer, of a broadcasting centre in Milan for EUR 12.4 m. Centre is fully let 
  to RAI (Italian State owned broadcasting company), with a gross entry yield of 
  7.7%; 
 
  *  acquisition from Pasini Group of an office building located in Sesto San 
  Giovanni (Milan) for EUR 27.5 m with a gross entry yield of 8.3%. The building has 
  a GLA of 13,100 sq m and was developed by the Pasini Group over a period of 18 
  months. The asset is let to Alstom Power Italia which uses the building to host 
  its Southern European Headquarters; and 
 
  *  acquisition from Coopsette Società Cooperativa - as part of the wide Enel 
  Framework Agreement signed on 22 November 2007 - of an office and storage 
  building located in Genova, Via Dino Col for EUR 4 m with a gross entry yield of 
  5.8%. The building has a GLA of 2,100 sq m and is fully let to Enel 
  Distribuzione S.p.A. with a lease contract of 6+6 years. 
 
Spazio has completed EUR 63.9 m of disposals in 2008: 
  *  disposal of 27 Telecom Italia assets located throughout Italy for a total cash 
  consideration of EUR 25.6 m, at an average exit yield of 5.8%, representing a 4.8% 
  premium to OMV as at 31 December 2007; 
 
  *  disposal of 1 Enel vacant asset in Livorno for a total cash consideration of EUR 
  0.7 m, representing a 3.8% premium to OMV as at 31 December 2007; 
 
  *  disposal of 1 Prada asset located near Arezzo for a total cash consideration of 
  EUR 12.2 m, at an exit yield of 6.9%, representing a 7.9% premium to OMV as at 31 
  December 2007; 
 
  *  disposal of 1 Enel asset located in Milan for a total cash consideration of EUR 10 
  m, at an exit yield of 6.8%, representing a 7.2% premium to OMV as at 31 
  December 2007; 
 
  *  disposal of 1 vacant asset located in Pianezza (part of the Agrileasing 
  portfolio) for a total cash consideration of EUR 0.3 m representing a 9.6% gross 
  margin over historical purchase price; 
 
  *  disposal of 13 units of Edificio 16, with a GLA of 3,356 sq m, for a total cash 
  consideration of approximately EUR 8 m, representing a premium to book value of 
  29.5%; 
 
  *  disposal of 2 Telecom Italia assets located in Sicily and Puglia for a total 
  cash consideration of EUR 1.1 m, at an average exit yield of 5.8%, equivalent to 
  OMV as at 30 June 2008; 
 
  *  disposal of 2 vacant assets located in Emilia and Lombardy for a total cash 
  consideration of EUR 1.7 m, representing a 4.3% premium to OMV as at 30 June 2008; 
  and 
 
  *  disposal of 6 units of Edificio 16, with a GLA of 1,828 sq m, for a total cash 
  consideration of EUR 4.2 m, representing a premium to book value of 27.7%. 
 
REVIEW OF DEVELOPMENT PROJECTS 
 
 
We have two existing developments, Edificio 16 and Eastgate Park. Following the 
announcement of the acceleration of our business plan Spazio does not intend to 
embark on  any new development projects. 
 
 
EDIFICIO 16 
 
 
The total investment in this project was EUR 34.2 m. As at 31 December 2008, 32 
out of 65 units had already been purchased by private companies, mainly 
belonging to Media & IT sectors and Architecture & Engineering studios. We 
remain confident that we will achieve our target of completing all sales of the 
remaining units in 2009. 
 
 
EASTGATE PARK 
 
 
As at 31 December 2008, total investment in the Eastgate Project was EUR 79.5 m 
(78% of total estimated investment), with 53,500 sq m of buildings completed and 
infrastructure work approx. 64% complete. Development is expected to be 
completed by the end of 2009, including the remaining infrastructure work and 
land movement for preparation of urbanized plot. 
 
 
We have started marketing the first three units and we expect to execute our 
first sales in the first half of 2009. Following completion of the development, 
the Board will then consider options for the remaining land at the Eastgate 
site. 
 
 
OUTLOOK 
 
 
The global real estate market has been adversely impacted by the credit crisis 
and worsening global economic conditions, leading to a softening in yields, the 
exit from real estate of a large number of investors and a significant decrease 
in transaction volumes. Despite current economic conditions, there continues to 
be a reasonable level of interest in the Group's property portfolio from local 
investors. The Company is in advanced negotiations to complete sales of 
approximately EUR 80 m in the first half of 2009. 
 
 
In the six months to 31 December 2008 there has been an overall decrease of 3.9% 
in the Company's property portfolio. This relatively modest decline in value 
demonstrates the resilience of Spazio's portfolio and can be attributed to the 
shortage in supply in Italy of high quality industrial products, the presence of 
low leveraged private investors and the quality of tenants and lease terms in 
the Spazio portfolio which provide a stable income stream. 
We expect a further decline in asset values in 2009 but the particular features 
of our portfolio, referred to above, are anticipated to continue to provide some 
degree of protection. Our net operating income from the portfolio at year end is 
approximately 2.2 times the aggregate amount of interest expenses and financing 
fees, thus demonstrating the Company's ability to service debt and maintain the 
level of operating income over the next twelve months..Our occupancy levels 
remain stable at around 96%. The average length of our leases is approximately 5 
years, with less than 5% in rental value expiring in the next 2 years. 
 
 
The decrease in values experienced to date in Italy is not as marked as in other 
European markets. However, the outlook for the Italian real estate sector and 
asset values remains uncertain. We are currently in full compliance with all of 
our banking covenants and the Board carefully monitors all existing banking 
arrangements. Full disclosure on how the financial covenants are calculated and 
their level as at 31 December 2008 is set out in the Notes to the accounts. 
 
 
The Board intends to retain flexibility over the timing of the payment of future 
cash returns to shareholders (including flexibility over the level of future 
dividends) in the context of its gearing position. In the near term, cash 
generated from operations and from the sale of assets will be used as necessary 
to maintain adequate headroom against banking covenants. Notwithstanding this 
need to maintain adequate covenant headroom, the Board remains fully committed 
to the implementation of its business plan and the generation of significant 
cash returns for its shareholders. 
 
 
 
 
Financial statements 
 
 
 
 
 
 
Consolidated Balance sheet as at 31 December 2008 
(in Euro) 
 
 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|Note  | ASSETS                       |        |     |  |  |  31.12.2008   |  31.12.2007  | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | NON-CURRENT ASSETS           |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  1   | Investment property          |        |     |  |  |   626.390.000 |  619.780.000 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | CURRENT ASSETS               |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  2   | Inventories                  |        |     |  |  |    97.010.496 |   89.904.481 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  3   | Trade receivables            |        |     |  |  |     2.007.725 |    5.094.683 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  4   | Other receivables            |        |     |  |  |       466.428 |    1.977.195 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  5   | Derivative financial         |        |     |  |  |             - |    5.035.512 | 
|      | instruments                  |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  6   | Cash and cash equivalents    |        |     |  |  |    79.766.399 |  103.332.229 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | TOTAL CURRENT ASSETS         |        |     |  |  |   179.251.048 |  205.344.100 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | TOTAL ASSETS                 |        |     |  |  |   805.641.048 |  825.124.100 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | EQUITY                       |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  7   | Share capital                |        |     |  |  |     5.498.279 |    6.096.020 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  8   | Share premium                |        |     |  |  |   274.486.750 |  308.956.491 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  9   | Retained earnings            |        |     |  |  |    87.778.559 |  100.361.034 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | TOTAL EQUITY                 |        |     |  |  |   367.763.588 |  415.413.545 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | LIABILITIES                  |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | NON-CURRENT LIABILITIES      |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  10  | Bank borrowings and payables to other       |  |  |   412.887.003 |  385.527.853 | 
|      | financial institutions                      |  |  |               |              | 
+------+---------------------------------------------+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | CURRENT LIABILITIES          |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  10  | Bank borrowings and payables to other       |  |  |       115.060 |       61.476 | 
|      | financial institutions                      |  |  |               |              | 
+------+---------------------------------------------+--+--+---------------+--------------+ 
|  11  | Trade payables               |        |     |  |  |    11.691.007 |   20.564.041 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  12  | Other payables               |        |     |  |  |     5.364.109 |    2.937.456 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  13  | Tax payables                 |        |     |  |  |       670.488 |      619.729 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|  5   | Derivative financial         |        |     |  |  |     7.149.793 |            - | 
|      | instruments                  |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | TOTAL CURRENT LIABILITIES    |        |     |  |  |    24.990.457 |   24.182.702 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      |                              |        |     |  |  |               |              | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
|      | TOTAL LIABILITIES AND EQUITY |        |     |  |  |   805.641.048 |  825.124.100 | 
+------+------------------------------+--------+-----+--+--+---------------+--------------+ 
 
 
Consolidated Income statement for the period from 1 January 2008 to 31 December 
2008 
(in Euro) 
 
 
+------+---------------------------------------------+--------------+--------------+ 
|Note  |                                             |  01.01.2008  |  01.01.2007  | 
|      |                                             |      -       |      -       | 
+------+---------------------------------------------+--------------+--------------+ 
|      |                                             |  31.12.2008  |  31.12.2007  | 
+------+---------------------------------------------+--------------+--------------+ 
|      |                                             |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
|  14  | Rental income                               |   42.774.239 |   42.629.650 | 
+------+---------------------------------------------+--------------+--------------+ 
|  15  | Net gain/(loss) from fair value adjustment  | (11.698.988) |   22.983.450 | 
|      | on investment property                      |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
|  16  | Net gain on disposal properties             |    2.594.838 |    5.827.100 | 
+------+---------------------------------------------+--------------+--------------+ 
|  17  | Net gain on disposal inventories            |    2.742.690 |    2.551.025 | 
+------+---------------------------------------------+--------------+--------------+ 
|  18  | Other operating income                      |      445.777 |    1.202.626 | 
+------+---------------------------------------------+--------------+--------------+ 
|  19  | Realised and unrealised gain/(loss) from    | (12.185.305) |    3.428.442 | 
|      | fair value adjustment on financial assets   |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
|  20  | Management fees                             |  (5.223.039) |  (5.172.963) | 
+------+---------------------------------------------+--------------+--------------+ 
|  21  | Other costs                                 |  (9.970.828) |  (9.992.498) | 
+------+---------------------------------------------+--------------+--------------+ 
|      |                                             |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
|      | OPERATING RESULT BEFORE FINANCING COSTS     |    9.479.384 |   63.456.832 | 
+------+---------------------------------------------+--------------+--------------+ 
|      |                                             |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
|  22  | Financial income                            |    5.667.492 |    3.767.350 | 
+------+---------------------------------------------+--------------+--------------+ 
|  23  | Financial expenses                          | (23.715.590) | (22.343.551) | 
+------+---------------------------------------------+--------------+--------------+ 
|      |                                             |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
|      | RESULT BEFORE TAX                           |  (8.568.714) |   44.880.631 | 
+------+---------------------------------------------+--------------+--------------+ 
|      |                                             |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
|  24  | Tax expense                                 |            - |            - | 
+------+---------------------------------------------+--------------+--------------+ 
|      |                                             |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
|      | RESULT FOR THE PERIOD                       |  (8.568.714) |   44.880.631 | 
+------+---------------------------------------------+--------------+--------------+ 
|      |                                             |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
|  25  | Basic and diluted earnings per share (Euro) |       (0,30) |         1,47 | 
+------+---------------------------------------------+--------------+--------------+ 
|      |                                             |              |              | 
+------+---------------------------------------------+--------------+--------------+ 
 
 
 
 
 
 
Consolidated Cash flow statement for the period from 1 January 2008 to 31 
December 2008 
(in Euro) 
 
 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |  01.01.2008  | |  01.01.2007  | 
|                                        |   |      |  |      |      -       | |      -       | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |Note  |  31.12.2008  | |  31.12.2007  | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Result for the period                  |   |      |  |  9   |  (8.568.714) | |   44.880.631 | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Adjustments for non-cash items:        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| - Financial expenses                   |   |      |  |  23  |   23.715.590 | |   22.343.551 | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| - Financial income                     |   |      |  |  22  |  (5.667.492) | |  (3.767.350) | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| - Change in fair value of investment   |   |      |  |  1   |   11.698.988 | | (22.983.450) | 
| property                               |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| - Unrealised gain on assets held for   |   |      |  |      |   12.185.305 | |  (3.428.442) | 
| trading / derivatives                  |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| - Adjustment IPO costs                 |   |      |  |  8   |            - | |       51.649 | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Changes in working capital:            |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| - Change in trade receivables/payables |   |      |  |      |  (5.786.076) | |    1.008.764 | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| - Change in other and tax              |   |      |  |      |    3.791.707 | |    4.332.363 | 
| receivables/payables                   |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| - Change in other and tax              |   |      |  |      |      196.472 | |   48.291.061 | 
| receivables/payables (VAT)             |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Investment in inventories              |   |      |  |  2   | (16.610.825) | | (43.568.114) | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Disposal in inventories                |   |      |  |  2   |    9.504.810 | |    7.151.975 | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Net cash flow generated / (absorbed) from         |  |      |   24.459.765 | |   54.312.638 | 
| operating activities (A)                          |  |      |              | |              | 
+---------------------------------------------------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Acquisition of investment property     |   |      |  |  1   | (67.358.988) | | (29.677.050) | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Acquisition cost plus additions to     |   |      |  |  1   |   49.050.000 | |   54.000.500 | 
| properties disposed                    |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Interest received                      |   |      |  |      |    4.083.395 | |    1.997.040 | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Disposal / (investment) in financial assets at fair value   |            - | |   20.419.228 | 
| through profit and loss                                     |              | |              | 
+-------------------------------------------------------------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Net cash flow generated / (absorbed) from         |  |      | (14.225.593) | |   46.739.718 | 
| investing activities (B)                          |  |      |              | |              | 
+---------------------------------------------------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Interest paid                          |   |      |  |  10  | (24.546.845) | | (21.507.970) | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Dividend distribution of the profit    |   |      |  |  9   | (38.412.634) | | (10.602.387) | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Proceeds of borrowings and payables to banks and other      |   29.828.086 | | (16.483.643) | 
| financial institutions                                      |              | |              | 
+-------------------------------------------------------------+--------------+-+--------------+ 
| Purchase of shares                     |   |      |  |  9   |    (668.609) | | (35.028.081) | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Net cash flow generated / (absorbed) from         |  |      | (33.800.002) | | (83.622.081) | 
| financing activities (C)                          |  |      |              | |              | 
+---------------------------------------------------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Total net cash flow generated / (absorbed) in the    |      | (23.565.830) | |   17.430.275 | 
| period (D=A+B+C)                                     |      |              | |              | 
+------------------------------------------------------+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Cash and cash equivalents at the beginning of the |  |      |  103.332.229 | |   85.901.954 | 
| period (E)                                        |  |      |              | |              | 
+---------------------------------------------------+--+------+--------------+-+--------------+ 
|                                        |   |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
| Cash and cash equivalents at the end of    |      |  |      |   79.766.399 | |  103.332.229 | 
| the period (D+E)                           |      |  |      |              | |              | 
+----------------------------------------+---+------+--+------+--------------+-+--------------+ 
 
 
 
 
Consolidated Statement of changes in equity for the period from 1 January 2008 
to 31 December 2008 
(in Euro) 
 
 
 
 
 
 
 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |  Retained    |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |note  |    Share     |    Share     |  earnings    |    Equity     | 
|                     |      |   capital    |   premium    |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
| Equity at 31        |      |    6.096.020 |  308.956.491 |  100.361.034 |   415.413.545 | 
| December 2007       |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
| Dividend 2007       |  8   |           -  |           -  |              |               | 
|                     |      |              |              | (22.224.452) |  (22.224.452) | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
| Interim dividend    |  8   |           -  |           -  |              |               | 
| 2008                |      |              |              | (16.188.182) |  (16.188.182) | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
| Purchase of share   |  8   |           -  |           -  |   (668.609)  |    (668.609)  | 
| capital             |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
| Cancelled acquired  | 7-8  |   (597.741)  |              |              |            -  | 
| shares              |      |              | (34.469.741) |   35.067.482 |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
| Result of the       |      |           -  |           -  |              |   (8.568.714) | 
| period              |      |              |              |  (8.568.714) |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
| Equity at 31        |      |    5.498.279 |  274.486.750 |   87.778.559 |   367.763.588 | 
| December 2008       |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
|                     |      |              |              |              |               | 
+---------------------+------+--------------+--------------+--------------+---------------+ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |   Retained    |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |note  |    Share    |    Share     |   earnings    |    Equity    | 
|                    |      |  capital    |   premium    |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
| Equity at 31       |      |   6.096.020 |  308.904.842 |   101.110.871 |  416.111.733 | 
| December 2006      |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
| Cost of IPO        |      |          -  |      51.649  |            -  |      51.649  | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
| Dividend 2006      |      |          -  |           -  |   (3.962.400) |              | 
|                    |      |             |              |               |  (3.962.400) | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
| Interim dividend   |      |          -  |           -  |   (6.639.987) |              | 
| 2007               |      |             |              |               |  (6.639.987) | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
| Purchase of share  |      |          -  |           -  |               |              | 
| capital            |      |             |              |  (35.028.081) | (35.028.081) | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
| Result of the      |      |          -  |           -  |   44.880.631  |              | 
| period             |      |             |              |               |   44.880.631 | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
| Equity at 31       |      |   6.096.020 |  308.956.491 |   100.361.034 |  415.413.545 | 
| December 2007      |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
|                    |      |             |              |               |              | 
+--------------------+------+-------------+--------------+---------------+--------------+ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to Consolidated Financial Statements as at 31 December 2008 
 
Introduction 
Spazio Investment N.V. (the "Company", formerly Spazio Industriale Investments I 
B.V.), incorporated on 22 November 2005, is a public company (listed at 
Alternative Investment Market - London) with limited liability (naamloze 
vennootscap) domiciled in Amsterdam, The Netherlands. The address of the 
registered office is Royal Damcenter, Dam 7f, 1012 JS Amsterdam, The 
Netherlands. 
The principal activity of the Company is holding of investments in subsidiaries 
and associates. 
The Company totally owns the units of the close-ended real estate investment 
fund "Spazio Industriale - Fondo Comune di Investimento Immobiliare di Tipo 
Chiuso" (the "Fund"). The Fund invests in real estate and operates in the 
development of land and buildings under renovation. 
The consolidated financial statements were authorised for issue by the board of 
directors on 25 March 2009. 
 
Significant Accounting Policies 
The principal accounting policies used in the preparation of these consolidated 
financial statements are set out below. These policies have been consistently 
applied, unless otherwise stated. 
 
 
Basis of preparation 
Pursuant to Regulation 1606 issued by the European Parliament and the European 
Commission in July 2002, the consolidated financial statements at 31 December 
2008 of Spazio Investment N.V. have been prepared on the basis of International 
Financial Reporting Standards as adopted by the European Union ("IFRS") 
(including International Financial Reporting Interpretations Committee ("IFRIC") 
interpretations). 
The comparative figures in the consolidated income statement and the 
consolidated cash flow statement for the period from 1 January 2008 up to 31 
December 2008 refer to the year 2007. 
The preparation of consolidated financial statements in conformity with IFRS 
requires the use of certain critical accounting estimates described in the 
paragraph "Accounting estimates and assumptions". It also requires management to 
exercise its judgement in the process of applying the Group's accounting 
policies. 
The profit and loss account included in the Company financial statements is 
presented in abbreviated form in accordance with article 2:402 of the Dutch 
Civil Code. 
The functional currency is the Euro. All values indicated in the Notes to these 
consolidated financial statements are expressed in Euro unless specified 
otherwise. All transactions and balance sheet positions are in Euro. 
The consolidated financial statements have been audited by 
PricewaterhouseCoopers Accountants N.V.. 
 
 
Standards, amendment and interpretations effective from 1 January 2008 
Amendments to IAS 39 "Financial Instruments: Recognition and Measurement" and 
IFRS 7 "Financial Instruments: Disclosures": reclassification of financial 
assets. 
The amendments to IAS 39 introduce the possibility of reclassifications, in rare 
circumstances, of some financial instruments out of the fair value through 
profit or loss category to other category. The amendment also permits an entity 
to transfer from available-for-sale category to the loans and receivables 
category a financial asset that would have met the definition of loans and 
receivables if the entity has the intention and ability to hold that financial 
asset for the foreseeable future. 
An entity shall not reclassify: 
-      a derivative; 
-      any financial instrument that upon initial recognition it was designated 
by the entity as at fair value 
 


through profit or loss.

These amendments have been endorsed by the European Union on October 2008. A 
further amendment ("Reclassification of financial assets - Effective date of 
transition"), issued in November 2008, clarified the effective date and 
transition requirements of the earlier amendment issued in October. In 
particular any reclassification made from 1 July until 31 October 2008 shall 
apply form 1 July 2008, while any reclassification made on or after 1 November 
2008 shall take effect only from the date when the reclassification is made. 
The application of these amendments have not had an impact on the Company 
financial statements. 
 
 
New standards or interpretations 
As required by IAS 8 ("Accounting policies, changes in accounting estimates and 
errors"), below is a brief description of new accounting standards or 
interpretations that have been issued but are not yet in force or not yet 
endorsed by the European Union. 
The Group has adopted none of these standards or interpretations in advance of 
their effective date. 
  *  IFRIC 11, 'IFRS 2 - Group and treasury share transactions', effective from 1 
  January 2009, is not applicable to the Fund; 
  *  IFRIC 12, 'Service concession arrangements', effective from 1 January 2008 but 
  not yet endorsed, is not applicable to the Fund; 
  *  IFRIC 13, 'Customer loyalty programmes', effective from 1 January 2009, is not 
  expected to have a material impact on the Fund financial statements; 
  *  IFRIC 14, 'IAS 19 - the limit on a defined benefit asset, minimum funding 
  requirements and their interaction', effective from 1 January 2009, is not 
  applicable to the Fund; 
  *  IFRIC 15, 'Agreements for the Construction of Real Estate'. This interpretation 
  provides guidelines on determining whether an agreement for the construction of 
  real estate units is within the scope of IAS 11 "Construction Contracts" or IAS 
  18 "Revenue", defining the point in time in which revenues should be recognised. 
  IFRIC 15, not yet endorsed by the European Union, will become effective from 1 
  January 2009. The future application of this interpretation is not expected to 
  have a material impact on the Fund financial statements since the Fund 
  accounting treatment is already in line with the above changes; 
  *  IFRIC 16, 'Hedges of a Net Investment in a Foreign Operation', effective from 1 
  October 2008 but not yet endorsed by the European Union, is not applicable to 
  the Fund; 
  *  IFRIC 17, 'Distributions of non-cash assets to owners', not yet endorsed by the 
  European Union, will be effective for financial years beginning after 30 June 
  2009. The application of this interpretation is not expected to have an impact 
  on the Fund financial statements; 
  *  IFRIC 18, 'Transfers of Assets from Customers'. This interpretation, not yet 
  endorsed by the European Union, has been issued on January 2009 and will be 
  effective from 1 July 2009. The application of this interpretation is not 
  expected to have an impact on the Fund financial statements; 
  *  IFRS 8, 'Operating segments', effective from 1 January 2009. IFRS 8 replace IAS 
  14, 'Segment reporting', and requires a 'management approach' under which 
  segment information is presented on the same basis as that used for internal 
  reporting purposes. The expected impact is still being assessed in detail, but 
  it appears likely that the number of reported segments may increase; 
  *  IAS 23 (amendment), 'Borrowing costs', effective from 1 January 2009. This 
  amendment, which is part of the project for convergence with US GAAP (SFAS 34 
  Capitalization of Interest Cost), removes the option of immediately expensing 
  borrowing costs directly attributable to the acquisition, construction or 
  production of a qualifying asset. Therefore, borrowing costs are required to be 
  capitalised as part of the cost of that asset. The future application of the 
  amendment is not expected to have a material impact on the Fund financial 
  statements since the Fund does not adopt itself of the option that was 
  eliminated; 
  *  IAS 1 (revised), 'Presentation of financial statements', effective from 1 
  January 2009. Management is in the process of developing proforma accounts under 
  the revised presentation requirements of these standards; 
  *  IFRS 2 (amendment) 'Share-based payment', effective from 1 January 2009 is not 
  applicable to the Fund; 
  *  IFRS 3 (revised), 'Business combinations' and consequential amendments to IAS 
  27, 'Consolidated and separated financial statements', IAS 28, 'Investments in 
  associates' and IAS 31, 'Interests in joint ventures', effective prospectively 
  to business combinations for which the acquisition date is on or after the 
  beginning of the first annual reporting period beginning on or after 1 July 
  2009. Management will assess the impact of the new requirements regarding 
  acquisition accounting, consolidation and associates on the Fund. The Fund does 
  not have any investment in subsidiaries, joint ventures or associates; 
  *  IAS 32 (amendment), 'Financial instruments: presentation', and consequential 
  amendments to IAS 1, 'Presentation of financial statements', effective beginning 
  January 1, 2009 is not applicable to the Fund, as it does not have any puttable 
  instruments; 
  *  IFRS 1 (amendment) "First-time Adoption of International Financial Reporting 
  Standards" and IAS 27 (amendment) "Consolidated and Separate Financial 
  Statements" - Cost of an investment in a subsidiary, jointly controlled entity 
  or associate. These amendments, endorsed by the European Union on January 2009 
  and effective from 1 January 2009 are not expected to have a material impact on 
  the Fund financial statements; 
  *  IAS 39 (amendment) "Financial Instruments: Recognition and Measurement - 
  eligible hedged items", not yet endorsed by the European Union, will be applied 
  retrospectively beginning on 1 July 2009. The future application of these 
  changes is not expected to have a material impact on the Fund financial 
  statements; 
  *  "Improvements" to IFRS: under the project begun in 2007, the IASB has issued a 
  series of amendments to IFRS in force. The amendments bring about accounting 
  changes for presentation, recognition and measurement and also terminology 
  changes. Such amendments, not yet endorsed by the European Union, will become 
  effective from 1 January 2009 (except for improvements to IFRS 5 which will 
  become effective from 1 July 2009). The future application of these amendments 
  is not expected to have a material quantitative impact on the Fund financial 
  statements. 
  *  IAS 40 Revised Companies applying the fair value model will be required to 
  account for all investment properties under construction at fair value from 1 
  January 2009, if the fair value can be reliably measured on a continuing basis. 
  The application of this revised IAS 40 has no impact on the financial statement 
  of the company as the company choose IAS 2 as the accounting policies of 
  inventories. 
 
 
 
Consolidation area 
The Consolidation is based on the financial statements of the companies in the 
consolidation area, which were prepared as of the reporting date on the basis of 
IFRS as adopted by the European Union. 
Subsidiaries are those 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 so as to obtain benefits from its activities. In 
Assessing control, potential voting rights that presently are exercisable are 
taken into account. The financial statements of subsidiaries are included in the 
consolidated financial statements from the date that control commences until the 
date that control ceases. 
The consolidation area covers one subsidiary - Spazio Industriale - Fondo Comune 
di Investimento Immobiliare di Tipo Chiuso ("Fondo Spazio Industriale" or the 
"Fund"), totally owned by Spazio Investment N.V.. 
The Fund started its activity on 28 December 2005, the date of authorisation of 
the Fund by Bank of Italy. All the financial statements used are expressed in 
Euro. 
 
 
Consolidation criteria 
The consolidation criteria can be summarized as follows: 
  *   subsidiaries are consolidated on a line-by-line basis, according to which: 
 
      -    the assets, liabilities, costs and revenues shown in the 
subsidiaries' financial statements are carried in full, 
 
regardless of the interest held; 
      -    the book value of equity investments is eliminated against the 
corresponding shares of net equity; 
      -    intercompany receivables and payables, as well as intercompany 
expenses and revenues among the 
 


consolidated companies are

eliminated, including dividends distributed within the Group; 
      -    minority holdings are shown under a specific net equity item, and 
minority interests in the profit or loss are 
 


stated separately in

the income statement; 
  *   profits and losses resulting from transactions between consolidated companies, 
  not involving third parties, are  eliminated in proportion to the percentage 
  held unless the transaction provides evidence of an impairment of  the asset 
  transferred; 
  *   subsidiaries are recorded upon acquisition using the "purchase method", which 
  entails: 
 
      -    determination of the purchase cost in compliance with IFRS 3; 
      -    determination of the fair value of the assets and liabilities 
acquired (both actual and contingent); 
      -    recognition of the difference in profit or loss, if the cost of 
acquisition is less than the fair value of Group's 
 


share of the

identifiable net assets of the subsidiary acquired. 
 
 
Accounting standards and policies 
Below is a summary of the significant accounting standards and policies applied. 
 
 
Investment property 
Investment properties are properties which are held to earn rental income, for 
capital appreciation, or both and are not occupied by the companies consolidated 
in the Group. 
Investment property comprises freehold land, freehold buildings, land held under 
operating lease and buildings held under finance lease. 
Land held under operating lease is classified and accounted for as investment 
property when the rest of the definition of investment property is met. The 
operating lease is accounted for as if it were a finance lease. 
Investment property is measured initially at cost, including related transaction 
costs. After initial recognition, investment property is carried at fair value. 
The fair values are based on open market values, being the estimated amount for 
which a property could be exchanged on the date of valuation between a willing 
buyer and a willing seller in an arm's length transaction wherein the parties 
had acted knowledgeably, prudently and without compulsion. 
An external, independent expert (CB Richard Ellis Professional Services 
S.p.A.), with appropriate recognised professional qualifications and recent 
experience in the rental of the category of property being appraised, values the 
portfolio on a quarterly basis. 
Valuations reflect, where applicable, the type of tenants currently occupying 
the property or responsible for meeting lease commitments, the allocation of 
maintenance and insurance responsibilities between lessor and lessee, and the 
remaining economic life of the property. In addition physical inspections are 
conducted in order to assess the quality, technical features and conditions of 
the properties. 
The valuations are prepared by considering the aggregate of the net annual rents 
received from the properties and where relevant, associated costs. A discount 
factor which reflects the specific risks inherent to the net cash flows is then 
applied to the net annual rents to arrive at the property valuation. 
The discount rate and assumption regarding future real growth are significant 
value-driving factors in the valuation model. 
The discount rate is the weighted average cost of borrowed capital and equity. 
The cost of borrowed capital is based on the market interest rate for loans. The 
cost of equity is based on a risk-free interest rate equivalent to the long-term 
government bond rate with the addition of a risk premium. The risk premium is 
specific to each property and can be divided into two parts - general risk and 
individual risk. The general risk adjusts for the fact that a real estate 
investment is not as liquid as a bond and the asset is affected by the general 
economic situation. The individual risk is specific to each property, and 
comprises a weighted assessment of the property's category, location, and 
technical condition and the quality of the property and its tenant at the 
valuation date. 
Future rental income is estimated based on the current lease and reasonable and 
demonstrable assumptions about rental income from future leases. In particular, 
at the end of the relevant lease contract, if appropriate, additional works and 
variations are assumed in order to convert the property to an alternative use 
and consequently to let or sell it at an adequate market value. 
Any gain or loss arising from a change in fair value is recognised in the income 
statement. 
Gains or losses arising from the disposal of investment property are determined 
as the difference between the net disposal proceeds and the carrying amount of 
the asset and are recognised in profit and loss in the period of the disposal. 
If an investment property becomes owner-occupied, it is reclassified as 
property, plant and equipment, and its fair value at the date of 
reclassification becomes its cost for accounting purposes. Property that is 
being constructed or developed for future use as investment property is 
classified as property, plant and equipment and stated at cost until 
construction or development is complete. At that time, it is reclassified and 
subsequently accounted for as investment property. 
If an item of property, plant and equipment becomes an investment property 
because its use has changed, any difference resulting between the carrying 
amount and the fair value of this item at the date of transfer is recognised in 
equity as a revaluation of property, plant and equipment under IAS 16. However, 
if a fair value gain reverses a previous impairment loss, the gain is recognised 
in the income statement. 
 
 
Inventories 
Inventories consist of land for development and buildings under renovation in 
the normal course of the Fund's activities, or during the construction process 
or development related to said activities. 
Land for development and buildings under renovation are stated at the lower of 
cost and net realisable value. Net realisable value is the estimated selling 
price, less the estimated costs of completion and selling expenses. Cost 
includes incremental expenses and capitalisable financial charges, as described 
below in the "Financial expenses" note. 
IAS 11 will be applied if a sales contract in relation to these projects has 
been signed. 
 
 
Receivables and payables 
Receivables are recognised initially at fair value and subsequently measured at 
amortized cost, using the effective interest method, less provision for 
impairment. 
A provision for impairment of trade receivables is established when there is 
objective evidence that the Group will not be able to collect all amounts due 
according to the original terms of the receivables. Significant financial 
difficulties of the debtor, probability that the debtor will enter bankruptcy or 
financial reorganisation, and default or delinquency in payments are considered 
indicators that the trade receivables are impaired. The amount of the provision 
is the difference between the asset's carrying amount and the present value of 
estimated future cash flows, discounted at the original effective interest rate. 
The carrying amount of the assets is reduced through the use of an allowance 
account, and the amount of the loss is recognised in the income statement. When 
a trade receivable is uncollectible, it is written off against the allowance 
account for trade receivables. Subsequent recoveries of amounts previously 
written off are credited in the income statement. 
Payables are recognised initially at fair value and subsequently measured at 
amortized cost, using the effective interest method. 
 
 
Leases 
When a group company is the lessee: 
(i)    Operating lease 
Leases in which a significant portion of the 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. 
(ii)    Finance lease 
Leases of assets where the Group 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. Each lease payment is 
allocated between the liability and finance charges so as to achieve a constant 
rate on the finance balance outstanding. The corresponding rental obligations, 
net of finance charges, are included in current and non-current borrowings. The 
interest element of the finance cost is charged to the income statement over the 
lease period so as to produce a constant periodic rate of interest on the 
remaining balance of the liability for each period. The investment properties 
acquired under finance leases are carried at their fair value. 
When a group company is the lessor: 
(i)    Operating lease 
Properties leased out under operating leases are included in investment property 
in the balance sheet. Lease income is recognised over the term of the lease 
using the net investment method, which reflects a constant periodic rate of 
return. 
(ii)    Finance lease 
When assets are leased out under a finance lease, the present value of the lease 
payments is recognised as a receivable. The difference between the gross 
receivable and the present value of the receivable is recognised as unearned 
finance income. 
 
 
Impairment of assets 
Assets including goodwill that have an indefinite useful life are not subject to 
amortisation and are tested annually for impairment. Assets that are subject to 
amortisation or depreciation are reviewed for impairment whenever events or 
changes in circumstance indicate that the carrying amount may not be 
recoverable. An impairment loss is recognised for the amount by which the 
asset's carrying amount exceeds its recoverable amount. The recoverable amount 
is the higher of an asset's fair value less costs to sell and value in use. For 
the purposes of assessing impairment, assets are grouped at the lowest levels 
for which there are separately identifiable cash flows (cash-generating units). 
 
 
Financial instruments 
Derivative financial instruments 
The Company uses financial instruments solely for hedging under IFRS. 
Derivatives are initially recognised at fair value on the date a derivative 
contract is entered into and are subsequently remeasured at their fair value. 
The method of recognising the resulting gain or loss depends on whether the 
derivative is designated as a hedging instrument, and if so, the nature of the 
item being hedged. 
Derivatives not classified as hedges 
In the case of fair value changes in derivatives not designated and qualified as 
hedges, these are immediately recognised to the income statement. The Group does 
not use the possibility of hedge accounting and all changes in the fair value of 
the derivative financial instruments are accounted in the profit and loss. 
They are measured at fair value even if they are contracts entered into to 
manage interest rate fluctuations and, more in general, to manage the Group's 
operating risks, since the Group policy does not allow the contracting of 
derivatives for speculative purposes. 
For 2008 the Fund does not apply hedge accounting. 
Determination of fair value 
The fair value of financial instruments listed on an active market is based on 
market prices as of the reporting date. The market price used for derivatives is 
the bid price, while for financial liabilities the ask price is employed. The 
fair value of instruments not listed on an active market is determined according 
to valuation techniques, i.e. discounted cash flow analysis and option pricing 
models, based on a series of methods and assumptions relating to market 
conditions as of the reporting date. 
Financial assets at fair value through profit and loss 
Financial assets held for trading are classified as current assets and stated at 
fair value, with any resultant gain or loss being recognised in the income 
statement. 
Transaction costs are directly recorded into profit and loss at trade date. 
The fair value of financial assets classified as held for trading is their bid 
price at the balance sheet date. 
Financial assets are derecognised when the rights to receive the cash flows from 
the investments have expired or have been transferred and the group has 
transferred substantially all risks and rewards of ownership. 
 
 
Cash and cash equivalents 
Cash and cash equivalents comprise cash balances and cash deposits. 
Cash and cash equivalents are booked at face value. 
The maturity date is less than three months. 
 
 
Bank borrowings and payables to other financial institutions 
Loans are initially recognised at their fair value, net of transaction costs 
directly attributable to the issuing of the financial liability. 
They are subsequently measured at amortized cost using the effective interest 
rate. 
The effective interest method is a method of calculating the amortized cost of a 
financial asset or financial liability and of allocating the interest income or 
interest expense over the relevant period. The effective interest rate is the 
rate that exactly discounts estimated future cash payments or receipts 
throughout the expected life of the financial instrument, or a shorter period 
where appropriate to the net carrying amount of the financial asset or financial 
liability. When calculating the effective interest rate, the Group estimates 
cash flows considering a debt repayment schedule drawn up in line with the 
relevant business plan but does not consider future credit losses. The 
calculation includes all fees and points paid or received between parties to the 
contract that are an integral part of the effective interest rate, transaction 
costs, and all other premiums or discounts. 
 
 
Share capital 
Shares are classified as equity when there is no obligation to transfer cash or 
other assets. 
Incremental costs directly attributable to equity transactions are recognised as 
a deduction from the proceeds. 
 
 
Dividend distribution 
Dividend distribution to the Company's shareholders is recognised as a liability 
in the Group's financial statements in the period in which the dividends are 
approved. 
 
 
Sale of assets 
Revenues from the sale of assets are recorded only when all of the following 
conditions are satisfied: 
  *  most of the risks and benefits linked to ownership of the assets have been 
  transferred to the buyer; 
  *  the effective control over the assets sold and the normal level of activities 
  associated with the asset have ended; 
  *  the amount of revenue can be reliably determined; 
  *  it is probable that the economic benefits deriving from the sale will be enjoyed 
  by the Company; 
  *  the costs sustained or to be sustained can be reliably determined. 
 
 
 
Rental income 
Gross rental income is determined based on contractual lease term entitlements 
and is recognised as lease services are rendered. Gross rental income does not 
include service charges, such as heating, electricity and security, which are 
directly charged to tenants. Rental income is recognised in the income statement 
on a straight-line basis over the term of the lease. Lease incentives granted 
are recognised as an integral part of the total rental income. Lease incentives 
are recognised on a straight-line basis over the shorter of the life of the 
lease or the year to the first break option. Differences that arise between the 
contractual lease payments and the periodic net lease income are capitalised in 
the balance sheet. Turnover based rents are recorded as income in the years in 
which they are earned. 
 
 
Interest 
Interest is recognised on an accrual basis considering the effective yield of 
the asset. 
 
 
Financial expenses 
Financial expenses are charged to the income statement in the period in which 
they are incurred unless they are directly attributable to the acquisition, 
construction or production of a qualifying asset, in which case they are 
capitalised as part of the cost of that asset. The amount of financial expenses 
capitalised is the actual borrowing costs incurred on the loan specifically 
borrowed for the purpose of obtaining the qualifying asset. 
A qualifying asset is an asset that necessarily takes a substantial period of 
time to get ready for its intended use or sale. 
The capitalisation of financial expenses ceases when substantially all the 
activities necessary to prepare the qualifying asset for its intended use or 
sale are completed. 
 
 
Tax expense 
In the Netherlands, Dutch corporate tax is based on the fiscal results, taking 
into account the fact that certain income and expense items as reported in the 
profit and loss account are tax-exempt. The applicable tax rates are 20% over 
the first Euro 275,000 and 25.5% over the remainder for the year 2008. The Dutch 
Tax Authorities have issued a "determination agreement ATR" stating that the 
Italian real estate property investment Fund is to be qualified as a transparent 
entity. In practical terms, this means that the Fund will be transparent from a 
Dutch corporate income tax point of view and the Company is treated as the 
direct owner of the underlying assets. Consequently, all income of the Fund 
should be treated as income of the Company and treated accordingly. Due to the 
operation of the Convention for the Avoidance of Double Taxation signed on the 8 
May 1990 by the Government of Italy and the Government of The Netherlands (and 
specifically article 24, paragraphs 1 and 2 of the Treaty) income and capital 
gains arising from immovable property situated in Italy is effectively exempt 
from corporate taxation in The Netherlands. Accordingly no deferred tax is 
calculated. 
 
 
Segment reporting 
The Group has only one line of business ("investments in light industrial 
properties") and operates through the Fund exclusively in Italy. Segment 
reporting is therefore not required. 
 
 
Financial risk management policies 
The Company has no employees or executive management of its own. It relies 
solely on its service providers under contract to undertake all executive and 
operational activities relating to the property portfolio in accordance with the 
Board's direction. In addition to their attendance at Board meetings, the 
Directors, through the Chairman, maintain a regular dialogue with the providers. 
In addition the Directors can call upon the services of the internal audit 
function of Pirelli RE Group to carry out periodic reviews. 
Highlights of the Group's risk management policies are discussed below. 
All monitoring controls relating to the management of the Company and risk 
management policies are performed by Pirelli & C. Real Estate Società di 
Gestione del Risparmio S.p.A. on the basis of the service level agreement. 
 
 
Types of financial risk 
Credit risk 
Credit risk represents the Group's exposure to potential losses due to default 
by its counterparties on their commercial and financial obligations. 
Credit evaluations are performed on all tenants as a part of the due diligence 
on properties to be acquired; in particular only properties rented to prime 
tenants are considered. In addition, the exposure to credit risk is monitored on 
an ongoing basis by management using aging analysis. 
To limit that risk, with regard to commercial counterparties, the Group has 
procedures in place to assess the financial solidity of its tenants, to monitor 
incoming payments, and to take credit recovery action should this become 
necessary. The aim of these procedures is to set credit limits for tenants and 
take appropriate actions when those limits are exceeded. 
In some cases tenants are asked for guarantees, generally sureties from banks in 
excellent standing or personal guarantees. Collateral is requested more rarely. 
As for financial counterparties, for the management of temporary excess funds or 
for the trading of derivative instruments, the Group does business only with 
intermediaries of high credit standing. 
Receivables are recognised net of impairment calculated for the risk of 
counterparty default, which is determined in light of the available information 
on solvency and historical trends. 
Where a debt passes its due date it is kept under constant review to determine 
whether a provision is necessary. In addition the provision is reviewed on a 
regular basis to determine whether a full write off is appropriate. 
 
 
Exchange rate risk 
The Group mainly operates at the Italian market level; as a consequence it has 
no exposure to exchange rate risk. 
Positions subject to exchange rate risk are essentially comprised of a very 
limited number of invoices payable and do not make up a sizeable proportion of 
that balance. Therefore, exchange rate fluctuation has no significant effect on 
the income statement. 
 
 
Currency risk 
The Group totally owns a real estate fund that prepare its financial statements 
in Euro which is the Group's reporting currency. For this reason the Group is 
not exposed to currency risk. 
 
 
Interest rate risk 
Interest rate risk to which the Group is exposed mostly originates from 
long-term financing. Since these are variable-interest bearing loans, the Group 
is exposed to cash flow risk. 
The Group manages the cash flow risk on interest rates through the use of 
derivative contracts. The derivatives considered are exclusively those defined 
as hedging instruments by IAS/IFRS: typically interest rate collars, which 
mitigate the cost of the cap by setting a minimum limit (floor) on interest 
payable. 
The purchase and designation of such derivatives as hedging instruments for the 
purposes of IAS 39 is decided on a case-by-case basis. 
Holding other conditions constant, a hypothetical 0.50 percent increase or 
decrease in all currencies' interest rates applicable to the floating-rate 
assets and liabilities and interest rate derivatives to which the Fund is 
exposed would, over the course of a year, increase the pre-tax profit by Euro 
4,343 thousand (Euro 4,981 thousand in 2007) or decrease the pre-tax profit by 
Euro 4,829 thousand (Euro 2,576 thousand in 2007), respectively. The effect on 
equity is the same as the effect on the pre-tax profit. 
 
 
Asset devaluation risk 
In the second half of 2008 Spazio experienced a modest fall in asset values, as 
explained in the Chairman's statement of this report. Should asset values 
continue to fall in the future this could potentially create a risk of a breach 
of our LTV banking covenants. The Board is committed to closely monitor Spazio's 
financial position and the compliance with all banking covenants. Cash flow from 
rental income, excess available cash from operations and the proceeds from sales 
in the pipeline could be used by Spazio to repay back debt and to maintain 
adequate headroom against banking covenants. 
 
 
Liquidity risk 
The main liquidity risk refers to the Group's ability to fulfil commitments to 
repay bank borrowings. In particular, principal reimbursements are linked to the 
property sale process, while interest payable is timed to match rental income 
collection and fully covered. 
The main instruments the Group uses to manage liquidity risk are financial plans 
and treasury plans, to allow the thorough and accurate measurement of incoming 
and outgoing funds. 
Discrepancies between these plans and the actual data are constantly analysed. 
The cash flow is monitored on a monthly basis. 
Financial liabilities outstanding at 31 December 2008 had the following 
maturities: 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| |                          |  |            |          |             |         |             | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| |                          |  |   within   | between  |  between    | beyond  |   Total     | | 
| |                          |  |            |    1     |      2      |         |             | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| |                          |  |   1 year   |  and 2   |    and 5    |    5    |             | | 
| |                          |  |            |  years   |    years    |  years  |             | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| |                          |  |            |          |             |         |             | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| | Bank borrowings and      |  |   115.060  |       -  |             |      -  |             | | 
| | payables to other        |  |            |          | 412.887.003 |         | 413.002.063 | | 
| | financial institutions   |  |            |          |             |         |             | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| | Trade payables           |  |            |       -  |          -  |      -  |             | | 
| |                          |  | 11.691.007 |          |             |         |  11.691.007 | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| | Other payables           |  |            |       -  |             |      -  |             | | 
| |                          |  |  2.769.574 |          |   2.594.535 |         |   5.364.109 | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| | Tax payables             |  |   670.488  |       -  |          -  |      -  |    670.488  | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| |                          |  |            |          |             |         |             | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| |                          |  |            |          |             |         |             | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
| |                          |  |            |          |             |         |             | | 
+-+--------------------------+--+------------+----------+-------------+---------+-------------+-+ 
 
 
Based on the accelerated Business Plan approved by the Management Board on 9 
December 2008 the actual reimbursement in the coming years may differ from the 
table above. 
The maturities of financial liabilities outstanding at 31 December 2007 were as 
follows: 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  |                        |  |            |             |            |             |             | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  |                        |  |   within   |  between    |  between   |   beyond    |   Total     | 
|  |                        |  |            |      1      |     2      |             |             | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  |                        |  |   1 year   |    and 2    |   and 5    |  5 years    |             | 
|  |                        |  |            |    years    |   years    |             |             | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  |                        |  |            |             |            |             |             | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  | Bank borrowings and    |  |            |             |            |             |             | 
|  | payables to other      |  | 81.120.894 | 102.463.731 | 52.438.923 | 149.565.781 | 385.589.329 | 
|  | financial institutions |  |            |             |            |             |             | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  | Trade payables         |  |            |          -  |         -  |          -  |             | 
|  |                        |  | 20.564.041 |             |            |             |  20.564.041 | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  | Other payables         |  |            |          -  |         -  |    475.345  |             | 
|  |                        |  |  2.462.111 |             |            |             |   2.937.456 | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  | Tax payables           |  |   619.729  |          -  |         -  |          -  |    619.729  | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  |                        |  |            |             |            |             |             | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
|  |                        |  |            |             |            |             |             | 
+--+------------------------+--+------------+-------------+------------+-------------+-------------+ 
 
 
 
 
Capital risk management 
The Group's objectives when managing capital are to maintain its ability to 
continue as a going concern in order to provide returns for unitholders and 
benefits for other unitholders and to maintain an optimal financial structure so 
as to reduce the cost of capital. 
 
 
Risk of vacancy 
The Income Producing Portfolio generates Euro 43.0 m of yearly rent mostly 
deriving from ten major tenants, which are principally telecommunications and 
utilities service suppliers (Telecom Italia S.p.A., Enel Group, Wind 
Telecomunicazioni S.p.A., Prima Comunicazione S.p.A. and RAI - Radiotelevisione 
Italiana S.p.A.), a fashion designer (Prada S.p.A.), logistics operators (Fiege 
Borruso S.p.A. and Bertola Servizi Logistici S.p.A.), providers of industrial 
components (ABB Cap S.p.A., Alstom Power Italia and ACC Group), and major 
retailers (SMA S.p.A.). Telecom Italia is the largest tenant, representing 
approximately 49% of the total annual passing rent of the portfolio as of 31 
December 2008. 
The total current vacancy of investment property based on GLA is about 3.9% 
(based on CBRE estimated value at 31 December 2008), mostly allocated to (i) 
four conversion assets, consisting of light industrial/mixed use properties that 
are currently vacant, totalling approximately 53,400 sq m of surface area and 
having strong redevelopment and conversion potential thanks to their location 
and land size, and (ii) eight distressed properties to be sold to end users. 
Given the existence of valid and binding leases with an average duration of five 
years (first lease term), the risk of a significant vacancy increase in the near 
future is considered to be low. In addition, the large majority of assets, 
especially those in the Telecom Italia portfolio, are located in central or 
semi-urban areas and, due to their location and nature, have considerable 
potential for alternative and more profitable uses (for most of the Telecom 
Italia assets, vacant possession could exceed the open market value based on 
current lease terms). 
Accounting estimates and assumptions 
The preparation of the financial report requires management to make estimates 
and assumptions that could influence the book values of certain assets, 
liabilities, costs and revenues, as well as the information provided on 
contingent assets/liabilities as of the reporting date. 
The following accounting estimates are critical to this report: 
            (a)  IAS 2 - Valuation of inventory 
Inventories, which are wholly held by the Fund, are booked at the lower of cost 
and net realisable value. 
Inventories consist of land for development in the normal course of the Fund's 
activities or during the construction process, or development related to said 
activities. Net realisable value is the estimated selling price, less the 
estimated costs of completion and selling expenses. Cost includes incremental 
expenses and capitalisable financial charges. 
            (b)  IAS 40 - Valuation of investment property 
Investment properties, all of which are held by the Fund, are kept to earn 
rental income or for capital appreciation or both. Investment properties are 
stated at fair values which are based on market values, being the estimated 
amount for which a property could be exchanged on the date of valuation between 
a willing buyer and a willing seller in an at arm's length transaction wherein 
the parties have acted knowledgeably, prudently and without compulsion. 
An external, independent expert (CB Richard Ellis Professional Services S.p.A.) 
with appropriate recognised professional qualification and recent experience in 
the property being appraised, values the portfolio every three months. 
The valuations are prepared by considering the aggregate of the net annual rents 
received from the properties and where relevant, associated costs. A discount 
factor which reflects the specific risks inherent to the net cash flows is then 
applied to the net annual rents to arrive at the property valuation. 
Valuations reflect, where applicable, the type of tenants currently occupying 
the property or responsible for meeting lease commitments, the allocation of 
maintenance and insurance responsibilities between lessor and lessee, and the 
remaining economic life of the properties. Any gain or loss arising from a 
change in fair value is recognised in the income statement. 
Gains or losses arising from the disposal of investment property are determined 
as the difference between the net disposal proceeds and the carrying amount of 
the asset and are recognised in the profit and loss account in the period of 
disposal. 
(c)  IAS 39 - Valuation of derivative financial instruments 
The Group uses derivative financial instruments to hedge its exposure to 
interest rate risk. In accordance with its treasury policy, the Group does not 
hold derivative financial instruments for trading purposes. However, derivatives 
that do not qualify for hedge accounting are accounted for as trading 
instruments.Derivative financial instruments are recognised initially at cost 
and subsequent to initial recognition are measured at fair value. 
The fair value of derivative financial instruments that are not traded in an 
active market is determined by using valuation techniques, i.e. discounted cash 
flow analysis and option pricing models. 
Since the Group does not use the possibility of hedge accounting all changes in 
the fair value of the derivative financial instruments are accounted in the 
profit and loss. 
 
 
Note 1 Investment property 
This item totals Euro 626,390,000 (Euro 619,780,000 at 31 December 2007) and is 
comprised of: 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  |                                  |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  |                                  |     |   |  01.01.2008 - |  01.01.2007 -  |  | 
|  |                                  |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  |                                  |     |   |   31.12.2008  |    31.12.2007  |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  |                                  |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  | Balance as at the beginning of   |     |   |   619.780.000 |   621.120.000  |  | 
|  | the year                         |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  |                                  |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  | Additions:                       |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  | - Acquisitions                   |     |   |   63.920.000  |    28.907.500  |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  | - Capital expenditure            |     |   |    3.438.988  |       769.550  |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  |                                  |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  | Net gain/(loss) from fair value            |               |    22.983.450  |  | 
|  | adjustments on investment property         |  (11.698.988) |                |  | 
+--+--------------------------------------------+---------------+----------------+--+ 
|  |                                  |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  | - Acquisition cost plus additions to   |   |               |   (54.000.500) |  | 
|  | properties disposed                    |   |  (49.050.000) |                |  | 
+--+----------------------------------------+---+---------------+----------------+--+ 
|  |                                  |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  | Balance as at the end of the     |     |   |   626.390.000 |    619.780.000 |  | 
|  | period                           |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
|  |                                  |     |   |               |                |  | 
+--+----------------------------------+-----+---+---------------+----------------+--+ 
 
 
The net gain on disposed property of Euro 2,594,838 (note 16), as listed in the 
income statement, refers to the properties sold in 2008. The balance is the 
difference between the sales proceeds (Euro 51,644,838) and the carrying amount 
(Euro 49,050,000). 
 
 
Note 2 Inventories 
At 31 December 2008 all inventories are valued at the lower of cost, including 
incremental expenses and capitalisable financial charges, and net realisable 
value. 
The movement in inventories over the period is shown in the table below: 
 
 
 
 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  |                                  |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  |                                  |   |    01.01.2008 -  |      01.01.2007 -  |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  |                                  |   |      31.12.2008  |        31.12.2007  |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  |                                  |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  | Balance as at the beginning of   |   |       89.904.481 |         53.488.342 |   | 
|  | the year                         |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  |                                  |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  | Capitalized costs:               |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  | - Acquisition                    |   |          33.000  |         8.695.000  |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  | - Capital expenditures           |   |      13.866.545  |        32.394.029  |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  | - Financial expenses             |   |       2.711.280  |         2.479.085  |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  | Total incremental costs in the   |   |      16.610.825  |        43.568.114  |   | 
|  | period                           |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  |                                  |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  | - Costs of inventory sold        |   |     (9.504.810)  |       (7.151.975)  |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  |                                  |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  | Balance as at the end of the     |   |       97.010.496 |         89.904.481 |   | 
|  | period                           |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  |                                  |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
|  |                                  |   |                  |                    |   | 
+--+----------------------------------+---+------------------+--------------------+---+ 
Inventories consist of land for development and buildings under renovation in 
the normal course of the Fund's activities or during the construction process, 
or development related to said activities. These buildings and land are not 
intended for the Fund's investment property portfolio. 
In 2008 a total of 16 sale agreements were made, totalling Euro 12,247,500, for 
the disposal of 19 units in the renovated "Edificio 16" building along with 28 
parking spaces. 
The net gain on disposal of inventories of Euro 2,742,690 (note 17), as listed 
in the income statement, refers to the properties sold in 2008. The balance is 
the difference between the sale proceeds (Euro 12,247,500) and the carrying 
amount (Euro 9,504,810). 
 
Note 3 Trade receivables 
+-----------------------------------+---+--+--+---------------+--------------+ 
|                                   |   |  |  |               |              | 
+-----------------------------------+---+--+--+---------------+--------------+ 
|                                   |   |  |  |    31.12.2008 |   31.12.2007 | 
+-----------------------------------+---+--+--+---------------+--------------+ 
|                                   |   |  |  |               |              | 
+-----------------------------------+---+--+--+---------------+--------------+ 
|                                   |   |  |  |               |              | 
+-----------------------------------+---+--+--+---------------+--------------+ 
| Trade receivables from third      |   |  |  |    2.007.725  |   5.094.683  | 
| parties                           |   |  |  |               |              | 
+-----------------------------------+---+--+--+---------------+--------------+ 
|                                   |   |  |  |               |              | 
+-----------------------------------+---+--+--+---------------+--------------+ 
| Total                             |   |  |  |     2.007.725 |    5.094.683 | 
+-----------------------------------+---+--+--+---------------+--------------+ 
 
 
Trade receivables are broken down below: 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  |                            |             |            |  |             |            |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  |                            |        31.12.2008        |  |        31.12.2007        |  | 
+--+----------------------------+--------------------------+--+--------------------------+--+ 
|  |                            |Non-current  |  Current   |  |Non-current  |  Current   |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  |                            |             |            |  |             |            |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  | Trade receivables from     |          -  |            |  |          -  |            |  | 
|  | third parties              |             |  2.054.584 |  |             |  5.104.245 |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  |                            |             |            |  |             |            |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  | Total gross trade          |           - |  2.054.584 |  |           - |  5.104.245 |  | 
|  | receivables                |             |            |  |             |            |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  |                            |             |            |  |             |            |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  | Provision for doubtful     |          -  |   (46.859) |  |          -  |    (9.562) |  | 
|  | accounts                   |             |            |  |             |            |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  |                            |             |            |  |             |            |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
|  | Total trade receivables    |           - |  2.007.725 |  |           - |            |  | 
|  |                            |             |            |  |             |  5.094.683 |  | 
+--+----------------------------+-------------+------------+--+-------------+------------+--+ 
 
 
Of Euro 2,054,584 in total gross trade receivables (Euro 5,104,245 at 31 
December 2007), Euro 1,933,419 is past due (Euro 1,094,746 at the close of 
2007). 
Receivables have been written down according to the Group policies described 
under "Credit risk" in the section "Financial risk management policies". 
Movements in the provision for doubtful accounts are shown below: 
+---------------------------------------+-----+--+--+-------------+--------------+ 
|                                       |     |  |  |             |              | 
+---------------------------------------+-----+--+--+-------------+--------------+ 
|                                       |     |  |  |01.01.2008-  |  01.01.2007- | 
|                                       |     |  |  |             |              | 
+---------------------------------------+-----+--+--+-------------+--------------+ 
|                                       |     |  |  | 31.12.2008  |  31.12.2007  | 
|                                       |     |  |  |             |              | 
+---------------------------------------+-----+--+--+-------------+--------------+ 
|                                       |     |  |  |             |              | 
+---------------------------------------+-----+--+--+-------------+--------------+ 
| Balance at the beginning of the year  |     |  |  |      9.562  |           -  | 
+---------------------------------------+-----+--+--+-------------+--------------+ 
| Movement during the period            |     |  |  |     37.297  |       9.562  | 
+---------------------------------------+-----+--+--+-------------+--------------+ 
|                                       |     |  |  |             |              | 
+---------------------------------------+-----+--+--+-------------+--------------+ 
| Balance as at the end of the period   |     |  |  |      46.859 |        9.562 | 
+---------------------------------------+-----+--+--+-------------+--------------+ 
 
 
The addition to the provision for the period is recognised in the income 
statement under "Other costs" (note 21). 
Trade receivables are secured by collateral in the amount of Euro 2,240,000 and 
by bank/personal guarantees totalling Euro 10,935,130. 
The Directors consider that the carrying amount of trade receivables 
approximates their fair value. 
 
Note 4 Other receivables 
This item totals Euro 466,428 (Euro 1,977,195 at 31 December 2007) and mainly 
includes: 
  *  Euro 155,195 in deferred charges, mainly referring to insurance premium; 
  *  Euro 96,722 in deferred charges, mainly referring to the registration tax on 
  rents (IRE); 
  *  Euro 60,059 in costs associated with transactions to be completed next year. 
 
There were no writedowns in 2008. 
The Directors consider that the carrying amount of other receivables 
approximates their fair value. 
 
 
Note 5 Derivative financial instruments 
+------------------------+--+--------------+-----------------+------------------+ 
|                        |  |              |                 |                  | 
+------------------------+--+--------------+-----------------+------------------+ 
|                        |  |   31.12.2007 |      Fair Value |       31.12.2008 | 
+------------------------+--+--------------+-----------------+------------------+ 
|                        |  |              |      Adjustment |                  | 
+------------------------+--+--------------+-----------------+------------------+ 
|                        |  |              |                 |                  | 
+------------------------+--+--------------+-----------------+------------------+ 
| Portogruaro derivative |  |     122.840  |      (533.419)  |       (410.579)  | 
+------------------------+--+--------------+-----------------+------------------+ 
| Jumbo derivative       |  |   4.912.672  |   (11.651.886)  |     (6.739.214)  | 
+------------------------+--+--------------+-----------------+------------------+ 
|                        |  |              |                 |                  | 
+------------------------+--+--------------+-----------------+------------------+ 
| Total                  |  |    5.035.512 |    (12.185.305) |      (7.149.793) | 
+------------------------+--+--------------+-----------------+------------------+ 
 
 
At 31 December 2008 this item totals Euro (7,149,793) (Euro 5,035,512 at 31 
December 2007), corresponding to the fair value of the four interest rate collar 
contracts signed. 
Two of derivatives of the same notional amount and carrying the same conditions 
have been taken out with Intesa Sanpaolo S.p.A. and Natixis to hedge the "Jumbo 
Loan" as described in note 10. 
The significant terms and conditions of the above-mentioned derivatives are as 
follows: 
 
 
+--+-------------------------------+---------------------+--+-------------------+ 
|  |                               |       Interest rate |  |     Interest rate | 
|  |                               |              collar |  |            collar | 
+--+-------------------------------+---------------------+--+-------------------+ 
|  | Counterparty                  |     Intesa Sanpaolo |  |           Natixis | 
|  |                               |              S.p.A. |  |                   | 
+--+-------------------------------+---------------------+--+-------------------+ 
|  | Notional for the period from  |         150.010.507 |  |       150.010.507 | 
|  | 31 December 2008 to 31 March  |                     |  |                   | 
|  | 2009                          |                     |  |                   | 
+--+-------------------------------+---------------------+--+-------------------+ 
|  | Premium paid                  |             519.000 |  |           519.000 | 
+--+-------------------------------+---------------------+--+-------------------+ 
|  | Effective date                |    29 December 2006 |  |  29 December 2006 | 
+--+-------------------------------+---------------------+--+-------------------+ 
|  | Expiry date                   |   30 September 2013 |  | 30 September 2013 | 
+--+-------------------------------+---------------------+--+-------------------+ 
|  | Interest rate cap             |               4,35% |  |             4,35% | 
+--+-------------------------------+---------------------+--+-------------------+ 
|  | Interest rate floor           |               3,40% |  |             3,40% | 
+--+-------------------------------+---------------------+--+-------------------+ 
|  | Fair value as at 31 December  |         (3.369.607) |  |       (3.369.607) | 
|  | 2008                          |                     |  |                   | 
+--+-------------------------------+---------------------+--+-------------------+ 
|  |                               |                     |  |                   | 
+--+-------------------------------+---------------------+--+-------------------+ 
 
 
The other two derivatives, of the same notional amount and carrying the same 
conditions, have also been taken out with Intesa Sanpaolo S.p.A. and Natixis to 
hedge the so-called "Portogruaro Loan" as described in note 10. 
No premium has been paid for these contracts because the purchase price of the 
cap option at the time of their negotiation was the same as the sale price of 
the floor option. 
 
 
+--+--------------------------------+--------------------+--+------------------+ 
|  |                                |      Interest rate |  |    Interest rate | 
|  |                                |             collar |  |           collar | 
+--+--------------------------------+--------------------+--+------------------+ 
|  | Counterparty                   |    Intesa Sanpaolo |  |          Natixis | 
|  |                                |             S.p.A. |  |                  | 
+--+--------------------------------+--------------------+--+------------------+ 
|  | Notional for the period from   |         15.454.390 |  |       15.454.390 | 
|  | 31 December 2008 to 31 March   |                    |  |                  | 
|  | 2009                           |                    |  |                  | 
+--+--------------------------------+--------------------+--+------------------+ 
|  | Premium paid                   |                 -  |  |               -  | 
+--+--------------------------------+--------------------+--+------------------+ 
|  | Effective date                 |   29 December 2006 |  | 29 December 2006 | 
+--+--------------------------------+--------------------+--+------------------+ 
|  | Expiry date                    |      31 March 2011 |  |    31 March 2011 | 
+--+--------------------------------+--------------------+--+------------------+ 
|  | Interest rate cap              |              4,55% |  |            4,55% | 
+--+--------------------------------+--------------------+--+------------------+ 
|  | Interest rate floor            |              3,40% |  |            3,40% | 
+--+--------------------------------+--------------------+--+------------------+ 
|  | Fair value as at 31 December   |          (205.290) |  |        (205.290) | 
|  | 2008                           |                    |  |                  | 
+--+--------------------------------+--------------------+--+------------------+ 
 
 
The fair value has been appraised by an independent professional on the basis of 
market information provided by a commonly used financial information provider, 
such as Bloomberg or Reuters. 
 
 
Note 6 Cash and cash equivalents 
At 31 December 2008 this item totals Euro 79,766,399 (with respect to Euro 
103,332,229 in 2007) of which Euro 39,221,324 in restricted accounts (Euro 
64,331,074 in 2007), subject to the repayment of borrowings and interest due. 
 
 
Note 7 Share capital 
Share capital is related to the Spazio Investment N.V. shares and amounts to 
Euro 5,498,279. 
The total authorised number of ordinary shares is 50,000,000 with a par value 
Euro 0.20 each and 100 preferred shares of par value Euro 0.20 each. 
At the Balance Sheet date, a total of 27,491,295 ordinary shares of par value 
Euro 0.20 each and 100 preferred shares of par value Euro 0.20 each are issued 
and fully paid. 
The movement that took place during the period from 1 January 2008 to 31 
December 2008, for a total amount of Euro 597,741, refers to the cancellation of 
2,988,705 ordinary shares acquired during the year following a share buy-back 
programme. 
 
 
Note 8 Share premium 
As at 31 December 2008 the item, amounting to Euro 274,486,750, is related to 
share premium reserve, totally distributable. 
The movement that took place during the period from 1 January 2008 to 31 
December 2008, for a total amount of Euro 34,469,741, refers to the cancellation 
of the shares during the year, as explained in the note 7 above. 
 
 
Note 9 Retained earnings 
The balance of Euro 87,778,559 reflects: 
  *  the initial amount at 1 January 2008, equal Euro 100,361,034; 
  *  the movements that took place during the period from 1 January 2008 to 31 
  December 2008 were as follows: 
    *  decrease equal to Euro 22,224,452 related to the dividend distribution referring 
    Spazio Investment N.V. 2007 result; 
    *  decrease equal to Euro 16,188,182 related to the interim dividend distribution 
    referring Spazio Investment N.V. result from the period 1 January 2008 to 30 
    June 2008; 
    *  decrease equal to Euro 668,609 related to the reclassification to the retained 
    earnings of the cancelled shares; 
    *  increase equal to Euro 35,067,482 related to the cancelled acquired shares of 
    2,988,705 depositary interests of the ordinary shares representing a total of 
    9.81% of the outstanding shares at 31 December 2007; 
    *  decrease equal to Euro 8,568,714 related to the result of year 2008. 
 
 
Reference is made to note 6 of the Company financial statements regarding the 
part of retained earnings that can not be freely distributed (an amount of Euro 
86,818,599 is not freely distributable to the shareholders). 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 10 Bank borrowings and payables to other financial institutions 
This item refers to bank borrowings. The main loan terms, summarised in the 
following table, are explained in detail below: 
 
 
+--+------------------+-------------+------------+--+--------------+-------------+ 
|  |                  |             |            |  |              |             | 
+--+------------------+-------------+------------+--+--------------+-------------+ 
|  |                  |        31.12.2008        |  |        31.12.2007          | 
+--+------------------+--------------------------+--+----------------------------+ 
|  |                  | Non-current |    Current |  |  Non-current |     Current | 
+--+------------------+-------------+------------+--+--------------+-------------+ 
|  |                  |             |            |  |              |             | 
+--+------------------+-------------+------------+--+--------------+-------------+ 
|  | Jumbo Loan       |             |    38.505  |  |              |     53.568  | 
|  |                  | 358.923.905 |            |  |  339.410.018 |             | 
+--+------------------+-------------+------------+--+--------------+-------------+ 
|  | Portogruaro Loan |             |     5.876  |  |   34.125.868 |      6.036  | 
|  |                  |  47.887.958 |            |  |              |             | 
+--+------------------+-------------+------------+--+--------------+-------------+ 
|  | Edificio 16 Loan |             |       641  |  |   11.991.967 |      1.872  | 
|  |                  |   6.075.140 |            |  |              |             | 
+--+------------------+-------------+------------+--+--------------+-------------+ 
|  | Bank overdraft   |          -  |    70.038  |  |           -  |          -  | 
+--+------------------+-------------+------------+--+--------------+-------------+ 
|  |                  |             |            |  |              |             | 
+--+------------------+-------------+------------+--+--------------+-------------+ 
|  | Total            | 412.887.003 |    115.060 |  |  385.527.853 |      61.476 | 
+--+------------------+-------------+------------+--+--------------+-------------+ 
 
 
The loan movements are presented in this table: 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  |             |             |            |              |             |            |              |             | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  |             |             |            |              |    Loan     |            |              |             | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  |             |  31.12.2007 | Increases  |  Decreases   |arrangement  |  Interest  |  Interest    |  31.12.2008 | 
|  |             |             |            |              |             |    due     |    paid      |             | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  |             |             |            |              |   costs     |            |              |             | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  |             |             |            |              |             |            |              |             | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  | Jumbo       |             |            |              |    282.521  |            |              |             | 
|  | Loan        | 339.463.586 | 54.240.000 | (35.008.634) |             | 21.183.484 | (21.198.547) | 358.962.410 | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  | Portogruaro |             |            |   (604.382)  |     98.381  |            |              |             | 
|  | Loan        |  34.131.904 | 14.268.092 |              |             |  2.802.908 |  (2.803.069) |  47.893.834 | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  | Edificio    |             |         -  |              |     78.686  |   543.998  |   (545.229)  |             | 
|  | 16 Loan     |  11.993.839 |            |  (5.995.513) |             |            |              |   6.075.781 | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  |             |             |            |              |             |            |              |             | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
|  | Total       |             |            |              |    459.588  |            |              |             | 
|  |             | 385.589.329 | 68.508.092 | (41.608.529) |             | 24.530.390 | (24.546.845) | 412.932.025 | 
+--+-------------+-------------+------------+--------------+-------------+------------+--------------+-------------+ 
 
 
At 31 December 2008, bank borrowings (current and non-current) total Euro 
412,932,025 and are broken down as follows: 
  *  Euro 358,962,410 for the property loan ("Jumbo Loan") granted on 18 October 2006 
  by a syndicate of banks comprising Natixis - Milan branch, Intesa Sanpaolo 
  S.p.A., Banco di Sicilia S.p.A., MCC S.p.A. and Banca di Roma S.p.A. for Euro 
  365,766,998 (Euro 329,106,998 of credit facility, Euro 35,160,000 of revolving 
  credit and Euro 1,500,000 of cash collateral line), stated net of Euro 6,843,093 
  in loan arrangement costs and Euro 38,505 in accrued interest at 31 December 
  2008; 
  *  Euro 47,893,834 for the Portogruaro Site ("Portogruaro Loan") granted on 18 
  October 2006 by a syndicate of banks comprising Natixis - Milan branch, Intesa 
  Sanpaolo S.p.A., Banco di Sicilia S.p.A., MCC S.p.A. and Banca di Roma S.p.A. 
  for Euro 14,904,110 (tranche 1), Euro 5,700,417 (tranche 2), Euro 15,622,877 
  (tranche 3) and Euro 15,134,189 (tranche 5 - cash collateral), stated net of 
  Euro 3,473,635 in loan arrangement costs and Euro 5,876 in accrued interest at 
  31 December 2008; 
  *  Euro 6,075,781 for the property under renovation ("Edificio 16 Loan") granted on 
  18 October 2006 by a syndicate of banks comprising Natixis - Milan branch, 
  Intesa Sanpaolo S.p.A., Banco di Sicilia S.p.A., MCC S.p.A. and Banca di Roma 
  S.p.A. for Euro 6,113,258, stated net of Euro 38,118 in loan arrangement costs 
  and Euro 641 in accrued interest at 31 December 2008. 
 
Concerning the "Jumbo Loan", during the year Euro 54,240,000 of the remaining 
part of the Facility Agreement was used to invest in the acquisition. Euro 
35,008,634 has been reimbursed as a result of sales. 
Concerning the "Portogruaro Loan", during the year Euro 14,268,092 of the 
remaining part of the Facility Agreement was used to invest in the development 
assets and urbanization expenses of the Portogruaro Site, and Euro 604,382 was 
used to reimburse part of the Facility line - tranche 5. 
Concerning the "Edificio 16 Loan", during the year Euro 5,995,513 was reimbursed 
as a result of sales 
The Jumbo Loan taken out on 26 September 2006, with a duration of seven years 
extendable for a further three years at the borrower's request,, is intended to 
finance all the Fund's properties and future acquisitions. It can be drawn down 
for a maximum total of Euro 530,967,703 (Euro 402,033,831 by way of a credit 
facility, Euro 118,500,000 by way of revolving credit for future acquisitions 
and Euro 10,433,872 to finance VAT). The interest rate is equal to the 
three-month Euribor plus a spread that varies according to the type of credit 
line used (80 bps for the Facility and VAT lines, 100 bps for the Revolving 
line). The effective interest rate, determined in accordance with the amortised 
cost method, is 4.858%. This loan is secured by a mortgage and assignments of 
receivables relating to insurance policies, lease agreements and any hedging 
agreements. 
The Portogruaro Loan taken out on 26 September 2006, with a duration of seven 
years extendable for a further three years at the borrower's request, is 
intended to finance the development of the Portogruaro Site. It can be drawn 
down for a maximum total of Euro 226,000,000 (Euro 201,000,000 by way of a 
credit facility and Euro 25,000,000 to finance VAT). The interest rate is equal 
to the three-month Euribor plus a spread that varies according to the type of 
credit line used (150 bps for the Facility line - tranche1, 2 and 3, 80 bps for 
the Facility line - tranche 4 and the VAT line, 30 bps for the Facility line - 
tranche 5 drawn down for cash as a counterguarantee of a line granted for the 
issue of sureties to the municipalities of Portogruaro and Fossalta di 
Portogruaro for urban development costs). The effective interest rate, 
determined in accordance with the amortised cost method, is 4.942% for tranche 
1, 2 and 3, 11.699% for tranche 4 and the VAT line and 4.077% for tranche 5. 
This loan is secured by a mortgage and assignments of receivables relating to 
insurance policies, lease agreements and any hedging agreements. 
The Edificio 16 Loan taken out on 26 September 2006, with a duration of seven 
years extendable for a further three years at the borrower's request, is 
intended to finance the purchase of the property and its subsequent 
renovation. It can be drawn down for a maximum total of Euro 27,200,000 (Euro 
26,000,000 by way of a credit facility and Euro 1,200,000 to finance VAT). The 
interest rate is equal to the three-month Euribor plus 80 bps. The effective 
interest rate, determined in accordance with the amortised cost method, is 
5.291%. This loan is secured by a mortgage, an assignment of receivables arising 
from the sale of the land and a pledge on current accounts. 
It should also be noted that the Management Company, in the name of and on 
behalf of the Fund, has signed an "Inter-creditor Agreement" along with other 
financing banks. This is designed to: (i) clarify the relationships between the 
Fund, and its various classes of creditors, and (ii) regulate the Fund's payment 
priorities with the different classes of creditors. 
 
 
 
 
 
 
The fair value of the above borrowings approximated their carrying values at the 
balance sheet date, since the impact of discounting is not significant. The fair 
values are based on cash flows discounted at a rate based on the latest 
applicable floating rates at the end of the period. 
The Fund confirms that all the financial covenants are in compliance with the 
financing contracts as at 31 December 2008. The calculation of borrowings for 
the purpose of determining the Loan to Value ratio is set out below. 
 
 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| |                  |             |   |             |  |           |             |             |             | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| |                  |        Bank |   |    Loan     |  |  Accrued  |Outstanding  |       Cash  |Outstanding  | 
| |                  |  Borrowings |   |arrangement  |  |           |    Loan     |             |    Loan     | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| |                  |          a) |   |    costs    |  |Interests  |    a+b-c    | Collaterals |   net of    | 
| |                  |             |   |     b)      |  |    c)     |             |             |    Cash     | 
| |                  |             |   |             |  |           |             |             |    Coll.    | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| |                  |             |   |             |  |           |             |             |             | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| | Jumbo Loan       |             |   |             | *  |   34.625  |             |             |             | 
| |                  | 323.798.530 |   |   6.843.093 |  |           | 330.606.998 |   1.500.000 | 329.106.998 | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| | Jumbo Loan -     |             |   |          -  | *  |    3.880  |             |          -  |             | 
| | revolving line   |  35.163.880 |   |             |  |           |  35.160.000 |             |  35.160.000 | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| | Portogruaro Loan |             |   |             |  |    5.876  |             |             |             | 
| |                  |  47.893.834 |   |   3.473.635 |  |           |  51.361.593 |  15.134.189 |  36.227.404 | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| | Edificio 16 Loan |             |   |     38.118  |  |      641  |             |          -  |             | 
| |                  |   6.075.781 |   |             |  |           |   6.113.258 |             |   6.113.258 | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| |                  |             |   |             |  |           |             |             |             | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
| | Total            | 412.932.025 |   |  10.354.846 |  |    45.022 | 423.241.849 |  16.634.189 | 406.607.660 | 
+-+------------------+-------------+---+-------------+--+-----------+-------------+-------------+-------------+ 
 
 
* All "Loan arrangement costs" are included in Jumbo Loan 
 
 
The covenants of the Fund at 31 December 2008 are in the tables here below: 
 
 
  *  LTV covenant: Loan to Value of Jumbo, Portogruaro and Edificio 16 loans should 
  not exceed 65% 
 
 
 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  |                |             |   |             |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  |                |         OMV |   | Outstanding |   |  LTV    |   LTV    | 
|  |                |             |   |        Loan |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  |                |             |   | net of Cash |   |         |Covenant  | 
|  |                |             |   |       Coll. |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  |                |             |   |             |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  | Jumbo Loan     |             |   |             |   |   58,6% |    65,0% | 
|  |                | 562.000.000 |   | 329.106.998 |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  | Portogruaro    |             |   |             |   |   43,9% |    65,0% | 
|  | Loan           |  82.600.000 |   |  36.227.404 |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  | Edificio 16    |             |   |   6.113.258 |   |   29,8% |    65,0% | 
|  | Loan           |  20.490.000 |   |             |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  |                |             |   |             |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  |                |             |   |             |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
|  |                |             |   |             |   |         |          | 
+--+----------------+-------------+---+-------------+---+---------+----------+ 
 
 
 
 
 
 
 
 
 
 
  *  Global LTV covenant: the aggregate amount of financial indebtedness incurred by 
  the Fund should not exceed 60% of the OMV of the real estate assets and 20% of 
  the value of the other assets 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  |                   |             |       |             |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  |                   |         OMV |       |Outstanding  |  |  Global   | Global LTV  | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  |                   |             |       |    Loan     |  |    LTV    |  Covenant   | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  |                   |             |       |             |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  | Jumbo Loan        |             |       |             |  |           |             | 
|  |                   | 562.000.000 |       | 330.606.998 |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  | Jumbo Loan -      |             | (1)   |             |  |           |             | 
|  | revolving line    |  57.970.000 |       |  35.160.000 |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  | Unlevered Assets  |   7.570.000 | (2)   |          -  |  |           |             | 
|  |                   |             |       |             |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  | Portogruaro Loan  |             |       |             |  |           |             | 
|  |                   |  82.600.000 |       |  51.361.593 |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  | Edificio 16 Loan  |             |       |             |  |           |             | 
|  |                   |  20.490.000 |       |   6.113.258 |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  |                   |             |       |             |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  |                   |             |       |             |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  | Total Real Estate |             | (3)   |             |  |     57,9% |       60,0% | 
|  | Assets            | 730.630.000 |       | 423.241.849 |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  | Cash & Other      |             | (4)   |          -  |  |      0,0% |       20,0% | 
|  | Assets            |  66.529.602 |       |             |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  |                   |             |       |             |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  | Fund total assets |             | (5)   |             |  |           |             | 
|  |                   | 797.159.602 |       | 423.241.849 |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  |                   |             |       |             |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
|  | Global LTV        | 752.806.534 | (6)   | 423.241.849 |  |     56,2% |       60,0% | 
|  | Covenant figures  |             |       |             |  |           |             | 
+--+-------------------+-------------+-------+-------------+--+-----------+-------------+ 
 
 
 
(1)        The investment properties financed by the revolving line are ACC, RAI 
and SMA assets. 
(2)        The unlevered assets are the Agrileasing portfolio and the investment 
property in 
 


Genova, Via Dino Col.

(3)        "Total Real Estate Assets" of Euro 730,630,000 is the total portfolio 
open market value as 
 


at 31 December 2008.

(4)        "Cash & Other Assets" includes Euro 53,186,847 of cash and cash 
equivalents. 
(5)        "Fund total assets" of Euro 797,159,602 is the amount of the total 
assets as per Bank of 
 


Italy financial statements.

(6)        The OMV of "Global LTV Covenant" is calculated as the sum of the OMV 
of the total Real 
 


Estate Assets (Euro 730,630,000) plus one

third of the "Cash & Other Assets" (Euro 
 


22,176,534).

  *  Prospective LTV covenant: in acquiring new assets, the aggregate amount of the 
  Jumbo Loan (Facility line and Revolving line) should not exceed 80% of the OMV 
  of the properties purchased and owned by the Fund 
+--+------------------+-------------+---+---------------+--+-------------+-------------+ 
|  |                  |             |   |               |  |             |             | 
+--+------------------+-------------+---+---------------+--+-------------+-------------+ 
|  |                  |    OMV      |   |  Outstanding  |  |Prospective  |Prospective  | 
|  |                  |             |   |     Loan      |  |             |    LTV      | 
+--+------------------+-------------+---+---------------+--+-------------+-------------+ 
|  |                  |             |   |  net of Cash  |  |    LTV      |  Covenant   | 
|  |                  |             |   |    Coll.      |  |             |             | 
+--+------------------+-------------+---+---------------+--+-------------+-------------+ 
|  |                  |             |   |               |  |             |             | 
+--+------------------+-------------+---+---------------+--+-------------+-------------+ 
|  | Jumbo Loan       |             |   |   329.106.998 |  |             |             | 
|  |                  | 562.000.000 |   |               |  |             |             | 
+--+------------------+-------------+---+---------------+--+-------------+-------------+ 
|  | Jumbo Loan -     |          -  |   |   35.160.000  |  |             |             | 
|  | revolving line   |             |   |               |  |             |             | 
+--+------------------+-------------+---+---------------+--+-------------+-------------+ 
|  |                  |             |   |               |  |             |             | 
+--+------------------+-------------+---+---------------+--+-------------+-------------+ 
|  | Total            | 562.000.000 |   |   364.266.998 |  |       64,8% |       80,0% | 
+--+------------------+-------------+---+---------------+--+-------------+-------------+ 
 
 
 
  *  ISCR covenant: the Interest Service Cover Ratio (calculated as the Annualised 
  NOI - Net Operating Income - divided by Annualised interest expense and fees 
  based on the most recent quarters actuals) for the entire duration of the 
  Facilities should not fall below 1.25x 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
|  |               |              |   |              |   |          |          | 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
|  |               |   01.10.2008 |   |  Projected   |   | ISCR of  |   min    | 
|  |               |            - |   |              |   |   the    |          | 
|  |               |              |   |              |   |  Period  |          | 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
|  |               |  31.12.2008  |   |   over 12    |   | a/(b+c)  |  ISCR    | 
|  |               |              |   |    months    |   |          |          | 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
|  |               |              |   |              |   |          |          | 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
|  | a) Projected  |         8,1  |   |        31,9  |   |          |          | 
|  | NOI           |              |   |              |   |          |          | 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
|  | b) Interests  |         3,5  |   |        13,8  |   |          |          | 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
|  | c) Financing  |         0,1  |   |         0,5  |   |          |          | 
|  | fees          |              |   |              |   |          |          | 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
|  |               |              |   |              |   |          |          | 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
|  | ISCR Covenant |              |   |              |   |   2.24x  |   1.25x  | 
+--+---------------+--------------+---+--------------+---+----------+----------+ 
 
 
 
Note 11 Trade payables 
These include the following amounts due to related parties: 
+--+-------------------------------------+--+--------------+--------------+ 
|  |                                     |  |              |              | 
+--+-------------------------------------+--+--------------+--------------+ 
|  |                                     |  |  31.12.2008  |  31.12.2007  | 
+--+-------------------------------------+--+--------------+--------------+ 
|  |                                     |  |              |              | 
+--+-------------------------------------+--+--------------+--------------+ 
|  |                                     |  |              |              | 
+--+-------------------------------------+--+--------------+--------------+ 
|  | Trade payables to Pirelli Group     |  |    2.049.536 |    4.163.719 | 
+--+-------------------------------------+--+--------------+--------------+ 
|  | Trade payables to third parties     |  |    9.641.471 |   16.400.322 | 
+--+-------------------------------------+--+--------------+--------------+ 
|  |                                     |  |              |              | 
+--+-------------------------------------+--+--------------+--------------+ 
|  | Total                               |  |   11.691.007 |   20.564.041 | 
+--+-------------------------------------+--+--------------+--------------+ 
 
 
At 31 December 2008, trade payables to Pirelli Group, amounting to Euro 
2,049,536, are detailed as follows: 
  *  Euro 1,111,191 to the Management Company in relation to the management fees 
  accruing at the reporting date as detailed under note 20 below; 
  *  Euro 355,328 to Pirelli RE Netherlands B.V. in relation to the management fees 
  accruing at the reporting date as detailed under note 20 below; 
  *  Euro 354,728 to Pirelli & C. Real Estate Property Management S.p.A. (a fellow 
  subsidiary wholly-owned by Pirelli & C. Real Estate S.p.A.) for the 
  administration and management of the Fund's current and future properties; 
  *  Euro 198,353 to Pirelli & C. Real Estate Agency S.p.A. (a fellow subsidiary 
  wholly-owned by Pirelli & C. Real Estate S.p.A.) for sales agency services; 
  *  Euro 21,640 to Pirelli & C. Real Estate S.p.A. for closing costs regarding the 
  IPO of the Company; 
  *  Euro 8,296 to Pirelli & C. Ambiente Site Remediation S.p.A. (a company 
  controlled by Pirelli & C. S.p.A.) for environmental due diligence relating to 
  the investment property acquisitions. 
 
At 31 December 2008 trade payables to third parties of Euro 9,641,471 mainly 
relate to: 
  *  urban development work carried out and costs for the construction of speculative 
  buildings at the Portogruaro Site (Euro 5,627,988); 
  *  costs for the construction of Edificio 16 (Euro 2,552,179); 
  *  costs for legal and professional services of the Company (Euro 577,843); 
  *  costs for the administration and building management of the Fund's investment 
  properties (Euro 380,477). 
 
Following Pirelli & C. RE Group's disposal of Pirelli & C. Real Estate 
Integrated Facility Management S.p.A. shares in 2008, Pirelli & C. Real Estate 
Integrated Facility Management S.p.A. has not been considered as related parties 
as at 31 December 2008, therefore the amount have been classified, as debits 
towards third parties. 
 
 
Note 12 Other payables 
At 31 December 2008, this item totals Euro 5,364,109 and mainly consists of: 
  *  Euro 2,577,500 in security deposits received on leases with Elettromeccanica 
  S.p.A., Appliances Components Companies S.p.A. and RAI - Radiotelevisione 
  Italiana S.p.A.; 
  *  Euro 2,000,000 paid by Progetto Magnolia S.r.l. (formerly named Spazio 
  Industriale 2 S.r.l.) into one of the Fund's restricted bank accounts to 
  guarantee its environmental commitments regarding the properties in 
  Portoferraio, Varese and Novara; the Fund will release the guarantee according 
  to the state of progress of the restoration work; 
  *  Euro 529,000 in downpayments received against preliminary sale agreements for 
  the Jumbo portfolio; 
  *  Euro 120,500 in downpayments received against preliminary sale agreements for 
  Edificio 16; 
  *  Euro 73,177 of Directors' remuneration. 
 
 
 
Note 13 Tax payables 
The balance of Euro 670,488 refers to: 
  *  VAT payable in the amount of Euro 670,127; 
  *  withholding taxes due to the authorities on services rendered by the Fund's 
  consultants, in the amount of Euro 361. 
 
 
 
Note 14 Rental income 
Rental income amounts to Euro 42,774,239, including Euro 21,526,428 from Telecom 
Italia S.p.A.. 
In the following 2 years ending 31 December 2010 the outstanding rental 
contracts that will expire represent about 4% of the total rental income 2008. 
In the following 2 years ending 31 December 2012 the outstanding rental 
contracts that will expire represent about 28% of the total rental income 2008. 
The future minimum lease payments under non-cancellable operating leases in the 
aggregate and for each of the following periods: 
- not later than one year Euro 42,368,460 of annual passing rent; 
- later than one year and not later than five years Euro 136,430,187 of annual 
passing rent; 
- later than five years Euro 44,808,553 of annual passing rent. 
 
 
Note 15 Net gain/(loss) from fair value adjustment on investment property 
The balance of Euro (11,698,988) is the difference between the fair value of 
investment property at 31 December 2008 and 31 December 2007, and between the 
fair value of investment property at 31 December 2008 and the related 
acquisition costs for investment property acquired during the year. 
The fair values are based on open market values, i.e. the estimated amount for 
which a property could be exchanged on the date of valuation between a willing 
buyer and a willing seller in an arm's length transaction wherein the parties 
have acted knowledgeably, prudently and without compulsion. 
The fair value gains arise from the determination of market value on 31 December 
2008 by an independent, professionally qualified appraiser. 
Fair values have been appraised by an external, independent expert (CB Richard 
Elis Professional Services S.p.A.) with appropriate recognised professional 
qualifications. The fair value valuations are prepared by considering the 
aggregate of the net annual rents received from the properties and where 
relevant, associated costs. A yield which reflects the specific risks inherent 
to the net cash flows is then applied to the net annual rents to arrive at the 
property valuation. Valuations reflect, where applicable, the type of tenants 
currently occupying the property or responsible for meeting lease commitments, 
the allocation of maintenance and insurance responsibilities between lessor and 
lessee, and the remaining economic life of the property. 
 
 
Note 16 Net gain on disposals properties 
This item amounts to Euro 2,594,838 and refers to the net gains on properties 
sold during the year. 
The balance is the difference between the proceeds of sales (Euro 51,644,838) 
and the carrying amount (Euro 49,050,000). 
 
 
Note 17 Net gain on disposals inventories 
This item amounts to Euro 2,742,690. 
During the year a total of 16 sale agreements were made, totalling Euro 
12,247,500, for the disposal of 19 units in the renovated "Edificio 16" building 
along with 28 parking spaces. 
The balance is the difference between the sales proceeds and costs (Euro 
9,504,810). 
 
 
Note 18 Other operating income 
This item, amounting to Euro 445,777, mainly relates to reimbursements and 
recoveries. 
Note 19 Realised and unrealised gain/(loss) from fair value adjustment on 
financial assets 
The item amounts to Euro (12,185,305) and reflects the unrealized loss on fair 
value of the four interest rate collar contracts at 31 December 2008 (for 
additional details refer to note 5 above). 
 
 
Note 20 Management fees 
Management fees, amounting to Euro 5,223,039, relate to the Management Company's 
commission (Euro 4,097,722) and to Pirelli RE Netherlands B.V. commission (Euro 
1,125,317). 
Since 18 October 2006, when the Fund's management was transferred from Pirelli & 
C. Real Estate Opportunities SGR S.p.A. to Pirelli & C. Real Estate Società di 
Gestione del Risparmio S.p.A. ("Management Company") and the amended Regulations 
were approved, the remuneration due to the "Management Company" consists of a 
fixed fee (the "Management Fee") calculated by applying 0.175% on a quarterly 
basis (0.7% per annum) to the "Fund's Total Asset Value". 
"Total Asset Value" is defined by paragraph 9.1.1 of the Fund Regulations as the 
sum of the purchase or contribution value of individual properties, real 
property rights, and investments held by the Fund plus (i) the purchase or 
contribution costs of individual properties or real property rights; (ii) 
maintenance, improvement and new construction costs (such as costs for 
decontaminating land for the recovery, renovation, decontamination, 
regularization, restoration to original status, refurbishment and new 
construction of buildings, or for the new construction or restoration of 
installations and systems), including in both cases the related financial costs. 
The Management Fee is calculated at the end of each quarter on the basis of the 
average between the Total Asset Value reported in the Fund's latest quarterly 
report and that reported in the previous quarter. The quarterly fee is paid in 
full to the Management Company with effect from the first working day of the 
month after each quarter-end. 
In any event, the Management Fee may not be less than Euro 530,000 on an annual 
basis (Euro 132,500 on a quarterly basis). If the quarterly Management Fee, as 
calculated above, is less than Euro 132,500 in any on quarter, the Management 
Company is entitled to receive the sum of Euro 132,500 with reference to that 
quarter. 
The total amount of management fees charged in the year (Euro 4,412,941) 
includes Euro 315,219 in fees relating to development activities at the 
Portogruaro Site and Edificio 16 which have been capitalised to the value of 
those properties. 
On 23 December 2008, the Management Company submitted a request regarding some 
changes to the Fund Regulations, concerning: 
  1.  the introduction of a cap on Management fees; 
  2.  the replacement of the Management Company. 
 
Concerning the first point, an annual cap on Management fees was agreed in the 
amount of Euro 2,470,000, effective from 1 January 2010. 
Regarding the second point, it was proposed that: (i) the Management Company not 
be replaced before 31 December 2010; (ii) in the event of a change of control 
for the Fund, the replacement could occur at any time (with the favourable vote 
of unitholders representing at least 50.01% of the units); and (iii) the 
Management Company be entitled to take six months' worth of fees from the Fund, 
with a cap of Euro 1,235,000. 
The amount of Euro 1,125,317 refers to the commission that Spazio Investment 
N.V. has to recognise to Pirelli RE Netherlands B.V.; this commission is payable 
for an amount equal to 0.15% on annually on the average between (i) the 
Aggregate Value of the Fund as reported in the quarterly report of the Fund 
relating to the quarter of reference and (ii) the Aggregate Value of the Fund is 
the aggregate historic acquisition cost or transfer value of the real estate 
assets, real property rights, shareholdings or other interests held by the Fund. 
In any event, the aggregate Management Fee shall not be less than Euro 350,000 
per year. 
An annual cap on Corporate Management fees was agreed in the amount of 
Euro 530,000, effective from 1 January 2010. 
 
 
Note 21 Other costs 
In detail: 
+--+----------------------------------------+---------------+---------------+ 
|  |                                        |               |               | 
+--+----------------------------------------+---------------+---------------+ 
|  |                                        |  01.01.2008 - |  01.01.2007 - | 
|  |                                        |               |               | 
+--+----------------------------------------+---------------+---------------+ 
|  |                                        |   31.12.2008  |   31.12.2007  | 
+--+----------------------------------------+---------------+---------------+ 
|  |                                        |               |               | 
+--+----------------------------------------+---------------+---------------+ 
|  | Other real estate expenses             |    5.262.997  |    5.648.872  | 
+--+----------------------------------------+---------------+---------------+ 
|  | General and administrative expenses    |    2.236.827  |    1.848.175  | 
+--+----------------------------------------+---------------+---------------+ 
|  | Local property tax                     |    2.471.004  |    2.495.451  | 
+--+----------------------------------------+---------------+---------------+ 
|  |                                        |               |               | 
+--+----------------------------------------+---------------+---------------+ 
|  | Total costs for services               |     9.970.828 |     9.992.498 | 
+--+----------------------------------------+---------------+---------------+ 
 
 
"General and administrative expenses" include Euro 37,297 of a provision for 
doubtful debtors to adjust the nominal value of trade receivables to estimated 
realisable value. 
Included in the general and administrative expenses is an amount of EUR 135,000 
including VAT (2007 EUR 126,000) relating tot the auditors fee for services 
rendered to Spazio Investment N.V. and its subsidiaries. The fee of 
PricewaterhouseCoopers Accountants N.V. was EUR 105,000 including VAT (2007 EUR 
99,000). No audit related nor non audit services were rendered during 2008 
(2007: 0). 
 
 
Note 22 Financial income 
Financial income amounts to Euro 5,667,492 and mainly relates to: 
  *  interest on accounts of the Fund of Euro 2,899,580; 
  *  income from the four interest rate collar contracts of the Fund of Euro 
  1,998,245; 
  *  interest on bank accounts of the Company of Euro 644,796. 
 
 
 
Note 23 Financial expenses 
These amount to Euro 23,715,590 and can be broken down as follows: 
+-+------------------------------------+-----------------+----------------+ 
| |                                    |                 |                | 
+-+------------------------------------+-----------------+----------------+ 
| |                                    |   01.01.2008 -  |  01.01.2007 -  | 
+-+------------------------------------+-----------------+----------------+ 
| |                                    |     31.12.2008  |    31.12.2007  | 
+-+------------------------------------+-----------------+----------------+ 
| |                                    |                 |                | 
+-+------------------------------------+-----------------+----------------+ 
| | Interest owed on bank loans        |     24.530.390  |    21.412.879  | 
+-+------------------------------------+-----------------+----------------+ 
| | Loan arrangement costs             |        715.994  |     1.897.310  | 
+-+------------------------------------+-----------------+----------------+ 
| | Bank commission on unutilised      |        821.769  |     1.086.145  | 
| | credit facilities                  |                 |                | 
+-+------------------------------------+-----------------+----------------+ 
| | Bank fees                          |        302.873  |       379.647  | 
+-+------------------------------------+-----------------+----------------+ 
| | Other financial charges            |         55.843  |        46.655  | 
+-+------------------------------------+-----------------+----------------+ 
| |                                    |                 |                | 
+-+------------------------------------+-----------------+----------------+ 
| | Total                              |      26.426.869 |     24.822.636 | 
+-+------------------------------------+-----------------+----------------+ 
| |                                    |                 |                | 
+-+------------------------------------+-----------------+----------------+ 
| | Capitalized financial expenses     |    (2.711.279)  |   (2.479.085)  | 
+-+------------------------------------+-----------------+----------------+ 
| |                                    |                 |                | 
+-+------------------------------------+-----------------+----------------+ 
| | Total                              |      23.715.590 |     22.343.551 | 
+-+------------------------------------+-----------------+----------------+ 
 
 
 
 
Note 24 Tax expense 
Due to the tax-exempt states of Spazio no tax has been calculated for the fiscal 
year. 
 
 
Note 25 Earnings per share (EPS) 
Basic EPS is calculated by dividing the profit attributable to the Company's 
shareholders by the weighted average number of ordinary shares in issue during 
the year. 
 
                                               Year ended 
 
                                        31 December 2008 
 
 
Profit/(Loss) attributable to the Company's shareholders (thousands of Euro) 
                (8,569) 
Weighted average number of ordinary shares in issue 
                                  28,185 
Basic and diluted EPS (Euro per share) 
                                             (0.30) 
 
 
Note 26 Fund 
During the year 2008 the Fund reimbursed Euro 26,000,004 of share capital to the 
Company. 
In accordance with the Spazio Industriale Fund Regulations, on 13 February 2009 
the Fund resolved to reimburse Euro 4,730.07 per unit, for a total amount of 
Euro 2,663,029. 
 
 
Note 27 Contingencies and guarantees 
The Company has contingent liabilities in respect of bank and other guarantees, 
and other matters arising in the ordinary course of business. It is not 
anticipated that any material liabilities will arise from the contingent 
liabilities. 
With reference to the property in Via Martellona 9, Bagni di Tivoli, Rome, 
purchased on 24 March 2006 from Pace Immobiliare S.p.A., the purchase price paid 
by the Fund may be increased by a maximum of Euro 500,000 if certain conditions 
regarding the renegotiation of the property's lease are satisfied by 28 April 
2009. 
With regard to defects of an environmental nature in the properties in 
Portoferraio, Varese and Novara purchased on 18 October 2006, Progetto Magnolia 
S.r.l. (formerly named Spazio Industriale 2 S.r.l.) has paid Euro 2,000,000 into 
the Fund's bank account by way of guaranteeing its obligations of restoration; 
the Fund will release this amount according to the state of progress of the 
restoration work. 
Following the agreement made on 30 December 2005 to purchase the site from the 
company Portolegno S.a.s. di Iniziative Immobiliari 3 S.r.l. ("Portolegno"), a 
subsidiary of Pirelli & C. Real Estate S.p.A., the Fund has relieved Portolegno 
of its obligations previously given to third parties as follows: 
  *  the Fund has undertaken to pay the previous owners of the site the sum of Euro 
  1.5 m if a suitably identified part of the site is transformed from 
  "agricultural" to "productive" use by 27 July 2008 at the latest. This occurred 
  on 27 July 2008, so the obligation has expired; 
  *  the Fund has taken over Portolegno's commitments to the Municipalities of 
  Portogruaro and Fossalta di Portogruaro under the Urban Planning Agreement in 
  relation to urban development and building work on the site. After taking over 
  these obligations, the Fund must give the aforesaid municipalities guarantees of 
  up to Euro 15.1 m to secure the realization of the urban development work; 
  *  the Fund has assumed the urban development costs on behalf of the company 
  Zaccheo Ambiente S.a.s. di Zaccheo Sandrino & C. ("Zaccheo Ambiente") on some of 
  the latter's property. 
  *  
 
 
 
Note 28 Commitments 
Spazio Investment N.V. had no commitments as of 31 December 2008. 
 
 
Note 29 Events after the financial statements date 
In pursuit of its strategy of returning cash to shareholders, on 15 January 
2009 the Company completed a tender offer. This resulted in the purchase by the 
Company of 4,545,448 of its Depository Interests from tendering shareholders at 
a price of Euro 5.50 per Depository Interest at a cost of approximately Euro 25 
million. The Depository Interests purchased by Spazio will be held by the 
Company and the cancellation of such securities shall be proposed at the next 
annual general meeting of shareholders to be held on 28 April 2009. 
On 16 January 2009 a preliminary sales agreement was signed with Studio Target 
S.n.c. for Euro 732,000, for the disposal of a unit in the renovated "Edificio 
16" building in addition to two parking spaces. 
On 20 January 2009 the Fund received an offer from Infogest S.a.s for nine 
properties near Catanzaro (CZ) with a gross floor area of 13,878 sq m, let in 
their entirety to Telecom Italia S.p.A. for an annual rent of Euro 533,513 for a 
total amount of Euro 5,500,000. 
On 10 March 2009 the Fund accepted an offer from Rondini S.r.l. for four 
properties in Tuscany with a gross floor area of 71,153 sq m, let in their 
entirety to Prada S.p.A. for an annual rent of Euro 4,230,259 for a total sales 
price of Euro 54,500,000. 
 
 
Note 30 Related party transactions 
 
 
Balances between the Companies of Pirelli & C. Group and Pirelli & C. Real 
Estate Group and the Management Company and companies in the latter's Group at 
31 December 2008 and transactions between the same are listed below: 
+---+---------------------------------+------------------+----------------------------------------+ 
|   |                                 |                  |                                        | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   |                                 |      31.12.2008  |                            31.12.2007  | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   |                                 |                  |                                        | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   | Trade payables to Pirelli & C.  |           8.296  |                               176.360  | 
|   | Group                           |                  |                                        | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   | Trade payables to Pirelli & C.  |         574.721  |                                        | 
|   | RE Group                        |                  | 2.309.489                              | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   | Trade payables to Management    |       1.466.519  |                                        | 
|   | Company                         |                  | 1.677.870                              | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   | Other payables to Pirelli & C.  |       2.000.000  |                                        | 
|   | RE Group                        |                  | 2.000.237                              | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   |                                 |                  |                                        | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   |                                 |                  |                                        | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   |                                 |    01.01.2008 -  |                          01.01.2007 -  | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   |                                 |      31.12.2008  |                            31.12.2007  | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   |                                 |                  |                                        | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   | Management fees                 |       9.635.980  |                                        | 
|   |                                 |                  | 4.326.485                              | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   | Other costs                     |       2.824.553  |                                        | 
|   |                                 |                  | 3.486.576                              | 
+---+---------------------------------+------------------+----------------------------------------+ 
|   |                                 |                  |                                        | 
+---+---------------------------------+------------------+----------------------------------------+ 
 
 
Following Pirelli & C. RE Group's disposal of Pirelli & C. Real Estate 
Integrated Facility Management S.p.A. shares in 2008, Pirelli & C. Real Estate 
Integrated Facility Management S.p.A. has not been considered as related party 
as at 31 December 2008.Please refer to note 11 for trade payables and to note 20 
for the management fees. 
All transactions are part of the Fund's ordinary management and are settled 
under market conditions; there are no unusual or atypical transactions or nay 
with potential conflicts of interest. 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 FR SELEFISUSELD 
 


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