EXCERPT OF THE ANNUAL REPORT

1

E X C E R P T O F T H E A N N U A L R E P O R T

2

K E Y F I G U R E S

The fi nancial year of Retail Estates runs from 1 April to 31 March. The key fi gures below are consolidated fi gures incorporating the subsidiaries Retail Estates Luxembourg sa, Retail Warehousing nv and Wickes Land Development nv.

TOTAL PORTFOLIO 31/03/05 31/03/04 31/03/03

Shop premises 189 184 151

Total gross m2 _{of shop premises 184 821 178 338 139 003}

Estimated investment value (1) _{in EUR 163 541 016 155 076 937 117 232 774}

Estimated liquidation value (2) _{in EUR 146 738 605 139 804 443 105 507 195}

Total annual rental income (3) _{in EUR 13 398 965 12 731 285 9 744 718}

Average rent prices per m2 _{73.58 72.58 71.76}

Occupancy rate 98.78% 98.61% 98.40%

Total m2 _{of premises under construction 5 672 2 624 4 139}

(1) Cushman & Wakefi eld Healey & Baker.

(2) The estimated sale value is calculated by deduction of the registration fee and the notarial fees from the estimated investment value (12,5 % in Wallonia and Brussels and 10 % in the Flanders).

(3) Contractual rents on 31 March.

KEY FIGURES 31/03/05 31/03/04 31/03/03

Current result per share 2,58 1,82 2,28

Recurrent operating profi t per share 2,26 1,82 2,28

Operating return on equity 6,7% 5,6% 6,9%

Return on equity 10,1% 7,4% 9,4%

Number of shares 3 568 594 3 568 614 2 283 142

Gross dividend per share 2,24 1,97 2,23

NAV/share 33,82 32,67 32,95

Closing price 36,50 35,46 32,60

Average price 34,85 33,89 29,75

Gross dividend yield on closing price 6.1% 5.6% 6.8%

Net dividend yield on closing price 5.2% 4.7% 5.8%

0 50 000 100 000 150 000 200 000 05 04 03 0 3 000 6 000 9 000 12 000 15 000 05 04 03 0,0 0,5 1,0 1,5 2,0 2,5 3,0 05 04 03 0,0 0,5 1,0 1,5 2,0 2,5 05 04 03

E

STIMATEDINVESTMENTVALUE

T

OTALRENTPRICES

_O

_{PERATIONALRESULT}

PERSHARE

G

ROSSDIVIDENDPERSHARE

11 7 232 774 155 0 76 937 163 54 1 0 1 6 9 744 7 1 8 12 73 1 285 13 398 965 2,28 1,82 2,58 2,23 1,97 2,24 € mio€ _{€ €}

3

R

ETAIL ESTATES

D

ISTRI

-L

AND4

31/03/2005 31/03/2004 31/03/2003 31/03/2005

Estimated investment value

(C&W H&B)

163 541 015 155 076 938

117 232 774

18 609 962

Estimated investment value

1

_per

m

2

_{(C&W H&B)}

_877,05

_871,79

_843,38

_821,58

Contractual rents

13 398 965

12 731 286

9 744 718

1 500 300

Contractual rents per m

2

_73,58

_72,58

_71,76

_66,77

Contractual rents including

estimated rental value of unlet

buildings

13 663 181

13 043 079

9 912 890

1 500 300

Contractual rents per m

2

_including

estimated rental value of unlet

buildings

2

_73,93

_73,14

_71,31

_66,77

Insured value

74 574 718

66 144 015

51 686 876

8 974 027

Acquisition value

3

_{144 636 661 106 638 440}

_{78 457 113}

_{14 040 558}

Total m

2

_{of property portfolio}

_{184 821}

_{178 338}

_{139 003}

_{22 469}

Number of premises

189

184

151

21

Total m

2

_{of premises let}

_{182 107}

_{175 411}

_{136 703}

_{22 469}

Total m

2

_{of premises under}

construction

5 672

2 624

4 139

-Retail Estates nv:

at 31 March 2005 all premises were let except : Diest (300m

2

_{), Bressoux (250m}

2

_),

Sint-Niklaas (575m

2

_{) and an offi ce and multi-functional premises at Sint-Denijs-Westrem (1 134m}

2

_).

At 31 March 2005 5 672m

2

_{is under construction: in Mechelen (1 565m}

2

_{), in Sint-Niklaas (2 250m}

2

₎

and in Sandweiler (1 857m

2

_).

Distriland nv:

all premises were let at 31 March 2005.

1 _{Total investment value divided by the gross built-over surface of the retail premises, excluding parking lots.} 2 _{In many cases these premises are let on a temporary basis until a permanent lessee can be found.}

3 _{Adjusted at 31 March 2005 to the book value of the real estate in Retail Estates nv’s property portfolio.} 4 _{Th is is the total portfolio of Distri-Land. Retail Estates holds 76.17% of the issued real estate certifi cates.}

4

L E T T E R T O S H A R E H O L D E R S

Dear Shareholder,

During the past fi nancial year Retail Estates nv met the objectives it presented to investors at the time of the July and December 2003 capital increases. The EUR 38.66 million raised by these transactions is fully invested in new real estate, and during the past fi nancial year these investments provided a full year’s income. Our current operating profi t is now over EUR 8 million, in line with expectations. This represents an annual growth of 24.40% compared to the 2003-2004 fi nancial year, and is in line with the growth of the company’s real estate portfolio and capital base since the beginning of 2003.

The property market for retail premises on the periphery of cities continues to develop well, with keen demand for retail property from both potential lessees and investors.

The attractiveness of this sector is demonstrated by the high occupancy rate (98.78%) and the continuing rise in value of Retail Estates nv’s property portfolio.

Declining consumer confi dence requires us, however, to keep a careful and constant watch on fi nancially weaker lessees and less successful retailing formulas. At the same take we are taking an increasingly pro-active approach towards those lessees.

In the past fi nancial year the company invested a further EUR 4.13 million in retail properties. Building projects worth another EUR 3.54 million are currently under construction. The continuing rise in value of retail property means, however, a sharp rise in the asking price for retail premises offered for investment. In order to continue to reach its return objectives, Retail Estates nv is therefore undertaking new building projects itself on a limited scale and also selectively acquiring existing properties.

5

R E T A I L E S T A T E S 2 0 0 5

With a low debt-ratio (33.61%) allowing it to invest further without having to raise funds on the public market, the company should be able to maintain this policy during the current fi nancial year.

A proposal has been made to the general meeting of shareholders to declare a dividend of EUR 2.24 per share (EUR 1.904 net). This is an increase of 13.71% compared to last years’ dividends. This dividend growth is supported by the strong growth of the current operating profi t during the past fi nancial year. The net asset value per share rose by 3.52% last year from EUR 32.67 to 33.82.

This increase is explained by the increased value of the real estate portfolio and the value created by project development, and also by the reversal of tax provisions following changes in and clarifi cations to the so-called exit tax regime.

In the light of the results we have achieved, we would thank our shareholders for their confi dence in our company and our employees for their continuous efforts which have made possible the growth of the company.

Ternat, 3 June 2005

Paul Borghgraef Jan De Nys

7

I V F I N A N C I A L I N F O R M A T I O N

A. C

ONSOLIDATED ANNUAL ACCOUNTS

A.

Balance

sheet

p 8

B.

Income

statement

p 10

C. Consolidation criteria and scope of consolidated companies

p 13

D. Valuation rules

p 14

E. Structure of the annual accounts

p 19

F. Differences in valuation rules between the consolidated and company accounts

p 19

G. Notes to the consolidated annual accounts

p 20

H. Origin and destination of the ressources

p 24

I. The statutory auditor’s report

p 25

8

A . C O N S O L I D A T E D A N N U A L A C C O U N T S

A

. B

ALANCE SHEET

A

SSETSINEUR

31/03/2005

31/03/2004

31/03/2003

FIXEDASSETS 181 839 218 172 673 178 120 802 510 I. Formation expenses 1 127 997 1 439 609 143 088

II. Intangible assets 0 6 605 53 355

III. Positive consolidation differences 168 772 179 281 0

IV. Tangible assets 180 542 336 171 047 569 120 605 953

Land and buildings 176 613 354 168 993 763 117 232 781

Plant, machinery and equipment 172 364 41 397 16 432

Furniture and vehicles 124 444 63 999 7 211

Leasing and other similar rights 18 833 40 270 40 455

Other fi xed assets 71 020

Assets under construction and advance payments 3 542 322 1 908 139 3 309 074

V. Financial assets 114 114 114

Other fi nancial assets 114 114 114

Amounts receivable and cash guarantees 114 114 114

CURRENTASSETS 14 440 912 7 047 227 6 728 014

VII. Stocks and contracts in progress 16 916 16 916 16 916

Stocks 16 916 16 916 16 916

Immovable property for sale 16 916 16 916 16 916

VIII. Amounts receivable within one year 818 095 952 654 271 343

Trade debtors 219 730 249 835 71 329

Other amounts receivable 598 365 702 819 200 014

IX. Investments 11 000 000 4 400 000 0

Other deposits 11 000 000 4 400 000 0

X. Cash at bank and in hand 2 355 319 1 489 358 6 278 723

XI. Deferred charges and accrued income 250 582 188 298 161 032

9

L

IABILITIESINEUR

31/03/2005

31/03/2004

31/03/2003

CAPITALANDRESERVES 120 702 272 116 572 602 75 220 244

I. Capital 80 293 315 47 043 367 30 097 573

Issued capital 80 293 315 47 043 367 30 097 573

II. Share premium account 4 659 585 37 910 033 16 193 171

III. Revaluation surpluses 528 895 545 414 0

IV. Consolidated reserves 35 220 477 31 073 788 28 929 500

PROVISIONS, DEFERREDTAXANDLATENTTAXATIONLIABILITIES 304 884 252 863 202 830

IX. Provisions for liabilities and charges 304 884 252 863 202 830

Major repair and maintenance works 260 053 233 032 202 830

Other liabilities and charges 44 831 19 831 0

CREDITORS 75 272 974 62 894 940 52 107 450

X. Amounts payable after one year 63 151 915 49 703 169 42 379 603

Financial debts 63 151 915 49 703 169 42 379 603

Leasing and other similar obligations 9 048 19 850 21 293

Credit institutions 63 095 788 49 631 571 42 358 311

Other loans 47 080 51 748 0

XI. Amounts payable within one year 10 813 996 12 316 737 9 063 704

Current portion of amounts payable after one year 138 182 28 242 19 868

Financial debts 23 143 4 758 398 1 859 201

Credit institutions 23 143 4 758 398 1 859 201

Trade debts 628 983 759 098 465 779

Suppliers 628 983 759 098 465 779

Taxes, remuneration and social security 1 812 843 2 745 932 1 255 210

Taxes 1 757 471 2 692 102 1 238 852

Remuneration and social security 55 372 53 831 16 359

Other amounts payable 8 210 845 4 025 066 5 463 645

XII. Accrued charges and deferred income 1 307 062 875 034 664 143

TOTAL LIABILITIES 196 280 130 179 720 405 127 530 524

10

B

. I

NCOME

S

TATEMENT INEUR INEUR

31/03/2005

31/03/2004

31/03/2003

CURRENTRESULT I. Operating income 14 246 773 11 770 111 8 575 533 Turnover 13 982 209 11 593 902 8 480 132

Fixed assets - own construction 0 25 000 12 500

Other operating income * 264 564 151 208 82 901

II. Operating charges 2 597 093 2 535 718 1 871 256

Services and other goods 1 605 848 1 555 627 1 166 237

Remuneration, social security costs and pensions 478 995 453 707 246 639

Depreciation of formation expenses, intangible and tangible fi xed assets 382 556 424 155 306 380

Amounts written of trade debtors 37 518 49 6 638

(increase +, decrease -)

Provisions for liabilities and charges 27 021 30 202 50 308

(increase +, decrease -)

Other operating charges* 65 154 71 979 95 054

III. Operating profi t (loss) (+)(-) 11 649 680 9 234 393 6 704 277

IV. Financial income 169 267 144 976 108 013

Income from fi nancial fi xed assets 0 13 205 0

Income from current assets 140 639 114 542 81 240

Other fi nancial income 28 628 17 229 26 774

V. Financial charges 3 165 819 2 518 973 1 534 033

Interest and other debt charges 3 082 664 2 383 060 1 456 691

Amounts written on positive consolidation differences 32 078 7 795 0

Amounts written off current assets -8 860 15 602 0

Other fi nancial charges 59 937 112 516 77 342

VI. Income taxes 567 099 -379 837 -82 529

Income taxes (-) -593 093 -379 837 -82 529

Tax adjustments and write-back of tax provisions 1 160 192

VII. Net current profi t (loss) 9 220 227 6 480 559 5 195 728

A . C O N S O L I D A T E D A N N U A L A C C O U N T S

* Th e assessment notices for property taxes recovered from the tenants are deducted from the section ‘Other operating charges’ and therefore are not reported under the section ‘Other operational income’.

For the exercises ending on 2005, 2004 and 2003 the amounts were: - 2005 : 803 893 EUR

- 2004 : 665 110 EUR

11

INEUR

31/03/2005

31/03/2004

31/03/2003

RESULTONTHEPORTFOLIO

VIII. Gain or loss on disposal of elementsof the portfolio (by reference to

their historical value) 0 220 129 0

Property assets 0 220 129 0

Property assets and other relating to buildings 0 220 129 0

Gains 0 220 129 0

Losses 0 0 0

IX. Changes in the market value of the portfolio 2 920 538 1 974 838 1 868 724

Property assets 2 920 538 1 974 838 1 868 724

Real estate and real rights on real estate 2 920 538 1 974 838 1 868 724

Gains 2 967 259 3 088 305 2 385 231

Gains as a result of take-over purchases and mergers 0 0 0

Losses* -46 721 -1 113 467 -516 507

Incorporation in capital 0 0 0

X. Profi t (Loss) on the portfolio 2 920 538 2 194 967 1 868 724

12

A . C O N S O L I D A T E D A N N U A L A C C O U N T S

INEUR

31/03/2005

31/03/2004

31/03/2003

EXTRAORDINARYRESULT

XI. Extraordinary income 0 0 18 929

Writeback of depreciations and amounts written of on intangible and tangible fi xed assets

0 0 0

Other extraordinary income 0 0 18 929

XII. Extraordinary charges 0 10 553 23 663

Loss on disposal of fi xed assets 0 637 0

Other extraordinary charges 0 9 916 23 663

XIII. Extraordinary profi t (loss) 0 -10 553 -4 734

RESULTAVAILABLEFORAPPROPRIATION

XIV. Profi t (Loss) of the year 12 140 765 8 664 973 7 059 718

XVI. Appropriation of the changes in market value of the portfolio 2 967 259 1 976 590 1 933 002

Transfer to reserves not available for distribution 2 967 259 1 976 590 1 933 002

Transfer from reserves not available for distribution (on condition that these reserves remain positive)

0 0 0

13

C. C

ONSOLIDATION CRITERIA AND CONSOLIDATION SCOPE

C

ONSOLIDATIONCRITERIA

The consolidated annual accounts are prepared in accordance with the Royal Decree of 30 January 2001 on the consolidated annual accounts of enterprises.

The consolidated annual accounts group together the accounts of the parent company and its subsidiaries, as prepared at the end of the fi nancial year.

The results of the parent company are integrated into the consolidated annual accounts, as prepared at the end of the fi nancial year.

The results of its subsidiaries are accounted for as follows:

The results of the subsidiary Retail Estates Luxembourg sa contain the results from 1 April 2004 to 31 March 2005.

The results of the subsidiary Wickes Land Development nv contain the results from 1 April 2004 to 31 March 2005.

Wickes Land Development nv is fully consolidated, given the high degree of control held by Retail Estates as a result of:

1. Its ownership of all the shares in the issuer Wickes Land Development nv, mainly through its 100% subsidiary Retail Estates Luxembourg sa and also in part directly;

2. Its ownership at 31 March 2005 of 46 208 of the 47 000 (98.31%) real estate certifi cates which have been issued.

Immobilière Distri-Land nv is not included in the consolidation, as Retail Estates nv is not a shareholder.

The results of the subsidiary Retail Warehousing nv contain the results from 1 April 2004 to 31 March 2005.

The full consolidation consists of incorporating the entire assets and liability components of the subsidiaries, along with all income and charges.

Minority interests are shown in a separate caption on both the balance sheet and income statement.

The full consolidation method is applied whenever the parent company has exclusive control provided that the participation is of a lasting character.

S

COPEOF CONSOLIDATEDCOMPANIES

F

ULLYCONSOLIDATEDSUBSIDIARIES

R

ETAIL

E

STATESPLCCONSOLIDATES

:

%

OFCAPITALHELD

C

HANGEINCAPITALHOLDING

%

Retail Estates Luxemburg sa Boulevard Royal 8

2449 Luxembourg

100% 0

Wickes Land Development nv Industrielaan 6 1740 Ternat 100% 0 Retail Warehousing nv Lindenpark 2 9831 Deurle 100% 0 F I N A N C I A L I N F O R M A T I O N A T 3 1 M A R C H 2 0 0 5

14

The valuation rules have been drawn up and the annual accounts prepared in accordance with the spirit and the objectives of the provisions of the Royal Decree of 10 April 1995 relating to fi xed capital real estate investment companies (BEVAKs/SICAFIs), and more specifi cally the Royal Decree of 4 March 1991 relating to collective investment trusts.

1. INCOME STATEMENT

Since Retail Estates nv is of the opinion that the usual statutory layout of the annual accounts which is applicable to fi xed capital real estate investment companies is not adapted to the specifi c nature of the sector, it has applied for and obtained a dispensation, allowing it to present its annual accounts in an alternative layout up to and including the fi nancial year ended on 31 March 2005.

This waiver was requested because Retail Estates nv is convinced that this alternative layout gives a better understanding of the fi nancial situation of a BEVAK/SICAFI.

In this alternative layout the income statement is structured around two key sections:

1) Operating results 2) Portfolio results

Operating results

The intention is to clearly show the operating result. This is the profi t or loss from the management of the portfolio of rental properties. This section therefore includes all income and charges from the real estate activities, together with fi nancial income and charges and residual tax charges.

The presentation has been simplifi ed by omitting those income and charges items that are not relevant to the company’s business (changes in work-in-progress, purchases of and changes in stocks).

The depreciation caption is retained, but mainly for machinery and equipment, furniture and vehicles held for the company’s own use.

Portfolio results

The intention is to refl ect in the income statement all accounting transactions and operations relating to the value of the portfolio.

Realised gains and losses are reported separately under heading VIII “Gain or loss on disposal of portfolio items”. These gains and losses express the difference between the realisation value and the historical acquisition value, corrected for depreciation up to the date on which the BEVAK/SICAFI status was obtained.

Caption IX “Charges in the investment value of portfolio items” records the evolution of the investment values. All recognised but unrealised capital gains and losses are included under this heading.

The consequence of this treatment is the transfer of the revaluation surplus out of shareholders’ equity into unavailable reserves.

Profi t

(loss) for the fi nancial year

The profi t or loss for the fi nancial year is then defi ned as the sum of the current results, the operating results and the extraordinary results.

Profi t

(loss) of the year available for appropriation

In order to respect the non distributable nature of unrealized gains on the portfolio, any unrealised capital gains during a particular year are therefore transferred to the unavailable reserves. Any unrealised capital losses are deducted from the unavailable reserves.

If the unavailable reserves are insuffi cient to offset the unrealized capital losses, the negative balance is then charged against income.

The limitations relating to the distribution of dividends, which result from the Belgian Company Code and the legislation applicable to BEVAKs/SICAFIs will apply.

A . C O N S O L I D A T E D A N N U A L A C C O U N T S

15

2. BALANCE SHEET

ASSETS

Formation expenses

Formation expenses, costs of capital increases and costs of amending the articles of association, such as registration fees, fi nancial engineering fees and placement fees are written off at 20% a year on a straight-line basis.

Tangible assets

1. Real estate assets (including real estate which has been leased out)

Tangible real estate assets are valued at acquisition value at the time of purchase, including incidental costs and non-deductible VAT.

Real estate assets under construction or in the process of reconstruction or expansion are valued at cost, in accordance with the progress including incidental costs such as interest on the work loans, registration duty and non-deductible VAT.

Without prejudice to the obligations concerning company accounting and annual accounts imposed by the Royal Decree of 30 January 2001, Retail Estates nv draws an inventory at least once a year, as well as every time that it issues shares and every time that it buys shares outside of offi cial stock market.

At the end of each fi nancial year an independent property expert values each of the following real estate assets:

. the real estate assets, assets assimilated to real estate by destination, and property rights on real estate held by Retail Estates nv or by a company controlled by it;

. option rights on real estate held by Retail Estates nv or by a real estate company controlled by it, as well as the real estate to which these rights give entitlement;

. the contract rights by which one or more real estate assets are leased to Retail Estates nv or to a company controlled by it, together with the underlying assets.

Retail Estates nv carries the portfolio on the asset side of the

balance sheet at the value attributed by the expert, i.e. the investment value, without deducting any supplementary fees or taxes.

Together with its property expert Retail Estates nv is convinced that the valuation method complies with the “Fair Value” principles required by IAS/IFRS 40.

IAS states that investment property should be valued at “fair value”, under the assumption of that they are being held on a “going concern” basis.

From the investor’s viewpoint a valuation which includes costs (the so-called investment value) is the most relevant valuation as it allows him to compare the value of an investment in a BEVAK/SICAFI with that of a direct investment in a similar investment asset.

The property expert’s valuations are binding on Retail Estates nv for its annual accounts.

In addition, at the end of each of the fi rst three quarters the expert updates the total valuation of the above-mentioned property assets based on market developments and the particular features of the individual buildings.

The Board of Directors is nonetheless entitled to apply the ‘liquidation value’, that is the ‘buyer’s costs’. This is the value estimated by the property expert but excluding costs, registration duty and fees.

Where one or more buildings are sold and until the payment of the sales proceeds, the building shall be valued at the sales price until the sale is established by notarial deed.

Contrary to articles 67, 1, 67.2 and 57 of the Royal Decree of 30 January 2001 implementing the Belgian Company Code, reductions in value and revaluation surpluses on real estate, as established by the expert and approved by the Board of Directors, are inventoried.

Contrary from articles 59 and 65 of the Royal Decree of 30 January 2001 implementing the Belgian Company Code, Retail Estates nv does not depreciate its buildings, property rights to buildings or real estate leased to it.

16

2. Tangible assets other than real estate

Tangible assets other than real estate having a limited useful life are valued at acquisition value, and then depreciated on a straight-line basis over their expected useful life.

In the fi nancial year in which an asset is fi rst posted to the accounts, depreciation is recorded pro rata temporis to the number of months in which the asset was held.

The following annual depreciation percentages apply: Straight-line depreciation

Plant, machinery and equipment 20%

Furniture 10%

Vehicles 20%

IT equipment 33%

Standard software 33%

Tailor Made software 20-25%

Leased equipment held under fi nancial leases is depreciated over the life of the leasing contract.

Maintenance and regular renovation costs are not capitalised.

Costs connected with major structural charges or alterations are only capitalized if they increase signifi cantly the surface area or the value in use of the building and therefore substantially raise its rental value.

Non-real estate fi xed assets which do not have a limited useful life are written down in the event of any lasting decrease in value. These assets may also be revalued.

At the time of sale or decommissioning of tangible assets other than real estate, the acquisition values and related depreciation are booked out of the accounts, and any gains or losses are recorded in the income statement.

Assets under construction

The assets under construction represent the cost of new building and/or conversion work, including the acquisition value of the land.

Real estate assets under construction or which are being converted or expanded, are valued at cost in accordance with the progress of the work, including incidental costs such as interest on loans, registration duty and non-deductible VAT.

As from the fi rst valuation following provisional delivery, these assets are transferred in their entirety to the ‘land and buildings’ caption.

Recognition of real estate certifi cates (unconsolidated and consolidated annual accounts.

1. Valuation of real estate certifi cates

a. General principle: stock market price of the previous 30 days b. Exception: ownership of a signifi cant interest (over 75%) in the

issued real estate certifi cates. At 31 March 2005 this exception is applicable only to the “Distri-land” real estate certifi cates.

The stock market price of these certifi cates, as quoted on the Euronext Brussels – Second Market, cannot be used as a reliable reference given the limited liquidity of these certifi cates. Retail Estates nv intends to revalue its real estate certifi cates at every closing date as a function of:

a. the investment value of the real estate owned by the issuer, by analogy with the valuation of its own real estate. This valuation is undertaken as of 31 December every year by a property expert retained jointly by Retail Estates nv and Immobilière Distri-Land nv, simultaneously with the valuation of its own real estate. Where one or more buildings are sold by the real estate certifi cate issuer, the sales price shall be used as the valuation until the distribution of the sales proceeds;

b. the contractual rights of the real estate certifi cate holder according to the issue prospectus.

Retail Estates nv invests only in certifi cates which relate to the fi nancing of retail properties on the edges of major city agglomerations. The real estate owned by the issuer is the type of out-of-town retail property that matches Retail Estates nv’s investment objectives. Although Retail Estates nv is not the legal owner of this property, it regards itself as the economic benefi ciary pro rata to its contractual rights as the owner of real estate certifi cates. In addition the investment in real estate

A . C O N S O L I D A T E D A N N U A L A C C O U N T S

17

certifi cates is regarded as real estate pursuant to art. 1.2.4. of

the Royal Decree of 10 April 1995 on fi xed capital real estate investment companies.

Given these considerations the certifi cates are recorded under tangible assets at their acquisition value. These certifi cates are revalued through an unavailable reserve, or against income where there is no unavailable reserve left to absorb the revaluation.

2. Recognition of coupons

a. Recognition of the operating balance

As the holder of the real estate certifi cates Retail Estates nv has a contractual right, pro rata to the real estate certifi cates in its possession, to a portion of the net operating balance realised by the issuer from the receiving of rent and after payment of operating and maintenance charges.

Since the entire decrease or increase in value is recognised by re-estimating the value of the real estate certifi cate, no portion of the coupon with respect to the operating balance should be viewed as remuneration for the reduction in value of the issuer’s buildings. For this reason the entire coupon is treated as net rental income and is recognised as ‘turnover’ under operating income.

b. Recognition of the liquidation balance on the sale of real estate.

Whenever a particular premises in the issuer’s portfolio is sold: the net proceeds, after retention of the property tax, are recorded as realised capital gain in Retail Estates nv’s books only for the difference between the book value of the real estate certifi cate at the closing date plus the net liquidation coupon and the book value at the previous closing date;

the book value of the real estate certifi cate is established at each closing date by undertaking a valuation of the certifi cate holder’s contractual rights as these appear in the issue prospectus and based on the investment value of the real estate owned by the issuer, as valued at the closing date by Retail Estates nv’s real estate expert. Where this book value exceeds the acquisition value, the surplus is booked as a revaluation surplus to the unavailable reserves.

Financial fi xed assets

Financial fi xed assets are valued upon purchase at their acquisition value, excluding incidental costs which are charged to the income statement. The Board of Directors will decide whether the supplementary costs are to be capitalised and over what period in this case they should be amortised.

By way of departure from article 66.2 and article 57.1 of the Royal Decree of 30 January 2001 implementing the Belgian Company Code revaluation gains and losses on fi nancial fi xed assets held in affi liated real estate companies and real estate investment institutions are inventoried each time the annual accounts are composed.

Financial fi xed assets are valued based on their investment value. The recorded gains are immediately booked to liabilities, the caption III ‘Revaluation surpluses’.

Articles 10 and 14.1 of the Royal Decree of 8 March 1994 on the accounting and annual accounts of certain variable capital investment funds apply to Retail Estates nv.

Article 57.2 of the Royal Decree of 30 January 2001 implementing the Belgian Company Code in relation to the annual accounts of enterprises is not applicable.

Stocks

Real estate properties that are not viewed as strategically important and which the Board of Directors has decided to sell are included as ‘real estate held for resale’ under heading VII ‘Stocks and contracts in progress’.

These properties are valued at the lower of book value or investment value at balance sheet date.

Amounts receivable

Amounts receivable both within and after one year are carried at their nominal value, after deducting reductions in value for doubtful or uncollectible receivables.

18

Investments (current assets)

Investment items shown under current assets are valued at the lower of acquisition value or investment value.

Supplementary costs are immediately charged against income. Listed securities are valued at their quoted price.

Recording of building works

Building works for the owner’s account are accounted for in two different ways, depending on the nature of the works.

The costs of maintenance and major repairs to roofs and parking lots are deducted from the operating profi t in the fi nancial year in which they are incurred.

In the case of roof maintenance and of major repairs to roofs and parking lots, provisions are set up when the repair work scheduled to take place in the present year has not been carried out, but has already been contracted out and has been postponed for exceptional reasons to the following fi nancial year.

Major conversion costs are capitalised.

Conversions are one-off works which add a function to the building or signifi cantly improve the current comfort level, leading to an increase in the rent and/or rental value.

These costs cover materials, fees, subcontracting works and the like. Internal management and supervision costs are not capitalised.

Deferred charges and accrued income

Compensation paid by lessees for the early termination of a lease contract are taken into income over a certain period according to the number of months’ rent the lessee has paid and in so far as the property in question is not re-let.

LIABILITIES

Exit tax

Where Retail Estates nv acquires control of real estate companies with the intention of merging these companies into itself, it records a provision for the exit tax that the real estate company in question will be required to pay upon merging with Retail Estates nv. This provision is recorded as a tax liability, and is deducted from the expressed revaluation gain which is recorded in the unavailable reserves at the time of the merger.

Provisions for liabilities and charges

Every year the Board of Directors examines the need to set up provisions to cover the risks and liabilities with which Retail Estates nv is confronted.

Creditors

Amounts payable are recorded at nominal value on the closing date.

19

- The fi nancial year runs for the twelve months from 1 April 2004

to 31 March 2005.

- Retail Estates nv assumed the legal status of a BEVAK/SICAFI on 27 March 1998. As a result the tangible fi xed assets (including fi xed assets leased on property leases) are valued at their investment value as determined by the property expert on 31 March 2005. The resulting revaluation surpluses are booked to an unavailable reserve in accordance with the new accounting rules applicable as a result of the waiver obtained on the basis of article 15 of the law of 7 July 1975 on the annual accounts of enterprises.

E. S

TRUCTURE OF THE ANNUAL ACCOUNTS

The valuation rules applicable to Retail Estates nv have been taken over in full in the consolidation.

The subsidiaries do not have a BEVAK/SICAFI status. Land and buildings are recorded in the subsidiaries’ unconsolidated accounts at their acquisition value. Supplementary costs are also capitalized.

Buildings are depreciated as follows in the subsidiaries’ unconsolidated accounts:

- Retail Estates Luxemburg sa: 2% a year - Retail Warehousing nv: 3% a year - Wickes Land Development nv: 5% a year

For consolidation purposes the accounts of the subsidiaries are adjusted to the valuation rules of Retail Estates nv:

-depreciation is eliminated;

- the value of land and buildings is brought into line with the estimated investment value.

F. D

IFFERENCES IN VALUATION RULES BETWEEN THE CONSOLIDATED AND UNCONSOLIDATED ACCOUNTS

20

G. N

OTES

VII.

STATEMENT OF FORMATION EXPENSES

Period

Net carrying value as at the end of the previous fi nancial year 1 439 609

Movements of the fi nancial year

- New expenses incurred 15 397

- Depreciation 327 010

Net carrying value at the end of the fi nancial year 1 127 996

Of which:

- Expenses of formation or capital increase, loan issue expenses, reimbursement premium and other

formation costs 1 127 996

- Reorganization costs

VIII.

STATEMENT OF INTANGIBLE ASSETS

Research and development expenses

a) Acquisition cost

As at the end of the previous fi nancial year 422 146

Movements during the fi nancial year :

- Acquisitions, incl. fi xed assets, own production

At the end of the fi nancial year 422 146

c) Depreciation and amounts written down

As at the end of the previous fi nancial year 415 540

Movements during the fi nancial year

- Recorded 6 605

-Acquisition from third parties

At the end of the fi nancial year 422 145

d) Net carrying value at the end of fi nancial year 0

21

IX. STATEMENT OF TANGIBLE FIXED

ASSETS

Land and buildings Plant, machinery and equipment Furniture and vehicles Leasing other similar rights Assets under construction a) Acquisitions cost

As at the end of the previous fi nancial year 130 761 008 121 782 69 014 72 939 526 281

Movements during the fi nancial year

- Acquisitions, incl. produced fi xed assets 3 350 297 146 102 73 068 3 886 586

- Sales and disposals 1 049 413 22 480

- Transfers from one heading to another 870 545 870 545

At the end of the fi nancial year 133 932 437 267 8843 142 082 50 459 3 542 323

b) Revaluation surpluses

As at the end of the previous period 44 780 770

Movements during the period

- Recorded 6 307 567

- Reversed 1 813 372

At the end of the fi nancial year 49 274 964

c) Depreciation and amounts written down

As at te end of the previous fi nancial year 6 548 015 80 384 5 015 32 669

Movements during the fi nancial year

- Recorded 46 032 15 135 12 625 21 437

- Written back as superfl uous

- Written down after sales and disposals 22 480

At the end of the fi nancial year 6 594 047 95 519 17 639 31 626

d) Net carrying value at the end of the fi nancial year

176 613 354 172 365 124 443 18 833 3 542 323

Of which:

- Land and Buildings

- Plant, machinery and equipment

- Furniture and vehicles 18 833

22

A . C O N S O L I D A T E D A N N U A L A C C O U N T S

X.

STATEMENT OF FINANCIAL FIXED ASSETS

Other enterprises

Amounts receivable

Net carrying value at the end of the previous fi nancial year 114

Net carrying value at the end of the fi nancial year 114

XI.

STATEMENT OF THE CONSOLIDATED RESERVES

Period

Consolidated reserves at the end of the previous fi nancial year 31 073 788

Movements

Shares of the group in the consolidated income 1 179 855

Other movements

Reclassifi cation revaluation surpluses on the reserves not available for distribution 2 966 834

Consolidated reserves at the end of the fi nancial fi nancial year 35 220 477

XII.

STATEMENT OF CONSOLIDATION DIFFERENCES AND DIFFERENCES RESULTING

FROM THE APPLICATIONS OF THE EQUITY METHOD

Consolidation differences

Positive

Net carrying value at the end of the previous fi nancial year 179 281

Movements during the fi nancial year

Amortisation (32 078)

Other changes 21 569

Net carrying value at the end of the fi nancial year 168 772

XIII.

STATEMENT OF AMOUNTS PAYABLE

Amounts payable with a residual term of

A. Analysis of the amounts originally after one year contracted for more than one year in function of their residual term

Not more than 1 year Between 1 and 5 years More than 5 years

F

INANCIALDEBTS

Leasing and similar obligations 9 048

Credit institutions 138 182 59 129 492 3 966 296

Other loans 41 708

23

XIV. RESULTS

Period Preceding period

A. Net turnover

A.2 Aggregate turnover of the group in Belgium 13 387 373 11 008 753

B. Average number of persons employed and personnel charges B.1 Consolidated enterprises and fully consolidated enterprises B.11 Average number of persons employed

Employees 6 7

B.12 Personnel charges 478 995 453 707

Remunerations and social security

B.13 Average number of persons employed in Belgium by the enterprises concerned

6 7

D. Income taxes

D.1 Difference between the tax charges in the consolidated income statement for the period and the preceding periods and the amount

of the tax paid or payable in respect of those periods, provided that this

difference is material for the purpose of future taxation (567 099) 379 837

XV.

RIGHTS AND COMMITMENTS NOT REFLECTED IN THE BALANCE SHEET

Period

A. Obligation to purchase with a condition precedent on the acquisition of the shares of Autobedrijf René

Sint-Niklaas 657 231

B. Retail estates has partially hedged itself by means of IRS contracts against the risks of a rise in fl oating interest rates. During the past period it concluded three IRS contracts with two Belgian banks:

1) An Interest Rate Swap with Fortis Bank for a notional amount of EUR 11 450 000, at a fi xed interest rate of 3.87% against Euribor 3 months, running from 2 July 2004 to September 2009;

2) An Interest Rate Swap with KBC Bank for a notional amount of EUR 5 525 000, at a fi xed interest rate of 3.365% against Euribor 3 months, running from 8 April 2004 to 26 March 2009;

3) An Interest Rate Swap with KBC Bank for a notional amount of EUR 5 000 000, at a fi xed interest rate of 3.135% against Euribor 3 months, running from 31 March 2005 to 30 November 2009.

XVII.

FINANCIAL RELATIONSHIPS WITH DIRECTORS OR MANAGERS OF THE CONSOLIDATION

ENTERPRISE

Period

A. Total amount of remuneration granted in respect of their responsibilities in the consolidation enterprise, its subsidiary companies and its affi liated companies, including the amounts in respect of retirement

pensions granted to former directors or managers 46 000

24

31/3/2004 - 31/3/2005 31/3/2003 - 31/3/2004 31/3/2002 - 31/3/2003

1.

C

ASHFLOWSFROMOPERATINGACTIVITIES

I. Net current profi t 9 220 227 6 480 559 5 195 728

II. Income from the sale of land and buildings 0 220 129 0

III. Result from the change in market value -46 721 -1 752 -64 277

IV. Extraordinary result 0 -10 552 -4 734

V. Amortisations, provisions and depreciations 493 816 456 158 427 604

VI. Change in the working capital -917 734 1 497 410 299 710

Operational Cash fl ow 8 749 588 8 641 951 5 854 030

2.

C

ASHFLOWSFROMINVESTINGACTIVITIES Acquisitions/Disposals

Land and buildings -4 715 997 -49 103 462 -17 676 687

Formation expenses, intangible and tangible fi xed assets -1 939 514 -354 561 -2 249 637

Financial fi xed assets 0 0 0

Immovable property acquired or constructed for resale 0 0 580 071

Cash from investing activities -6 645 002 -49 637 304 -19 346 253

3.

C

ASHFLOWFROMFINANCINGACTIVITIES

Changes in capital and share premium account -500 38 662 655 0

Changes in the amounts payable after 1 year 13 448 746 7 323 566 19 821 293

Changes in the amounts payable within 1 year -4 625 315 2 907 571 -104 079

Dividends -3 461 555 -8 287 804 -4 908 755

Cash from fi nancing activities 5 361 376 40 605 988 14 808 459

Net change in investment and cash in the bank and in hand 7 465 961 -389 365 1 316 236

4.

C

HANGEININVESTMENTANDCASHINTHEBANKANDINHAND

Investments and cash in the bank and in hand at the end of the fi nancial year 13 355 319 5 889 358 6 278 723

Investments and cash in the bank and in hand at the beginning of the fi nancial year

5 889 358 6 278 723 4 962 487

Net change in investment and cash in the bank and in hand 7 465 961 -389 365 1 316 236

H. O

RIGIN AND DESTINATION OF THE RESSOURCES

(

IN EUR

)

25

I. F

REE

T

RANSLATION OF STATUTORY AUDITOR

’

S REPORTON THECONSOLIDATED FINANCIALSTATEMENTS FORTHE

YEAR ENDED

31

MARCH

2005

TO THEGENERALSHAREHOLDERS

’

MEETING OF RETAILESTATES NV

In accordance with legal and statutory requirements, we are pleased to report to you on the performance of the audit assignment which you have entrusted to us.

We have audited the consolidated fi nancial statements as of 31 March 2005 which have been prepared under the responsibility of the board of directors and which show a balance sheet total of EUR 196 280 130 and a profi t for the year of EUR 12 140 765. We have also carried out the specifi c additional audit procedures required by law.

Unqualifi ed audit opinion on the consolidated fi nancial statements

We conducted our audit in accordance with Belgian auditing standards, as issued by the «Institut des Reviseurs d’Entreprises/ Instituut der Bedrijfsrevisoren.” These standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free of material misstatement, taking into account the legal and statutory requirements applicable to consolidated fi nancial statements in Belgium.

In accordance with those standards, we considered the group’s administrative and accounting organisation, as well as its internal control procedures. We obtained all explanations and information required for our audit. We examined, on a test basis, the evidence supporting the amounts in the consolidated fi nancial statements. We assessed the accounting principles used, the signifi cant estimates made by the enterprise, as well as the overall presentation of the consolidated fi nancial statements. We believe that these activities provide a reasonable basis for our opinion.

In our opinion the consolidated fi nancial statements present fairly the company’s net worth and consolidated fi nancial position as of 31 March 2005 and the consolidated results of its operations for the year then ended, in accordance with the applicable legal and regulatory requirements in Belgium, and the information given in the notes to the consolidated fi nancial statements is properly presented.

Additional opinion

We supplement our report with the following additional opinion, which do not impact in our opinion on the fi nancial statements:

• The consolidated directors’ report contains the information required by law and is in accordance with the consolidated fi nancial statements.

3 June 2005

The statutory auditor

PricewaterhouseCoopers Reviseurs d’Entreprises / Bedrijfsrevisoren

represented by Luc Discry Company auditor

NAME: Retail Estates nv

STATUS: Real estate investment company with fi xed capital established according to Belgium law (BEVAK/SICAFI)

ADDRESS: Industrielaan 6 –B -1740 Ternat

TELEPHONE: +32 (0)2 /568 10 20

FAX: +32 (0)2 /581 09 42

EMAIL: [email protected]

WEBSITE: www.retailestates.com

(FORMER) TRADE REGISTRY: Brussels 550.780

VAT NUMBER: BE 434 797 847

COMPANYNUMBER: 0434 797 847

CONSTITUTION: 12 July 1988

STATUSASREALESTATEINVESTMENTCOMPANYWITHFIXEDCAPITAL GRANTEDON:

27 March 1998

STATUTORYPERIODOFESTABLISHMENT : Unlimited

MANAGEMENT: Internal

AUDITORS: PricewaterhouseCoopers –auditors

represented by Mr. Luc Discry

FINANCIALYEARCLOSING: 31 March

CAPITAL: 80 293 315 EUR

NUMBEROFSHARES: 3 568 594

GENERAL MEETING: The last monday of June

SHARELISTING: Euronext - continuous market

DEPOSITORYBANK: KBC Bank

FINANCIALSERVICES: KBC Bank and ING Belgium

VALUEOFREALESTATEPORTFOLIO: 163.54 mio EUR (excl. value Real Estate certifi cates “Distri-Land”)

REALESTATEEXPERT: Cushman & Wakefi eld Healey & Baker

NUMBEROFPROPERTIES: 189

TYPEOFPROPERTIES: Peripheral shopping real estate

LIQUIDITYPROVIDER: KBC Securities

CONTACTS

JAN DE NYS ([email protected]) Executive Director-CEO

STEVEN D’HAENE ([email protected]) CFO

JOHAN JANSSENS ([email protected]) Property Manager

BERNADETTE ROSSEL ([email protected]) Property Manager

FABIENNE DUCHATEAU ([email protected]) Assistant Property Manager

RIET VAN RANSBEECK ([email protected]) Manager Finance & Accounting

MAAIKE DUBOIS ([email protected]) Legal Counsel

KRISTINE GEBOERS ([email protected]) Management Assistant

The annual report is a free translation of the Dutch text.

I X . G E N E R A L I N F O R M A T I O N