Financial Report 2006

184 656 916 – Paris Trade and Companies Register (RCS) € Financial Report 2006

21, avenue Kléber – 75116 Paris – Tel.: 33 (0)1 40 67 57 40 – Fax: 33 (0)1 40 67 55 62 A French corporation (société anonyme) with an Executive Board and a Supervisory Board . 780 152 914 Registero capital stock of N 2006 Financial Report Klépierre – This document, along with the 68-page 2006 Activity Report, constitues the shelf registration document.

« This shelf registration document (document de référence) was filed with the French Autorité des Marchés Financiers (AMF) on March 8, 2007, in compliance with article 212-13 of AMF regulations. It may be used in connection with a financial transaction only if acccompanied by a transaction memorandum registered with Photo credits : Ambroise Tézenas. the Autorité des Marchés Financiers.» Design and production : - 6720. Contents

3 Management report 78 Consolidated financial statements and independent auditor’s report 141 Draft resolutions 156 Independent auditor’s report on share capital reduction, stock issues and free allotment of shares 162 Other information 168 AMF reconciliation table

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Contents of management report

3 A -Business activity and earnings by segment 3 I - Shopping center segment 12 II - Office segment 15 B – Consolidated earnings and cash-flows 15 I - Consolidated earnings and cash-flows 16 II - Change in cash-flow 16 III - Parent company earnings 18 IV - Subsidiaries and equity interests on December 31st, 2006 20 C – Revalued net assets (RNA) 26 D – Financing policy 29 E – Human resources 30 F – Recent developments, outlook and risk factors 30 I - Recent developments 30 II - Outlook 31 III - Risk factors 35 G – Corporate governance 35 I - List of offices and positions 38 II - Summary of major agreements 39 III - List of common conventions and regulated conventions 43 IV - Compensation and benefits paid to members of management bodies – Composition of the Supervisory Board and the Executive Board – Judgment for fraud 47 H – Capital and shareholding structure 47 I - History 48 II - General information 50 III - General information regarding equity capital 53 IV - Equity capital and stock market 55 I - Sustainable development 66 Special management report to the shareholders on transactions related to the free allotment of shares 67 Special management report to the shareholders on stock buy-back programs 69 Special management report to the shareholders on transactions carried out by virtue of the provisions of Articles L. 225-177 through L. 225-186 of the French Commercial Code0 70 Report of the Supervisory Board 71 Report of the Chairman of the Supervisory Board 77 Statutory auditor’s report prepared pursuant to Article L. 225-235 of the French Commercial Code

Klépierre_Financial report 2006 (2) The mobileaggregateover 12monthsisreconstructed (1) Source: OECDeconomicoutlook, no.80(28.11.2006). (latest figuresavailablearethroughSeptember). by SégécéfromEurostatmonthlyindicators SUPERVISORY BOARDMEETINGOFFEBRUARY E management report Executive Board’s measured byrevenues (whichtogether observed inthetopthree countriesas period in2005,withsatisfactory growth mall businessrose by3.4%versusthesame November 2006,revenues from shopping Year-over-year forthe12monthsthrough REVENUE TRENDS on aparwiththe2006level. consumption in2007remains satisfactory, of Portugal.However, theoutlookforprivate in growth versus2006,withtheexception Forecasts for2007indicateaslightdecline four andahalfyearsofvirtualstagnation. nonetheless comesaswelcomenewsafter recovery. ForItaly, this subduedperformance two countriesthatare undergoingeconomic in Portugal(+1.3%)andItaly(+1.8%), The numberswere lesspositive resilience. 2.1%, withhouseholdspendingshowing disappointing, thetotalforyearwas In France,where thethird quarterwas in Spain(+3.7%)andGreece (+4.0%). +6.2%, Poland:+5.1%,Hungary:+4.0%), (Slovakia: +8.2%,theCzechRepublic: It wasevenhigheracross CentralEurope performance seensince2000. as awholereached 2.6%,thebest this backdrop, GDPgrowth fortheEuro area growth was sustainedin2006.Against particularly intheUnitedStates,globalGDP Despite somesignsofaslowdown, ECONOMIC ENVIRONMENT 1 –Consumption SHOPPINGCENTERSEGMENT - I A -BUSINESS ACTIVITY AND EARNINGSBYSEGMENT 9 , 2007 RELATIVE TO FISCAL YEAR2006 (1) by retail segment,personalproduct a lessrobust 1.5%.Broken down For downtowncenters,theincrease was centers up4.4%,regional centersup2.9%). of non-downtowncenters(inter-communal for theyear, drivenbytheperformance revenues inFrancerose byatotalof3% showing inDecember2005(+5.4%), 2006, compared withaparticularlystrong After postinga1.6%increase inDecember France higher thanlastyear. goods segment,revenue growth wasslightly and Restaurants(+2.6%).Forthehousehold Culture/Gifts/Entertainment (+3.4%) by theBeauty/Healthsegment(+3.7%), products (+4.8%).Itwasfollowed significant growth, particularlypersonal In 2006,allretail segmentsshowed of Portugal. second halfoftheyearincase and 2.0%,respectively –despiteagood account for3%oftotalrevenues), by1.8% in SlovakiaandPortugal(whichtogether revenues declinedforshopping centers no changeversustheprevious year, while Czech RepublicandGreece growth in domesticconsumption.Inthe in France,revenue growth farexceeded (+3.5%). InItalyand,toalesserextent, Spain (+4.9%),Italy(+3.7%)andFrance account for93%oftotalrevenues brought in): 2 , salesshowed

3 MANAGEMENT REPORT Financial report _management report

sales rose by 5.8% in 2006, followed 2 – Rental business The sharp rise in rents on a current portfolio by Beauty/Health (+3.4%), Restaurants Rental business in Europe trended upward basis versus a comparable basis is primarily (+2.6%), and Culture/Gifts/Entertainment in 2006, with lease income from Klépierre’s due to the following factors: (+1.8%). Household equipment shopping center properties reaching • the fourth quarter 2005 acquisition of the sales fell by 1.8% over the period. 458.1 million euros, an increase of 17.3% Colombia mall in Rennes and an additional compared with the previous year co-owned parcel containing 40 retail outlets Spain (390.6 million euros). Additional variable in the Sevran center; The major centers reported positive trends rents represented 10.8 million euros • beginning in the first quarter 2006, (+7.4% over twelve months). Hypermarket of the total. On a constant portfolio basis, collection of rents from the new downtown malls reported a 2% increase in revenues, rents rose by 4.1%. mall in Valenciennes (Place d’Armes) and the with mid-sized retail units reporting BHV Déco department store in the retail park Portugal 2.5% particularly high growth (nearly 10%). of the Bègles Rives d’Arcins center; Czech Republic 2.5% • completion of the Cesson Boissénart, Greece 1.3% Italy Blagnac and Quétigny extensions Belgium 2.7% Slovakia 0.3% The significant revenue growth (+3.7%) and the commercial restructuring Poland 4.3% seen in 2006 was driven by all sectors. of the Montesson mall; Italy’s victory in the World Cup boosted • the December 2006 acquisition summer sales. of 128 Buffalo Grill restaurant properties located in various suburban retail parks. Portugal The average decline in shopping center Uncollected past due rent represented 0.3% revenues was 2%, attributable to a sluggish of total invoicing, versus 0.4% at year-end economic backdrop and stepped-up competition. 2005. The financial occupancy rate in 2006 Nonetheless, mid-sized retail units once again was 99.3% (99.2% at year-end 2005). Hungary 6.4% posted higher sales (+3%). Spain 13.1% The average occupancy cost ratio (rents Italy 16.1% France 50.7% Greece + utilities over revenues excluding tax) was Revenues were stable over the period 9.1%, versus 8.8% at year-end 2005. (+0.1%). The Makedonia center was France This is a reasonable rate, suggesting adversely affected by the opening Rents totaled 232.3 million euros (including that further rental reversion is possible of Cosmos, a rival center, with a particularly 7.5 million euros in additional variable rent), when leases expire and are renewed visible impact in Beauty/Health. Conversely, an increase of 11% over 2005. On a constant or taken up by new tenants. Patras reported a significant rise in revenues portfolio basis, growth was 4%, driven by The distribution of rents among tenants (+22.1%). rental reversion and index-linked adjustments, remains highly diversified, a factor which had an impact of +1.8%. As a reminder, that reduces the rental risk for the portfolio The Czech Republic and Slovakia the ICC index for the second quarter of 2005, as a whole. Based on leases in force on Novy Smichov saw modest revenue growth which applies to 78% of guaranteed rents December 31, 2006, the Buffalo Grill group (+0.3%). Sales were adversely affected in the portfolio, increased by a mere 0.7%. is now Klépierre’s number one partner by contracting sales in Beauty/Health (-2.1%) In addition, most of the other leases (19% in France, with 7.4% of total retail rents, and household goods (-5.6%). Danubia of the portfolio) are pegged to the index for followed by Auchan (3.5%), the PPR group reported a 1.8% decline in revenues, the first quarter 2006 (+7.24%). Negotiations (3.9%, of which Fnac for 3%), the Etam, attributable to a rise in the vacancy rate. conducted in 2006 led to the following Inditex (includes Zara), Celio and Go Sport comparable scope changes: groups (2.2% each), Camaïeu (2.1%), Belgium Vivarte (1.5%), and Armand Thiéry (1.4%). Revenues from the Esplanade • 214 re-lets and 227 lease renewals at Louvain-la-Neuve totaled 114 million (respectively +24.8% and +19.5% versus euros. The center got off to a good start, previous conditions); with sales rising substantially since October • 30 lease-ups, representing 0.9 million 2006 as measured by monthly comparisons. euros in rents. It should be noted that the additional variable rents, which are tied to tenants revenues, increased slightly between 2006 and 2005 (+2.7%).

Klépierre_Financial report 2006 Spain the Longoni group (2.1%), Calzedonia- Invoiced rents totaled 59.8 million euros, Intimissimi (2.1%), Scarpe & Scarpe (2.1%) a current portfolio increase of 6.5%. and Autogrill (2%). On a constant portfolio basis, the increase REPORT MANAGEMENT was 4.9%, driven by significant index-linked Hungary adjustments (3.6%). On a comparable In 2006, invoiced rents totaled 29.5 million portfolio basis, rental business in 2006 euros (+2.5%). can be analyzed as follows: On a constant portfolio basis, they increased • 130 re-lettings (+15.4%); by 2.9%, reflecting the impact of index-linked • 219 renewals (+8.4%); adjustments (+1.3%) and rental reversion. • 25 lease-ups (0.5 million euros). Last year, the following lease changes were The current portfolio rise in rents is attributable completed on a comparable basis: mainly to the acquisition of the Molina • 115 re-lettings (-5.6% or 160 thousand de Segura center at the end of the first half euros); of the year. • 113 renewals (-2.8% or 134 thousand The default rate remains stable (1.2%), euros); and the financial occupancy rate was 98% • 22 lease-ups for 175 thousand euros. at year-end. These developments reflect the effort The occupancy cost ratio was 11.5% to reposition the centers commercially, in 2006, and the top ten retail tenants in the interest of improving their competitive represent less than 29% of total rents. profile. Global negotiations involving the The Inditex group is the largest contributor tenant Match were the source of two-thirds to rents (5.9%), followed by Ceneza (5.3%), of these rental capital losses. Yelmo Cineplex (2.6%), Belros (2.6%), In the case of the Kanizsa, Alba and Szeged McDonald’s (2.5%), Opticas Afflelou (2.4%), centers, full-scale commercial restructuring Cortefiel (2.4%), Décimas (2.3%), Hobby Zoo was carried out following the departure (1.5%) and Aki (1.4%). of Match, with a temporary effect on rental negotiations: 51 re-lettings (-16.7% Italy or 322 thousand euros), 35 renewals For the Italian shopping center portfolio (+4.7% or 37 thousand euros), as a whole, invoiced rents in 2006 totaled and 4 lease-ups (+75 thousand euros) were 73.9 million euros, an increase of 30.4%. completed for these centers. The 3% increase on a constant portfolio The financial occupancy rate was 97.7% basis was equally attributable to the impact in 2006, while the default rate was 3.5%. of index-linked adjustments (+1.3%) The concentration of rents among tenants and rental reversion. There were 92 changes is satisfactory: Match (5.7%), Mercur (3.5%), to lease terms in 2006 on a comparable Fotex (3.3%), IT Magyar Cinema (3.2%), scope basis: Pecsi Direkt (2.5%), Palace Cinema (2.3%), • 43 re-lettings (+9.8%); Jeans Club (2.3%), Fun Szorakoztato (2.1%), • 46 renewals (+30.7%); Humanic (2%) and Coin Works (1.1%). • 3 lease-ups (71 thousand euros). The current portfolio change in rents was attributable to extensions (Montebello, Giussano and Varese centers). In 2006, the default rate was 2%, the financial occupancy rate was 97.9%, and the occupancy cost ratio was 8.7%. The top 10 retail tenants represent less than 28% of total rents. The Media World group accounts for 5.8%, followed by Inditex (3%), Benetton (2.8%), Oviesse (2.6%), Risto (2.6%), Piazza Italia (2.4%), Miroglio (2.3%),

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For Novy Smichov, the default rate was competition in Krakow and a major 3.3%, while the occupancy cost ratio was commercial restructuring effort in Sadyba, 9.6%. For Danubia, the rates were 19% which resulted in replacing Peek & and 11.2%, respectively. About half of all Cloppenburg by more dynamic international unpaid past due rents were attributable retail anchors (such as Mango, Esprit to 3 retail anchors, which have since vacated and Aldo). their premises. The space has been re-let. The financial occupancy rate was 96.1%, The Novodvorska Plaza center, which opened and the default rate was 6.1%. this year and is still being leased up, reported The top 10 retail tenants accounted a financial occupancy rate of 83.7%. for 31.2% of total rents: Cinema City Portugal represented 6.4%, followed by Fantasy Park For the Portuguese portfolio as a whole, Greece (5.8%), Reserved (4.8%), Champion (2.7%), invoiced rents totaled 11.6 million euros, Invoiced rents totaled 6.1 million euros, Inditex (2.5%), Smyck (2.3%), Piotr i Pawel down by 3.7%. This decline reflects difficult an increase of 6.2% that reflected (2%), CCC (1.6%), Albert (1.5%) and prevailing business conditions and, index-linked adjustments (3.6%) and rental Intermarché (1.4%). for the Loures and Parque Nascente centers, reversion. There were 5 changes in tenant more intense competition. The impact mix that led to an average increase of 11.2% Rental outlook in 2007 of index-linked adjustments was +1.9%. compared with previous rental conditions. For all of the Group’s European holdings, On a comparable scope basis, 18 re-lettings The financial occupancy rate was 98.9% leases that will come up for renewal between (-7.7%, but only 51 thousand euros), and the default rate was 3.3%. The average now and the end of 2007 represent 9.6% 4 renewals (+1.8% or 5 thousand euros) occupancy cost ratio was 12.2%. of contractually guaranteed rents, with and 4 lease-ups (+91 thousand euros) were important rental stakes in a number completed in 2006. Belgium of countries. In Poland, 18.4% of contractually The 8 re-lettings involving the Parque Invoiced rents totaled 12.1 million euros, guaranteed rents will come up for renewal; Nascente center generated a rental capital compared with 3.4 million euros in 2005, in Hungary, the figure is 16.5%, in Spain loss of 540 thousand euros, primarily reflecting the impact over the full year 15.8%, and in the Czech Republic 15%. attributable to the movie theaters. of the Louvain-la-Neuve center, which In France and in Italy, where there are fewer A restructuring project is under way, opened its doors in October 2005. leases set to expire, the respective totals are with Media Markt set to become a tenant On a constant portfolio basis, rents rose 7.8% and 7.1% in value terms. in the second quarter of 2007. by 21.7%. Only 1.7% of this increase was In France, renewal efforts, combined with In 2006, the default rate was 5.1%, due to index-linked adjustments. The rest restructurings and/or commercial extensions, the financial occupancy rate was 96%, reflects the impact of the end of the lease-up remain a major source of leverage in terms and the occupancy cost ratio was 12.6%. period (in particular Rue Charlemagne), of rental reversion. Indexation of minimum which led to an increase in the financial guaranteed rents will have a significant The Czech Republic and Slovakia occupancy rate from 90.8% to 97.2%. impact on rents, particularly those impacted For these two countries, invoiced rents A total of 14 lease-ups for 1 million euros by the ICC index for the second quarter of totaled 13 million euros. On a constant in full-year rents were completed in 2006. 2006, up by 7.05% and applicable to about portfolio basis, rents increased by 4.8% The default rate was 2%. 77% of all shopping center rents collected in the Czech Republic, in particular thanks in France. to index-linked adjustments (+2.4%). Rental Poland changes in the comparable portfolio involved: Invoiced rents totaled 19.7 million euros. • 7 re-lettings (+8%); Rents rose by 9.2% on a constant portfolio • 2 renewals (+10.5%); basis, of which 1.7% was attributable • 1 lease-up. to index-linked adjustments. Rental activity In Slovakia, invoiced rents decreased by 8.6% in 2006 produced the following results: due to extended vacancies for several parcels. • 42 re-lettings (down by 5.5% or 82 On a current portfolio basis, Czech rents thousand euros); increased by 1.8 million euros thanks • 28 leases renewed (down by 14.1% to the acquisition of the Novodvorska Plaza or 153 thousand euros); center. • 15 lease-ups, including 10 in Poznan, The financial occupancy rates were 100% for 492 thousand euros. for Novy Smichov and 93.8% for Danubia. These changes reflect more intense

Klépierre_Financial report 2006 3 – Development In France, the opening of the Place d’Armes Investments made in Italy (19.4 million euros) center, located in the heart of Valenciennes, primarily concerned the extension of existing THE SHOPPING CENTER was the culmination of a project that Ségécé centers, particularly in Giussano-this extension INVESTMENT MARKET kicked off in 1989 when the design phase opened in 2006 (9.1 million euros)- and REPORT MANAGEMENT Competition for assets to purchase began. The center, which for Klépierre in Varese (5.2 million euros). in the shopping center market continues represents an investment of 51.8 million Finally, investments totaled 24.9 million euros to be very intense, with insurance companies euros at opening, includes 4 mid-sized retail in Belgium (Louvain-La-Neuve center), actively seeking opportunities, against a units (Match, Fnac, H&M and Zara) and 15.5 million euros in Poland, for backdrop of waning supply. Consequently and 56 smaller retail outlets distributed additional cash payments due under the and unsurprisingly, the squeeze on rates over a GLA of 16 000 sq.m. acquisition agreements based on an improved continues, and the yields of secondary The acquisition of Toulouse Purpan was rental profile for the centers involved. transactions are now approaching those made after the shopping center’s mall Globally, acquisitions made in 2006 bring to of prime transactions. and Carrefour hypermarket underwent 236 the number of shopping centers owned Some of the important trends observed major extension work. The new center by Klépierre in Continental Europe, covering include the growing appeal of retail business offers a total of 7 220 sq.m. GLA approximately 2 million sq.m. of GLA. parks, as well as the tendency of major retail and 32 retail outlets. They will generate additional net rent of groups to outsource their property assets, In addition, Klépierre increased its equity 19.4 million euros, full year. encouraged by tax incentives. interest in the company that owns the Val d’Europe shopping center • Integration of the management network INVESTMENTS MADE IN 2006 by 15% (64 046 sq.m. of GLA), In buying out the minority interests in its In this environment, the completion bringing its total stake to 55%. Italian and Czech management subsidiaries of projects that Klépierre had identified In all, and also including expenditures related (50% and 25% of equity capital, respectively) or even controlled before the year began to extensions and pending projects, Klépierre in 2006, Ségécé pursued its strategy offers a greater advantage than ever. invested 219 million euros in France last year. of gaining control over its European asset The Group achieved a high investment In late June of 2006, Klépierre acquired management network in countries where volume in 2006, even though it remained Molina de Segura in Murcia, Spain the group is present. These acquisitions very selective throughout the year. from a local developer for 29.3 million euros. represented a total investment of 9.4 million In addition, via Klémurs, Klépierre staked Covering 10 651 sq.m. the shopping center euros in 2006. out a position as a buyer of retail property includes 79 retail outlets juxtaposing assets, in a bid to provide a global response a Supercor supermarket. to the real estate challenges facing large In Czech Republic, the Novodvorska Plaza retail groups and become a genuine shopping center was also acquired partner in this area. at the end of the first half of 2006, for 38.6 million euros. This 25 900 sq.m. • 378 million euros in investment shopping center, which was inaugurated outlays for shopping center properties in March of 2006, is part of the agreement The investments made in shopping centers entered into with Plaza Centers Europe in 2006 encompass a very diverse set in July of 2005. It includes a Tesco of transactions. First of all, they are hypermarket and a retail mall with 120 outlets, geographically diverse, since investments plus a movie theater and a bowling alley. were made in 7 of the 10 Continental In Portugal, Klépierre acquired the Braga European countries in which the group shopping center from Banco Espirito Santo. is present. Diversity was also achieved Covering 9 293 sq.m., this center is structured in terms of the type of assets acquired, around a Carrefour hypermarket and features since they included properties located 66 shops and 2 000 parking stalls. in downtown areas, regional shopping centers and mid-sized malls. Finally, there was also diversity in terms of pipeline, since the acquisitions involved partners with which Klépierre has historical ties (Carrefour, Plaza Centers, Finiper) as well as local developers and owners.

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KLEPIERRE'S INVESTMENTS: ACHIEVEMENTS IN 2006 GLA/sq.m. Property o/w down 2006 Future value in €M payments made investment outlay in €M before 01.01.2006 outlay in €M ACQUISITIONS WITH IMMEDIATE EFFECT AND SHOPPING CENTER INAUGURATION COMPLETED BY SÉGÉCÉ France 87 793 329.8 201.0 118.2 10.7 Valenciennes (16 000 sq.m.), Toulouse Purpan (7018 sq.m.) Belgium 41 483 137.3 111.1 24.9 1.3 Spain 13 455 34.1 4.1 29.6 Molina de Segura (10 651 sq.m.) Italy 31 970 118.2 100.1 12.9 5.3 Portugal 9 293 67.5 38.7 29.8 -1.0 Braga (9 293 sq.m.) Poland 98 248 208.5 183.0 15.5 10.0 Czech Republic 19 776 45.3 0.0 38.6 6.7 Novodvorska Plaza (19 776 sq.m.) Sub total 302 018 940.9 637.9 269.4 33.0

ACQUISITIONS WITH DELAYED EFFECT Spain 46 742 228.1 90.0 1,3 136.8 Vallecas (45 639 sq.m.) Italy 5 463 19.8 0.0 6.5 13.4 Czech Republic 20 670 42.8 0.0 0.0 42.8 Pilzen (20 670 sq.m.) Poland 56 243 133.5 0.0 0.0 133.5 Rybnik (17 529 sq.m.), Sosnoviec (13 031 sq.m.), Lublin (25 683 sq.m.) Sub total 129 118 424.3 90.0 7.8 326.5

EXPENSES RELATED TO PROJECTS UNDER ASSEMBLY OR DEVELOPMENT IN 2006 o/w projects 120.946.535.738.6 o/w extensions 130.912.065.183.5 Sub-total 251.8 58.5 100.8 122.1

TOTAL PROPERTY ACQUISITIONS 2006 431 136 1 616.9 786.4 378.0 481.6

Acquisitions of service provider subsidiaries 9.4 9.4 Ségécé Italy (50%), Ségécé Czech Republick (25%)

TOTAL FOR 2006 431 136 1 626.2 786.4 387.3 481.6 in millions of euros

• Nearly 300 million euros invested while another 105 restaurants were acquired OPENING UP A NEW LINE in the property assets of a major retailer in the form of finance leases. OF BUSINESS: HOLDING AND MANAGING via Klémurs The outstanding principal amount THE COMMERCIAL REAL ESTATE ASSETS Klémurs acquired the ownership on these finance leases at the time OF MAJOR RETAIL GROUPS of 128 Buffalo Grill restaurant properties of purchase was 50 million euros. in France. This 299.8 million euro investment This acquisition constitutes the first step • An ambitious growth strategy (including transfer duties and acquisition in a broader strategic partnership between in a promising market costs) is expected to generate 18.7 million Klémurs and Buffalo Grill that also calls For retail groups, the reasons for outsourcing euros in net rents, full year. 23 of these for the involvement of Klémurs real estate assets are numerous. restaurants were acquired outright, in the development of Buffalo Grill’s restaurant In an environment of high and rising property for a total investment of 50.8 million euros, business in France and in Europe. values, outsourcing frees up considerable

Klépierre_Financial report 2006 financial resources that can be used to focus it has excellent knowledge of many distribution (12 500 sq.m. in 3 phases), Blagnac on the core business. Outsourcing offers sectors; it is able to develop new retail (11 000 sq.m.), Saint-Orens (10 000 sq.m.), access to technical, tax, legal and related facilities as these retail groups expand Rambouillet (7 700 sq.m.), Orléans-Saran expertise in an area-the management and seek new sales outlets; it has a (5 000 sq.m.), Rennes Colombia REPORT MANAGEMENT of property assets-that is becoming pan-European presence, experienced teams (5 000 sq.m.) and Grand Nîmes increasingly sophisticated. Outsourcing of acknowledged real estate professionals (1 400 sq.m.). The average net yield reduces the financial squeeze created and significant investment capability. on these extensions is estimated to be by the need to invest in commercial Taking Klémurs public will also prove around 6.5%. operations and real estate at the same time. beneficial to its growth strategy: In the area of real estate development, This is an issue that confronts the successors – as a listed company, Klémurs is an the period will see significant progress of many business founders who are just now attractive buyer for retail groups in light in – and in some cases, the completion reaching retirement age. Finally, the current of the provisions of SIIC 4; of – several new centers for which tax environment offers incentives to retailers – in addition, Klémurs has not only the development or building permit process willing to outsource, in the form of tax the support of the Klépierre group but also has already been launched: Angoulême breaks on the capital gains generated its own financial resources to fund future (scheduled to open in August 2007) and by the sale of their real estate assets to listed growth; Gare Saint-Lazare in Paris (2010), but also companies such as Klémurs (so-called SIIC 4 – Klémurs also continues to qualify for SIIC La Cité du Meuble et de La Maison in tax provisions). tax status. Cesson, Nancy Bonsecours, Besançon, For these reasons, Klémurs has opted Aubervilliers, Vannes Nouvelle Coutume, etc. to focus on developing a portfolio of strategic DEVELOPMENT POTENTIAL 2007-2011 The average net yield on these development business assets primarily comprised For the five years ahead, Klépierre’s projects, which represent 425 million euros, of the investment property outsourced investment potential in the shopping center is about 8%, after provisioning for general by major restaurants, multi-line distribution, segment is estimated to be around 3 billion contingencies. service and specialty retail chains. euros (excluding Klémurs). This potential Finally, Klépierre intends to acquire existing The goal of Klémurs is to support the future includes, in particular, 2.1 billion euros centers or projects from outside developers development of its clients. Accordingly, in controlled investments, i.e., investments for a total of 307 million euros (expected it will choose the latter primarily from among for which firm commitments have been net yield of 5.9%). the major groups with nationwide and acquired, or investments where the level In all, the total volume of controlled international geographic reach, which have of control over feasibility and financing terms investments in France over the 2007-2011 acquired a retail presence in multiple is deemed adequate. period is 1.5 billion euros, for an average net shopping districts located in downtown yield of 6.8%, after provisioning for general and suburban areas, and whose business • France contingencies. shows genuine prospects for growth. Before France remains a preferential development acquiring the 128 Buffalo Grill restaurants region for Klépierre: in addition • International in late 2006, Klémurs already owned three to the numerous extensions that have been Klépierre’s development abroad will continue retail property assets, located in Paris and identified in connection with existing assets, to advance steadily in the years ahead, Rouen (14 206 sq.m. of total rental space). a number of projects involving the creation with 567 million euros to be outlaid At year-end 2006, its property holdings were of new shopping centers have been detected. over the 2007-2011 period, out of valued at 334 million euros. Klémurs intends With respect to extensions, the agreement the investments already committed, to achieve rapid growth in this specialized signed in 2006 with Carrefour brings added for an average net yield of around 7.7%. market segment, with the aim of achieving impetus. Under the terms of this agreement, For its international development, Klépierre critical mass and broad diversification Ségécé acquires from Carrefour the right will continue to reap the benefits of rental risk. In addition, it seeks to triple to build the extensions of centers of the relationships it has established with the size of its portfolio within three to five in common, and will step up the promotion international developers that include Plaza years, as opportunities arise. of these projects-currently evaluated at Centers Europe in Central Europe, Wilhelm 120 000 sq.m.-to be completed over 4 years. & Co in Belgium, Finim and Finiper in Italy. • Major competitive strengths In all, the extensions represent 775 million These relationships give it an opportunity Thanks to its membership in the Klépierre euros of potential investments over to acquire upstream positioning on future group, Klémurs enjoys a number the 2007-2011 period, covering a number development projects. In addition, Klépierre of advantages for successfully positioning of projects of various sizes, including intends to make its own contribution itself as a major partner of retail groups Val d’Europe (17 120 sq.m.), Pontault- to the development of both new and existing that seek to outsource their property assets: Combault (13 000 sq.m.), Marseille Bourse centers, by gradually acquiring local

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development teams in the countries where Country Company Workforce Nb. Nb. Square meters % (1) it has established a presence. centers leases managed Ownership The extension potential for Klépierre centers France Ségécé 350 140 5 408 1 374 268 75% located outside of France is in fact Galae 6 – – – 100% substantial, and has not yet been thoroughly Ségécé Loisirs etTransactions 2 – – – 100% exploited. Over the 2007-2011 period, Spain Ségécé España 111 89 3 103 651 478 100% this potential is estimated to be more than Italy Ségécé Italia 87 53 1 385 322 311 100% 32 000 sq.m. in Spain (for an investment Portugal Ségécé Portugal 43 12 949 190 243 100% of 88 million euros), more than 35 000 sq.m. Czech Rep. & Slovakia Ségécé Ceska Republika 23 3 275 77 328 100% in Hungary (for 77 million euros), and around Belgium Devimo 100 20 1 144 429 745 35% 4 000 sq.m. in Italy (for 19 million euros). Hungary Ségécé Magyarorszag 121 16 1 404 215 354 100% With respect to the acquisition of shopping Greece Ségécé Hellas 4 5 114 37 990 100% centers or projects, Spain is the top country Poland Ségécé Polska 44 4 429 101 479 100% represented in the pipeline, with 160 million TOTAL 891 342 14 211 3 394 774 euros of estimated investments, including (1) Number of sq. m. occupied by all tenants in every shopping center (excluding parking stalls, common areas and vacant premises). the Vallecas center in Madrid, currently under construction. Poland accounts ACTIVE AND DIVERSIFIED ORGANIC ON COURSE IN ITALY for 146 million euros, in particular thanks GROWTH IN FRANCE Wholly owned since the beginning to the agreement signed in July 2005 With development fee income of 11.6 million of the year, Ségécé Italia focused with Plaza Centers Europe, under which euros for the year ended December 31, 2006, on revisiting its organization while staying 3 centers will be sold to Klépierre. compared with just 6.9 million euros in 2005, on the performance course set earlier. The same agreement calls for the acquisition Ségécé pursued its strategy of organic growth Managing 1 385 leases at year-end 2006, of a shopping center in the Czech Republic via a number of restructuring-extension projects the Company also ensured successful – a country with total controlled investments (Blagnac, Bègles, Angers, Orléans, Rambouillet, completion of the extensions involving over the period of around 50 million euros. Pontault-Combault). It also monitored transac- the Giussano and Varese centers, as well Overall, controlled acquisitions of shopping tions involving the shopping centers in as the restructuring of the Brianza center. centers outside of France represent Angoulême and Valenciennes for Klépierre 383 million euros, for an average net yield and the Buffalo Grill restaurant properties. GREECE ACHIEVES FINANCIAL EQUILIBRIUM of around 7.5%. Thanks to this development, the rental The third-party management contract signed management team achieved 6% growth with the Larissa center at the end of 2005, 4 – Real estate services in fee income for all mandates in France. covering 13 100 sq.m. under management, After acquiring an additional 50% has brought financial balance to Ségécé of its Italian subsidiary and 25% of its Czech STEADY GROWTH IN PORTUGAL Hellas after only two years in operation. subsidiary early last year, Ségécé’s focus After taking on the management With four employees, it now provides in 2006 was on consolidating its network of Torreshopping and the Jeronimo Martins rental management services for a total of management affiliates across Europe park in the second half of 2005, Portugal of 5 shopping centers. by pursuing the deployment of its methods received full-year management fees for and organizational principles, as well its services in 2006. As a result, its earnings DEVELOPMENT CONFIRMED as rebranding. As a result, all of rose by 39%. Currently, its business portfolio IN THE CZECH REPUBLIC its wholly-owned subsidiaries now do contains 949 leases, and the Portuguese With the opening of the Novodvorska Plaza business under the Ségécé name. management subsidiary will also manage in Prague on March 22, 2006, there are now This European presence was also reflected the Braga center, which Klépierre acquired 3 centers under management in stepped-up business in the monitoring at the end of the year. in the Czech Republic and Slovakia. of new assets located outside France, This development ensures the lasting which in turn generated a 42% increase STEPPED-UP DEVELOPMENT IN SPAIN profitability of Ségécé Ceska Republika, in international asset management fees. With 89 shopping centers under management, which now employs 23 people and manages Ségécé España is currently focusing 77 328 sq.m. its resources on development, particularly involving the Vallecas, Torremolinos and REORGANIZATION UNDER WAY IN POLAND Oviedo centers. It managed the acquisition Under ownership since July 2005, the Polish of the Molina de Segura center in late June subsidiary of Ségécé is actively preparing of 2006. its information system and organizational

Klépierre_Financial report 2006 structure for the management of additional harmonize shopping center property deployed by all group subsidiaries. centers-including Klépierre projects under and rental management with Group Currently, Devimo manages 1 144 leases way in Rybnik, Sosnowiec and Lublin. practices, and align the organizational and employs a workforce of 100. The company currently employs 44 people structure with Ségécé standards. REPORT MANAGEMENT and manages 101 479 sq.m. BENEFICIAL REPOSITIONING PORTFOLIO UNDER MANAGEMENT FOR GALAE FURTHER INTEGRATION IN HUNGARY IN BELGIUM GROWS Galae’s repositioning in specialty leasing, Managing 16 shopping centers, including With the Louvain-la-Neuve center fully which took place in 2005, is beginning 12 for Klépierre, Ségécé Magyarorszag operational and the new mandate obtained to pay dividends. The subsidiary reported employs 121 people, 65 of whom are directly for the Gent Zuid center, Devimo has a net profit in 2006. With six full-time assigned to shopping centers. The aim demonstrated its ability to keep pace with employees, Galae addresses the needs of the policy in force at this time is twofold: the business expansion strategy being of the brands and advertisers operating in the Group’s shopping centers. 5 – Segment earnings

Shopping center segment 12.31.2006 12.31.2005 % variation of new staff by Ségécé in France with Lease income 458.1 390.6 17.3% expertise in the areas of development Other rental income 8.7 5.6 56.3% and shopping center management. Rental income 466.7 396.1 17.8% EBITDA reached 419.4 million euros, Land expenses (real estate) -2.3 -2.0 12.5% an increase of 20.3%. The operating ratio Non recovered land expenses -5,9 -4.0 45.9% (total expenses/net operating income) was Building expenses (owner) -28.9 -30.1 -3.9% 14.9% for 2006, versus 15.3% for 2005. Net lease income 429.7 360.0 19.4% Depreciation and amortization Management, administrative and related income 56.2 45.9 22.6% for the period increased by 19.5 million Other operating income 6.7 5.5 21.0% euros, due in particular to portfolio growth: Survey and research costs -1.1 -0.8 34.6% the acquisition in 2005 of the Polish Payroll expense -54.3 -46.9 15.8% shopping malls (6.8 million euros); Other operating expenses -17.7 -15.0 17.9% the Louvain-la-Neuve center (4.5 million EBITDA 419.4 348.6 20.3% euros); the Italian shopping malls Assago, D&A allowance on investment and arbitrage property -127.6 -106.8 19.4% Lecce, Tor Vergata and Solbiate (3.9 million D&A allowance on PPE -2.2 -3.5 -36.6% euros); the Rennes Colombia center Provisions 0.1 -3.0 NC (1.1 million euros); and the integration RESULTS OF OPERATIONS 289.7 235.3 23.1% of Valenciennes (0.9 million euros), Novo Share in earnings of equity method investees 0.7 0.6 20.5% Plaza (0.8 million euros) and Molina de Proceeds of sales 5.0 2.8 NC Segura (0.4 million euros) in 2006. SEGMENT EARNINGS 295.3 238.7 23.7% D&A net of releases and recoveries, in millions of euros totaled 5.8 million euros, primarily attributable to real estate provisions Lease income from shopping center in the method of consolidation for the Italian on shopping centers in Poland and properties increased by 17.8% in 2006, and Hungarian management firms the Czech Republic. reaching 466.7 million euros. Building (3.1 million euros). After neutralization Results from operations totaled 289.7 million expenses totaled 37.1 million euros, slightly of these changes in scope, the rise in fee euros, an increase of 23.1% compared rising versus 2005. They include the increase income was 15.8%, attributable in particular with 2005. in Ségécé’s ownership interest in Ségécé Italia to the increase in the shopping center After incorporating the result of the Belgian from 50 to 100%. The fees invoiced development business in France (3.9 million management firm (accounted for by the to the group are now totally neutralized euros) and by new management mandates equity method) and the net proceeds of sales in the consolidated financial statements. awarded in Portugal (0.9 million euros). totaling 5.0 million euros and including a Net lease income was 429.7 million euros Payroll expense rose by 15.8%, reflecting capital gain on the sale of a 15% equity in 2006, up 19.4%. the following factors: the full-year integration interest in Klémurs, the shopping center Management and administrative income of the Polish management firm’s workforce; produced earnings in 2006 of 295.3 million (fees) rose by 10.3 million euros (+22.6%), the full consolidation of Ségécé Italia (which euros, an increase of 23.7%. attributable primarily to the change is now wholly-owned); and the hiring

11 Financial report _management report

RENTAL VALUES 2 – Disposals and investments Globally, average face rents are made in 2006 on the upturn: +5% in Paris Center West, The disposals made in 2006 (three buildings +2% in the Western Crescent and +3% and indivisible rights) involved 28 025 sq.m. in the rest of the Inner Rim. for a total amount of 112.6 million euros II - OFFICE SEGMENT However, disparities persist from one sector (net seller). On average, the sale price to the next. As for rents on prime properties, exceeded the last appraisals (+11.3%). 1 – The rental market only Paris Center West rose, by 9%. Prime rents at La Défense fell by 8% Office disposals completed in 2006 Floor area in sq.m RENTAL TRANSACTIONS over the same period, while relative stability – Saint-Maurice (94) In 2006, demand reached a record high, far was observed for the Western Crescent. 3/5, avenue du Chemin de Presles 9 885 surpassing the year 2000, which remained Commercial incentives, while declining – Paris 17e – 140/144, boulevard Malesherbes 7 156 the benchmark. Nearly 2.9 million sq.m. were gradually, are still common practice. – Levallois-Perret (92) – Front de Paris – Îlot 5* 9 991 let or sold, up by 30% compared with 2005. – Vélizy (78) – 8, rue des Frères Caudron 993 This brisk pace of transactions was primarily THE INVESTMENT MARKET 3 assets sold +39.25% of indivisible rights due to the substantial weight of large deals: In light of the inflows of capital to the French for a total of 112.6 million euros 1.2 million sq.m. were taken up for properties real estate market, which continued * Indivisible rights. with floor area in excess of 5 000 sq.m. throughout last year to run substantially 40% of the floor area let was in new or ahead of supply, the record high investment In accordance with its opportunistic restructured buildings, as businesses sought total of 2005 (15.7 billion euros in France approach to the office property market, to regroup or rationalize their operations. and 13.8 billion euros in Ile-de-France) Klépierre has resumed its position as a buyer The traditional business districts (Paris Center was beaten in 2006: 23.1 billion euros were in this segment, while continuing West and the Western Crescent) remain invested in France, of which 19.8 billion to pursue the mature asset disposal the leaders of space let or sold (42%). Given euros in Ile-de-France. 85% of all firm program launched several years ago. the very large transactions completed commitments were for office properties. The two acquisitions made in 2006 provide in the south of Ile-de-France, space let a good illustration of Klépierre’s high-end or sold to occupiers in the Outer Rim rose With 53% of the total, French investors once positioning: by 50% (from 14% to 20%). again led the pack, followed by North • the first one, measuring 4 115 sq.m. The most active business sectors American investors (18%). Investors from (useful weighted floor area), is located in this historic year were manufacturing the UK were in third place, with 7% of at 7, Rue Meyerbeer, in the heart of the Paris (29%), financial services (19%) the volumes invested. The global collapse CBD (Quartier de l’Opéra). This choice and the public sector (14%), although of yield rates continued for all types location should eventually generate it was less active than in 2005. of investment properties, to differing degrees significant rental upside potential; depending on the geographic sector • the second involves the purchase SUPPLY and asset type. The competition between of an office building to be built in the ZAC Immediate supply declined by only around investors and the significant change Forum Seine in Issy-les-Moulineaux, 8% compared with January 1, 2006, i.e. to in the INSEE construction index should help in connection with a real estate development 2.5 million sq.m. This decrease was gradual to maintain pressure on rates contract or CPI (Contrat de Promotion due to the steady arrival of new and vacated of return in 2007. Immobilière). The building, which space throughout the year. As a result, is scheduled for delivery in late 2008, the vacancy rate has declined substantially, will feature nearly 12 000 sq.m. of office to 5.2% on average for Ile-de-France, space, distributed over 7 floors, and more 4.4% for Paris Center West, and 5.7% for than 300 parking stalls. This project La Défense. Future supply (available within is adjacent to another building owned one year) was 3.6 million sq.m., fairly stable by Klépierre, which is currently fully compared with the previous year. occupied by the commercial tenant Steria. This property is likely to be offered on the rental market at a right timing cycle-wise. Together, these two acquisitions represent an investment of 112.9 million euros, including 67.0 million euros in 2006 and 45.9 million euros spread over 2007 and 2008 in connection 12

Klépierre_Financial report 2006 with the Issy-les-Moulineaux CPI. CONSTANT PORTFOLIO RISE IN RENTS The total amount of rents used to appraise On a constant portfolio basis, rents increased these two investments is 6.7 million euros. by 11.9%, rising from 44.1 million euros on For 2007, the investment target is 100 million the December 31, 2005 reporting date to 49.4 REPORT MANAGEMENT euros, while planned disposals are expected million euros ay year-end 2006. This 5.3 million to reach 75 million euros. Accordingly, euro increase can be analyzed as follows: Klépierre has already begun its 2007 disposal • index-linked rent adjustments brought program, signing a seller’s promise on one in 1.1 million euros in additional rents versus property and a memorandum of understanding 2005 (+2.5%); on another, for a global sum of 59.9 million • relettings of leases signed in 2005 and euros. 2006, net of departures or temporary vacancy, produced 4.2 million euros 3 – Rental business in additional rent (+11.5%). Office properties generated rents of 52.8 million euros in 2006, a total REDUCED RENTAL STAKES IN 2007 that was virtually unchanged compared On December 31, 2006, the portfolio with 2005 (52.9 million euros). of leases represented a rental base This stability should be viewed as a positive (net of protocol sales) of 50.7 million euros, development in light of disposals made for which expirations are given in the table in 2005 (124.8 million euros) and 2006 below: (112.6 million euros). The 8 properties By date As % By date As % sold in 2005 and the 4 sold in 2006 Lease terms - Year of next of total of lease expiration of total reduced the rental base by 5.3 million euros. exit options 2007 5.9 11.7% 2.3 4.5% NEW LEASES 2008 15.9 31.4% 12.1 23.9% A total of 16 leases were signed in 2006 2009 13.8 27.2% 0.3 0.5% for 4.4 million euros in all, a full-year increase 2010 5.7 11.2% 1.2 2.3% in rent of 0.5 million euros. These leases include 2011 4.9 9.7% 10,4 20.5% 11 new tenants, 3 renewals, and 2 contractual 2012 0.1 0.2% 4.6 9.2% changes, covering weighted usable floor area (1) 2013 0.0 0.0% 5.5 10.8% of 11 219 sq.m. The most significant 2014 0.0 0.0% 3.1 6.1% transaction in 2006 involved: 2015 et + 4.4 8.6% 11.2 22.1% • the renewal of 2 leases for floor area TOTAL RENTS 50.7 100.0% 50.7 100.0% totaling 5 819 sq.m. in the building at 11/11 in millions of euros bis, place du Général-Leclerc à Levallois (92); • the reletting of 1 969 sq.m. of vacant floor At year-end 2006, there were 6 570 sq.m. area in the building located in the 16th of lease-ups, representing total potential arrondissement of Paris (36, rue de Marbeuf), rents of 2.9 million euros. Renewals to come taken up by Linklaters, already a tenant in 2007 involve 6 860 sq.m. (7 leases), at 23-25, Rue Marignan. or about 3.1 million euros in rents (1) Useful weighted floor area: (and 4.5% of lease income). These lease-ups floor area after adjustment for different types of spaces, OCCUPANCY RATE SORES TO EARLIER and renewals would increase the rental base such as "Offices, Archives – Parking Stalls – Company Restaurant" so that all spaces can be viewed with respect HEIGHTS by 1.8 million euros (3.6%). to the sq.m. office price. Reflecting the lease-ups completed in 2005 and 2006, the financial occupancy rate on December 31, 2006 was 98.7% (versus 88.2% at year-end 2005).

13 Financial report _management report

4 – Klégestion A company that specializes in office property and rental management, Klégestion is a wholly-owned subsidiary of Klépierre. For 2006, Klégestion generated revenues of 4.2 million euros, an increase of 7.7% compared with the previous year. It breaks down as follows: • 0.6 million euros in acquisition or monitoring fees, following the acquisition 5 - Segment earnings of 2 assets in 2006. These fees were the principal driver of the annual rise Offices segment 12.31.2006 12.31.2005 % change in revenues; Lease income 52.8 52.9 -0.1% • 2.2 million euros in management fees; Other rental income 0.0 0.0 • 1.4 million euros in sales fees. Rental income 52.8 52.9 -0.1% With a staff of 14 employees, payroll expense Land expenses (real estate) -0.3 -0.3 17.9% for 2006 was 1.2 million euros. Net earnings Non recovered land expenses -0.4 -1.2 -64.9% totaled 2.1 million euros. Building expenses (owner) -2.0 -2.3 -10.0% Net lease income 50.0 49.1 1.9% Management, administrative and related income 1.3 0,5 159.7% Other operating income 2.8 1,7 65.0% Survey and research costs 0.0 0,0 Payroll expense -2.2 -2.1 4.4% Other operating expenses -0.9 -1.2 -22.7% EBITDA 50.9 47.9 6.2% D&A allowance on investment and arbitrage property -13.4 - 18.5 -27.8% D&A allowance on PPE -0.8 -1.1 -20.2% Provisions 0.0 -0.1 nc RESULTS ON OPERATIONS 36.7 28.2 29.9% Share in earnings of equity method investees 0.0 0.0 Proceeds of sales 27.5 17.5 57.0% SEGMENT EARNINGS 64.2 45.8 40.3% in millions of euros

Lease income for office properties The operating ratio (total expenses/net (52.8 million euros) was stable in 2006 operating income) was 5.8% in 2006, compared with the previous year. The loss versus 6.5% in 2005. of rental income generated by disposals was Depreciation and amortization for the period largely offset by relettings in 2005 and 2006. declined by 5.4 million euros, primarily due As a result, the occupancy rate was 98.7%, to disposals. Results from operations were compared with 88.2% in 2005, while 36.7 million euros, an increase of 29.9%. building expenses declined by 1.1 million Capital gains on the sale of real estate assets euros. were 27.5 million euros, related to the sale Net rents totaled 50.0 million euros, of the following buildings: Saint-Maurice a 1.9% increase. Other operating income (94), 140/144 bd Malesherbes, Vélizy (78) included a VAT adjustment related to prior and a portion of the Front de Paris building periods for 1.7 million euros. Personnel in Levallois-Perret. expense was fairly stable (2.2 million euros). Earnings from the office segment totaled EBITDA was 50.9 million euros (+6.2%). 64.2 million euros in 2006, up by 40.3%.

Klépierre_Financial report 2006 B - CONSOLIDATED EARNINGS AND CASH-FLOWS

I - CONSOLIDATED EARNINGS AND CASH-FLOWS REPORT MANAGEMENT Change 12.31.2006 12.31.2005 €M % in 2006, roughly the same as in 2005. Net lease income 479.7 409.1 70.6 17.3% This stability from one period to the next Management, administrative and related income 57.5 46.4 11.1 24.0% is primarily attributable to the increase Other operating income 9.5 7,2 2.3 31.3% in Ségécé’s ownership in Ségécé Italia, from Payroll expense -59.9 -52,4 -7.6 14.5% 50 to 100%, which led to the neutralization Other operating expenses -23.3 -19,9 -3.4 17.1% in the consolidated financial statements EBITDA 463.5 390,4 73.0 18.7% of all of the fees invoiced to the group Amortization -144.1 - 130.1 -14.0 10.7% by the Italian management subsidiary. Allowance to reserves 0.0 - 3.1 3.1 c This change was partly offset by higher Results of operation 319.4 257,2 62.2 24.2% payroll and operating expenses. Proceeds of sales 32.5 20.3 12.2 60.1% Payroll expense was 59.9 million euros Financial results -136.1 -114.3 -21.8 19.1% for 2006, compared with 52.4 million euros Share in earnings of equity method investees 0.7 0.6 0.1 20.5% the previous year (+14.5%). Other than Pre-tax current earnings 216.5 163.8 52.7 32.2% the changes in scope related to the full-year Corporate income tax -22.0 -17.9 -4.1 23.0% impact of the Polish management firm Net income 194.5 145.9 48.6 33.3% and the full consolidation of Ségécé Italia Minority share -29.9 -25.5 -4.5 17.5% (now wholly-owned), this 7.6 million euro NET INCOME, GROUP SHARE 164.5 120.4 44.1 36.6% increase also reflects the impact of hiring new staff in France, particularly in the areas Pre-tax current cash flow 328.5 279.1 49.4 17.7% of shopping center development and Pre-tax earning, exclusive sale of assets, group share 149.2 112.5 36.7 32.7% management. On a constant scope basis, Pre-tax current cash flow, group share 279.7 234.0 45.6 19.6% the increase was 8.8%. Net current cash flow, group share 263.6 222.1 41.5 18.7% Other operating expenses reached in millions of euros 23.3 million euros, up by 17.1% compared PER SHARE RATIOS with 2005. On a comparable scope basis, Average number of shares 45 845 441 45 965 465 the increase was 9.0%. The operating ratio Net earning per share (euro) 3.6 2.6 37.0% (total expenses/net operating income) Pre-tax earning, exclusive sale of assets/share (euro) 3.3 2.4 33.0% for 2006 was 15.2%, versus 15.6% in 2005. Pre-tax current cash flow/share (euro) 6.1 5.1 19.9% Net current cash flow/share (euro) 5.7 4.8 19.0% EBITDA totaled 463.5 million euros, an 18.7% increase versus 2005. Depreciation and amortization for the period Net lease income for 2006 was 479.7 and administrative fee income reached reached 144.1 million euros, a 10.7% million euros, an increase of 17.3% over 57.5 million euros, a 24% increase that increase (14 million euros) that primarily the previous year. Lease income was is primarily attributable to the shopping reflects new shopping center 519.6 million euros, with 466.7 million euros center segment, where the rise in fee acquisitions (19.5 million euros), the impact provided by the shopping centers income was 22.6% on a current scope of which was offset by office property and 52.8 million euros provided by office basis (15.8% on a constant portfolio basis), disposals (5.4 million euros). properties. Compared with 2005, shopping after the impact of Ségécé’s increased center rents increased by 17.3% on a current percentage of ownership in the Italian Results from operations totaled 319.4 scope basis, and by 4.1% on a constant and Hungarian affiliates is neutralized. million euros in 2006, an increase portfolio basis. Office rents were stable Revenues generated abroad represented of 24.2% compared with 2005. on a current scope basis, with the impact 42.4% of total revenue for 2006, compared Financial income for the year is a loss of disposals offset in particular with 39.3% one year prior. Other operating of 136.1 million euros, compared with a loss by the reletting of Espace Kleber. income mainly reflected work re-invoiced of 114.3 million euros in 2005. The group’s On a constant portfolio basis, office rents to tenants and miscellaneous gains. interest expense rose by 21.8 million euros increased by 11.9%. Management Building expenses totaled 39.9 million euros due to the increase in net debt, which went

15 Financial report _management report

from 3 229 million euros on December 31, Consolidated net income for 2006 2005 to 3 804 million euros on December is 194.5 million euros, an increase 31, 2006, reflecting major investments made of 33.3% over 2005. during the year. Minority share of net income for 2006 The cost of the debt went from 4.1% is 29.9 million euros, exclusively generated in 2005 to 4.3% in 2006. by the shopping center segment, which Klépierre’s financing policy and financial brings the group share of net income to structure are both described in more detail 164.5 millions euros, an increase of 36.6%. below (see the section on financing policy). Change The financial result also reflects a discounting II - CHANGE IN CASH-FLOW 12.31.2006 12.31.2005 €M % expense on the exit tax liability of 1.2 million EBITDA - Shopping centers 419.4 348.6 +70.8 20.3% euros on December 31, 2006, compared EBITDA - Offices 50.9 47.9 +3.0 6.2% with 1.3 million euros on December 31, Corporate and shared expenses -6.9 -6.1 -0.8 12.5% 2005. EBITDA 463.5 390.4 +73.0 18.7% Proceeds from the sale of assets totaled Allowances to and releases of reserves -1.8 0,5 -2,3 nc 32.5 million euros, compared Operating cash flow 461.6 390,9 +68.4 18.1% with 20.3 million euros in 2005. Interest expense -133.1 -111,8 -21.3 19.0% This line item also includes 27.5 million Pre-tax current cash flow 328.5 279.1 +49.4 17.7% euros in capital gains generated on the sale Share in equity method investees earnings 0.7 0.6 +0.1 20.5% of four office properties and proceeds Current tax expense -22.0 -17.9 -4.1 23.0% of 5.0 million euros on the sale of some Net current cash flow 307,2 261,8 +45,4 17.4% shopping center assets, in particular Proceeds of sales 32.5 21,2 +11.4 53.7% the sale of 15% of the equity interest Net cash flow 339.7 282.9 +56.8 20.1% in Klémurs (1.7 million euros). in millions of euros Since it elected SIIC status, Klépierre distinguishes three tax segments: All countries contributed to the rise in cash Klépierre SA recorded net earnings of 198.5 million • the tax exempt SIIC segment that includes flow from operations, which totaled 461.6 euros for 2006. Klépierre and all eligible French real-estate million euros, an increase of 18.1%. The taxable earnings of the taxable segment affiliates. Some of these companies have kept Pre-tax current cash flow reached were 9.6 million euros. a part of their activity taxable at regular tax 328.5 million euros in 2006, a 17.7% The minimal distribution requirement is rate; increase over 2005. Expressed in terms 116.4 million euros, after taking into account • French companies that are not eligible for of group share, pre-tax current cash flow the annual requirement concerning capital SIIC status and hence have regular tax status; reached 279.7 million euros, which translates gains on the sale of assets. • foreign affiliates. into 6.1 euros per share, showing a 19.9% The Supervisory Board will recommend on For the year ended December 31, 2006, one-year increase. April 5, 2007 that the shareholders approve the global tax expense for these three After-tax, net current cash flow reached the payment of a dividend in respect of 2006 segments was 22.0 million euros: 307.2 million euros, an increase of 17.4%. of 3.20 euros per share. This dividend will be • 5.9 million euros (SIIC segment); Group share, the total is 263.6 million euros, payable on April 13, 2007. The 18.5% increase • 5.0 million euros (French companies i.e. 5.7 euros per share and a 19.0% increase. versus the previous year’s dividend payout not eligible); reflects the year’s good performance level • 11.1 million euros (Foreign affiliates). III - PARENT COMPANY EARNINGS and the desire on the part of Klépierre Klépierre SA – Condensed to provide its shareholders with sustained statement of income 12.31.2006 12.31.2005 growth in the return on their investment Operating profits 50.4 13.5 over the long term, in line with the Group’s key Operating expenses -31.4 -16.9 performance indicators. Operating results 19.0 -3.4 The amount that will be proposed for distribution Share in earnings of subsidiaries 129.2 154.8 is 147.7 million euros, i.e., 56% of net current Financial results 31.8 -17.0 cash flow and 89.8% of net income, group Pre-tax results 180.0 134.4 share, without taking into account the cancellation Non-recurring results 33.8 48.6 of the dividend on treasury shares Corporate income tax -15.3 -11.2 in the Company’s possession on the day Net income for the year 198.5 171.8 the dividend is payable. in millions of euros 16

Klépierre_Financial report 2006 Five-year financialsummary )Aon fsafbnft 0 0 0 0 0 0 3.50 0 2.00 0 0 2.30 2.70 0 913 531 -3 724 219 52 605 961 -5 3.20 526 519 89 475 -277 727 177 600 106 366 21 483 224 11 418 643 124 053 307 19 533 725 256 147 316 15 864 638 15 279 368 608 359 12 119 takingintoaccountthecancellationofdividendontreasury shares*Without intotheCompany’s possessiononthedaydivid C) Amountofstaff benefits 052 039 179 753 178 49 916 656 B) Amountofthepayroll costsfortheyear 184 A) Average staff ofworkersemployedduringtheyear 916 656 921 184 919 14 Employees 916 656 184 763 759 44 C) Netdividendeallottedtoeachshare 229 164 46 229 164 46 aftertaxes,employeeprofitB) sharing Earnings 229 aftertax,employeeprofit sharing A) Earnings 164 46 pershare Earnings E) Distributedearnings* aftertax,employeeprofit sharing D) Earnings C) Incometax B) employeeprofitPre-tax sharing, earnings, A) Pre-tax revenues Transactions andresults ofprevious years B) Numberofexistingordinary shares A) Share capital Capital atyearend KLÉPIERRE SA n mriainepneadpoiin .037 .968 3.47 6.82 1.69 3.72 4.30 109 603 57 916 448 308 756 944 74 496 301 188 270 810 227 and amortisationexpenseprovisions amortisation expenseandprovisions n ro oaotsto xes n rvsos46 .416 .24.10 7.02 1.63 3.84 156 799 51 4.60 354 275 305 605 792 77 138 752 171 416 465 198 and priortoamortisationexpenseprovisions and amortisationexpenseprovisions 2006 2005 2004 2003 n spybe ineuros end ispayable. 2002 17 MANAGEMENT REPORT Financial report _management report

IV – SUBSIDIARIES AND EQUITY INTERESTS OF KLÉPIERRE SA ON DECEMBER 31ST, 2006

Capital Shareholders’ % Accounting Revenues Gross Net Sureties Loans Dividends equity of capital income exclusive book book and and collected other than held at year of VAT value value backings advances capital & end given given Financial information Subsidiaries and Equity investments earnings 1. SUBSIDIARIES HELD AT MORE THAN 50% 5 Turin SAS 3468 7840 100 552 873 6936 6936 403 Angoumars SNC 2 0 99 -204 0 1 1 51295 Barjac Victor SNC 2 0 100 589 2844 1336 1336 27170 Bègles Papin SCI 2 0 99 -297 789 1 0 12727 Capucine BV 2400 -120 100 -1560 0 7200 7200 29178 CB Pierre SAS 48000 7509 100 23304 4594 22389 22389 7170 Cécoville SAS 278 146302 100 11026 20720 142281 142281 39752 5014 Centre Bourse SNC 3812 6931 100 3774 2808 47419 47419 Clermont Jaude SAS 21685 9588 100 4916 7486 83813 83813 8777 Combault SCI 2 0 99 -173 0 2 2 7760 Foncière de Louvain-la-Neuve SA 62 -2927 100 -1716 0 61 61 29620 Foncière Saint-Germain SNC 152 0 100 527 1885 324 324 15929 Galeria Commerciale Klépierre SARL 1560 12862 100 -453 5587 15510 15510 50350 Général Leclerc SNC 2368 0 100 1137 1941 0 24888 Godefroy Puteaux SNC 586 -51 100 6 0 0 H1 SA 103 35 100 -66 0 12244 12244 34735 H3 SAS 44 -320 100 -846 0 660 660 4492 Immobiliare Commerciale Dodicesima SPA 520 16739 85 75 5270 16158 16158 35653 33999 Immobiliare Magnolia SRL 520 3455 85 -143 2019 4904 4904 11014 7225 Jardin des Princes SNC 2 0 99 296 1192 1542 1542 9131 Kléber La Pérouse SNC 4118 17 100 1585 0 11471 11471 115414 575 Klécar Europe Sud SCS 315260 293547 83 29188 0 523247 523247 0 Klécar France SNC 500881 578844 83 77964 56695 831462 831462 28054 Klécar Participations Italie SAS 30546 - 8825 83 1661 25958 25958 58188 Klefin Italia SPA 15450 100835 100 -920 606 125625 125625 190255 Klégestion SNC 640 72 100 2146 4185 876 712 Klémurs SCA 82500 68074 84 -97 883 124519 124519 1583 Klépierre Conseil SAS 500 78 100 -86 5336 1851 529 4406 Klépierre Finance SAS 38 4 100 1978 0 38 38 985 Klépierre Participations et Financements SAS 153000 140085 100 88380 306001 306001 165145 0 Klépierre Portugal SA 250 4050 100 780 0 4250 4250 57400 48591 1326 KLE 1 SAS 38 42 100 7103 319 76 76 60411 2631 Klépierre Vallecas SA 60 -27 100 -6543 0 5535 5535 95966 Klépierre Vinaza 60 -26 100 -1309 1031 225 225 36785 Klé Projet 1 SAS 37 100 37 37 Klétransactions SNC 2 0 99 -221 238 2 2 0 5709 Le Havre Capelet SAS 229 325 100 21 0 267 267 271 Le Havre Tourneville SAS 150 48 100 458 0 1522 1522 663 190 LP 7 SAS 39 4 100 -23 0 192 192 1428 Maille Nord SNC 2 0 99 -4 1 1 Nancy Bonsecours SAS 38 38 100 -18 0 535 94 Novate SRL 16895 13757 85 -1751 11489 28160 28160 74900 35700 Odysseum Place de Venise SAS 38 -4 100 -8 0 90 0 2

Klépierre_Financial report 2006 Financial informationSubsidiariesandEquityinvestments (continued) RN OA I 973249 632 608 2011618109460 39 6811 404 1267188 100 225001 20777 2630083 2633827 3 6 274499 162 9 1 298723 0 139 99 124104 490 8 6 636 124104 1 139 35 42434 245 26488 862 1271 8 834 2456 19654 61 1889 10854 199 0 0 303 49 2 9 10854 2419 0 309 41837 -8 25 49 0 -5 415 90682 0 2768 41837 2 50 572 -9 -25 50 77 7671 0 50 4869 98 50 -17 0 0 5 4383 267 3234 38 50 202 -61 28428 0 330 50 71183 -116 50 270 267 28428 -41 -24 12 71183 0 53 0 104 72733 0 2 99 22555 0 21479 0 100 99 20721 11735 -89 26679 15 75 0 21708 -140 79 216 0 669 100 GRAND TOTAL I+II 448 9650 100 2 2136 0 2 38 TOTAL II 1600 2844 40 -18 39 Odysseum PlacedeFranceSAS Sviluppo Klépierre FinimSPA 229 Solorec 100 Socoseine SAS La PlaineduMoulinàVent SCI Galae SNC -2 Effe Kappa SRL Bègles d’Arcins SCS Bassin Nord SCI Antin Vendôme SCI 400 2. EQUITYINVESTMENTSHELDBETWEEN10AND50% TOTAL I Tour Marcel Brot SCI Sovaly SAS Sodévac SNC Ségécé SCS SCOO SNC Poitiers AliénorSAS Pasteur SNC Odysseum Placed’AlexandrieSAS Capital Shareholders' other than capital & earnings equity of capital held % Accounting income at year end Revenues exclusive of VAT Gross value 779271 464 426 2011308109460 1239048 225001 2452969 2456044 237312 273799 book 42 78 773171 84 0 28140 0 177114 177783 37187 24924 value book Net backings Sureties given and advances Loans given and in thousandsofeuros Dividends collected 19 MANAGEMENT REPORT Financial report _management report

that the owners of such property would be able to align rents with market rates when the corresponding leases came up for renewal, and took into account the current conditions of occupation in the form of a capital loss calculated as before. However, unlike prior valuation adjustments, the appraisers did not limit their approach to properties coming up for renewal in the three years to come, on the grounds that the investors participating C - REVALUED NET ASSETS (RNA) in current market transactions make projections that extend beyond this three-year horizon. Methodology 2006 In the second case, the financial capital gain Klépierre adjusts the value of its net assets Appraisal Consulting observed was added to the appraised value per share on December 31 and June 30 fees fees derived, equal to the discounted value of each year. The valuation method used Atireal Expertise – (at a rate of 5.5%) of the difference between entails adding unrealized capital gains to Foncier Expertise 80 – actual lease income and market price until the book value of consolidated shareholders’ Retail Consulting Group 957 345 the first firm period of the lease expires. equity. These unrealized gains reflect Icade Expertise – Icade Conseil 150 787 In the third case, a capital loss was deducted the difference between estimated market Cushman & Wakefield 100 – from the derived value, equal to the discounted values and the net values recorded in thousands of euros value (at the rate of 5.5%) of the difference in the consolidated financial statements. between actual lease income and market Offices price until the lease expires. Valuation of holdings The appraisers combine two approaches: Starting on December 31, 2005, the appraiser Klépierre entrusts the task of assessing the first entails a direct comparison with reasons on the basis of the rate of return the value of its holdings to various appraisers. similar transactions completed in the market (yield) and not on the basis of the capitalization For office property holdings, Foncier Expertise during the period, while the second involves rate. In other words, the rate that was used and Atisreal Expertise (formerly Coextim) capitalizing individual yields (observed is that applied to the income determined as jointly perform this task. The Retail or estimated). An analysis of these yields before to derive an appraised value inclusive Consulting Group (RCG) values its shopping reveals that one of three situations prevails: of transfer duties. Before, the rate used center holdings in all countries, with the lease income is either substantially equal to, resulted in a valuation exclusive of transfer exception of the shopping centers held higher than or lower than market value. duties. The decision to use this rate results by Klécar Foncier Iberica (for which appraisals If lease income and market value are from an observation of the market, are performed by Cushman-Wakefield) substantially equal, the lease income used in the context of transactions actually and those located in Hungary and Poland, in the valuation is the actual lease income completed by investors. To derive where the task is performed by ICADE earned on the property. If lease income the appraised value exclusive of transfer Expertise. The holdings appraised is higher than market value, the valuation duties, transfer duties and fees were deducted by the latter two firms represent 20% uses market value and takes into account at the rate applicable to each relevant country of Klépierre’s shopping centers in terms a capital gain calculated from the discounted (see § RNA excluding transfer duties). of number of properties. value of the difference between actual lease All of these appraisal assignments income and market value. If lease income Shopping centers are awarded on the basis of the Real Estate is lower than market value, the appraisers To determine the fair market value of a shopping Appraisal Guidelines (Charte de l’Expertise en considered the scheduled term of the center, appraisers apply a yield rate to net Evaluation Immobilière) and in accordance corresponding lease, at which time annual lease income for leased-up premises, with the recommendations issued by the the rental price will be aligned with going and to net market price for vacant properties. COB/CNC “Barthès de Ruyter Work Group.” rates. Pursuant to the French decree The yield rate is applied after deduction Fees paid to appraisers are set prior to their of September 30, 1953, the rental prices of the net present value of all reductions property valuation work, on a lump sum of properties that are used solely as office or rebates on leases with minimum guaranteed basis in accordance with the size premises are automatically aligned with rents and the net present value of all expenses and complexity of the assets being appraised, market rates when the leases in question on vacant premises. The discount rate used is and independently of the appraised value come up for renewal. Consequently, equal to the yield rate applied to determine of the assets. the appraisers worked on the assumption fair market value. Gross rent includes

Klépierre_Financial report 2006 minimum guaranteed rent, variable rent implicit cost of financing is taken into account. and the market price of any vacant premises. In the second step, which seeks to estimate Net rent is determined by deducting all the value of the business portfolio, these charges from the gross rent, including cash flows and the estimated future value REPORT MANAGEMENT management fees, expenses borne of the portfolio of business at the end by the owner and not passed on to tenants, of the projected period (terminal value) and charges paid on vacant premises. are discounted using a reasonable rate. The appraiser determines the yield rate on This discount rate, which is derived the basis of numerous variables, in particular on the basis of the Capital Asset Pricing retail sales area, layout, competition, type Model (CAPM) formula, is the sum of the and percentage of ownership, rental reversion following three factors: the risk-free interest and extension potential, and comparability rate, the systematic risk premium (average with recent market transactions. As for rental expected market risk premium times reversion potential, the appraiser determines the beta coefficient of the business portfolio) the market rental value for the shopping and the specific risk premium (to account center in its present state on the basis for that portion of the particular risk that of the shopping center’s location is not already integrated in the cash flows). and the revenues generated by its tenants. The third and last step consists of determining The shopping center’s development potential the value of the Company’s own equity is determined by calculating the difference by extracting net financial debt on the date between the market rental value of valuation from the portfolio’s total value and the current rents being charged. and, where applicable, the estimated value An internal rate of return is also calculated of minority interests on that same date. using a method that involves discounting a series of cash flows, generally to 10 years, Assessing the value of debt and based on a number of predefined assumptions. interest-rate hedging instruments The estimated resale value at the end of Effective December 31, 2005, RNA incorporates this period is generally calculated using a cap the fair value of debt and interest rate hedging rate that is equal to or slightly higher than instruments that are not recorded under that initially applied to the net end of period rent. consolidated net assets pursuant to IAS 32-39, In sum, the appraiser derives a current value which essentially involves marking to market by determining the yield rate that applies the fixed rate, non-hedged portion of debt. under prevailing market conditions, the current annual rent and the shopping RNA including transfer duties center’s reversionary potential. He then and before taxation on unrealized verifies that the internal rate of return capital gains derived is consistent by calculating an IRR. The valuation of properties is initially This result in a value that is inclusive presented inclusive of property transfer of transfer duties, from which duties (which duties. Properties that are held for sale under are calculated at the rate applicable to each a firm commitment on the date of the valuation relevant country for deriving a value exclusive are valued at their probable selling price, of duties) must be deducted (see RNA including less related fees and taxes. For properties transfer duties). acquired less than six months before the date of the calculation, acquisition Appraisal of the Ségécé group prices are used. This appraisal, which is performed on Klépierre’s behalf by Aon Accuracy, is primarily Klépierre does not adjust the values based on a range of estimates obtained of shopping centers under development, using the Discounted Cash Flow (DCF) even in cases where building permits have method. The DCF method consists of estimating been granted. Until these shopping centers the future cash flows of current business in open, they are carried in the consolidated the Company’s portfolio before the explicit or financial statements at cost, and this figure

21 Financial report _management report

regulations in force, on the basis of appraised property values, for the portion which corresponds to the difference between the net book value and the tax value as determined by capital gains tax rates in force in each country. At the June 30, 2005 reporting date, the RNA calculation was adjusted to include the tax on unrealized capital gains is used to calculate revalued net assets. corresponding to the difference between The Ségécé group is appraised annually using the net book value and fair value on this the method described in detail above. same basis. At the December 31, 2005 Equity interests in other service subsidiaries, reporting date, and to align its practices including Klégestion and Klépierre Conseil, with those of its principal peers, Klépierre are not reappraised. This initial calculation considered the type of ownership of its provides revalued net assets “including properties, using the same approach as transfer duties and before taxation that used to determine transfer duties. on unrealized capital gains.” For office properties, the treatment is based entirely on property ownership, but since RNA excluding transfer duties the entire scope benefits from tax exempt A second calculation is made to establish status as an SIIC, there is no unrealized revalued net assets excluding transfer duties. taxation. Duties on office properties are calculated For the shopping centers, and depending on individually using the rates set forth below. the country, taxes on unrealized capital gains Duties on shopping centers are calculated are based on the tax rate applied to the sale property by property for companies that own of buildings for companies that own several several real-estate assets, or on the basis properties, and at the tax rate applicable to of revalued securities if the company owns securities for companies that only own one only one property asset. This approach was property. considered to be the most relevant considering that investors are more likely to acquire REVALUED NET ASSETS shares in companies that own shopping AT DECEMBER 31ST, 2006 centers and that Klépierre generally is more likely to seek other backers for its projects Appraisal results than to sell full ownership in shopping The value of Klépierre’s real estate holdings centers. Naturally, transfer duties are including transfer duties was 9.1 billion euros calculated on the basis of applicable local (total share) and 8.1 billion euros (group tax regulations. For France, the rate used share). Total share, shopping centers for transfer duties is 6.20%. Klépierre did represent 88.7% and offices 11.3%, while not opt to use the most advantageous rate the group share percentages are 87.3% (1.8%) for properties that still fall within and 12.7%, respectively. On a constant the scope of the VAT since it does not portfolio basis, office assets increased currently plan to sell within the prescribed in value by 14.9% in 2006, while the value deadline. of shopping center assets grew by 14.7% over the same period, compared with respective RNA excluding transfer duties increases of 8.7% and 11.1% in the first half and after taxation of unrealized of 2006. capital gains A third calculation is made to establish revalued net assets excluding transfer duties and after taxes on unrealized capital gains. In the consolidated balance sheet, deferred taxes are recognized pursuant to accounting

Klépierre_Financial report 2006 HOLDINGS (TOTAL SHARE) MANAGEMENT REPORT MANAGEMENT

Current portfolio basis Constant portfolio basis 12.31.2006 12.31.2005 Change 12.31.2006 12.31.2006 Change Shopping centers France 4 610,5 3 403,6 1 206,9 35,5% 3 908,2 3 271,2 637,1 19,5% Spain 1 084,7 941,4 143,4 15,2% 951,2 845,2 106,0 12,5% Italy 1 173,8 1 071,2 102,6 9,6% 919,8 857,1 62,7 7,3% Hungary 350,2 340,0 10,2 3,0% 350,2 340,0 10,2 3,0% Poland 211,9 206,5 5,5 2,7% – – – – Portugal 177,8 145,6 32,3 22,2% 146,1 145,6 0,6 0,4% Other countries 487,3 387,3 100,0 25,8% 258,7 236,9 21,8 9,2% Total, Shopping centers 8 096,2 6 495,5 1 600,7 24,6% 6 534,2 5 696,0 838,3 14,7% Total, Offices 1 031,2 951,0 80,2 8,4% 966,6 841,4 125,2 14,9% TOTAL, REAL ESTATE HOLDINGS 9 127.4 7 446.5 1 680.9 22.6% 7 500.9 6 537.4 963.5 14.7% in millions of euros

HOLDINGS (GROUP SHARE)

Current portfolio basis Constant portfolio basis 12.31.2006 12.31.2005 Change 12.31.2006 12.31.2005 Change Shopping centers France 3 870.9 2 808.8 1 062.1 37.8% 3 205.0 2 677.8 527.2 19.7% Spain 923.5 798.1 125.4 15.7% 789.9 701.9 88.0 12.5% Italy 1 064.5 972.8 91.7 9.4% 815.6 760.6 55.0 7.2% Hungary 350.2 340.0 10.2 3.0% 350.2 340.0 10.2 3.0% Poland 211.9 206.5 5.5 na – – Portugal 177.8 145.5 32.3 22.2% 146.1 145.5 0.6 0.4% Other countries 473.7 375.3 98.4 26.2% 245.6 224.9 20.7 9.2% Total, Shopping centers 7 072.5 5 647.1 1 425.5 25.2% 5 552.5 4 850.8 701.7 14.5% Total, Offices 1 031.2 951.0 80.2 8.4% 966.6 841.4 125.2 14.9% TOTAL, REAL ESTATE HOLDINGS 8 103.7 6 598.1 1 505.6 22.8% 6 519.1 5 692.1 826.9 14.5% in millions of euros

Offices Values, transfer duties Average yields On a constant portfolio basis, the value included 12.31.06 (including transfer duties) of Klépierre’s office properties increased Offices Constant basis - Total share €M % 12.31.2006 12.31.2005 by 14.9% in 2006 (and by 8.7% over Paris - West 551.2 57.0% 5.2% 5.7% six months). Based on appraised values Paris - East 50.9 5.3% 5.6% 6.0% at December 31, 2006 (transfer duties Paris immediate vicinity (“1re couronne”) 363.1 37.6% 5.9% 6.5% included), the average yield on the portfolio Others 1.4 0.1% 13.4% 7.9% was 5.5% for 2006, a decline of around TOTAL 966.6 100.0% 5.5% 6.1% 60bps over 12 months.

23 Financial report _management report

Analysis of the change in the value Values, transfer duties Average yields (values, of holdings (incl. duties) included 12.31.2006 transfer duties31.12.2005 included) Shopping centers Constant portfolio – Total share €M % 12.31.2006 12.31.2005 +67 France 3 908.2 59.8% 5.5% 6.0% +20 > 100 €M 1 742.9 5.0% 5.5% -113 100 > x > 50 €M 904.5 5.3% 5.6% +105 1 031 < 50 €M 1 260.9 6.3% 6.7%

951 Spain 951.2 14.6% 6.0% 6.7% > 50 €M 369.1 5.6% 6.4% < 50 €M 582.1 6.3% 6.9% Italy 919.8 14.1% 6,0% 6.3% 2005 Sales Cap rate Rental Acquisitions 2006 effect appreciation € effect > 50 M 531.8 5.5% 5.8% in millions of euros < 50 €M 388.0 6.6% 6.9% Portugal 146.1 2.2% 7.2% 7.2% Hungary 350.2 5.4% 7.4% 7.5% In 2006, 4 office properties were sold for Others 258.7 4.0% 6.8% 7.4% a total of 112.6 million euros. The sales TOTAL 6 534.2 100.0% 5.8% 6.3% prices were 11.3% higher than the most recent appraised values for these properties. On a current portfolio basis, the increase Analysis of the change in the value in the value of assets also takes into account of holdings (incl. duties) the acquisition in December of an office property located in Paris (2nd arrondissement) +762

and a project under development in Issy- +364

les-Moulineaux, for which their stated book +474 values were used for the calculation of RNA. 8 096

The office portfolio is valued at 1 031.2 million 6 495 euros. 2 of these properties have an estimated unit value that exceeds 100 million euros, 6 have a unit value of between 100 million 2005 Cap rate Rental Acquisitions 2006 and 50 million euros, and 14 have a unit effects appreciation effect value of less than 50 million euros. in millions of euros

Shopping centers On a current portfolio basis, the increase Revalued net assets at December 31, On a constant portfolio basis, at year-end in the value of assets includes the acquisition 2006 up by 34.1% over 12 months 2006 Klépierre’s shopping center holdings, of Buffalo Grill restaurants, the Valenciennes On the basis of appraisals including transfer including transfer duties, increased in value and Toulouse Purpan shopping centers duties, revalued net assets after deferred by 14.7% in light of the rental reversions in France, Novo Plaza in Czech Republic, taxes on capital gains and marking to market and the decline in yields. The average decline Molina de Segura in Spain, Braga in Portugal of debt came to 97.4 euros per share, versus in yields over the year that was used and various projects under development, 72.6 euros on December 31, 2005 by the appraisers was around 50bps, for which their stated book values and 79.9 euros on June 30, 2006, which translates into an average yield in the group’s financial statements were used a six-month increase of 21.9% and a 34.1% on the portfolio of 5.8%, including to calculate RNA. increase in 12 months. transfer duties. The shopping center property portfolio Revalued net assets excluding transfer duties, is valued at 8 096.2 million euros (7 072.5 after deferred taxes on capital gains and million euros, group share). Of the 236 marking to market of debt came to 91.5 shopping centers under Klépierre ownership euros per share, as opposed to 67.5 euros (excluding those currently under construction), on December 31, 2005 and 74.5 euros 15 of these properties have a unit value that on June 30, 2006. exceeds 100 million euros, 25 have a unit value of between 50 million and 100 million euros, and 196 have a unit value of less than 50 million euros. 24

Klépierre_Financial report 2006 12.31.2006 06.30.2006 12.31.2005 06.30.2005 How RNA is determined Balance sheet Group share Balance sheet Group share Balance sheet Group share Balance sheet Group share Consolidated shareholders’ equity 2 392 1 955 2 241 1 825 2 305 1 880 2 178 1 756 REPORT MANAGEMENT Real estate companies goodwill -9 Unrealized capital gains in real estate portfolio 2 475 1 776 1 449 992 – Appraised value 8 104 6 982 6 598 5 613 – Net book value -5 628 -5 205 -5 149 -4 621 Unrealized capital gains on non-real estate assets 102 83 73 65 – Ségécé group capital gain 102 83 73 65 Tax on unrealized capital gains -167 -129 -116 -56 Restatement of deferred taxes on securities 94 85 101 Taxes and fees related to the sale of assets -267 -247 -235 -223

Revalued Net Assets 4 182 3 393 3 152 2 534 Number of shares, fully diluted 45 768 408 45 723 014 45 976 570 45 976 998 NAV excluding transfer duties, after taxes on unrealized capital gains (in € per share) 91.4 74.2 68.6 55.1 Marked to market of fixed rate debt excluding IAS 32-39 (€M) 7.3 11.2 -47.4 -69.9 NAV excluding transfer duties, after taxes on unrealized capital gains and marking to market of fixed-rate debt (in € per share) 91.5 74.5 67.5 53.6 NAV including transfer duties, after taxes on unrealized capital gains and marking to market of fixed-rate debt (in € per share) 97.4 79.9 72.6 58.4 in millions of euros unless otherwise indicated

25 Financial report _management report

contemplated sum of 500-600 million euros). The margin was set at 70bps above the 10-year swap rate.

A dedicated financing policy for Klémurs Klémurs planned to organize its financial structure around an LTV ratio of up to 65%. This substantial gearing ratio is consistent D - FINANCING POLICY with the profile of the assets it owns, which offer long-term leases, high occupancy rates In 2006, Klépierre undertook to restructure FINANCIAL RESOURCES and, as a result, highly recurrent cash flows. existing financing lines and secure the terms Consolidated net debt of Klépierre went from Accordingly, the acquisition by Klémurs and conditions of its future financings. 3 229 million euros on December 31, 2005 of 128 Buffalo Grill restaurants Against a backdrop of rapidly rising interest to 3 804 million euros on December 31, on December 18, 2006 was financed rates and a flattening of the yield curve, 2006*. This 575 million euro increase results through a combination of new equity it would appear that the decision primarily from investment outflows (which brought in 135 million euros) to complete as early as in January the bulk (754 million euros) and the dividend payout and bank financing. On December 31, 2006, of the transactions aimed at extending (125 million euros), and was partly offset Klémurs had an LTV ratio of 47%. the maturity of its debt and reinforcing its by cash flow generated by disposals interest rate hedging program was a wise one. (115 million euros) and free cash flow CREDIT AGREEMENT From a strictly financial perspective, for the year. This debt was mainly financed On December 12, 2006, Klémurs signed the rationale behind taking Klémurs public via lines of credit that became available after a 5-year credit facility for up to 150 million was to give the group greater flexibility. the financing transactions that were carried euros, from BNP Paribas and BECM. By providing this subsidiary out in the first quarter of 2006, as well as via On December 31, 2006, 143 million euros with independent financial resources the use of credit arrangements that were set of the total had been drawn down. and a dedicated financial structure, up by Klémurs in December 2006. Its principal characteristics are the following: the Group gives itself greater latitude • an initial margin of 45bps, subject to an in financing its future investments: equity Two major transactions adjustment based on a loan to value grid; or debt, at the level of Klépierre or Klémurs. for Klépierre • financing covenants that primarily concern Accordingly, Klépierre will be able to allocate • On January 31, 2006, Klépierre signed a the loan-to-value ratio (limited to 55%), its shareholders’ equity on the basis new 7-year syndicated loan for a total the coverage of interest expense by EBITDA of its investment policy priorities. of 1.5 billion euros (including CP back-up (minimum 2.0), and the secured financing of 300 million euros). It used the facility to revalued net assets ratio (limited to 20%). Swap rates to refinance existing credit lines of a residual The first two indicators may go as high as average duration of 1.4 years, drawn down 65% and 1.8 times, respectively, including % 4.5 for 1 025 million euros (excluding back-up). subordinated debt. The latter could include Klémurs – An initial margin of 35bps, which is subject the financing granted by Klépierre. 4.3 Klépierre swaps bond issue to adjustments based on a loan to value grid 4.1 Klépierre (ratio of net debt to revalued assets); 3.9 Swaps – Financing covenants that primarily concern 3.7 the loan-to-value ratio (limited to 52%), 3.5 the coverage of interest expense by EBITDA 3.3 (minimum 2.5), and the secured financing 3.1 2 years 7 years 10 years to revalued assets ratio (limited to 20%). 2.9 2006/01 2006/04 2006/07 2006/10 2007/01 • On February 28, 2006, Klépierre issued a 10-year bond due in 2016 and paying a coupon rate of 4.25%. In response to significant oversubscription, Klépierre decided to raise the face value of the bond * Excluding Fair Value Hedge swap valuation. to 700 million euros, versus the originally

Klépierre_Financial report 2006 SUCCESSFUL IPO Financings by due date The capital increase of Klémurs was accompanied by the introduction €M

1 600 REPORT MANAGEMENT for public trading of its stock: 1 400 • 6% of its stock was initially offered 1 200 1 000 1 200 to the public, via a fixed price offering 800 600 for private investors and a global placement 600 700 400 600 135 for institutional investors; 200 300 165 150 0 • together, Mutavie and CNP acquired 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 a 9.0% equity interest in Klémurs. Subsidiary loans CP (back-up) Klémurs Bank Facility Klépierre Part & Fints bilatéral loan On the basis of an initial price of 20 euros, Klépierre bilateral loan 2006 syndicated loan 2008 Eurobond 2011 Eurobond demand reached 9.4 times the size of the 2016 Eurobond fixed-price offering, with a significant interest coming from private investors (who placed 37% of total orders). The final allocation was Financings breakdown fairly balanced, with 37% allotted to private Bilateral loans 11% investors (of which 43% were individual Mortage loans 4% shareholders of Klépierre, who had priority Finance leases 2% subscription rights for up to 300 shares). Syndicated loans 29% Institutional investors accounted for 63% of the placement. After exercise of the over-allotment option on December 11, 2006, Klépierre owns 84.1% of the equity in Klémurs. Since it began trading on compartment B of Eurolist by EuronextTM, Paris Klémurs has continued to attract interest. Introduced at 20 euros on December 8, 2006, the share was trading at 31.4 euros at year-end, after rising above 40 euros in the first days of trading. Bond market 52% CP back-up 2% LONGER AND MORE DIVERSIFIED DEBT Based on credit authorizations in place on December 31, 2006, the average duration INTEREST RATE HEDGES of the Group’s debt is 5.9 years (including the back-up line), versus 3 years on Profile of the swap portfolio December 31, 2005. The breakdown Klépierre took advantage of the relatively low by type of financing remains diversified. interest rates in the early part of the year to reduce the refinancing risk of its next significant fixed-rate debt maturity: its 600 million dollar bond due in July 2008. By negotiating 2 forward starting swaps for a notional amount of 300 million euros, Klépierre reset the rate of half of the future refinancing at just below 3.5% (excluding the credit margin), for a term of 7 years starting in July 2008.

Similarly, Klémurs contracted two 7-year swaps in November 2006 for a notional amount of 50 million euros each:

27 Financial report _management report

FINANCIAL RATIOS AND RATINGS Klépierre’s key financial ratios evolved as follows in 2006:

Total share 12.31.2006 12.31.2005 Loan To Value 41.7% 43.4% EBITDA/ Interest expense 3.42 3.47 Net current cash-flow/ Net debt 8.1% 8.1%

in the first contract, which began on These levels fall within the range of objectives January 2, 2007, Klémurs is the fixed-rate used by Standard and Poor’s for its BBB+ payer (3.79%). In the second, which begins rating of Klépierre’s debt, i.e.: on December 31, 2007, the paid rate is 3.8%. • Loan-to-value ≤ 50%; At the December 31, 2006 reporting date, • Net Current Cash Flow/Net Debt ≥ 7%; the Group’s swap portfolio was almost • EBITDA/Interest Expense ≥ 2.5%. entirely composed of plain vanilla swaps. The average fixed rate on payer swaps The outlook associated with this rating was is 3.1%. revised from stable to positive in January The ratio of fixed-rate debt to total debt 2007. (after hedging) accounted for 85% of Klépierre’s financing debt on January 2, Ratings from Standard and Poor’s 2007 (start date of the first Klémurs swap), versus 74% on December 31, 2005. Short-term A-2 Long-term BBB+ Outlook Positive Interest-rate hedge profile

€M COST OF THE DEBT 3 500 3 000 The historic cost of the debt (ratio of interest 2 500 expense to average financing debt) was 2 000 1 500 4.3% in 2006, compared with 4.1% in 1 000 2005. 500 0 The cost of the debt projected on the basis 20072008 2009 2010 2011 2012 2013 2014 2015 2016 of the financial structure and rates at the SwapsForward-starting swaps Fixed-rate debts December 31, 2006 reporting date was 4.3%. A 100bps rise in interest rates would Fair value of hedge instruments lead to an increase in the average cost of On December 31, 2006, the unrealized debt of 0.15%, with a negative impact on capital gain on Klépierre’s swap portfolio, net current cash flow of 5.9 million euros. calculated as the sum of their fair value excluding accrued interest, is 57.1 million euros. This increase of 33.6 million euros versus December 31, 2005 is attributable to the impact of significantly higher interest rates. If bonds and other fixed-rate debt are included, the total fair value of Klépierre’s financial instruments is 68.4 million euros, an increase of 113.5 million euros compared with December 31, 2005.

Klépierre_Financial report 2006 Klépierre is pursuing its policy of promoting diversity and retaining employees. At the European level, 61% of the 220 newly-hired employees were REPORT MANAGEMENT women. In addition, women represented 52.5% of all promotions that were granted. With a rate of attrition among employees that is limited to 7.2%, Klépierre demonstrates that it is able to maintain a high level of motivation among its staff. E - HUMAN RESOURCES In France, Klépierre continued to limit the use of interim employment, hiring Throughout 2006, Klépierre pursued curriculum in 2006. With its 14 modules, 10 temporary employees (full-time equivalent) initiatives aimed at achieving responsible this in-house university has trained 240 on average in 2006. Based on an average human resource development. This year, employees in France. The training modules, workforce of 482, this was equal to 2.1%. in addition to recurrent subjects such which include basic courses in commercial Excluding paid maternity leave, absenteeism as retaining talent, offering training and leases as well as instruction in the art was only 1.3% in 2006. development opportunities and encouraging of negotiation, are highly technical and seek a strong group focus in its corporate culture, to transfer the skills and knowledge A MOTIVATING WORKPLACE ENVIRONMENT Klépierre concentrated on further integrating that are specific to Ségécé. In 2006, Klépierre signed a wage agreement its European affiliates and taking steps Cross-business training provided by outside covering all of its employees in France, to include them in the global corporate specialists is also offered in many disciplines, providing an across-the-board increase mission. including foreign languages, the evolving of 1.2% plus a bonus of 1 000 euros per legal framework, the use of office tools employee. The employment agreements GREATER EUROPEAN COHESION and technology, and managerial practices. currently in force also offer employees- With 1 032 employees based across Europe For its first year of application in France, in addition to profit-sharing entitlements- in 2006, Klépierre has acquired a truly the “Droit Individuel à la Formation” the option of participating in a number European dimension. Currently, 52% (individual right to training agreement) of employer-sponsored savings plans of its workforce is located outside of France. was used by 188 employees, including (Plan d’Épargne Entreprise, PERCO Employees with particularly high potential 35 who have already used it to the fullest and a capital increase) with financial backing. were detected when the succession plan was possible extent. subject to an annual analysis, and individual In the area of individual management, TOPICS FOR FURTHER DEVELOPMENT interviews were conducted when members Klépierre is pursuing its policy of promoting IN 2007 of the Group’s corporate HR department diversity and retaining employees. As a logical extension of its commitment visited operating units in the various The human resources department has to responsible human resources practice, countries. conducted more than 260 individual career Klépierre initiated an audit in 2006 on In addition, a consistent performance interviews in the last two years, during which employment of the disabled. The conclusions appraisal process was recently launched, employees express their career aspirations, will be communicated in 2007 for this audit, and a personalized employee information review their career path and discuss the aim of which is to examine various ways database has also been rolled out. opportunities for internal promotion, of promoting the hiring of people with While local managers are given wide latitude both within the Klépierre group and more disabilities. in light of their specific knowledge of the broadly within BNP Paribas. These efforts particular country in which they work, to know the workforce, combined with Klépierre’s foreign affiliates also appreciate a commitment to ongoing dialogue with the HR expertise and best practices that are business area head, support a pragmatic made available. and effective approach to the annual pay review, during which 2.3% of the total EMPLOYEES ARE COMMITTED payroll is distributed to reward individual TO A DYNAMIC GROUP performance and achievement. Ségécampus, the occupational campus In 2006, stock option grants were awarded (École des Métiers) of the Klépierre group to around 80 employees. established in 2005, offered a full and steady In the area of individual management,

29 Financial report _management report

Male Female Total o/w % Managers Managers December 31, 2006 Managers Non Managers Total Managers Non Managers Total Ségécé, Galae et Ségécé LT 144 12 156 69 133 202 358 213 Klépierre Services 34 7 41 57 23 80 121 91 Klégestion 4 4 6 4 10 14 10 CB Pierre 1 0 1 1 0 1 2 2 Sub-total France 183 19 202 133 160 293 495 316 64% Ségécé Italia 10 40 50 0 37 37 87 10 Ségécé España 54 0 54 32 25 57 111 86 Effe Kappa (Italy) 0 1 1 0 3 3 4 0 Ségécé Portugal 4 11 15 2 26 28 43 6 Ségécé Ceska Republika 3 1 4 8 11 19 23 11 Ségécé Hellas 2 0 2 1 1 2 4 3 Ségécé Magyarorszag 4 41 45 1 75 76 121 5 Ségécé Polska 7 12 19 6 19 25 44 13 Devimo (Belgium) 12 26 38 15 47 62 100 27 Sub-total International 96 132 228 65 244 309 537 161 30% TOTAL 279 151 430 198 404 602 1 032 477 46%

F – RECENT DEVELOPMENTS, OUTLOOK AND RISK FACTORS

I - RECENT DEVELOPMENTS of the memorandum, on January 9, 2007 some 4 billion euros over the period running Klépierre signed the acquisition of full equity from 2007 through 2011, including around Acquisition of Progest ownership of Progest. 2.3 billion euros of controlled investments. On December 21, 2006, Klépierre signed A down payment of 73.5 million euros was This significant potential for growth a memorandum of agreement with made on that date. is supported by the three major pillars the group owned by Monsieur Henry of Klépierre’s business development strategy: Hermand, pertaining to the acquisition Klépierre’s outlook and rating • mainly shopping centers (3.0 billion euros, of full equity ownership of Progest and revised upward by Standard of which 2.1 billion euros controlled); diverse financial interests in various real & Poor’s • the real estate assets of major retail groups, estate companies. Progest and these various On January 11, 2007, the rating agency via Klémurs (669 million euros over companies are the owners of equity interests Standard & Poor’s announced that it was the 2007-2008 period, including 69 million in several shopping centers or facilities revising the outlook on Klépierre’s credit of controlled investments under in operation, spread across 13 sites located rating from stable to positive. Klépierre the agreement with Buffalo Grill); near or in the downtown areas of major has enjoyed a rating of a Standard & Poor’s • to a lesser extent, Parisian office properties, French cities. rating of BBB+ since 2001. a market in which Klépierre has resumed The assets have GLA of more than 88 000 sq.m., its posture of selective buyer (400 million including an ownership share of 36 000 sq.m. II - OUTLOOK euros, including controlled investments of Klépierre’s total investment is an estimated Through consistent deployment 100 million euros, particularly in connection €109.6 million based on the appraised value at the European level of its integrated with the Issy-les-Moulineaux project). of the real estate assets in question business model – as a shopping center (€115.5 million, including €6.7 million property asset owner, manager and developer In 2007, Klépierre plans to invest a total for the land acquired). Triple net rent in 2007 – Klépierre expects to maintain a sustained of around 800 million euros in these three for the assets in operation is expected and steady pace of growth in the years markets. In parallel, the group will pursue to reach €6.4 million. ahead. Klépierre has developed and the arbitrage of its office portfolio, with As a follow-up to the signature is executing an investment program totaling disposals totaling an estimated 75 million euros.

Klépierre_Financial report 2006 The business outlook is positive and should DEVELOPMENT AND INVESTMENT RISKS enable the Group to once again achieve Klépierre does engage real estate development sustained growth in 2007. As its external activities from time to time for its own growth prospects, Klépierre will benefit from account. Two major risks have been identified: REPORT MANAGEMENT the contribution of the acquisitions it made • the cost of construction may turn out to be in 2006, which represent full-year additional higher than Klépierre’s initial assessments: rents of 19.4 million euros, to which the building phase may take longer than the investments already identified expected, technical difficulties may be for the current year will be added. encountered due to the complexity Organic growth will get a boost from higher of some projects, and the prices rents made possible by significant index- of construction materials may evolve adversely; linked adjustments in France, where 77% • Klépierre may have difficulty leasing of the leases in the portfolio (in terms up a project, which may mean that of value) will be impacted as of January 1, the project is only partly leased up 2007 by the 7.05% rise in the ICC cost or is being leased up at lower rent levels. of construction index for the second quarter Klépierre’s investments (in new projects, of 2006. existing assets or extensions) are subject to legal authorizations that may be granted III - RISK FACTORS later than expected, or Klépierre and/or its partners may fail to obtain them at all. Risks related to Klépierre’s strategy In any case, costs incurred initially and activities (such as internal or external studies) may be impossible to defer or cancel. REAL ESTATE IS A CYCLICAL BUSINESS The development and investment risks One of the reasons Klépierre has chosen to mentioned above could lead to delays, focus on shopping centers is that it considers to the cancellation of the contemplated this segment to be less cyclical than the other developments or investments, or to their segments of the real estate market. However, completion at a higher cost than expected. conditions in any real estate market fluctuate This in turn may have a negative impact periodically and depend on the balance on Klépierre’s pipeline completion, results between supply and demand, competing and financial situation. investment opportunities (financial assets, level of interest rates) and the economic background in general. Because economic and real estate market cycles are difficult to predict, Klépierre may not always execute its investments and divestments at the most opportune time or may have to postpone contemplated investments or divestments. Leases may come up for renewal during downside periods and may not reflect the reversion potential assessed in the past. If several assets were bought at the same time, leases of those assets are likely to be maturing in the same period; this concentration of lease maturities could increase the lease renewal risk and its impact on cash flows. As a whole, adverse real estate market conditions may weigh negatively on the appraised value of Klépierre’s portfolio as well as on the operating results it generates.

31 Financial report _management report

RISKS RELATED TO THE FOCUS to hedge interest rate risks, such as swaps, ON THE SHOPPING CENTER SEGMENT which enable it to pay a fixed or variable Klépierre’s strong focus on shopping centers rate, respectively, on a variable or floating make it more dependent on this market rate debt. The market value of these segment, whose performance depends instruments also fluctuates with the level on business conditions in the retail market of interest rates. Since Klépierre applies IFRS in general and on the level of consumption accounting standards, such fluctuations in particular. Moreover, competition between are reflected in Klépierre’s balance sheet assets is specific to the shopping center and may also be reflected in Klépierre’s market, because the appearance of new income statement should hedge relationships centers in the vicinity of Klépierre’s assets not be documented or cease to be may attract some customers away from documented, or should existing hedges the latter. be only partially effective. Therefore, shopping center occupancy ACQUISITION RISKS rates may not always be at generally high LIQUIDITY RISK Klépierre’s growth strategy is highly dependent levels – with a potentially negative impact Klépierre’s strategy depends on its ability on its ability to acquire real estate assets on Klépierre’s operating results. to raise financial resources, either debt or companies that own them. This activity or equity, for the purpose of funding its entails the following risks: TENANT INSOLVENCY RISKS investments and acquisitions and refinancing • Klépierre may have misjudged the expected Klépierre’s ability to collect rents depends maturing debts. Klépierre may not always return on assets, and therefore may have on the solvency of its tenants, in particular have the desired access to capital, or may paid an inappropriate price for their those in the office segment, where tenant find it difficult to raise the funds needed acquisition; insolvency risk is not as widely spread. or to do so under attractive terms and • Klépierre may have failed to detect hidden Tenants may not pay on time, or may be conditions. This situation may arise due defects such as the existence of sub-leases, in default, or Klépierre may need to reduce to a crisis in the debt or equity markets, tenant practices that are hazardous the amount of rents invoiced by making events in the real estate market, to the environment, or discrepancies concessions that align lease payments with a downgrade in Klépierre’s corporate credit between plans and the actual the financial situation of some tenants. rating, or any other change in Klépierre’s construction of certain assets; In all these cases, tenant insolvency may hurt activity, financial situation or shareholder base • Klépierre may have difficulty completing Klépierre’s operating results. that could change investor perception an acquisition because of its impact of its credit quality or investment appeal. on internal organization (information Some of Klépierre’s financing includes technology, human resources). Risks related to Klépierre’s financing financial covenants in the legal documentation policy and financial activities (mainly outstanding bond issues and syndicated COUNTRY RISKS loans). Should Klépierre not be able to Klépierre considers Europe as its domestic INTEREST RATE RISK maintain the financial ratios set forth in market, and focuses its investments Klépierre finances some of its investments these contracts, it may be subject to on the Euro area and on countries that are by raising debt with either a fixed or early repayment or may be asked to do likely to adopt the euro over the medium a floating rate of interest. These financing so (depending on the particular case), forcing to long term. activities generate the following risks: Klépierre to find new sources of funding Some countries in which Klépierre operates • the interest expense paid by Klépierre or renegotiate the debt. or may operate in the future may present on its floating rate debt is exposed to higher risk profiles than Klépierre’s historic an increase in the interest rates to which CURRENCY RISK markets (France, Spain and Italy): they are indexed; Klépierre operates in some countries that the economic and political • the market value of Klépierre’s fixed rate have not yet joined the Euro area (Slovakia, environment may be more volatile, debt would increase if market interest rates the Czech Republic, Hungary and Poland the regulatory framework – including decreased; to date). In these countries, Klépierre’s entry barriers – may be less favorable, and • Klépierre may be exposed to the level exposure to currency risks derives from transactions may be completed in local of interest rates on a particular date, the following elements: currencies that may be more volatile. for example if it has planned to raise fixed • local currencies may depreciate between Country risks may adversely influence rate debt to fund a planned acquisition. the time rents are invoiced in euros and Klépierre’s earnings and financial condition. Klépierre uses derivative instruments the time tenants pay those rents, creating

Klépierre_Financial report 2006 translation losses for Klépierre. In addition, to sanctions in the event that one or several a few leases are not invoiced in euros, but tenants in one of its shopping centers fail in dollars or local currencies, creating to comply with applicable standards. additional risk with respect to the amount All those regulatory risks may negatively REPORT MANAGEMENT actually collected in euros; affect Klépierre’s results and the appraised • fluctuations in local currencies also impact value of its portfolio. the level at which local financial statements are translated into euros and integrated TAX RISK RELATED TO SIIC STATUS into Klépierre’s consolidated financial Klépierre has SIIC tax status, which makes statements; it exempt from corporate income tax. • since most tenants are invoiced in euros, To be eligible for this status and local currency depreciation may make the exemption, Klépierre must distribute it difficult for them to meet rent obligations, a significant portion of its profit. leading to deterioration in their solvency. Should Klépierre not be able to fulfill this obligation, it may lose SIIC COUNTERPARTY RISK status, an event that is likely to weigh When Klépierre uses derivative instruments adversely on its activities and earnings. such as swaps to hedge a financial risk, Klépierre’s counterparty may owe Klépierre LEGAL INTELLIGENCE some payments during the lifetime Klépierre’s legal and support departments of the instrument. Insolvency of that work in partnership with outside consultants counterparty may lead to delay or default to ensure that information on new laws and in such payments, which would have regulations that could have a material impact an adverse impact on Klépierre’s results. on the Group’s financial condition and its Klépierre is also exposed to counterparty business development is captured, processed risks on its short-term financial investments. and disseminated throughout the Group. Procedures for monitoring risks and systems This intelligence-gathering extends set up internally to limit and manage them to legislation and regulations in every country are presented in the notes to the consolidated in which the Group has equity interests. financial statements. Environmental risks Legal, tax In every country in which it operates, and regulatory risks Klépierre must comply with environmental laws pertaining to the presence or use REGULATORY RISKS of hazardous or toxic substances, the use of As an owner and manager of real estate facilities that could generate pollution, public assets, Klépierre must comply with health issues, including epidemics (especially the regulatory rules in force in all of the countries for shopping centers), ground pollution and in which it operates. These rules pertain to flooding. Should Klépierre fail to comply several fields, including corporate law, taxation, with a regulatory requirement or sustain health and safety, the environment, building an environmental accident, its properties developments, commercial licenses, leases could lose their appeal and/or Klépierre and urban planning. Changes in the regulatory could be subject to penalties that could framework may require adaptation generate additional costs and impair in Klépierre’s activity, assets or strategy. the Company’s reputation. Costs may For example, more stringent safety also be incurred to defend the Company regulations may generate additional against such environmental claims or enforce management costs, whereas lower barriers measures designed to remedy the newly to market entry may weigh negatively identified environmental risks. on the return on the assets located in that area To date, no quantified, comprehensive or encourage Klépierre to realign its investment estimate has been made of the Company’s strategy. Klépierre may also be subject environmental risks.

33 Financial report _management report

insuranceprograms that integrate Risks related to Klépierre’s local lines of insurance. shareholder base The program of systematic reappraisal Klépierre cannot predict the evolution of coverage every five years will be continued of its shareholder structure. In particular BNP in 2007, to ensure that a perfect fit Paribas, Klépierre’s current majority is maintained between insurance coverage shareholder, may choose to decrease and insurance values. or increase its holdings in Klépierre Overall, the significant reductions in the future. in premiums obtained in 2005 were maintained in 2006 against a backdrop of claims pressures in the liability market (the number of claims was limited in terms of holdings, but a larger number of claims Insurance risks were filed asking for higher damage awards), Klépierre has contracted insurance coverage offset by the very limited number designed to protect the equity capital of major property insurance claims. and revenue capability of each of its core As a reminder, insurance premiums business segments. The remaining risks -with the exception of rental insurance- are primarily of two types: Klépierre are passed on to tenants, either directly, could be subject to higher premiums or via shared expenses. The environmental for the same level of coverage, or it could impairment liability policy, which covers suffer losses that are not entirely covered protected sites in France, was renewed by the insurance it has contracted. with Assurpol. Insurance coverage In both case, Klépierre’s earnings for construction work is always contracted and the fair market value of its assets on a one-off basis. In addition, the coverage could be adversely affected. taken out specifically for Ségécé and its subsidiaries was reviewed and harmonized SHOPPING CENTERS in 2007 as part of an ongoing process. In 2006, Klépierre pursued the policy Klépierre also pursued its policy of protecting initiated in prior years to harmonize persons and property by contracting the Company’s insurance programs individual accident insurance coverage. in force, both in France and abroad. All of its assets are fully or partially protected These programs are built against the risk of terrorist attacks. on the same basis, with the aim of unifying the scope and level OFFICES of coverage provided (replacement Properties in Klépierre’s portfolio are covered cost in the event of an insured loss, under a fleet policy that includes replacement compensation for loss of lease income cost cover for property and compensation equal to two years of rent, insurance for rental income interruption caused against the financial impact by the occurrence of an insured loss of damage to third parties for which (three years). Klépierre may from time Klépierre is deemed liable, etc.) to time take out special construction as well as the amount of all deductibles. coverage for major renovations that The insurance programs are placed it undertakes. Klégestion is insured under with major insurers and monitored a commercial third-party liability policy by a dedicated department that works for its management business. Klépierre in cooperation with the Group’s brokers. was able to obtain a 20% decrease For foreign markets, the decision was made in its insurance premium payments when to give preference to local relationships these policies came up for renewal. by working through local personnel All insurance premiums are re-invoiced and broker correspondents on global to tenants as part of building operating costs.

Klépierre_Financial report 2006 G - CORPORATE GOVERNANCE

To ensure transparency and keep the public • Foncière Louvain-la-Neuve (Belgium) REPORT MANAGEMENT informed, Klépierre has introduced a series • Kléminho (Portugal) of measures based on corporate • Capucine BV (Netherlands) recommendations, such as the creation Member of the Board of Directors: of Supervisory Board committees • GIE Astria and the appointment of independent • Les Trois Vallées members to the Supervisory Board. • France Habitation As a result, the Company considers that • Place de l’Accueil (Belgium) the governance structure it has set up comply Trustee: with current corporate governance standards • Kléber La Pérouse SNC and practices. • Kanizsa 2002 (Hungary) • Duna Plaza Offices (Hungary) I - LIST OF OFFICES AND POSITIONS • Bestes (Czech Republic) List of offices and positions held by • Entertainment Plaza (Czech Republic) the Company’s governing boards Representative of Klépierre, sole director at December 31, 2006. of Klépierre Vallecas (Spain)

Executive Board Jean-Michel GAULT • Member of the Klépierre Michel CLAIR Executive Board • Chairman, Klépierre Executive Board • Member of the Board • Chairman, Duna Plaza Executive Board of Directors, Soaval (Hungary) • Chairman of the Board • Chairman, Arcol Supervisory Board of Directors, Place de l’Accueil (Belgium) (Slovakia) Member of the Executive Board: • Permanent representative of Klépierre • Krakow Plaza (Poland) and member of the Supervisory Board • Sadyba Centre SA (Poland) of SCS Ségécé Vice-Chairman of the Board of Directors: Member of the Executive Board: • Galleria Commerciale Assago (Italy) • Krakow Plaza (Poland) • Galleria Commerciale Cavallino (Italy) • Poznan Plaza (Poland) • Galleria Commerciale Collegno (Italy) • Ruda Slaska Plaza (Poland) • Galleria Commerciale Klépierre (Italy) • Sadyba Centre SA (Poland) • Galleria Commerciale Solbiate (Italy) • Klépierre Novo (Czech Republic) • Galleria Commerciale Serravalle (Italy) Chairman of the Board of Directors: • Klécar Italia (Italy) • Klépierre Foncier Makédonia (Greece) • Klefin Italia (Italy) • Klépierre Athinon A.E. (Greece) Appointed director: • Klépierre Nea Efkarpia (Greece) • Immobiliare Magnolia (Italy) • Klépierre Péribola Patras (Greece) • Novate (Italy) • Effe Kappa (Italy) • ICD (Italy) • Finascente (Portugal) Member of the Board of Directors: • Galeria Parque Nascente (Portugal) • Cinémas de l’Esplanade (Belgium) • Gondobrico (Portugal) • Coimbra (Belgium) • Klélou-Imobiliaria SA (Portugal) • Foncière de Louvain-la-Neuve (Belgium) • Klénord Imobiliaria (Portugal) • Klépierre Foncier Makédonia (Greece) • Klépierre Portugal SGPS SA (Portugal) • Klépierre Athinon A.E. (Greece) • Klétel Imobiliaria (Portugal) • Klépierre Nea Efkarpia (Greece) • Cinémas de l’Esplanade (Belgium) • Klépierre Péribola Patras (Greece) • Coimbra (Belgium) • IGC Spa (Italy)

35 Financial report _management report

• Effe Kappa (Italy) • Galleria Commerciale Klépierre (Italy) Supervisory Board • Capucine BV (Netherlands) • Galleria Commerciale Serravalle (Italy) • Kléminho (Portugal) • IGC (Italy) Dominique HOENN • Klélou-Imobiliaria SA (Portugal) • Klécar Italia (Italy) • Chairman of the Klépierre • Klénord Imobiliaria (Portugal) • Klefin Italia (Italy) Supervisory Board • Klépierre Portugal SGPS SA (Portugal) Vice-Chairman of the Board of Directors: • Chairman of the Klémurs • Klétel Imobiliaria (Portugal) • ICD (Italy) Supervisory Board Member of the Supervisory Board: • Immobiliare Magnolia (Italy) • Senior Adviser, BNP Paribas • Duna Plaza (Hungary) • Novate (Italy) • Chairman of the Board • Nyiregyhaza Plaza (Hungary) Member of the Supervisory Board: of Directors of Paribas International • Arcol (Slovakia) • Ségécé Magyarorszag (Hungary) • Chairman of the Board • Delcis CR (Czech Republic) • Duna Plaza (Hungary) of Directors of BNP Private Equity • Klépierre Novo (Czech Republic) • AMC – Prague sro (Czech Republic) • Vice-President of the Supervisory Trustee, KPSVR 2002 (Hungary) • Ségécé Ceska Republika (Czech Republic) Board of Euronext NV (Amsterdam) • Klépierre Novo (Czech Republic) • Member of the College Claude LOBJOIE • Ségécé Polska (Poland) of Autorité des marchés financiers • Member of the Klépierre • Ségécé Slovensko (Slovakia) Member of the Board of Directors: Executive Board Member of the Board of Directors: • BNP Paribas Securities Services • Trustee, SNC Klégestion • Ségécé España (Spain) • BNP Paribas Luxembourg SA • Sole director of GIE Klépierre Services • Ségécé Hellas (Greece) • Clearstream International (Luxembourg) • Chairman of SAS CB Pierre • Ségécé Italia (Italy) • LCH Clearnet (London) • Member of the Supervisory • Ségécé Portugal (Portugal) Board of SCS Ségécé Trustee: Alain PAPIASSE • Member of the Executive Board • GYR 2002 (Hungary) • Vice-Chairman of the Klépierre of Sadyba Centre SA (Poland) • UJ Alba 2002 (Hungary) Supervisory Board • Member of the Supervisory Board • Klépierre Krakow (Poland) • Member of the BNP Paribas of Duna Plaza (Hungary) • Klépierre Poland (Poland) Executive Committee Member of the Board of Directors: • Klépierre Poznan (Poland) • Chairman of the Supervisory • Klépierre Foncier Makédonia (Greece) • Klépierre Sadyba (Poland) Board of BNP Paribas Immobilier • Klépierre Athinon A.E. (Greece) • Klépierre Galeria Krakow (Poland) • Member of the Supervisory • Klépierre Nea Efkarpia (Greece) • Klépierre Rybnik (Poland) Board of CooperNeff Alternative • Klépierre Péribola Patras (Greece) • Klépierre Warsaw (Poland) Managers • IGC Spa (Italy) • Klépierre Galeria Poznan (Poland) • Chairman of the Board of Directors Trustee: • Klépierre Sosnowiec (Poland) of BNP Paribas Private Bank • Debrecen 2002 (Hungary) • Klépierre Lublin (Poland) • Chairman of the Board • Zalaegerszeg Plaza (Hungary) • Klépierre CZ (Czech Republic) of Directors of BP2S Independent Advisor of SAS Comadim • CSPL 2002 (Hungary) • Chairman of the Board of Directors Permanent representative of Ségécé, member of BNP Paribas Luxembourg Laurent MOREL of the Board of Directors: Member of the Board of Directors: • Member of the Klépierre • Devimo Sud (Belgium) • Cortal Consors Executive Board • Devimo Consult (Belgium) • BNP Paribas Assurance • Trustee, SCS Ségécé • Devimo Progresso (Belgium) • BNP Paribas Switzerland • Member of the Arcol Executive Board • BNP Paribas UK Holdings Ltd (Slovakia) Permanent representative of Sicovam • Chairman of the Supervisory Board Holding, Member of the Board of Directors of Delcis CR (Czech Republic) of Euroclear plc (Switzerland) Chairman of the Board of Directors: • SAS Soaval Jérôme BÉDIER • Galleria Commerciale Assago (Italy) • Member of the Klépierre • Galleria Commerciale Cavallino (Italy) Supervisory Board • Galleria Commerciale Solbiate (Italy) • Member of the Supervisory Board • Galleria Commerciale Collegno (Italy) of Générale de Santé

Klépierre_Financial report 2006 • Executive Chairman of the Fédération Bertrand JACQUILLAT Vivien LÉVY-GARBOUA des Entreprises du Commerce et de la • Member of the Klépierre • Member of the Klépierre Distribution (Federation of Retail and Supervisory Board Supervisory Board Distribution Companies) • Chairman and CEO of Associés • Member of the Executive REPORT MANAGEMENT • Member of the Executive Committee en Finance Committee, BNP Paribas of France’s employers confederation, MEDEF • Member of the Supervisory Board • Head of Compliance and Coordination • Chairman, Board of Directors of Presses Universitaires de France of Internal Control at BNP Paribas de la Fondation de la Croix Saint-Simon • Member of the Board of Directors • Member of the Supervisory Board • Independent advisor to the Board of of Total SA of BNP Paribas Immobilier Directors of Éco-Emballages • Member of the Supervisory Board Bertrand LETAMENDIA of Presses Universitaires de France François DEMON • Member of the Klépierre Member of the Board of Directors: • Member of the Klépierre Supervisory Board • BNP Paribas (UK) Supervisory Board • Trustee, SNC AGF Immobilier • BNP Paribas SA (Switzerland) • Member of the Klémurs • Trustee, SNC Phénix Immobilier • BNP Paribas Luxembourg Supervisory Board Member of the Board of Directors: • Compagnie d’Investissements de Paris • Chairman and CEO • Sogeprom • Financière BNP Paribas of Société de Participations Mobilières • Immovalor Gestion • Chairman SAS Chairman: Philippe THEL BNP Paribas Participations • SAS Établissements Paindavoine • Member of the Klépierre • Executive Vice-President, not member of • SAS Étoile Foncière et Immobilière Supervisory Board the Board of Directors of OGDI • SAS Financière Cogedim Laennec Member of the Board of Directors: Member of the Board of Directors: • SAS INVCO • GIPEC • Cobépa Technology (Belgium) • SAS Kléber Lamartine • PSR • Claireville (Belgium) • SAS Madeleine Opéra • BNP Paribas Immobilier SAS • Sagip (Belgium) • SAS Kléber Passy • Permanent representative of BNP Paribas • BNP Paribas International BV (Netherlands) • SAS Société Foncière Européenne Immobilier SAS, member of the Board of • Non-partner trustee of Paribas Dérivés • SAS Société de Négociations Immobilières Directors of Promogim Garantis et Mobilières Maleville “SONIMM” • Permanent representative of BNP Paribas, • Permanent representative of SAS BNP • Vernon SAS member of the Board of Directors of Sofibus Paribas Participations, director of Capefi Trustee: • SNC Laennec Rive Gauche Bertrand de FEYDEAU • EURL 20/22 rue Le Peletier • Member of the Klépierre • SARL de l’Étoile Supervisory Board • SARL Relais de la Nautique • Member of the Klémurs • Société de Construction et de Gestion Supervisory Board Immobilière des Mesoyers • CEO of Association Diocésaine de Paris • SCI Remaupin • Chairman and CEO • SCI 3 Route de la Wantzenau “Les Portes of AXA Immobilier SAS de l’Europe” Member of the Board of Directors: • SC Prelloyd Immobilier • AXA Aedificandi • SCI Via Pierre 1 • Foncière des Régions • SCI Le Surmelin • Gécina Liquidator of SCCV 33 La Fayette • Société Beaujon SAS • SITC SAS • Ahorro Familiar Independent advisor: • Affine • Sefri Cime

37 Financial report _management report

II - SUMMARY OF MAJOR AGREEMENTS 2006 Agreement to purchase a portfolio Partnership agreement and agreement of shopping malls and commercial Major acquisition contracts to purchase the property of the Buffalo premises in France Grill Group in France. • Memorandum of agreement signed 2005 • Signed on August 3, 2006 on December 21, 2006, deed of acquisition Agreement to purchase a portfolio and supplemented by four additional clauses. signed on January 9, 2007. of shopping centers in Poland • Seller: Buffalo Grill. • Seller: Henry Hermand Group. and the Czech Republic • Object: • Buyer: SNC Kléber La Pérouse. • Signed on July 29, 2005. – acquisition of the buildings of 128 restaurants • Object: • Seller: Plaza Centers Europe. in France as part of an overall investment – acquisition of a 100% interest in Progest, • Object: agreement to acquire Buffalo Grill properties a company with some 40 holdings including – acquisition of several companies owning either outright or in the form of finance leases; a large number of shopping malls and four existing shopping centers in Poland; – concomitant signature of a lease for each commercial premises. – agreement for the future acquisition asset acquired; • Amount of the transaction: €100 million. of companies that own three shopping – concomitant signature of a partnership centers in Poland either under construction agreement intended to facilitate the proper Memorandum of agreement and promise or to be built. For one of the centers located execution of leases, provide for the automatic of sale for property in Montpellier in Lublin, a put option was granted, exercisable extension of the partnership, by operation • Signed on December 21, 2006 and on the condition precedent that the seller of law, to all properties as and when they are December 22, 2006. Signature of the off- first acquires all of the Company’s securities sold by Buffalo Grill, provide for changes plan deed of sale on February 15, 2007. (50% of the Company’s securities are in the scope of the partnership, developing • Parties: SC Odysseum 2 for the business currently owned by a third party); the relationship between Klépierre and pole and Société d’Équipement de la Région – agreement for the acquisition of companies Buffalo Grill over the long term, and participate Montpelliéraine for the leisure/entertainment that own two shopping centers in the Czech in the development of new Buffalo Grill pole, Klépierre and Icade Foncière des Republic either under construction or to be locations. Buffalo Grill has also undertaken Pimonts with the contractual right built; to give Klépierre the opportunity to acquire to be substituted by SAS Odysseum Place de – acquisition of the remaining securities up to 30 new projects within five years France. of the Hungarian management company of the starting date of the partnership • Object: (PCM Hungary), since the acquisition in 2004 agreement. Klépierre will be able to offer – Development of a major property complex concerned only 50% of the company’s Buffalo Grill new project development called Odysseum on a single site that includes securities; opportunities at shopping centers owned both leisure/entertainment and commercial – acquisition of a 100% interest in the Polish by the Klépierre Group; activities. management company (PCM Poland). – the contractual right for Klépierre • Amount of the transaction: €200 million. • Amount of the transaction concerning to be substituted by Klémurs, exercised on existing shopping centers in Poland: November 27, 2006; Carrefour memorandum of agreement – €193 million. – amount of the transaction: €299.8 million. additional clause no. 9 relating to sites • Guarantees given by the seller: the usual in France. guarantees for this type of transaction. On December 18, 2006, Klémurs acquired • Signed on September 28, 2006. • License to use the PCM brand in Poland, the following from Buffalo Grill: • Parties: Klépierre/Carrefour. granted for a 99-year period. • 23 restaurant buildings outright; • Object: • outstanding rights under various finance – extension and renovation of shopping malls leases granted by leasing companies in France; to Buffalo Grill SA or its subsidiaries, covering – definition of guidelines and conditions a portfolio of 105 restaurants in France. for setting the economic parameters On the same date, 128 commercial leases of the project (value of the extension work, were granted to Buffalo Grill. cost price, impact of operating expenses The partnership agreement will continue on land costs) determined separately for each during 2007. renovation or extension.

Klépierre_Financial report 2006 Important financing contracts 2006 Bond loan of March 16, 2006: Finance contract signed on January 31, • Parties: banking syndicate led by BNP 2005 2006: Paribas (lead bank and bookrunner) and Bridge loan contract of July 28, 2005 • Lender: BNP Paribas. HSBC (lead bank). REPORT MANAGEMENT • Lender: BNP Paribas. • Purpose: credit for a maximum amount • Purpose: bond loan with a principal • Purpose: credit for a total final amount of €1.5 billion. amount of €700 million. of €400 million. • Repayment terms: to be paid back • Repayment terms: to be paid back • Repayment terms: earliest between at the latest by January 31, 2013. at the latest by March 16, 2016. March 31, 2006 and the date on which • Conditions of use: a first tranche • Interest: fixed rate of 4.25%. a new long-term finance contract is signed. A comprising a swingline loan for • Listed on the Luxembourg Bourse. • Conditions of use: one or more a maximum amount of €300 million; • Standard clauses for Eurobond-type bonds. drawdowns. a medium-term tranche B for a maximum • Special clauses: • Interest: indexed on the Eonia rate plus amount of €1.2 billion. Both tranches – early redemption option for bearers in the a fixed margin. can be used as drawdowns. event of a change in voting right structure • Interest: interest is indexed to the Euribor that results in the downgrading of the This loan had been repaid as of early plus a margin defined according to a Loan Standard & Poor’s (or another rating agency’s) 2006. To Value ratio. The interest rate used for rating to below BBB-; swingline loans is the Eonia index. – case of default: if the debts backed by • Non-utilization fees, if applicable. assets given as guarantees to third parties • Financial covenants: exceed 50% of the revalued net assets. – a Loan To Value ratio limited to 52%; – hedging of financial expenses with EBITDA of at least 2.5; – and a percentage of secured debts divided by revalued assets limited to 20%.

III - LIST OF COMMON CONVENTIONS AND REGULATED CONVENTIONS

List of conventions in force and elaborated under normal and current conditions signed between Klépierre and its affiliates

Party to the contract Object Date BNP Paribas/Klépierre Finance contract (€135 million) 12.22.2004 BNP Paribas/Klépierre Syndicated loan (€1,5 billion) 01.31.2006 BNP Paribas/Klépierre Participations et Financements Finance contract (€165 million) – Counter-guarantee Klépierre 12.22.2004 BNP Paribas/Klépierre Portugal Finance contract (€36.7 million) – Counter-guarantee Klépierre 12.10.2003 BNP Paribas/Klépierre Portugal Finance contract (€36.7 million) – Counter-guarantee Klépierre 12.20.2002 BNP Paribas (payer of the floating rate)/Klépierre Swap No 1935869 01.09.2006 BNP Paribas (payer of the floating rate)/Klépierre Swap No 1932518 01.04.2006 BNP Paribas (payer of the floating rate)/Klépierre Swap No 1917648 08.31.2005 BNP Paribas (payer of the floating rate)/Klépierre Swap No 1932101 07.07.2005 BNP Paribas (payer of the floating rate)/Klépierre Swap No 1712141 04.11.2005 BNP Paribas (payer of the floating rate)/Klépierre Swap No 1902525 12.20.2004 BNP Paribas (payer of the floating rate)/Klépierre Swap No 1612549 12.20.2004 BNP Paribas (payer of the floating rate)/Klépierre Swap No 1612550 12.20.2004 BNP Paribas (payer of the floating rate)/Klépierre Swap No 1612251 12.20.2004 BNP Paribas (payer of the fixed-rate)/Klépierre Swaps No 1910972 et 1901562 06.30.2004 BNP Paribas (payer of the floating rate)/Klécar Italia Swap No 1620401 12.29.2004 BNP Paribas (payer of the floating rate)/Klémurs Swap No. 2244051 11.03.2006 BNP Paribas (payer of the floating rate)/Klémurs Swap No. 2244052 11.03.2006

39 Financial report _management report

Party to the contract Object Date BNP Paribas/Klépierre Finance Automatic cash centralization agreement 11.30.2000 BNP Paribas Securities Services/Klépierre Option plan management mandate July 2006 Exane BNP Paribas/Klépierre Liquidity contract 09.14.2005 Ségécé Search mandate for Klépierre – Initial: 11.23.1998 – General additional clause: 12.27.1999 – Additional clause No 1 Carrefour: 03.24.2000 – Additional clause No 2: 11.03.2000 – Additional clause No 2 for the Carrefour operation: 03.29.2001 – Additional clause No 3 for the Carrefour operation: 01.03.2005 – Additional clause No 2 for the Valenciennes operation: 02.27.2006 – Additional clause for the Toulouse Purpan substitution operation: 12.08.2006 – Additional clause for the Vinaroz (Spain) operation: 04.04.2006 – Additional clause for the Seville (Spain) operation: 04.04.2006 – Additional clause for the Solbiate (Italy) substitution operation: 02.27.2006 – Additional clause for the Cavalino Lecce (Italy) substitution operation: 02.27.2006 – Additional clause No 2 for the Assago (Italy) operation: 01.11.2006 – Additional clause No 3 for the Assago (Italy) operation: 01.12.2006 Ségécé Search mandate, loan arrangement, follow-up and operational – Initial: 04.21.2004 management for Klépierre in Europe, excluding France – Additional clause for the Molina (Spain) substitution operation: 09.14.2006 – Additional clause for the Czech Republic substitution operation: 01.12.2006 – Additional clause No 2 for Prague 4 operation: 08.30.2006 – Additional clause No 2 for Polish mall operation (Sadyba and Ruda): 12.20.2006 – Additional clause No 2 for the Poznan operation: 12.20.2006 – Additional clause No 2 for the Krakow operation: 12.20.2006 Ségécé Search mandate, loan arrangement, follow-up and operational – Initial: 04.21.2004 management for Klépierre in France – Additional clause for the Angers Saint Serge substitution operation: 01.04.2006 – Additional clause for the Orléans Saran substitution operation: 12.19.2006 – Additional clause No 2 for the Rambouillet operation: 11.14.2006 – Additional clause the Rambouillet substitution operation: 02.13.2006 – Additional clause for the Rennes Colombia substitution operation: 02.27.2006 Holding Gondomar 3 Shareholder’s loan 09.01.2005, additional clause No. 1: 12.01.2006 Holding Gondomar 1 Shareholder’s loan 09.01.2005 Klécar Participations Italie Shareholder’s loan 12.20.2004, additional clause No. 1: 01.04.2005 Klépierre Vallecas Shareholder’s loan 12.01.2004, additional clause No. 1: 01.01.2006, additional clause No 2: 05.15.2006 Novate SRL Shareholder’s loan 12.01.2004, additional clause No. 1: 05.15.2006 Coimbra Shareholder’s loan 03.14.2006, additional clause No. 1: 04.01.2006 Delcis CR Shareholder’s loan 04.04.2005, additional clause No. 1: 05.15.2006 Immobiliare Commerciale Dodicesima Shareholder’s loan 06.19.2006 Klépierre Novo Shareholder’s loan 06.30.2006, additional clause No. 1: 07.25.2006, additional clause No. 2: 11.30.2006 Bestes Shareholder’s loan 07.25.2006 Klépierre CZ sro Shareholder’s loan 01.25.2006, additional clause No. 1: 03.01.06, additional clause No. 2: 05.15.2006 SKF Shareholder’s loan Place de l’Accueil Shareholder’s loan 04.01.2006 Galeria Commerciale Klépierre Shareholder’s loan 04.28.2005 Capucine BV Shareholder’s loan 04.01.2005, additional clause No. 1: 05.22.2006 Foncière de Louvain-la-Neuve Shareholder’s loan 12.01.2004, additional clause No. 1: 01.01.2006, additional clause No 2: 04.01.2006

Klépierre_Financial report 2006 ni edm hrhle’ on06.25.1999 AGO04.16.2003 AGO04.02.2003 AGO2003 05.15.2006 1: 12.01.2004,additionalclauseNo. 05.15.2006 1: 12.01.2004,additionalclauseNo. 01.01.2006, 1: 12.01.2004,additionalclauseNo. Shareholder’s loan Shareholder’s loan Shareholder’s loan Shareholder’s Shareholder’s loan loan Shareholder’s loan Shareholder’s loan Shareholder’s loan Shareholder’s Shareholder’s loan loan Shareholder’s loan Shareholder’s loan Shareholder’s loan Shareholder’sSNC BarjacVictor loan Antin Vendôme SNC MailleNord SNC Jardins desPrinces Klécar FranceSNC SAS LP7 KLE 1 Issy Desmoulins Klépierre Conseil Opave Opale Magnolia Klépierre Vinaza Klefin Italia atu hrhle’ on01.16.2003 07.11.2003 AGO04.23.2003 10.02.2006 1: 12.01.2004,additionalclauseNo. 12.20.2004 07.05.2004 05.17.2005 1: 04.22.2005,additionalclauseNo. 12.23.2002 12.20.2004 12.20.2004 Shareholder’s loan 12.20.2004 12.05.2003 Rentpaymentguarantee Firstdemand guaranteeforthebalanceofNancyBonsecours Jointsurety forafinanceloanof Shareholder’s loan Jointsurety forafinanceloanof Shareholder’s loan 10.28.2005 1: 11.05.2003,additionalclauseNo. Shareholder’s loan AGO03.28.1997 Shareholder’s loan Shareholder’s loan AGO2003,03.28.2003 AGO04.18.2003 Shareholder’s loan Shareholder’s loan BNP Paribas/Klétransactions AGO04.10.2003 BNP Paribas/Klépierre Shareholder’s loan Shareholder’s loan Shareholder’s loan Jointsurety forafinanceloanof Klépierre/Klépierre Portugal Shareholder’s loan AGO06.03.2003 Klépierre/Klépierre Portugal AGO06.16.1999 Klépierre/Klépierre ParticipationsetFinancements Shareholder’s loan AGO04.10.2003 Pasteur AGO04.10.2003 12.18.1998 Klépierre Portugal Shareholder’s loan SCI LaPlaineduMoulinàVent Loan Loan Klétransactions Shareholder’s loan Loan SCOO Shareholder’s loan Doumer Caen Shareholder’s loan Combault Angoumars Shareholder’s loan Shareholder’s loan Shareholder’s loan Marseille LeMerlan Tour Marcel Brot Shareholder’s loan Foncière Saint-Germain Shareholder’s loan CB Pierre 11/11bisLevallois SNC GénéralLeclerc No. Shareholder’s loan GAM Shareholder’s loan Havre Lafayette Le Shareholder’s Shareholder’s loan loan Havre Vauban Le Shareholder’s loan Espace Cordeliers Solorec Bègles Papin Sovaly Sodevac Nancy Bonsecours Socoseine OPDF Kléber LaPérouse Klémurs Havre Tourneville Le Havre Capelet Le Cécoville Bassin Nord Party tothecontract adprhs rc KEIREcutrgaate 12.29.2005 land purchase price(KLEPIERREcounter-guarantee) Object € € € 67mlin12.10.2003 12.20.2002 12.22.2004 36.7 million 24.6 million 165 000 diinlcas o :05.23.2006 2: additional clauseNo. Date 41 MANAGEMENT REPORT Financial report _management report

Party to the contract Object Date BNP Paribas/Sodevac Joint surety (Klépierre counter-guarantee) 12.15.2003 BNP Paribas/Meurthe Canal Brot Joint surety 08.12.1999 BNP Paribas/Klépierre First demand guarantee for the Plaza acquisitions 07.29.2005 BNP Paribas España/Klépierre First demand guarantee for the Chiclana facilities 07.07.2006 BNP Paribas/Klépierre Joint sureties for Klépierre Portugal SGPS 12.20.2002 12.10.2003 BNP Paribas/GC Assago First demand guarantee 09.21.2006 BNP Paribas/GC Klépierre First demand guarantee 09.21.2006 BNP Paribas Hungaria/Duna Plaza Joint sureties (Klépierre counter-guarantee) 06.01.2006 BNP Paribas/groupe Klépierre Bank accounts and securities accounts Klégestion Mandate to carry out transactions relating to the “Malesherbes” building 09.21.2006 Klégestion Mandate to carry out transactions relating to the “Front de Paris” building 04.04.2006 Klégestion Mandate to carry out transactions relating to the “Issy-les-Moulineaux” building 04.07.2006 Klégestion Mandate to carry out transactions relating to the “Vélizy” building 08.04.2006 Klégestion Mandate to carry out transactions relating to the “Strasbourg” building 08.28.2006 Klégestion Mandate to carry out transactions relating to the “Champlan” building 09.15.2006 Klégestion Mandate to carry out transactions relating to the “Meyerbeer” building 10.25.2006 Klégestion Management mandate 01.03.1997 Klégestion Management mandate for the “Issy-les-Moulineaux” building December 2006 Klégestion Management mandate for the “Meyerbeer” building January 2007 Klécar France SNC Service agreement for purchasing real estate assets 03.30.2001 Klépierre Conseil Financial and legal engineering agreement (Rennes Colombia shopping center) 11.22.2005 Klépierre Conseil Financial and legal engineering agreement (Vannes commercial premises) 06.29.2006 Klépierre Conseil Financial and legal engineering agreement (offices building in Paris 9th district) 12.14.2006 Klépierre Conseil Financial and legal engineering agreement (“Issy-les-Moulineaux” building) 12.14.2006

Date of authorization Regulated convention Participant granted by the SB Date Object LIST OF REGULATED CONVENTIONS THAT CONTINUED TO BE IMPLEMENTED IN 2006 June 22, 2001 July 9, 2001 Bond loan: Subscription agreement BNP Paribas (signatory) June 22, 2001 July 10, 2001 Bond loan: Fiscal agency agreement BNP Paribas Luxembourg and BNP Paribas Securities Services May 26, 2004 July 9, 2004 Bond loan: Subscription agreement BNP Paribas (signatory) May 26, 2004 July 15, 2004 Bond loan: Fiscal agency agreement BNP Paribas Securities Services and BNP Paribas Securities Services, Luxembourg October 7, 2004 October 14, 2004 Modification of remuneration – Service agreement (additional clause No. 3) SAS Klépierre Conseil December 15, 2005 December 16, 2005 Service agreement relating to the performance of shopping center Éric Ranjard consulting and assistance services

LIST OF REGULATED CONVENTIONS SIGNED IN 2006 February 8,2006 March 13, 2006 Bond loan: Subscription agreement BNP Paribas, HSBC France and The Royal Bank of Scotland PLC February 8, 2006 March 16, 2006 Bond loan: Fiscal agency agreement BNP Paribas Securities Services and BNP Paribas Securities Services, Luxembourg Branch March 24, 2006 April 24, 2006 Agreement to contribute the Rennes Colombia mall SAS Cécoville October 6, 2006 October 20, 2006 Mandate to assist in preparing and carrying out the Klémurs IPOs BNP Paribas – Klémurs October 24, 2006 December 7, 2006 Underwriting and placement agreement for Klémurs shares BNP Paribas – Klémurs October 24, 2006 December 29, 2006 Acquisition of property assets in Paris, corner of Rue Meyerbeer and Rue Halevy Compagnie Financière Ottomane

Klépierre_Financial report 2006 IV - COMPENSATION AND BENEFITS PAID TO MEMBERS OF MANAGEMENT BODIES – COMPOSITION OF THE SUPERVISORY BOARD AND THE EXECUTIVE BOARD – JUDGMENT FOR FRAUD

Remunerations and benefits paid to management body members Compensation of Executive REPORT MANAGEMENT Board members 2006 Gross salaries Directors Benefits Pension Total The compensation of members of the Company officers fees in kind benefit remuneration Fixed Variable Executive Board and the Executive Executive Board Committee is broken down into a fixed Michel CLAIR 282 990 175 000 3 440 461 430 part and a variable part. The variable part Jean-Michel GAULT 131 100 80 000 3 240 5 488 219 828 is determined overall for the six members Claude LOBJOIE 193 710 115 000 2 699 23 050 334 459 of the Executive Committee by applying Laurent MOREL 150 740 80 000 2 762 8 069 241 571 a performance-related percentage to Supervisory Board the total of fixed salaries. Of this total Jérôme BÉDIER 20 406 20 406 amount, 70% is divided in proportion François DEMON 18 707 18 707 to their fixed salaries and 30% according Bertrand de FEYDEAU 31 679 31 679 to the achievement of individual targets. Dominique HOENN 30 936 30 936 Bertrand JACQUILLAT 25 736 25 736 Compensation of Supervisory Bertrand LETAMENDIA 27 964 27 964 Board members Vivien LÉVY-GARBOUA 16 376 16 376 The amount of directors’ fees paid in fiscal Alain PAPIASSE 18 322 18 322 2006 to all the members of the Supervisory Philippe THEL 14 385 14 385 Board totaled €210 000. in euros

2005 Gross salaries Directors Benefits Pension Total Company officers fees in kind benefit remuneration Fixed Variable Executive Board Michel CLAIR 282 990 130 000 2 687 415 677 Jean-Michel GAULT 130 350 63 300 3 213 5 488 202 351 Claude LOBJOIE 182 960 100 600 1 237 23 050 307 847 Laurent MOREL 130 000 35 000 2 316 8 069 175 385 Éric RANJARD 275 100 250 000 3 881 528 981 Supervisory Board Jérôme BÉDIER 14 681 14 681 François DEMON 10 399 10 399 Bertrand de FEYDEAU 17 058 17 058 Dominique HOENN 14 975 14 975 Bertrand JACQUILLAT 16 470 16 470 Bertrand LETAMENDIA 20 931 20 931 Vivien LÉVY-GARBOUA 20 931 20 931 Christian MANSET 23 308 23 308 Jean NUNEZ 3 988 3 988 Alain PAPIASSE 5 350 5 350 Laurent TRECA 1 905 1 905 in euros

43 Financial report _management report

Fees paid to Independent Auditors for fiscal 2005 and 2006

2005 2006 Ernst & Young Mazars & Guérard Ernst & Young Mazars & Guérard Deloitte Amount % Amount % Amount % Amount % Amount % Audit* – Auditing, certification and review of individual and consolidated financial statements 537 90 486 96 47 100 460 95 469 82 – Side mandates 62 10 20 4 25 5 102 18 Sub-total 599 100 506 100 47 100 485 100 571 100 Other services – Legal, fiscal and labour-related – –––– – –––– Sub-total ––––– – –––– TOTAL 599 100 506 100 47 100 485 100 571 100 * Including services of independent accountants or from the network, at the Statutory Auditor’s request for the certification of the financial statements.

Supervisory Board

Dominique HOENN (2) (3) Date of first appointment: Annual General Meeting of April 8, 2004. 21, avenue Kléber – 75116 Paris End of term: Annual General Meeting called to approve the 2006 financial statements. Chairman of the Board Up for re-election by the Annual General Meeting of April 5, 2007. Owns 100 shares.

Alain PAPIASSE (1) Date of first appointment: Annual General Meeting of April 7, 2005. 21, avenue Kléber – 75116 Paris End of term: Annual General Meeting called to approve the 2007 financial statements. Vice-Chairman of the Board Owns 60 shares.

Jérôme BÉDIER (1) (3) Date of first appointment: Annual General Meeting of April 8, 2004. 21, avenue Kléber – 75116 Paris End of term: Annual General Meeting called to approve the 2007 financial statements. Board Member Owns 100 shares.

François DEMON (3) Date of first appointment: Annual General Meeting of April 7, 2005. 21, avenue Kléber – 75116 Paris End of term: Annual General Meeting called to approve the 2007 financial statements. Board Member Owns 60 shares.

Bertrand de FEYDEAU (2) (3) Date of first appointment: Annual General Meeting of July 21, 1998. 21, avenue Kléber – 75116 Paris End of term: Annual General Meeting called to approve the 2006 financial statements. Board Member Up for re-election by the Annual General Meeting of April 5, 2007. Owns 313 shares.

Bertrand JACQUILLAT (1) Date of first appointment: Annual General Meeting of April 12, 2001. 21, avenue Kléber – 75116 Paris End of term: Annual General Meeting called to approve the 2008 financial statements. Board Member Owns 625 shares.

Bertrand LETAMENDIA (1) (2) Date of first appointment: Annual General Meeting of July 21, 1998. 21, avenue Kléber – 75116 Paris End of term: Annual General Meeting called to approve the 2008 financial statements. Board Member Owns 312 shares.

Vivien LÉVY-GARBOUA (1) (2) Date of first appointment: Annual General Meeting of April 12, 2000. 21, avenue Kléber – 75116 Paris End of term: Annual General Meeting called to approve the 2006 financial statements. Board Member Up for re-election by the Annual General Meeting of April 5, 2007. Owns 600 shares. 44

Klépierre_Financial report 2006 Philippe THEL (3) Date of first appointment: Annual General Meeting of April 7, 2006. 21, avenue Kléber – 75116 Paris End of term: Annual General Meeting called to approve the 2008 financial statements. Board Member Owns 200 shares. MANAGEMENT REPORT MANAGEMENT

(1) Member of the Audit Committee. (2) Member of the Appointments and Remunerations Committee. (3) Member of the Investment Committee.

Supervisory Board Meetings The Supervisory Board may decide to form Board. The Chairman of the Executive Board The Board held nine meetings committees to review issues that it or its represents the Company in its relations with in 2006. Chairman may wish to submit to their third parties. consideration. The Board draws up rules The Supervisory Board may assign the same Appointments, functioning of procedure according to which it exercises power of representation to one or more and powers of the Supervisory Board its powers and grants delegations to its members of the Executive Board who will The Supervisory Board is composed of Chairman. bear the title of Chief Executive Officer. a minimum of three and a maximum The Executive Board meets as often as of twelve members who are appointed Executive Board the interests of the Company require. by the Annual Meeting of Shareholders. These meetings are held at the head office For the duration of their term, members Michel CLAIR or at any other venue as indicated of the Supervisory Board must each own Chairman of the Executive Board in the notice of meeting. At least half at least sixty shares. 21, avenue Kléber of the Executive Board members must Members of the Supervisory Board are 75116 Paris Owns 9 747 shares be present for proceedings to be considered appointed for a three-year term, subject valid. Decisions are adopted by the majority to the requirements of annual renewal Jean-Michel GAULT of votes of members present and represented. of a third of the Board. Member of the Executive Board The Executive Board is vested with The duties of a member of the Supervisory 21, avenue Kléber the most extensive powers to act on behalf Board expire at the end of the Annual 75116 Paris Owns 327 shares of the Company in all circumstances. General Meeting of shareholders called It exercises these powers within the limits to approve the accounts of the past year Claude LOBJOIE of the corporate object, subject, however, and held in the year in which the term Member of the Executive Board to those expressly attributed by law and of said member expires. 21, avenue Kléber the articles of association to the Supervisory The Supervisory Board appoints a Chairman 75116 Paris Owns 4 673 shares Board or General Meetings. and one or several Vice-Chairman(s) from Under the control of the Supervisory Board, among its members. Laurent MOREL it must in particular: The Supervisory Board meets as often as Member of the Executive Board • present a report to the Supervisory Board the interests of the Company require, either 21, avenue Kléber about the Company’s business, at least once at the head office or at any other venue. 75116 Paris Owns 140 shares every quarter; Meetings are called by the Chairman, • present the annual financial statements, and the Board examines all questions Executive Board meetings and if applicable, the consolidated financial on the agenda drawn up by the Chairman The Executive Board meets once every week. statements to the Supervisory Board or the Board ruling by simple majority. At least for auditing and control, within three months half of the Board’s members must be present Appointments, functioning after each balance sheet date. for proceedings to be considered valid. and powers of the Executive Board The Executive Board draws up rules Decisions are adopted by the majority The Company is managed by an Executive of procedure according to which it exercises of votes of members present or represented. Board. its powers, grants delegations and designates The Supervisory Board is in charge of The Supervisory Board appoints the members Executive Directors. the permanent oversight of the Company’s of the Executive Board and determines their management by the Executive Board. number within the legal limits. The Executive Loans and guarantees granted At any time during the year, it conducts Board is appointed for three years. to members of management bodies any audits and controls that it deems The Supervisory Board appoints one of the None. necessary and can ask for all documents Executive Board members to be its Chairman. that it considers necessary for carrying The Chairman carries out his duties throughout its duties. out his term as member of the Executive 45 Financial report _management report

Service agreements binding Insider employees members of the Supervisory Board In accordance with the General Regulations or Executive Board to the Company of the stock market regulatory authority, or to any of its subsidiaries Autorité des marchés financiers, members and which provide for the granting of the Supervisory and Executive Boards of benefits in application are required to disclose their dealings of the agreement the Company’s securities and are prohibited A service agreement was signed on from acting in a personal capacity December 16, 2005 between Éric Ranjard on Klépierre’s securities during the following and U3C, a company of which he is a periods: trustee. Under this agreement, U3C provides • for each calendar quarter, during the period the Company with consulting services between the first day of the quarter and concerning the search for operations the day Klépierre publishes its consolidated and shopping center management. As such, revenues, occurring during the quarter U3C steps in at the Company’s request for in question; all aspects concerning the development • for each calendar half-year, during and acquisition of shopping centers, as well the period between the first day of as the financial arrangement and the follow-up the half-year and the day Klépierre publishes of the projects presented to it. its annual or half-year consolidated financial This agreement was entered into for two statements, occurring during the half-year years. in question; • in the time between the date on which To the best of the Company’s knowledge: Klépierre is apprised of information • there are no family ties between members that could have a significant impact of the Executive Board and/or members on the Company’s stock price, if it were of the Supervisory Board; made public, and the date this information • no members of the Executive Board and is made public. the Supervisory Board have been convicted This procedure has been extended to of fraud in the last five years; employees who are classified as permanent • no members of the Executive Board or insiders. the Supervisory Board have been associated The terms under which these rules are with a bankruptcy or gone into receivership to be applied are defined in an internal as a member of an administrative, practice note, which is regularly updated management or supervisory body or as Chief by the Klépierre group’s ethics department. Executive Officer within the last five years; • no penalty, rebuke or official public sanction has been applied to or pronounced against any of the members of the Executive Board or Supervisory Board; no member has been barred by a court from acting as a member of an administrative, management or supervisory body of an issuer or from managing or running the affairs of an issuer in the last five years; • there is no potential conflict of interest between the exercise of the duties, with respect to the issuer, of any of the members of the Executive Board or Supervisory Board and their private interests and/or other duties.

Klépierre_Financial report 2006 H - CAPITAL AND SHAREHOLDING STRUCTURE

I - HISTORY Europe (late 2001) for 5 new Spanish was the result of the agreement signed REPORT MANAGEMENT shopping centers and the Loures shopping with Plaza Centers Europe at the end of July. Klépierre as it is today was formed center in Portugal (2002). In 2002, Klépierre On this occasion, Ségécé wholly acquired at the end of 1990 from the split-up strengthened its position in Italy by: the subsidiary in charge of managing of Locabail-Immobilier, whose ordinary • acquiring 11 Carrefour shopping centers; the Polish shopping centers and took over rental properties has been kept and rented. • partnering with Finim to create PSG, the full control of PCM Hungary by acquiring Since then, Klépierre has been focusing the leading Italian manager of shopping the remaining 50% interest in this company. on its two core businesses: holding and centers; Klépierre also carried out its first investment managing high-end office buildings in Paris • signing a strategic agreement with Finiper in Belgium with the Esplanade shopping and the Greater Paris area, and shopping to acquire a 40% stake in IGC (owner center in Louvain-la-Neuve. centers in France and the rest of Europe. of 9 Finiper shopping centers) and a partnership In 2006, Klépierre continued with its shopping At the end of 1998, Klépierre made to develop new shopping centers. center development program in 7 of the a strategic bid to become a major player In 2003, with 28 shopping centers acquired, 10 countries in which the Group operates, in the creation of new business sites Klépierre consolidated its existing positions and achieved further integration of its in Continental Europe by acquiring an initial in the shopping center segment in France, management network in Italy and the Czech site in Italy. It develops its French businesses Spain, Italy and Greece. The Group also Republic by acquiring whole ownership through its subsidiary Ségécé. At the time, expanded into two further countries of the local management firms. the Group’s principal shareholder was during the year. In Portugal, where Klépierre The outsourcing of property assets by leading Compagnie Bancaire, which had a 51% acquired 3 shopping centers including retailers has also provided Klépierre with new interest. The merger of this group with the Porto Gondomar shopping center, growth opportunities. The Group’s subsidiary Paribas in May 1998 provided Klépierre which was a joint purchase from Eiffage Klémurs, whose IPO took place in December with the opportunity of carrying out several with Prédica, the Group achieved critical 2006, plans to expand its business rapidly business combinations during the year. mass with 4 shopping centers owned. in this area. At the end of 2006, Klémurs They included the takeover-merger of Klépierre also carried out its first investment acquired the real estate ownership of 128 Compagnie Foncière and the contribution in the Czech Republic with the Novy Smichov Buffalo Grill restaurants in France as part of all the securities of Foncière Chaptal. shopping center in Prague. of a major strategic agreement calling for These acquisitions radically changed It extended its network of management the involvement of Klémurs in the chain’s the Company’s size and reinforced subsidiaries with the creation of Sogecaec further development. its positioning in its core investment sectors. in Portugal. With 236 shopping centers owned and On July 17, 2000, Klépierre signed a major In 2003, Klépierre also opted for the French 342 under management at the end contract with the Carrefour group involving tax status of Sociétés d’Investissements of December 2006, Klépierre is a market the acquisition of 160 shopping centers Immobiliers Cotées (SIIC). In 2004, the Group leader in France, Spain and Italy. It is adjoining the superstores of the leading continued with its expansion in France, Italy the second largest owner and the leading retailer brand as well as a management and Spain with the acquisition of 6 shopping manager of shopping centers in Continental and development partnership. centers. Klépierre also gained a strategic Europe through Ségécé and its network This investment was estimated at over position in Hungary with the acquisition of management companies. €1.6 billion. In addition to the 47 Spanish of 12 shopping centers as well as a 50% shopping centers acquired at the end of interest in a local management company, 2000, Klépierre acquired 74 other centers Plaza Centers Management, through in 2001, mainly located in France, 15 in 2002 its subsidiary Ségécé. It raised its stake in IGC and 14 in 2003. At the end of 2004, from 40% to 50% at the end of November. it had acquired a total of 151 shopping Ségécé reinforced its European management centers, mainly in France and Spain, taking network with the creation of Ségécé Hellas the number of acquisitions required under (Greece) and the acquisition of the remaining the agreement to over 96%. 50% stake in Centros Shopping Gestion Klépierre embarked on the second phase (Spain). of the Carrefour agreement, consisting In 2005, Klépierre acquired 9 shopping in a priority right on all the new sites centers, 4 of them in Poland. This was a new developed by Carrefour in Continental country for the Group, and the acquisition

47 Financial report _management report

• to operate and enhance property value In accordance with the French Commercial by leasing such properties or otherwise; Code, shareholders who have owned • to enter into any lease agreement, registered shares for at least three days in France or abroad; prior to the General Meeting may attend • to acquire direct or indirect equity interests the Meeting without any prior formalities. in the legal persons indicated in Article 8 To be entitled to attend General Meetings, and in paragraphs 1, 2 and 3 of Article 206 owners of bearer shares must, at least of the French General Tax Code and, more three days before the meeting date II - GENERAL INFORMATION generally, to acquire equity interests in any and at the venue indicated in the notice company whose purpose is to operate rental of meeting, file a certificate issued by Corporate name properties; an authorized intermediary attesting to Klépierre • incidentally, to acquire an equity interest the unavailability of their shares until the date or ownership in any company or enterprise of the meeting. Trade and Companies Registry operating in the real-estate sector; The Executive Board may shorten, if it chooses, 780152914 RCS PARIS • more generally, to engage in all types the time requirements set forth in the foregoing SIRET 780 152 914 00211 of civil, commercial, financial, investment paragraphs. Shareholders may vote at all NAF 702 C and real-estate transactions directly related meetings by mail as provided for by law. to the aforementioned purpose or in the To be valid, the Company must receive voting Term of the Company furtherance thereof, in particular, borrowing forms at least three days before the meeting. The Company was registered as a French and the constitution of any guarantees Société Anonyme à Conseil d’Administration or pledges required in relation thereto. Fiscal year (French corporation or public limited (Article 30 of the articles of association) company) on October 4, 1968. Its term was Voting rights The fiscal year starts on January 1 and ends set at 99 years, expiring on October 3, 2067. (Article 8 of the articles of association) on December 31 each year. Each share gives right to part ownership Legal form in the Company’s assets, to a share Statutory distribution of profits Klépierre is a French Société Anonyme in the profits and liquidation surplus (Article 31 of the articles of association) à Directoire (Executive Board) et Conseil in a proportion corresponding to At least 5% of profits for the fiscal year, de Surveillance (Supervisory Board). the share capital which it represents. less any prior losses, are set aside to establish It is governed by the legal provisions All new or existing shares, provided they the legally required reserve fund, until such applicable to sociétés anonymes, in particular are of the same class and the same paid-up fund equals one-tenth of the share capital. Articles L. 225-57 to L. 225-93 of the French nominal value, are fully assimilated once The balance and any retained earnings Commercial Code, and by its own articles they entitle holders to the same benefits. constitute distributable profit, from of association. During the appropriation of any profit, which is deducted any amounts that and also during the total or partial refund the General Meeting, acting on Registered office of their nominal capital, they receive the recommendation of the Executive 21, avenue Kléber the same net amount, and all the taxes Board, and subject to the approval 75116 Paris and duties to which they may be subject of the Supervisory Board, decide to appropriate Tel.: 33 (0)1 40 67 57 40 is evenly divided among them. to one or more optional, ordinary or Owners of shares are liable responsible extraordinary funds, with or without special Corporate purpose only up to the limit of the nominal amount appropriation, or to carry forward as (Article 2 of the articles of association) of shares that they own. retained earnings. The Company’s purpose is: The balance is apportioned among • to acquire any land, real-estate rights General meetings (Articles 25 the shares. The General Meeting called or properties located in France or abroad, and 26 of the articles of association) to approve the annual financial statements as well as all properties or rights that may Meetings are called by the Executive may grant each shareholder the option constitute an addition or annex to such or Supervisory Board, or by the persons of receiving the dividend in cash properties; designated by the French Commercial or in shares, for all or a portion • to construct buildings and engage Code. They deliberate in accordance of the distributed dividend. in all operations directly or indirectly related with applicable legal and regulatory This option may also be granted to the construction of those buildings; provisions. for the payment of interim dividends.

Klépierre_Financial report 2006 Disclosure of thresholds (Article 7 and coming from profits and/or capital gains of the articles of association) that are tax exempt under the tax status, Any natural or legal person, acting alone provided that they are distributed in the fiscal or in concert, who acquires more than 2% year following the year in which they were REPORT MANAGEMENT of the share capital or any multiple thereof, earned. is required to notify the Company, by registered letter with acknowledgement Legal proceedings and arbitration of receipt, of the total number of shares No exceptional event, state or legal held within five trading days after having proceedings or arbitration of which exceeded each of the aforementioned the Company is aware to date has thresholds. recently had a material impact on the financial Should a shareholder fail to make these position or profitability or earnings declarations under the above-mentioned of the Company and the Group. conditions, the shares that exceed the fraction that should have been Consultation of documents declared are deprived of their voting rights and information concerning at Shareholders’ Meetings, if the failure the Company to declare is noted at a meeting and if one The articles of association, minutes of general or more shareholders holding together meetings and other corporate documents, at least 2% of share capital so request as well as historic financial information, at the Meeting. The forfeiture of voting all appraisals and declarations made rights applies to all shareholders’ meetings by experts at the Company’s request, for a period of two years from the date and all other documents that have to be the shareholder corrects the notification. kept at the disposal of shareholders in Shareholders are also required to notify accordance with the law may be consulted the Company, as per the above-mentioned at the Company’s head office: procedures and deadlines, when their 21, avenue Kléber – 75116 Paris interest in the Company falls below any Tel.: +33 (0)1 40 67 30 01 of the foregoing thresholds.

Tax status Klépierre has opted for the tax status of SIIC (Sociétés d’Investissements immobiliers Cotées) pursuant to Article 208-C of the French General Tax Code. As such, it is exempted from corporate income tax on: • income from rents, on the condition that 85% of said income is distributed to shareholders before the end of the fiscal year following that in which the income was earned; • capital gains from the sale of buildings, equity interests in real estate partnerships (sociétés de personnes) or in subsidiaries that have opted for the new tax status, provided that 50% of these capital gains are distributed to shareholders before the end of the second fiscal year in which they were realized; • dividends received from subsidiaries that have opted for SIIC tax status

49 Financial report _management report

III - INFORMATION REGARDING EQUITY CAPITAL

Share capital – Type of shares The shares are in registered or bearer form, Authorizations to increase As of December 31, 2006, the Company’s share as the shareholder may decide. Share capital share capital capital stood at €184 656 916, divided into may be modified under the conditions By virtue of the resolutions approved 46 164 229 shares with a par value of four euros. provided by the law. by the extraordinary General Meeting Shares may carry single or double voting of shareholders of April 7, 2005, rights in accordance with article 28 the Executive Board has received the following of the articles of association. authorizations:

Delegations of authority/ Maximum account Term Expiry autorizations of capital increase date Issue of common shares with or without warrants and investment securities giving access to share capital with or without PSR 60 000 000 euros 26 months June 7, 2007 Capitalization of reserves, profits, issue, share and contribution premiums 60 000 000 euros 26 months June 7, 2007 Issue of shares in consideration for contributions in kinds relating to capital stock or IS that give access to share capital 10% of share capital 26 months June 7, 2007 Bonus issue of existing or future shares 10% of share capital 26 months June 7, 2007 Abbreviations: PSR – Pre-emptive share rights; IS – Investment securities *Additionnal delegation to the Executive Board to increase the number of shares to be issued in case of capital increase with or without PSR within the limits of the percentage of the initial issue as per legal or regulatory provisions applicable when the issue takes place. For the above delegations and authorizations, give access to share capital is €1 200 000 000. the maximum increase in share capital social These authorizations are still valid is €70 000 000 and the maximum increase and cancel and supersede all previous in IS representative of the Company’s debt that authorizations of the same nature.

Five-year summary of changes in share capital

Dates Type of increase Number of Premium Share shares issued capital January 30, 2001 Bond conversion* COB Visa No. 98-850 2 910 – F647 432 750 June 5, 2001 Conversion of share capital into euros COB Visa No. 98-850 – – €103 589 240 January 15, 2002 Bond conversion* COB Visa No. 98-850 434 902 – €107 068 456 December 3, 2002 Bond conversion* COB Visa No. 98-850 1 536 364 – €119 359 368 April 4, 2003 Reduction of the value of shares from €8 to €4 14 919 921 – €119 359 368 April 4, 2003 Capital increase through capitalization of reserves 14 919 921 – €179 039 052 May 6, 2004 Payment of dividend in shares 1 404 466 – €184 656 916 * Bond convertible into shares – November 1998 – represented by 970 681 bonds with a F1 295 par value.

Dividends The dividends distributed for the last five fiscal years were as follows:

Year of distribution 2002 2003 2004 (1) 2005 (1) 2006 (1) Number of shares 13 383 557 14 919 921 44 759 763 46 164 229 46 164 229 Net dividend €3.10 €3.50 €2 €2.30 €2.70 Tax credit at 50% €1.55 €1.75 €0.70 – – Overall revenue €4.65 €5.25 €2.70 – – Net dividend paid (2) €41 489 026.70 €52 219 723.50 €89 519 526.00 €106 177 726.70 €124 643 418.30 (1) After the tripling of shares in 2003 following the two-for-one stock split and the allotment of a free share for two shares. (2) Without taking into account the cancellation of dividend on treasury shares in the Company’s possession on the day the dividend is payable.

Klépierre_Financial report 2006 No interim dividends were paid during this period. Nevertheless, in the case of change Dividends that remain unclaimed automatically of ownership resulting from an inheritance, lapse in favor of the state after five years from the liquidation of the joint estate of spouses the date of distribution. or a donation inter vivos for the benefit of REPORT MANAGEMENT Treasury shares held by the Company do not a spouse or relative entitled to inherit does qualify for dividends. not entail the suppression of acquired right. The Company may cancel double voting Breakdown of share capital rights under the conditions provided and voting rights (Article 28 by the law. of the articles of association) As of December 31, 2006, there were 65 780 350 Holders of registered shares or their proxies, voting rights, 20 011 942 of which were double if their shares are fully paid-up and registered voting rights. in their name for at least two years, or come There are no voting rights attached to treasury from a pool of full paid-up shares, all registered shares held by the Company. in the name of their owner for at least two years, are entitled to two votes for each share As of 31 December 2006, the following were held at ordinary and extraordinary meetings. the main owners of the Company’s 46 164 229 Shares forfeit their double voting right if they shares: are converted into bearer shares or when the ownership is transferred.

Votes % of capital % of voting owned rights Main shareholders Number of shares Total votes Simple Double OGDI 9 351 911 15 532 356 3 171 466 6 180 445 20.26% 23.61% Foncière de la Compagnie Bancaire 8 341 460 16 682 920 8 341 460 18.07% 25.36% BNP Paribas SA 3 959 082 7 894 377 23 787 3 935 295 8.58% 12.00% Compagnie Financière Ottomane 1 398 878 2 732 756 65 000 1 333 878 3.03% 4.16% SETIC 103 660 207 320 103 660 0.22% 0.32% UCB Bail 420 840 0 420 ns ns Total for the BNP PARIBAS Group 23 155 411 43 050 569 3 260 253 19 895 158 50.16% 65.45% Floating stock 22 612 997 22 729 781 22 496 213 116 784 48.98% 34.55% Treasury shares 395 821 – – – 0.86% 0.00% TOTAL 46 164 229 65 780 350 25 756 466 20 011 942 100% 100%

51 Financial report _management report

The Company was notified of several cases the 2% threshold several times in both • BNP Paribas crossed the 66.66% threshold in which shareholding disclosure requirement directions. several times in both directions. thresholds were exceeded during fiscal 2006: • Compagnie Financière Ottomane’s interest • The Société Générale group crossed fell below the 6% and 4% thresholds.

Breakdown in the distribution of share capital in the last three years

Situation as of December 31, 2004 Situation as of December 31, 2005 Situation as of December 31, 2006 Number % % of voting Number % % of voting Number % % of voting of shares of capital rights of shares of capital rights of shares of capital rights BNP ParibasGroup 24 705 513 53.51% 69.40% 24 705 411 53.52% 69.39% 23 155 411 50.16% 65.45% Floating stock 21 224 815 45.98% 30.60% 21 271 159 46.08% 30.61% 22 612 997 48.98% 34.55% Treasury shares 233 900 0.51% – 187 659 0.41% – 395 821 0.86% –

As of 31 December 2006, Klépierre held At the annual general meeting to be held authorized the Executive Board to grant, 395 821 treasury shares, representing 0.86% on April 5, 2007, the Executive Board will ask on one or more occasions, stock options of the share capital. To the best of the the shareholders to renew this authorization on existing Company shares from purchases Company’s knowledge: for a period of 18 months. The terms and made by the Company pursuant to applicable • there is no agreement which, if implemented, conditions will remain unchanged and laws. This authorization is valid for thirty- could lead to a change in control over the the maximum purchase price will be eight months. Company at a later date; 200 euros for each share with a par The total number of stock options granted • there are no shareholders’ agreements. value of 4 euros. may not entitle beneficiaries to subscribe or buy shares in excess of 1.1% of the share Authorization to trade in the A description of the share buyback program capital. The stock options have a vesting Company’s shares and cancel them, was posted on the Klépierre website period of eight years. if necessary www.klepierre.com Under this authorization, 195 000 stock In accordance with the provisions of Article options were granted on May 30, 2006. L. 225-209 of the French Commercial Code, Stock options As of 31 December 2006, no stock options the Annual General Meeting of April 7, 2006 At the meeting held on April 28, 1999, had been exercised yet. authorized the Executive Board to purchase the shareholders authorized the Executive Shares acquired by exercising stock options the Company’s own shares. The purpose of Board to grant, on one or more occasions, may be freely assigned, on the condition this authorization is to enable the Company options to subscribe to new Company shares that the abstention period concerning to lawfully trade in its own shares. or to purchase existing shares from purchases trading in the Company's securities The maximum purchase price was fixed made by the Company pursuant to applicable by members of the Executive Board at 150 euros per share. laws. This authorization was valid for four and insider staff was complied with. The authorization is valid for a maximum years. period of eighteen months. The total number of stock options granted Employee profit-sharing The Executive Board may also cancel may not entitle beneficiaries to subscribe There is no agreement that provides the shares held in connection with the stock or buy shares in excess of 3% of the share employee sharing in the issuer’s capital. purchase authorization, for a period of capital. two years and up to a maximum of 10% The Company’s stock options have a vesting of the Company’s capital per 24-month period of between five and ten years. period, and to reduce share capital accordingly Under this authorization, 70 600 stock by charging the difference between options were granted on June 24, 1999. the purchase value of the cancelled Given the two-for-one stock split and the securities and their par value to available allotment of one free share for two existing premiums and reserves. A description of shares in April 2003, these stock options the share buyback program was posted involve 211 841 shares. on the Klépierre website and the website As of December 31, 2006, 32 598 stock of Autorité des marchés financiers on March options had not yet been exercised. 16, 2006. The annual general meeting of April 7, 2006

Klépierre_Financial report 2006 IV - EQUITY CAPITAL AND STOCK MARKET

Shares All equity securities are listed on the Eurolist by Euronext Paris (compartment A). REPORT MANAGEMENT

2001 2002 2003 2004 2005 2006 Market capitalization 1 436 1 927 2 135 3 008 3 661 6 601 (in millions of euros)* Number of securities – Daily average volume 24 444 33 837 44 853 49 474 68 436 112 030 Share price High 37.0 44.9 48.9 66.0 85.0 143.3 Low 31.7 36.1 38.3 47.1 60.6 78.7 Close 35.8 43.0 47.7 65.2 79.3 143.0 * Last quotation of the year. Source: Euronext

Trading volume over the last 18 months (in number of shares and equity traded)

Price Price Number of Amount traded Shares high low shares traded (in € millions)

2005 September 85.0 78.5 1 259 850 101.8 October 84.8 77.0 1 124 174 90.0 November 80.3 76.1 1 864 780 145.9 December 79.3 75.4 1 700 453 131.4 2006 January 82.6 78.7 2 240 209 180.4 February 98.0 81.6 3 837 579 353.6 March 103.4 96.0 2 913 816 291.6 April 106.9 92.4 1 956 620 193.8 Mai 98.6 82.1 3 639 313 324.5 June 91.9 80.2 2 869 257 247.1 July 101.9 89.3 2 286 206 218.1 August 110.0 99.5 1 846 921 194.5 September 118.8 105.5 1 650 321 183.6 October 122.6 113.6 2 329 767 274.7 November 126.4 117.0 1 484 805 180.2 December 143.3 120.5 1 512 956 199.9 2007 January 144.7 130.8 2 864 741 391.5 February 164.7 135.5 3 104 559 470.7 Source: Euronext

53 Financial report _management report

July 2008 bonds Description:

Amount of the issue €600 millions Issue price 99.557% for principal amount of €500 million 99.006% for principal amount of €100 million Due date July 10, 2008 Coupon 6.125% ISIN code FR0000486516 Quotation Luxembourg Stock Exchange

A prospectus dated July 9, 2001 is available from the Company.

July 2011 bonds Description:

Amount of the issue €600 millions Issue price 99.241% Due date July 15, 2011 Coupon 4.625% ISIN code FR0010099226 Quotation Luxembourg Stock Exchange

A prospectus dated July 9, 2004 is available from the Company.

March 2016 bonds Description:

Amount of the issue €700 millions Issue price 99.02% Due date March 16, 2016 Coupon 4.25% ISIN code FR0010301705 Quotation Luxembourg Stock Exchange

A prospectus dated March 13, 2006 is available from the Company.

Klépierre_Financial report 2006 I - SUSTAINABLE DEVELOPMENT

SOCIAL AND ENVIRONMENTAL by Klépierre, and managed by Ségécé and REPORT MANAGEMENT INDICATORS UNDER NRE its subsidiaries (hereafter referred to as PKlp) (NOUVELLES RÉGULATIONS ÉCONOMIQUES) in France and abroad. OR NEW ECONOMIC LEGISLATIONS Offices Shopping centers The office segment is a secondary business Working through Ségécé and its subsidiaries, for Klépierre and represents just 10.3% the Klépierre group specializes in the leasing of total revenue. For the properties it and real estate management of shopping already owns, Klépierre’s role is an advisory centers for third parties. The property one only, and tenants are responsible administered and managed in this way falls for the use they make of the premises. into two categories: real estate assets owned On the other hand, Klépierre does include by Klépierre, and real estate assets managed, environmental considerations in its specifications but not owned, by Klépierre. Monitoring for new projects. Information on how of the following NRE environmental corporate office buildings are managed indicators applies to shopping centers owned will also be provided.

Social indicators under NRE Fiscal 2006 Scope 1. Total compensation and all benefits paid during the fiscal year to each corporate officer See page 43 2. Total compensation and all benefits received during the fiscal year by each corporate officer from controlled companies within the meaning of Article L. 233-13 of the French Commercial Code See page 43 3. List of all offices and functions held in any company by each of these officers during the fiscal year See page 35 4. Total company workforce, At the end of December 2006, the Group workforce totaled 1 032 employees, an increase of 41 employees Group including employees who (27 in France and 14 abroad) compared with December 2005. The workforce under management in France totaled work under fixed-term contracts 495 employees (488.4 full-time equivalent), including only 16 on fixed-term contracts. This virtual stability of the workforce (+4% compared with 2005) both in France and abroad can be attributed to the way in which existing teams are structured without outside development. Although the concept of “cadre,” loosely translated as “executive,” is not transposable to other countries, we have analyzed this group and found that, in France, executives account for 64% of the workforce. 30% of employees in our foreign subsidiaries occupy executive positions. The breakdown of the Group workforce in 2006 – 48% in France and 52% abroad – was unchanged versus 2005. 5. Recruitment, analyzed by fixed-term In 2006, the Group recruited 220 new permanent employees in the various consolidated entities, Group and open-ended contracts with females accounting for 61.3% of the total. The 71 new employees recruited in France during 2006 can be broken down as follows: 44 women and 27 men, 21 of whom are covered by fixed-term contracts (13 women and 8 men). 9 of these recruitments resulted from the conversion of fixed-term contracts to open-ended contracts. Of the 149 new employees recruited in our foreign subsidiaries during 2006, 94 are employed under open-ended contracts, and 55 under fixed-term contracts. 61% of these new employees are women. For the first time in 2006, with 2 employees recruited in Hungary under VIE contracts (Volontariat International en Entreprise, or International Business Volunteer program).

55 Financial report _management report

Social indicators under NRE Fiscal 2006 Scope 6. Recruitment difficulties Within the commercial real estate sector, Klépierre remains an attractive company to work for. Group With 2 600 résumés received in 2006 (including 350 unsolicited applications), Klépierre was able to meet its recruitment needs, although the market for certain job profiles appears to be getting tighter (e.g., real estate lawyers, negotiators, accountants). This year saw a sharp increase in the hiring of young graduates who have completed higher education and had at least two years of job experience (10% of all new hires). More experienced people (over five years of experience) with considerable expertise in their fields (e.g., shopping center directors, real estate project managers and negotiators) still account for a high percentage of new hires. The Group’s subsidiaries are confronted with a number of relatively tight labor markets. In Eastern Europe, job offers from foreign companies (especially those from English-speaking countries) that have recently set up local operations have led to substantial turnover, with individuals rushing to sign with the highest bidder. In Spain as well, particularly in Madrid, a city with virtually no unemployment, finding qualified people who can speak foreign languages is no easy task. The problem is compounded by the fact that real estate and construction are the driving forces behind Spain’s current economic boom. The result has been a considerable upward drift in wages and salaries. 7. Dismissals and grounds for dismissal There were 43 dismissals in 2006. The main grounds were professional incompetence and gross misconduct. Group More than half of the dismissals occurred in Hungary, where a number of Klépierre employees ultimately proved to lack the required skills in the Group’s core business. 8. Overtime A total of 1 018 hours were worked in 2006, a figure 3.8% lower than in 2005. France 9. Non-company labor The monthly average for temporary staff was kept to a modest 10 full-time equivalent employees. France This figure has not changed since 2005, although the Company workforce in France increased by 6% during the same period. The average length of these contracts was 36 days, versus 21 days in 2005. Expenditure on temporary staff is as follows: 2004: €345 000 (excluding taxes) 2005: €401 000 (excluding taxes) 2006: €475 000 (excluding taxes) The year-over-year rise in temporary staff costs in 2006 was due to recruitment of increasingly qualified personnel. Klépierre uses licensed temporary manpower agencies. The contracts signed with these agencies include very strict clauses on compliance with employment law and the prevention of illegal subcontracting. 10. Information relating to the workforce Klépierre has not implemented any workforce reduction or job protection plan. France reduction and job protection plan, Whenever necessary, Klépierre examines all career change opportunities within the Klépierre Group redeployment, reappointment and the BNP Paribas Group. and career support (where applicable) 11. Working hours Since November 2000, the legal workweek in France has been 35 hours. As part of the standard number of hours France worked during the year, all employees receive 28 days’ paid leave, as well as May 1st, all national public holidays and rest days (RTT). Klépierre Group employees work on Whit Monday in accordance with the Journée de Solidarité (day of solidarity) legislation. Employees with over 12 months of service may join a Compte Épargne Temps (Time Savings Account) in which they accumulate paid leave and/or time off earned under the working hours reduction (RTT) legislation. The maximum number of entitlements (each equivalent to 1 day) that can be added to the Compte Épargne Temps in one calendar year is 10 (the maximum rises to 15 for employees whose working hours cannot be predetermined, and those over 50 years of age). In addition to being taken as additional paid leave, saved days can also be used to offset hours or days not worked as a result of switching to part-time work, for training received outside working hours, or as Fongecif unpaid leave. In 2006, 52 employees accumulated paid leave days in their CET, compared with 60 in 2005 and 45 in 2004. 12. Working hours for full-time employees In France, the general rule is that full-time employees work a 35-hour week on average. In the other Group (exc. Belgium) European subsidiaries, the full-time working week is 39 or 40 hours. 13. Working hours for part-time employees At December 31, 2006, 32 people were working part-time, representing 6.5% of the workforce. France 100% of part-time employees are women. 80% of the full-time equivalent is the most common option selected by part-time employees (91%).

Klépierre_Financial report 2006 21. 20. 19. 17. 16. 15. 22. elhadsft odtos In2006,companydoctorsatcorporateheadquarterscompleted128consultations(including83annua Group (exc.Belgium) Health andsafetyconditions Laborrelations intheKlépierre Group havebeenconstructive.In2006,twonewagree Labor relations andcollectiveagreements TheKlépierre Group workforce (1032employees)comprises602womenand430men.Women nowre Gender equalitywithintheCompany France Forconsolidatedcompanies,thetrend inpayroll expenseswasasfollows: Underawageagreement signedinMay2006,theemployeesofKlépierre Francewere granteda1.2%raise,capped Theaveragegross monthlysalaryis Payroll expenses Pay trend Pay riig84cusswr fee n20,rpeetn 0 or ftann o 8 mlye n eieigatann Fran 894courseswere offered in2006,representing 8500hoursoftraining for388employeesanddeliveringatraining Training 18. 14. nrpieadsvnspas (CompanySavingsPlan)oraPland’ÉpargneRetraiteCollectifGroup SavingsPlan)towhic InFrance,employeesare covered bytheBNPParibasGroup employeeshareholding agreement Entreprise andsavingsplans) underthesetwoplans.Thesumsinvolved,togetherwithvoluntarypaymentsmaybei Code (employeeprofit-sharing, shareholding Klépierre in ChapterIVofBooktheFrench Labor Application oftheprovisions setout leaveisi Theabsenteeismrateis1.3%forillnessalone,risingto3.9%whenmaternity Absenteeism andreasons forabsenteeism Social indicatorsunderNRE the CFE-CGC-SNUHAB(themajorityorganization)andCFDT. with 41.4%in2005and39.7%2004.OutsideFrance,40%ofallfemalestaff membersholdexecutivepositions. The planhad639members. to 2.26%oftotalpayroll. In2006,Klépierre paid2.3%oftotalwagesintheformindividualperformancebonuses. 11% were promoted duringtheyear. Absenteeism forillnesswas16%lowerthanin2005,whereas leaverose absenteeismrelated by60%. tomaternity 60% of the internships were forperiods oflessthan3months. 60% oftheinternships vaccinations dispensedtovolunteers.Two blooddonationcampaignswere alsoconductedin2006. for allemployees,andadviceisregularly givenduringmedicalexams.Fluvaccination campaignscontinue,with14free on issuessuchascancer, AIDS,stress, tobaccodependencyandcardiovascular disease.Informationleafletsare available - Ongoinghealthriskprevention initiatives: practical adviceisalsogiven. how toassessandadjusttheirposture whenusingacomputer. Premises are alsoinspected regularly, atwhichtime a computerworkstation.Forexample,thisleafletencouragesemployeestoadjust theirscreen brightness,andexplains and annualcheck-up.Itfocusesprimarilyonhowtoavoidposture-related healthrisks andhowtoworksafelyat - Ergonomics: monitoring andhealthriskprevention initiativesinthefollowingareas: 1 reinstatement exam, company physicians.In2006,thelattercompleted80consultations(including10recruitment exams,1post-illness as aresult oftheseexamsand4tofamilyphysicians.Employeesworkingatshoppingcentersare examinedbylocal 3 consultationsataphysician’s request and1atanemployee’s request) 3employeeswere referred tospecialists 25 recruitment exams,4post-natal1post-illnessreinstatement exam,1post-accidentreinstatement exam, New workscouncilsandemployeerepresentative electionswere heldinOctober, withtwounionswinningpositions: and anagreement onhowtodivideupretirement contributions. to improve conditionsforemployeeswere signed:apayagreement (seePartXVIoftheNREAppendix) from up representing 69%ofallpromotions, In theGroup’s European subsidiaries,womengot21outof40 recruits were women.11.2%ofallnewrecruits inFranceare overtheageof40. of theworkforce, compared with56.2%in2005and54.8%2004.In2006,61.3%oftheKlépierre Group’s new at 27% ofemployeesreceived payincreases in2006. had a total of 41 interns inFrance,halfofthemworkingoperationalmanagement departments. had atotalof41interns claimed trainingtime,with35ofthemusing thefullnumberofhourstowhichtheyare entitled.In2006,Klépierre In thefirstyearinwhichDroit Individuelà laFormation(DIF, orVocational Training Law)wasinforce, 188employees extend theirknowledgeofthedisciplines inwhichSégécéisinvolved.Thiscollegetrained240employees2006. managementcompany Ségécébecameoperational attheendof2005.Ithasalready helpednumerous employees access rateof77.3%.TheÉcoledesMétiersSégécécollege,orSégécampus,set upbyKlépierre shoppingcenter € 350. Theagreement alsoincludesanexceptionalbonusof The amountofemployeesavingsheldbypresent andformerGroup employeestotaled 2006 was75%,upfrom 69%in2005. Employees ofFrench companieswere alsoabletosubscribetheBNPParibascapitalincrease: thesubscriptionratefor also contributes. A leafletonITworkstationergonomicsisdistributedanddiscussedattherecruitment examination signed anemployeeprofit-sharing agreement post-accident reinstatement examand1post-natalexam).Klépierre continueditshealthandsafety € 9 ecuigepoescvrdb pca a cls.France 2 997(excludingemployeescovered byspecialpayscales). Fiscal 2006 61% in2005.InFrance,42%ofwomenholdexecutivepositions,compared Under theseinitiatives,healthinformationandeducationare provided i iloso uo)1. 13.5 11.1 (in millionsofeuros) promotions. In € 1 000.Thetotalamountpaidwas in 2004.In 2006,employees France, 33womenwere promoted in2006, 052006 2005 et eind France ments designed received 15%oftheircompensation nvested inaPland’Épargne cue.France ncluded. € 24.7 millionatDecember31,2006. € 827 000,equal hc-p,France l check-ups, Scope rsn 83 Group present 58.3% . France h thecompany 57 MANAGEMENT REPORT ce Financial report _management report

Social indicators under NRE Fiscal 2006 Scope 23. Employment and inclusion Klépierre employs 3 disabled employees. France of disabled employees Klépierre has started to develop service provision relationships with Centers of Assistance through Work, particularly in connection with public events. In addition, an audit has been initiated with an organizational consultant specializing in disability. The goal of the audit is to identify the best ways of developing employment opportunities for the disabled, both in-house and externally through appropriate companies. 24. Company benefit plans National-level social and cultural activities are administered jointly by a federation of works councils that encompasses France several subsidiaries of the BNP Paribas Group. Local initiatives are run by the individual works councils of each Klépierre company. These services are very diverse, and include the organization of staff holidays, children’s summer camps, family assistance, lending libraries for CDs, videos and other media, and reductions on theater and movie tickets. A sports and cultural association gives employees the opportunity to participate in team sports and a wide range of cultural activities. 25. Relations between the company In 2006, Klépierre continued to maintain contact with educational institutions whose areas of specialty Group (head offices and and community outreach organizations, correspond to our own (e.g., the ESPI, Negocia Procos, etc.). These relations can take the form of offers of PKlp shopping centers) educational institutions, environmental open-ended contracts, fixed-term contracts or, more infrequently, apprenticeship or certification contracts. conservation and consumer groups, In France and abroad, over 55% of all Group shopping centers are engaged in philanthropy or programs to foster and local residents the economic and social development of the country or region in which they operate. The work done by 15 French shopping centers in favor of employment is a prime example. Such efforts may range from making space available and organizing forums to providing grants and establishing partnerships. All told, close to €250 000 has been allocated to such programs by the 169 shopping centers monitored in 10 different countries. As a partner to the Association Française contre les Myopathies (AFM), Ségécé and 41 shopping centers in France participated in the Telethon for the third year in a row. The approach this year was to propose that the shopping centers “buy back” fictitious floor space to create a virtual shopping center. Approximately €90 000 was raised through events held at shopping centers, donations from merchants, grants and other contributions. In addition, Galae broadcast free infomercials on the Telethon for two weeks. This year, these infomercials were shown on 967 plasma screens in 70 shopping centers. The cost of showing them across the entire portfolio was €150 000. Last of all, to enhance stakeholder relationship management, close to 80 satisfaction surveys were conducted among shopping center customers in France and abroad. 26. Methods used by the company to assess In 2006, Klépierre projects authorized by the Commission Nationale or Départementale d’Équipement France the regional impact of its business activities Commercial created 569 additional (full-time equivalent) retail jobs. on regional employment and development This figure excludes jobs created indirectly as a result of the construction and management of future retail facilities. 27. The extent of subcontracting – The company selects its subcontractors on the basis of their compliance with employment standards. Group methods applied by the company Sustainable development criteria are therefore included in all the contracts signed with providers of to ensure that its subcontractors maintenance and security services for the French and foreign shopping centers managed by Klépierre subsidiaries. comply with basic ILO standards Suppliers are also required to submit a certified statement to the effect that the work concerned will be carried out by staff working under regular employment contracts, and that their terms of employment and working conditions comply with local legislation. In France, regular checks are made to ensure that these commitments are honored. These checks will also be extended to cover foreign centers. 28. Methods applied by the company It should be noted that all of the countries in which Klépierre operates have ratified the eight basic ILO conventions, Group to ensure that its subsidiaries comply with the exception of the convention on the minimum working age of children in the Czech Republic. We are also able with basic ILO standards to confirm that no child is employed by Klépierre or any of its subcontractors. The widespread introduction in 2005 of standard contracts incorporating sustainable development clauses also helps to ensure that the company’s subsidiaries require their subcontractors to comply with the basic employment regulations. 29. Methods applied to ensure that foreign Klépierre imposes sustainable development targets to steer the relationship between its foreign subsidiaries and centers Group subsidiaries consider the impact and their suppliers. Almost 80% of the shopping centers have adopted clauses requiring compliance with environmental of their business activities standards. Standard code of conduct clauses that are consistent with the Ségécé-Klépierre charter have also been on regional development incorporated into 65% competitive bidding every three years and to give priority to companies that comply and local communities with Europeanstandards in this area. 95% of the companies approached for the most important services (security, cleaning and maintenance) meet the requirements imposed by local and European standards.

Klépierre_Financial report 2006 4. 3. 2. nrycnupin657000kWh,13 500litersofheatingoiland1143cubicmeterssteamwere usedtoheatthefourbuilding Permanentmonitoringandcontrol ofshoppingcentertechnicalsystemsensure effective man Measures to improve energyefficiency Energy consumption Mostoftheheadoffices ofGroup subsidiarieshaveadoptedpoliciesseekingtolimitpaper consumptio Raw materialsconsumption 1. ae osmto lper’ oprt edurescnue 3 ui eeso ae n20.Pes ee otetbe Gro Klépierre’s corporateheadquartersconsumed3333cubicmetersofwaterin2006.Pleaserefer tothetable Water consumption Environmental indicatorsunderNRE required outandwindowsclosedattheend ofeachday. tomakesure thatlightshavebeenturned Lighting: of energyconsumption. (with 16more already scheduledfor2007). by anISO14001certifiedcompany. nearly 220sq.m.ofpaperhasbeencollectedattheKlépierre corporateheadquartersandrecycled or paperfrom eco-certifiedsuppliers.SinceMarch 2006,thestartingdateforselectivesorting, of theGreek andPortuguesesubsidiaries.TheCzech,ItalianSpanishsubsidiariesuserecycled paper Selective papersortingwasintroduced atcorporateheadquartersinParis,aswelltheheadoffices Similarly, waterusedtotestsprinklersisnowsystematicallyrecovered. etn ytm nisbidns oad h aeed h euiysrie norbidnsae (offices) heating systemsinitsbuildings.Towards thesameend,securityservicesinourbuildingsare performance” testsandregularly mandates for smallershoppingcenters.In being testedatthePontault-Combaultshoppingcenter. Duetothiscostfactor, itcanbeenvisioned Centralisée, orGTC).AnewGTCthatcostshalfonethird ofwhatpresent systemsdoiscurrently and 55PKlpshoppingcentersabroad possessacentraltechnicalmanagementsystem(GestionTechnique Automation oftechnicalsystems: including theParque NascenteshoppingcenterinPortugalandPoznanPlazaPoland. and roofs at foreign shoppingcenters.Solarcontrol filmhasalsobeenintroduced at6sitesabroad, Glazing: and expanded.Thissameprogram alsoincludedtheintroduction ofadaylight-responsive lightingcontrol system. some ofthemover13metershigh,were installedwhentheRambouilletshoppingcenterwasrenovated of naturallightinnewprojects contributestothiseffort. Forexample,over1500sq.m.ofglasswalls, At theforeign shoppingcenters,closeto PKlpshoppingcenters) in Francethatapplythispolicytoalllightingfixtures. when fixtures are replaced. This preference may be seenat70%ofthePKlpshoppingcenters,including17 shopping centers.29French shoppingcentersand12PKlpforeign centersconductedenergyauditsin2006 Please refer tothetablesonpages64and65fordetailsofelectricity, gasandheatconsumptioninmonitored at theheadoffice in2006.130580cubicmetersofchilledwaterwere usedforair-conditioning. € npg 5frdtiso ae osmto ymntrdsopn etr 3 rnhcnes PKlpshoppingcenters) promoted. Studiesoninstallingartesianwellstomeetsprinklingneedsare underwayinseveralcountries. The useofevaporatedwaterair-conditioning systemshasbeendiscontinued.Water recovery isalsobeing installed water-saving processes ordevices(44%haveinstalledspecialtaps). any corrective actionrequired. 48%ofFrench shoppingcenters,aswell68%offoreign shoppingcenters,have They shouldmakeitpossibletomonitorwaterconsumptionmore accuratelyin2007,andtherefore tofine-tune and 46foreign centers).Theuseofwatersub-metershasbecomeincreasingly prevalent atFrench shoppingcenters. on page65fordetailsofwaterconsumptionbymonitored shoppingcenters(33French centers energy-saving lightbulbsandfluorescent lightingtubesare givenpreference 133 000wasinvestedtoimprove air-conditioning systemsorinstallUVfiltersonglasswalls h fiebsns,Klége the office business, 62 French shoppingcenters(halfofthemstillunderhypermarketcontrol) € 280 000wasinvestedthisyeartoimprove lighting.Increasing use HVAC engineeringconsultants Fiscal 2006 stion hasalready carried outallits“energy to monitorandoptimize agement Gr n. Group Scope Group (headoffices and s 59 centers)

oup ( MANAGEMENT REPORT PKlp shopping up (headoffices and Financial report _management report

Environmental indicators under NRE Fiscal 2006 Scope 5. Use of renewable energy sources As part of its voluntary approach to responsible energy use, 4 major Klépierre shopping centers around Paris Group (PKlp shopping have been running exclusively on electricity generated solely from renewable sources since November 2004. centers) The amount of power involved in 2006 was 15.4 million kWh, or 14.8% of total estimated consumption at Klépierre’s sites in France. Renewable sources from suppliers also account for 3% of total energy consumption at the 4 shopping centers in Poland. 6. Land use The property development activities of Klépierre are limited solely to France. Environmental impact studies are conducted France (shopping for all construction and renovation projects, in accordance with current regulations. The Company also ensures center development) that the land used for its construction projects is clean. Soil pollution studies are always conducted on new-build land. Construction work in other countries is limited to renovation work. In this context, Company subsidiaries address the natural risks of the work concerned on soil contamination, in accordance with local regulations. 7. Air, water and ground discharges Klépierre mandated an outside organization to conduct a Bilan Carbone® (greenhouse gas count) based Group (PKlp shopping on consumption levels in 2005 and using version 4.0 of the method developed by the ADEME (French Agency centers) for Environment and Energy Management). To reflect the specific issues facing owners and managers of shopping centers, Klépierre devised an in-house survey expanded to include waste and refrigerant fluids. The study involved 85 PKlp shopping centers in France covering 2.247 million sq.m. (total retail floor area). The findings are detailed on page 65. The survey makes it clear, for example, that the expenditures of the past three years on cardboard compacters at these 85 sites reduced greenhouse gases by the equivalent of 879 tons of carbon equivalent (or approximately 3 200 tons of CO2). For the time being, the extension of this process abroad is not quite feasible, due to the different standards in existence and the problem of finding a company able to perform the survey in several countries. It was therefore decided to make up for this lack by conducting energy audits at the foreign shopping centers (see indicator 3, “Energy consumption”). €34 000 was invested to improve waste water treatment at the Novy Smichov (Prague) and Krakow (Poland) shopping centers. Similarly, the Capodrise (Italy) shopping center switched from fuel oil to natural gas at its power plant. This resulted in the elimination of three buried tanks and more limited greenhouse gas emissions (for an estimated cost of €100 000). One-fourth of the shopping centers monitored periodically test air quality in the buildings and underground parking structures. “Green work sites” have becom an increasingly common way of limiting the risk of pollution during the construction phase. The PKlp shopping centers encourag their patrons to shop using public transit or bicycles. Almost 65% of the Group’s shopping centers in France and abroad have secure parking areas for bikes, and over 70% of them enjoy direct public transit service (bus, subway or tramway). But most patrons of the Group’s shopping centers (except for the ones in downtown locations) use their cars to shop. For this reason, efforts are made in the construction or renovation phase to facilitate access to parking areas and thereby reduce exhaust from cars. This issue is also being dealt with in the Group’s office segment. To promote bicycle use, Klégestion assesses (Offices) the specific needs of its tenants so that sufficient bicycle parking spaces can be made available in its parking areas. 8. Noise and odor pollution Whether in connection with new or restructured buildings in France or within the context of day-to-day management, Group (PKlp shopping problems involving noise and odors are handled efficiently. In the interest of reducing odors, which in any case are not centers) considered to pose a significant problem, and in accordance with regulations in force, the shopping centers use special containers and air-conditioned facilities. The prevention of noise pollution entails the use of adapted means and times for deliveries (in virtually all centers) but also during construction work. The Louvain-la-Neuve center in Belgium received a noise-related complaint related to the additional traffic generated after it opened, but audiometric testing did not bear out this claim. During the renovation of the Nantes Beaulieu center (which is rent managed), a plant-based anti-noise wall will be installed around the delivery dock.

Klépierre_Financial report 2006 12. 11. 10. niomna vlainadcriiainKlépierre hasbeenincludedforthree yearsinthefollowingSocially ResponsibleInv Environmental evaluationandcertification centers) As on with environmental lawsandregulations the company’sbusiness activitiescomply Measures taken toensure that Group (P TheNancyproject isanotherexample.TheBonsecours(scheduledtoopenin2008)project willinclude toallnewconstructionprojects, suchasthoseatBèglesRivesd’Arcins andCesson. Ingeneralterms,thecompanyappliesdemandingenvironmental standards (HQEstandards) animal andplantspecies on theecologicalbalance, Measures takentolimitimpact 9. at ramn InFrance,paperisrecovered by56centers.Fortherest oftheFrench holdings,sortingisdonebythehyperma Waste treatment Environmental indicatorsunderNRE sector. Aspartofthisprocess, aPilotHQE provided forthecollectionofotherwastes(batteries,cartridges,toner, etc.).Finally, plasticscrew capsare being A paperrecycling systemwassetupatthebeginningofyear, withveryencouragingresults, andbinsare now Several environmental protection initiativeswere launchedforthe4corporateoffice buildingsin2006. and rechargers. The shoppingcentersare alsoactiveintheenhancementofothertypeswaste,includingplastic,organics,batteries is installinganewwastestoragebaythatcomplieswiththelatestenvironmental protection andwastesortingregulations. Abroad, 60%oftheshoppingcentersnowperformselectivesortingoncardboard centerinItaly waste.ThePaderno to limittheneedforsprinkler-based watering.Theissueofplantbiodiversityandsustainabilitywasdiscussedwhen of about2800sq.mpersite).More thanhalfofthesecentersindicatethattheyhaveadaptedtheirgreen spaces Of the169facilitiesmonitored in10countries,outdoorgreen spacescovermore than470000sq.m(anaverage and façades.More than500trees were plantedwhentheRambouilletcenterwasextendedandrenovated. projects focus onthevisualintegrationofshoppingcentersanduseplants,particularlyascladdingforroofs In addition,duringconstructionorextensionwork,green spacesare oftenincluded.Themostrecent landscaping. are comfortable andthattheyblendinwiththeirenvironment. Constructionandextensionprojects ofteninclude waste management(routine orreconstruction) andbusinesswasteproducts, whilealsoensuringthatthesebuildings the selectionofmaterialsthatincorporaterecycled componentsselectedonthebasisoftheirlifecycle.Itwillalsofacilit et Technique duBâtiment),whichwilldrafttheHQE such asLaProvidence, whichare already ISO14001-certificated,andtocompaniesalready engagedinthe certification no evaluationshavebeenconductedatthesecompanies.Itshouldbenotedthat Klépierre givespreference topartners All ourpartnercompaniesare therefore contractuallyboundtocomplywiththesecommitments.So far, however, of subcontractorstoensure thatallofthemcomplywithourownethicalandenvironmental commitments. estate managementactivities,measures haveneverthelessbeentakentoharmonize thecontractualobligations certification program hasbeenimplementedyetinthecompany’s existingshoppingcenters.GiventheGroup’s real The Group iscommittedtoitspolicyofsocialresponsibility. However, noenvironmental evaluationor responsibilities. certification, itdoesprovide apositiveindicationofthewayinwhichKlépierre addresses itssocial and environmental that Klépierre hasbeenincludedintheseindicescannotbeconstruedandofitselfas aformofevaluationor the DowJonesSustainabilityIndexWorld, FTSE4GoodEurope andGlobalIndexASPIEurozone. Although thefact their ownlocalandnationallegalissueslegislation. the In addition,AubervilliersisstillservingasatestcaseforthedefinitionofspecificHQE and pipesystemthatchannelsrainwaterdirectly tothewatertable,reducing exposure tosources ofpollution. collected fordonationtocharities.TheGreek andPortuguesesubsidiariesalsosortpaper. process. in thevariousGroup operatingcountries.Thecompany’s Czech,ItalianandSpanishsubsidiariesalsomonitor and theCompany’s networkoflegaladvisorstogather, pr ato noprtn hne eutn rmteaoto fnwlw n euain ieyt aesgiin Group part ofincorporatingchangesresulting from theadoptionofnewlawsandregulations likelytohavesignifiant the Group andthegrowth ofitsbusiness,theGroup LegalDepartmentworkswithotherKlépierre departments Cité duMeuble n ec o oioe yteGop at rdcinrcrsfr20 hwasbtnilrs ncrbadcenters) in theBilanCarbone of pressboard presses andtheadoptionofsortingpracticesisthoughttohaveresulted (outof85centersthattakepart by 3%.Overthesameperiod,wasteproduction declinedbymore than20%.Thewidespread usebyshoppingcenters enhancement (pleaserefer tothetableonpage64).AlsoinFrance,cardboard recovery isthoughttohaveincreased and hencenotmonitored bytheGroup. Waste production records for2006showasubstantialriseincardboard ® carbon disclosure project) ina3200tonreduction inCO at Cessonwasbeingbuilt. ® Project agreement wasentered intowiththeCSTB(Centre Scientifique ® benchmark. TheCompanywillmoveinthisdirection with Fiscal 2006 ocess anddistributedataaboutthelegislationapplying 2 emissions inthelastthree years. ® standard for theretail smn nie: Group estment indices: a roof Scope ate

kt France(PKlpshopping rkets 61 MANAGEMENT REPORT Klp shopping Financial report _management report

Environmental indicators under NRE Fiscal 2006 Scope 13. Expenditures on preventing environmental Klépierre’s expenditures in this area are integral to its business activities and are therefore difficult to isolate. Group damage caused as a result Certain expenditures are, however, mentioned as examples in the preceding or following indicators. of company activities 14. Internal environmental Environmental impacts and the measures designed to limit them are implemented by the local teams Group management resources responsible for managing the facilities and limiting their direct and indirect effects on the environment. But Klépierre also has its own dedicated Prevention, Risks and Environment Department, which was set up to help the Company become a driving force in environmental issues by applying compulsory regulations and implementing innovative solutions. The department is made up of five members who are responsible for establishing the recommendations and procedures required to cope with environmental accidents and other similar issues. A number of early warning tools and systems generate systematic and varied data for dealing with problems that may arise. 15. Employee training and information All the various internal communication channels are leveraged to keep employees up to date on Klépierre’s commitment Group to social and environmental responsibility. Each new environmental initiative is accompanied by efforts to build awareness. To further that goal, a newsletter dedicated to sustainable development has been started. A system for collecting feedback has also been set up. And sustainable development is a permanent feature of Group presentations. 16. Resources dedicated A number of resources were introduced in 2006 to enable Klépierre to anticipate environmental risks Group (PKlp shopping to reducing environmental risks more effectively: centers) – a Legionnaire’s Disease alert tool; – a risk management tool (in relation to asbestos, Legionnaire’s Disease, water, structures and roofing) providing a comprehensive view of risk areas; – a weather monitoring tool (currently under study) to help anticipate climatic phenomena likely to generate accident and pollution risks (materials blown around by wind, drainage networks flooded by rain and snow, etc.). Natural and technological risk prevention plans have been in place since June 2006 at all the shopping centers in the Klépierre estate. With respect to Legionnaire’s Disease, it should be stressed that cooling towers are being gradually eliminated(for example, the one in Nice Lingostière this year). At those shopping centers that still use such equipment, systematic monitoringof the cooling towers allows for effective prevention of disease propagation. At all the relevant sites, a Legionnaire’s Disease risk analysis has been conducted in coordination with local maintenance companies, disease surveillance centers and laboratories. A pre-alert system ensures rapid response by maintenance teams in case of doubt, which may go as far as shutting down and disinfecting the towers if necessary. A total of 739 analyses including water samples have been conducted in cooling towers at French shopping centers. In the other countries in which Klépierre operates, Legionnaire’s Disease monitoring has also become the rule, with European standards and thresholds being applied. A number of alerts that occurred off-site have demonstrated how effective these monitoring and prevention arrangements are. Outside of France, outlays totaling €1 100 000 have made it possible to improve safety of property and personal safety at 14 shopping centers. Most of this amount was used to improve fire safety and routine protection of persons. Building solidity was tested at 8 shopping centers in 2006 (for a total cost of €100 000), and 6 others are scheduled for testing in 2007. In the office business, the Group’s overriding concern is to anticipate future legal standards in the area of employee safety. (offices) The main efforts carried out by our operational departments to limit the risks to those who shop or work at our shopping centers include a flood risk prevention plan, a natural and technological risk prevention plan, a program to improve safety on flat roofs, an audit of every elevator car and an annual technical audit. The long-term budgets that result from this approach also provide Klépierre with a clearer view of which areas should take priority, what its legal obligations are and what renovation programs should be initiated.

Klépierre_Financial report 2006 Environmental indicators under NRE Fiscal 2006 Scope 17. Organizational structure implemented to “Any unexpected situation or event capable of threatening the image, financial stability and environment Group cope with accidental pollution incidents of the centers under management, and therefore our company, is a crisis situation”. Company premises Faced with this fact, our Company has introduced a specific crisis management procedure. Crisis management is handled REPORT MANAGEMENT in accordance with an established procedure involving all the Company’s managers. Depending on the risk identified, this procedure provides for the implementation of a monitoring and communication group until the crisis has passed. Every Company manager has received special training in identifying, understanding and reacting appropriately to such situations. 18. The amount of provisions and guarantees None in place to cover environmental risks 19. The amount of fines paid during the fiscal year None subsequent to legal prosecutions over environmental issues 20. Information about the targets set for foreign Over the last two years, sustainable development reporting has been deepened and become increasingly widespread. Foreign subsidiaries subsidiaries in relation to the criteria set Virtually the entire Klépierre shopping center estate in France completed the Group’s questionnaires in which Klépierre out in items 1 to 17 for the first time in 2006, whereas the foreign shopping centers owned and managed by Klépierre, as well has at least a 50% as the 7 management subsidiaries in which Klépierre has at least a 50% holding, have been monitored for two years holding in a row. Analysis of the answers given to the sustainable development questionnaires has enabled the Group to prepare an inventory of current practice across Europe in this area. This has been an important source of information used in establishing this table and elsewhere. Targets will be set for subsidiaries on this basis, and in accordance with the commitments set out by Klépierre in its Sustainable Development Charter.

63 Financial report _management report

OVERVIEW OF FLUID CONSUMPTION of actual consumption, which explains why Shopping centers abroad: AND WASTE PRODUCTION these centers are not always able to supply Only shopping centers owned for over one The following tables give a historic overview their data. year and managed by Klépierre are covered of fluid consumption and waste production by consumption reporting, with a total since 2004 for the PKlp estate. Its scope is France: of 8 countries involved. therefore constantly changing. 76.2% of the shopping centers owned The sq.m ratios enable the changes in each by Klépierre conduct monthly checks To achieve a more comprehensive view of of these areas to be tracked. All or part of of electricity consumption. how our business impacts the environment, these indicators are monitored quantitatively The monitoring rate for water, gas and a decision was made in 2006 to conduct in all French and foreign shopping centers. waste/cardboard consumption ranges a Bilan Carbone® (greenhouse gas count) In some cases, consumption is rebilled from 25% to 32% (for technical reasons, on 85 shopping centers in France. The by the hypermarket concerned on the basis the rest of the estate is monitored results will be explained in greater detail of floor area without a detailed account by Carrefour). following the tables.

Waste France Central Europe + Belgium Southern Europe 2004 2005 2006 2004 2005 2006 2004 2005 2006 No. of shopping centers monitored 17 24 26 16 16 19 16 19 18 Total amont processed (in metric tons) 11 179 15 305 12 324 4 650 4 563 5 297 5 911 6 197 5 616 Total area of waste in sq.m. (GLA) 393 265 492 274 503 378 291 989 291 989 370 314 249 127 264 222 259 469 Ratio kg/sq.m.GLA 28.4 31.1 24.5 15.9 15.6 14.3 23.7 23.5 21.6 Δ 2005/2006 Δ 2005/2006 Δ 2005/2006 Ratio kg/sq.m.GLA -21.2% -8.5% -7.7%

Cardboard France Central Europe + Belgium Southern Europe 2004 2005 2006 2004 2005 2006 2004 2005 2006 No. of shopping centers monitored 16 22 31 1 1 11 8 9 11 Total amont processed (in metric tons) 2 806 3 224 3 916 133 174 773.15 1 000 915 1 002 Total area of waste in sq.m. (GLA) 366 312 478 922 544 835 37 556 37 556 211 346 189 898 197 042 207 910 Ratio kg/sq.m.GLA 7.7 6.7 7.2 3.5 4.6 3.7 5.3 4.6 4.8 TOTAL CARDBOARD AS % OF WASTE PRODUCED 27.1% 21.5% 29.3% 22.2% 29.6% 25.6% 22.2% 19.8% 22.3% Δ 2005/2006 Δ 2005/2006 Δ 2005/2006 Ratio kg/sq.m.GLA +7.5% -21.0% +3.8% TOTAL CARDBOARD AS % +36.5% -13.6% +12.5% OF WASTE PRODUCED

The reduction in kg/sq.m. recorded for recycled cardboard abroad in 2006 (at constant scope) is the result of incorporating new sites whose performances are below average due to the recent introduction of selective sorting.

Electricity France Central Europe + Belgium Southern Europe 2004 2005 2006 2006 2004 2005 2006 2004 2005 2006 No. of shopping + 4 centers 24 32 76 17 17 19 30 34 29 centers monitored supplied exclusively by renewable energy Total 54 525 67 699 102 234 15 401,3 48 130 48 061 58 199 70 315 75 149 66 587 consumption in MWh Total mall area 150 057 192 150 293 277 44 104 71 256 71 256 87 394 146 728 156 907 141 435 in sq.m. Ratio of kWh/mall sq.m. 363 352 349 349 676 675 666 479 479 471 Δ 2005/2006 Δ 2005/2006 Δ 2005/2006 Ratio of kWh/mall sq.m. -0.9% -1.3% -1.7% 64

Klépierre_Financial report 2006 Water France Central Europe + Belgium Southern Europe 2004 2005 2006 2004 2005 2006 2004 2005 2006 No. of shopping centers monitored 22 28 33 17 17 19 26 28 27 Total consumption in m3 595 382 746 287 735 246 215 184 201 113 230 074 644 853 638 101 582 413 REPORT MANAGEMENT Total mall area in sq.m. 144 962 175 894 181 321 71 256 71 256 87 394 130 770 133 070 134 109 Ratio of m3/mall sq.m. 4.1 4.2 4.1 3.0 2.8 2.6 4.9 4.8 4.3 Δ 2005/2006 Δ 2005/2006 Δ 2005/2006 Ratio of m3/mall sq.m. -3.5% -6.8% -9.6%

Gas + Heat France Central Europe + Belgium Southern Europe 2004 2005 2006 2004 2005 2006 2004 2005 2006 No. of shopping centers monitored 16 21 28 17 17 18 16 17 17 Total consumption in kWh 17 433 817 20 206 581 25 753 087 25 402 952 25 428 020 30 385 165 14 025 100 15 522 850 12 573 580 Total mall area in sq.m. 116 188 147 413 163 877 75 110 75 110 91 249 64 299 65 679 63 307 Ratio of kWh/mall sq.m. 150 137 157 338 339 333 218 236 199 Δ 2005/2006 Δ 2005/2006 Δ 2005/2006 Ratio of kWh/mall sq.m. +14.7% -1.7% -16.0%

BILAN CARBONE® 7 681 tons carbon equivalent, that is to say Analysis by type/sq.m. Klépierre mandated an outside organization approximately 28 000 tons of CO2 (kg carbon equivalent) to conduct a Bilan Carbone® based on consumption levels in 2005 and using version PET (polythylene terephthalate) 258 Cardboard 4 (recycled + misc.) 114 Others waste 33 4.0 of the method developed by the ADEME 3.5 (French Agency for Environment and Type R407C gas 481 Combustibles (combustion + upstream emissions) 350 3 Energy Management). In addition, to reflect Type R134A gas 96 Electricity 2 544 2.5 the specific issues facing owners and 2 managers of shopping centers, Klépierre 1.5 devised an in-house survey expanded 1 Waste to include waste and refrigerant fluids. Refrigeration 0.5 The study involved 85 PKlp shopping centers Energy 0 in France with 2.247 million sq.m. (total retail floor area).

Type R22 gas 3 552 Loss online 254

65 Financial report _management report Special management report to the shareholders

ON TRANSACTIONS RELATED TO THE FREE ALLOTMENT OF SHARES

(ARTICLE L. 225-197-1 AND FOLLOWING OF THE FRENCH COMMERCIAL CODE) SIn 2005 and 2006, the Executive Board capital or voting rights are held, directly did not exercise the authorization granted or indirectly, by the Company. to it by shareholders at their annual The Executive Board identifies the beneficiaries general meeting on April 7, 2005 (under of freely allotted shares as well as the share the eighteenth resolution) to freely allot, allotment conditions and, where applicable, in one or more transactions, at its option, criteria. existing shares of the Company, following During the general shareholders meeting the buyback of said shares, or newly issued on April 5th, 2007 the Executive Board will shares, to: propose to the shareholders to renew under • salaried employees, directors and officers similar conditions this authorization for a new of the Company; period of 24 months. • salaried employees, directors and officers of companies and inter-company partnerships (groupements d'intérêt économique) of which at least ten percent of the equity

Klépierre_Financial report 2006 adverse markettrends. for shares ortoeffect transactionstocounter provider, inparticulartostimulatethemarket concluded withaninvestmentservices shares inconnectionwithaliquidityagreement transferring, lendingortemporarilytransferring • of acouponanyotherway;or repayment, translation,exchange,presentation Company immediatelyoratmaturityby with aclaimtotheequitycapitalof attached tosecurities(bonds,warrants,etc.) • • are indicated; or of thetenthresolution, underthetermsthat shares, pending adoptionbytheshareholders • Commercial Code;or L. 225-197-1andfollowingoftheFrench • of theFrench Labor Code;or in particular, ArticlesL.443-1andfollowing employee savingsplanasprovided bylaw, • following oftheFrench Commercial Code;or plan pursuanttoArticlesL.225-177and • the purposeof: Commercial Code,inparticularfor of ArticleL.225-209theFrench in accordance withthetermsandconditions Board to buyshares ofstockintheCompany the shareholders authorizedtheExecutive (in theninthandtenthresolutions), At itsannualmeetingonApril7,2005, PREPARED INCOMPLIANCE WITHARTICLE L225-209OFTHEFRENCHCOMMERCIAL CODE purchasing, selling,converting,assigning, remitting shares inconnectionwithrights remitting themastender inanacquisition;or canceling allorsomeoftheserepurchased freely allotting shares pursuanttoArticles implementing anyCompany-sponsored implementing anyCompanystockoption ON STOCK BUY-BACK PROGRAMS S report tothe shareholders Special management of thebuy-backprogram beingto: of relevant law, theultimatepurpose forsubsequent usewithinthelimits Board tobuybackshares oftheCompany the authorizationgrantedtoExecutive at whichtimetheshareholders renewed passed bytheshareholders onthatdate, under theninthandtenthresolutions was rendered nullandvoidonApril7,2006 The unusedportionofthisauthorization of thisauthorization. No shares were cancelledbyvirtue in any24-monthperiod. the shareholders’ authorization:10% that maybecancelledbyvirtueof • 7, 2005; meeting authorizingtheprogram, i.e.,April 18 monthsasofthedateshareholders’ • amount of461642200euros; capital, i.e.4616422shares foratotal acquired: nomore than10%oftheshare • of 4euros; 100 euros for each share withaparvalue • on April7,2005are summarizedbelow: granted bytheshareholders’ meeting The basicfeatures oftheauthorization on March 11,2005,number05-140. by theAMF( an informationmemorandumapproved This authorizationwasthesubjectof maximum percentage ofequitycapital duration ofthebuy-backprogram: maximum numberofshares thatcanbe maximum priceforthepurchase ofshares: Autorité desmarchésfinanciers ) adverse markettrends. or toeffect transactionstocounter to stimulatethemarketforshares accepted bytheAMF, inparticular in accordance withmarketpractices with aninvestmentservicesprovider, conduct guidelinesandthatisconcluded that complieswiththeAFEIprofessional in connectionwithaliquidityagreement lend ortemporarilytransfershares • immediately oratmaturity; the equitycapitalofCompany attached tosecuritieswithaclaim • financiers accepted bytheAMF( in compliancewiththemarketpractices remitting themastenderin anacquisition, • under thetermsthatare indicated;or of thetenthextraordinary resolution below, shares, pending adoptionbytheshareholders • Code; or and followingoftheFrench Commercial pursuant toArticlesL.225-197-1 or totheGroup officers and/oremployees • of theFrench Labor Code;or in particular, ArticlesL.443-1andfollowing employee savingsplanasprovided bylaw, • of theFrench Commercial Code; or pursuant toArticlesL.225-177andfollowing • purchase, sell,convert,assign,transfer, remit shares inconnectionwithrights hold themforthepurposeofsubsequently cancel allorsomeoftheserepurchased freely allot shares totheCompany implement anyCompany-sponsored cover anyCompanystockoptionplan ); or Autorité desmarchés 67 MANAGEMENT REPORT Financial report _management report

This authorization is described in detail • duration of the buy-back program: 18 in a document that was published on months as of the date of the shareholders’ the websites of the AMF and Klépierre meeting authorizing the program, i.e., on March 16, 2006. April 7, 2006; • maximum percentage of equity The basic features of the authorization granted capital that may be cancelled by virtue by the shareholders’ meeting on April 7, of the shareholders’ authorization: 2006 are summarized below: 10% in any 24-month period. • maximum price for the purchase of shares: No shares were cancelled by virtue 150 euros for each share with a par value of this authorization. of 4 euros; • maximum number of shares that can be The table below summarizes the transactions acquired: no more than 10% of the share involving the Company’s own shares that capital, i.e. 4 616 422 shares for a total were completed in fiscal year 2006 by virtue amount of 692 463 300 euros; of the two aforementioned authorizations:

Liquidity Stock-options Future Total agreement stock-options In number of treasury shares Plan 1999 Plan 2006 Situation on December 31, 2005 31 871 59 389 96 399 187 659 Stock-options grants 96 399 -96 399 Stock options exercised during the year -26 791 Bought 118 569 98 601 142 756 Sold -124 973 Situation on December 31, 2006 25 467 32 598 195 000 142 756 395 821 As a percentage of share capital (46164229 shares) 0.06 0.07 0.42 0.31 0.86

On December 31, 2006, the Company sold for an average price of €119.08. held 395 821 treasury shares, i.e., 0.86% • 241 357 shares were bought to cover of its share capital. This total was an increase stock option plans for an average price of 208 162 shares compared with the number of €90.24: 98 601 to cover the needs held on December 31, 2005. The change of the stock options granted under reflects the following factors: the 2006 plan, and 142 756 for plans • the exercise of options under the stock that may be rolled out in the future. option plan dated June 24, 1999 resulted At the annual shareholders’ meeting in the sale of 26 791 shares. on April 5, 2007, the Executive Board • transactions completed to stimulate will seek the renewal of this authorization or counter market trends resulted for a further period of eighteen months in the net sale of 6 404 shares: under similar terms and conditions, 118 569 were bought for an average for a maximum purchase price of 200 euros price of €97.60 and 124 973 shares were for each share with a par value of 4 euros.

Klépierre_Financial report 2006 lueLBOEJune24,1999 Claude LOBJOIE and officers oftheCompanyduringfiscalyear. Table ofstockoptionsgrantedbyKlépierre andexercised bydirectors in thetablebelow: The informationdisclosedtotheshareholders pursuanttoArticleL225-184issummarized OF ARTICLES L225-177THROUGH L225-186OFTHEFRENCHCOMMERCIAL CODE arn OE May30,2006 DateoftheAGMthatauthorizedrollout ofastockoptionplan:April7,2006. May30,2006 (3) 28,1999. DateoftheAGMthatauthorizedrollout ofastockoptionplan:April (2) Afternumberofshares wastripledin2003(two-for-one stocksplitandallotmentofonefree share). (1) Laurent MOREL June24,1999 Jean-Michel GAULT Michel CLAIR Executive Board Stock-options S ON TRANSACTIONS CARRIED OUTBYVIRTUE OFTHEPROVISIONS report tothe shareholders Special management June 24,1999 May 30,2006 May 30,2006 Grant date (3) (3) (3) (2) (2) (3) (2) of options Number granted 000May30,2010through May30,2014 000 10 May30,2010through May30,2014 000 10 000 10 May30,2010through May30,2014 502 10 000 15 004 18 501 7 (1) (1) (1) May 30,2010through May30,2014 June 25,2004through June24,2007 June 25,2004through June24,2007 May 30,2010through May30,2014 Strike period (in euros) Strike price options on Remaining 12.31.2005 83 7 7 0 904 12 0 0 876 1 – 876 1 28.33 904 12 36.66 66 05248705605 5 0 897 4 502 10 36.66 15 000–01 000 10 0 – 000 10 91.50 15 000–01 000 10 000 10 0 0 000 15 – 0 – 000 10 – 000 10 91.50 91.50 000 15 91.50 options exercised in2006 Number of options in2006 Number of cancelled options on Remaining 12.31.2006 69 MANAGEMENT REPORT Financial report _management report Report of the Supervisory Board

TO THE ANNUAL MEETING OF THE SHAREHOLDERS

APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2006 RTo the Shareholders of Klépierre: Pursuant to the provisions of Article Committee and the Selection L. 225-68 of the French Commercial Code, and Compensation Committee. we are required to present our observations The Supervisory Board has no particular on the Executive Board report that was just remarks or observations to make with respect read to you, as well as on the parent company to either the Executive Board report or and consolidated financial statements the results for fiscal year 2006. Accordingly, for the year ended December 31, 2006. the Supervisory Board recommends that The Supervisory Board was regularly you approve the financial statements updated throughout the year on the Group’s and resolutions as presented. business by the Executive Board and carried The Supervisory Board wishes to thank out the necessary audits and controls the Executive Board and all employees in connection with the Board’s role of the Company for their hard work and duties. and efforts in 2006. To this end, the Supervisory Board relied on the support of three special committees: the Investment Committee, the Audit The Supervisory Board

Klépierre_Financial report 2006 Report REPORT MANAGEMENT of the Chairman of the Supervisory Board

HELD ON FEBRUARY 9, 2007 TO REVIEW FISCAL YEAR 2006

RPursuant to Article L. 255-68 of the French each individual transaction does not involve Commercial Code, relating to the preparation more than €8 million or its foreign currency and organization of the Supervisory Board’s equivalent. work and internal control procedures Both the Chairman of the Supervisory Board established by the Klépierre group. and the Executive Board must report on any use of these authorizations to the Supervisory 1 - REPARATION AND ORGANIZATION Board. OF THE SUPERVISORY BOARD’S WORK The Supervisory Board is primarily The Supervisory Board responsible for the permanent oversight of A list containing the names of the nine the Company’s management by the Executive members of the Supervisory Board can be Board. To this end, it carries out audits found in the activity report, in the section and controls as needed and requests entitled “Supervisory Board.” Independent the information that it deems necessary. members are defined as members who have At least quarterly, the Executive Board is no relationship whatsoever with the required to submit a management report Company, the Group or its management to the Supervisory Board as well as that could interfere with their independent the Company’s financial statements judgment. for audit and control. According to these criteria, four of the nine In addition, the Executive Board must have members of the Supervisory Board are the Supervisory Board’s authorization to carry independent. out the following transactions: The work of the Board, like that of its special • acquire or dispose of all interests in any purpose sub-committees, is prepared and company; organized by their respective chairmen. • acquire or dispose of all real estate property; The Supervisory Board makes decisions after • in the event of a dispute, sign all treaties its members have deliberated on the issue and transactions and accept all special at hand. Each member is free to express arrangements. his or her opinion and ask for any additional The Supervisory Board has delegated information. The Supervisory Board met to its Chairman the power to authorize nine times in fiscal year 2006. The global the Executive Board to carry out the attendance rate was 84%. The main issues aforementioned transactions, provided discussed during these meetings are listed that each individual transaction does below: not involve more than 46 million euros • the annual parent company and consolidated or its foreign currency equivalent. financial statements for 2006 and related Furthermore, the Supervisory Board has management report; delegated to the Executive Board the power • the quarterly activity report of the Executive to carry out these transactions, provided that Board;

71 Financial report _management report

Special-purpose committee: – report on period control activity in 2006; In the furtherance of its mission, – ongoing controls; the Supervisory Board has formed – professional ethics and compliance. special-purpose committees. Additional The committee met four times in 2006. information regarding the composition, The global attendance rate was 85%. duties and work of the committees • investments (in France and abroad); is provided in the “Committees” section Selection and Compensation Committee • the principal terms and conditions of the activity report. This committee makes recommendations of financing and the restructuring of some A brief description of each special-purpose to the Supervisory Board on the appointment of the existing debt; committee appears below: and remuneration of Executive Board • simplification of asset ownership members, pension and personal protection in the Klépierre group; Investment Committee plans, benefits in kind and stock option plans. • appointments of incumbent and alternate The role of the investment committee The committee met three times in 2006. statutory auditors; is to examine the conditions under which The global attendance rate was 92%. • review of a stock option plan; planned acquisitions are to be made The committee recommended the appointment • half-year parent company and consolidated and ensure that they are consistent with of members of the Board of Klémurs, whose financial statements; the Company’s investment strategy. composition was enlarged to include two • property disposals; This committee focuses more particularly independent directors. They joined the three • enlargement of the investment policy; on the value creation aspect of investments, members from the Klépierre Supervisory Board. • the Klémurs IPO; a factor that is decisive in any decision made The committee recommended the procedures • regulated agreements. to acquire, hold or divest of an asset. for determining variable pay in 2006 for The committee also defined the financing members of the Executive Committee. Global COMPENSATION PAID TO MEMBERS assumptions used for all future investments. compensation is made up of three components: OF THE SUPERVISORY BOARD The committee met nine times last year, • a fixed portion, determined annually The global budget for directors’ fees was and the global attendance rate was 93%. at the beginning of the year; set at 210 000 euros for year 2006 Its work focused on 32 planned investments: • a variable portion, for which the global and thereafter until modified. 13 were or will be completed, 10 are sum to be divided among the members Fees are distributed as follows: currently being negotiated, and 9 were of the Executive Committee is equal to • 50 000 euros divided among the following not carried out. no more than the sum of the fixed wages members of the Supervisory Board: The most significant projects last year of the board. its chairman and vice-chairman, and involved: The amount of the variable portion depends the chairmen of the audit, investment • Buffalo Grill; on whether or not annual net current cash and selection and compensation committees, • Patrimoine Progest – Henry Hermand. flow (60%) and pre-tax earnings (40%) i.e. 10 000 euros in the form of fixed targets are met. This global total is divided compensation for each of the aforementioned Audit Committee among the members of the Executive individuals; This committee is responsible for assessing Committee, ratably (70%) on the basis • 108 000 euros divided among all the major accounting decisions and financial of the fixed portion of compensation for of the members of the Supervisory Board disclosures, the quality of procedures, and each member, and partially (30%) the basis for their membership on the Board, of which: the statutory auditors’ budget. The key issues of the extent to which personal objectives - 72 000 euros divided equally among the examined by the audit committee last year are met; members of the Board in the form of fixed were: • benefits in kind at Klépierre include compensation; • interim and annual parent company and the use of a company car for members - 36 000 euros divided among the members consolidated financial statements: financial of the Executive Committee, of which part of the Board in the form of variable pay and information and highlights of the full and of the cost (for personal use) is payable distributed on the basis of each member’s half year; by the beneficiary and subject to taxes and attendance at Board meetings; • presentation of restructuring projects social charges. • 52 000 euros divided among the Board involving the Group’s French or foreign The committee also drafted a formal stock members on the basis of their membership affiliates: accounting and tax aspects; option grant policy for employees of the group on sub-committees of the Board, in the form • statutory auditors: appointment in 2006 and prepared the Supervisory Board’s of variable pay and distributed on the basis of a new statutory auditor. decision on stock option grants for members of the number of sub-committee meetings Budget for 2007; of the Executive Board. In 2006, a total they actually attended. • Internal control system: of 195 000 stocks were granted to 84 grantees.

Klépierre_Financial report 2006 2 - INTERNAL CONTROL PROCEDURES – procedures: They provide a defined framework for the business, exactly where Internal control is the organization the risks have been identified. They are easily of processes, procedures and controls accessible on the Group’s intranet site and REPORT MANAGEMENT implemented by the Executive Board the Group has provided training and information to ensure that risks are fully controlled about them. They are regularly updated to and to obtain reasonable assurance that comply with laws and regulations in force. the Company’s strategic objectives have The purpose of the process launched in 2002 been met. for all of the Group’s French entities was to map all procedures and best practices This organization is mainly based on: that were selected for implementation. • the effectiveness and efficiency; It was also intended to be used as a tool for of the Klépierre group’s internal processes; carrying out first and second level controls • the reliability of external and internal data; of these procedures and best practices as • the adaptation of internal policies and their needed. In 2007, Klépierre plans to review compliance with laws and regulations. all of the procedures that have already been formalized, to determine any needs not met This internal control system is built by current procedures, and to draft new ones on the following key principles: accordingly. This process will be gradually • the contribution of all Group employees extended to foreign affiliates later this year; to the internal control system. All employees – Controls: The frequency, intensity and are responsible at their particular level for organization of controls depend on exercising effective control over the activities the level of risk. Controls are formalized that fall within their scope of accountability; in the procedures. The implementation • the separation of powers between those and effectiveness of the most important who exercise independent control and those ones are monitored. who are involved in operations; Accordingly, Fundamental Surveillance Points • universality. No area of the Klépierre group, (FSP) have been identified and are used to either in France or abroad, falls outside ensure second level controls of the Group’s the scope of the internal control system. essential business areas by management. For the latter, they constitute a key element of risk management and supervision. The system is broken down into For each activity that presents a major risk, two components: ongoing control these controls are carried out in accordance and periodic control. with a methodology and timetable that have • The ongoing control process is based been predefined by management. on the continuous implementation of five Periodic control also conducts controls components, using a set of appropriate to ensure that the FSPs are being correctly resources: monitored, qualitatively as well as quantitatively. – the identification and assessment of risks: There are currently twenty-one FSPs included these involve the analysis and measurement in the regular reporting system. of regularly updated risks, taking controls – reporting: The reporting system was and procedures into account. Klépierre has designed to provide managers with visibility rolled out a tool known as the “Risk over risk exposures (particularly the main Assessment Matrix,” which maps the Group’s incidents that occur), controls and procedures, exposure to risk, based on ten identified and corrective actions under way; risk families (unreliable information, loss of Reports are submitted every three months, competitiveness, excessive costs, interruption in particular to the Executive Board. of business, non-compliance with laws and – steering: A regular examination of regulations, loss of assets, disclosure of the reports submitted serves as a basis sensitive information, commercial and for making decisions about any changes that reputation, human resources, code of ethics); need to be implemented.

73 Financial report _management report

• Periodic control, carried out by Internal control is based business or mission critical services the Klépierre group’s internal audit on the following three levels in operation and ensure that operations department, is an independent and of control: can be set up and run at another physical objective activity aimed at providing location in the event of a serious loss. assurance and counsel that generate • Two levels of ongoing control: Since 2005, a business continuity drill added value and improve the Company’s the first level of control is performed by each is conducted annually to ensure readiness. organization. It helps the Executive Board employee on the specific operations carried out, These functions report directly to the achieve its objectives by providing in accordance with operating procedures in Executive board and the Audit Committee. a systematic and methodical approach force, while the second level is performed by to assessing and improving risk management, the business area or functional manager, in • The third level of periodic control: control and corporate governance processes. accordance with the FSPs. Two dedicated a third level of control is exercised The responsibilities, independence and role teams are also part of this system. by the Klépierre group’s internal audit of the internal audit function are set forth - Two employees from Accounting department. in a set of internal audit guidelines signed Procedures and Audit in France and Accordingly, an annual audit plan in 2004 by the Chairman of the Executive Abroad, which reports to the Corporate drawn by the chief internal audit officer Board and the Chairman of the Supervisory Accounting Department, have been and the Executive Board is submitted Board. specifically appointed: for the approval of the Audit Committee. – to draw up applicable procedures; This plan is based on a preventive approach In 2006, the Group separated Ongoing – to define the first and second level controls to risks that seeks to define audit priorities Control from Periodic Control functions applicable to the closing of the Group's that are in line with the Group’s objectives. and, in so doing, adopting best practices corporate and consolidated financial However, one-off assignments may also in internal control. In connection with this statements; be carried out to address a specific problem change, the position of Ongoing Control – to carry out horizontal controls; that may arise. Coordinator, reporting to the Executive Board – to monitor the implementation of recom- was created, responsible for: mendations made by external auditors; At the same time, audits are performed in • coordinating the development and – to verify from time to time that subsidiaries France on compliance with regulations and implementation of actions intended are correctly implementing the Group’s internal procedures in the management of to improve ongoing control; benchmark relating to the preparation of shopping centers once every three years. • coordinating the selection of methodologies consolidated financial statements; These audits are based on a standard and tools; – to verify that the accounting and financial benchmark that covers the following areas: • circulating directives related to internal information sent to the Company’s governing – safety of property and persons, particularly control and tracking changes in the system; bodies provide a fair and accurate picture of pursuant to regulations governing • consolidating reporting resources and the Company’s business and position. establishments open to the public; media. – property administration; At Klépierre and Ségécé, one employee is – rental management; The managers of activities, functions assigned with the task of coordinating – coordination of retailer associations. and subsidiaries have been designated ongoing control activities for the various to serve as the correspondents operational and corporate level departments. of ongoing control. They are responsible for: -Two specialized functions have • coordinating the implementation been created to perform second-level of the Group’s methodological choices controls: at the local level; – this is the case of the Ethics and • designing and regularly adapting Compliance Department, which is responsible the system’s reporting process and product for ensuring compliance with prevailing by indicating the indicators that will provide standards of professional conduct managers with the greatest visibility and anti-money laundering; over their ongoing control system; – this is also the case of the Organization • ensuring that reports are regularly Function, which is responsible for Business passed on to officers and then Continuity Planning, which encompasses to the Ongoing Control Coordinator. all of the measures designed to maintain

Klépierre_Financial report 2006 of accountingdata. andthatit correctly control system isfunctioning internal - thatthelocalaccountingdepartment’s with theGroup’s accountingstandards; consolidation are reliable andcompliant - thattheaccountingdataprovided for managers ofthesesubsidiariescertify: of consolidation.Everyquarter, thefinance subsidiaries thatare includedinthescope the dataproduced bytheGroup’s foreign A process hasbeencreated tocertify is accurateandcomplete. used toprepare thefinancialstatements that thesupportingdocumentation A secondlevelofcontrol involvesensuring operations are accurateandcomplete. justification records toensure thataccounting audit workingpapersandaccounting The Group hassetupprocedures toformalize headquarters onapooledinformationsystem. are prepared centrallyatKlépierre’s corporate The financialstatementsofFrench companies responsibility oftheChief Financial Officer. corporate accountingdepartmentunderthe financial statementsare prepared bythe Auditors. Thecorporateandconsolidated working incollaborationwiththeStatutory used are monitored bytheAuditCommittee, the relevance of theaccountingprinciples The clarityoffinancialinformationand Production offinancialinformation participants tothesystem. of theworkcarriedoutbyvarious to saidsystemandthefindings internal controlsystem,changes least onceayearoftheGroup’s entire The AuditCommitteeisinformedat to audititsorganizationandprocedures. entity, theBNPParibasGroup, inparticular General InspectionUnitofitsconsolidating or SupervisoryBoard maycalluponthe In thespecificcaseofKlépierre, itsManagement control. There are sixemployees assignedtoperiodic to theAuditCommittee. plans basedonitsworkandfindings reports, recommendations and implementation access totheExecutiveBoard andsubmits auditdepartmenthasdirect The internal ensures thereliability is consistentwiththeconsolidated result. to ensure thattheaccountingresult controllers carryoutanoverallreconciliation Furthermore, theGroup’s management matched withaccountingaggregates. aggregates ofthemanagementresults are of control. Atthelocallevel,main balances, thereby providing asecondlevel on thefinancialstatementsandinterim carries outconsistencyandprobability checks Each managementcontrol department management control department. are transmitted totheGroup level basis, before consolidated managementdata management informationonaquarterly and validateeach each businessorfunctionalarea toidentify Management controls are performedfor in Franceandabroad. services, primarilyfortaxmatters,both consulting Klépierre also uses external their compliancewithIFRSstandards. consolidation restatements toensure In addition,itjustifiesandanalyzesall policies havebeencorrectly applied. that French and non-French accounting The consolidationdepartmentensures package withindeadlinessetbytheGroup. cut-off andproduces aconsolidation local unitsdoesaquarterlyaccounting accounting standards. EachoftheGroup’s information, compliantwithGroup of consistentaccountingandfinancial departments, whichpromotes theproduction sent outtoallconsolidatedaccounting process thatincludesexplicitinstructions drawn upinaccordance withadefined The consolidatedfinancialstatementsare of consolidation. who reports tothepersonincharge in theCorporateAccountingDepartment Each foreign affiliate hasacorrespondent Accounting Department. under theresponsibility oftheCorporate closing are issuedandcompliedwith and eventsthatoccurafteryear-end Furthermore, off-balance sheetprocedures operating unit’ s 75 MANAGEMENT REPORT Financial report _management report

These two reconciliation procedures provide the internal control department with accounting as well as management information. Naturally, the control mechanism has been adapted to the most recent IFRS accounting standards.

The Group’s financial position, treasury forecasts and interest rate risk management are analyzed once a week by the treasury unit, which reports directly to the Chief Financial Officer and the Chairman of the Executive Board. This unit also prepares decisions concerning financing, investment and interest rate hedging. Important decisions are submitted to the Supervisory Board.

Accounting and management control information is collected and captured by two different software programs, Carat for consolidation and Essbase for management control. These two tools, which are interconnected, are administered and updated by a dedicated team that reports directly to the Corporate Accounting Department. Data is entered into the consolidation tool locally, by local accounting personnel, in the principal countries of operation. All the accounting and financial data follow IT procedures based on daily backups, which are archived at locations which are separate from operational sites.

Klépierre_Financial report 2006 Statutory REPORT MANAGEMENT auditors’ report

PREPARED PURSUANT TO ARTICLE L.225-235 OF THE FRENCH COMMERCIAL CODE ON THE REPORT OF THE CHAIRMAN OF THE SUPERVISORY BOARD OF KLÉPIERRE WITH RESPECT TO THE INTERNAL CONTROL PROCEDURES FOR THE PREPARATION AND TREATMENT OF ACCOUNTING AND FINANCIAL INFORMATION

SYEAR ENDED 31 DECEMBER 2006 Dear Shareholders,

In our capacity as statutory auditors of control procedures relating to the preparation Klépierre, and pursuant to Article L. 225-235 and treatment of financial and accounting of the French Commercial Code (Code information, as set out in the Chairman’s de commerce), we hereby report to you on report; the report prepared by the Chairman of your • obtaining an understanding of company in accordance with Article L. 225-68 the underlying work performed to support of the French Commercial Code for the year the information given in the report. ended 31 December 2006. In his report, the Chairman reports, in partic- On the basis of our procedures, we have no ular, on the conditions for the preparation comment to make on the information given and organisation of the Board of Directors’ in respect of the internal control procedures work and the internal control procedures relating to the preparation and treatment of implemented by the Company. financial and accounting information, set It is our responsibility to report to you our forth in the report of the Chairman of the observations on the information and Supervisory Board, prepared in accordance assertions set out in the Chairman’s report with Article L. 225-68 of the French on the internal control procedures relating Commercial Code. to the preparation and treatment of financial and accounting information. We performed our procedures in accordance Done in Courbevoie and Neuilly-sur-Seine with professional guidelines applicable in March 7, 2007 France. These require us to perform procedures to assess the fairness of the The Statutory Auditors information set out in the Chairman’s report Deloitte & Associés: Laure Silvestre-Siaz on the internal control procedures relating Pascal Colin to the preparation and treatment of financial Mazars & Guérard: Odile Coulaud and accounting information. These procedures notably consisted of: • obtaining an understanding of the objectives and general organisation of This is a free translation of the original French internal control, as well as the internal language text for information purposes only.

77 Financial report _consolidated financial statements

Contents consolidated financial statements 79 Income statement as at December 31, 2006 80 Balance sheet as at December 31, 2006 82 Statement of consolidated cash flow as at December 31, 2006 83 Statement of change in equity as at December 31, 2006 84 Notes to the consolidated financial statements 139 Report of the Statutory Auditors on the consolidated financial statements

Klépierre_Financial report 2006 I Statement Income e noeprsaei uo,flydltd36262,3 2,6 3,6 0 468 126 455 902 145 078 2 -40 467 194 557 129 55 671 490 -351 1 -247 671 14 990 -2 759 131 -161 234 20 831 163 732 587 -3 -4 088 -117 060 31 459 122 597 -143 Net incomepershare ineuros, fullydiluted 240 126 -5 -3 744 33 Net incomepershare ineuros 5.4 399 -91 Minority interests 296 5.3 -6 362 46 Group share 5.4 267 of which -109 NET INCOMEOFTHECONSOLIDATED ENTITY 5.3 497 57 535 -125 Corporate incometax PRE-TAX EARNINGS 968 -140 5.2 5.3 ofequity-methodcompanies Share inthe earnings Discounting effect Change inthevalueoffinancialinstruments Cost ofnetdebt Net dividendsandprovisions onnon-consolidatedinvestments Profit onthesaleofshort-termassets Results ofthesaleinvestmentproperty&equityinterests Net bookvalueofinvestmentproperty andequityinvestmentsold Gains onsaleofinvestmentproperty andequityinterests RESULTS OFOPERATIONS Provisions Depreciation andamortizationallowanceonPPE Depreciation andamortizationallowanceoninvestmentproperty Other generalexpenses Payroll expense Survey andresearch costs Other operatingincome Management, administrativeandrelated income Net leaseincome Building expenses(owner) Non-recovered rental expenses Land expenses(real estate) Lease income AT DECEMBER 31 Notes in thousandsofeuros unlessotherwiseindicated 2006 2005 . 2 1 1 0 3873 -3 909 -17 016 -22 5.6 698 -121 700 -112 879 806 -134 5.5 111 -3 12 551 6 510 -43 365 -52 217 7 5.3 938 -59 -910 861 -21 480 9 8.1 379 -32 296 5.2 420 -2 399 990 -30 017 449 598 -2 5.3 570 519 5.3 5.2 6 3 2 4 0 147 105 449 120 341 534 130 164 811 163 483 216 696 237 208 257 374 319 917 372 102 409 686 479 2004 2 4 1 4 1 857 -19 040 -19 145 -22 9932 5 1321 21 453 25 933 29 120- 3 2510 -2 330 -1 200 -1 -771 -835 124 -1 , , 2,3 2,6 3,6 79 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements Balance sheet

ASSETS AT DECEMBER, 31 B Notes 2006 2005 2004 Non-allocated goodwill 4.1 41 555 33 410 33 366 Intangible assets 4.2 7 478 6 033 7 120 Tangible assets 4.3 41 482 42 167 59 709 Investment property 4.4 5 930 744 5 487 725 4 902 919 Fixed assets in progress 4.4 207 825 107 692 95 573 Property held for sale 4.5 46 985 48 857 36 599 Equity-method securities 4.6 3 023 2 877 4 998 Financial assets 4.8 585 609 842 Non-current assets 4.9 17 104 18 743 28 821 Interest rate swaps 4.16 65 139 36 037 33 310 Deferred tax assets 4.18 26 275 33 417 21 467 Non current assets 6 388 195 5 817 567 5 224 724 Inventories 4.10 2 463 7 895 7 253 Trade accounts and notes receivable 4.11 46 159 42 437 38 225 Other receivables 4.12 264 364 207 788 193 445 – Tax receivables 111 048 62 685 53 699 – Other debtors 153 316 145 103 139 746 Cash and cash equivalents 4.13 157 696 166 663 115 367 Current assets 470 682 424 783 354 290

TOTAL ASSETS 6 858 877 6 242 350 5 579 014 in thousands of euros

Klépierre_Financial report 2006 o-urn iaca iblte .53602426396257766 567 2 906 633 2 254 680 3 4.15 TOTAL LIABILITIESANDEQUITY Current liabilities Short-term provisions Tax andsocialliabilities Other liabilities Payables tofixedassetsuppliers Trade payables Current financial liabilities Non-current liabilities Deferred tax liabilities Security depositsandguarantees Interest rate swaps Long-term allowances Non-current financialliabilities Equity Minority interests Shareholders' equity, group share Consolidated earnings – Retainedearnings – Otherconsolidatedreserves – Fairvalueoffinancialinstruments – Treasury shares – Revaluationvariance Consolidated reserves Statutory reserve Additional paid-incapital Capital LIABILITIES AT DECEMBER, 31 Notes 2006 2005 .96 1 9698 124 87 025 101 649 69 847 115 050 324 813 64 017 135 941 789 4.19 602 114 002 10 4.19 441 281 124 158 579 7 4.15 986 127 572 8 4.18 4.17 in thousandsofeuros 5 7 4 5 7 014 579 5 350 242 6 877 858 6 787 767 2 956 884 2 712 910 3 968 244 2 588 304 2 105 392 2 859 842 1 759 879 1 144 955 1 5 6 5 0 6 259 566 806 052 1 060 556 109 402 147 105 829 424 772 124 449 120 961 436 318 831 534 164 985 791 954 747 166 743 021 813 657 184 166 743 865 756 657 184 622 830 657 184 2004 3 2 906- 691 -6 096 -9 823 -30 3072 7 067 4 630 48 579 21 790 55 017 13 206 75 772 61 338 81 900 93 728 -8 201 -9 904 17 734 39 466 18 466 18 363 1 0 0 211 009 4 0 111 2 0 521 680 0 0 0 81 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements Statement of consolidated cash flows

AT DECEMBER 31 S 2006 2005 2004 Cash flow from operating activities Net income from consolidated companies 194 467 145 902 126 468 Elimination of expenses and income with no impact on cash or unrelated to business – Amortizations and provisions 141 302 135 657 121 039 – Gains and losses on disposals of assets net of tax and deferred tax -3 607 -3 338 -9 315 – Reclassification of financial interests and other items 142 079 122 544 121 698 Cash flow from consolidated companies 474 241 400 765 359 890 Paid taxes -79 349 -46 612 -31 511 Change in operating working capital requirements -1 633 8 158 20 610 CASH FLOW FROM OPERATING ACTIVITIES 393 259 362 311 348 989

Cash flow from investment operations Income from fixed asset sales 120 773 163 893 203 123 Acquisitions of intangible assets -822 – – Acquisitions of property, plant and equipment -1 461 – – Acquisitions of investment property -671 972 -479 378 -212 870 Acquisitions of subsidiaries under deduction of the acquired cash -66 180 -130 145 -236 335 Change in loan and advances granted and other investments 2 925 24 335 -13 394 NET CASH FLOW FROM INVESTMENT OPERATIONS -616 737 -421 295 -259 476

Cash flow from financing operations Dividend approved for payments to shareholders of the parent -124 163 -105 727 -19 820 Dividends approved for payment to minority shareholders -39 782 -23 186 -12 751 Dividends payable ––– Change in the net situation 21 105 – – Refund of share premium –– – Acquisition/Disposals of treasury shares -19 869 1 826 13 087 New loans, financial liabilities, and hedging instruments 1 918 290 590 238 1 427 038 Loan refunds, financial debts and hedge instruments -1 409 199 -302 764 -1 259 136 Financial interests paid -115 260 -113 020 -204 835 NET CASH FLOW FROM FINANCING OPERATIONS 231 122 47 367 -56 417

Currency fluctuations 36 1 765

CASH FLOW MOVEMENTS 7 680 -9 852 33096 Cash at beginning of year 55 017 64 869 31 773 Cash at year end 62 697 55 017 64 869 in thousands of euros 82

Klépierre_Financial report 2006 23.06145 362146-02 93 494766 6541514466 2392105 436961 48935 1955144 164534 756865 747954 0 -19509 48935 – 39734 -30823 -19509 48935 18466 2304588 -473 – 424829 830622 1879759 184657 120449 -19509 813021 2218 831318 1827 -473 0 48935 -87456 -87456 -9201 1827 -473 -9096 18466 -21727 743166 2244968 184657 1827 402109 1842859 4232 105147 12.31.2006 791985 -473 807404 87456 Other movements Equity repayments tominorities Dividends paidtominorities -8728 Change inconsolidationscopeand%ofinterest Changes inaccountingpolicy -2405 Change intranslationadjustment -6691 Change inthefairvalueoffinancialinstruments to parent company shareholders 17904 anddividendspaid Allocation ofearnings fortheperiod Consolidated earnings Equity transactioncosts 743166 Acquisitions anddisposalsoftreasury shares 184657 Change intheshare capitaloftheconsolidatingentity 12.31.2005 Other movements Equity repayment to minorities Dividends paidtominorities Change inconsolidationscopeand%ofinterest Changes inaccountingpolicy Change intranslationadjustment Change inthefairvalueoffinancialinstruments shareholders anddividendspaidtoparent company Allocation ofearnings anddividendspaidtoparent company Allocation ofearnings fortheperiod Consolidated earnings Equity transactioncosts Acquisitions anddisposalsoftreasury shares Change intheshare capitaloftheconsolidatingentity 01.01.2005 IFRS S of change in of change in Statement AT DECEMBER 31 Capital Additional paid-in capital equity Statutory reserve Treasury shares Change in fair value Consolidated reserves Currency reserve lation trans- 562 -1142 562 -1142 -1142 -105147 -105727 -105727 reserves lidated conso- Other Total for the or loss period Profit Equity group share interests Minority in thousandsofeuros equity Total 20947 20947 20947 20947 20947 -3714 -3714 -120449 -124163 -39782 -163945 -39782 -124163 -120449 -3714 -3714 -1855 -1855 -1855 -1855 6165 65 426693 6651 6651 6651 13-2 -2 -66-189 -123 -123 9 9 792 -185 607 792 ––– 83 CONSOLIDATED FINANCIAL STATEMENTS – – 22124 22124 22124 – 194467 ––– – 29933 ––– 164534 164534 – -6167 –-6167 26491 –26491 – – – – 145902 25453 120449 – 120449 -22991 – ––– -22991 Financial report _consolidated financial statements Notes to the consolidated financial statements

1 - HIGHLIGHTS IN 2006 AND THE PREVIOUS PERIOD 1.1 N- FISCAL YEAR 2006 Ségécé, 75% subsidiary of Klépierre acquired (including acquisition rights and fees) on January 5, 2006 the balance of the capital is expected to generate net annual lease Change in Klépierre group's of the Italian management company income of 18.7 million euros. It is the first shopping center holdings (PSG, now Ségécé Italia) in which it had 50% step in the strategic partnership agreement controlling interest. The investment totaled between Klémurs and Buffalo Grill, which FRANCE 9.1 million euros. also provides for associating Klémurs with The Place d’Armes shopping center located the brand’s expansion in France and in in downtown Valenciennes was inaugurated SPAIN Europe. on April 18, 2006. Klépierre invested 51.8 Klépierre acquired on June 30, 2006 Molina million euros in the shopping center, which de Segura shopping center (Autonomous OFFICE BUILDINGS: CONTINUATION is expected to generate annual net lease community of Valence), featuring a 10 651 sq.m. OF THE DISPOSAL PROGRAM income of 4.6 million euros. The two-level mall with 79 shops and a Supercor supermarket, AND REPOSITIONING IN ACQUISITION shopping center, which covers 16 000 sq.m. as well as a 600-space parking lot. Total In accordance with its opportunistic policy (GLA), features 60 new retail outlets (FNAC, investment reached 29.3 million euros for in offices, Klépierre, while continuing H&M, the supermarket Match, Zara, estimated lease income of 1.9 million euros. its divestment of mature assets program, Séphora). The Toulouse Purpan shopping became buyer on this market. center was acquired after large scale PORTUGAL The two acquisitions made illustrate extension works to the mall and Carrefour. Klépierre acquired the Braga shopping center Klépierre’s new positioning: The new center covers 7 220 sq.m. of GLA (9 293 sq.m.) on December 28, 2006. - The first, a surface area of 4 000 sq.m., and includes 32 shops. is located 7, rue Meyerbeer, in the heart In addition, Klépierre raised its equity interest CZECH REPUBLIC of the Paris business district (Opera area). in the company that owns the Val d’Europe Klépierre acquired on June 29, 2006 the This prime positioning is expected shopping center (64 046 sq.m. of GLA) Novodvorska Plaza shopping center, located to ultimately generate a genuine potential by 15% raising its share to 55%. in the 4th district of Prague. The 26 000 sq.m. for enhanced value. shopping center features a Tesco outlet - The second concerns the acquisition of an ITALY (6 300 sq.m. GLA), a hundred or more shops, office building to be built in the ZAC Forum The investments made mainly concerned exten- an entertainment area with a movie theater Seine in Issy-les-Moulineaux, in the context sions to existing shopping centers such as the and a bowling club as well as a car parking of a Property Development Contract (PDC). Giussano shopping center (10.2 million euros), for 870 spaces. Klépierre invested a total The building will be completed by late 2008 located in the north-west outskirt of Milan, and of 38.6 million euros in this project. and will include nearly 12 000 sq.m. of in Varese (5.6 million euros). offices distributed on 7 floors and more Initially created in 1997, the Giussano shopping INVESTMENT IN THE PROPERTY than 300 parking places. This project adjoins center previously comprised a Carrefour OF LARGE RETAIL ANCHORS another building owned by Klépierre, hypermarket (14 000 sq.m.) and adjoining mall Klémurs, a subsidiary 84.1% owned by which is currently entirely occupied by Steria. of 2 800 sq.m. After the extension, the hypermar- Klépierre after its market floatation in The two transactions represent total ket now measure 15 800 sq.m. and the mall has December 2006, acquired the real estate investment of €112.9 million, of which been resized to 8 200 sq.m. with 25 new retail ownership of 128 Buffalo Grill restaurants 67 million in 2006 and € 45.9 million spread anchors of/w 3 mid-sized retailers including Darty. in France. This 296.2 million euros investment between 2007 and 2008 as regards the PDC

Klépierre_Financial report 2006 includes aswinglineofcommercial paperof The newseven-yearrevolving credit facility had beendrawndown)wasfully repaid. of second halfof2005,foramaximumamount drawn down.Thebridgeloansetupinthe euros inmediumtermlinesthatwere fully line expiringinMarch 2006and750million 2004, includinga300millioneuros backup early thesyndicatedloanssetupin2003and In particular, Klépierre hasdecidedtoredeem while releasing newsources offinancing. credit linesexpiringin2006,2007and2009, This credit allowed Klépierre torefinance club dealwith6banks. 1.5 billioneuros revolving credit facilityin a • Change indebtfinancingterms for 2006. contributed 3.3millioneuros toleaseincome amount of112.6millioneuros. Theseassets off, representing 28025sq.m. foratotal At thesametime,fouroffices were disposed of 6.45millioneuros. 2006 The leasesbeganrunningonFebruary1, remaining third. term lease),whichagreed torent the and toVeolia Environnement (5-yearfirm which rented two-thirds ofthetotalspace, Credit SuisseGroup (9-yearfirmtermlease), space, wasleasedsimultaneouslytothe developing 9866sq.m.ofweighteduseful at 25Avenue Kléber(Paris16 In addition,EspaceKléber, located of Issy-les-Moulineaux. On January31,2006,Klépierre signeda € 400 million(ofwhich275euros and willproduce annualleaseincome th ) and The payoutdatewassetforApril 13, 2006. decided tosetthedividendat2.7 euros pershare. The annualgeneralmeetingofApril 7,2006 Dividend payment BBB+ positiveoutlook. Klépierre ratingfrom BBB+stableoutlookto • program. financing needsgeneratedbyitsinvestment bank loansexpiringin2006andtomeetthe Klépierre used theproceeds torefinance Luxembourg StockExchange. euros). The bondsare listedonthe contemplated sumof500to600million to 700millioneuros (versustheoriginally Klépierre decided toraisethesizeofissue In response tosignificantoversubscription, the 10yearswaprate. margin wasfixedat70basispointsabove and bearinga4.25%coupon.Theloan a 10-yearbond,expiringonMarch 16,2016 Standard &Poor’s, issuedonFebruary28,2006 • to revalued assets ratio(limitedto20%). (minimum 2.5),andthesecured financing the coverageofinterest expensebyEBITDA the Loan-To-Value ratio(limitedto52%), - Financingcovenantspertainingto grid (ratioofnetdebttorevalued assets); to adjustmentsbasedonaLoan-To-Value - Aninitialmarginof35bps,whichissubject this facilityare asfollows: of 1.2billioneuros. Theprincipalfeatures of 300 millioneuros andalong-termcredit line In January2007,Standard &Poor’s raised Klépierre, ratedBBB+stableoutlookby 85 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

12 Plaza Centers shopping centers located in Montigny-le-Bretonneux; Hungary were acquired. Klépierre early • in June: the le Nymphéa building in released Plaza Centers from the bank Villepinte; guarantee consented to for certain incidental • in September: the le Ponant building rent in connection with the acquisition. in Paris and the Tour Marcel Brot Building in Nancy; ITALY • in October: the le Florentin building Klépierre invested 250 million euros, predom- in Issy-les-Moulineaux; inantly in the shopping malls of Tor Vergata • in November in Paris, the property on 1.2 - FISCAL YEAR 2005 (Rome), Lecce (Pouilles), Solbiate (Lombardy) l’Impasse Guémémée in addition to the one and Assago (Milan). The latter, which was on boulevard Saint-Germain which was Change in Klépierre group holdings inaugurated in June 2005, is in fact the swapped for the Colombia mall located in major extension of an existing shopping downtown Rennes. POLAND center whose retail base is already well- After acquiring holdings in the Czech established. The gross leasable area has now SALE OF EQUITY INTEREST IN SECMARNE Republic (2003) and then Hungary (2004), been extended to 24 600 sq.m., including On January 13, 2005, Klépierre and Klépierre strengthened its holdings in Central 9 mid-size retail units and 87 smaller shops Klétransactions sold 8.87% and 13.14%, Europe in 2005, acquiring a key position in - all fully leased up - adjoining a 25 000 respectively, of Secmarne equity to BNP Poland, the region’s largest market. After sq.m. Carrefour hypermarket. Assurances for 29.6 million euros excluding entering into a memorandum of agreement transfer duties. Secmarne owns the Noisy on May 20, 2005 with Plaza Centers (Europe) BELGIUM Arcades shopping center as well as Blagnac BV, Klépierre acquired 4 shopping centers On October 5, 2005, Klépierre acquired and Saint-Orens shopping malls located in in Poland on July 29, 2005 for a total outright ownership of the Louvain-la-Neuve the Greater Toulouse Area. investment of 203 million euros. Located shopping center, marking the Group’s first The acquisition of the two malls included an in Warsaw, Krakow, Poznan and Ruda, investment in Belgium. The 52 219 sq.m. additional cash payment of 4.2 million euros the 4 centers in operation cover a gross shopping center is on 2 levels and comprises in March 2005 to the seller. leasable area of 98 240 sq.m. and generate 134 shops for total value of 157 million In June 2005, Klépierre included its subsidiary annual lease income of around 19 million euros. SNC SCOO (former: Secmarne) in the SIIC tax euros. plan in return for an exit tax of 7.3 million The agreement also calls for the acquisition FRANCE euros. in 2006 and 2007 of centers currently under Klépierre pursued its development in 2005, development, representing gross leasable acquiring: area of 102 868 sq.m.: in Poland with • the Rennes Colombia shopping center, for projects in Rybnik, Sosnowiec and Lublin for 44.1 million euros. The shopping mall, which a total estimated investment of 133 million offers gross leasable area of 20 215 sq.m. euros; and in the Czech Republic with and includes a supermarket, 4 mid-size units projects in Prague and Pilzen, for 87 million and 67 smaller shops, was acquired as part euros. of an asset swap in exchange for the proper- These shopping center acquisitions are ty at 280/282, boulevard Saint-Germain (Paris subject to conditions precedent, in particular, 7th); obtaining the final building and operating • a 8 625 sq.m. extension of the Grand permits. Under the terms of the agreement, Marché in Quétigny, for 39.7 million euros. Klépierre agreed to pay for the centers when It was inaugurated in October 2005 and they are open for business, the transaction formally acquired at year end. being covered by a bank guarantee from Klépierre to Plaza Centers. The Prague center OFFICE PROPERTY ARBITRAGE CONTINUED was acquired on June 30, 2006. Klépierre sold eight buildings in 2005 repre- In addition to this transaction, Ségécé senting a total surface area of 35 039 sq.m. acquired the remaining 50% equity interest for a total amount of 124.8 million euros: in the Plaza Centers Hungarian management • in January: the property located at 43/45, business it did not already own, having Avenue Kléber in Paris; acquired a 50% stake in July 2004 when • in March: the le Timbaud building in

Klépierre_Financial report 2006 Klépierre SupervisoryBoard sinceApril8,2004. Dominque Hoennhasbeenamember ofthe Collège del’Autoritédesmarchés financiers, Director ofBNPParibasandmemberthe Hoenn, Senioradviser, formerManaging chose toappointaschairman,Dominique meeting immediatelyafterthemeeting, The membersoftheSupervisoryBoard, of April8,2004. was renewed attheannualgeneralmeeting as memberoftheSupervisoryBoard which April 12,2000.Hewillcontinuehisoffice Board, aposthehadbeenoccupyingsince as ChairmanoftheKlépierre Supervisory of April7,2005,heresigned from hisduties As aresult, after theannualgeneralmeeting quit allactivitiesaschairmanoftheboard. BNP ParibasearlyJanuary2005,decidedto head oftheGroup Compliancefunctionin Lévy-Garboua,whowasappointed Vivien and ExecutiveBoard appointments Supervisory Board changeschair - Abridgeloanwascontractedinthesecond - bankfinancingwassetupinItalythe • - defininglessonerous andmore homo- - improving thefinancingtermsand - renewing andextendingthecommercial with theaimof: were renegotiated in March 2005, • Change indebtfinancingterms of amaximumamount been drawndownfor On December31,2005,thisloanhad program, whichwasrevised upward. half of2005tofinancetheinvestment shopping mallinLecce,Italy; and theacquisitionofCavallino of additionalequitybyKlépierre inAssago December 8,2005tofinancetheacquisition sum of is non-recourse forKlépierre. Anadditional financing facility(dueinDecember2006) in favorofKlefinItalia.Thisshort-term form ofabilateralloan genous financialcovenantconstraints. term linesofcredit; conditions ofthisswinglineandmedium- paper swingline; New bankborrowings: The clubdealssignedin2003and2004 € 90 millionwasdrawndownon € 275 million,out € € 80.9 million 400 million. of theShoppingcenterdivision. Financial Officer andLaurent Morel, Head General Secretariat: Jean-MichelGault,Chief Head oftheoffice property unitandthe Michel Clair, itsChairman,ClaudeLobjoie, The ExecutiveBoard nowhas4members: will nowtakeoverthemanagement. last JuneasChiefExecutiveOfficer ofSégécé, Shopping Centers.Laurent Morel appointed Chairman oftheFrench NationalBoard of growth strategy.and external Heremains the Klépierre Executive Board onitsacquisitions and developmentwilladvisethe of Klépierre specialized inmanagement of theentire Ségécé group, subsidiary Éric Ranjard willremain the chairman of 2005ashehadpreviously announced. and quithisoperationalfunctionsbytheend 2005, hiswishtousepensionrights Supervisory Board, heldonDecember15, and shoppingcenters,confirmedtothe Executive Board inchargeofdevelopment Mr ÉricRanjard, Vice-President ofthe to headtheShoppingcenterdivision. February 2005;hismainresponsibility is Laurent Morel joinedKlépierre in Officer ofKlépierre since 1998. Jean-Michel Gault,hasbeenChiefFinancial Jean-Michel GaultandLaurent Morel. members totheKlépierre ExecutiveBoard: met onJune1,2005appointedtwonew The Klépierre SupervisoryBoard which 87 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

The accounting principles applied for the the opening balance sheet at January 1, consolidated accounts at December 31, 2006 2005 are all assets and liabilities that meet are identical to those used in the consolidated the accounting definitions and criteria of accounts at December 31, 2005, with the IFRS, and only these; exception of new standards, interpretations • the assets and liabilities are classified and amendments to existing standards in accordance with IFRS; applicable to the accounting periods opened • the assets and liabilities are measured as from January 1, 2006 or thereafter and in accordance with IFRS; which were not applied by the Group in • the impact of adjustments is booked anticipation: in equity at the beginning of the year. • pursuant to the new standards: The impacts of the first-time adoption of IFRS 2 - ACCOUNTING PRINCIPLES IFRS 7: Financial instruments – Disclosures are detailed on page 137 in the 2005 AND METHODS (mandatory application as of January 1, reference document. 2007); The IAS 32-39 standards on financial instruments Corporate reporting • pursuant to amendments to existing are applied as from January 1, 2005 (with Klépierre is a French law société anonyme, standards: no comparative data in accordance with subject to all the texts applicable to IAS 1: Presentation of financial statements, paragraph 36 a of IFRS 1). commercial enterprises in France, share capital disclosures (mandatory application The impacts of the application of IAS 32-39 and in particular the provisions of as of January 1, 2007) are detailed in paragraph 10.5 in the notes the commercial code. Amendment IAS 39 and IFRS 4: financial to the consolidated financial statements The company’s head office is located at guarantees and credit insurance; of the 2005 reference document. 21, avenue Kléber in Paris. • pursuant to the interpretations: As first-time adopter at December 31, 2005, On February 5, 2007, the Executive Board IFRIC 7: Practical methods of reprocessing IFRS 1 allows derogations from certain closed and authorized the publication the financial statements according to IAS 29 – optional provisions: of Klépierre SA consolidated financial Financial information on hyper-inflationist • business combinations: non restatement statements for the period from January 1, economies (mandatory application to of business combinations that occurred 2006 to December 31, 2006. financial years opened as from March 1, before January 1, 2004. Klépierre shares are listed on Eurolist by 2006). This standard is not applicable to • fair value or revaluation used as the Euronext Paris (Compartment A). Klépierre’s activities. presumed cost: used as presumed cost for IFRIC 8: Scope of application of IFRS 2, property, plant and equipment and investment Principles of financial statement share-based payments (applicable to financial property of the fair value retained in the preparation years opened as from May 1, 2006). To date, consolidated accounts during the revaluation It is recalled that in accordance with details relating to the scope of application on January 1, 2003 following the adoption European Regulation 1606/2002 dated have no impact on Klépierre’s financial of the SIIC status; July 19, 2002, the consolidated financial statements. • employee benefits: for fixed-benefit statements have been drawn up in IFRIC 9: Separation of incorporated derivatives post-employment benefits, the group applied conformity with IFRS rules, as adopted by (applicable to the financial years opened the so-called corridor method for posting the European Union on December 31, 2005. as from June 1, 2006). Klépierre has no actuarial gains and losses on the company’s The IFRS reference system as adopted by incorporated derivatives to date. commitments; the European Union includes the IFRS • equity-settled transactions: only plans (International Financial Reporting Standards), IFRS 1: Overview of methods granted after November 7, 2002 the IAS (International Accounting Standards) for first-time adoption of IFRS in and for which there were no vested rights and their interpretations (SIC and IFRIC). the accounts at December 31, 2005 at January 1, 2005 have been recognized The consolidated annual financial statements As a first-time adopter of IFRS standards at in the accounts. on December 31, 2006 are prepared in December 31, 2005, the specific provisions of accordance with IFRS, as adopted by IFRS 1 relating to the first-time adoption were the European Union on December 31, 2006. applied. The consolidated annual financial statements For preparing the opening balance sheet, as of December 31, 2006 are presented in the retrospective application of the standards the form of complete accounts including all applicable at December 31, 2005 means the information required by the IFRS that: reference system. • the assets and liabilities to be included in

Klépierre_Financial report 2006 liabilities, shareholders’ equityandearnings. would affect thevalueofGroup’s assets, of theseestimatesorassumptions,which and circumstances mayleadtochanges and reasonable assumptions.Somefacts estimates andretains anumberofrealistic that theGroup usesacertainnumberof statements inaccordance withIFRSimplies The preparation ofconsolidatedfinancial and materialestimates Summary ofjudgments thousand unlessotherwiseindicated. and allvaluesare rounded tothenearest financial statementsare presented ineuro to therisksbeinghedged.Theconsolidated to reflect changesinfairvalueattributable measured elsewhere atcost,isadjusted of fairvaluehedging,andwhichare that are hedgedaccording toarelationship The carryingamountofassetsandliabilities are measured andcarriedattheirfairvalue. assets thatare beingheldforsale,which of derivativefinancialinstrumentsand the historicalcostprinciple,withexception statements are establishedaccording to The Group’s consolidatedfinancial this control ceases. interest and prevails untilthedateonwhich on whichtheGroup acquired acontrolling on whichtheyare acquired, whichisthedate Subsidiaries are consolidatedasofthedate accounting methods. as thatoftheparent intermsofconsistent prepared using the samebenchmarkperiod The financialstatementsofsubsidiariesare and ofitssubsidiariesatDecember31,2006. the financialstatementsofKlépierre S.A. The consolidatedfinancialstatementsinclude Basis ofpreparation Consolidated financialstatements– Financial ReportingStandards (IFRS). prepared inaccordance withtheInternational of Klépierre SAandallitssubsidiarieswere The consolidatedfinancialstatements standards Compliance withaccounting events andothersources ofuncertainty future The principalassumptionsconcerning USE OFESTIMATES entities intheGroup. powers). There are nospecialpurpose decision-making andmanagement of theGroup, theGroup hasthe conducted exclusivelyonbehalf exercises control (itsactivitiesare of therelationship isthattheGroup the entity, provided thatthesubstance the Group hasnoequityinterest in to manageatransaction,evenwhere entities (SPEs)formedspecifically The Group consolidatesspecialpurpose on whichtheGroup obtainseffective control. A subsidiaryisconsolidatedfrom thedate can beexercised orconvertedimmediately. an entitlementtoadditionalvotes,ifthese account ofpotentialvotingrightsgiving The calculationofthelevelcontrol takes or significantinfluence. which ithasmajoritycontrol, jointcontrol of Klépierre cover allcompaniesover The ConsolidatedFinancialStatements Consolidation scope OF CONSOLIDATION 2.1 -SC value ofthebuildings. rates whichhaveadirect impactonthe use theassumptionsoffuture flowsand described inparagraph9.1.Theappraisers half yearaccording tothemethods appraised bythird partyappraisersevery The Group hasitsreal estateassets • of thesecashflows. discount ratetocalculatethecurrent value generating unitandalsotochooseapre-tax expected future cashflowsfrom thiscash in use,Klépierre hastomakeestimateson allocated. Inorder todeterminethevalue generating unitstowhichthegoodwillis an estimateofthevalueinusecash goodwill atleastonceayear. Thisrequires The Group checkstheneedtowritedown • presented below: and liabilitiesinasubsequentyear, are change inthenetcarryingamountofassets which there isasignificantriskofmaterial linked totheuseofestimatesatyearendfor Valuation ofgoodwill Investment property OPE AND METHOD 89 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

Consolidation method 2.2 - ACCOUNTING FOR BUSINESS The Group’s method of consolidation is not COMBINATIONS based on the sole criteria of percentage of According to IFRS 3, all business combinations control in the subsidiary: covered by the standard must be accounted • majority control: full consolidation. Control for as acquisitions. is presumed to exist when Klépierre holds A business combination is defined as more than half of the company’s voting the grouping of separate entities rights directly or indirectly. Control is also or businesses into one reporting entity. certified when the parent has the power to On the acquisition date, the acquirer must direct the entity’s financial and operational allocate the cost of the business combination policies, appoint, recall or convene most by recognizing, at fair value at this date, the members of the board of directors or the identifiable assets, liabilities and contingent equivalent management body; liabilities of the acquired business (except for • joint control: proportional consolidation. non-current assets held for sale). Joint control is justified by the need for the Goodwill is the difference between the price unanimous agreement of shareholders for paid to acquire the consolidated companies’ operational, strategic and financial decisions. securities and the Group’s stake in the fair The agreement is contractual: articles of asso- value of the acquired identifiable assets and ciation, shareholders’ agreements; liabilities. • Significant influence: equity method On the acquisition date, the acquirer records consolidation. Significant influence is the positive goodwill as an asset. Total negative power to participate in an entity’s financial goodwill is immediately recognized in the and operational policy, without having profit and loss statement. control over it. Control is presumed to exist Goodwill is no longer amortized, pursuant when Klépierre holds directly or indirectly to IFRS 3 “business Combinations”. However, 20% or more of an entity’s voting rights. it must be tested annually for impairment The equity-method shares are initially or more often if certain events or changes recognized in the balance sheet at their cost in circumstances indicate possible impairment. plus or minus the share of the net position For this test, goodwill is broken down generated after the acquisition and less by cash-generating unit (CGU), which is impairment. a homogeneous group of assets that • no influence: non-consolidated company. generates identifiable cash flows. Intangible assets are recognized separately The goodwill of equity-accounted companies from goodwill if they are separately is classified with the value of “equity-account- identifiable, i.e. if they arise from contractual ed investments” and is not amortized. or other legal rights or if they are capable of being separated from the activities Inter-company transactions of the entity acquired and are expected Inter-company accounts together with profits to generate future economic benefits. resulting from transactions between group Any adjustments to assets and liabilities companies are eliminated. Since January 1, recognized on a provisional basis must be 2005, the internal margin on development done within 12 months of the acquisition fees incorporated into the cost price of date. capitalized assets or inventories by purchasing companies is eliminated. Financial products billed to property development companies are listed among their inventories and carried in profit and loss.

Klépierre_Financial report 2006 held share isnotrevalued. the additionalacquisitiondate.Thepreviously stake acquired, atthefairvalueon after priorcontrol oftheadditionalequity goodwill andrevaluing thesubsidiary’s asset has electedamethodthatconsistsinrecording a relevant accounting.TheKlépierre group use itsjudgmentindevelopingandapplying transaction, otherevent,managementmust Interpretation thatspecificallyappliestoa in theabsenceofastandard oran type oftransaction.According toIAS8.10, there are nospecificaccounting rulesforthis IFRS 3.Asitisnotabusinesscombination, considered asabusinesscombinationunder The acquisitionofminorityinterests isnot in acontrolled entity acquisition ofsecurities Recognition oftheadditional is recognized inprofit orloss. from equity, onthatforeign operation gain/loss, asrecognized separately the totalaccrueddeferred exchange of thedisposalaforeign operation, under aseparatelineitem.Intheevent allocated directly toshareholders equity Any translationdifferences thatresult are weighted exchangeratefortheyear. accounts are converted attheaverage on theclosingdateandtheirprofit andloss is theeuro, at theexchangerateinforce into Klépierre SA’s reporting currency, which liabilities ofthesesubsidiariesare converted On thebalancesheetdate,assetsand rate onwhichthisfairvaluewasdetermined. at fairvalue,are convertedattheexchange in foreign currencies andwhichare measured initial transactions.Non-monetaryitemsstated the exchangerateinforce onthedatesof at theirhistoricalcost,are convertedusing foreign currencies, andwhichare measured sheet date.Non-monetaryitemsstatedin at theexchangerateinforce onthebalance are convertedintothefunctionalcurrency assets andliabilitiesstatedinforeign currencies At theaccountingcut-off date,monetary of thetransaction. at theexchangerateinforce onthedate initially recorded inthe functionalcurrency functional currency. Thesetransactionsare transactions inacurrency otherthantheir The Group’s foreign affiliates conductcertain this functionalcurrency. its financialstatementsare measured using its functionalcurrency, andallitemsin of theGroup’s subsidiariesdetermines functional andreporting currency. Each are reported ineuro, whichisKlépierre’s The ConsolidatedFinancialStatements FOREIGNCURRENCYTRANSLATION - 2.3 from it. and future economicbenefitsare expected by theenterpriseasaresult ofpastevents or contractualrights.Itiscontrolled from theacquired entityorarisefrom legal be identifiableandtherefore separable without physicalsubstancethatmust An intangibleassetisanon-monetary INTANGIBLE ASSETS - 2.4 property onafairvaluebasis. financial datarestating itsinvestment property, Klépierre isproviding the fairvaluemodeltotheirinvestment statements ofkeycompetitorsapplying complete andcomparabletothefinancial To produce financialreporting thatisboth of IAS40usingthecostmodelapproach. approved theadoptionbyKlépierre On May26,2004,theSupervisoryBoard statements. in thenotesappendedtofinancial give thefairvalueofinvestmentproperty of IAS16;inthiscase,theenterprisemust • being recognized intheincomestatement);or • their initialbooking: Investment property ismeasured after and equipment(long-termfixedassets). are recorded under property, plant property”. BuildingsoccupiedbytheGroup meet thedefinitionof“investment Nearly allofKlépierre’s real-estate assets of business(trading). • purposes; or supply ofgoodsorservicesforadministrative • as opposedto: rentals orforcapitalappreciation orboth the lessee(underafinancelease)toearn as property heldbytheowneror IAS 40definesinvestmentproperty INVESTMENT PROPERTY - 2.5 their expectedusefullife. straight linebasisoverperiodswhichreflect finite usefullivesshouldbeamortizedona Assets classifiedasintangibleassetswith but testedannuallyforimpairment(IAS36). known usefullifeshouldnotbeamortized known usefullife.Intangibleassetswithno be amortizedoverthebestestimateofits IAS 38statesthatanintangibleassetshould at costpursuanttothemethods; either atthefairvalue(allchanges property heldforsaleintheordinary course property heldfortheproduction, pro forma 91 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

retain as the initial cost of its buildings for its opening balance sheet, the revalued value determined at January 1, 2003 during the adoption of the SIIC status, value that is representative of the market value at that date. The values were allocated between land and building according to the terms fixed by the appraisers, namely: • on the basis of land/construction allocation rates for office property; • by comparison with the rebuilding cost for shopping centers. Cost model An obsolescence factor was applied Fixed assets are recorded at cost, including to the cost of restoring to a new condition duties and fees, and are amortized using increased by reconstruction costs. the components method. Long-term fixed assets acquired after January Depreciation of fixed assets must reflect 1, 2003 together with the extensions the consumption of economic benefits. and improvements on the re-appraised The calculation must be based on: investment property are recorded • the basis of the amortizable amount which in the balance sheet at their acquisition cost. is equal to the acquisition cost less the residual value of the fixed asset; Components method • spread over the useful life of the PPE The application of the components method is components. When the different fixed asset based on the recommendations issued components have different useful lives, each by the Fédération des Sociétés Immobilières component whose cost has a material impact et Foncières (Federation of Property on the total cost of the fixed asset must be Companies – FSIF) regarding components separately amortized over its own useful life; and useful lives: After initial recognition, fixed assets are • concerning buildings developed measured at their cost less accumulated by the companies themselves, precise analysis amortizations and impairments if any. of assets by component type and posting The amortization of fixed assets is calculated at realization cost; over the service period according • concerning buildings held in portfolio, to the straight line method. sometimes for a long time, components The amortization period, the method identification was based on four property of amortization as well as the residual value asset types: business premises, shopping must be reviewed at each balance sheet centers, offices and residential property. date. Four components were identified for each Long-term fixed assets are tested for loss of these asset types in addition to the land: in value whenever there is evidence of – Structure; impairment on the balance sheet date. – Facades, waterproofing and roofing; If evidence of impairment is found, the new – General and technical installations (IGT); recoverable amount of the asset is compared – Fittings. to its net carrying amount and any observed The components are broken down by history impairment is recorded (see 2.7). and the technical aspects specific to each Gains or losses from the disposal building. of investment property are recorded under For the first time adoption of the components “Result of the sale of investment property method, the historic cost of buildings has and equity interests.” been reconstituted according to the percentages The adoption of the cost model leads to allocated to each component using the application of the components method. the reappraisal values retained as As offered by IFRS 1, Klépierre elected to the presumed cost at January 1, 2003.

Klépierre_Financial report 2006 G 0yas1%2 er 25% 20years 15% 10 to 15 25years 10% 15% 35 to 50 15% years 12 20years 60% 30years years 60 Fittings IGT Facades Structure • • selling costs; amount andthefairvaluenetofrequired • The accountingconsequencesinclude: vente covered byacontracttosell( The Klépierre Group reclassifies allproperty being classifiedasassetsheldforsale. immediately testedforimpairmentbefore criteria ofthedisposalasset.Theassetis under considerationmeetstheclassification sales process hasbeeninitiatedandtheasset to thecostmodelinIAS40,sofaras investment property measured according presentation andmeasurement applyto The provisions ofIFRS5concerning FOR SALE NON-CURRENTASSETS HELD - 2.6 value ofthecomponentsisnil. Given theselectedusefullives,residual life, afterdeductingthedisposalcosts. and intheconditionofenditsuseful would obtainiftheassetwere already old estimate oftheamountwhichcompany The residual valueisequaltothecurrent period ofthestructure. construction isamortizedovertheamortization and construction.Theportionassignedto Acquisition costsare allocatedbetweenland period asfixedin2003bytheappraisers. components andisamortizedovertheresidual is deductedfrom theportionofother assets. Theportionofstructure component date orthelastmajorrenovation forfixed in thematrixappliedfrom theconstruction “Cladding” according totheperiodsoutlined “Fittings”, “Technical installations”and at January1,2003ofthecomponents As aresult, Klépierre determined theportions The componentsmatrixisanew“matrix”. discontinuance ofamortizations. separate reporting intherelevant properties; transfer tothelowervalueofcarrying Period Office buildings ) inaccordance withIFRS5. Portion Period Shopping centers mandat de Portion er 10% years 50% years financing istakenintoaccount. before theexplicitorimplicitcostof by thebusinessportfolioofeach company, likely tobegeneratedinthefuture consists offirst,estimatingthecashflows over aperiodof5years.TheDCFmethod by thediscountedcashflow(DCFmethod) based ontherangeofestimatesgiven of Klépierre byAonAccuracyare primarily These appraisalscarriedoutonbehalf in caseofamaterialeventduringtheyear. The appraisalisdiscountedtopresent value by athird-party appraiseratleastonceayear. Impairment testsare carriedout Ségécéanditssubsidiaries. concerns In addition,theGroup’s goodwillmainly and eachshoppingcenterasaCGU. The Klépierre group considerseachproperty impairment exceptforunallocatedgoodwill. have torestate inincomeallorpartofthis In certaincases,theentitymaysubsequently recognize impairmentinprofit andloss. its recoverable amount,theentityshould If thecarryingamountofanassetexceeds of theasset. planned useandthefuture disposal cash inflowsdiscountedtoreflect the The usefulvalueisdeterminedfrom future and theusefulvalue. of thenetfairvaluedisposalcosts The recoverable valueisthehigheramount value. amount whichexceedstheirrecoverable are notrecognized intheaccountsatan The entityshouldmakesure thattheassets from otherassetgroups. are largelyindependentofthecashinflows cash inflowsfrom continuinguseandthat homogenous groups ofassetsthatgenerate into cash-generatingunits(CGU).CGUsare For thistest,fixedassetsare combined or legalenvironment. • value, • A signofimpairmentmaybe: in anasset. checks toseeifthere are signs ofimpairment The standard requires thatthecompany plant andequipment,includinggoodwill. IAS 36appliestointangibleassetsandproperty, IMPAIRMENT OFASSETS - 2.7 a changeinthetechnological,economic a significantdrop intheasset’s market 93 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

in return for payment or a series of payments. property, provided that this increase in value IAS 17 defines two categories of leases: is confirmed by independent appraisers. • a finance lease is a lease that transfers Otherwise, it should be charged against substantially all the risks and rewards income. of ownership of an asset to the lessee. • Building renovation requiring removal Ownership may, or may not be transferred of the existing tenants by the end of the lease term; If eviction indemnities are paid in the context • an operating lease refers to any lease of major renovation or reconstruction that is not a finance lease. of a building requiring the prior departure In the second step, which seeks of the existing tenants, these costs are to estimate the value of the business Treatment of stepped rents considered as preliminary expenses treated portfolio, these cash flows and the estimated and rent-free periods as additional components following the future value of the portfolio of business Rental income from operating leases renovation. at the end of the projected period (terminal is recognized on a straight-line basis over value) are discounted using a reasonable rate. the entire term of the lease. Building leases: IAS 40 and 17 This discount rate, which is derived Stepped rents and rent-free periods are Land and building leases are classified as on the basis of the Capital Asset Pricing Model accounted for as an increase or decrease operating or finance leases, in the same way (CAPM) formula, is the sum of the following to lease income for the financial year over as leases of other assets. However, the land three factors: the risk-free interest rate, the the life of the lease. presents the characteristics of having normally systematic risk premium (average expected The period of reference is the first firm lease an undefined economic life and if there are market risk premium times the beta coefficient term. no plans for transferring ownership to the of the business portfolio) and the specific risk lessee at the end of the lease term, the lessee premium (to account for that portion of Entry fees does not receive nearly all the risks and the particular risk that is not already integrated Entry fees received by the lessor are benefits inherent to ownership (when they in the cash flows). The third and last step recognized as supplementary rental income. concern lands, leases are considered as consists of determining the value of the Entry fees are part of the net amount operating leases). Any initial payment made company’s own equity by extracting net exchanged by the lessor and the lessee for such leasehold represents pre-paid lease financial debt on the date of valuation under a lease agreement. To this end, payments which are amortized over the lease from the portfolio’s total value and, where the accounting periods during which this net term in accordance with the pattern applicable, the estimated value of minority amount is recognized should not be of benefits provided. The analysis interests on that same date. affected by the form of the agreement is on a contract by contract basis. and the payment installments. These rights Pursuant to the components-based method 2.8 - INVENTORIES are spread over the first firm lease term. defined by IAS 40, these initial payments are Under IAS 2, inventories include assets held reclassified as prepaid expenses. for sale in the ordinary course of business, Termination indemnities assets in the production process for sale in Tenants who terminate their leases prior the ordinary course of business or materials to the expiration date are liable for early and supplies that are consumed in production. termination fees. An impairment should be recognized if These fees are allocated to the terminated the net realizable value (fair value net of exit contract and are credited to income in the costs) is less than the booked cost. period in which they are recognized. The Group’s inventories mainly comprise expenses concerning projects under study. Eviction indemnities These expenses are written off as losses Where the lessor terminates an ongoing when the projects are discontinued. lease, he pays an eviction indemnity to the existing tenant. 2.9 - LEASES • Replacement of a tenant In cases in which paying an eviction indemnity Leases leads to improve asset performance (higher IAS 17 defines a lease as an agreement rent, and thus higher asset value), the revised under which the lessor transfers to the lessee version of IAS 16 allows for the indemnity for a fixed period the right to use an asset to be capitalized as part of the cost of the

Klépierre_Financial report 2006 AND OTHER DEBTORS TRADE ACCOUNTS - 2.10 a regulated French market,withaminimum is availablebyoptiontocompanies listedon implemented bythedecree ofJuly11,2003 by article11ofthefinancelawfor2003and real-estate investmentcompanies(SIIC) for companiesintroduced infavouroflisted The specificregime oftaxexemption • investment companies Tax statusfor listedreal-estate CURRENTAND DEFERREDTAXES - 2.13 of nonremunerated long-termliabilities. IAS 37requires thediscounting from thisthird party. compensation beingobtainedinreturn the saidparty, withoutatleastanequivalent in anoutflowofresources infavourof to athird partythatwillprobably result is recognized where there exists anobligation liabilities andcontingentassets»,aprovision Pursuant toIAS37«Provisions, contingent LIABILITIES PROVISIONS AND CONTINGENT - 2.12 the constructionperiod. these chargesare capitalizedover of thecostassetsacquired. Asaresult, costs related totheseoperationsaspart treatment, sinceitconsidersthefinancial Klépierre hasnotoptedforthebenchmark of therelevant asset. of aqualifyingassetaspartthecost to theacquisition,constructionorproduction borrowing coststhatare directly attributable istotreat The allowedalternative costs asanexpense. to recognize construction-related borrowing The benchmarktreatment underIAS23is BORROWING COSTS - 2.11 in losswhentheyare identifiedassuch. Non recoverable receivables are recognized receivable cannotberecovered. when itismore thanprobable thattheentire recoverable amounts.Baddebtisestimated deducting provisions forwrite-off ofnon for theinitialamountofinvoiceafter Trade accountsare recognized andbooked General characteristicsoftheSIICtaxstatus transactions andgainsfrom disposals, exempted from taxonproperty leasing Klépierre hasdeterminedaSIICsector Since thestatuswasadoptedin2003, for SIICstatus • Klépierre’s refinancing spread. the deferred paymentandincreased by rate dependsontheinterest ratecurvegiven on thecut-off date.Theretained discount be reduced toitsdiscountedcarryingamount in profit andloss.Inthisway, theliabilitycan expense isrecognized ateachcut-off date the initiallybookedliabilityandaninterest The discountvalueisdeductedfrom of thedeferred payment. in theincomestatementforperiod status. Afinancialchargeisthenrecorded on whichtheentityinquestionadoptsSIIC is payableoverfouryearsasofthedate of itspaymentschedule.Thisliability The exittaxliabilityisdiscountedonthebasis • retroactive toJanuary1,2003. the newSIICtaxstatus;optionwas 2003 authorizedKlépierre tochoose The annualgeneralmeetingofSeptember26, years. and thebalancespread overthenextthree on December15oftheyearoption on thebasisofaquarteramount to corporationtax.Theexittaxispayable and shares in partnerships notsubject on theunrealized capitalgainsonproperties the exittaxof16.5%becomescurrent Once acompanyelectsfortheSIICstatus, have selectedthisstatus. subsidiaries subjecttocorporationtaxwhich 100% ofthedividendspaidbytheir income, 50%oftheirsalesincomeand are required todistribute85%oftheirrental forthisexemption,thecompanies In return choose thisstatus. tax andatleast95%controlled mayalso irrevocable. Subsidiariessubjecttocorporation with identicalsocialobjects.Theoptionis holding ofequityinterests inlegalentities of buildingsforrental ordirect orindirect purpose istheacquisitionorconstruction capital of15millioneuros andwhoseprimary Income taxforcompaniesnoneligible Discounting theexittaxliability 95 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

gains and losses on available for sale assets. amortized cost calculated using the effective In this case, the corresponding deferred interest rate (rate that accurately discounts taxes are charged to equity. the expected cash flow to the instruments Deferred taxes are calculated at the rates current value). in force on the cut-off date. The main rates applied are 34.43% for France, 32.5% for • Financial assets available for sale Spain, 37.25% for Italy, 33% in Belgium, Financial assets available for sale include 25% in Greece, 27.5% in Portugal, 19% investment securities. and a taxable sector for the other activities. in Poland and 20% in Hungary (excluding Investment securities represent the group’s Income tax for companies excluded from the ordinary deficits capitalized at 16%), equity investments in non consolidated SIIC status is calculated according to common 24% for the Czech Republic and 19% companies. law conditions. for Slovakia. Investments in equity instruments with no quoted price on an active market and whose Common law status 2.14 - TREASURY SHARES fair value cannot be reliably measured must and deferred taxes All treasury shares owned by the Group be valued at cost. Corporate income tax is determined on are recognized at cost and deducted from the basis of the rules and rates applicable equity. Gains from the sale of these shares • Cash and cash equivalents in each country where the group’s companies are directly credited to equity, so that any Cash and cash equivalents include cash are located for the period in which the results gains or losses on the transaction have no on bank accounts, short-term deposits with were incurred. effect on net profit and loss for the period. an initial term of less than three months, Current as well as future income tax are money-market funds and other financial offset when they originate within the same 2.15 - DISTINCTION BETWEEN securities. tax group, are subject to the same tax LIABILITIES AND EQUITY authority and when it is legally possible The criteria for differentiating debts Measurement and recognition to offset taxes. from equity is the existence or not of an of financial liabilities Deferred taxes are recorded in respect of all obligation for the issuer to make a payment With the exception of derivatives, all loans timing differences between the carrying value in cash to its counterparty. The fact of and other financial liabilities are measured of assets and liabilities on the balance sheet initiating the outflow or not is the primary at amortized cost, computed using the and their tax value, for those leading criterion for differentiating between debt effective interest rate. to taxable income in future periods. and equity. A deferred tax asset is recognized in case • Recognition of financial liabilities of tax losses carried forward in the probable 2.16 - FINANCIAL ASSETS at amortized cost assumption that the entity concerned will AND LIABILITIES Pursuant to IFRS, redemption premiums have future taxable income on which the tax Financial assets comprise long-term financial on bond issues and debt issuance expenses losses can be charged. investments, current assets representing are deducted from the nominal value Deferred tax assets and liabilities are measured, accounts receivable, financial securities or of the loans concerned and applied in according to the liability method, at the tax investments including derivatives and cash. the calculation of the effective interest rate. rate expected on the period in which the Financial liabilities comprise borrowings, asset will be realized or the liability settled, other financing and bank overdrafts, • Application of the amortized cost on the basis of tax rates and tax regulations derivatives and accounts payable. approach to liabilities covered by fair which were adopted or will be before the value hedge cut-off date. The measurement of deferred The measurement and recognition of financial Changes in fair value of swaps used as fair tax assets and liabilities must reflect the tax assets and liabilities are defined by IAS 39 value hedges require (with respect to their consequences that would result from “Financial instruments: recognition and effective part) an adjustment in the carrying the way in which the company expects, measurement”. value of the corresponding liability. at the balance sheet date, to recover or settle Since the derivatives and underlying the book value of its assets and liabilities. Measurement and recognition assets/liabilities involved in fair value hedges Current and deferred taxes are booked of financial asset. show similar characteristics in most cases, as tax income or expense in profit and loss, • Loans and receivables any ineffectiveness in the hedge relationship with the exception of deferred taxes booked This category includes receivables from will have only minimal impact on income. or settled at the acquisition or disposal investments, other loans and receivables. If the swap is cancelled prior to of a subsidiary or equity interest, the underlying These instruments are recognized at extinguishment of the liability, the amount

Klépierre_Financial report 2006 – for future cashflowhedges,theeffective – for fairvaluehedgesonexistingassets has theconsequencesbelow: • defined byIAS39. qualification andefficiency criteria Klépierre’s portfoliomeetsthehedging liability (oranasset). fixing thefuture cashflowofafloating-rate flows (“cashflowhedge”),whichentails - hedgingofpotentiallyfluctuatingfuture example ofafixedrateliability; credit or currency risk(“fairvaluehedge”): fluctuating fairvalueduetoaninterest rate, - hedgingofbalancesheetcomponentswith accounting inaccordance withIAS39: and hasconsequentlyadoptedhedge Klépierre hedgesitsliabilitiesusingderivatives as welltherelevant hedgeinstruments. facilities required tofund thegroup’s business of puttinginplaceattheKlépierre level,any exposures. Thisfinancialpolicyconsists manages itsinterest rateandcurrency Group’s financingneedsandcentrally Klépierre provides for virtually allofthe As theheadofaGroup ofcompanies, of derivatives Measurement andrecognition is terminated. at thedateonwhichhedgerelationship the effective interest rateascomputed amortized overitsresidual life,basedon of theadjustmentinliabilityshouldbe in theaccounts. the hedgeditemsare recognized statement symmetricallywiththe way are restated intheprofit andloss The amountsrecorded inequity part isreflected inprofit andloss. The changeinthevalueofineffective as anoffsetting entrytoequity. of thehedgeinstrumentiscarrieddirectly part ofthechangeinfairvalue as theyare effective; of thehedginginstruments,insofar symmetrical changesinthefairvalue against profit and loss,offset by Any changesinthisfairvalueare charged in thebalancesheetatfairvalue. or liabilities,thehedgedpartiscarried The adoptionofhedgeaccounting assets. prices forsimilarinstrumentsand underlying techniques, etc.)basedonquotedmarket Back andScholesmodel,interpolation using widelyacceptedmodels(DCFmethod, are tradedonactivemarkets.Theyare valued futures, caps,floorsandsingleoptions Most over-the-counter derivatives,swaps, and optionsare valuedinusingsuchprices. traded onorganizedmarketssuchasfutures fair value.Listedsecuritiesandderivatives are available,theyare usedtodetermine When quotedpricesinanactivemarket liquid market. considered an activeandtherefore being measured are tradedmaybe instruments highlysimilartotheinstrument supply anddemandspreads, andonwhich characterized byregular transactions,narrow For agivenfinancialinstrument,anymarket of finance. methods grounded inrecognized theories refers here tomathematicalcalculation on marketparameters.Theterm“model” market pricesorvaluationmodelsthatrely fair valueare measured usingeitherlisted Financial assetsandliabilitiescarriedattheir • particular) are bookedontheirsettlementdate. – Otherfinancialinstruments(debtsin takes intoaccountanydeferred departures; in sofarastheirmeasurement actually – Derivativesare bookedontheirtradingday, Klépierre appliestherulesbelow: and itsactualmaturitydate. the daypaper’s replacement istraded outstanding commercial paperbetween recognition wouldleadtoartificiallyinflating and usingthetradingdateasabasisfor is oftenrenewed afewdaysbefore payment instruments: commercial paperforexample, indifferently applied toallfinancial However, thisprinciplecannotbe in order tomeasure thedeferred departure. recognized atthenegotiationstage departure dateshouldtheoretically be an instrumentstatedwithadeferred the timevalueoffinancialinstruments, As IFRSstandards seektocloselyreflect • Determination offairvalue Recognition date:tradeorsettlement 97 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

• Short-term benefits value of the plan’s hedging assets at the end The enterprise should recognize an expense of the previous period. when it has used the services rendered by its members of staff in exchange • Long-term benefits for the benefits it has granted to them. Long-term benefits are benefits other than post-employment benefits and career • Post-employment benefits termination compensations that are not fully Pursuant to generally-accepted principles, due in the twelve months following the end the Group determines the appropriate of the exercise in which the members of staff accounting treatment according to whether rendered the corresponding services. the plan is a defined contribution plan The actuarial measurement method is similar or a defined benefit plan. to the method applied to defined • Tax treatment of fair value changes Plans known as “defined contribution plans” post-employment benefits, but the actuarial In the particular cases of Klépierre: are not representative of a commitment gains and losses are immediately booked – Klépierre SA’s financial instruments carried for the enterprise and no provision is and no corridor is applied. Further, the effect according to the fair value method results set aside for them. The amount of contributions linked to possible changes in plan considered in the calculation of deferred taxes for paid during the year is recognized as expenses. as related to past services is immediately the non SIIC part, in proportion to the Only “defined benefits plans” represent booked. financial result; a liability for the enterprise and are – the financial instruments of foreign therefore measured and provisioned. • Employment agreement termination subsidiaries booked according to the fair Classification in one or other of these benefits value method (example: Klécar Italia swap) categories is based on the economic Compensation due to the termination results in the calculation of deferred taxes at substance of the plan to determine of an employment agreement results the applicable rate in the country concerned. if the group is required or not, by the clauses from the benefit granted to employees during of an agreement or by an implicit obligation, the termination by the group of the 2.17 - EMPLOYEE BENEFITS to provide the services promised to its employment agreement before the statutory IAS 19 defines the conditions for members of staff. retirement age or results of an offer made in the accounting of employee benefits. Defined post-employment benefits are order to encourage voluntary redundancy. The standard applies to all payments given subject to actuarial measurements using Employment agreement termination benefits by an enterprise in exchange for services demographic and financial assumptions. which fall due more than 12 months after rendered, with the exception of equity-based The amount set aside as provision for the balance sheet date should be discounted. compensation which is covered by IFRS 2. the commitment is determined by using Accordingly, all kinds of employee benefits, the actuarial assumptions retained by 2.18 - EQUITY-SETTLED PAYMENT monetary or otherwise, short-term the enterprise and by applying the method Pursuant to IFRS 2, all equity-settled or long-term must be classified in one of projected unit credits. The value of hedge or equity-indexed payments should be of the four large categories: assets if any (plan assets and rights to recognized as an expense where the goods – short-term benefits such as salaries, annual reimbursement) is deducted from this amount. or services rendered in exchange for these leaves, profit-sharing, shares and company Measurement of the obligation, resulting payments have been used. contributions to schemes; from the plan and the value of its hedge For the Klépierre group, this standard – in France, post-employment benefits mainly assets can strongly change from one year is mostly relevant for equity purchases under comprise additional bank pensions and to another depending on changes in a stock-option plan. outside France they comprise pension plans actuarial assumptions and lead to actuarial Pursuant to IFRS 1, only plans granted managed by a number of pension funds; gains after November 7, 2002 and for which – other long-term benefits include paid and losses. The group applies the so-called there were no vested rights at January 1, leaves and bonuses linked to seniority, certain “corridor” method to post actuarial gains 2005 should be recognized in the accounts. deferred compensations paid in monetary and losses on the company’s commitments. As a result, the stock-option plan granted units; This method authorizes the recognition, by Klépierre group in 1999 cannot – compensation due to termination of job as from the next period and so as to spread be restated. contract. over time, of only a fraction of the actuarial Classification in one of these categories gains which exceed the higher of the two determines the measurement and accounting values below: 10% of the discounted value method. of the gross obligation or 10% of the market

Klépierre_Financial report 2006 threshold by10%until75%isreached. must beidentifiedwhiledropping the of consolidatedincome,then,newsectors be detailedrepresents lessthan75% If thetotalincomefrom thesectorsto sheet total. than 10%ofresult, revenues orbalance be presented insofarasitrepresents more A businessorgeographicsectorshould constitute homogenousgroups. of riskanalysisandprofitability soasto formats. Segmentsare identifiedonthebasis as theirprimaryandsecondaryreporting segments orgeographical segment reporting, choosingeitherbusiness IAS 14requires companies toprovide SEGMENTREPORTING - 2.19 and “other”Europe. Portugal, Italy, Greece, Hungary, Poland - Level2geographicalregion: France,Spain, offices; - Level1business:shoppingcentersand for level2. for level1andbygeographicalregion breaks downbybusinessoperations Segment reporting oftheKlépierre group for theperiod. income, segmentassetsandinvestments Level 2disclosures include:segment investments fortheperiod. assets, segmentliabilitiesand expenses, thecarryingamountofsegment andfinancial pre-tax segmentearnings Level 1disclosures include:segmentincome, 99 CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

3 - SCOPE OF CONSOLIDATION

Companies Siren No. Head office Méthods % of interest % of control December 2006* 2006 2005 2006 2005 SA Klépierre 780152914 Paris FC 100.00% 100.00% 100.00% 100.00%

OFFICES SAS Klépierre Finance 433613312 Paris FC 100.00% 100.00% 100.00% 100.00% SAS LP7 428782486 Paris FC 100.00% 100.00% 100.00% 100.00% SAS CB Pierre 343146932 Paris FC 100.00% 100.00% 100.00% 100.00% SAS 5 Turin 398969014 Paris FC 100.00% 100.00% 100.00% 100.00% SNC Général Leclerc n° 11 Levallois 381986363 Paris FC 100.00% 100.00% 100.00% 100.00% SNC Jardins des Princes 391237716 Paris FC 100.00% 100.00% 100.00% 100.00% SNC Barjac Victor 390123057 Paris FC 100.00% 100.00% 100.00% 100.00%

SHOPPING CENTERS – FRANCE SNC Kléber La Pérouse 388724361 Paris FC 100.00% 100.00% 100.00% 100.00% SAS KLE 1 389217746 Paris FC 100.00% 100.00% 100.00% 100.00% SNC SCOO (ex-Secmarne) 309660504 Paris FC 79.94% 79.94% 79.94% 79.94% SNC Angoumars 451149405 Paris FC 100.00% 99.38% 100.00% 99.38% SNC Klécar France 433496965 Paris FC 83.00% 83.00% 83.00% 83.00% SNC KC1 433816501 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC2 433816444 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC3 433816725 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC4 433816774 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC5 433817269 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC6 433842549 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC7 433842515 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC8 433842564 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC9 433816246 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC10 433816220 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC11 433894243 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC12 433894102 Paris FC 83.00% 83.00% 100.00% 100.00% SNC KC20 449054949 Paris FC 83.00% 83.00% 100.00% 100.00% SAS Opale 398968735 Paris FC 100.00% 100.00% 100.00% 100.00% SAS Centre Jaude Clermont 398960963 Paris FC 100.00% 100.00% 100.00% 100.00% SCS Klécar Europe Sud 428864268 Paris FC 83.00% 83.00% 83.00% 83.00% SAS Socoseine 389287871 Paris FC 93.75% 93.75% 100.00% 100.00% SC Solorec 320217391 Paris FC 80.00% 80.00% 80.00% 80.00% SNC Centre Bourse 300985462 Paris FC 100.00% 100.00% 100.00% 100.00% SCS Bègles Arcins 404357535 Paris PC 50.00% 50.00% 50.00% 50.00% SCI Bègles Papin 449389956 Paris FC 100.00% 100.00% 100.00% 100.00% SNC Soccendre 319814075 Paris FC 75.25% 75.25% 100.00% 100.00% SCI Sécovalde 405362682 Paris FC 55.00% 40.00% 55.00% 40.00% SAS Le Havre Tourneville 407799493 Paris FC 100.00% 100.00% 100.00% 100.00% SAS Cécoville 409547015 Paris FC 100.00% 100.00% 100.00% 100.00% SAS Le Havre Capelet 410336564 Paris FC 100.00% 100.00% 100.00% 100.00% SAS Poitiers Aliénor 410245757 Paris FC 100.00% 100.00% 100.00% 100.00%

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Klépierre_Financial report 2006 AKéirePrbl arsGec NoPyio C 30%8.0 0.0 100.00% 100.00% 100.00% 100.00% 100.00% 83.00% 100.00% 100.00% 83.00% 100.00% 83.00% 100.00% 100.00% 83.00% 100.00% 100.00% 100.00% 83.00% 83.01% 100.00% 100.00% 100.00% 100.00% 83.00% 100.00% 100.00% FC 83.01% 100.00% 100.00% 100.00% 100.00% 100.00% FC 100.00% 100.00% 100.00% 100.00% 100.00% 83.00% 100.00% FC 83.00% 100.00% NeoPsyhiko 100.00% 100.00% FC FC 100.00% 83.00% 100.00% 100.00% 83.00% 100.00% FC FC Greece FC Athens 100.00% 75.00% 100.00% 100.00% 87.25% Athens MadridAlcobendas 87.75% 100.00% FC MadridAlcobendas 75.00% Athens 100.00% Brussels FC Greece Spain 87.25% Spain FC Brussels 100.00% FC 87.75% 100.00% Greece 75.00% MadridAlcobendas MadridAlcobendas Greece Belgium 100.00% Spain 100.00% Spain 100.00% – 75.00% FC Belgium 100.00% FC 100.00% Brussels 100.00% Brussels – 75.00% FC FC FC 100.00% Belgium Belgium 100.00% Paris 75.00% – Paris 100.00% 100.00% 100.00% 50.00% 100.00% 83.00% Paris – 433909165 Paris FC Paris SA Klépierre PeribolaPatras 50.00% 435194725 100.00% 100.00% 100.00% 100.00% 83.00% 100.00% 50.00% 100.00% 100.00% 50.00% 562100214 100.00% 398058149 83.00% 50.00% 100.00% 398967000 50.00% 100.00% 50.00% SA Klépierre AthinonA.E. 70.00% FC 100.00% Paris 100.00% 50.00% 100.00% SA Klépierre FoncierMakedonia FC 50.00% 100.00% 83.00% 50.00% 50.00% SA Klépierre NeaEfkarpia 50.00% FC 50.00% 100.00% SA Klépierre Vallecas 84.11% 50.00% 100.00% FC 100.00% SA Klépierre Vinaza 50.00% 83.00% 50.00% 50.00% 50.00% SA KlécarFoncierEspaña 50.00% PC 421220252 37.50% SA KlécarFoncierIberica 100.00% 70.00% Paris 50.00% SA Placedel’Accueil FC 83.00% FC 50.00% 50.00% Paris 50.00% 50.00% FC SA Foncière deLouvain-la-Neuve 84.11% 37.50% Paris 50.00% SA Coimbra SA Cinémasdel’Esplanade Paris 100.00% 50.00% 50.00% SHOPPING CENTERS–INTERNATIONAL PC 100.00% 450895164 FC PC Paris 441648714 PC 100.00% FC PC 50.00% PC 479087942 Paris Paris 100.00% Paris 100.00% PC 398967232 100.00% 479718124 100.00% Gie Klépierre Services PC Paris 388233298 Paris Paris 100.00% 438570129 Paris 438568545 Paris Paris Paris SNC Galae FC Paris SAS Klépierre Conseil LaPlaineSt-Denis SNC SégécéLoisirsetTransactions FC 408175966 420292047 442229175 SNC Klégestion 420307704 422733402 419711833 419620075 SCS Ségécé 428788525 SERVICE PROVIDERS –FRANCE 421101882 Paris Paris 378668875 442692315 SCI BeauSevranInvest SCI LaPlaineduMoulinàVent SNC Klétransactions SCI Combault SAS Klépierre ParticipationsetFinancements(FormerK.Hungary) SAS HoldingGondomar3 SA HoldingGondomar1 SNC Pasteur SAS KlécarParticipationsItalie SAS OdysseumPlacedeFrance SNC Sodevac Havre Lafayette SNC Le Havre Vauban SNC Le SCI duBassinNord SNC EspaceCordeliers SAS Cecobil SCA Klémurs SAS Soaval SNC Foncière Saint-Germain Companies Companies Siren No. Country Head office Head office eebr2006* December eebr2006* December Méthods Méthods 2006 2006 % ofinterest % ofinterest 2005 2005 2006 2006 % ofcontrol % ofcontrol 2005 2005 101

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

Companies Siren No. Head office Méthods % of interest % of control December 2006* 2006 2005 2006 2005 Sarl Szeged Plaza Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl Szolnok Plaza Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl Zalaegerszeg Plaza Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl Nyiregyhaza Plaza Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% SA Duna Plaza Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl CSPL 2002 (Cespel) Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl GYR 2002 (Gyor) Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl Debrecen 2002 Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl Uj Alba 2002 Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl Miskolc 2002 Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl Kanizsa 2002 Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Sarl KPSVR 2002 (Kaposvar) Hungary Budapest FC 100.00% 100.00% 100.00% 100.00% Srl Immobiliare Magnolia Italy Milan FC 85.00% 85.00% 85.00% 85.00% Spa ICD Italy Milan FC 85.00% 85.00% 85.00% 85.00% Srl Novate Italy Milan FC 85.00% 85.00% 85.00% 85.00% Spa IGC Italy Milan PC 50.00% 50.00% 50.00% 50.00% Spa Klécar Italia Italy Milan FC 83.00% 83.00% 100.00% 100.00% Spa Klefin Italia Italy Milan FC 100.00% 100.00% 100.00% 100.00% Galleria Commerciale Collegno Italy Milan FC 100.00% 100.00% 100.00% 100.00% Galleria Commerciale Serravalle Italy Milan FC 100.00% 100.00% 100.00% 100.00% Galleria Commerciale Assago Italy Milan FC 100.00% 100.00% 100.00% 100.00% Galleria Commerciale Klépierre Italy Milan FC 100.00% 100.00% 100.00% 100.00% Galleria Commerciale Cavallino Italy Milan FC 100.00% 100.00% 100.00% 100.00% Galleria Commerciale Solbiate Italy Milan FC 100.00% 100.00% 100,00% 100.00% Besloten vennootschap Capucine BV Netherlands Amsterdam FC 100.00% 100.00% 100.00% 100.00% Klépierre Sadyba Poland Warsaw FC 100.00% 100.00% 100.00% 100.00% Klépierre Krakow Poland Warsaw FC 100.00% 100.00% 100.00% 100.00% Klépierre Poznan Poland Warsaw FC 100.00% 100.00% 100.00% 100.00% Ruda Slaska Plaza Spzoo Poland Ruda Slaska-Wirek FC 100.00% 100.00% 100.00% 100.00% Sadyba Center SA Poland Warsaw FC 100.00% 100.00% 100.00% 100.00% Krakow Spzoo Poland Krakow FC 100.00% 100.00% 100.00% 100.00% Poznan SA Poland Krakow FC 100.00% 100.00% 100.00% 100.00% Klépierre Poland Poland Warsaw FC 100.00% 100.00% 100.00% 100.00% SA Finascente Portugal Carnaxide PC 50.00% 50.00% 50.00% 50.00% SA Klépierre Portugal SGPS SA Portugal Carnaxide FC 100.00% 100.00% 100.00% 100.00% SA Galeria Parque Nascente Portugal Lisboa PC 50.00% 50.00% 50.00% 50.00% SA Gondobrico Portugal Lisboa PC 50.00% 50.00% 50.00% 50.00% SA Klénor Imobiliaria Portugal Carnaxide FC 100.00% 100.00% 100.00% 100.00% SA Klétel Imobiliaria Portugal Carnaxide FC 100.00% 100.00% 100.00% 100.00% SA Klélou Immobiliare Portugal Carnaxide FC 100.00% 100.00% 100.00% 100.00% Kleminho Portugal Carnaxide FC 100.00% – 100.00% – SA Delcis Cr Czech Republic Prague FC 100.00% 100.00% 100.00% 100.00% Klépierre CZ Czech Republic Prague FC 100,00% 100.00% 100.00% 100.00% Bestes Czech Republic Prague FC 99.00%– 100.00% – Entertainment Plaza Czech Republic Prague FC 100.00% – 100.00% – Klépierre Novo Czech Republic Prague FC 100.00% – 100.00% – Akciova Spolocnost ARCOL Slovakia Bratislava FC 100.00% 100.00% 100.00% 100.00%

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Klépierre_Financial report 2006 C orMre rt48127 C 0.0 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 99.99% 100.00% 100.00% 100.00% 100.00% NC 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% NC 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% NC NC 100.00% NC 100.00% NC NC 100.00% 100.00% 100.00% 100.00% 100.00% 428810287 100.00% 100.00% – 100.00% 100.00% 100.00% NC NC NC 100.00% 419297163 100.00% NC NC 100.00% 100.00% NC NC 423012376 398966812 100.00% 400110235 NC 423012004 400098448 NC NC – NC NC – NC NC 393439062 402668792 398969113 NC NC 50.00% 100.00% 399181635 100.00% 100.00% NC – 451355861 50.00% 419057823 393438742 100.00% 50.00% – SCI Tour Marcel Brot 100.00% 377563978 50.00% 75.00% 419057922 100.00% 100.00% 582017273 389519158 392663670 75.00% 100.00% 50.00% 75.00% 37.50% 35.00% 75.01% 392654505 75.00% 100.00% 400098356 FC 75.00% 35.00% 75.01% 398968677 SlovakiaBratislava FC 75.50% 400098364 PC FC SA Brescia SAS LeblancParis15 26.25% 392655395 SAS Suffren Paris15 75.50% SAS 43Kléber 75.00% 100.00% FC FC SAS Candé 26.25% SAS Flandre Carnaxide 100.00% Prague 100.00% Milan SAS MelunSaintsPères SAS Tours FC Nationale 75.00% SAS StrasbourgLaVigie 56.25% Portugal EM SAS DoumerCaen Athens Milan CzechRepublic SAS MarseilleLeMerlan 100.00% Italy 75.00% SAS SaintAndréPeyBerland 75.00% SAS EspaceDumontd’Urville 100.00% Warsaw SAS EspaceKléber Greece Italy SAS 43Grenelle Brussels 75.00% SAS 23Avenue Marignan FC FC SAS 192Charles-de-Gaulle Poland SAS 46RueNotre DamedesVictoires 75.00% SAS 21LaPérouse Belgium SAS 21Kléber SAS KléberLevallois Budapest SAS Concorde Puteaux Prague SAS IssyDesmoulins FC DECONSOLIDATED COMPANIES Hungary MadridAlcobendas CzechRepublic Spain AMAC AMC Prague Ségécé CeskaRepublika(ex-FMCCentralEurope) SA Sogecaec Ségécé Polska(ex-PCMPoland) Srl SégécéItalia(ex-PSG) Srl Effe Kappa Ségécé Magyarorszag (ex-PCMHungary) Ségécé Hellas Ségécé España(ex-Centros ShoppingGestion) SA DevimoConsult SERVICE PROVIDERS-INTERNATIONAL Companies Companies Siren No. Siren No. Head office Head office G nérto lbl P nérto rprinel E iee qiaec C Déconsolidéeaucoursdel’exercice. Miseenéquivalence–NC: Intégrationproportionnelle –ME: Intégrationglobale–IP: * IG: eebr2006* December eebr2006* December Méthods Méthods 2006 2006 % ofinterest % ofinterest 2005 2005 2006 2006 % ofcontrol % ofcontrol 2005 2005 103

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

Equity interests in subsidiaries • 24 companies were removed from At December 31, 2006, the Group the scope of consolidation following consolidated 135 companies versus 151 at mergers and total transfer of assets December 31, 2005. The decrease reflects and liabilities internal restructuring of the group’s companies. 15 companies merged with and into • 8 companies were fully consolidated KLEPIERRE. They include: Issy Desmoulins, for the first time Concorde Puteaux, Kléber Levallois, SNC Pasteur, in charge of a shopping center 21 Kléber, 21 La Pérouse, 46 rue ND project in Besançon. des Victoires, 192 Charles de Gaulle, SCI Combault, which is receiving a retail outlet 23 Avenue Marignan, 43 Grenelle, Paris 15, near the Pontault Combault shopping center 43 Kléber, Suffren Paris 15, Brescia, in Seine et Marne. Espace Kléber and Espace Dumont d’Urville. Ségécé acquired 25% of the securities Kleminho, Portuguese company, owner 6 companies merged with and into SAS of Ségécé Ceska Republica (former FMC) of a mall in Braga. CECOVILLE. They include: Saint André Pey and raised its equity interest to 100%. Klépierre Novo, a Czech company created Berland, Marseille Le Merlan, Doumer Caen, This company was already fully consolidated for the acquisition of all the equity interests Strasbourg La Vigie, Tours Nationale at December 31, 2005 at 56.25%, of Entertainement Plaza which holds 99% and Melun Saints-Pères. it has now moved to 75%. of Bestes stock, owner of the Novodvorska SAS Flandre and SAS Candé were taken On September 25, 2006, Kléber Pérouse Plaza shopping mall. over by SAS KLEMURS. acquired 15% of the securities of its The acquisition of Entertainement Plaza SCI Tour Marcel Brot was removed subsidiary Secovalde (owner of the Val and Bestes on June 30, 2006 was booked from the scope of consolidation. d’Europe shopping center), raising its equity according to the acquisition method. • Changes in the percentage of interest interest to 55%. The company has been fully This method entails allocating the business The percentage of interest in the Ségécé Italia consolidated since the beginning. combination cost by booking the acquired assets (formely PSG) management company increased In December, Klépierre reduced its stake as well as the liabilities and contingent from 37.5% to 75% at the beginning in its subsidiary Odysseum Place de France liabilities if any, taken at their fair value on their of the year with the acquisition of 50% to 50% after selling off 20% of the company's acquisition date. AMAC (Slovakia) and AMC of the equity of Ségécé (75% owned securities. Odysseum Place de France was Prague, management companies in charge by Klépierre). This company is now fully fully consolidated at December 31, 2005 of the respective centers of Danubia consolidated (proportional integration but was consolidated on a proportionate in Bratislava and Novy Smichov in Prague. at December 31, 2005). basis as of December 31, 2006.

The contribution of entities acquired in the year to main lien items in the financial statements, which have a material impact on group accounts, is analyzed as follows:

Country Center/city Acquisition date Lease income Result of operations Net earnings Net fixed assets Net indebtedness Czech Republic Novo Plaza – Prague 4 June 30, 2006 1 821 -683 -1 414 51 877 39 089 TOTAL 1 821 -683 -1414 51877 39089 in thousands of euros

Furthermore, the purchase price and the amount spent for the acquisition of securities in 2006 are: Bestes Entertainment Klépierre Plaza Novo Purchase price of securities 6 086 7 114 73 Amount paid in 2006 for the acquisition of securities 0 Amount paid for the purchase of shareholders loans 4 067 2 127 73 Amount of cash on acquisition date 1 478 1 – in thousands of euros

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Klépierre_Financial report 2006 4.1 -UNALLOCATED GOODWILL 4 -NOTES TO THEFINANCIAL STATEMENTS: BALANCE SHEET tesgowl 8 688 909 150 8 713 1 977 11 897 174 3 209 2093 3 688 814 248 909 7 111 1119 9 –897 902 913 713 1 977 11 Others goodwill 174 3 Ségécé Italia(FormerPSG) IGC ICD (Brescia) SCOO Hungary –PlazaCentersManagement Ségécé Centros ShoppingGestion Galeria Parque Nascente Vignate Metropoli E ODIL3 1 4 1555 41 0 0 of 1to4years. amortized onastraightlineperiod of thisamountcorrespond tosoftware versus 6millioneuros. 2.5millioneuros 145 8 Intangible assetsamountto7.5millioneuros, INTANGIBLE ASSETS - 4.2. 410 33 hand. Italianmallontheother out fortheVignate on onehandandthepaymentofanearn management subsidiary(formerlyPSG) of anadditionalstakeinSégécéItalia’s Italian million euros following theacquisition euros as atDecember31,2006,upby8.1 Non-allocated goodwilltotaled41.6million NET GOODWILL E AU 3 1 3 111775 1 478 7 115 002 -11 260 -2 52 742 -8 415 480 18 023 2 609 803 4 193 11 -194 727 -300 -49 -515 -34 403 -188 -15 131 -1 101 21 -264 -252 62 18 -12 -34 991 704 131 -1 343 266 21 474 -1 716 1 0 829 4 825 033 6 0 -863 – -38 -825 716 1 802 -10 872 -7 930 -2 282 778 655 835 – 16 1 531 923 1 3 921 10 460 NET VALUE INTANGIBLE ASSETS– Total amortizations Other intangibleassets Computer software Leasehold acquisitioncosts Total gross value Other intangibleassets Computer software Business concerns Leasehold acquisitionrights December 2005 December 2005 creations and contributions Acquisitions, creations and contributions Acquisitions, tinued operations Decrease through disposals, discontinued operations Decrease through disposals, discon- reclassification movements, Other in thousandsofeuros for theperiod Allowances December 2006 consolidated Change in scope fluctuation Currency reclassification movements, Other in thousandsofeuros December 2006 105

CONSOLIDATED FINANCIAL STATEMENTS 461 – Financial report _consolidated financial statements

4.3 - PROPERTY, PLANT AND EQUIPMENT

2005 Acquisitions, Decrease through Allowances Foreign currency Consolidation Other 2006 December creations and disposals, discon- for the period fluctuations scope movements, December contributions tinued operations reclassification Land 23 030 23 030 Constructions and fixtures 17 683 17 683 Furniture and equipment 6 965 1 461 -205 44 150 -5 8 410 Total gross value 47 678 1 461 -205 – 44 150 -5 49 123 Constructions and fixtures -1 994 -664 3 -2 655 Furniture and equipment -3 517 196 -1 332 -31 -108 -194 -4 986 Total amortizations -5 511 – 196 -1 996 -31 -108 -191 -7 641 Provision for impairment – PROPERTY PLANT & EQUIPMENT – NET VALUE 42 167 1 461 -9 -1 996 13 42 -196 41 482 in thousands of euros

Property, plant and equipment include the allocated for the operation. The increase two buildings in Paris operated by the Group: in this line item can be primarily explained 21, La Pérouse and Espace Dumont d’Urville by the change of corporate headquarters together with the equipment and furniture of the Hungarian management subsidiary.

4.4 - INVESTMENT PROPERTY AND FIXED ASSETS IN PROGRESS

2005 Acquisitions, Decrease through Amortization Foreign Entry into Other 2006 December creations and disposals, discon- allowance currency consolidation movements, December contributions tinued operations and provisions fluctuations scope reclassification Land 2 763 216 211 590 -1 510 2 193 4 970 -35 834 2944 625 Constructions and fixtures 3 040 215 270 444 -7 096 10 348 45 319 75 560 3 434 790 Total gross value 5 803 431 482 034 -8 606 – 12 541 50 289 39 726 6 379 415 Constructions and fixtures -308 650 518 -135 985 -1 524 -592 7 270 -438 963 Total amortizations -308 650 – 518 -135 985 -1 524 -592 7 270 -438 963 Provision for impairment -7 056 -4 983 -204 -1 192 3 727 -9 708 INVESTMENT PROPERTY – NET VALUE 5 487 725 482 034 -8 088 -140 968 10 813 48 505 50 723 5 930 744 FIXED ASSETS IN PROGRESS 107 692 181 318 -2 0 -4 219 -81 398 207 825 in thousands of euros

Capital expenditures for the year totaled (14.7 million euros in 2006 for a total cost 482 million euros. price of 50.1 million euros), “La Grande In France, the principal transaction Récrée” retail outlet in Montesson concerned the acquisition of 128 Buffalo (4.9 million euros), “Les Terrasses” food grill restaurants by Klémurs, Klépierre’s newly court in Val d’Europe (4.1 million euros), listed subsidiary, for an amount various premises in the shopping malls of 296.2 million euros. of Rennes Colombia (3.4 million euros,) and Quimper (3 million euros), ground Other investments and projects carried floor retail outlets in the Vannes Coutume by the group were realized in the shopping mall (3.8 million euros), “Agnele” premises center sector: the Toulouse Purpan center in Portet-sur-Garonne (2.2 million euros) (27.8 million euros), the Place d’Armes center and the Goutte d’eau plot of land at Bègles in Valenciennes (1 million euros).

106

Klépierre_Financial report 2006 of item includesaproperty provision The provision forimpairmentline d’Arcins ( Brianza inItaly( ( ( Moulin àVent ( Val d’Europe ( Saran ( malls ( ( Issy-Les-Moulineaux office building Contracts: by third partiesunderProperty Development managed bythegroup orsupervised was duetoongoingconstructions The increase infixedassetsprogress 15% stakeinVal d’Europe. from theacquisition oftheadditional difference of20.5millioneuros generated Poznan andRudaaswellthevaluation in 2005ofPolishmallsWarsaw, Krakow, paid in2006thecontextofacquisition outs for sale,includetheearn of fixedassetsinprogress andproperty held Other movements,netofreclassifications 50.5 millioneuros. center, managedbyBestesfor NovodvorskaPlaza,theCzech concern New entriesintheconsolidationscope for 4.9millioneuros. on theLouvain-La-Neuvemall In Belgium:additionalinvestment euros; In Italy:Giussanocenterfor10.2million euros; In Portugal:Bragacenterfor31.7million et “GrandSurLaLinéa”(1.3millioneuros); Segura mallinValence (30.7millioneuros) were madeabroad: In Spain:Molinade Other equallymaterialacquisitions located rueMeyerbeerinParis. acquired a33.8millioneuros building In theoffice property sector, theGroup located inPolandandtheCzechRepublic. € € € 3.8 million),Valenciennes ( 5.6 million),Portet-sur-Garonne 34.5 million),extensionsoftheAngoulème € 8 milliononshoppingcenters € € 26 million),Rambouillet( 18.9 million),Blagnac(e16.8million), € 1.6 million). € € € 13.9 million),SCILaPlainedu 8.1 million),Varese 2.3 million)andRives € 2.7 million), € 22.2 million), OA 3 744 930 5 184 14 193 49 114 148 602 597 783 156 867 218 363 185 142 742 340 254 856 863 257 743 2 TOTAL 142 Office property 333 5 Other Greece Portugal Czech Republic Belgium Poland Hungary Spain Italy France Shopping centers iied eevdfo qiymho nete -525 023 3 671 877 2 EQUITY-METHOD INVESTMENTS,DECEMBER31,2006 985 46 Other movements Dividends received from equity-mehtodinvestees 202 83 ofequity-methodinvestees Share in2006earnings EQUITY-METHOD INVESTMENTS DECEMBER31,2005 074 -85 euros. thousands The totalbalancesheetwas8753 0 thousands euros. euros andresult of1745 excluding Devimo’s result was782thousands At December31,2006,thenetsituation shopping centersegment(26.25%owned). a serviceprovider inBelgiumthe 857 48 by theequity-method:Devimo, Only onecompanyisconsolidated 4.6 -INVESTMENTS INASSOCIATES PROPERTIES HELD FORSALE and awarehouse, RheinfeldinStrasbourg. and theFront de ParisbuildinginLevallois, were heldfor sale LeChamplan(Essonne) At December31,2006,twooffice buildings 4.5 -PROPERTIES HELDFORSALE as follows: business andbygeographicsectorwas amount ofinvestmentproperty by At December31,2006,thenetcarrying of investmentproperty Net carryingamount in thousandsofeuros December 2005 creations and contributions Acquisitions, tinued operations Decrease through disposals, discon- reclassification movements, Other in thousandsofeuros in thousandsofeuros December 2006 107

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

4.7 - EQUITY INTERESTS IN JOINT VENTURES Jointly-controlled companies are consolidated according to the proportionate consolidation method. December December December 2006 2005 2004 Share in the balance sheet of joint companies Current assets 15 531 24 393 29 934 Non-current assets 183 707 180 677 129 702 Total Asset 199 238 205 070 159 636 Current liabilities 122 182 117 281 31 063 Non current liabilities 77 056 87 789 128 573 Total Liabilities 199 238 205 070 159 636 Share in the earnings of joint companies Income from ordinary activities 26 265 25 267 27 269 Operating expenses -11 106 -9 178 -10 961 Financial result -5 355 -5 237 -5 685 Pre-tax earnings 9 803 10 852 10 623 Corporate income tax -2 603 -4 632 -2 975 NET INCOME 7 200 6 220 7 648 in thousands of euros

4.8 - FINANCIAL ASSETS The main non-consolidated company is SA The “financial assets” line item comprises Sovaly, company created to manage the Gare the values below: de Lyon development project. SNC Pasteur was consolidated as from December 31, 2006.

December 31, 2006 December 31, 2005 Equity Earnings for % Gross value Net value Equity Earnings for % Gross value Net value the period of holding of securities of securities the period of holding of securities of securities Principal securities 1 442 404 1 637 493 SAS Sovaly 308 -41 100% 572 309 344 -36 100% 572 308 SAS Nancy Bonsecours 77 -19 100% 535 95 74 -31 100% 535 75 SKF Spa nc nc 50% 245 – nc nc 50% 245 – SAS Opave 34 -8 100% 90 – 42 -8 70% 83 24 SNC Pasteur 86 -21 100% 202 86 Other investment securities 228 181 183 116 TOTAL 1 670 585 1 820 609 in thousands of euros

108

Klépierre_Financial report 2006 te ogtr netet – 56 905 1 -202 1 -149 – 204 107 2 TOTAL Other long-termfinancialinvestments Security deposits Other long-terminvestments Loans Advance paymentstonon-consolidatedorproprotionate consolidationcompanies Finance-lease fixedassets consolidated companies. to non-consolidatedorproportionate include advancepaymentsandloansgranted The othernon-current financialassetsmainly 4.9 -NONCURRENTFINANCIAL ASSETS cudlaiiis- 7 - 6 - 3 - 173 -8 535 -9 253 941 7 2186 39 159 46 437 42 060 -1 895 7 001 6938 47 694 55 174 475 6 609 -8 50 624 1 463 2 079 1 704 6 968 -1 191 1 463 2 723 -5 – 282 2 849 2 TOTAL 184 4 Accued liabilities Receivables Trade receivables includethedefermenteffect ofbenefitsgrantedtotenants. 4.11 -TRADE RECEIVABLES AND RELATED ACCOUNTS TOTAL partners Share ofexternal Group share by “trading”companies( As atDecember31,2006,theGroup’s inventoriesmainlycompriseassetsacquired 4.10 -INVENTORIES TOTAL Other advancepayments SA Soaval SCI duBassinNord (A) Advance paymentstononconsolidatedorproportionate consolidationcompanies. “marchands debiens” ). as anon-current receivable. as afinanceleaseoperationandrecorded a financelease(Lille)isconsidered The residual valueofthebuildingunder Real-estate activities activities December Other 2006 December December December December 2006 2005 2005 2005 in thousandsofeuros in thousandsofeuros (A) consolidation consolidation Entries inthe Entries inthe December December scope of scope of 2005 2004 873289398- 8 8 7104 17 388 -2 088 -6 988 3 849 2 743 18 8 4 2 572- 8 6580 6 792 120 -5 8493 186 2 -2 812868 7 589 8 -135 -1 544 8 8 4 2 572- 8 580 6 186 -2 792 -5 120 3 849 2 589 8 443244 1 962594 2 -38 -31 -135 -83 514 1 442 3 Increases Increases 31 -12 19 Decreases Decreases Other Other in thousandsofeuros in thousandsofeuros December December 2006 2006 109

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

4.12 - OTHER RECEIVABLES December December Janaury 2005 2006 2005 IFRS State 111 048 62 685 53 699 – Corporate income tax 4 378 1 327 5 014 – VAT 106 670 61 358 48 685 Sundry debtors 153 316 145 103 139 746 – Call for funds 68 389 59 812 57 304 – Trade payabables and advance payments 2 408 1 549 2 628 – Marketing fees – – 5 815 – Other deferred expenses 84 253 266 – Prepaid expenses 66 657 70 133 59 246 – Others 15 778 13 356 14 487 TOTAL 264 364 207 788 193 445 in thousands of euros

December Less than More than 2006 one year one year State 111 048 111 048 – Corporate income tax 4 378 4 378 – VAT 106 670 106 670 Sundry debtors 153 316 86 659 66 657 – Call for funds 68 389 68 389 – – Trade payables and advance payments 2 408 2 408 – – Other deferred expenses 84 84 – – Prepaid expenses 66 657 66 657 – Others 15 778 15 778 – TOTAL 264 364 197 707 66 657 in thousands of euros

The VAT item includes amounts pending fund The main pre-lease payments under from the local tax administration for recent construction leases or long-term lease rights acquisitions (or constructions in progress): recognized as prepaid expense and amortized Issy-les-Moulineaux (7.5 million euros), over the term of the lease agreement Buffalo Grill (37 million euros), Braga in accordance with benefits procured include: (6.2 million euros), Angoulêmes (2.8 million Oviedo for 10.3 million euros, euros), extension at Quetigny and Toulouse the Louvain-la-Neuve center and its extension Purpan (14.2 million euros) and Milan Assago for 11.5 million euros and Val d’Europe (8.1 million euros). for 16.4 million euros.

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Klépierre_Financial report 2006 certificates ofdepositsinItalyfor6.2million open-end mutualfundsorOPCVMinFrance, Cash equivalentscomprisemoneymarket OA 5 9 6 6 1 367 115 663 166 884 59 696 157 805 612124 105 911 15 483 55 412 29 858 41 255 32 084 52 – 181 160 43 10 603 9 903 8 The Group’s netcashandequivalentsamountedto: TOTAL Cash – Moneymarketinvestments – Otherfixed-revenue securities – Treasury billsandcertificatesofdeposit Cash equivalents 4.13 -CASH AND CASH EQUIVALENTS OA 614294 6 2 614229 164 46 229 164 46 229 164 46 NA NA 2.10 millioneuros atDecember31,2005. 1.9 millioneuros atDecember31,2006 and were bookedinequityforanamount of Capital gainsondisposalsoftreasury shares NA of 30.8millioneuros. December 31,2005)foranacquisitionvalue 498 50 December 31,2006(versus187659at There wasatotalof395821as 869 shares ofKlépierre S.A. 64 646 111 884 483 59 55 805 612124 by theordinary generalmeetingstoacquire 105 The Group 999 usedtheauthorizationsgranted 94 017 55 858 41 Treasury shares 697 084 62 367 52 115 TOTAL 663 166 Redeenable convertiblepreferential shares Ordinary shares of 696 157 Authorized value of4euros each.Theyare fullypaidupandare inregistered form orbearer shares. At December31,2006theGroup’s share capitalcomprised46164229shares withanominal Share capital 4.14 -EQUITY Cash andcashequivalents Bank overdrafts Gross cash andcashequivalents Cash Cash equivalents € ah4 6 2 614294 6 229 164 46 229 164 46 229 164 46 4 each (one weekmaturity). treasury billsfor2.7millioneuros euros (onemonthmaturity)andSpanish investments onitsconsolidated balance and equipmentlong-term financial Klépierre revalued theproperty, plant In 2003,undertheSIICstatusoption, REVALUATION UNDERTHESIICSTATUS Other consolidatedreserves to equity. were respectively debitedfrom andcredited as wellgainsonthesaleofsecurities The acquisitioncostofpurchased securities December December December 2006 2006 2006 December December December 2005 2005 2005 in thousandsofeuros in thousandsofeuros number ofshares aur 2005 January January 2005 December 2004 IFRS IFRS tax of130.6millioneuros. also recorded inequityundernetdeferred The corresponding revaluation variancewas revalued intheconsolidatedbalancedsheet. from thisamount.Noneligibleassetswere of 119.4millioneuros wasthendeducted the beginningofperiod.Adischargetax revaluation varianceoneligibleassetsat of 784.6millioneuros wasrecorded as National AccountingBoard, agross amount n°2003-C ofJune11,2003theFrench sheet. Pursuanttotheprovisions ofopinion 111

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

4.15 - CURRENT AND NON-CURRENT FINANCIAL LIABILITIES

Change in indebtedness at December 31, 2005. Net financial debt to investment flows (754 million euros) The total amount of current and non-current corresponds to the difference between and the dividend payout (125 million euros), financial liabilities totalled 3 962 million euros financial liabilities (excluding revaluation partially offset by disposals at December 31, 2006. linked to the Fair Value Hedge) and cash (120.7 million euros) and free cash flow Net financial debt totalled 3,804 million and cash equivalents. The increase of the period. euros compared to 3 229 million euros of 575 million euros primarily corresponds

December December January 2006 2005 2005 IFRS NON CURRENT Bond issues net of costs/premiums 1 885 596 1 220 845 1 212 646 – of which revaluation linked to Fair Value Hedge 228 28 189 25 987 Loans and debts from credit institutions > 1 year 1 668 921 1 294 394 1 226 314 Sundry financial loans and debts 125 737 118 667 128 806 – Other loans 232 24 963 – Loans to groups and associates 125 505 118 667 103 843 TOTAL NON CURRENT FINANCIAL LIABILITIES 3 680 254 2 633 906 2 567 766

CURRENT Loans and debts from credit institutions < 1 year 34 217 514 248 16 582 Accrued interests 61 743 38 460 36 970 – on bond issues 54 263 30 545 30 461 – on loans from credit institutions 3 104 2 565 1 928 – on loans to groups and associates 4 376 5 350 4 581 Bank overdrafts 94 999 111 646 50 498 Commercial paper 90 000 125 000 220 000 Sundry financial loans and debts 482 587 – – Other loans 154 277 – – Loans to groups and associates 328 310 – TOTAL CURRENT FINANCIAL LIABILITIES 281 441 789 941 324 050 in thousands of euros

• The amount of capitalized financial costs and the club deals of 2003 and 2004: Financements (formerly Klépierre Hungary); stood at 7.7 million euros. The retained rate - at December 31, 2006, 950 million euros of • borrowings exist on the Italian (mainly is the rate applied to the compensation the medium term facility of 1 200 million Klecar Italia for 116 million euros), of intercompany loans. euros had been used. It matures on and Portuguese subsidiaries (Klépierre January 31, 2013; Portugal for 58 million euros); Main financings - The back-up line of commercial paper • commercial paper stands at 90 million The main financing lines are as follows: (300 million euros) has not been used; euros. • at December 31, 2006, Klépierre had total • a credit facility of 150 million euros was set outstanding bonds of 1 900 million euros. up in December 2006 by Klémurs and used The table below provides the characteristics up to 143 million euros as at December 31, of three bonds issued in 2001 (maturity 2006; 2008), 2004 (maturity 2011), and 2006 • a bilateral loan of 135 million euros was set (maturity 2016); up in 2004 by Klépierre; • a syndicated loan was set up in January • a bilateral loan of 165 million euros was set 2006, used to repay the 2005 bridge loan up in 2004 by Klépierre Participations et

112

Klépierre_Financial report 2006 vrrfsKéireFnne10 oi 09 50 8 – 12.13.2007 E3m Eonia 50% 100% Klépierre Finance IGC Overdrafts Short-term line iac essIC5%Em0.121 mrial 5 amortizable 5 116 08.01.2011 E3m amortizable 116 50% 06.30.2015 E3m 83% IGC KlécarItalia Finance leases Mortgage loans ogtr iaea on lper 10 ie ae0.221 135 03.22.2010 Fixedrate 100% Klépierre Long-term bilateralloans (2) Thetotalsare calculatedexcludingback-uplineinsofarasthemaximumamountof"commercial paper"linecorresponds ydctdlasKéire(rnh :bc-p 10 3 13.03300 01.31.2013 E3m 100% back-up) Klépierre (Tranche A: Syndicated loans Borrowings from credit institutions Bond issue Financing omrilpprKéire10 300 – – 100% to Klépierre thefollowingguidelines: to “positive”.Theratingagencyassigned but changedtheoutlookfrom “stable” confirmed Klépierre’s ratingofBBB+, Klépierre • to financingandrating Financial covenantslinked are fixeduntiltheinstrument’s maturitydate. on thefixed-ratefinancialinstruments at 6monthsorless.Interests instruments are revalued regularly Interests onthevariable-ratefinancial (1) 105financeleases;theirweightedaveragetermwas5.2yearsasofDecember31,2006(2.6takingearlyrepayment opt TOTALS Commercial paper In January2007,Standard &Poor’s (2) lper 0%Ena–2 23 23 – Eonia 100% Klépierre oae8%Em0.120 mrial 8 amortizable 8 01.31.2008 E3m 85% Novate G 0 3 72.017aotzbe7 7 amortizable amortizable 11 4 7 7 amortizable amortizable 07.24.2011 07.31.2011 11 4 E3m 14 E3m 16 05.10.2011 50% 50% 07.15.2011 35 7 amortizable E3m amortizable 23 E3m 14 16 85% amortizable 02.01.2008 85% amortizable 12.15.2013 35 E6m 10.15.2016 23 E6m E6m 85% 12.30.2010 Klémurs 84% 12.30.2009 85% IGC 85% E3m IGC E3m 100% Magnolia 100% ICD Novate (formerCienneo) Novate (formerVignate) ICD Klépierre Portugal Klépierre Portugal anla8%Em0.521 mrial 2 amortizable 1 2 amortizable 01.15.2018 1 E3m 85% 01.31.2008 E3m 85% Magnolia 165 150 Magnolia 03.22.2010 12.12.2011 Fixedrate E3m 100% Klépierre ParticipationsetFinancements Klémurs 84% – Netcurrent cashflow/Netdebt – Netdebt/Revaluedassets(loantovalue) ≤ – EBITDA/Netfinancialcostsincluded of therelevant financing: in demandfortheearlyrefund Failure tocomplywiththemmayresult agreements includethefollowingclauses. In addition,Klépierre’s maincredit

50%; Borrower lper TaceB 10 3 13.031200 1 01.31.2013 E3m 100% Klépierre (Tranche B) lper 0%420 31.06700 03.16.2016 4,250% Klépierre 100% lper 0%465 71.01600 07.15.2011 4,625% Klépierre 100% lper 0%615 71.08600 07.10.2008 6,125% Klépierre 100% % holding/ Klépierre ≥ 37% Fixedrate 7%. Reference ≥

2.5; rate Term 63% E3m totheamountofback-upline. ions intoaccount). (1) Maximum amount 3 729 3 237 4 0aotzbe50 amortizable 50 Repayment profile Amount used in fine 113 in fine in fine in fine in fine CONSOLIDATED FINANCIAL STATEMENTS 8 in fine in fine in fine in fine in fine in fine 165 143 135 7 in millionsofeuros 950 700 600 600 90 – Financial report _consolidated financial statements

In January 2007, Standard & Poor’s – For bond issues: confirmed Klépierre’s rating of BBB+, – secured debts are subject to a ceiling but changed the outlook from “stable” of 50% of the revalued net asset; to “positive”. The rating agency assigned – should there be a change of ownership to Klépierre the following guidelines: of one third of the voting rights which would – EBITDA/Net financial costs ≥ 2.5; result in Standard and Poor’s rating falling – Secured financial debt/Revalued assets below BBB-, investors would have a sell ≤ 20%; option that can force Klépierre to early – Net debt/Revalued assets (loan to value) refund. ≤ 52%; – Revalued asset group share ≥ 5 billion Breakdown of financial debt by maturity date: euros.

Total Less than From 1 to 5 More than one year years 5 years NON CURRENT Bond issues net of costs/premiums 1885596 228 1194409 690959 – of which revaluation linked to Fair Value Hedge 228 – – Loans and debts from credit institutions > 1 year 1668921 – 598735 1070186 Sundry financial loans and debts 125737 – – 125737 – Other loans 232 – – 232 – Loans to groups and associates 125505 – 125505 TOTAL NON CURRENT FINANCIAL LIABILITIES 3680254 228 1793144 1886882

CURRENT Loans and debts from credit institutions < 1 year 34217 34217 – – Accrued interests 61743 61743 – – – on bond issues 54263 54263 – – – on loans from credit institutions 3104 3104 – – – on loans to groups and associates 4376 4376 – – Bank overdrafts 94999 94999 – – Commercial paper 90000 90000 – – Sundry financial loans and debts 482 482 – – – Other loans 154 154 – – – Loans to groups and associates 328 328 – – TOTAL CURRENT FINANCIAL LIABILITIES 281441 281441 – – in thousands of euros

Schedule of financing (amounts used):

Overdraft Loans sub- Klémurs Commercial Klémurs Bilateral Bilateral 2006 2008 2011 2016 TOTAL sidiaries Finance paper Bank Loan Klépierre Klépierre Syndicated Bond issue Bond issue Bond issue Year of repayment Loan Part. & Fints Loan 2007 32 36 7 90 165 2008 16 9 600 625 2009 35 18 54 2010 47 4 165 135 351 2011 16 4 143 600 762 2012 7 2 9 2013 7 2 950 958 2014 5 1 6 2015 91 1 93 2016 4 1 700 705 TOTALS 32 264 50 90 143 165 135 950 600 600 700 3729 in millions of euros 114

Klépierre_Financial report 2006 Klépierre’s hedgeratio,defined or inversely. Thankstotheseinstruments, it topassfrom variableratetofixeddebt underwritten swapagreements allowing (see corresponding section),Klépierre has As partofitsriskmanagementpolicy lmr 00.121 1.2.2007 no 7.10.2008 no 7.10.2008 no no no 01.01.2014 no no no 12.31.2010 07.10.2015 07.10.2015 09.02.2012 07.11.2012 04.15.2012 12.22.2011 12.22.2010 50 12.22.2009 12.22.2008 90 100 200 100 100 100 500 200 300 100 Klémurs Klécar Italia Klépierre Klépierre Klépierre Klépierre Klépierre Klépierre Klépierre Klépierre Klépierre 4.16 -INTEREST-RATE HEDGINGINSTRUMENTS lper 0 .521 no 12.31.2007 7.15.2011 12.31.2014 600 in profit andloss). instrument (changeinvaluerecognized euros. Itwasrecorded asatrading 50 on December31,2006was9.5million date August2009),whosenotionalamount contracted anamortizabletunnel(maturity Furthermore, the ItaliansubsidiaryIGC(50%) Klépierre Klémurs Variable ratepayer Fixed ratepayer Amount (millionsofeuros) Amount (millionsofeuros) Cash flowhedge Fair valuehedge contracts included: As ofDecember31,2006,theGroup’s swap stood at85%January2,2007. after hedgingingross financialdebt, as theproportion offixedratedebts Maturity Maturity Deferred departure Forward startdate 115

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

Breakdown by maturity date At December 31, 2006, derivative instruments could be broken down by maturity date as follows:

Hedge relationship 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 TOTAL Klépierre fixed rate payer Cash flow hedge – 100 300 200 500 300 – – 300 – 1 700 – of which immediate departure swaps – 100 300 200 500 300 – – – – 1 400 – of which deferred departure swaps July 2008 – – – – – – – – 300 – 300 Klépierre variable rate payer Fair value hedge – – – – 600 – – – – – 600 Klécar Italia fixed rate payer Cash flow hedge – – – 90 – – – – – – 90 Klémurs fixed rate payer Cash flow hedge – – – – – – – 100 – – 100 – of which deferred departure swaps – – – – – – – 100 – – 100 January and December 2007 IGC (tunnel) Trading – – 5 – – – – – – – 5 TOTAL – 100 305 290 1100 300 – 100 300 – 2495 in millions of euros Fair Value At December 31, 2006, unrealized capital is recognized on the balance sheet gain on Klépierre’s portfolio of derivatives, for 65.1 million under assets. calculated as the sum of their fair value Over the period, Klépierre’s derivatives excluding accrued interests, was 57.1 million recorded an increase in their fair value euros. The full coupon fair value of 33.6 million euros.

Derivatives Clean fair value at December Fair value change Counterpart entries 31, 2006 in 2006 Cash flow hedge 61,1 58,8 Equity Fair value hedge -4 -25,2 Debts Trading 0,0 0,0 Income statement TOTAL 57,1 33,6 in millions of euros

4.17 - LONG-TERM AND SHORT-TERM PROVISIONS

December Allowances Reversals Reversals Other Change December 2005 for the year (provision (unused movements of scope 2006 used) provision) NON CURRENT Provisions for staff benefit schemes – Defined benefits plan 3 415 831 -36 -84 40 4 166 – Medical assistance and post employment – – – Early retirement and APE 124 -124 – – Other long-term benefits 1 241 460 -32 – 1 669 Provisions for contingencies and losses 2 799 1 058 -387 -772 39 – 2 737 TOTAL NON CURRENT PROVISIONS 7 579 2 349 -579 -856 39 40 8 572 in thousands of euros

The discounting of provisions for contingencies and losses is considered as immaterial.

116

Klépierre_Financial report 2006 te tm 347 3 - 0 2 275 711 26 -101 743 -19 107 -7 275 26 502 -4 739 42 -35 107 -7 403 -8 707 -124 -35 417 33 756 7 986 -127 in Klépierre’s 417 855 consolidatedaccounts. 33 -3 233 -4 018 26935 -154 This bookrevaluation 636 isneutralized -12 484 -123 tax of29.8millioneuros. exchange forthepaymentofarevaluation 774 42 in theindividualfinancialstatements from anaccountingandtaxviewpoint 124 -158 ICD, MagnoliaandNovatewere revalued The fivemallsheldbytheItaliancompanies NET POSITIONS Total deferred taxassets Other items Buildings Total deferred taxliabilities Other items Buildings 4.18 -DEFERREDTAXES te iblte 164 325 4955 44 870 8 345 7 200 215 47 63 880 1 025 101 752 556 664 50 7 71 372 4 847 115 981 58 310 7 767 017 135 034 66 493 1 253 46 124 211 87 3 is currently beingcontestedbyKlépierre. 767 018 9 988 4 35 linked totheadoptionofSIICstatus, 649 69 807 2 for financialyear2003.Thisnotice, 540 11 to thenoticereceived inDecember2006 a liabilityof12.9millioneuros corresponding 813 64 927 3 under theitem"Corporatetaxincome" 570 13 2003 and2004.TheGroup hasfunded by thetaxauthoritiesforfinancialyears Since 2006,Klépierre SAisbeingaudited Other liabilities Prepaid income Creditor clients Other liabilities Other incometaxesand – VAT – Corporateincometax State Social securityandotheragencies Employees andsimilaraccounts Social andtaxliabilities 4.19 -TAX LIABILITIES, STAFF BENEFITS AND OTHER PAYABLES for expensesare recorded in“Creditor received from tenantsasadvancepayments (18.7 millioneuros). Advancepayments of theexittaxliabilityrecognized in2003 euros fordeferred taxliability. The Group reversed aprovision of12 million for anamountof32.7millioneuros. on December31were restated the deferred tax liabilitiesexisting than theconsolidatedvalue.Asaresult, tax valueoftherelevant assets The taxrevaluation resulted inagreater In 2006,Klépierre paidthe4 companies. to 9.8millioneuros, duebyItalian of therevaluation tax,corresponding This lineitemalsoincludesthebalance December 2005 December in income Change 2006 December changes Other 2005 th quarter in thousandsofeuros in thousandsofeuros January 2005 December 2006 IFRS end of2006. They amountto48.2millioneuros atthe on theassetsideofbalancesheet. anamountequaltothecash with inreturn accounts ofprincipalsSégécégroup of fundscorresponding tothemanagement The otherliabilitiesare primarilycomprised clients” for58.9millioneuros. for -8.4millioneuros. • for -7.3millioneuros; asset acquisitionsmadein2005 • of NovodvorskaPlazafor-3.6millioneuros; • The othernetmovementsrecord theimpact: restatements onhedginginstruments outsonPolish,ItalianandBelgian earn of theentryintoconsolidatedscope – 117

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

5 - NOTES TO THE FINANCIAL STATEMENTS: PROFIT & LOSS ACCOUNT

5.1 - SEGMENT INCOME STATEMENT AT 12.31.2006

2006 2005 2004 Lease income 466.7 396.1 333.5 Land expense (real estate) -2.3 -2.0 -0.9 Non-recovered rental expenses -5.9 -4.0 -3.7 Building expenses (owner) -28.9 -30.1 -17.5 Net lease income 429.7 360.0 311.4 Management, administrative and related income 56.2 45.9 33.2 Other operating income 6.7 5.5 6.0 Survey and research costs -1.1 -0.8 -0.8 Payroll expense -54.3 -46.9 -38.5 Other general expenses -17.7 -15.0 -17.6 Depreciation and amortization allowance on investment property -127.6 -106.8 -89.3 Depreciation and amortization allowance on PPE -2.2 -3.5 -2.8 Provisions 0.1 -3.0 1.3 Results of operations Shopping centers 289.6 235.3 203.0 Results of sale of investment property and equity interest 3.5 2.6 -0.3 Profit on the sale of short-term assets 1.5 0.1 Share in earnings of equity-method companies 0.7 0.6 0.5 SEGMENT EARNINGS SHOPPING CENTERS 295.3 238.7 203.2 Lease income 52.8 52.9 65.9 Land expenses (real estate) -0.3 -0.3 Non-recoverable rental expenses -0.4 -1.2 -0.1 Building expenses (owner) -2.0 -2.3 -4.4 Net lease income 50.0 49.1 61.5 Management, administrative and related income 1.3 0.5 0.4 Other operating income 2.8 1.7 0.5 Survey and research costs – – – Payroll costs -2.2 -2.1 -2.5 Other general expenses -0.9 -1.2 -2.1 Depreciation and amortization allowance on investment property -13.4 -18.5 -19.9 Depreciation and amortization allowance on PPE -0.8 -1.1 – Provisions – -0.1 1.3 Results of operations Office property 36.7 28.2 39.2 Results of sale of investment property and equity interest 27.5 17.5 15.0 SEGMENT EARNINGS SHOPPING CENTERS 64.2 45.8 54.3 Corporate and share expenses -7.0 -6.3 -4.6 Profit on sale of short-term assets – – 2.1 Net dividends and provisions on non-consolidated investments -0.2 -0.2 -0.4 Net cost of debt -134.8 -112.7 -121.8 Change in the value of financial instruments – – Effect of discounting -1.2 -1.3 -2.5 Pre-tax earnings 216.4 163.8 130.2 Corporate income tax -22.0 -17.9 -3.9 NET INCOME OF THE CONSOLIDATED ENTITY 194.4 145.9 126.4 in millions of euros

118

Klépierre_Financial report 2006 companies. income received bytheserviceprovider • • The group’s revenues comprise: income. income from entryfeesandothersundry Lease incomeisrental incomeexcluding termination indemnitiesandreceived entryfees. to leaserevenues suchasparkingrentals, malls togetherwithotherincomesimilar payments from office buildings andshopping Lease revenues compriseallthelease 5.2 -OPERATING INCOME fiepoet 28 . 54.1 510.957.5 1.3 568.4 12.2 the disposalsin2005andearly 2006. income of52.9million2005 despite 52.8 They are almoststablecompared tothelease 0.6 of leaseincomeatDecember31,2006. Office buildingsgenerated52.8millioneuros 11.61.9 13.5 12.2– center. 19.70.2 11.6 19.9 to thecontributionofnewValenciennes 12.2 29.50.8 euros ofleaseincomemainlythanks 30.3 The 2006acquisitionsgenerated9.0million 514.5 232.341.0 Louvain-la-Neuve centerfor7.4millioneuros. 273.3 Assago center)andinBelgiumwiththe 56.2 (of which9.9millioneuros onthenew for 8.2million,inItaly16.0millioneuros in Polandfor11.3millioneuros, inFrance 458.1 to acquisitionsmadein2005andespecially growth51.9 millioneuros. wasdue External growth, i.e., driven bythe13.2%external income from Shopping centerswasmainly The 67.5millioneuros increase inlease TOTAL Office property Other Greece Czech Republic Portugal Belgium Poland Hungary Spain Italy France Shopping centers Analysis ofrevenues bygeographicalarea and managementadministration rental income; income stoodat At December31,2006theamountoflease income. re-invoicing ofworkstotenantsandsundry The otheroperatingincomecomprise 2005. 49.3% compared to46.4%atDecember31, generated byoutsideFrancerepresents to December31,2005.Theportion centers increased by17.3%inrelation Lease incomefrom Klépierre shopping for office buildings. 458.1 forshoppingcentersand52.8million early July2005. (PSG) earlyJanuary2006andPCMHungary by the100%consolidationofSégécéItalia This increase can beprimarilyexplained compared toDecember 31,2005. reached 57.5millioneuros, upby24% in third-party management anddevelopment carried outbySégécéanditssubsidiaries Shopping centerfeesfrom theactivities income Rental € 510.9 millionofwhich Management income in millionsofeuros 59.8 6.4 66.2 73.9 5.3 79.2 1.4 – 1.4 6.1 0.2 6.3 TOTAL 119

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

5.3 - OPERATING EXPENSES Building expenses are posted net Land expenses correspond to amortizations of re-invoicing to tenants and only include and fees on construction lease. the amounts at the owner’s expense. Non-recovered rental expenses are mainly from expenses on vacant premises.

2006 2005 2004 OPERATING EXPENSES (excluding Corporate activities) -39 884 -39 915 -26 074 Land expenses (real estate) -2 598 -2 296 -910 – Office property activities -342 -290 – Shopping center activities -2 256 -2 006 Non recovered rental expenses -6 296 -5 240 -3 772 – Office property activities -428 -1 221 – Shopping center activities -5 868 -4 019 -3 772 Building expenses -30 990 -32 379 -21 392 – Office property activities -2 151 -2 270 -3 935 – Shopping center activities -28 839 -30 109 -17 457 DEPRECIATION AND AMORTIZATION ALLOWANCE -144 094 -130 122 -112 257 Depreciation and amortization allowance on property -140 968 -125 535 -109 267 Depreciation and amortization allowance on PPE -3 126 -4 587 -2 990 TOTAL -183 978 -170 037 -138 331 in thousands of euros

Allowances for the depreciations 5.4 - INCOME/LOSS FROM THE SALE and amortization of property increased by 15.4 OF INVESTMENT PROPERTY million euros compared to December 31, 2005. AND EQUITY INTERESTS This evolution comes from: Klépierre sold four offices for a total amount • the Increase of the portfolio with the Polish of €112.6 million. The most significant centers (6.8 million euros), the Louvain-la- capital gains concern the “Les Ellipses” Neuve center (4.5 million euros), the Italian building located at Saint-Maurice acquisitions (3.9 million euros) and several for 10.1 million euros and the Front de Paris other malls for a total of 3 million euros; building for 16.9 million euros. Six shopping • the disposal of office buildings in 2005 centers were also sold in 2006 generating and 2006, which generate a 3.1 million euros income of 8.1 million euros and a capital decrease in allowances to amortization; gain of 1.5 million euros. • the net allowances to depreciation, amounting to 5.8 million euros which mainly correspond to provisions on shopping centers located in Poland and in the Czech Republic.

120

Klépierre_Financial report 2006 the replacement ofthenetinterest expense the increase ofinterest rates,andallowed played theirhedgingrole against change favourably:fixedratepayerswaps • on whichmostdebtsare indexed; of theincrease inshort-terminterest rates on loansfrom credit institutionsistheresult • of 700millioneuros; in March 2006,ofanewbondloan (+24.3 millioneuros) followstheissue, • The mainchangesare: 894 – 4 299 1 – 640 6 658 128 1 – – 099 1 035 1 513 441 4 – 661 1 951 004 211 4 3 326 8 033 1 217 1 Currency translationgains Other revenues andfinancialgains Sundry interests received Interets onloanstogroup and associates Spreading ofcashpayments Net interest gainonSwaps Gains from thesaleofinvestmentsecurities Financial income It comprisestheitemsbelow: reflecting theincrease indebtfortheperiod. 112.7 millioneuros atDecember31,2005 euros atDecember31,2006versus The costofnetdebtrose to134.8million 5.5 -COST OFNETDEBT OA 1083-2 4 13941 -133 540 -126 698 -121 833 -150 700 -112 806 -134 541 -4 763 -6 274 138 819 -6 589 155 -136 -1 902 189 4 – -6 858 -2 – -763 -662 553 -24 – 400 -1 707 -10 907 545 5 -7 – 228 639 -2 -49 – -591 -29 835 -1 – 343 -5 644 -65 – 516 – – 809 873 -37 -89 – 330 -5 COST OFNETDEBT 199 -43 TOTAL 849 -48 Allowances toprovisions forotherlong-termfinancialassets Allowances foramortizationofreimbursement premiums Allowances foramortizationofborrowing issuecosts Currency translation losses Transfer offinancialexpenses Other financialexpenses Interets on loanstogroup andassociates Cash paymentoncancelledSwaps Spreading ofSwapcashpayments Net interest 243 expenseonSwaps 12 Other bankinterests Interests on loansfrom credit institutions Interests on bondissues 840 13 Financial expenses 027 TOTAL 16 the interest amountsexchangedonswaps the 5.6millioneuros increase ofinterests the increase ininterests onbondissues as wellthebankloanofKlémurs. of anewbondissue,syndicatedloan and commissionslinkedtothesetupin2006 of 5.9millioneuros corresponds tofees The “transferoffinancialexpenses”item of 3.2millionin2006. of 2005(-2.2millioneuros) byanetgain 2006 2005 in thousandsofeuros 2004 121

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

5.6 - INCOME TAX

2006 2005 2004 Current tax -64 756 -26 464 -16 518 Deferred tax 42 740 8 555 12 645 TOTAL -22 016 -17 909 -3 873 in thousands of euros

Klépierre distinguishes three income tax sectors: Other French payments not dependent includes, first, a revaluation tax expense • the SIIC segment that includes Klépierre on the SIIC segment records an expense of 29.8 million euros in the Italian companies and all eligible French real-estate affiliates. of 5 million euros: ICD, Magnolia and Novate, secondly, Some of these companies have elected • 3.1 million euros for the limited partners a deferred tax gain of 32.6 million euros for the common law tax status; of Ségécé and Klécar Europe Sud; from the reversal of inventories for provisions • companies incorporated under French law; • 1.6 million euros representing the income for deferred tax liabilities funded on these • foreign affiliates. expense actually due for the period assets at December 31, 2005; by the entities in the segment; • 5.9 million euros of deferred tax expense The tax expense for 2006 represents • 0.3 million euros are gains from calculated, primarily on amortization 22 million euros: the capitalization of deficits and changes allowances restated according Expense on the SIIC segment, i.e., in deferred taxes on retirements. to the component-based method; 5.9 million euros, analyzed as follows: • 4.9 million euros of deferred tax income • a 3.7 million euro expense on the The tax expense of foreign subsidiaries, on local timing differences; segment’s taxable earnings. These earnings i.e., 11.1 million euros is comprised of: • 0.7 million euros of income from are mainly connected to the financial • 13.7 million euros of current tax, in Italy the capitalization of tax deficits. business of the relevant companies; (8.1 million euros), in the Czech Republic • an expense of 1.2 million euros of deferred (1.6 million euros), in Hungary (1.3 million taxes mainly calculated on the cash payment euros), in Portugal (1.2 million euros) and the capitalizations of deficits; and in Spain (1.0 million euros); • a tax expense due to the tax audits • net income of 2.8 million euros of 12.9 million euros; on the restatement of the revaluation • deferred tax reversal of 12 million euros. of a number of Italian assets. This amount

SIIC sector Non SIIC Foreign Total sector companies Tax free Taxable Total France Reconciliation of theoretical and actual income tax expenses at December 31, 2006 earnings earnings Pre-tax income and income from equity-method companies 98 358 18 867 117 225 60 420 38 167 215 812 THEORETICAL TAX EXPENSE AT 34.43% -33 865 -6 496 -40 361 -20 802 -13 141 -74 303 Tax free sector Exit taxes and cancellation of provisions for deferred taxes – – SIIC sector tax free earnings 33 865 33 865 33 865 Taxable sectors Impact of permanent differences – 16 229 -1 042 15 187 Restatements of tax free consolidations – -2 583 80 -2 503 Effects of non-capitalized deficits – -927 -1573 -2500 Recognition of non-capitalized deficits – 2 227 570 2 797 Exit tax on long-term capital gain special reserve – – Change in tax status – – Discounting of deferred tax after restructuring – 682 35 581 36 263 Discounting of rates and other taxes 637 637 94 -32 410 -31 679 Rate differences outside France – – 858 858 ACTUAL TAX EXPENSE 637 -6 496 -5 859 -5 080 -11 077 -22 016 in thousands of euros

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Klépierre_Financial report 2006 France Ordinary deficitsare capitalized iftheirrecovery isdeemedprobable: OA 8 7 6042 3 837 1 234 24 Holding:taxfree dividends -0.04 064 26 489 – 637 777 -88 – 0 637 – – – 489 850 -1 012 1 – 446 659 -1 192 – 34.43% - 012 1 – 0 – 29.50% 452 – – – 0.3 – 192 922 1 717 -2 283 141 31 381 -2 339 37.25% 159 0 922 -515 8231 -5 147 255 19.00% -760283 141 19.00% 31 33.00% 339 37.25% 159 133 37.25% 255 TOTAL 16 -563 Kléber LaPérouse – -911 -125 -635 -702 0 019 -1 25.00% -0.4 17 Capucines BV 0 37.25% Netherlands 25.00% – 25.00% 25.00% PCMP 19.00% 0 45 0 631 2 Holdings polonaises -69 Noncapitalizedtaxdeficits Foncières polonaises 485 1 Poland 572 1 25.00% Collegno 0 -962 632 2 45 487 24.00% 0 914 3 485 1 – Galleria Commerciale Klépierre Serravalle 448 -16 183 1 Klefin 488 0 915 -133 3 742 368 0 -4 Assago 737 16.00% 6 572 221 1 Probable restructuring Italy 046 34.00% -12 500 34.00% -1 742 Athinon -0.2 609 3 863 2 240 32.50% 623 -4 6 -642 Efkarpia 32.50% Patras 181 -2 346 4 864 KFM 448 2 1 34.00% 240 Ségécé Hellas 34.43% Greece 34.00% -23 AMC Prague 371 -13 811 -8 447 1 Czech Republic -698 Foncières hongroises 32.50% 32.50% Klépierre Part. etFin.(French 27.50% company) 204 -4 Hungary 34.43% Place del’Accueil 34.43% Foncière Louvain-la-Neuve Coimbra Cinémas Louvain-la-Neuve Belgium Vallecas Vinaza Klécar FoncierEspaña Klécar FoncierIberica Spain H3 (French company) H1 (French company) Finascente Portugal Entities Applicable tax rate ordinary deficits Inventory of 12.31.2006 at 12.31.2006 Capitalizable Unlimiteddeferralofordinary deficits – amounts at 12.31.2006 capitalized Amounts zdamounts ized at 12.31.2006 Non capital- Deficitsdeferrableover5years – Ordinary deficitsdeferrableover – Deficitstobecarriedforward over5years – Unlimiteddeferralofordinary deficits Unlimiteddeferralofordinary deficits – Deficitsdeferrableover15years – – – Non-capitalized deficitspriortoconsolidation and gainsfrom saleofsecurities Remarks in thousandsofeuros Deficits deferrableover6years indefinitely deferrable 5 yearsforthefirst3 123

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

6 - RISK EXPOSURE AND HEDGING STRATEGY

Klépierre is attentive to the management (40% of debt on December 31, 2006, before of the financial risks inherent in its activity hedging): it includes the bank loans (standard and in the financial instruments that it uses. or mortgage), drawdowns from syndicated The group identifies and regularly evaluates loans, commercial paper and the use its exposure to the different sources of risks of authorized overdrafts. (rate, liquidity, foreign exchange, counterparty, stocks) and defines the applicable IDENTIFIED RISK management policies, where appropriate. An increase of an interest rate on which the variable rate debts are indexed 6.1 - INTEREST RATE RISKS (Euribor 3 months primarily) could lead to an increase in future interest rate expense. A) Cash Flow Hedge interest rate risk EVALUATION OF EXPOSURE RECURRENCE OF FLOATING RATE The tables below enable a comparison FINANCING REQUIREMENT of the exposure of Klépierre to changes Variable rate debts structurally represent in interest rate changes before and after a significant portion of the group’s debt hedging.

Amount Change in financial expenses caused by a 1% increase Interest rate position before hedging in interest rates Gross position(variable rate debts and short-term debts) 1 529 15.3 – Investment securities -52 -0.5 NET POSITION BEFORE HEDGING 1 477 14.8 in millions of euros

Amount Change in financial expenses caused by a 1% increase Interest rate position after hedging in interest rates Gross position before hedging 1 529 15.3 – Net hedge -890 -8.9 Gross position after hedging 639 6.4 – Investment securities -52 -0.5 NET POSITION AFTER HEDGING 587 5.9 in millions of euros

Financial debt after hedging breaks down as follows:

Fixed rate debts Variable rate debts Total gross financial debts Average cost of projected debt Amount Rate Fixed portion Amount Rate Variable portion Amount Rate 12.31.2004 2 146 4.41% 77% 648 2.82% 23% 2 794 4.04% 4.17% 12.31.2005 2 434 4.30% 74% 851 3.00% 26% 3 285 3.96% 4.09% 12.31.2006 3 159 * 4.22% 85% 570 4.27% 15% 3 729 4.23% 4.28% * Including Klémurs swap of 50 million euros starting from January 2, 2007. in millions of euros The rates above are calculated, for the variable portion, on the basis of the market rates as of December 31, 2006. They do not include non-utilization commissions, spread of cash payments on swaps and spread of loan premiums and costs (hence the variance between the weighted average rate and the average cost of the projected debt).

124

Klépierre_Financial report 2006 highly probable aspectofrenewing thesedebts. that Klépierre’s financing planunderlinesthe can exceedthatofhedgeddebtsoncondition Generally, thetermofhedginginstrument parts ofitsindebtedness. boththelong-termandshort-term concerns term. ThatiswhytheKlépierre’s hedgingstrategy variable rateloanswillberenewed inthemedium it istherefore highlyprobable thattheshort-term to reduce theproportion ofitsshort-termdebt, coming years.Sincethegroup doesnotseek of 200to300millioneuros onaveragein the current financingplanstatesadebtincrease program, Klépierre isstructurallyaborrower; Considering itsstrategyandinvestment index, forexamplebybuyingacaponthisindex. by limitingthepossiblevariationsofreference Klépierre couldalsouseCashFlowHedges rate financing. to convertfixedratefinancingsintovariable of variableratefinancingratesorinversely uses swapagreements, enablingthefixing To reach itstargetlevel,Klépierre primarily to anticipateitshedgingrequirements. of theparticularlylowinterest rateenvironment 2007, giventhatKlépierre tookadvantage by thetableabove,itwas85%onJanuary2, hedging) ingross financialdebts.Asshown as theproportion offixedratedebts(after of approximately 70%.Thisrateisdefined Klépierre hassetitselfatargethedgingratio HEDGING STRATEGY duration ofthehedgeddebt,sinceKlépierre hedging instrumentsisneverhigherthanthe The durationofthe“FairValue Hedge” hedged. The “credit margin” componentisnot rate paymentsbyvariablepayments. rate swapsenablingthereplacement offixed ratio. Itisalsobasedontheuseofinterest to reflect theobjective oftheoverallhedge The “FairValue Hedge”strategyiscalibrated before hedging. at afixedraterepresent 2219millioneuros As ofDecember31,2006,debtssubscribed RISK AND HEDGINGSTRATEGY EVALUATION OFEXPOSURE as a“cashflowhedge”riskunderIFRS. then envisagehedgingthisrisk–considered before setting uptheloan.Klépierre could be exposedtotheriskofinterest ratechange (e.g.: scheduledacquisition).Itwouldthen the fixedratedebtatalaterdate to know, atagivendate,thatitshouldraise Furthermore, Klépierre maybeinaposition the ratesfallandinversely. value offixedratedebtsincreases when market interest rates,insofarasthefair is exposedtothefluctuationsofrisk-free On itsfixedrateindebtedness,Klépierre IDENTIFIED RISK and other“equity-linked”products. to thebondmarketorconvertiblebonds debt maycomefrom resorting again The principalsources offixedrateadditional Financements. et by bilateral bankloanssubscribedin2004 corresponds toitsbondissuesandtwo Today, Klépierre’s fixedrateindebtedness DESCRIPTION OFFIXEDRATE INDEBTEDNESS B) Fair Value B) Hedgeinterest raterisk Klépierre andParticipations OA 2 718 7293 3 510 1 898 1 510 1 310 900 1 319 TOTAL Floating ratebankloans Fixed ratebankloansandfinanceleases Fixed ratebondissues Financing atDecember31,2006 in thecontrarycase. of ratechangesandcredit margin fair valuecalculatedonthebasis quotations iftheyare available, applicable): utilizationofmarket • conditions ofthedebt; credit event notimpactedonthefinancial to thenominalamount,unlessmajor calculated onthebasisofequal • conditions ofthedebt; event notimpactedonthefinancial to thenominalamount,unlessmajorcredit • to thefollowingprinciples: value. Fairvaluesare drawnupaccording of thefairvaluesdebtsandtheirface The tablebelowenablesacomparison and notatfairvalue. in thebalancesheetatamortizedcost Under IFRS,financialdebtsare posted and liabilities D) Fairvalueoffinancialassets and theamountsinvolved. their temporarynature (cashinvestments) to amoderateinterest rateriskgiven These investmentsexposeKlépierre euros (maturitywithinoneweek). and Spanishtreasury billsfor2.7million for 6.2millioneuros (onemonthmaturity) in France,certificatesofdepositsItaly open-end andmutualfundsorSICAV-FCP They are comprisedofmoneymarket 52.1 millioneuros. investment securitiesrepresented As ofDecember31,2006,theKlépierre’s C) Investmentsecurities within thedefinitionofIAS32/39. wishes toobtainaverystrong “efficiency” fixed ratebankdebts:fairvalue variable ratebankdebts:fairvalueequal bond issues(andconvertiblewhere Nominal values in millionsofeuros Fair value 125

CONSOLIDATED FINANCIAL STATEMENTS Financial report _consolidated financial statements

Derivative instruments are posted in overdrafts) on December 31, 2006. the balance sheet at their fair value. Generally, access to the financing On the asset side, non-consolidated securities of real-estate companies is facilitated are classified in the category of securities by the security received by lenders “available for sale” and are therefore from their property assets. valued at their fair value. Given the activity Some Klépierre financings (club deals, of the concerned companies, it is estimated bond issues) come with financial that the net book value is close to the fair covenants which must be complied with value. under pain of the application of an early payability clause (see. also the note E) Measurements and resources on financial liabilities). These agreements for managing rate risks concern ratios which follow up Given the importance of its rate risk is standard for property professionals management for Klépierre, general and the imposed constraints management is involved in any decision that leave sufficient flexibility concerning the hedging portfolio. to Klépierre to keep the liquidity risk low. The Financial Division has IT tools enabling it first to track market place trends in real Principal Maximum amount Contractual limit Impact Level on time, and second to calculate the market covenants of relevant financing of non compliance 12.31.2006 values of its financial instruments including (Millions of euros) derivative instruments. Loan To Value ≤ 52% 41.7% EBITDA/FFI ≥ 2.5 3.4 6.2 - LIQUIDITY RISK Secured debts/ 1 800 Default case 2.6% Klépierre focuses on refinancing its long-term Revalued assets ≤ 20% activity and diversifying maturity dates Group share of and the group’s financing sources, revalued assets } ≥ 5Md€ 8.1Md€ so as to facilitate renewals. Secured debts/NAV 1 900 ≤ 50% Default case 5.2% Accordingly, bond issues represented 52% of financial debts at December 31, 2006, the duration of the debt was brought from The bond issues (€1 900 million) include 3 years at December 31, 2005, to 5.9 a bearer option, giving bondholders years at December 31, 2006, and bank the possibility of requesting early repayment debt is spread out in different products in case of a change of control that would (syndicated loans, mortgage loans, etc.) change Klépierre’s rating into “non-investment and various international scale counterparties. grade”. Apart from this clause, no financial Outstanding commercial paper agreement refers to the rating conferred (representing the bulk of short-term to Klépierre by Standard & Poor’s. financing) never exceeds the amount of the club deal “back-up” line with several 6.3 - CURRENCY RISKS banks and which would enable immediate Klépierre’s business is mainly located in refinancing of this outstanding the Euro zone. As of December 31, 2006, in the event of renewal difficulty the exceptions were the Czech Republic, on this market. Slovakia, Hungary and Poland. Additionally, Klépierre had €508 million In these countries, to date, the currency risk of unutilized credit lines (including bank was not considered sufficiently important to be hedged by derivative instruments. As acquisitions and their financing are carried out in euros, currency risk mainly concerned the commercial activity of subsidiaries. Generally, rents are invoiced to lessees in euro with the conversion into local currency on the invoicing date.

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Klépierre_Financial report 2006 Lessees have the choice of paying their rents 6.5 - EQUITY RISK in local currency or in euro (or in dollars As of December 31, 2006, the stock for some minority leases). Currency risk of treasury shares held by Klépierre is therefore limited to the variance, if any, was 395 821 shares, whose acquisitions between the invoiced rent and the collected value (€30.8 million) is deducted from equity. rent when the currency depreciates versus This inventory is allocated as follows: euro between the invoice date and the actual • 25 467 stocks in the context of the liquidity payment in local currency by the lessee. agreement for regulating its share market At the same time, Klépierre makes sure price; that lease payments from tenants do not • 32 598 shares under the stock-options represent an overly large portion of their plans set up for Klépierre group employees

revenues so as to avoid, in case of a sharp as decided by the Executive Board STATEMENTS increase in the value of the euro, on June 14, 1999; a deterioration of their financial situation • 195 000 shares under the stock-options FINANCIAL CONSOLIDATED which could increase the risk of default plan set up for Klépierre group employees payments for Klépierre. as decided by the Executive Board on May 30, 2006; 6.4 - COUNTERPARTY RISK • 142 756 shares under upcoming Counterparty risk is limited by the fact stock-option plans. that Klépierre is structurally a borrower. A 10% drop of Klépierre’s share compared It only concerns investments carried out to the closing rate at December 31, 2006 by the group and the group’s counterparties would have no impact on the Group’s results, in derivative product transactions. given that the value of those shares is clearly less than the stock market price on that date Counterparty risk in the balance sheet. on investment securities Counterparty risk on investments is limited by the type of products used: • UCITS managed by recognized firms, and therefore concerning diversified signatures; • government loans from countries where Klépierre is present (in the form of repurchase agreement); • occasionally, certificates of deposit issued by leading banks.

Counterparty risk on hedging instruments Klépierre gets involved in derivative instrument transactions only with world-class financial firms. Today, all swap contracts have a “AA” counterparty rating. In any case, the group would not accept to deal with a firm rated lower than A- by S&P or an equivalent agency.

127 Financial report _consolidated financial statements

7 - FINANCING AND GUARANTEE COMMITMENTS

7.1 - RECIPROCAL COMMITMENTS or a sale before completion contract Reciprocal commitments correspond (payment guaranteed by the buyer to reciprocal guarantees in the context and completion guaranteed of a real-estate development contract by the developer).

December December December 2006 2005 2004 Guarantee under a property development contract or a sale before completion 192 512 79 324 66 606 TOTAL 192 512 79 324 66 606 in thousands of euros

7.2 - COMMITMENTS GIVEN AND RECEIVED December December December 2006 2005 2004 Commitments given – Guarantees on loans granted to employees 8 910 6 687 6 785 – Guarantees, deposits and mortgages 8 273 7 159 1 677 – Purchase commitments 568 886 562 462 450 498 TOTAL 586 069 576 308 458 960 Commitments received – Guarantees received as guarantee for property management activity and transactions 120 340 120 340 75 310 – Sale commitments 58 875 52 484 – – Deposits received from tenants 53 638 46 780 27 791 – Other guarantees received 109 838 112 956 85 619 – Unutilized confirmed credit lines 467 000 306 757 167 408 TOTAL 809 691 639 317 356 128 in thousands of euros

Purchase commitments As the probability of the lease being extended Other guarantees received Purchase commitments primarily correspond or full ownership being obtained cannot In the context of Vallecas, Klépierre has to acquisition subject to conditions precedent be measured, this earn out was not booked. a security deposit of €110 million euros of securities of companies pertaining to in the event of failure of the Madrid shopping centers in Poland and the Czech Unutilized confirmed credit lines Municipal authority to obtain a building Republic for €216.3 million, a preliminary At December 31, 2006, Klépierre had permit. purchase agreement, 109.6 million euros, €508 million of unutilized credit lines To our knowledge, there is no omission for 100% of the equity interests of Progest, comprising the following: of a material off-balance sheet commitment as well as financial stakes in various real estate • €467 million of confirmed lines: or which could become in the future companies, and a preliminary purchase – €250 million of credit lines available according to applicable accounting standards. contract for the construction of the Vallecas on the syndicated loan set up in 2006; (Madrid) center for 115.6 million euros. – €210 million of possible commercial The price paid for Sadyba, in the context paper issuance (variance between of the Polish acquisitions realized in 2005, the amount of the back-up line is subject to an earn out clause Klépierre does and the outstanding issued paper); not fully own the land for the center but holds – €7 million of credit lines available a lease set to expire on July 31, 2021. on the credit set up by Klémurs An earn-out will be paid to the seller if he in 2006. obtains an extension of the lease or full ownership • €41 million authorized under within a period of 10 years as from July 2005. a partially used overdraft.

128

Klépierre_Financial report 2006 7.3 - GUARANTEES December December December 2006 2005 2004 Guaranteed debts 386 424 619 319 425 810 TOTAL 386 424 619 319 425 810 in thousands of euros

Guaranteed debts mainly include: Generally, the group finances its assets • mortgage on the shopping centers owned by equity or debts contracted by the parent by Klécar Italia to hedge a 119.7 million without pledging these assets. euros bank loan;

• security deposit given by Klépierre to hedge STATEMENTS the 165 million euros debt of Klépierre

Participations et Financement. FINANCIAL CONSOLIDATED

The details of debts secured by pledges are as follows:

Loan Mortgage Pledge Plege Social NBV amount amount start date expiry date of pledged at 12.31.2006 assets On property, plant & equipment 450 400 Novate 30 559 – Metropoli 61 975 04.16.1999 12.15.2013 81 320 – Vignate 28 000 12.15.2003 10.15.2016 58 267 Immobiliare Magnolia 5 758 20 789 09.08.1999 07.15.2011 22 297 04.18.2003 01.15.2018 ICD 11 310 43 382 06.30.1996 05.11.2011 79 964 Klécar Italia 116 398 331 500 06.25.2003 06.25.2015 208 552 On long-term financial assets 0 TOTAL 450 400 in thousands of euros

Lastly, a mortgage was given for the loans • one in favour of Klépierre: obligation Agreement signed with AXA France Vie subscribed by IGC in 1997 and fully repaid of minorities to exit at the request in case of disposal of equity shares to date and which is in the process of being of Klépierre in the event of the sale constituting Ségécé’s capital released (Klépierre’s share: €38 million). of Klécar’s assets to a third party; The following provisions apply to share • the other in favour of minorities: process disposals that would not be considered 7.4 - SHAREHOLDERS’ AGREEMENTS enabling the latter, in 2011, 2016 and 2017 as free disposals and grant Axa France Vie for Italian companies and 2010, 2014 the advantages below: Shareholders’ agreement concerning and 2015 for the other malls to consider • the obligation for Klépierre to buy from Klécar France, Klécar Europe Sud, different exit scenarios: Axa France Vie the total number of equity Solorec and Klécar Participations Italia – assets sharing or sale, shares that it holds in Ségécé in so far as The partners’ agreements binding Klépierre – outright purchase by Klépierre of minority a sale proposed by Axa France Vie would and CNP Assurances and Ecureuil Vie were securities (no obligation for Klépierre), not be approved in accordance with article 8 amended by rider signed on December 30, – sale to a third party with payment of the bylaws of Ségécé; 2004 in order to cancel the liquidity commitments of a discount by Klépierre if the offer • indemnification of the amount of Klépierre towards its partners. is less than the Revalued Net Asset. of the registration fees at a rate of 4.80% The agreement provides for the usual minority which Axa France Vie might have to pay protections: pre-emptive share right, joint exit in case of the sale of its equity shares. right, decision process in case of investment or disinvestment. Furthermore, in each of the agreements, two clauses were planned:

129 Financial report _consolidated financial statements

In central Europe, the IPCUM index, Very exceptionally, leases exempted published by Eurostat, is based from the status, by no more than two years on the consumer price of all countries can be made compliant. of the European monetary union. The term of the lease is often 9 years, only the lessee can terminate it at the end Guaranteed minimal rent and variable rent of each three year period by sending Appraised yearly, the rent corresponds a six-month prior notice by extrajudicial act. to a percentage of the revenues earned The parties may be exempted from by the lessee during the civil year under this clause of three-year termination. consideration. The applied rates differ The rent is usually paid every quarter, depending on the activity carried out. at the start of the period and is annually 7.5 - COMMITMENTS ON OPERATING This binary rent (fixed + variable) cannot and totally indexed on the INSEE construction LEASES - LESSORS be less than the minimum guaranteed rent cost index. The rent may be progressive (MGR). The MGR is re-priced every year with or gradual and may include franchises but General description the indexing rate. whatever the case, determined when of the main clauses of the lessor’s lease The variable rent corresponds to the the lease is signed and for the entire agreement variance between the percentage of term (apart from riders during the lease). the revenues as fixed in the lease and All expenses including property taxes A) Shopping centers the minimum guaranteed rent after indexing. and taxes on offices, are generally The agreement stipulates rental terms At the renewal of the lease, all or part at the lessee’s expense, apart from the works ranging from 5 years in Spain to 12 years of the variable rent is consolidated regulated by article 606 of the Civil code in France (with three 3-year periods), Italy in the MGR. which are usually at the lessor's expense. offering a mixed system of 5 to 12 years. For example, the variable rent is often The terms for fixing and indexing rents reduced to zero at the end of the lease For professionals (lawyers, chartered are determined contractually. (every 5 to 12 years, as the case may be). accountants, architects, etc.): the status Indexing allows re-pricing of the guaranteed Each year, it is also reduced by the does not apply. After a minimum duration minimum rent, by the application progression of LMG in the application of six year, the lessee can leave at any time of a country-specific index. of the indexing. by giving six months prior notice. These The variable rent clause which is mainly agreements are not renewable. The other Indexing specific to each country found in the leases of historic French and conditions are based more closely on In France, the applicable index used is Italian assets, has been gradually included the provisions of commercial leases. the ICC, the reference construction cost, in other leases whenever they come up published each quarter The index retained for renewal or renegotiation. Total amount of conditional rents and applied corresponds that posted in income of the “anniversary” quarter of the lease. B) Office buildings The conditional rent refers to the part The ICC for the second quarter of each year 100% of Klépierre’s property assets are of payments made for renting whose amount (published in October) applies to about located in France and therefore governed is not fixed but which is established on 70% of leases in Klépierre’s rental property by French law. the basis of a factor other than lapsed time in France. (e.g. percentage of revenues, degree In Spain, the consumer price index (IPC) For commercial activities the following of utilization, price indices, market interest is recorded annually every January 1. apply: Articles L. 145-1 to L. 145-60 rate). Under the lease, minimum payments In Italy, the system is based on the consumer of the Commercial code and the non refer to the payments which the lessee is, price indices for working class and junior codified articles of n° 53-960 or can be, required to make during the term management (excluding tobacco) households of September 30, 1953 (the “bylaw”). of the lease, excluding the conditional rent, (ISTAT). But implementing indexing is more A certain number of these clauses are the cost of services and taxes to be paid complex: depending on the leases, we either in the public domain. For example: or refunded to the lessor. apply the ISTAT at 75%, or the reference the contracts cannot be shorter segment index at 100%. than 9 years (regarding the lessor’s In Portugal, the retained index is the commitment), the right to renewal, consumer price excluding property (IPC). the formal conditions to comply with The Consumer Price Index (CPI) is applied in the event of cancellation, leave, renewal, in Greece. and eviction, etc.

130

Klépierre_Financial report 2006 At December 31, 2006, the accumulated minimal future rents receivable pursuant to the non-cancelable operating lease agreements were as follows:

December 2006 Less than one year 500 411 Between 1 and 5 years 919 170 More than 5 years 319 495 TOTAL 1 739 076 in thousands of euros STATEMENTS STATEMENTS 7.6 - COMMITMENTS ON LEASES the lessee may elect to buy the building

AGREEMENTS - FINANCING at his discretion. The reconciliation between FINANCIAL CONSOLIDATED Klépierre has a finance lease agreement the minimal future payments under the lease for the office space located in Lille, rue agreement – financing and the discounted Nationale. This contract is valid for 18 years value of the net minimal payments pursuant until July 31, 2009. On the expiration date to the leases are presented as follows: of the treaty term of the finance lease,

December 2006 Minimal discounted value payments of payments Less than one year 427 226 Between one and five years 746 459 More than five years Total minimal payments for the lease 1 173 685 Less amounts representing financial expenses -488 DISCOUNTED VALUES OF MINIMUM PAYMENTS FOR THE LEASE 685 685 in thousands of euros

7.7 – HOLDING COMMITMENTS The buildings or finance leases acquired during the Buffalo Grill transaction are placed under the tax plan of Article 210 E of the French General Tax Code and the buildings are protected by a preservation commitment during five years as from their acquisition.

131 Financial report _consolidated financial statements

8 - COMPENSATIONS AND EMPLOYEE BENEFITS

8.1 - PAYROLL EXPENSES In addition, the Group's staff benefits The amount of payroll expenses amounted from treaty or contractual personal protection to 59.9 million euros at December 31, 2006. plans in various forms such as retirement Fixed and variable salaries and wages, gratuities. together with incentives and profit sharing, In Italy, the applicable plan in Ségécé Italia totalled 43.9 million euros, expenses related and Effe Kappa is a ”Trattamento di Fine to retirement indemnities, retirement Rapporto” (TFR) type of plan. The amount expenses and other staff benefit expenses due by the employer at the termination at 15.1 million euros, and income tax, taxes of the employment contract (resignation, and similar payments at 0.9 million euros. dismissal, retirement) is calculated The Group had a total of 1 032 employees by the application of an annual coefficient at December 31, 2006. for each year worked without this amount exceeding a certain threshold. 8.2 - RETIREMENT COMMITMENTS As the corresponding liability is certain, • Post-employment plans with defined it can be posted under other debts contributions and not as a provision for contingencies. In France, the Klépierre group contributes In Spain, a provision for retirement to different national and inter-professional commitments can be funded in the case basic and supplementary pension bodies. of a special clause in the collective • Fixed benefits post-employment plans agreement, but the staff of Spanish The fixed benefit plans existing in France subsidiaries of the Klépierre group and in Italy are subject to independent is not concerned. actuarial assessments according to The existing commitments for post- theprojected unit credit methods in order employment medical assistance plans to determine the expense corresponding are valued by using the evolution to the rights acquired by employees assumptions for medical costs. and the outstanding benefits to be paid to These assumptions, based on historic pre-retirees and retirees. The demographical observations, take into account the estimated and financial assumptions used to estimate future changes in the cost of medical services the discounted value of the commitments resulting both from the cost of medical and the hedging assets for these plans take benefits and inflation. into consideration the economic conditions specific to the monetary zone under • Reconciliation between the assets and liabilities posted on the balance sheet consideration. The fraction of actuarial variances to be amortized, after application December 31, 2006 of the conventional limit of 10% (corridor Obligations surplus on the assets of financed plans 4 422 method) is calculated separately Gross discounted value of obligations wholly or partly financed by assets 8 036 for each defined-benefit plan. Fair value of the plans assets -3 814 The provisions funded for fixed-benefit Discounted value of non-financed assets 4 222 post-employment plans amounted Yet to be recognized costs in application of IAS 19 to 4.2 million euros at December 31, 2006. Cost past services -29 Klépierre has set up supplementary Actuarial gains and losses -27 retirement plans by corporate agreement. Net obligation booked in balance sheet for defined-benefit plans 4 166 Under the supplementary plans, employee in thousands of euros beneficiaries will receive at the time of their retirement, additional income to their pensions (where applicable) paid by the national plans, according to the kind of plan they are entitled to.

132

Klépierre_Financial report 2006 • Movements on the net liability/asset posted in the balance sheet

December 2006 Net obligation at beginning of period 3 415 Retirement cost recorded in profit and loss for the period 751 Contributions paid by Klépierre in profit/loss for the period Acquisition/Disposal Benefits paid to beneficiaries of non-financed benefits Net obligation at end of period 4 166 in thousands of euros

• Components of the retirement expense STATEMENTS

December 2006 FINANCIAL CONSOLIDATED Costs of services rendered in the period 577 Financial cost 277 Return expected from the plan's assets -152 Write down of actuarial gains and losses 144 Write down of past services -44 Impact of reductions or liquidations of plan -50 TOTAL RECOGNIZED IN "PAYROLL COSTS" 751 in thousands of euros

• Other long-term benefits The provision for long-service awards totaled 1 669 thousands of euros at December 31, 2006.

• Principal actuarial assumptions used for calculating on the balance sheet date

In percentage, at January 1, 2006 France Discount rate 3.92% - 4.13% Rate of return expected from plan's assets 4.00% Rate of return expected from repayment rights n/a Rate of future salary increases 2.50% - 5.00%

8.3 - STOCK OPTIONS a proportionate expense during the vesting of 91.5 euros, a share price on the grant date There are currently two stock-option plans period (between the grant date and May 30, of 83.8 euros, volatility of 21.5%, a risk-free for Group executives and members of staff. 2010). interest rate of 4.1% for 8 years maturity These plans are standard stock options, A total expense of €378 thousands and a dividend of 3 euros per share in other words, they are not subject was recognized in profit and loss in 2006 in 2006 then a growth assumption calculated to performance conditions. for share purchase options. from a straight-line regression on previous Only stock options granted after November 7, The unit value of stock options granted year dividends. 2002 are booked in application of IFRS 1. in 2006 was valued at 13.7 euros. The calculated expense also takes into The valuation is carried out by an account an estimate of the population • Plan authorized in 2006 independent specialized company. of beneficiaries at the end of the vesting 195 000 options were granted in the context The model retained respects the basic period, since a beneficiary may lose his rights of the stock option plan authorized assumptions of the Black & Scholes model, if he leaves Klépierre during this period. by the Executive Board of May 30, 2006. adapted to the specific characteristics These options may be freely exercised as of options (in particular dividends in discrete from May 31, 2010 and until May 30, 2014 amounts and the possibility of exercising included. In accordance with IFRS 2, Klépierre as from May 31, 2010). appraised the market value of options The main data taken into account on their grant date and recognized for the valuation include an exercise price

133 Financial report _consolidated financial statements

Plan 1 Plan 1 Plan 2 Date of shareholders’ General Meeting 04.28.1999 04.28.1999 04.07.2006 Date of Executive Board meeting 06.24.1999 06.24.1999 05.30.2006 Subscription or purchase price 36.66 28.33 91.50 Total number of shares to be subscribed or purchased – company executives and officers 49 510 22 503 45 000 – first 10 employees beneficiairies* 0 75 010 41 000 Starting point for exercise of options 06.25.2004 06.25.2004 05.31.2010 Expiry date 06.24.2007 06.24.2007 05.30.2014 Number of shares subscribed at December 31 2006 31 001 141 040 0 Cancelled share subscription or purchase option 0 7 202 0 Outstanding share subscription or purchase options at December 31 2006 18 509 14 089 195 000 * The number of employees mentioned may be greater than 10 in case of identical number of options, or may be less than ten when there are fewer than 10 employees on a plan.

Grant Number Exercise Exercise price Outstanding Number Number Outstanding date of options period (in euros) options of options of options options Stocks-options granted at 12.31.2005 exercised cancelled at 12.31.2006 Executive Board in 2006 in 2006 Michel CLAIR June 24, 1999 (2) 18 004(1) June 25, 2004 36.66 12 904 0 0 12 904 to June 24, 2007 May 30, 2006 (3) 15 000(1) May 30, 2010 91.50 15 000 0 0 15 000 to May 30, 2014 Claude LOBJOIE June 24,1999 (2) 10 502(1) June 25, 2004 36.66 10 502 4 897 0 5 605 to June 24, 2007 June 24,1999 (2) 7 501(1) June 25, 2004 28.33 1 876 1 876 0 0 to June 24, 2007 May 30, 2006 (3) 10 000(1) May 30, 2010 91.50 10 000 0 0 10 000 to May 30, 2014 Jean-Michel GAULT May 30, 2006 (3) 10 000(1) May 30, 2010 91.50 10 000 0 0 10 000 to May 30, 2014 Laurent MOREL May 30, 2006 (3) 10 000(1) May 30, 2010 91.50 10 000 0 0 10 000 to May 30, 2014 (1) Restated to reflect trebled number of shares in 2003 (1 for 2 split and bonus share grant). (2) SGM decision on April 28, 1999. (3) SGM decision on April 7, 2006.

134

Klépierre_Financial report 2006 9 - ADDITIONAL INFORMATION

9.1 – DISCLOSURES ON THE FAIR-VALUE MODEL

2006 Fair value 2006 2005 PROFIT & LOSS ACCOUNT (Fair value) restatements Fair value Fair value model model Lease income 519 570 519 570 449 017 Land expenses (real estate) -2 598 2 600 2 0 Non-recoverable rental expenses -6 296 -6 296 -5 240 Building expenses (owner) -30 990 -28 -31 018 -28 632

Net lease income 479 686 2 572 482 258 415 145 STATEMENTS Management, administrative and related income 57 497 57 497 46 362

Other operating income 9 480 9 480 7 217 FINANCIAL CONSOLIDATED Change in the fair value of investment property 998 230 998 230 552 149 Survey and research costs -1 124 -1 124 -835 Payroll expense -59 938 -59 938 -52 365 Other general expenses -22 145 -22 145 -19 040 Depreciation and amortization allowance on investment property -140 968 139 059 -1 909 -758 Depreciation and amortization allowance on PPE -3 126 -3 126 -4 587 Provisions 12 0 12 2 261 RESULTS OF OPERATIONS 319 374 1 139 861 1 459 235 945 549 Gains on sale of investment property and equity interests 122 459 122 459 163 831 Net book value of investment property and equity investment sold -91 399 -20 067 -111 466 -148 889 Results of the sale of investment property & equity interests 31 060 -20 067 10 993 14 942 Profit on the sale of short-term assets 1 490 0 1 490 129 Net dividends and provision on non-consolidated investments -161 -161 -247 Cost of net debt -134 806 -134 806 -112 700 Change in the value of financial instruments 55 55 -40 Discounting effect -1 200 -1 200 -1 330 Share in earnings of equity-method investees 671 671 557 PRE-TAX EARNINGS 216 483 1 119 794 1 336 277 846 860 Corporate income tax -22 016 -114 554 -136 570 -101 503 NET INCOME OF THE CONSOLIDATED ENTITY 194 467 1 005 240 1 199 707 745 357 of which Group share 164 534 872 123 1 036 657 642 146 Minority interests 29 933 133 117 163 050 103 211 in thousands of euros

135 Financial report _consolidated financial statements

31.12.2006 Fair value 2006 2005 Balance sheet (Fair value) restatements Fair value Fair value model model Non-allocated goodwill 41 555 -9 138 32 417 33 410 Intangible assets 7 478 7 478 6 033 Tangible assets 41 482 41 482 42 167 Investment property 5 930 744 -5 923 432 7 312 3 382 Fair value of investment property 8 382 413 8 382 413 6 839 715 Fixed assets in progress 207 825 -12 107 195 718 99 610 Fair value of property held for sale 46 985 16 228 63 213 54 918 Equity-method securities 3 023 3 023 2 877 Financial assets 585 585 609 Non-current assets 17 104 17 104 18 743 Interest rate swaps 65 139 65 139 Deferred tax assets 26 275 26 275 33 417 NON CURRENT ASSETS 6 388 195 2 453 964 8 842 159 7 134 881 CURRENT ASSETS 470 682 - 64 638 406 044 394 525 TOTAL ASSET 6 858 877 2 389 326 9 248 203 7 529 406 Capital 184 657 184 657 184 657 Additional paid-in capital 830 622 830 622 743 166 Statutory reserve 18 466 18 466 18 466 Consolidated reserves 756 865 958 760 1 715 625 1 246 133 – Treasury shares 0 0 -9 096 – Available-for-sale assets -30 823 -30 823 – Fair value of financial instruments 39 734 39 734 -9 201 – Fair value of investment property 955 729 955 729 433 112 – Other consolidated reserves 747 954 3 031 750 985 831 318 Consolidated earnings 164 534 872 123 1 036 657 642 146 Shareholders' equity, group share 1 955 144 1 830 883 3 786 027 2 834 568 Minority interests 436 961 312 483 749 444 626 497 EQUITY 2 392 105 2 143 366 4 535 471 3 461 065 Non-current financial liabilities 3 680 254 3 680 254 2 633 906 Long-term allowances 8 572 8 572 7 579 Security deposits and guarantees 93 900 93 900 81 338 Deferred tax liabilities 127 986 245 960 373 946 288 703 NON-CURRENT LIABILITIES 3 910 712 245 960 4 156 672 3 011 526 CURRENT LIABILITIES 556 060 556 060 1 056 815

TOTAL LIABILITIES AND EQUITY 6 858 877 2 389 326 9 248 203 7 529 406 in thousands of euros

Fair value refers to the amount for which Klépierre has entrusted the task an asset may be exchanged between of assessing the value of its holdings properly informed, consenting parties acting to various appraisers. For office property under the conditions of normal competition. holdings, Atisreal Expertise (formerly The fair value is the most probable price Coextim) and Foncier Expertise jointly (excluding transactions fees and costs) perform this task. The Retail Consulting that can be reasonably obtained Group (RCG) appraises its shopping on the market on the balance sheet date. center holdings in all countries except The fair value of Klépierre buildings those centers owned by Klécar Foncier is determined by third-party appraisers. Iberica which were appraised by Cushman

136

Klépierre_Financial report 2006 & Wakefield (6% of assets) and the centers came up for renewal, and took into account from the gross rent: including management located in Hungary and in Poland, the current conditions of occupation fees, expenses borne by the owner and which were appraised by ICADE Expertise in the form of a capital loss calculated as before. not passed on to tenants, and charges paid (8% of assets). The appraisers did not limit their approach on vacant premises. Assignments entrusted to appraisers are all to properties coming up for renewal in the three The interest rate is set by the appraiser based carried out in accordance with the principles years to come, on the grounds that the investors on defined parameters and especially: retail sales of the Real Estate Appraisal Guidelines participating in current market transactions area, layout, competition, type and percentage (Charte de l’Expertise en Evaluation make projections that extend beyond this of ownership, rental reversion and extension Immobilière) using the recommendations three-year horizon. If lease income is higher potential, and comparability with recent market of COB/CNC “Barthès de Ruyter” working than market value, the financial capital gain transactions. As for rental reversion potential, group. observed was added to the appraised value the appraiser determines the market rental value

The market value is the value determined derived which is equal to the discounted value for the shopping center in its present state STATEMENTS by third-party appraisers who value the (at a rate of 5.5%) of the difference between on the basis of the shopping center’s location group's holdings on June 30 and December actual lease income and market price until expiry and the revenues generated by its tenants. FINANCIAL CONSOLIDATED 31 of each year excluding transfer duties of the first firm period of the lease. In the third The shopping center’s development potential and fees (duties are assessed on the basis case, a capital loss was deducted from the is determined by calculating the difference of the direct sale of the building, even derived value. It corresponds to the discounted between the market rental value and the current if these costs can, in certain cases, value (at the rate of 5.5%) of the difference rents being charged. An internal rate of return be reduced when the company which owns between actual lease income and market price is also calculated using a method that involves the asset is sold). until the lease expires. discounting a series of cash flows, generally Since December 31, 2005, the appraiser has to 10 years, based on a number of predefined Office buildings been reasoning on the basis of the rate of return assumptions. The estimated resale value at the The appraisers combine two approaches: (yield) and not on the basis of the capitalization end of this period is generally calculated using the first entails a direct comparison with similar rate. That is, the rate that was used is that a cap rate that is equal to or slightly higher transactions completed in the market during applied to the income determined as before than that initially applied to the net end the period, while the second involves capitalizing to derive an appraised value inclusive of transfer of period rent. recognized or estimated revenue. duties. Before, the rate used resulted in a valuation In sum, the appraiser derives a current value An analysis of these revenues reveals three exclusive of transfer duties. The decision by determining the yield rate that applies under situations depending on whether lease income to use this rate results from an observation prevailing market conditions, the current annual is substantially equal to, higher than or lower of the market, in the context of transactions rent and the shopping center’s reversionary than market value. actually completed by investors. To obtain potential. He then verifies that the internal rate If lease income and market value are substantially the appraised value exclusive of transfer duties, of return derived is consistent by calculating equal, the lease income used in the valuation transfer duties and fees were deducted an IRR. This results in a value that is inclusive is the actual lease income earned on the at the rate applicable to each relevant country. of transfer duties, from which duties property. If lease income is higher than market (which are calculated at the rate indicated above value, the valuation uses market value and takes Shopping centers for deriving a value exclusive of duties) must into account a capital gain calculated To determine the fair market value be deducted. from the discounted value of the difference of a shopping center, appraisers apply a yield between actual lease income and market value. rate to net annual lease income for leased-up If lease income is lower than market value, premises, and to discounted net market price the appraisers considered the scheduled term depending on the projected vacancy period of the corresponding lease, at which time for vacant properties. The present value net the rental price will be aligned with going rates. of all reductions or rebates on leases with Pursuant to the French decree of September 30, minimum guaranteed rents and the present 1953, the rental prices of properties that are value net of all expenses on vacant premises used solely as office premises are automatically are then deducted from the total figure. aligned with market rates when the leases The discount rate used is equal to the yield rate in question come up for renewal. applied to determine fair market value. Consequently, the appraisers worked The gross lease income includes: minimum on the assumption that the owners of such guaranteed rent, variable rent and the market property would be able to align rents with price of any vacant premises. Net rent market rates when the corresponding leases is determined by deducting all charges

137 Financial report _consolidated financial statements

9.2 - EARNINGS PER SHARE Diluted earnings per share is computed Basic earnings per share is computed by dividing the net income for the period by dividing the net income for the period attributable to ordinary shares by the weighted attributable to ordinary shares by the weighted average number of current shares in the year, average number of current shares excluding treasury shares adjusted to reflect in the period, excluding treasury shares. the effects of the diluting options.

12.31.2006 12.31.2005 12.31.2004 Numerator Net income group share (K€) a 164 534 120 449 105 147 Denominator Average number of weighted shares before dilutive effect b 45 845 441 45 965 465 45 291 739 Effect of dilutive options 0 0 0 Total potential dilutive effect c 0 0 0 Average number of weighted shares after dilutive effect d = b + c 45 845 441 45 965 465 45 291 739 NET INCOME GROUP SHARES PER NON DILUTED SHARE (in euros) a/b 3,6 2,6 2,3 NET INCOME GROUP SHARE PER DILUTED SHARE (in euros) a/d 3,6 2,6 2,3

9.3 - AFFILIATED COMPANIES 9.4 - COMPENSATION OF DIRECTORS of 42 000 sq.m. next to a shopping mall As of December 31, 2006, the share of BNP AND OFFICERS and a hypermarket. Paribas in bank loans totalled 1 129 million The directors' fees paid to members Total capital expenditure for the project euros, of which 958 million euros were of the Supervisory Board totaled is 109.6 million euros. The expected net used. This equity interest must be 150 000 euros. The overall amount triple lease income in 2007 for assets under compared to a total authorized amount of compensations paid in 2006 to the six operation amounts to 6.4 million euros. of 2 037 million euros, of which members of the Executive Committee 1 739 million euros are used. was 1 748 thousand euros. 9.6 - IDENTITY OF THE REPORTING These amounts do not include ENTITY the commercial paper back-up 9.5 - POST BALANCE SHEET DATE EVENTS As of December 31, 2006 Klépierre was fully facility (not drawn) of an amount Klépierre acquired on January 9, 2007, consolidated by BNP Paribas group. BNP of 300 million euros, and in which BNP 100% of the securities of Progest and signed Paribas holds an equity stake of 50.16% Paribas has an interest of 150 million euros. an MOA concerning the equity interests in Klépierre. In December 2006, Klépierre acquired in various real estate companies from Compagnie Financière Ottomane of group of Mr Henry Herman. (BNP Paribas group) a building located Progest and its different entities also own rue Meyerbeer in Paris. shares in several centers or commercial Furthermore, Atis Real, subsidiary facilities under operation, located of the BNP Paribas Group is tenant on 13 sites, in or near to the city centers of a building in Levallois belonging of large French cities. They represent total to Klépierre. gross leasable area of more than 88 000 sq.m., The transactions between affiliated of which 36 000 sq.m. for sold portions. parties were carried out under terms For this transaction, Klépierre has mainly equivalent to those prevailing in the case acquired interests in four leading shopping of transactions subject to normal conditions centers: Creil Saint-Maximin, Tourville-la- of competition. Rivière near Rouen, Le Belvédère in Dieppe and L’Océane in the south of Rezé, near Nantes. Four plots of land are also covered by the MOA, the largest of which is located in Forbach (57). The Group intends to use this plot to build a business park

138

Klépierre_Financial report 2006 Report of the Statutory Auditors

ON THE CONSOLIDATED FINANCIAL STATEMENTS STATEMENTS YEAR ENDED 31 DECEMBER 2006 CONSOLIDATED FINANCIAL CONSOLIDATED RDear Shareholders, Following our appointment as statutory 2 - JUSTIFICATION OF ASSESSMENTS auditors by your Annual General Meeting, In accordance with the requirements of we have audited the accompanying Article L.823-9 of the French Commercial consolidated financial statements of Klépierre Code (Code de commerce) relating to the for the year ended 31 December 2006. justification of our assessments, we bring The consolidated financial statements have to your attention the following matters: been approved by the Management Board. • as indicated in Notes 2.5 and 9.1 to the Our role is to express an opinion on these consolidated financial statements, real estate financial statements, based on our audit. assets are appraised by independent real estate experts. We ensured ourselves that the 1 - OPINION ON THE CONSOLIDATED impairments recognised were sufficient with FINANCIAL STATEMENTS regard to these external appraisals. Moreover, We conducted our audit in accordance with we ensured ourselves that the determination professional standards applicable in France. of the fair value of buildings as set forth in Those standards require that we plan and Note 9.1 were performed based on these perform the audit to obtain reasonable expert appraisals; assurance about whether the consolidated • as indicated in Note 2.7 to the consolidated financial statements are free of material financial statements, the Group used certain misstatement. An audit includes examining, estimates with respect to the monitoring of on a test basis, evidence supporting the the value of goodwill. Our procedures amounts and disclosures in the financial consisted in assessing the data and the statements. An audit also includes assessing assumptions on which these estimates are the accounting principles used and significant based, reviewing the calculations performed estimates made by the management, as well by your company, examining management’s as evaluating the overall financial statements approval procedures for these estimates and presentation. We believe that our audit finally verifying that the notes to the financial provides a reasonable basis for our opinion. statements give appropriate disclosures of In our opinion, the consolidated financial the assumptions adopted by the Group. statements give a true and fair view of the assets and liabilities and of the financial position of the Group as at 31 December 2006 and of the results of its operations for the year then ended in accordance with IFRSs as adopted by the EU.

139 Financial report _consolidated financial statements

• we examined the accounting treatment 3 - SPECIFIC VERIFICATION adopted by the Group for the purchase In accordance with professional standards of minority interests which are not subject applicable in France, we have also verified to specific provisions in the IFRSs as adopted the information given in the Group’s in the EU and we ensured ourselves management report. We have no matters that Note 2.2 gives appropriate disclosure to report as to its fair presentation and its in respect thereto. consistency with the consolidated financial • as indicated in Note 2.16 to the statements. consolidated financial statements, your company recognises its derivative instruments Signed in Courbevoie and Neuilly-sur-Seine, using hedge accounting as set forth in IAS March 7, 2007 39. We examined the classification and documentation criteria specific to this standard. The Statutory Auditors These assessments were made in the context Deloitte & Associés: Pascal Colin of our audit of the consolidated financial Laure Silvestre-Siaz statements taken as a whole, and therefore Mazard & Guérard: Odile Coulaud contributed to the opinion we formed which is expressed in the first part of this report. This is a free translation of the original French language text for information purposes only.

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Klépierre_Annual report as 2006 D resolutions Draft aforementioned reports. financial statementsorsummarizedinthe r approve thetransactions of 194467000euros. documents, showingaprofit fortheperiod as presented intheaforementioned 2006, hereby approve saidfinancialstatements statements fortheyearendedDecember31, of theauditorsonconsolidatedfinancial the SupervisoryBoard report, andthereport and havingread theExecutiveBoard report, to ordinary meetings ofshareholders, and majorityrequirements pertaining The shareholders, havingfulfilledthequorum the 2006consolidatedfinancialstatements. The purposeofthisresolutionistoapprove SECOND RESOLUTION in theaforementioned reports. in thefinancial r also approve thetransactions of 198465415.77euros. documents, showingaprofit fortheperiod as presented in theaforementioned 2006, hereby approve saidfinancialstatements statements fortheyearendedDecember31, of theauditorsonannualfinancial the SupervisoryBoard report, andthereport and havingread theExecutiveBoard report, to ordinary meetings ofshareholders, and majorityrequirements pertaining The shareholders, havingfulfilledthequorum the 2006financialstatements. The purposeofthisresolutionistoapprove FIRST RESOLUTION ORDINARY RESOLUTIONS statements or The shareholders also eflected inthe The shareholders summarized eflected • • • of theCode. in accordance withArticleL.225-88 in theaforementioned document each oftheagreements presented Commercial Code,hereby approve to inArticleL.225-86oftheFrench report ontheagreements referred noted thetermsofauditors’special of shareholders, andhavingduly pertaining toordinary meetings the quorumandmajorityrequirements The shareholders, havingfulfilled Commercial Code. to inArticleL.225-86oftheFrench the transactionsandagreementsreferred The purposeofthisresolutionistoapprove THIRD RESOLUTION and anetdividendpershareof the appropriationof2006earnings The purposeofthisresolutionistodetermine FOURTH RESOLUTION • • of resolve toappropriate theyear’s earnings to ordinary meetings ofshareholders, and majorityrequirements pertaining The shareholders, havingfulfilledthequorum (i.e., adividendof dividend of A shareholder earnings of From whichisderiveddistributable Plus retained earnings Total retainedearnings Earnings fortheperiod Earnings € 198 465415.77asfollows: € 3.20 pershare) € € € € € 147 725532.80 449 358992.83 250 893577.06 198 465415.77 301 633460.03 € 3.20. 141

DRAFT RESOLUTIONS Financial report _draft resolutions

SIXTH RESOLUTION the equity capital of the Company, it being The shareholders, having fulfilled the quorum specified that this limit of 10% may be and majority requirements pertaining to assessed at any time whatsoever, by applying ordinary meetings of shareholders, and duly this percentage to an adjusted amount noting that the term of office of Mr. Bertrand of equity capital after the completion de FEYDEAU expires today, hereby re-elect of capital transactions that may affect it after Mr. de FEYDEAU to the Supervisory Board the date of this meeting, or 5% of the total for a term of three years expiring at the close number of shares comprising the equity of the shareholders’ meeting called in 2010 capital of the company, it being specified to approve the financial statements that this limit of 5% may also be assessed for the year ending December 31, 2009. at any time whatsoever, by applying The shareholders resolve that, pursuant Mr. de FEYDEAU has signaled his acceptance this percentage to an adjusted amount to Article L. 225-210 of the French of the re-election, and has indicated that he of equity capital after the completion Commercial Code, the dividend distributable is not barred, by a court of law or because of capital transactions that may affect in respect of treasury shares owned of other positions or offices held, from it after the date of this meeting if these on the date of payment, and any amounts serving on the Board. shares are acquired by the Company that the shareholders have agreed to waive, for the purpose of holding them shall be appropriated to retained earnings. SEVENTH RESOLUTION for subsequent tender or exchange The dividend shall be paid on April 13, 2007. The shareholders, having fulfilled the quorum in a corporate merger, spin-off or business As a reminder, the following dividends were and majority requirements pertaining to transfer. paid out in euros in respect of the three prior ordinary meetings of shareholders, and duly The purpose of this authorization is to empower fiscal periods (the two-for-one stock split and noting that the term of office of Mr. Vivien the Company to trade in its own shares the free allotment of one share for two old LÉVY-GARBOUA expires today, hereby for all allocations there of that are allowed shares occurred in April 2003): re-elect Mr. LÉVY-GARBOUA to the under current legislation, the aim of this share • In respect of 2003: €2, o/w €1.40 with a Supervisory Board for a term of three years buyback program being to: €0.70 tax credit, and €0.60 without, expiring at the close of the shareholders’ • implement any Company stock option plan due to SIIC tax status; meeting called in 2010 to approve pursuant to Articles L. 225-177 • In respect of 2004: €2.30; the financial statements for the year and following of the French Commercial • In respect of 2005: €2.70; ending December 31, 2009. Code; or Mr. LÉVY-GARBOUA has signaled • implement any Company-sponsored FIFTH TO SEVENTH RESOLUTIONS his acceptance of the re-election, employee savings plan as provided by law, The purpose of these resolutions is to re-elect and has indicated that he is not barred, in particular, Articles L. 443-1 and following three members of the Supervisory Board for by a court of law or because of other of the French Labor Code; or a three-year term. positions or offices held, from serving • freely allot shares to directors, officers on the Board. or employees of the Company or companies FIFTH RESOLUTION that are affiliates, pursuant to Articles L. 225- The shareholders, having fulfilled the quorum EIGHTH RESOLUTION 197-1 and following of the French Company and majority requirements pertaining The purpose of this resolution is to delegate Code; or to ordinary meetings of shareholders, authority to the Executive Board to acquire, • cancel all or some of these repurchased and duly noting that the term of office hold and use the Company’s shares. shares, pending adoption by the shareholders of Mr. Dominique HOENN expires today, The shareholders, having fulfilled the quorum of the ninth extraordinary resolution below, hereby re-elect Mr. HOENN to the Supervisory and majority requirements pertaining to under the terms that are indicated; or Board for a term of three years expiring ordinary meetings of shareholders, • hold them for the purpose of subsequently at the close of the shareholders’ meeting and having reviewed the Executive Board remitting them as tender in an acquisition, called in 2010 to approve the financial report, hereby authorize the Executive Board, in compliance with the market practices statements for the year ending December 31, which may sub-delegate this power accepted by the Autorité des marchés 2009. in accordance with the terms and conditions financiers; or Mr. HOENN has signaled his acceptance set forth by law, to purchase shares • remit shares in connection with rights of the re-election, and has indicated of the Company pursuant to Article attached to securities with a claim that he is not barred, by a court of law L. 225-209 and following of the French to the equity capital of the Company or because of other positions or offices held, Commercial Code, limited to 10% immediately or at maturity; or from serving on the Board. of the total number of shares comprising • purchase, sell, convert, assign, transfer,

142

Klépierre_Financial report 2006 lend or temporarily transfer shares in such cases by a factor equal to the number in connection with a liquidity agreement of shares that make up the Company’s equity that complies with the AFEI professional capital before the transaction divided conduct guidelines and that is concluded by the number of shares after the transaction. with an investment services provider, This authorization is valid for a maximum in accordance with market practices accepted period of eighteen months. Effective today, by the Autorité des marchés financiers, it renders null and void the unused in particular to stimulate the market for shares portion of the authorization granted or to effect transactions to counter adverse by the shareholders under the ninth market trends. resolution, ratified at the April 7, 2006 The acquisition, sale or transfer of these shares annual meeting. The Executive Board of stock may be completed at any time is granted all necessary powers (including during the period of public to implement this authorization offering), subject to all relevant legal and the option of delegating such powers conditions and limits in force on the date within the limits of applicable law. of such transaction, particularly those pertaining In particular, the Board is authorized to volume and price, and by all appropriate to submit trading orders, enter into means, either through public stock market agreements, draw up and amend documents, transactions or private contracts, including in particular information memoranda, carry acquisition or sale of stock in blocks, through out all formalities, including those related recourse to derivative financial instruments to allocating or reallocating shares acquired on a regulated or private market, for various purposes, and all filings with or the allotment of free shares following the Autorité des marchés financiers DRAFT RESOLUTIONS DRAFT the issuance of securities with a claim and other organizations, and in general to the treasury shares held by the Company at to do whatever is necessary to give effect maturity through conversion, exchange to this authorization. or redemption, upon presentation of a warrant, or by any other means allowed by law. The shareholders hereby resolve to set par value at 4 euros, the maximum purchase price per share at 200 euros and the total number of shares that may be acquired to 10% of the Company’s equity capital, it being specified that this limit may be assessed at any time by applying this percentage to equity capital that has been adjusted to reflect capital transactions completed after this meeting, for a total amount not to exceed 923 284 400 euros. Notwithstanding the foregoing, the Executive Board may adjust the aforementioned price in the event of any transaction that affects shareholders’ equity, including but not limited to the capitalization of reserves or earnings that results in either an increase in the par value of shares or the issuance and a free allotment of shares, as well as in the event of either a stock split or a bundling of shares, to take into account the impact of such transactions on the value of shares, the aforementioned price being adjusted

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EXTRAORDINARY RESOLUTIONS

NINTH RESOLUTION TENTH RESOLUTION The purpose of this resolution is to delegate The purpose of this resolution is to raise capital authority to the Executive Board to reduce in cash by a par value amount of nine million, share capital by canceling treasury shares. two hundred and thirty-two thousand, eight The shareholders, having fulfilled hundred and forty-five euros and eighty cents the quorum and majority requirements (€9 232 845.80) through the capitalization pertaining to extraordinary meetings of reserves, and to raise the par value of each of shareholders, and having reviewed the share by twenty cents (€0.20). ELEVENTH RESOLUTION Executive Board report and the special The shareholders, having fulfilled the quorum The purpose of this resolution is to increase report of the auditors, authorize the and majority requirements pertaining the total number of shares through Executive Board, for a period of twenty-six to extraordinary meetings of shareholders, a three-for-one stock split, bringing months to cancel, in one or more and having reviewed the Executive Board the par value per share from €4.20 down transactions, Company shares purchased report, and noting that the equity capital to €1.40 per share. in connection with share buyback programs is fully paid up, hereby resolve to increase The shareholders, having fulfilled the quorum authorized by the shareholders through said equity capital, which currently stands and majority requirements pertaining the ratification of an ordinary resolution at 184 656 916 euros, divided to extraordinary meetings of shareholders, and, in particular, by virtue into 46 164 229 shares with a par value having read the Executive Board report of the authorization granted of 4 euros each, fully paid up, by nine explaining the rationale behind the equity by the shareholders in the eighth ordinary million, two hundred and thirty-two split, hereby note that the share capital is resolution hereinabove, up to a maximum thousand, eight hundred and forty-five euros fully paid up and resolve to reduce the par of ten percent of the equity capital and eighty cents (€9 232 845.80), thereby value of each share from €4.20 to €1.40 per 24-month period (it being understood bringing it to €193 889 761.80. and to concomitantly multiply the number that the equity capital used to determine This capital increase is achieved through of shares by three, such that there this percentage may be adjusted to reflect the capitalization of sums set aside under are 138 492 687 shares in existence. the impact of operations on equity capital other reserves, in the amount of nine million, The share capital shall remain set at subsequent to this meeting two hundred and thirty-two thousand, eight €193 889 761.80. It will be divided of the shareholders) and reduce equity hundred and forty-five euros and eighty cents into 138 492 687 shares, each with a par capital accordingly by charging (€9 232 845.80). value of €1.40, and all of the same rank. the difference between the purchase value This capital increase is achieved by raising Consequently, the shareholders resolve of the cancelled securities and their par the par value of each Klépierre share to amend Article 6 of the bylaws (Share value to additional paid-in capital and by twenty cents, bringing said par value Capital), so that it reads as follows: reserves. to four euros and twenty cents (€4.20). The shareholders grant the Executive Board Accordingly, the shareholders resolve “Article 6 all necessary powers, to amend Article 6 of the bylaws SHARE CAPITAL with the option of sub-delegating such (Share Capital), so that it reads henceforth The share capital shall be €193 889 761.80, powers, to implement the transaction(s) as follows: divided into 138 492 687 shares, fully paid up.” that entail reducing share capital The shareholders grant the Executive Board by cancelling treasury shares “Article 6 all powers required to accomplish related that it may decide to undertake, SHARE CAPITAL formalities and carry out all actions required to amend the bylaws accordingly The share capital shall be €193,889,761.80, to conduct this transaction, and in particular and accomplish all related formalities. divided into 46.164.229 shares, fully paid-up.” to determine the date on which the shares This authorization renders null and void with a par value of €4.20 shall be exchanged as of the date of this meeting any non- The shareholders grant the Executive Board for new shares. utilized portions of prior authorizations all the powers required to carry out related granted to the Executive Board to reduce formalities and complete this transaction, TWELFTH RESOLUTION share capital by canceling treasury shares. and in particular to determine the date Rectification to the meeting notice no. on which the existing shares with a par value 0701867, published on February 26, 2007: of 4 euros will be exchanged against new the wording of article 31 below has been shares. modified.

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Klépierre_Financial report 2006 The purpose of this resolution is to amend a Shareholder Subject to the Withholding Articles 7 and 31 of the bylaws. (as the term is defined in Article 31 of these The shareholders, having fulfilled the quorum bylaws). If such shareholder declares and majority requirements pertaining that it is not a Shareholder Subject to extraordinary meetings of shareholders, to the Withholding, it must satisfy any having read the Executive Board report, and request made by the company that pursuant to the new tax provisions applicable it prove this status and, if the company to the dividend distributions of SIICs so requests, it must be able to provide (Sociétés d’Investissements Immobiliers a legal opinion in support of this statement Cotées), hereby resolve to amend Articles 7 issued by an internationally reputed tax and 31 of the Company bylaws, to read consultancy at the request of the company. as follows: Any shareholder, other than a physical person, notifying the company that it “Article 7 has surpassed the ten percent threshold FORM AND TRANSFER OF THE SHARES via direct or indirect ownership must also The fully paid-up shares shall be under inform the company in a timely fashion registered form or bearer form at the owner’s of any change in its tax status such that election. it comes to be or ceases to be a Shareholder The shares shall give rise to registration Subject to the Withholding. in an account under terms and conditions provided for by law and regulations. Failure to disclose such information in The shares derived from a capital increase accordance with the procedures and may be traded as soon as such capital deadlines indicated in lines five and six DRAFT RESOLUTIONS DRAFT increase is completed. of this article shall result in the forfeiture The company is entitled to request, at any of the right to vote for that percentage time, under the terms and conditions provided of shares whose ownership should have for by law and regulations, the identity been disclosed, as provided for by law, of holders of shares, warrants or other securities, to the extent that one or more shareholders granting immediately or in the future (holding together at least two percent the right to vote during its shareholders' of the company’s share capital or voting meetings, as well as more generally, any rights) makes this request, duly noted information enabling the identification of in the minutes of the shareholders’ meeting. shareholders or intermediaries as provided The deprivation of the voting right applies for, in particular, in Articles L. 228-1 through to any shareholders' meeting being held L. 228-3-1 of the French Commercial Code. until expiration of a two-year period Any individual or legal entity, acting alone following the date of regularization or jointly, that would hold a percentage of of the disclosure. the capital at least equal to 2% or any multiple Any person is also bound to inform of such percentage, shall inform the company, the company under the forms and within by registered letter with receipt requested the time-periods provided for in paragraph 5 indicating the number of shares held, with above when his/her interest in the capital in five days following the date on which becomes lower than each of the thresholds each of such thresholds is exceeded. mentioned in said paragraph.” If the ownership threshold of ten percent of the company’s share capital (understood “Article 31 as the ownership of ten percent or more ALLOCATION OF PROFITS - RESERVES of the rights to dividends paid by the company) An amount of at least 5%, if necessary after is equaled or surpassed, whether through deduction of the loss carried forward, shall direct or indirect ownership, any shareholder be deducted from the profit of the fiscal year, other than a physical person must indicate in order to build up the reserve provided in its disclosure that this ownership threshold for by law until the day these reserves has been surpassed whether or not it is amount to one tenth of the share capital.

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(the “Difference”) between (i) the amount in application of the provisions provided that would have been paid to the company hereinabove. by one or more SIIC Daughter Companies The shareholders' meeting, ruling on if the latter had not been subject to the financial statements for the fiscal year, the Withholding because of the Shareholder shall have the right to grant to each Subject to the Withholding, multiplied shareholder, for all or part of the dividend by the percentage of dividend entitlements paid out, the option of paying the dividend held by shareholders other than the in cash or in shares. Such option may also Shareholder Subject to the Withholding, be granted in the event of distribution and (ii) the amount that was in fact paid of interim dividends For all payouts in The balance increased by the carry by the SIIC Daughter Company or the form of shares, the Shareholder Subject forward results, if any, shall make up the Companies, multiplied by the percentage to the Withholding will receive a portion distributable profit on which the amounts of dividend entitlements held by shareholders in shares, it being specified that there will that the shareholders' meeting, upon other than the Shareholder Subject be no fractional shares created and proposal of the Executive Board, after to the Withholding, such that the other the Shareholder Subject to the Withholding consent of the Supervisory Board, will deem shareholders do not have to bear any shall receive a cash amount corresponding useful to allocate to one or more facultative, portion whatsoever of the Withholding to the value of the fractional shares ordinary or extraordinary reserve, will be paid by any of the SIICs in the equity (the latter payable via registration in successively withdrawn, with or without ownership chain because of the Shareholder an individual current account), such that special allocation, or carry forward. Subject to the Withholding. The shareholders the offsetting mechanism described The balance shall be divided among other than the Shareholders Subject to above can be applied to the fraction the shares. the Withholding will be creditors with of the distribution paid out by registration Any shareholder other than a physical respect to the company, for an amount in an individual current account. person (i) who directly or indirectly holds, equal to the Difference, adjusted to reflect Unless in case of capital reduction, no on the dividend payout date, at least 10% their dividend entitlements. distribution may be made to shareholders of the dividend entitlements of the company, If there is more than one Shareholder Subject when the equity capital is or becomes, and (ii) whose own situation or that of its to the Withholding, each Shareholder further to such distribution, lower than partners who directly or indirectly hold, Subject to the Withholding shall be liable the amount of the capital increased for the purpose of any dividend distribution, to the company for the share of the total by reserves that the law or the by-laws 10% or more of its dividend entitlements, Withholding owed by the company and do not allow to distribute.” renders the company liable for the 20% generated by its share of ownership. withholding mentioned in Article 208 C II ter The status of Shareholder Subject THIRTEENTH RESOLUTION of the French General Tax Code to the Withholding shall be determined The purpose of this resolution is to grant (Code Général des Impôts), referred on the basis of the dividend payout date. a delegation of authority to the Executive to as the Withholding (a shareholder Unless otherwise indicated in disclosures Board to decide to increase share capital in this situation referred to hereinafter made available in compliance with the sixth through the issuance – with preferential as a Shareholder Subject to the Withholding), point under Article 7 of the company bylaws, subscription, rights maintained – of shares shall be liable to the company, at the time all shareholders (other than a physical person and/or securities with a claim to the equity of any such dividend distribution, for an who owns or comes to own at least ten capital of the Company, and/or the issuance amount equal to the amount of the percent of the stated capital, directly of securities that entitle holders Withholding payable by the company or indirectly) shall be assumed to be to the allocation of debt securities. in respect of said distribution. Shareholders Subject to the Withholding. In the event that the company comes to The payout of all distributions payable The shareholders, having fulfilled the quorum own, directly or indirectly, 10% or more to a Shareholder Subject to the Withholding and majority requirements pertaining of one or more SIICs (Sociétés shall be made by way of registration in to extraordinary meetings of shareholders, d’Investissements Immobiliers Cotées) an individual current account on the part having read the Executive Board report mentioned in Article 208 C of the French of this shareholder (non-interest bearing); and the special report of the auditors, Tax Code (an “SIIC Daughter Company”), the current account shall be reimbursed and pursuant to Article L. 225-129 and the Shareholder Subject to the Withholding within five business days of the date of following of the French Commercial Code, shall also owe the company, on the date this registration, after offsetting to reflect in particular, Article L. 225-129-2 and Articles the dividend is available for payment, the sums payable by the Shareholder L. 228-92 and following of the Code, hereby: an amount equal to the difference Subject to the Withholding to the company 1. delegate its authority to the Executive

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Klépierre_Financial report 2006 Board, which may in turn sub-delegate operations, to protect the rights in accordance with the terms and conditions of holders of securities with a claim set forth by law, subject to the prior approval to equity capital; of the Supervisory Board and pursuant • the maximum total principal amount to Article 16-3 of the bylaws, to decide of debt securities issued with a claim to increase share capital, in one or more to the equity capital of the Company offerings, in such amounts and at such time may not exceed 1 200 million euros as it shall choose, in France or abroad, (or an equivalent amount, on the issue in euros or any other currency or monetary date, in any other currency or monetary unit established with reference to several unit established with reference currencies, through the issue of shares to several currencies), it being specified (excluding preferred stock) or securities with that this amount will be applied a claim to the equity capital of the Company, to the global ceiling mentioned or securities that entitle holders to grants in the twenty-first resolution put before of debt securities issued for consideration or this meeting of the shareholders. free of charge, payable in cash or freely 4. resolve that the delegation of authority allotted, under the conditions set forth granted by virtue of this resolution shall in Articles L. 225-149 and following be valid for twenty-six months, as from and Articles L. 228-91 and following the close of this meeting. of the French Commercial Code. 5. in the event that the Executive Board It is understood that some or all of these makes use this delegation of authority: shares and securities may be payable • resolve that the right of first refusal in cash, or to offset a debt, or through on new shares shall be granted to existing DRAFT RESOLUTIONS DRAFT the capitalization of reserves, retained shareholders, who are entitled to apply earnings or additional paid-in capital. as of right for new shares and/or 2. resolve that the share capital to which securities in proportion to the number the bearers of securities issued by the of shares already held at that date; Company are entitled may be the • duly note that the Executive Board share capital of a company that owns, may grant shareholders the right directly or indirectly, more than half to apply for excess shares; of the equity of the Company, or in which • duly note that this delegation of authority the Company owns, directly or indirectly, automatically entails, in favor of the holders more than half of the equity. It is understood of the securities issued with a claim that the company in which to the Company’s equity capital, the waiver these rights will be exercised must approve by shareholders of their preferential the issue of these securities. subscription rights to said capital 3. resolve to set the maximum amounts to which the holders of the securities by which the Executive Board is authorized are entitled immediately or upon maturity, to increase capital by virtue of this delegation • duly note that in the event that the shares of authority as follows: subscribed as of right and not as of right • the maximum principal amount do not absorb the capital increase in full, of immediate or future capital increases the Executive Board may, as provided by completed by virtue of this delegation law and in the order that it shall determine, of authority is set at 60 million euros, exercise one and or other of the following it being specified that this amount options: will be applied to the global ceiling – limit the issuance to the amount mentioned in the twenty-first resolution of subscriptions received, provided put before this meeting that this amount equals at least three of the shareholders. To these amounts quarters of the proposed capital increase; shall be added, if applicable, – freely allot all or a portion of the shares the nominal amount of any additional or the securities with a claim to equity shares issued through new financial capital proposed for issue by the

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Executive Board but not subscribed; in the form of an allotment of Company capital after each capital increase, – offer all or a portion of non-subscribed assets); these securities may be issued • determine and make all adjustments shares or non-subscribed securities with warrants entitling the bearer required to accurately reflect the impact with a claim to equity capital, to the allotment, purchase or subscription of transactions on the Company’s share on the French market, foreign markets, of bonds or other debt securities, capital, in particular, modifications and/or the international market; or consist of complex bonds as defined of the par value of the share, capital • resolve that stock purchase warrants by the stock exchange regulators increases through the capitalization with a claim to the equity capital (for example, on the basis of their of reserves, the free allotment of the Company may be offered redemption or interest-bearing terms of shares, stock splits or stock for subscription or freely allotted or other rights such as indexing or consolidations, the distribution to owners of existing shares, it being the exercise of options). The Executive of reserves or any other assets, specified that the Executive Board will Board is also granted all powers the amortization of equity capital, have the power to decide that odd to modify the terms and conditions or any other transaction involving lots are not negotiable and that referred to hereinabove, during the term shareholders’ equity, and determine the corresponding securities shall be sold. of said securities and in compliance the means by which the rights of holders 6. grant the Executive Board full authority, with all applicable formalities; of securities with a claim to the equity with the power to delegate its authority • determine the method of payment capital of the Company will be protected pursuant to applicable law, to give effect for stock or securities entitling the bearer and maintained, to this resolution, in particular, to: to equity immediately or upon maturity; • duly note the new total equity capital • resolve to increase capital and determine • determine, as required, the conditions following each capital increase the type of securities to be issued; governing the exercise of rights attached and amend the bylaws accordingly, • set the amount of the capital increase, to stock or securities issued with a claim • in general, conclude all agreements the issue price and the amount of any to the equity capital to be issued in the furtherance of the issues additional paid-in capital required and, in particular, the date, which may undertaken by virtue of this delegation at the time of issue; be retroactive, from which the new of authority, take all measures and • determine the dates, terms and conditions shares shall earn dividends, the conditions complete all formalities required of the capital increase and the nature governing the exercise of any rights for the issue, listing, and financing and characteristics of the securities to the conversion, exchange, redemption, of the securities issued and the exercise to be issued; determine, including in the form of an allotment of the rights attached there to. in the event of an issue of bonds of Company assets, and all other terms and 7. duly note that this authorization renders or other debt securities (including the conditions under which the capital increase null and void as of the date of this meeting securities referred to in Article L. 228-91 shall be effected, any non-utilized portions of prior authorizations of the French Commercial Code, • as applicable, determine the terms and with a similar purpose, namely, all general entitling their bearers to an allotment conditions under which the Company may authorizations to increase share capital, of debt securities), whether the securities make a public purchase or exchange offer, including through the issue of securities and shall be subordinated (and, if applicable, at any time or during defined periods, the transactions referred to in this resolution, the rank of subordination, in accordance to buy back securities already issued or with preferential subscription rights with Article L. 228-97 of the French to be issued immediately or upon maturity, maintained; Commercial Code) and the interest rate for the purpose of canceling or owning 8. Duly note that in the event that the (in particular, fixed, variable, zero-coupon said securities, in compliance with Executive Board utilizes the delegation of or index-linked), and plan for mandatory applicable laws, authority granted by virtue of this resolution, or voluntary cases of suspension • determine the conditions under which the Board will report use it has made of said or non-payment of interest, the term the Executive Board may suspend authorization, in accordance with the laws to maturity (fixed or open), the option the exercise of rights attached to these and regulations in force, at the next general of reducing or increasing the par value securities, in compliance with applicable meeting of the shareholders. of securities and other terms laws and regulations, and conditions governing issuance • at its sole initiative, use additional FOURTEENTH RESOLUTION (including any guarantee or warranties) paid-in capital from capital increases The purpose of this resolution is to grant and amortization (including redemption to pay any fees incurred in respect a delegation of authority to the Executive of these transactions and to bring Board to increase capital through the the legal reserve to the required issuance-with preferential subscription rights one-tenth of the new total equity waived-of shares and/or securities with

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Klépierre_Financial report 2006 a claim to the equity capital of the company, the equity capital of the Company. and/or securities that entitle holders This authorization entails, in favor of the to the allocation of debt securities. holders of the shares and securities that may The shareholders, having fulfilled the quorum be issued by other companies in the group and majority requirements pertaining of the Company, the waiver by the to extraordinary meetings of shareholders, Company’s shareholders of their preferential having read the Executive Board report subscription rights to the shares or securities and the special report of the auditors, entitling their bearer to a portion and pursuant to Article L. 225-129 and of the Company’s share capital, to which following of the French Commercial Code, the holders of said securities have a claim; in particular, Article L. 225-129-2, L. 225-135 3. resolve that the share capital to which and L. 225-148, as well as Articles L. 228-92 are entitled the bearers of securities and following of the same Code: issued by the Company may be 1. hereby delegate its authority to the the share capital of a company that owns, Executive Board, which may in turn directly or indirectly, more than half sub-delegate in accordance with the terms of the equity of the Company, or in which and conditions set forth by law, subject to the Company owns, directly or indirectly, the prior approval of the Supervisory Board more than half of the equity. It is understood and pursuant to Article 16-3 of the bylaws, that the company in which these rights to increase share capital, in one or more will be exercised must approve the issue public offerings in France or abroad, in such of these securities; amounts and at such times as it shall choose, 4. resolve to set the maximum amounts in euros or any other currency or monetary by which the Executive Board is authorized DRAFT RESOLUTIONS DRAFT unit established with reference to several to increase capital by virtue currencies, through the issue of shares of this authorization: (excluding preferred stock), securities with • the maximum principal amount a claim to the equity capital of the company, of immediate or future capital increases or securities granting access to the right effected by virtue of this delegation to a grant of debt securities, payable in cash is 60 million euros, it being specified or freely allotted, under the conditions set that this amount will be applied to the forth in Articles L. 225-149 and following global ceiling mentioned in the twenty-first and Articles L. 228-91 and following of the resolution put before this meeting French Commercial Code. It is understood of the shareholders. To this amount shall that some or all of these shares and securities be added, if applicable, the principal may be payable in cash, by offsetting a debt, amount of any additional shares issued through the capitalization of reserves, through new financial transactions retained earnings, additional paid-in capital, to protect the rights of holders or in kind. In particular, securities may be of securities with a claim to equity capital; issued in consideration for shares tendered • the maximum total principal amount in a public offer of exchange effected in of any debt securities issued with a claim France or abroad, in compliance with local to the equity capital of the Company regulations, for shares described in Article may not exceed 1 200 million euros L. 225-148 of the French Commercial Code; (or an equivalent amount, on the issue 2. hereby delegate its authority to the date, in any other currency or monetary Executive Board, which may sub-delegate unit established with reference to several in accordance with the terms and conditions currencies), it being specified that this set forth by law, to issue shares or securities amount will be applied to the global with a claim to the equity capital of the ceiling mentioned in the twenty-first Company to be issued following the issue, resolution put before this meeting by companies in which the Company owns of the shareholders; directly or indirectly more than half 5. resolve that the authorization granted the equity, securities with a claim to by virtue of this resolution shall be valid

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for twenty-six months, as of the close 10. hereby grant the Executive Board full to stock or securities issued with a claim of this meeting; authority to give effect to this resolution, to the equity capital to be issued and, 6. resolve that the preferential subscription with the power to delegate its authority in particular, the date, which may be retroactive, rights of shareholders on the shares referred pursuant to applicable law, in particular: as from which the new shares shall earn to in this resolution shall be waived. • resolve to increase capital and determine dividends, the conditions governing However, as provided for in Paragraph 2, the type of securities to be issued; the exercise of any rights to the conversion, Article L. 225-135, the Executive Board has • set the amount of the capital increase, exchange, redemption, including in the form the power to grant shareholders pre-emptive the issue price and the amount of any of an allotment of Company assets, such rights, during the period and under the terms additional paid-in capital required at the time as securities already issued by the Company, that it shall define in accordance with of issue; and all other terms and conditions under applicable laws and regulations, to subscribe • determine the dates, terms and conditions which the capital increase shall be effected; some or all of the securities issued, without of the capital increase and the nature and • as applicable, determine the terms and giving rise to the creation of negotiable characteristics of the securities to be issued; conditions under which the Company may rights. Pre-emptive rights are granted determine, in the event of an issue make a public purchase or exchange offer, in proportion to the number of existing of bonds or other debt securities (including at any time or between defined dates, to buy shares held by each shareholder. the securities referred to in Article L. 228-91 back securities already issued or to be issued Shareholders may be granted the right of the French Commercial Code, entitling immediately or upon maturity, for the pur- to apply for excess shares, it being their bearers to an allotment of debt pose of canceling or owning said securities, understood that non-subscribed securities securities), whether the securities shall be in compliance with applicable laws; shall be publicly sold in France or abroad; subordinated (and, if applicable, the rank • determine the conditions under which 7. duly note that in the event that of subordination, in accordance with Article the Executive Board may suspend the exercise the subscriptions, including, as the case may L. 228-97 of the French Commercial Code), of rights attached to the securities issued, be, those by shareholders, do not absorb the interest rate (in particular, fixed, variable, in compliance with applicable laws and the capital increase in full, the Executive zero-coupon or indexed interest), and regulations; Board may limit the operation to the amount plan for mandatory or voluntary cases of • in the event that securities are issued of subscriptions received, provided suspension or non-payment of interest, in consideration for securities tendered that this amount equals at least three the term to maturity (fixed or open), in a public offer of exchange, draw up quarters of the proposed capital increase; the option of reducing or increasing the list -of securities tendered in exchange, 8. duly note that this authorization automatically the par value of securities the term set the issue terms and conditions, entails, in favor of the holders of securities to maturity (fixed or open), and other terms the exchange ratio, and, if applicable, with a claim to the equity capital of the and conditions governing issuance (including the amount of the cash payment to be Company, the express waiver by shareholders any guarantees or warranties) and amortization made, and set issue terms and conditions of their preferential subscription rights to said (including redemption in the form for a public offer of exchange, an alternative capital to which the holders of the securities of an allotment of Company assets). offer of purchase or exchange, a single offer are entitled; These securities may be issued with warrants to purchase or exchange said securities 9. duly note that, in compliance with Item 1, entitling the bearer to the allotment, for consideration in cash and securities, Paragraph 1, Article L. 225-136, of the purchase or subscription of bonds or other a principal takeover bid or public offer French Commercial Code, the amount paid debt securities, or consist of complex bonds of exchange, combined with a secondary to, or due to, the Company for each share as defined by the stock exchange authorities offer of exchange or takeover bid, or issued by virtue of the aforementioned (for example, due to terms governing any other type of public offer in compliance authorization, taking into account redemption or payment of interest or other with applicable laws and regulations; the issue price of unattached stock subscription rights such as indexing or the exercise of • at its sole option, use additional paid-in warrants, if issued, shall be determined options). The Executive Board is also granted capital from capital increases to pay any fees in accordance with the laws and regulations all powers to modify, during the term of said incurred in respect of these transactions in force on the date of the issue; securities, the terms and conditions referred and to bring the legal reserve to the required to hereinabove, in compliance with all one-tenth of the new total equity capital applicable requirements; after each capital increase; • determine the method of payment for • determine and make all adjustments stock or securities entitling the bearer to required to accurately reflect the impact equity immediately or upon maturity; of operations on the Company’s share • determine, as required, the conditions capital, in particular, modifications governing the exercise of rights attached of the par value of the share, capital increases

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Klépierre_Financial report 2006 through the capitalization of reserves, sub-delegate this authority in accordance the free allotment of shares, stock splits with the terms and conditions set forth or stock consolidations, the distribution by law, subject to the prior approval of reserves or any other assets, the amortization of the Supervisory Board pursuant to Article of equity capital, or any other operation 16-3 of the bylaws, to set the issue price involving shareholders’ equity, and determine under the following conditions, up to the means by which the rights of holders a maximum of ten percent of share capital of securities with a claim to the equity capital (this limit shall be assessed on the basis of the Company will be protected and of the Company’s share capital at any time maintained; whatsoever, by applying this 10 percent limit • duly note the new total equity capital to capital adjusted to reflect any transactions following each capital increase and amend that may affect it after this meeting) within the bylaws accordingly; any given 12-month period: • in general, conclude all agreements resolve that the amount paid to, or due to, in the furtherance of issues undertaken the Company for each share issued by virtue by virtue of this authorization, take all of the aforementioned authorization, taking measures and undertake all formalities into account the issue price of unattached required for the issue, listing, and financing stock subscription warrants, if issued, must of the securities issued and the exercise equal at least 85 percent of the weighted of the rights attached thereto. average share price for the three trading 11. duly note that this authorization renders days preceding the determination of the issue null and void as of the date of this meeting procedures. any non-utilized portions of prior authorizations It is hereby specified that the amount DRAFT RESOLUTIONS DRAFT with a similar purpose, in general, all of any capital increases carried out by virtue authorizations to increase share capital, of this resolution will be applied to the global in general, with preferential subscription ceiling mentioned in the twenty-first rights waived, including through the issue resolution put before this meeting of securities and the transactions referred of the shareholders. to in this resolution; This delegation shall be granted for 12. duly note that in the event that a period of twenty six months the Executive Board utilizes the authorization as of the date of this meeting. granted by virtue of this resolution, the Board The shareholders duly note that, to the will report use it has made of said authorization, extent that the Executive Board makes use in accordance with the laws and regulations of this authorization, it will prepare an in force, at the next general meeting additional report, to be certified of the shareholders. by the auditors, describing the definitive terms and conditions of the transaction FIFTEENTH RESOLUTION and providing information on the impact The purpose of this resolution is to set the of the transaction on the shareholder’s issue price of shares, limited to 10% of the situation. share capital per year, in connection with a capital increase through the issue of shares SIXTEENTH RESOLUTION with preferential subscription rights waived. The purpose of this resolution is to The shareholders, having fulfilled the quorum delegate authority to the Executive Board and majority requirements pertaining to increase the number of securities to extraordinary meetings of shareholders, to be issued in the event of a capital having reviewed the Executive Board report increase, with or without preferential and the Special report of the Auditors, subscription rights maintained. and pursuant to Article L. 225-129-2 The shareholders, having fulfilled and item 2 of Article L. 225-136 1 the quorum and majority requirements of the French Commercial Code, hereby pertaining to extraordinary meetings authorize the Executive Board, which may of shareholders, having reviewed the

151 Financial report _draft resolutions

authority to the Executive Board, which may having reviewed the Executive Board report sub-delegate in accordance with the terms and subject to the prior approval of the and conditions set forth by law, and subject Supervisory Board, pursuant to Article 16-3 to the prior approval of the Supervisory Board of the bylaws, delegate authority to the and pursuant to Article 16-3 of the bylaws, Executive Board, which may sub-delegate in as needed to increase capital, in one or more accordance with the terms and conditions set offerings, up to a maximum of 10% forth by law, to increase share capital, of the share capital (this limit may be in one or more offerings, up to the maximum assessed at any time whatsoever, by applying principal amount of 60 million euros, Executive Board report and in accordance this percentage to an adjusted amount through the successive or simultaneous with the relevant provisions of of equity capital after the completion capitalization of all or a portion of reserves, Article L. 225-135-1 of the French of capital transactions after the date retained earnings or additional paid-in Commercial Code: Hereby delegate to the of this meeting), in consideration capital, and the issue and free Executive Board, which may sub-delegate for contributions in kind tendered allotment of shares and/or an increase in accordance with the terms and conditions to the Company in the form of capital shares in the par value of shares. The maximum set forth by law, its authority to increase or securities with a claim to equity capital. nominal amount of the capital increases the number of shares to be issued in The Shareholders delegate all powers that may be carried out under this resolution the event of a capital increase with or to the Executive Board (with the option will be applied to the global ceiling without preferential subscription rights of sub-delegation in accordance with mentioned in the twenty-first resolution maintained, as mentioned in the thirteenth the terms and conditions set forth by law) put before this meeting of the shareholders. and fourteenth resolutions, limited to to approve the valuation of the contributions The Shareholders hereby resolve that odd lots the percentage of the initial issuance and, where applicable, to grant special benefits, or fractional shares shall not be negotiable provided for in the relevant legal and to record this fact, to charge all related fees and that the corresponding shares shall be regulatory provisions in force at the time incurred in connection with the capital sold; the proceeds from such sales shall be of issue, it being understood that the issue increase to the contribution premium, allocated to holders of rights as provided price will be the same as that decided to withdraw the sums needed for the legal for by applicable laws and regulations. on for the initial issue. reserve from this same source, to record The nominal amount of the increase decided the results of the capital increase The Shareholders hereby grant full authority on under this resolution shall be applied and to amend the bylaws accordingly. to the Executive Board, with the power to the global ceiling mentioned The nominal amount of any increase decided to delegate its authority pursuant in the twenty-first resolution put before by virtue of this resolution shall be applied to applicable law, to determine, as the case this meeting of the shareholders. to the global ceiling mentioned in may be, issue dates and terms and define This authorization shall be valid for a period the twenty-first resolution put before the amounts to be issued, and resolve of twenty six months. this meeting of the shareholders. that any new shares allotted on the basis This delegation is valid for a period of twenty of existing shares with double voting rights SEVENTEENTH RESOLUTION six months as of the date of this meeting, shall confer these rights on the holder The purpose of this resolution is to provide and renders null and void as of this same as from the date of issue, to make any for the option of issuing shares with a claim date any non-utilized portions of prior adjustments that may be required to take on the share capital, with preferential authorizations with a similar purpose, namely, into account the impact of the transaction subscription rights waived, in consideration all general authorizations to increase share on the share capital of the company, for contributions in kind involving equity capital through the capitalization of reserves, in particular in the event of a change shares or securities with a claim to equity earnings or other. in the par value of its shares, or of a capital capital. increase through the capitalization of The shareholders, having fulfilled the quorum EIGHTEENTH RESOLUTION reserves, or the free allotment of shares, and majority requirements pertaining The purpose of this resolution is to grant or the division or regrouping of shares, to extraordinary meetings of shareholders, a delegation of authority to the Executive or the distribution of reserves or other having reviewed the Executive Board report Board to decide to increase share capital assets, or the amortization of the share and the special report of the auditors, and through the capitalization of additional capital or any other transaction that impacts pursuant to Articles L. 225-129 and following paid-in capital, reserves, earnings or other. shareholders’ equity, and to determine of the French Commercial Code The Shareholders, having fulfilled the quorum the ways in which the rights of the holders (and in particular Article L. 225-147 and majority requirements pertaining of securities with access to the equity capital paragraph 6 of the Code), hereby delegate to extraordinary meetings of shareholders, shall be protected and, more generally,

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Klépierre_Financial report 2006 to take all measures in furtherance that the maximum nominal amount of any of the issues, undertake all formalities capital increases that may be carried out and fulfill all requirements to render by virtue of this delegation will be applied the corresponding capital increases to the global ceiling mentioned definitive, and amend the bylaws accordingly. in the twenty-first resolution put before This authorization is granted for twenty-six this meeting of the shareholders; months as from the date of this meeting 2. resolve that the delegation of authority and renders null and void as of this same to issue granted by virtue of this resolution date, any non-utilized portions of prior shall be valid for twenty-six months, as from authorizations with a similar purpose, the close of this meeting; namely, all general authorizations to issue 3. resolve that the subscription price securities that grant access to the share for shares or securities with a claim to equity capital, without preferential subscription capital may not exceed the average opening rights maintained in consideration price of the Company’s share on Eurolist for cash contributions relating to equity by Euronext for the twenty trading days shares or securities that grant access preceding the date on which the subscription to the equity capital. launch date is determined, or be less than this average by more than 20% NINETEENTH RESOLUTION (30% when the lock-up period for the plan, The purpose of this resolution is to grant pursuant to Article L. 443-6, is ten years a delegation of authority to the Executive or more). The Shareholders expressly authorize Board to decide to increase share capital the Executive Board, at its discretion, by issuing stock or other securities with to reduce or cancel the aforementioned DRAFT RESOLUTIONS DRAFT access to the share capital, reserved discounts, within the limits defined for members of savings plans, with preferential by applicable laws and regulations, including, subscription rights waived in favor of the latter. but not limited to, legal, accounting, tax The Shareholders, having fulfilled the quorum and employment regulations applied locally; and majority requirements pertaining 4. resolve that the preferential subscription to extraordinary meetings of shareholders, rights of shareholders on the shares issued having read the Executive Board report by virtue of this resolution shall be waived and the special report of the auditors, in favor of the aforementioned beneficiaries; in accordance with Articles L 225-129-6 5. resolve that the Executive Board shall and L 225-138-1 of the French Commercial be granted full authority, with the power Code and Articles L 443-1 and following to delegate its authority pursuant of the French Labor Code: to applicable law, to give effect 1. hereby delegate authority to the Executive to this authorization within the limits Board, which may sub-delegate and under the conditions described in accordance with the terms and conditions hereinabove, in particular: set by law, to decide to increase Company • draw up, as provided by law, the list share capital, subject to the prior approval of companies whose employees, of the Supervisory Board pursuant to Article pre-retirees and retirees may apply 16-3 of the bylaws, by a maximum principal for the shares issued and be eligible amount of 3 000 000 euros, in one or offerings, for shares or securities with a claim through the issue of shares reserved to the free allotment of shares, for employees enrolled in one or more if applicable; employer-sponsored company savings plans • decide whether or not eligible employees offered by the Klépierre group, which may acquire shares directly, via an includes the company and the French and employee savings fund (fonds commun foreign companies included in the same de placement d’entreprise, FCPE), scope of consolidation or combination or other structures permitted of accounts, pursuant to Article L. 444-3 by applicable laws and regulations; of the French Labor Code; it being specified • determine the conditions, especially

153 Financial report _draft resolutions

the length of service, which beneficiaries TWENTIETH RESOLUTION of the capital increases must satisfy; The purpose of this resolution is to authorize • set the opening and closing dates the Executive Board to freely allot shares for subscription; to employees and directors and officers • determine the amounts of the issues of the Company or the Group. effected by virtue of this agreement The Shareholders, having fulfilled the quorum and, in particular, the issue prices, dates, and majority requirements pertaining to periods, the terms and conditions extraordinary meetings of shareholders, of subscription, payment, delivery having read the Executive Board report and dividend entitlement (which may and the special report of the independent be retroactive) and all other issue terms auditors, in accordance with Articles and conditions, within the legal L 225-197-1 and following of the French acquisition period of two years has expired. and regulatory limits in force; Commercial Code, subject to the prior The Shareholders set the mandatory • duly note the number of new shares approval of the Supervisory Board and lock-up period during which the beneficiaries subscribed, by virtue of this authorization pursuant to Article 16-3 of the bylaws: are required to hold the shares (after any reductions effected due • hereby authorize the Executive Board at a minimum of two years from the end to an oversubscription), individually, to freely allot, in one or more transactions, of the acquisition period. The Executive via an employee savings fund at its option, existing shares of the Company, Board shall have the authority to extend or via another structure permitted following the buyback of said shares, or the length of the acquisition and holding by applicable laws and regulations, newly issued shares, to: periods; and the new total equity capital; – salaried employees and directors • duly note that in the event that new shares • where applicable, use additional paid-in and officers of the Company, are freely allotted, this decision shall entail, capital from capital increases to pay – salaried employees, directors and officers upon expiration of the acquisition period, any fees incurred in respect of these of companies and inter-company a capital increase through the capitalization transactions and bring the legal reserve partnerships (groupements d’intérêt of reserves, retained earnings or additional to the required one-tenth of the new total économique) of which at least ten paid-in capital, in favor of the beneficiaries equity capital after each capital increase; percent of the equity capital or voting of said shares and the simultaneous waiver • conclude all agreements, complete all rights are held, directly or indirectly, by shareholders in favor of said beneficiaries transactions and requirements either by the Company, it being understood of the capitalized portion of reserves, directly or indirectly, by proxy, including that the Executive Board shall identity retained earnings and additional paid-in all formalities following capital increases the beneficiaries of freely allotted shares capital; and all amendments to bylaws reflecting as well as the share allotment conditions • duly note that, in the event that changes; and, if applicable, criteria; it being hereby the Executive Board were to make use • in general, enter into all agreements specified that in the case of free shares of this authorization, it will present in the furtherance of issues undertak granted to directors and officers, an annual report to the shareholders en by virtue of this authorization, take the supervisory board must either (a) of the transactions completed by virtue all measures, make all decisions and decide that such shares are non- of the provisions of Articles L. 225-197-1 undertake all formalities required transferable once granted until such time to L. 225-197-3 of the French Commercial for the issue, listing, and financing as the grantees cease to exercise their Code, in accordance with the terms of the securities issued and the exercise duties, or (b) determine the number and conditions set forth in Article of rights granted immediately of free shares granted that these L. 225-197-4 of said Code; or subsequent to the capital increases; beneficiaries are required to hold • duly note that this delegation of authority 6. duly note that this authorization renders in their own name until such time renders null and void as of the date null and void as of the date of this meeting as they cease to exercise their functions; of this meeting any non-utilized portions any non-utilized portions of prior • resolve that the total number of shares of prior authorizations granted to the authorizations granted to the Executive freely allotted, whether existing or Executive Board to freely allot existing Board to increase the Company’s share to be issued, may not exceed 0.5 percent or new shares for the benefit of all capital through the issue of shares of the company’s share capital, calculated or some employees, directors and officers reserved for employees enrolled in an on the date of the Board’s decision. of the Group; employer-sponsored company savings plan, The allotted shares shall not be • resolve that this authorization shall be valid with preferential subscription rights waived considered as definitively granted for twenty-six months, as from the date in favor of said employees. to their beneficiaries until a minimum of this meeting.

154

Klépierre_Financial report 2006 The shareholders hereby delegate all sixteenth, seventeenth, eighteenth and powers to the Executive Board, which nineteenth resolutions hereinabove, may sub-delegate within allowable limits, resolve to set the maximum principal to give effect to this authorization, and, amount of immediate or future capital as the case may be, to safeguard the rights increases effected by virtue of the authorizations of the beneficiaries by making any adjustments granted in the aforementioned resolutions needed to the number of shares freely to 70 million euros. It is understood that allotted to reflect any transactions to this amount shall be added, if applicable, involving the share capital of the Company, the principal amount of any additional to determine, in the event of granting shares issued to protect the rights shares to be issued, the amount and of holders of securities with a claim nature of reserves, earnings and additional to equity capital, in accordance with paid-in capital to be capitalized, to duly applicable law. Subsequent to the adoption record the increase or increases in capital of the thirteenth, fifteenth, sixteenth completed under this authorization, and seventeenth resolutions hereinabove, to amend the bylaws accordingly and, the Shareholders also resolve to set more generally, to take whatever steps the maximum principal amount of debt are necessary. securities issued with a claim to equity capital at 1 200 million euros. TWENTY-FIRST RESOLUTION The purpose of this resolution is to set TWENTY-SECOND RESOLUTION a global ceiling to be applied to authorizations The Shareholders hereby grant full authority to issue shares or securities with a claim to the bearer of an original, a copy DRAFT RESOLUTIONS DRAFT to equity capital. or an excerpt of these minutes for The Shareholders, having read the Executive the purpose of complying with all formal Board report, and as a result of the adoption publication and filing requirements required of the thirteenth, fourteenth, fifteenth, by law.

155 Financial report _draft resolutions Report of the Statutory Auditors

ON THE SHARE CAPITAL DECREASE BY CANCELLATION OF SHARES PURCHASED, PROPOSED TO THE SHAREHOLDERS’ MEETING

SHAREHOLDERS’ MEETING OF 5 APRIL 2007 – 9TH RESOLUTION To theR Shareholders, In accordance with our appointment as from the date of this Shareholders’ Meeting, statutory auditors of Klépierre, and pursuant is subject to adoption by shareholders. to the engagement set forth in Article Shareholders are requested to confer all L. 225-209 of the French Commercial Code necessary powers on the Management (Code de Commerce) concerning capital Board, during a period of 26 months, to share decreases by cancellation of shares cancel the shares purchased by the Company, purchased, we hereby report to you on our pursuant to the share purchase authorisation, assessment of the reasons for and terms up to 10% of the share capital by 24-month and conditions of the proposed capital share period. decrease. We have no comments on the reasons for We conducted our review in accordance or the terms and conditions of the proposed with professional standards applicable share capital decrease, which, you are in France. Those standards require that reminded, may only be performed subject we plan and perform the review in order to the prior approval by the Shareholders’ to examine the fairness of the reasons Meeting of the purchase by the Company for and the terms and conditions of of its own shares. the proposed capital share decrease. This transaction involves the purchase Signed in Courbevoie and Neuilly-sur-Seine, by the Company of its own shares, up to March 7, 2007 a maximum of 10% of the share capital, pursuant to the terms and conditions set The Statutory Auditors forth in Article L. 225-209 of the French Deloitte & Associés: Pascal Colin Commercial Code. This purchase authorisation, Laure Silvestre-Siaz to be granted for a period of 18 months Mazard & Guérard: Odile Coulaud

This is a free translation of the original French language text for information purposes only.

156

Klépierre_Financial report 2006 the French Commercial Code( or, inaccordance withArticleL.228-93of access totheshare capitalofthecompany – ordinary shares and/orsecuritiesconferring resolution), of preferential subscriptionrights(thirteenth the grantofdebtinstruments,withretention capital and/orconferringentitlementto or indirectly more thanhalfoftheshare share capitalor inwhichitholdsdirectly directly orindirectly more thanhalfofits Commerce of theFrench Commercial Code( or, inaccordance withArticleL.228-93 access totheshare capitalofthecompany - ordinary shares and/orsecuritiesconferring powers todecidetheissueof: • Your Management Board proposes: by shareholders. and securities,whichare subjecttoadoption to youontheproposed issuesofshares L. 225-136and228-92,wehereby report Commerce in theFrench Commercial Code( pursuant totheengagementsetforth as statutoryauditorsofKlépierre, and In accordance withourappointment To theShareholders, THIRTEENTH, FOURTEENTH, FIFTEENTH,SIXTEENTHAND SEVENTEENTHRESOLUTIONS SHAREHOLDERS’ MEETINGOF AND/OR CANCELLATION OFPREFERENTIALSUBSCRIPTIONRIGHTS ON THEISSUEOFSHARES AND SECURITIES WITHTHERETENTION cancellation ofpreferential subscription the grantofdebtinstruments, with capital and/orconferringentitlement to or indirectly more thanhalfoftheshare share capitalorinwhichitholdsdirectly directly orindirectly more thanhalfofits Commerce that shareholders delegatetoitthenecessary R ), ofanycompanythatholds ) andnotablyArticlesL.225-135, ), ofanycompanythatholds of the Statutory Auditors Report Code de 5 Code de Code de APRIL 2007 the sixteenthresolution. ( 135-1 oftheFrench Commercial Code under theconditionssetoutinArticleL.225- fourteenth, fifteenthandseventeenthresolutions, of thedelegationsgrantedbythirteenth, securities tobecreated pursuanttoapplication These ceilingstakeaccountoftheadditional € instruments issuedmaynotexceed The totalnominalamountofdebt or inthefuture, maynotexceed share capitalincreases, immediately The totalnominalamountofpotential of theshare capital. price withintheannuallegallimitof10% by thefourteenthresolution, tosettheissue to implementationofthedelegationgranted of thefifteenthresolution andpursuant • (seventeenth resolution), conferring accesstoshare capital consisting ofshare capitalorsecurities contributions inkindtothecompany, of preferential subscriptionrights,toremunerate access totheshare capital,withcancellation powers toissueshares orsecuritiesconferring • Commercial Code( out inArticleL.225-148oftheFrench bid forsecuritiessatisfyingthecriteriaset to thecompanyaspartofashare exchange issued toremunerate securitiestransferred that suchsecuritiesmayinparticularbe rights (fourteenthresolution), itbeingnoted Code deCommerce 1 200million. that shareholders authoriseit,byvirtue that shareholders delegatetoitthenecessary Code deCommerce ), shouldyouadopt € 70 million. ), 157

DRAFT RESOLUTIONS Financial report _draft resolutions

Based on its report, the Management Board performed pursuant to the thirteenth asks shareholders to delegate, for a period and seventeenth resolutions, which are not of twenty-six months and in accordance presented in the Management Board’s report. with Article L. 225-129-2 of the French As the issue price of securities to be issued Commercial Code (Code de Commerce), has not been fixed, we do not express the necessary powers to decide transactions an opinion on the final terms and conditions performed pursuant to the thirteenth under which the issues will be performed and fourteenth resolutions and determine and, as such, on the proposed cancellation issue terms and conditions and proposes of preferential subscription rights to cancel, in the fourteenth resolution, in the fourteenth resolution and shareholder preferential subscription rights. on the presentation of the company’s It is the responsibility of the Management indebtedness. Board to prepare a report in accordance In accordance with Article 155-2 with Articles 154 and 155 of the Decree of the Decree of 23 March 1967, we shall of 23 March 1967. Our role is to express issue a further report on the performance an opinion on the fair presentation by your Management Board of any issues of the quantified information extracted with cancellation of preferential subscription from the accounts, on the proposed rights or of any issues of securities conferring cancellation of preferential subscription access to the share capital and/or entitlement rights and on certain other information to the grant of debt instruments. concerning the issue, contained in this report. We conducted our procedures in accordance Signed in Courbevoie and Neuilly-sur-Seine, with professional standards applicable March 7, 2007 in France. Those standards require that we plan and perform procedures to verify The Statutory Auditors the contents of the Management Board’s Deloitte & Associés: Pascal Colin report in respect of these transactions Laure Silvestre-Siaz and the terms and conditions governing Mazard & Guérard: Odile Coulaud the determination of the issue price of securities to be issued. Subject to a later review of the terms This is a free translation of the original French and conditions of proposed issues, language text for information purposes only. we have no comment on the issue price determination terms and conditions presented in the Management Board’s report in respect of the fourteenth and fifteenth resolutions. We have not reviewed issue price determination terms and conditions and amounts for share capital issues

158

Klépierre_Financial report 2006 Code, theauthoritytodecideoneorseveral L. 225-129-2oftheFrench Commercial of twenty-sixmonths,pursuanttoArticle Board asksyoutodelegate,foraperiod On thebasisofitsreport, theManagement euros. or inthefuture maynotexceed3million increases tobe performedimmediately The totalnominalamountofshare capital share subscription rightstotheshares issued. of theCompanyandtocancelyourpreferential securities entailingaccesstotheshare capital the issueofordinary shares andmarketable to delegatetheauthoritydecideon Your Management Board asksyou L.443-5 oftheLabourCode. of theFrench Commercial CodeandArticle approval pursuanttoArticleL.225-129-6 capital increase issubmittedtoyoufor to youforapproval. Thisproposed share of aGroup corporate savingsplan,submitted of theKlépierre Group, whoare members or marketablesecuritiesreserved foremployees report ontheproject toissueordinary shares thereof, wehereby present you withour Articles L.225-135,L.225-138andL.228-92 Code (Codedecommerce) andinparticular in accordance withtheFrench Commercial As statutoryauditorsofyourCompanyand To theShareholders, SHAREHOLDERS’ MEETINGOF ON THEISSUEOFSHARES AND MARKETABLE SECURITIES RESERVED FORGROUP EMPLOYEES R of the Statutory Auditors Report 5 APRIL 2007 As theshare issuepricehasnotyetbeenset, forth intheManagementBoard’s report. for determiningtheshare issuepriceasset to makeonthetermsandconditions Board maydecide,wehavenocomment capital increase thattheManagement of thetermsandconditionseachshare Subject tothesubsequentreview the share issue price. the termsandconditionsfordetermining report inrespect ofthisoperationand the contentofManagementBoard’s that weperformprocedures toverify applicable inFrance.Thosestandards require in accordance withprofessional standards We haveperformed ourprocedures in thisreport. theissue,presented information concerning subscription rightsandoncertainother on theproposed cancellationofpreferential information takenfrom theaccounts, the trueandfairnature ofquantified 1967. Itisourrole toissueanopinionon 154 and155oftheDecree of23March prepare areport inaccordance withArticles It istherole of theManagementBoard to share subscription rightstotheshares issued. conditions, andtocancelyourpreferential share capitalincreases, the final termsand – 19 TH RESOLUTION language textforinformationpurposesonly. This isafreetranslationoftheoriginalFrench Mazard &Guérard: Deloitte &Associés: The StatutoryAuditors March 7, 2007 Signed inCourbevoieandNeuilly-sur-Seine, submitted toyou. with thedraftdelegationwhichhasbeen may decidetoperforminconnection capital increase thatyourManagementBoard prepare anadditionalreport for eachshare the Decree of 23 March 1967,weshall In accordance withArticle155-2of for approval. element oftheoperationsubmittedtoyou however, thistypeofcancellationisalogical the ManagementBoard hasproposed; preferential share subscription rightswhich no opiniononthecancellationofyour be performed.Asaresult, wecanexpress or severalshare capitalincreases, would and conditionsunderwhichtheshare capital, we canexpress noopiniononthefinalterms Odile Coulaud Laure Silvestre-Siaz Pascal Colin 159

DRAFT RESOLUTIONS Financial report _draft resolutions Report of the Statutory Auditors

ON THE ALLOCATION, FOR NO CONSIDERATION, OF EXISTING SHARES OR SHARES TO BE ISSUED, TO EMPLOYEES OF THE COMPANY AND CORPORATE OFFICERS

SHAREHOLDERS’ MEETING OF 5 APRIL 2007 – 20TH RESOLUTION To the Shareholders,RIn the absence of any professional standards applicable to this transaction, performed As statutory auditors of your Company pursuant to legislative provisions of 30 and in accordance with Article L.225-197-1 December 2004 and 30 December 2006, of the French Commercial Code (Code de we performed the procedures we considered commerce), we have prepared this report on necessary. Those procedures consisted the proposed allocation, for no consideration, in verifying that the proposed terms and of existing shares or shares to issued, conditions presented in the Management to employees and corporate officers Board’s report comply with the provisions of Klépierre or affiliated companies as provided for by law. defined by Article L.225-197-2 of the French Commercial Code. We have no comment to make on the information given in the Management Shareholders are requested to authorise Board’s report relating to the proposed the Management Board to allocate existing transaction of the allocation of shares shares or shares to be issued for no consideration. for no consideration. It is the role of the Management Board to prepare a report on the transaction which Signed in Courbevoie and Neuilly-sur-Seine, it wishes to perform. It is our role, where March 7, 2007 necessary, to comment on the information given to you on the proposed transaction. The Statutory Auditors Deloitte & Associés: Pascal Colin Laure Silvestre-Siaz Mazard & Guérard: Odile Coulaud

This is a free translation of the original French language text for information purposes only.

160

Klépierre_Financial report 2006 161

DRAFT RESOLUTIONS Financial report _other information

Index other information 163 Klépierre’s principal competitiors 164 Organization chart 165 Analysis of intra-group services 166 Statement of the person responsible for self registration document 167 Persons responsible for audits

162

Klépierre_Financial report 2006 K principal competitors Klépierre’s te noe7 0 3 – – – 3 9 – 19 58 62 3 61 – 58 58 18 102 – – 64 – 102 – 90 19 40 594 – 113 207 – 136 594 8 – 326 58 – 513 195 – 76 36 53 326 61 86 492 245 217* 12 102 – 34 96 699 102 20 185 511 244 594 – 207 – 587 75 594 – – 458 326 76 92 492 326 40% 74 492 60 – 100% 285 699 511 75% 587 (3) (1) TOTAL CONSOLIDATED TURNOVER 100% Other income Total consolidatedrents 100% Other Offices Shopping centersandretail 50% * IncludesBelgium. Breakdown ofconsolidatedreported rentsTOTAL byassettype CONSOLIDATED TURNOVER Other income Total consolidatedrents Other Netherlands Italy Spain France Breakdown ofconsolidatedreported rents bycountry EPRA free floatband Value ofconsolidatedportfolio(excl.duties, Market capitalisationasofDecember31,2006( ExaneBNPParibas. Source: 2006 figures. – Value ofportfolioasDecember31, 2006.– (4) 2005 figures. – (5) 2006 figures (year-end June30). (2) Value ofporfolioasSeptember30, 2006. € )8801 3 3 007190881 950 1 017 10 031 5 639 10 860 8 M) € )6618494139061311046 1 331 1 036 9 163 4 499 8 601 6 M) Klépierre Klépierre Klépierre (1) (3) (3) Unibail Unibail Unibail (1) (3) (3) Corio Corio Corio (2) (4) (4) Rodamco Rodamco Rodamco Europe Europe Europe (2) (4) (4) Eurocommercial Eurocommercial Eurocommercial (1) (5) (5) IGD IGD IGD (3) (3) (1) in millionsofeuros 163 in millionsofeuros OTHER INFORMATION Financial report _other information Organization chart

OReal estate Development Service Property and rental management Multimedia

Special pupose Klécar France 83 real-estate companies Ségécé 75 50 Galae 49 France Kléber Special pupose La Pérouse 100 real-estate companies Klécar Special pupose Europe Sud 83 real-estate companies Spain Shopping centers 100 Klécar F. España 100 Klécar F. Iberica 100 Ségécé España Business Support Services Klécar Participations Italy 83 IGC 50 Italy Effe Kappa 50 Special pupose 100 Klécar Italia real-estate companies 100 Ségécé Italia 33 Klépierre Services 34 Hungary 33 Klépierre Participations Special pupose 100 and Financements 100 real-estate companies Ségécé Magyarorszag

Portugal Special pupose Klépierre Portugal 100 real-estate companies 100 Ségécé Portugal

Greece Special pupose 100 real-estate companies 100 Ségécé Hellas

Belgium Foncière Louvain-la-Neuve 100 35 SA Devimo Consult

Poland Special pupose real-estate companies 100 100 Ségécé Polska

Delcis Czech Republic 100 Bestes Czech Republic 99 Key Ségécé Ceska Others 100 Klépierre SA’s Republika % direct ownership Arcol Slovakia 100 percentage. Direct ownership 100 percentage of one France group subsidiary by another CB Pierre 100 Klégestion 100 subsidiary. Offices

France Klémurs 84,11 Klépierre Conseil 100 Retails facilities 164

Klépierre_Financial report 2006 Ségécé LPM lper LPM Klépierre Ségécé Ségécé Lease Management CAA =ConsultancyandAssistanceonAcquisitionsLM = HRM =HumanResources Management AM =AccountingManagementDVPT=Development France Klécar Property éééDP MFnnigFnnigLMFnnigCACAFnnigFnnigCAFnnigFnnigFnnigCAFnnigCALPM Property CB Pierre < France CAA ><< Belgium > Central Financing Europe< CAA Financing Financing > Financing Portugal CAA Financing >< < Greece Financing > CAA < CAA Financing Italy > LPM Financing Financing SPAIN LM >< France DVPT Ségécé > Klépierre Property osi CAA LPM Klégestion Conseil Property Property Klémurs Coimbra CAA Property Devimo Financing Financing Arcol Financing Part. &Fints Property Klépierre Polska Financing Financing Magyarorszag Ségécé Republika CAA Ceska Ségécé Portugal Portugal Ségécé Europe Sud Klécar Property Financing Hellas Ségécé Italia –IGC Klécar Property Financing Italia MM Kappa* Effe España FM Financing Klécar - CAM Iberica Klécar - Sud Europe Property Klécar SF - España AM MM AM RHM Galae Financing SF et filiales CAM FM RHM AM Financing Financing Financing FM Services Klépierre CAM GIE SF Klépierre Service provider

Service recipient A CAA LPM AM A A O A O O O O PO P DVPT LPM OP OP LOP LOP LOP LOP CAA LOP CAA CAA

Klépierre

GIE Klépierre Services of intra-group services Analysis Ségécé

Klécar France and its subsidiaries

Galae

Ségécé España

Klécar Europe Sud - Klécar Iberica - Klécar España

Effe Kappa* LPM =LeaseandProperty Management PM =Property Management MM= Multimedia of Personnel CAM =CompanyAdministrativeManagementLOP = Leasing

Ségécé Italia

Klécar Italia

IGC P LPM LPM AM Ségécé Hellas

Klécar Europe Sud

Ségécé Portugal

Klépierre Portugal

Ségécé Ceska Republika

A CAA CAA FM CAM Ségécé Magyarorszag

Ségécé Polska *EFFE KAPPA is jointlyownedbyKlépierre andFinim WSD =Web SiteDesign Financing =Financement SF =SupportFonctions FM =FinancialManagement Klépierre Part. & Fints

Arcol

Devimo

Coimbra A CAA LPM CAA LPM LPM LPM CAA Klémurs

Klépierre Conseil

Klégestion

MF MF H FM CAM RHM FM AM CAM FM CAM FM CAM FM CAM CB Pierre

Others/external CAM LPM CAA LPM MM CAA LPM 165 LPM OTHER INFORMATION CAA AM, LPM LPM CAM CAA SF P PM LPM AM Financing Property CAA CAA LPM CAA LPM LPM LPM Property Property CAA WSD Financial report _other information Statement of the person responsible

FOR SHELF REGISTRATION DOCUMENT

FOR FISCAL 2006 SAfter having made all reasonable efforts the information relating to the financial to ensure that this is the case, I certify that position and the financial statements provided the information contained in this reference in this Shelf registration document and read document is, to the best of my knowledge, the Shelf registration document in full. accurate and that no material facts have been omitted. Michel Clair, I have been given a letter by the Statutory Chairman of the Executive Board Auditors stating that they have checked March 7, 2006

The corresponding consolidated financial statements and reports of the Statutory Auditors for fiscal year 2004 and 2005 are presented pages 84 to 122 and 2 to 16 of the IFRS book of the 2004 shelf registration document filed with the AMF under the number D.05-0328 on April 1, 2005 and pages 77 to 145 of the 2005 shelf registration document filed with the AMF under the number D.06-0112 on March 8, 2006 respectively.

Information from a third party, and in particular information obtained from appraisers, have been faithfully reproduced. To the best of Klépierre’s knowledge and inasmuch as it can certify this in the light of the information published by this third party, no fact has been omitted that could make the information reproduced inaccurate or misleading.

166

Klépierre_Financial report 2006 Statutory auditors PERSONS RESPONSIBLE FORAUDITS 1 Odile Coulaud 92075 ParisLaDéfenseCedex –4,alléedel’ArcheLe Vinci de Paris Member ofthe Statutory auditors, MAZARS &GUÉRARD 1 Pascal Colin/Laure Silvestre-Siaz 92200 Neuilly-sur-Seine 185, avenueCharlesdeGaulle Deloitte &Associés de Versailles Member ofthe Statutory auditors, DELOITTE &ASSOCIES End ofterm:Fiscalyear2009. End ofterm:Fiscalyear2009. st st appointed: GMofNovember4,1968. appointed: GMofJune28,2006. . . Compagnie régionale Compagnie Régionale P responsible Persons FOR AUDITS AND FINANCIAL DISCLOSURES Tel.: +33140673505 Financial Officer Member oftheExecutiveBoard –Chief Jean-Michel GAULT DISCLOSURES RESPONSIBLE FORFINANCIAL End ofterm:Fiscalyear2009. 92075 ParisLaDéfenseCedex –4,alléedel’ArcheLe Vinci Patrick deCambourg End ofterm:Fiscalyear2009. 92200 Neuilly-sur-Seine 7-9, villaHoussay Société BEAS StatutoryAuditors Alternate 167

OTHER INFORMATION Financial report _other information Shelf registration document

AMF RECONCILIATION TABLE

1. Persons responsible 166 and 167 2. Statutory Auditors 167 3. Selection of financial data 4 and 5 – 66 to 68 4.S Risk factors 31 to 34 5. Information about the issuer a. History and development of the Company 1 – 47 b. Investments 8 and 9 – 46 to 59 – 61 – 64 to 65 – 7 to 10 – 12 to 13 6. Business overview a. Main businesses 38 to 51 – 60 to 63 – 3 to 6 – 12 to13 b. Principal markets 62 – 3 to 4 – 12 to 13 – 31 to 32 7. Organization chart 164 8. Real estate property, plants and facilities 52 to 59 – 64 and 65 – 33 and 34 –59 to 63 –105 to 107 9. Assessment of the financial position a. Financial position 22 and 23 – 68 – 26 to 28 – 82 and 83 – 111 to 116 b. Operating profit 68 – 11 –14 –15 and 16 10. Cash and capital 22 and 23 – 68 – 26 to 28 – 82 and 83 – 111 11. Research and development, patents and licences – 12. Trends 3 and 4 – 6 13. Profit forecasts or estimates 3 – 22 and 23 – 6 – 30 and 31 14. Administrative, Management and Supervisory bodies, Management 2 and 3 – 14 to 16 – 35 to 37 – 43 to 46 15. Remunerations and benefits 43 – 57 – 72 – 132 to 134 16. Functioning of administrative and management bodies 3 – 14 to 16 – 35 – 43 to 46 17. Employees 5 – 26 and 27 – 29 and 30 – 46 – 55 to 59 – 71 to 76 18. Main shareholders 51 to 52 – 138 19. Operations with affiliates 38 to 42 – 138 20. Financial information regarding the issuer’s assets, financial situation and results a. Historical financial data 79 to 138 – 166 b. Pro forma financial data – c. Financial statements 79 to 83 d. Verification of annual historical financial data 139 and 140 – 166 e. Date of last financial data 78 f. Interim and other financial data – g. Dividend payment policy 5 – 6 and 7 – 17 – 50 and 51 h. Legal proceedings and arbitration 49 i. Significant change in financial or business position 30 and 31 21. Additional information a. Share capital 50 to 52 b. Memorandum and articles of association 48 to 49 22. Major contracts 38 to 39 23. Information from third parties, declaration from experts and declarations of interest 166 24. Documents accessible to the public 49 25. Information about equity interests 18 and 19 – 100 to 103 Pages of the Activity Report and Financial Report 168

Klépierre_Financial report 2006 This document, along with the 68-page 2006 Activity Report, constitues the shelf registration document.

184 656 916 – Paris Trade and Companies Register (RCS) € Financial Report 2006