KPMG - IERE

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SSAS and SIPP The Directors have been advised that the Shares in the Company will be eligible for inclusion in a SSAS or SIPP. 53
Part IV Background to the Continental European Real Estate Market Overview of the Continental European economy Following three years of relatively weak economic activity from 2003 to 2005, the six months to 30 June 2006 has seen recovery in economic growth in the Eurozone. However, broad aggregate measures of economic activity conceal the wide divergence of growth within the different countries of the Eurozone. For example, rapid economic growth in Spain and Ireland has been driven by the strength of the retail and housing markets, much of which has been fuelled by lower cost debt. In contrast, the much larger German economy has until recently experienced both weak retail sales and housing markets, with consumers preferring to save rather than spend. The recovery in global economic growth has benefited a number of Continental European economies, particularly those with exposure to international financial services and those with large export industries. Stronger economic growth along with increased global inflationary pressures has resulted in the European Central Bank (ECB) increasing interest rates, however at 3.25 per cent. they currently remain significantly lower than those in the US and UK. Continental European real estate market The Eurozone real estate market is estimated to be worth in excess of A3,000 billion 1 which is approximately three times the size of the UK market. Of this, the German market is by far the largest individual market at A1,080 billion, with a value slightly lower than that of France and Italy combined, at A780 billion and A660 billion respectively. On the basis of the Assumptions, 47 per cent. of the Market Value of the properties owned by the Company is attributable to Germany and 31 per cent. to France. Real estate investment yields are significantly higher than Eurozone interest rates which has been a key factor behind the large increase in investor demand for this asset class. Over the last few years there has been a significant increase in the level of cross border investment activity, much of which has been debt-funded. The strength of investor demand for Continental European real estate assets has resulted in downward pressure on investment yields, which in turn has increased property values. Rising interest rates and continuing strong demand for real estate has reduced the size of the margin between real estate yields and interest rates over the last two years. The Investment Manager believes that stock selection and active asset management will become increasingly important in driving assetlevel total returns as the positive yield gap (differential between rental yields and financing rates) narrows. Typical lease structures Lease structures differ across the Continental Europe. Continental European countries tend to have shorter lease lengths than the UK, with rents that are typically index-linked. In France, for example, the typical lease structure is a 9 year lease, with break clauses at 3 and/or 6 years. Although this creates a potentially less certain income stream, the Investment Manager believes that good quality, well-located real estate assets have a lower risk of rental voids. Closer analysis is required in determining under what circumstances a tenant might seek to exercise a break clause, considering, for example, the costs of moving, costs of disruption and market rent differences. German leases are typically of 10 years duration with the tenant having the right to renew at lease expiry. Unlike the UK, where rents tend to change only at a specified rent review date, most Continental European leases contain indexation provisions that increase or decrease the rents paid during the term of the lease. In German retail property, for example, the indexation is often applied once the index exceeds an agreed hurdle – at which point either 75 per cent. or 66 per cent. of the total growth is applied. The index is typically a consumer price index or an alternative cost of living index. As a consequence, leases containing indexation have a potentially greater scope for a disconnect between market rents and the actual rents paid during the lease, particularly where there has been a period of significant price increases or decreases. Tenants will typically bear the costs of service charge expenses, insurance, local taxes and the costs of internal repairs. Structural repairs are usually the responsibility of the landlord. There are certain 1 European Public Real Estate Association, September 2005. Exchange rate – $1:A1.221 54
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Invista European Real Estate Trust
Page 3 and 4: JPMorgan Cazenove and Citigroup, ea
Page 5 and 6: Summary This summary should be read
Page 7 and 8: The Group currently owns, and inten
Page 9 and 10: Risk Factors Investing in the Share
Page 11 and 12: If actual financial data differ fro
Page 13 and 14: assumptions or flawed assessments u
Page 15 and 16: loss of revenue, which could materi
Page 17 and 18: The Group’s performance is depend
Page 19 and 20: less than the costs of the leverage
Page 21 and 22: Future Share issues could dilute th
Page 23 and 24: The holding company structure for t
Page 25 and 26: Important Information Investment in
Page 27 and 28: investors in Germany are urged to c
Page 29 and 30: made by broker-dealers who are regi
Page 31 and 32: * the tax treatment of the Group an
Page 33 and 34: Directors and Advisers Directors To
Page 35 and 36: Part I Information on the Company I
Page 37 and 38: and expanding analysis of property
Page 39 and 40: Where properties have achieved thei
Page 41 and 42: payable. To the extent that the Net
Page 43 and 44: The Company will also publish semi-
Page 45 and 46: Part II Directors, Management & Adm
Page 47 and 48: Mark Long* - Director, Strategy, Re
Page 49 and 50: The Custodian may entrust the safek
Page 51 and 52: Part III The Offer The Offer A tota
Page 53: period of 180 days from Admission,
Page 57 and 58: Continental European Listed Propert
Page 59 and 60: The 5 largest properties account fo
Page 61 and 62: 10 Largest Tenants Tenant Net Annua
Page 63 and 64: 4 Purpose of the valuation report W
Page 65 and 66: 7.3 Environmental matters We have r
Page 67 and 68: German Properties C104,700,000: Pro
Page 69 and 70: Property Sector Description, Age &
Page 73 and 74: Belgian Properties C18,500,00: Prop
Page 77 and 78: French Properties C22,100,000: Prop
Page 79 and 80: Czech Republic Properties C12,900,0
Page 81 and 82: Polish Properties A8,750,000: Prope
Page 83 and 84: INVISTA EUROPEAN REAL ESTATE TRUST
Page 93 and 94: ecognised in the financial statemen
Page 97 and 98: 16. Finance expenses 2006 B Amortis
Page 101 and 102: We planned and performed our work s
Page 103 and 104: (2) No account has been taken of th
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* a logistics property in Nanteuil,
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important to an understanding of th
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Availability of financing During th
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The Group’s diversification by ma
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higher immediately following Admiss
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At 30 September 2006 the Group had
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temporary difference is controlled
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currency swaps and foreign exchange
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(q) where voids currently exist or
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in the Group carries on a trade in
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taxable as a corporation) organised
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PFIC - Default Excess Distribution
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these proposed Treasury Regulations
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Part XII General Information 1. Inc
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2.11 All of the Shares will be in r
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Name Current Directorships and Part
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Name Current Directorships and Part
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The general meeting of Shareholders
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(a) Shares of the Company to be red
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The Company will be bound towards t
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Every Shareholder may take part in
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which fall within the scope of the
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The Bank Facility also provides for
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performance by the Depositary of it
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The primary tasks of the Company’
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In relation to the investment restr
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doubt as to whether courts outside
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Part XIII Definitions The following
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‘‘Invista Group’’ Invista a
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‘‘uncertificated’’ or ‘
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1.6 1.5.2 pending investigation of
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transfer or other taxes due in conn
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contravention of any registration o
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Notes On How To Complete The Applic
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I I I I I I I I I I I I I I I I I I
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I I I I I I I I I I I I I I I I I I
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KPMG - IERE

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