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SPAZIO INVESTMENT N.V.2008 CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS00 Highlights01 Chairman’s statement03 Company overview, Financial Snapshot05 Company overview, Real Estate Assets07 Portfolio overview08 Income producing assets13 Vacant assets14 Development projects18 Spazio Investment Board of Directors20 Management team22 Pirelli RE23 Corporate governance statement27 Consolidated balance sheet

as at 31 December 2008

28 Consolidated income statement for the period from 1 January 2008 to 31 December 2008

29 Consolidated cash flow statement for the period from 1 January 2008 to 31 December 2008

30 Consolidated statement of changes in equity for the period from 1 January 2008 to 31 December 2008

31 Notes to the consolidated financial statements as at 31 December 2008

51 Company balance sheet as at 31 December 2008 after appropriation of result

52 Company profit and loss accounts for the period from 1 January 2008 to 31 December 2008

53 Notes to the company financial statements as at 31 December 2008

57 Other information59 Auditor’s report61 Financial calendar and advisors

Spazio Investment N.V. Highlights

HIGHLIGHTS

MARkET CAP AS AT 31 DECEMBER 2008 € 164.9 MDIVIDEND PER SHARE € 0.59OPEN MARkET VALuE € 730.6 MADJ. NET ASSET VALuE* € 373.8 M

*ADJ. NAV: Investment Properties and Development Projects at OMV

MAJOR SHAREHOLDERS AT 31 DECEMBER 2008

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Company Structure

Spazio Investment N.V. (Spazio Investment) is a Dutch-based real estate company, currently focused on Italy’s industrial real estate market, the second largest in Europe. It invests through a fully-owned real estate fund: Spazio Industriale – Fondo Comune di Investimento Immobiliare di Tipo Chiuso (the “Fund”).Established in November 2005 by Pirelli RE and Cypress Grove, Spazio Investment was admitted to London’s Alternative Investment Market (AIM) on 18 October 2006.

Major Shareholders

1 LAXEY PARTNERS 19.59%2 PIRELLI RE NETHERLANDS B.V. 18.42%3 kDA CAPITAL LLP 9.87%4 LEHMAN BROTHERS INC* 9.62%5 GLG PARTNERS LP 7.96%6 ARTISAN PARTNERS 6.11%7 WELLINGTON MANAGEMENT CO LLP 3.97%8 FIDELITY 3.77%9 REMINDER OF FREE FLOAT 20.69%

PIRELLI RE NETHERLANDS

PIRELLI RE SGR SPAZIO INDUSTRIALE FUND

Managed by

Managed by

100% ownership

THE COMPANY STRUCTURE

SPAZIO INVESTMENT

* Currently the Administrator is monitoring the shares

Share Price Performance

Spazio’s share price was down 49% over the course of 2008, performing in line with FTSE All Share Real Estate Index (-49%), marginally underperforming the FTSE EPRA/NAREIT (ex uk) Index (-44%) and outperforming the wider AIM market (-62%).

Spazio lagged all three benchmarks in the first three quarters of the year but outperformed in the fourth quarter following the Interim results and details of the acceleration of the business plan set out in September 2008.

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1 Spazio Investment N.V. Chairman’s statement

CHAIRMAN’S STATEMENT

Dear Shareholders,I am pleased to announce Spazio’s results for the twelve months ended 31 December 2008.

Financial Highlights

Total portfolio open market value (“OMV”) as at 31 `December 2008 of € 730.6 m (€ 757.5 m as at 30 June 2008), a decline of 3.9% in asset values1 Adjusted NAV per share of ` € 13.6 (€ 15.8 as at 30 June 2008)Rental income for the year of ` € 42.8 m (2007 € 42.6 m)Net loss for the year of ` € 8.6 m (2007 net profit of € 44.9 m)Total portfolio Loan to Value of 56.5% (53.2% as at 30 June `2008)Completed asset sales of ` € 63.9 m at an average premium to last accounted OMV of 5.6% and at an average gross exit yield of 6.2% for investment properties. Asset disposals of € 7.0 m since 30 June 2008Acquired ` € 63.9 m of assets (of which only € 4.0 m in H2 2008) at an average gross entry yield of 8.1% Shareholder approval obtained for accelerated business `plan and revised arrangements with the external managerTotal cash returned to shareholders in the course of 2008 of `€ 38.4 mSince year end returned ` € 25 m of cash to shareholders via tender offerNo final dividend is proposed for H2 2008. Total dividend `payments for the year ended 31 December 2008 will therefore be € 0.59 per share (2007 € 1.03).

Results for the period ended 31 December 2008 and full year dividend

Net loss for the year was € 8.6 m compared with a net profit of € 44.9 m in 2007. The net loss in 2008 primarily reflected a fall in asset values of € 11.7 m and a decrease in the fair value of financial instruments of € 12.2 m during the year. Income available for distribution in 2008 was € 17.6 m compared with € 28.9 m in 2007, with the decrease reflecting the lower gains realised on disposals in 2008. Rental income in 2008 remained broadly constant compared to 2007 at € 42.8 m (2007 € 42.6 m).

The decline in the open market value of the Company’s investment portfolio was limited to 2.6% in the six months ending 31 December 2008, reflecting an average increase in cap rates between 10 and 20 basis points, a slight increase in the discount rate applied to future rental streams and a lengthening of the time required to lease vacant properties. However, there was a more substantial decline of 11.4% for the

development projects, mainly due to a lengthening of the time required to either complete the scheme or to lease/sell the units.

Spazio’s Adjusted Net Asset Value per share of € 13.62 dropped 13.8% compared to Adjusted Net Asset Value at 30 June 2008. This primarily results from the payment of the interim dividend of € 16.2 m in October and from the net loss of € 30.0 m in the second half of the year (which was mainly driven by a fall in asset values of € 17.83 m and by a decrease in the fair value of financial instruments of € 18.3 m)..In October 2008 Spazio paid an interim dividend of € 0.59 per share. However, given an unpredictable market outlook, at this time, we believe it is prudent for the Company to conserve capital and retain cash. Accordingly, the Board has determined not to pay a final dividend for the six months ended 31 December 2008.

Accelerated business plan and revised arrangements with the external manager

In my statement accompanying the interim accounts for the six months to 30 June 2008, I indicated that we were reviewing our business plan with a view to generating more cash to return

Share Price Performance

Spazio’s share price was down 49% over the course of 2008, performing in line with FTSE All Share Real Estate Index (-49%), marginally underperforming the FTSE EPRA/NAREIT (ex uk) Index (-44%) and outperforming the wider AIM market (-62%).

Spazio lagged all three benchmarks in the first three quarters of the year but outperformed in the fourth quarter following the Interim results and details of the acceleration of the business plan set out in September 2008.

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SHARE PRICE PERFORMANCE

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1Equivalent to an overall asset devaluation of € 29.9 m as per 2H 2008 CBRE external appraisal. The 3.9% decrease is net of acquisitions, capital expenditures and disposals occurred in 2H 2008.2This value is before cancellation of the 4,545,448 Depository Interests bought back by the Company following the tender offer which was completed on 15 January 2009. The pro-forma Adjusted NAV post cancellation of the repurchased securities will be € 15.2 per share.3€17.8 m comprising € 16.7 m of CBRE fair value adjustment and € 1.1 m of accrued capital loss on assets for which a binding offer has been accepted by the Fund at a price lower than the book value of the assets at year end.

to shareholders. At the same time we stated our intention to revise our arrangements with Pirelli RE, our external manager, to more closely align their interests with those of shareholders. Following the announcement, the Company had extensive and constructive discussions with a number of its major shareholders which resulted in an EGM of the Company to approve the following:

Target disposal of assets over a three-year period to 31 `December 2010 of € 450 mSuspension of acquisition and further development `activitiesReturn excess capital to shareholders `Revised arrangements with Pirelli RE `

The revised arrangements with Pirelli RE, the external manager, are designed to incentivise them to deliver the accelerated business plan. For further details on the accelerated business plan, the revised arrangements with the external manager and the other resolutions which were passed at the Company’s EGM of 9 December 2008 please refer to the shareholder circular which was posted to shareholders on 21 November 2008 and which is also available on the Company’s website www.spazioinvestment.com.

Tender offer

In pursuit of its strategy of returning cash to shareholders, on 15 January 2009 Spazio completed a tender offer. This resulted in the purchase by the Company of 4,545,448 of its Depository Interests from tendering shareholders at a price of € 5.50 per Depository Interest at a cost of approximately € 25 m. More information regarding the tender offer is also available on the Company’s website www.spazioinvestment.com.

The Depository Interests purchased by Spazio will be held by the Company and the cancellation of such securities shall be proposed at the next annual general meeting of shareholders to be held on 28 April 2009.

Outlook

The global real estate market has been adversely impacted by the credit crisis and worsening global economic conditions, leading to a softening in yields, the exit from real estate of a large number of investors and a significant decrease in transaction volumes. Despite current economic conditions, there continues to be a reasonable level of interest in the Group’s property portfolio from local investors. The Company is in advanced negotiations to complete sales of approximately € 80 m in the first half of 2009.

As mentioned above in the six months to 31 December 2008 there has been an overall decrease of 3.9% in the Company’s property portfolio. This relatively modest decline in value demonstrates the resilience of Spazio’s portfolio and can be

JOHN DUGGANCHAIRMAN

2 Spazio Investment N.V. Chairman’s statement

CHAIRMAN’S STATEMENT CONTINuED

attributed to the shortage in supply in Italy of high quality industrial products, the presence of low leveraged private investors and the quality of tenants and lease terms in the Spazio portfolio which provide a stable income stream.We expect a further decline in asset values in 2009 but the particular features of our portfolio, to which I have just referred, are anticipated to continue to provide some degree of protection. Our net operating income from the portfolio at year end is approximately 2.2 times the aggregate amount of interest expenses and financing fees, thus demonstrating the Company’s ability to service debt and maintain the level of operating income over the next twelve months. Our occupancy levels remain stable at around 96%. The average length of our leases is approximately 5 years, with less than 5% in rental value expiring in the next 2 years.

The decrease in values experienced to date in Italy is not as marked as in other European markets. However the outlook for the Italian real estate sector and asset values remains uncertain. We are currently in full compliance with all of our banking covenants and the Board carefully monitors all existing banking arrangements. Full disclosure on how the financial covenants are calculated and their level as at 31 December 2008 is set out in the Notes to the accounts.

The Board intends to retain flexibility over the timing of the payment of future cash returns to shareholders in the context of its gearing position, including flexibility over the level of future dividends. In the near term, excess cash generated from operations and from the sale of assets will be used as necessary to maintain adequate headroom against banking covenants. Notwithstanding this need to maintain adequate covenant headroom, the Board remains fully committed to the implementation of its business plan and the generation of significant cash returns for its shareholders.

COMPANY OVERVIEWFINANCIAL SNAPSHOT

3 Spazio Investment N.V. Company Overview

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Investment property Eastgate Park Edificio 16

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Open Market Value

Open Market Value of € 730.6 m is composed of € 627.5 m of Investment Property and € 103.1 m of development projects. Whilst the decline in the investment portfolio in the six months ending 31 December 2008 was limited to 2.6%, there was a more substantial decline of 11.4% for the development projects. External appraisal of the entire Company’s Portfolio is conducted by CB Richard Ellis on a semi-annual basis. Yielding assets are predominantly valued on the basis of the Discounted Cash Flow (DCF) methodology which is considered the most appropriate valuation technique for this type of assets, whereas Development Projects are valued based on the Transformation method. In order to determine the Fair Value of Spazio’s properties, CB Richard Ellis has conducted site visits to each of the assets in the Portfolio.

NET DEBT

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Net Debt Cash

Consolidated Debt

103

Net Debt

The total Cash balance at the end of 2008 was € 79.8 m and the solvability of the Company is considered strong.We are currently in full compliance with all of our banking covenants and the Board is carefully monitoring the existing banking arrangements. Full disclosure on how the financial covenants are calculated and their level as at 31 December 2008 is set out in the Notes to the accounts.

COMPANY OVERVIEW CONTINuED

FINANCIAL SNAPSHOT


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NET ASSET VALUE

Adj. NAV Accounting NAV

Adj. NAV per share

434415

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374 368

Dec-08

13.6

Net Asset Value

Spazio’s Adjusted NAV per share of € 13.6 dropped 13.8% compared to Adjusted NAV per share at 30 June 2008.This primarily results from the payment of the interim dividend of € 16.2 m in October and from the net loss of € 30.0 m in the second half of the year.

Dividend

Income available for distribution in 2008 was € 17.6 m compared with € 28.9 m in 2007, with the decrease reflecting the lower gains realised on disposals in 2008 and the capital loss on Investment Properties. As described above, the Board has determined not to pay a dividend in respect of the six month period ended 31 December 2008. Consequently of the € 17.6 m of income available for distribution, € 16.2 m has been distributed to shareholders as dividends in October 2008 and € 1.4 m has been retained by the Company.

Accounting NAV is calculated taking into account Investment Properties at OMV and Development Projects at cost value (IFRS).Adjusted NAV is calculated taking into account both Investment Properties and Development Projects at OMV.Adjusted NAV per Share is based on outstanding shares of 27,491,295..

Spazio Investment N.V. Company Overview5


REAL ESTATE ASSETS

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PORTFOLIO BREAKDOWN BY USE (GLA)

1 LABS 36%2 TRADING ASSET 1%3 LIGHT 21%456

LOGISTICS 7%DEVELOPMENT 34%ASSET UNDER CONVERSION 1%

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PORTFOLIO BREAKDOWN BY USE (OMV)

1 INCOME PRODUCING 84%2 DEVELOPMENT 14%3 VACANT 2%

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Covering 1,387,682 sq m, the Company’s portfolio is one of the largest in the Italian industrial real estate market. Independently valued at € 730.6 m with annualised passing rents of € 43.0 m at December 2008, it comprises 370 income producing assets

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

with high-quality tenants, many of them leaders in their sector; 24,606 sq m of vacant assets with conversion potential; and two high-profile development projects (Eastgate Park and Edificio 16) covering around 477,246 sq m of buildings covering.



REAL ESTATE ASSETS

REVIEW OF ACQUISITIONS AND DISPOSALS IN THE FULL YEAR 2008

Spazio has completed € 63.9 m of acquisitions in the full year period:

acquisition from SMA S.p.A. (part of the Auchan Group) of à distribution centre of 32,000 sq m and additional 14,500 sq m of land with development potential at Segrate, 15 km east of Milan. Purchased for consideration of € 20.0 m with a gross entry yield of 8.4% (sale and leaseback transaction);acquisition from Immobiliare Capra S.r.l., a private Italian `real estate developer, of a broadcasting centre in Milan for € 12.4 m. The centre is fully let to RAI Radiotelevisione Italiana S.p.A. (Italian State owned broadcasting company), with a gross entry yield of 7.7%;acquisition from Pasini Group of an office building located ìn Sesto San Giovanni (Milan) for € 27.5 m with a gross entry yield of 8.3%. The building has a GLA of 13,100 sq m and was developed by the Pasini Group over a period of 18 months. The asset is let to Alstom Power Italia S.p.A. which uses the building to host its Southern European Headquarters; andacquisition from Coopsette Società Cooperativa - as part òf the wide Enel Framework Agreement signed on 22 November 2007 - of an office and storage building located in Genova, Via Dino Col for € 4.0 m with a gross entry yield of 5.8%. The building has a GLA of 2,100 sq m and is fully let to Enel Distribuzione S.p.A. with a lease contract of 6+6 years.

Spazio has completed € 56.9 m of disposals in the first half of 2008:

disposal of 27 Telecom Italia assets located throughout Ìtaly for a total cash consideration of € 25.6 m, at an average exit yield of 5.8%, representing a 4.8% premium to OMV as at 31 December 2007;

disposal of 1 Enel vacant asset in Livorno for a total cash `consideration of € 0.7 m representing a 3.8% premium to OMV as at 31 December 2007;disposal of 1 Prada asset located near Arezzo for a total `cash consideration of € 12.2 m, at an exit yield of 6.9%, representing a 7.9% premium to OMV as at 31 December 2007;disposal of 1 Enel asset located in Milan for a total `cash consideration of € 10.0 m, at an exit yield of 6.8%, representing a 7.2% premium to OMV as at 31 December 2007;disposal of 1 vacant asset located in Pianezza (part of the Àgrileasing portfolio) for a total cash consideration of € 0.3 m representing a 9.6% gross margin over historical purchase price; anddisposal of 13 units of Edificio 16, with a GLA of 3,356 sq `m, for a total cash consideration of approximately € 8 m, representing a premium to historical cost of 29.5%.

Spazio has completed € 7.0 m of disposals in the second half of 2008:

disposal of 2 Telecom Italia assets located in Sicily and `Puglia for a total cash consideration of € 1.1 m, at an average exit yield of 5.8%, equivalent to OMV as at 30 June 2008;disposal of 2 vacant assets located in Emilia and Lombardy `for a total cash consideration of € 1.7 m, representing a 4.3% premium to OMV as at 30 June 2008; anddisposal of 6 units of Edificio 16, with a GLA of 1,828 sq `m, for a total cash consideration of € 4.2 m, representing a premium to historical cost of 27.7%.

TENANT LIST* RENT €/M RENT %

Telecom Italia 21.01 48.9%

Prada 6.09 14.2%

Enel Group 2.74 6.4%

Alstom Power 2.72 6.3%

ACC Group 1.91 4.4%

BSL 1.82 4.2%

SMA 1.68 3.9%

Prima Comunicazione 1.31 3.1%

RAI 0.99 2.3%

Fiege 0.94 2.2%

Pasini 0.57 1.3%

ABB 0.45 1.1%

INPS 0.44 1.0%

Wind Telecomunicazioni 0.30 0.7%

Residential 0.01 0.0%

Total 43.0 100.0%

RISK ASSESSMENT

In the second half of the year Spazio’s portfolio experienced an overall fall in asset values of 3.9% as explained in the Chairman’s statement section of this report. This fall in asset values in 2008 did not cause any breach of our loan-to-value covenants and the Board will continue to monitor the existing banking arrangements and financial position of the Company in the prospect of any possible further decline in asset values going forward. Apart from an increased alert on asset valuation and its potential impact on banking arrangements, no new major risks or uncertainties have been recognised compared to 2007. For an overview of the monitoring controls you can refer to the notes to the financial statements.Interest rate risk is monitored through the use of financial derivatives (which protect the Company from interest rate fluctuations). At the balance sheet date Spazio does not have any other financial instruments and therefore cannot be exposed to any related risk. For a further explanation pleasesee page 36 of this report.

* as at 31 December 2008

PORTFOLIO BREAKDOWN BY LOCATION (GLA)

1 NORTH-EAST DISTRICTS 43%2 NORTH-WEST DISTRICTS 30%3 CENTRAL DISTRICTS 15%4 SOUTHERN DISTRICTS 12%

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PORTFOLIO BREAKDOWN BY LOCATION (OMV)

1 NORTH-EAST DISTRICTS 20%2 NORTH-WEST DISTRICTS 47%3 CENTRAL DISTRICTS 21%4 SOUTHERN DISTRICTS 12%

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PORTFOLIO OVERVIEW

7 Spazio Investment N.V. Portfolio overview

Spazio Investment’s portfolio is among the largest in the Italian real estate sector. In total, its assets cover 1,387,682 sq m and have a current market value of € 730.6 m. With a high-quality tenant list, the portfolio’s income producing assets offer stable, long-term returns. These returns will rise further in the years ahead as the fund capitalises on emerging development and conversion opportunities.

Pages 8-12

INCOME PRODUCING ASSETS

Spazio Investment’s 370 income producing assets cover 885,830 sq m and have a combined market value of € 616.1 m. They are spread across a mix of uses, including laboratories/technology (56.4% based on GLA), light industrial (33.1 % based on GLA) and logistics (10.5 % based on GLA). All of these income producing properties are currently occupied and together they generate € 43.0 m in passing rent annually.

Page 13

VACANT ASSETS

Spazio Investment owns 12 light industrial properties that are currently vacant and have a combined open market value of € 11.4 m. 4 of these properties offer high-return redevelopment opportunities thanks to their location and land size. To maximise the value of these assets, Spazio Investment’s strategy is to re-zone them before selling them to local developers for conversion into urban mixed use projects. The other 8 properties offer the opportunity to get a fast trading, selling them to end users.

Pages 14-17

DEVELOPMENT PROJECTS

Spazio Investment currently has two major developments underway: Eastgate Park in Venice Province and Project Edificio 16 in Milan. The first is arguably northern Italy’s most important industrial/logistics development. The second is helping to revitalise Milan’s historic city centre. Covering a total of 477,250 sq m, Spazio Investment’s developments have a combined open market value of € 103.1 m.

SPAZIO INVESTMENT HAS ASSEMBLED A DIVERSIFIED PROPERTY PORTFOLIO OF OuTSTANDING QuALITY, WITH 370 INCOME PRODuCING ASSETS, 12 VACANT PROPERTIES, OF WHICH 4 WITH EXCEPTIONAL CONVERSION POTENTIAL AND 2 DEVELOPMENT PROJECTS.

INCOME PRODUCING ASSETSTELECOM ITALIA

8 Spazio Investment N.V. Income producing assets

In 2007, Telecom Italia recorded sales of over € 30 bn. Spazio Investment’s Telecom Italia portfolio comprises 347 mixed use telephone exchange properties located throughout Italy, mainly in urban areas. Their prime locations will make them ideal for conversion into residential, retail or office space once their leases expire.

Covering around 493,000 sq m, these properties have a total market value at year end of around € 326.9 m. They were entirely leased back to Telecom Italia and make up 48.9% of Spazio Investment’s income producing assets based on total yearly rent. 32% of the leases (based on total annual passing rent; 44% based on number of Telephone Exchange) are set for six years and the remainder for nine years for a total annual passing rent of € 21.0 m. In 2008 Spazio sold 29 Telecom assets for a market value equal to € 26.7 m, at an average exit yield of 5.8% and with a gross margin on last accounted open market value of 4.8%.

KEY FACTS

Surface Area 493,000 sq m `Annual Passing Rent ` €21.0 mMarket Value ` €326.9 m 347 mixed use telephone exchange properties `located throughout Italy, mainly in urban areas and entirely leased to Telecom Italia S.p.A.

PORTFOLIO LOCATION - NUMBER OF ASSETS

# REGION n° ASSETS # REGION n° ASSETS

1 Abruzzo 10 10 Piemonte 15

2 Calabria 9 11 Puglia 37

3 Campania 5 12 Sardegna 27

4 Emilia-Romagna 11 13 Sicilia 39

5 Friuli Venezia Giulia 4 14 Toscana 19

6 Lazio 12 15 Trentino Alto Adige 5

7 Liguria 20 16 umbria 13

8 Lombardia 112 17 Valle d'Aosta 6

9 Marche 3

TOTAL 347

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TELECOM ITALIA IS SPAZIO INVESTMENT’S BIGGEST SINGLE TENANT. IT IS ALSO ITALY’S BIGGEST FIXED-LINE TELEPHONE COMPANY WITH OPERATIONS THROuGHOuT THE WORLD.

Abbiategrasso, Lombardia region


INCOME PRODUCING ASSETSPRADA

INCOME PRODUCING ASSETSBSL

ESTABLISHED IN 1913, PRADA ROSE TO PROMINENCE DuRING THE 1990S TO BECOME AN ICONIC BRAND IN THE LuXuRY GOODS MARkET, GENERATING OVER € 1.6 BN OF TOTAL SALES IN 2007.

The Portfolio consists of six light industrial and warehousing buildings all leased back to Prada, four in Tuscany and two in the Marche region. They are, 2 assets leased based on 6-year leases (31% Prada total annual passing rent) and 4 assets on 12-year leases (69% of Prada total annual passing rent). In total, the properties generate an annual passing rent of around € 6.1 m, cover 101,400 sq m and have a market value at year end of € 79.2 m.The properties consist of high quality industrial assets with top finishing and solid double net lease contracts (only property tax charged to the landlord). In March 2007 Prada shoes factory in Montegranaro designed by Guido Canali and Mimma Caldarola won the award for the best Architectural building constructed in Italy in the last 5 years.

Montevarchi, Tuscany region Pavia, Lombardia region

VeniceMilan

Florence

Rome

ACQuIRED IN 2006, THIS LOGISTICS COMPLEX COMPRISES EIGHT WAREHOuSE BuILDINGS AND TWO SMALL OFFICE BuILDINGS NEXT TO THE uRBAN CENTRE OF PAVIA, 30kM SOuTH OF MILAN.

Entirely leased to BSL - Bertola Servizi Logistici S.p.A. on a 6-year lease starting from 1st February 2006, these properties cover 39,100 sq m, on a site area of 98,500 sq m, generate an annual passing rent of € 1.8 m and have a market value at year end of € 23.3 m.

KEY FACTS

Surface Area 39,100 sq m `Annual Passing Rent ` €1.8 mMarket Value ` €23.3 mThe property complex includes 8 warehouse `buildings and 2 small office buildings next to the urban centre of Pavia, 30 km south of Milan, entirely leased to BSL Bertola Servizi Logistici S.p.A.

VeniceMilan

Florence

Rome

KEY FACTS

Surface Area 101,400 sq m `Annual Passing Rent ` €6.1 mMarket Value ` €79.2 m 6 light industrial and warehouse buildings, 4 in `Tuscany and 2 in the Marche region, entirely leased to Prada S.p.A.


INCOME PRODUCING ASSETSENEL

INCOME PRODUCING ASSETSFIEGE

WITH A MARkET CAP IN EXCESS OF € 25 BN AND NET PROFITS OF € 3.8 BN IN 2007, ENEL IS ITALY’S BIGGEST POWER COMPANY.

The entire Enel portfolio currently owned by Spazio consists of 13 properties: 4 vacant assets (the ENEL vacant portfolio) with potential conversion (see page 13) and 9 income producing properties located throughout Italy.These nine income producing properties cover 75,100 sq m, have a combined market value at year end of € 70.0 m and generate an annual passing rent of € 4.8 m, with the following breakdown based on Enel total annual passing rent: 57% of the portfolio is leased to Enel Group, 27% to Prima Comunicazione S.p.A., 9% to INPS and 7% to Wind Telecomunicazioni S.p.A..In September 2008, Spazio acquired from Coopsette Società Cooperativa - as part of the wide Enel Framework Agreement signed on 22 November 2007 - an office and storage building located in Genova, Via Dino Col for € 4.0 m with a gross entry yield of 5.8%. The building has a GLA of 2,100 sq m and is fully let to Enel Distribuzione S.p.A. with a lease contract of 6+6 years.

Mestre, Veneto region Bagni di Tivoli, Lazio region

VeniceMilan

Florence

Rome

SPAZIO INVESTMENT ACQuIRED THE TIVOLI LOGISTICS COMPLEX IN 2006..

Comprising three main warehouses, one office building and a small house covering approximately 21,000 sq m, it is located in the logistics district of Bagni di Tivoli, east of Rome. It is entirely leased to Fiege Borruso S.p.A., the Italian subsidiary of German logistics operator Fiege, on a 12-year lease set to expire in 2009 (First break option). The tenant has already notified the Company of its intention not to renew the lease contract upon expiry but at the same time has asked for a possible lease extension until H1 2010 which is currently under negotiation. The asset generates an annual passing rent of € 0.9 m and has a market value at year end of € 11.9 m.

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KEY FACTS

Surface Area 75,100 sq m `Annual Passing Rent ` €4.8 mMarket Value ` €70.0 m9 light industrial and warehouse properties located `throughout Italy

KEY FACTS

Surface Area 21,000 sq m `Annual Passing Rent ` €0.9 mMarket Value ` €11.9 mThe property complex includes 3 warehouse `buildings and its related offices located in the logistic district of Bagni di Tivoli (east of Rome), entirely leased to Fiege Borruso S.p.A.


INCOME PRODUCING ASSETSACC

INCOME PRODUCING ASSETSALSTOM POWER / ABB / PASINI

Mel, Veneto region Sesto San Giovanni, Lombardia region

ACQuIRED AT THE BEGINNING OF 2007, THESE TWO INDuSTRIAL BuILDINGS ARE LOCATED IN THE NORTH-EAST OF ITALY, ONE OF THE MOST INDuSTRIAL REGIONS OF THE COuNTRY.

The properties, located in Pordenone and Belluno, cover 75,000 sq m, on a site area of 274,100 sq m. They are currently occupied by ACC Group, one of the world’s leading companies manufacturing components for household and commercial appliances, on a 12-years lease, generating an annual passing rent of € 1.9 m. Total market value of the buildings at year end is € 24.1 m.

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KEY FACTS

Surface Area 41,800 sq m Ànnual Passing Rent ` € 3.7 mMarket Value ` €46.9 m3 light industrial buildings (the original property `complex) and one new office building, located in Sesto San Giovanni near Milan’s Bicocca district, leased to Alstom Power Italia S.p.A., ABB Cap S.p.A. and Pasini Group

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COMPRISING THREE LIGHT INDuSTRIAL BuILDINGS AND A NEW OFFICE BuILDING COVERING ALMOST 41,800 SQ M, THIS ASSET STANDS IN SESTO SAN GIOVANNI, AN INDuSTRIAL AREA OF MILAN THAT HAS uNDERGONE SIGNIFICANT REDEVELOPMENT IN RECENT YEARS..

The properties are currently occupied by Alstom Power Italia S.p.A. on a seven-year lease, and ABB Cap S.p.A. on a 6-year lease. They generate an annual passing rent of € 1.4 m and have a market value of € 16.6 m. The properties are located within one of the biggest complexes under conversion in Milan’s northern-west area. The whole area will be transformed into a mixed use residential, office, retail and industrial complex: this will enhance our properties significantly, ensuring them a strong potential conversion upside once their lease expires. In April 2008, Spazio acquired from Pasini further 13,200 sq m of new office space for € 27.5 m with a gross entry yield of 8.3%. The asset is leased to Alstom Power Italia S.p.A. on a seven-year lease and to Pasini Group on a 6-year lease. The Open Market Value at year end is € 30.3 m. The asset generates a yearly rent of € 2.3 m.

KEY FACTS

Surface Area 75,000 sq m `Site Area 274,100 sq m Ànnual Passing Rent ` €1.9 mMarket Value ` €24.1 m2 light industrial buildings, located in Pordenone ànd Belluno, leased to ACC Group


INCOME PRODUCING ASSETSRAI

INCOME PRODUCING ASSETSSMA

IN MARCH 2008 SPAZIO ACQuIRED A BROADCASTING OPERATING CENTRE FuLLY LET TO RAI, THE ITALIAN STATE-OWNED BROADCASTING COMPANY.

The asset, located in Milan, is covering 6,300 sq m and was acquired on March 12, 2008 from Immobiliare Capra S.r.l., a private Italian RE operator and developer for € 12.4 m, representing a gross entry yield of 7.7%. The broadcasting centre is fully let to RAI, the Italian State owned broadcasting company. The Open Market Value at year end is € 12.7 m. The asset generates a yearly rent of approximately € 1 m.

IN MARCH 2008 SPAZIO ACQuIRED A DISTRIBuTION CENTRE OF 33,000 SQ M AND ADDITIONAL 14,500 SQ M OF LAND WITH DEVELOPMENT POTENTIAL AT SEGRATE, 15 kM EAST OF MILAN.

The asset was purchased on March 7, 2008 from SMA S.p.A. - part of the Auchan Group - in a sale and leaseback transaction for a total cash consideration of € 20.0 m, representing a gross entry yield of 8.4%. The distribution centre, covering 33,000 sq m, is fully let to SMA with a 6-year lease with a first break option in March, 2011. The additional land with development potential covers 14,500 sq m. The Open Market Value at year end is € 21.1 m. The asset generates a yearly rent of approximately € 1.7 m.

Milan, Lombardia region

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KEY FACTS

Surface Area 6,300 sq m `Annual Passing Rent ` €1.0 mMarket Value ` €12.7 m1 broadcasting centre fully let to RAI, the Italian `State owned broadcasting company

KEY FACTS

Surface Area 33,000 sq m of logistic building + `14,500 of land with development potentialAnnual Passing Rent ` € 1.7 mMarket Value ` €21.1 m1 distribution centre fully let to SMA S.p.A., `part of the Auchan Group, and additional land with development potential

Milan, Lombardia region

13 Spazio Investment N.V. Vacant assets

VACANT ASSETSENEL VACANT

VACANT ASSETSAGRILEASING

FOuR INDuSTRIAL PROPERTIES (FORMER ENEL PLANT) LOCATED THROuGHOuT ITALY, CuRRENTLY VACANT, WITH GREAT REDEVELOPEMENT AND CONVERSION POTENTIAL.

Four light industrial properties located throughout Italy, all part of Spazio Investment’s Enel portfolio. Currently vacant, these properties have strong redevelopment and conversion potential thanks to their location and the average site area dimension. Spazio Investment’s strategy is to obtain for all these properties all necessary planning and rezoning consent to change the destination of use into residential, retail or office use, maximising their value with the focus to sell them to third-party local developers.

Portoferraio, Tuscany region

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SPAZIO INVESTMENT MADE THE FIRST TRANSACTION OF THIS kIND IN ITALY, IN WHICH A LEASING COMPANY HAS SOLD A PORTFOLIO OF INDuSTRIAL DISTRESSED ASSETS TO A THIRD PARTY REAL ESTATE INVESTOR.

The portfolio comprises 8 assets predominantly located in Northern Italy, with an aggregate GLA of approx. 11,400 sq m. The buildings within the portfolio are all vacant and Spazio plans to sell the assets to third party users. The Open Market Value of the buildings at year end is € 3.5 m.

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KEY FACTS

Surface Area 13,200 sq m `Site Area 53,400 sq m `Market Value ` €7.9 m4 light industrial buildings, located throughout `north of Italy, entirely vacant

KEY FACTS

Built Surface Area 11,400 sq m `Site Area 21,700 sq m `Market Value ` €3.5 m8 vacant light industrial buildings, mainly located `in Northern Italy

Canneto sull’Oglio, Lombardia region

DEVELOPMENT PROJECTSSEDICI

14 Spazio Investment N.V. Development projects

THIS HISTORICAL BuILDING IS LOCATED IN MILAN BICOCCA AND WAS FORMERLY A MANuFACTuRING PLANT uSED BY THE ANSALDO GROuP. CARE HAS BEEN TAkEN TO PRESERVE ITS DISTINCTIVE STONE-AND-BRICk APPEARANCE AND INDuSTRIAL CHARACTER.

Refurbishment works have been completed in December 2007, with the creation of 65 units ranging from 150 sq m to 600 sq m over two levels above ground. The new spaces are offered on sale as laboratories, showrooms and factory lofts. The total investment in this project was € 34.2 m. As at 31 December 2008, 32 out of 65 units have been already purchased by private companies, mainly belonging to Media & IT sectors and Architecture & Engineering studios. We remain confident that we will achieve our target of completing all sales of the remaining units in 2009.

KEY FACTS

Total GLA 18,100 sq m `Total units 65, ranging 150-600 sq m `use laboratories, studios, show-room `Total Investment: ` € 34.2 mSold 32 of 65 out of units within 31 December `2008Market Value of remaining units ` € 20.5 m

SEDICI

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February 2008


DEVELOPMENT PROJECTSSEDICI CONTINuED

THE DISTRICT

Edificio 16 stands in the ansaldo area, the northern expansion of the Bicocca district, probably the most growing, dynamic and cultural location of Milan.The Ansaldo Area is a vast industrial complex lying to the north of Bicocca district of which it is considered to be the natural expansion. Important changes have already been made to the

Ansaldo-Bicocca area in accordance with the urban planning recently approved by the City of Milan. Infrastructure, viability and new function are changing the aspect of the district, in particular: the Bicocca Village multiplex (the second largest in Italy for annual ticket sales), the contemporary art space Hangar Bicocca, the Arcimboldi Theatre; further real estate development projects, both commercial and residential.

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A Deutsche BankB SiemensC Arcimboldi TheatreD Bicocca VillageE Hangar BicoccaF Bicocca degli ArcimboldiG Prysmian

H Pirelli AreaI Pirelli RE HQJ Pirelli TyresK university Milano BicoccaL National Research Center (CNR)M Hachette RusconiN Greco Pirelli Station

actual buildings buildings under construction future projects Bicocca Area Ex Ansaldo Area

DEVELOPMENT PROJECTSEASTGATE PARK


KEY FACTS

Total Land Area 1.8 m sq m `Development Area 936,000 sq m `Total Buildable Surface 468,000 sq m `

- Industrial First Building: 8,500 sq m - Logistic First Building : 33,000 sq m - First Two Artisan Buidings: 12,000 sq m - Expansion Area: 414,500 sq m

On December 2008 the overall development `activity reached 78% of completionTotal Investment as at 31 December 2008 ` €79.5 mMarket Value ` €82.6 m

uNDER ITS INNOVATIVE MASTERPLAN, EASTGATE PARk IS THE LARGEST INTEGRATED INDuSTRIAL PARk IN NORTH-EAST ITALY DEVOTED PRIMARLY TO LOGISTICS, MANuFACTuRING AND ASSEMBLY.

Eastgate Park is the largest integrated logistics, industrial and artisan park in Italy’s northeast: 1.8 m sq m, located near the towns of Portogruaro and Fossalta of Portogruaro in the Veneto region. Inspiration for the project comes from extensive international experience in the industrial property sector, and it will be an outstanding blend of functionality, architectural harmony, strategic location and respect for the environment. It will be an unrivalled example of innovation, quality, modernity and high production standards. With a total buildable surface of 468,000 sq m, the entire development will comprise manufacturing units dedicated to large and medium-sized enterprises, a logistics section, an area of artisan labs for craft industry, a mixed-use services area and a multifunctional area for large-scale built-to-suit projects. At the moment in

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the park we have built one logistic building of 33,000 sq m, two artisan buildings for craft industry of 12,000 sq m and one industrial building of 8,500 sq m. The rest of the park will be an expansion full urbanised area ready for future construction work for industry, logistics, crafts, office, retail, multifunctional and wholesale trade uses. About 40% of the total land will be handed to the local authorities for a range of public uses including roads, parking and green areas.As at 31 December 2008 total investment in the Eastgate Project was € 79.5 m (78% of total estimated investment), with 53,500 sq m of buildings completed and infrastructure work approx. 64% complete. Development is expected to be completed by the end of 2009, including the remaining infrastructure work and land movement for preparation of urbanized plot. We have started marketing the first three units and we expect to execute our first sales in the second half of 2009. Following completion of this first phase of development, the Board will then consider options for the remaining land at the Eastgate site.

The Eastgate Park development includes a large area (taking up about 414,500 sq m of land) where it is possible to define detailed planning specifications, with the aim of smoothing the establishment of large industrial or multifunctional hubs, including wholesale traders: this interesting opportunity is rarely available inside an already operating integrated park, and has been sized to a scale that will allow specialists to plan the development of their business for subsequent steps (business start-up, future expansion).

TIMELINE

July 2008 ` , completion of first Industrial buildingAugust 2008 ` , completion of the first Logistics building and of the first Artisan Labs blockNovember 2008 ` , approved and ratified the updated terms of the Portogruaro urbanistic Contract, including the final agreement on the Consortium functionsFebruary 2009 ` , presented to the Municipality of Portogruaro the Building Permit for the construction of the “Polo dell’Innovazione Strategica”

DEVELOPMENT PROJECTSEASTGATE PARK CONTINuED


Industrial building Logistic buildingPolo dell’Innovazione StrategicaArtisan building

HIGHWAY A4 THIRD LANE REALIZATION

RAILWAY COMPLETION HIGHWAY A28

MAIN ROAD RING ROAD OF PORTOGRuARO

AIRPORT NEW TOOLGATE OF ALVISOPOLI

PORT

FREIGHT VILLAGE

THE DISTRICT

Eastgate Park stands on the largest authorised and unpolluted brown field industrial site in the region. Equidistant from the cities of Venice, Trieste and Pordenone, it is strategically located close to the pan-european corridor 5, linking Lisbon in the west with kiev in the east. It is also within easy access to Italy’s motorway network. Straddling the border between the municipalities of Portogruaro and Fossalta di Portogruaro in the province of Venice.

SPAZIO INVESTMENT BOARD OF DIRECTORS

18 Spazio Investment N.V. Spazio Investment Board of Directors

John Duggan Richard Mully Roy Dantzic.

The Company operates a one-tier governance structure with a single board of Directors. During the extraordinary general meeting of shareholders held on 9 December 2008, the shareholders’ body resolved to increase the number of Directors to a total of six Directors. The formal board structure was not changed.

JOHN DUGGAN (CHAIRMAN, INDEPENDENT)John Duggan is the Chairman of Gazeley, having previously been its CEO. Gazeley is a wholly-owned subsidiary of Wal-Mart and a leading European developer of warehouse space. He has 30 years of experience in real estate, working in the construction, house-building, real estate development and retail sectors. Mr Duggan is a qualified accountant (FCCA) and has a master’s degree in business administration (Cranfield). He is also a member of the board of the uS China Centre for Sustainability, a member of the uS advisory council for the Prince of Wales’ Business Trust and the Environment Programme and is Chairman of the Milton keynes Parks Trust.

SPAZIO INVESTMENT’S BOARD INCLuDES RESPECTED AND EXPERIENCED NAMES FROM THE INTERNATIONAL REAL ESTATE BuSINESS. THEIR ASSOCIATION WITH THE FuND IS A CLEAR VOTE OF CONFIDENCE IN ITS PAST PERFORMANCE AND FuTuRE.

RICHARD MULLY (INDEPENDENT)Richard S. Mully joined SRE (Soros Real Estate) in January 2000, and assumed primary responsibility for management’s investment strategy and oversight in Europe. As Managing Partner of SRE and Grove, he initiated and built several successful operating platforms and joint ventures, and has served on the board of every European and Russian platform, namely Apellas, Awon, Captiva, Dolce, First Serviced Offices, GMR, Lohnbach, Mapeley, Safestore, SB Capital Europe, MedGroup and Spazio Investment N.V. Prior to joining SRE, Mr. Mully was the Chief Executive Officer of European Property Partners Limited and a Managing Director and Head of European Merchant Banking for Prudential Insurance Company of America (“PRICOA”). Prior to PRICOA, Mr. Mully was a Partner and Managing Director of Bankers Trust Company (“BT”). He founded and headed BT’s European Real Estate Investment Banking Group in 1992 where he was responsible for the management of all aspects of this business until 1998. Mr. Mully holds a BS in Economics from university College London and an MBA from the City university Business School.

ROY DANTZIC (INDEPENDENT) Roy Dantzic is Non-Executive Chairman of Interior Services Group plc in addition to being a Non-Executive Director of Airplanes Ltd . Prior to these positions, Mr Dantzic was Finance Director of Stanhope Properties from 1992 until it was acquired in 1995, and Managing Director of British Gas property subsidiary from May 1996 until his retirement in May 2003. Mr Dantzic is a qualified accountant (a member of the Institute of Chartered Accountants of Scotland), a member of the Council of Management of the Architectural Heritage Fund and a Trustee of the Portman Estate.

Gualtiero Tamburini Fabrizio Lauro Nicholas James.

19 Spazio Investment N.V. Spazio Investment Board of Directors

GUALTIERO TAMBURINI (INDEPENDENT) Professor Tamburini is the President of Nomisma S.p.A. and scientific director of the Real Estate Department of the Company. He is an industrial economist by training and has world-class experience in research, co-ordination and development of real estate related projects, as well as consulting in the fields of construction and complex real estate programmes. Professor Tamburini has also served as a consultant for numerous Italian public and private bodies on economics and policies relating to real estate, construction and infrastructure. Professor Tamburini is currently the President of Assoimmobiliare (the Italian Association of real estate companies) and a member of a number of boards and commissions. He has also published extensively in the field of economics and is a Professor of Applied Economics at urbino university.

FABRIZIO LAURO (PIRELLI RE)Mr. Lauro, after receiving a degree in Economics from the university of Genoa, began his career with Morgan Stanley in London in 1998. He subsequently worked for General Electric for over eight years where he held high level positions in the European Finance and Corporate M&A functions. In 2003, he was appointed CFO of GE Real Estate Italia and in 2006 he became the Head of European Asset Management at D.B. Zwirn, an American special opportunity fund. Mr. Lauro joined Pirelli RE in December 2007 as Director, Advisory & Acquisitions, and is also the current CFO and COO of Spazio Investment N.V.. Mr. Lauro became effective on 9 December 2008 when he was appointed Director as a representative of Pirelli RE, replacing Mr. de Poulpiquet who resigned on the same date.

NICHOLAS JAMES (NON-INDEPENDENT)Nicholas James joined DTZ Debenham Tie Leung in 1991 where he trained as a chartered surveyor and worked until 1995. He then joined Rees Richards and Partners as a surveyor where he was made partner in 1998 and is responsible for Development and Investment. Nicholas currently serves on the board of a number of property development and property management companies in the uk, including Westhill Property Holdings Limited. He is also a director of Terra Catalyst Fund Limited. He has an MSc Property Management and Development from the university of Sheffield and is a member of the Royal Institute of Chartered Surveyors. Mr. James became effective on 9 December 2008.

MANAGEMENT TEAM

20 Spazio Investment N.V. Management team

KEY MANAGEMENT

ALBERTO IORIFUND MANAGER OF SPAZIO INDUSTRIALE FUND HEAD OF INDUSTRIAL BUSINESS UNITAfter his studies in economics at the universities of Pisa and Pavia, he began his professional career in 1989 at Milano Più S.p.A., a real estate holding company. Subsequently, Mr. Iori worked in Cushman & Wakefield where he held positions of increasing responsibility until he became Partner, head of industrial sector advisory as well as deputy of the European Industrial team, where he gained invaluable experience in international markets. Mr. Iori joined Pirelli RE in 2002 as Head of Investment & Asset Management for the industrial sector and set up the joint venture between Pirelli RE and Soros Real Estate Investors which resulted in the birth of Spazio Industriale. Today he is Spazio Industriale’s Fund Manager and has a track record of transactions in the industrial sector which makes him one of the most specialized and experienced managers in his field.

FABRIZIO LAURO BOARD MEMBER, COO AND CFO OF SPAZIO INVESTMENT N.V.Mr. Lauro, after receiving a degree in Economics from the university of Genoa, began his career with Morgan Stanley in London in 1998. He subsequently worked for General Electric for over eight years where he held high level positions in the European Finance and Corporate M&A functions. In 2003, he was appointed CFO of GE Real Estate Italia and in 2006 he became the Head of European Asset Management at D.B. Zwirn, an American special opportunity fund. Mr. Lauro joined Pirelli RE in December 2007 as Director, Advisory & Acquisitions, and is also the current CFO and COO of Spazio Investment N.V..

GIACOMO SONZINIHEAD OF INDUSTRIAL ASSET MANAGEMENT UNITAfter receiving a degree in Environmental Engineering from Milan’s “Politecnico” university in 2002, Mr. Sonzini acted as a research assistant at “Politecnico” in the course of a project involving the treatment of waste water. In 2003 he joined Pirelli RE covering positions of increasing responsibility in the Industrial Investment & Asset Management Division where he worked initially as an analyst for the Acquisition Team and, subsequently, he played an active role in the execution of numerous deals. He is head of Industrial Asset Management as of 2005.

GIORDANO GRAFF HEAD OF INDUSTRIAL DEVELOPMENT ASSET MANAGEMENT UNIT who holds a degree in Architecture and a Master’s Degree in Strategic Design

from Milan’s “Politecnico” university. He began his professional career in 2002 with Pirelli RE Franchising where he was involved in the development of the Franchising network. He subsequently held positions of increasing responsibility in Pirelli RE’s Asset Management area. Currently he is head of the Industrial Development Asset Management unit.

SILVIA SAVASTAASSET MANAGER - INDUSTRIAL ASSET MANAGEMENT UNITwho holds a degree in Economics from the university of Turin, began her professional career with Lingotto S.p.a in Turin and, subsequently, worked for IPI S.p.A. where she covered positions of increasing responsibility in the management control, financial analysis and asset management divisions. Ms. Savasta joined Pirelli RE in 2005 as an industrial portfolio Asset Manager.

STEFANIA MANDELLI ASSET MANAGER - INDUSTRIAL ASSET MANAGEMENT UNIT who holds a Bachelor’s Degree in Architecture and a Master’s Degree in Real Estate Management from Milan’s “Politecnico” university. Ms. Mandelli began her professional career in 1998 with an integrated services property management company, “Arcotecnica Real Estate”. She joined Pirelli RE Property Management in 2002 and currently is an Asset Manager of Spazio Industriale Fund.

GIORDANO BARBIERIASSET MANAGER - INDUSTRIAL ASSET MANAGEMENT UNITMr. Barbieri began his professional career in 1989 as a foreman and project manager. Between 1991 and 1999 he continued to develop his professional skills acting as the technical manager of residential, commercial and office buildings. He joined the Pirelli RE in 1999 initially as Building Manager and then as Property Manager. In January 2007 he became part of Industrial Portfolio Asset Management.

ANDREA FRANCESEASSET MANAGER - DEVELOPMENT ASSET MANAGEMENT UNIT who holds a degree in Political Science from the university of Turin as well as a Master’s Degree in territorial development from Turin’s Politecnico university. After working briefly for Meie Assicurazioni, Mr. Francese began to work for Cushman & Wakefield in Milan. In the course of this experience he further strengthened his expertise in the area of appraisals and feasibility studies, in particular in regard to commercial and industrial real estate.He has been working as an asset manager with Pirelli RE since 2002. Currently, Mr. Francese coordinates the value added aspects of Fondo Spazio Industriale’s development projects.

DuRING 2008 THE EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS HAS RESOLVED TO PuT IN PLACE NEW INCENTIVE ARRANGEMENTS IN ORDER TO ALIGN THE INTERESTS OF THE kEY MANAGEMENT(*) MORE CLOSELY TO THE INTERESTS OF THE COMPANY’S SHAREHOLDERS. THIS TEAM IS CONSIDERED DIRECTLY RESPONSIBLE FOR SuPERVISING THE COMPANY’S ACCELERATED BuSINESS PLAN.

(*) including Pirelli RE’s executives: Rodolfo Petrosino, Renzo Misitano and Francesco Allegretta.

Alberto Iori

21 Spazio Investment N.V. Management team

MARIO ANGELINIAGENCY - HEAD OF INDUSTRIAL DEPARTMENTMr. Angelini began his professional career in 1991 with the real estate agency network “Tecnocasa”. During this experience he further strengthened his expertise in the industrial and commercial real estate markets. He then worked as director in a private institute specializing in real estate training. In 2004 he joined Pirelli RE covering positions of increasing responsibility in the Industrial & Land sales department where he worked initially as head of centre-south Region and, subsequently, he was responsible for Italy. Now he is head of captive sales Industrial & Land department.

MARCO MONSELESANAGENCY - INDUSTRIAL DEPARTMENTAfter receiving a degree in Environmental Engineering from Padova’s university in October 2002, Mr. Monselesan acted as Veneto junior area manager for SIB S.p.A commercial structure, one of the biggest Italian Service Companies managing NPL portfolios. In 2004 he joined Gruppo Immobiliare Paulin srl, a real estate company located in Friuli Venezia Giulia, as asset manager of their real estate portfolios. In 2005 he began to work with Fin.Service S.p.A. a company focused on NPL investments as asset manager and head of the acquisition team. In 2007 after a short experience in Blue Skye Italia Srl, a JV with Fin.Service S.p.A. focused on NPL investments, he joined Pirelli RE Agency as primary account of Fondo Spazio Industriale and of knight Frank, one of the biggest international Agency structures that works in Italy in JV with Pirelli RE Agency S.p.A..

MARCO MACCARIOAGENCY - INDUSTRIAL DEPARTMENTAfter receiving a degree in Architecture from Milan’s “Politecnico” university in 2004, Mr. Maccario acted as a consultant for several engineering companies located in Milano area. In 2005 he joined Pirelli RE Agency S.p.A. developing his professional skills concerning real estate market, by managing the sale process related to industrial and land assets and then as account of Pirelli RE network franchisees in relation to the real estate product flow. Since 2007 Mr. Maccario works in Pirelli RE Agency team dedicated to Fondo Spazio Industriale portfolio as account for the first contact requests and preliminary sale contracts.

DEDICATED CORPORATE & FUND MANAGEMENT TEAM

ROBERTO MURONICHIEF ADMINISTRATIVE OFFICER OF PIRELLI RE NETHERLANDS B.V.who holds a degree in Economics from Milan’s “Cattolica del Sacro Cuore” university, began his professional career as financial analysis and management control in an industrial holding structure. Mr. Muroni joined Pirelli RE’s Administration and Control Division in 2001, initially as Head of Service Provider Administrative Division, and subsequently as Head of Investment and Asset Management Finance Division. In October 2008 he joined Pirelli RE Netherlands B.V. as Chief Administrative Officer of the Company.

JESSE MARTIJNSE COMPANY LAW AND LEGAL AFFAIRS MANAGER - PIRELLI RE NETHERLANDS B.V.who holds a Masters degree in Dutch Law – Notarial from the university of Amsterdam. He began his professional career in 1999; in 2001 he joined the Corporate Legal Department of Scala Business Solutions N.V. In 2002 he took office as Corporate Legal Counsel and head of the Corporate Legal Department, where he was responsible for all legal affairs of the company. In 2004 he moved to the united kingdom and took office as Associated Corporate Counsel at the EMEA headquarters of “Epicor Software Corporation”, a Nasdaq listed company, where he was responsible for the Company’s legal and company law affairs in EMEA. In January 2008 Mr. Martijnse returned to Amsterdam to join Pirelli RE’s legal department as Company Law and Legal Affairs Manager.

GILBERTO MAZZOCCHI ADMINISTRATION, PLANNING & CONTROL - PIRELLI RE NETHERLANDS B.V.After serving several years as a Senior Accountant and Financial Controller for the Amsterdam office of Impregilo International Infrastructures N.V. (the Italian branch of Impregilo S.p.A. Group), in October 2006 Mr. Mazzocchi joined Pirelli RE Netherlands B.V. as the office manager in charge of the Corporate and Administrative services within the Corporate Management Agreement of Spazio Investment N.V..

THOMAS RIVOLTACORPORATE MANAGER OF SPAZIO INVESTMENT N.V. who holds a degree in Economics from the Milan’s “Bicocca” university, began his professional career in 2005 working for an Italian insurance company. After a short experience with an Italian asset management company, he joined Pirelli RE in February 2007 as an analyst in the Advisory & Acquisitions Department were he primarily focussed on Retail foreign acquisitions. In March 2008 he joined the Industrial unit, in charge of the corporate management of Spazio Investment N.V..

FRANCESCO VALLIASSET MANAGER - DEVELOPMENT ASSET MANAGEMENT UNITwho holds a degree in Management Engineering from Milan’s “Politecnico” university, began his professional career in 2004 developing integrated management software for a design company. In 2006 Mr. Valli joined Pirelli RE as an Asset Manager of Industrial Development Projects.

STEFANO DIRINDINADMINISTRATIONwho holds a degree in Institutional Economics and Financial Markets from Milan’s “Cattolica del Sacro Cuore” university, began his professional career in 2003 with Pirelli RE Administration and Consolidated Financial Reports Division. As of 2004, Mr. Dirindin has been involved in the administration of the Industrial sector. Currently he is in charge of the financial statements for the “Retail & Industrial” unit.

JAN MAGNIPLANNING & CONTROLwho holds a degree in Economics form LIuC university of Castellanza, began his professional career in 1999 in kPMG as junior auditor, mainly focussed on global industrial companies; after an experience in Ernst & Young as senior auditor, from the end of 2003 he worked for Sicor Spa, an Italian pharmaceutical company, member of Teva Group. In 2007 he joined Pirelli RE Group as controller of Pirelli RE SGR, the fund management company of Pirelli RE. Since November 2008, Mr Magni is in charge for Industrial Planning & Control activities.

GIANLUCA RIONTINO STRUCTURED FINANCE MANAGER who holds a degree in Management Engineering from Milan’s “Politecnico” university. He began his professional career as a consultant for Mckinsey and, subsequently, worked for Centrobanca - “Banche Popolari unite Group’s Investment Bank” - where he covered positions of increasing responsibility in the division active in structured financing for LBOs and real estate deals. He joined the structured finance unit of Pirelli RE in 2004 as head of the “Retail & Industrial” unit. As of 2006 he is responsible for all commercial structured finance both in Italy and abroad.

PIRELLI RE

22 Spazio Investment N.V. Pirelli RE

Active in Italy, Germany and Poland, Pirelli RE (Pirelli & C. S.p.A. Group) is one of the main players in the European real estate sector.

The company has been listed on the Milan Stock Exchange since 2002.

Pirelli RE is a real estate fund & asset management company which acquires, adds value to and manages high quality property portfolios by taking minority stakes in partnerships with leading international investors.

Real estate assets under management have a value of € 15.4 bn (market value as at 31 December 2008, including € 0.4 bn of assets completely owned by third parties) of which € 3.8 bn are assets owned by the Pirelli RE Group.

Geographically, just over half of the assets managed are located in Germany (€ 7.6 bn) and in Poland (€ 0.2 bn in development projects), with the remaining balance in Italy (€ 7.6 bn, of which € 5.8 bn in 19 real estate funds).

The organization structure based on geographical areas – Italy, Germany and Poland - and product-oriented business units combines knowledge of local markets with specialist know-how in different segments.

CORPORATE GOVERNANCE

23 Spazio Investment N.V. Corporate Governance Statement

Even though the Company is not mandatory required to comply with the united kingdom Combined Code on Corporate Governance, as published in 2003 by the Financial Reporting Council (the “Combined Code”), the Board has recognised since the Company’s admission to AIM that it is in the best interests of the Company and its shareholders to comply with the principles of corporate governance contained in the Combined Code, to the extent these are appropriate to a company incorporated in The Netherlands, and to support high standards of corporate governance, as an AIM-listed company.

The Company is also subject to the Dutch Corporate Governance Code (“DCG Code”), which also applies to Dutch public limited liability companies listed on AIM. Pursuant to the DCG Code, the Company is obliged to include a description in its annual report of its compliance to the best practice provisions of the DCG Code and in case of non-compliance to provide an explanation thereof.

The Board considers that based on its choice to comply with the principles of corporate governance contained in the Combined Code, the Company’s corporate governance procedures, as further described in this section, are appropriate for a company of its size and activities and are generally in line with the best practice provisions of the DCG Code. The Company hence does not deem necessary to explicitly explain deviations from the best practice provisions of the DCG Code.

The Company complies in full with the principles of the Combined Code, save for the following:

Combined Code provision A.3.3 provides that one of the `non-executive directors should be appointed as senior independent director and that he/she should be available to shareholders if they have concerns that other contact with the Company has not resolved. The Board has not appointed such senior independent director to date to carry out this function. The Board considers that since all the directors are non-executive it is not necessary for the time being for the Board to appoint such senior independent director.

Combined Code provision A.6.1 requires the Board to state `in the annual report how performance evaluation of the Board, its committees and its individual directors has been conducted and that the non-executive directors, led by the senior independent director, should be responsible for performance evaluation of the Chairman, taking into account the views of executive directors. The Board has commenced with preparation of a formal evaluation programme of its own performance and that of its committees and individual directors.

Combined Code provision C.2.1 state that the Board should `report on their review of the effectiveness of the Company’s system of internal controls. As a minimum it should disclose that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company, that it has been in place for the year under review and up to the date of approval of the annual report and accounts and that it is regularly reviewed by the Board. Given the specific structure of Spazio, which has no employees, and is managed by an external fund- and corporate manager the Board has decided

not to issue a statement on internal control. In stead reference is made to the paragraph in this chapter relating to internal controls.

Combined Code provision D.2.4 states that the Company `should arrange for the notice of the Annual General Meeting and related papers to be sent to shareholders at least 20 working days before the meeting. However Dutch law and the Company’s articles of association require that the notice of call for all general meetings is made at least fifteen days prior to the date of the meeting. Accordingly the Board in compliance with Dutch law and the Company’s articles of association shall continue to provide 15 days notice for its general meetings of shareholders.

BOARD COMPOSITION AND ROLEThe Company operates a one-tier governance structure with a single board of Directors. During the extraordinary general meeting of shareholders held on 9 December, 2008, the shareholders’ body resolved to increase the number of Directors to a total of six Directors. The formal board structure was not changed. The Board relies on service providers to undertake executive and management activities in relation to the business and operation of the Company and its portfolio. Corporate and administrative services, including budgeting-, legal-, secretarial- and investor relations services, are provided to the Company by the Corporate Manager, Pirelli RE Netherlands B.V., a wholly owned subsidiary of Pirelli RE, to which company the Board has granted a continuing proxy to that effect. The responsibilities of the Corporate Manger are described in further detail below.

The Board has overall responsibility for the management of the Company and is responsible to the shareholders for the performance of the Company. The Schedule of Reserved Matters, which was adopted by the Board on 25 September 2006, details matters that are solely reserved for the Board and which may not be delegated by the Board, including, amongst other matters: approval of alterations to the fund management arrangements; annual budgets and corporate plans; and material acquisitions and expenditure. To enable the Board to perform its duties, each Director has full access to all relevant information and regular meetings with the Corporate Manager (see below).

Each Director is required to retire from the Board, no later than the day of the first shareholder’s meeting held following expiry of the three year period from the date of his appointment. The Shareholders are entitled to appoint the members of the Board. However, as long as a holder of issued and outstanding preferred shares is also a holder of at least 10% of the aggregate issued and outstanding ordinary shares, such preferred shareholder shall have the right to nominate one Board member, which shall be appointed by the shareholders from a list of nominees, containing the names of at least two persons for each vacancy. The nomination shall be binding unless a qualified majority of the shareholders deprives the nomination of its binding character.


DIRECTOR’S INDEPENDENCEThe Combined Code states that the Board should determine whether a Director is independent in character and judgment and whether there are relationships or circumstances that are likely to affect, or could appear to affect, the Director’s judgment. under the provisions of the Combined Code, four of the six Directors (including the Chairman) can be considered to be independent, these being: John Duggan, Roy Dantzic, Gualtiero Tamburini and Richard Mully. Nicholas James has been appointed to the Board as a non-independent director, and Fabrizio Lauro as a representative of Pirelli RE.

BOARD COMMITTEESAs recommended by the Combined Code, the Company has established the following three committees: a Remuneration Committee, a Nomination Committee and an Audit Committee.

The terms of reference of the committees have been supplemented with additional provisions from the Combined Code as applicable to AIM companies (taking into account the guidance for AIM companies issued by the Quoted Companies Alliance in July 2005), and have been adopted by the Board in the meeting of 23 October 2006. A brief description of the terms of reference of the committees is set out below.

REMUNERATION COMMITTEEThe Remuneration Committee is comprised of John Duggan, Roy Dantzic and Gualtiero Tamburini and meets at least once each year. The Remuneration Committee is chaired by John Duggan. Subject always to the remuneration policy adopted by the General Meeting, the committee’s responsibility, amongst other matters, is to make recommendations to the Board on the framework of the Directors’ remuneration and to ensure that the Directors are fairly, but responsibly rewarded for their individual contribution to the overall performance of the Company. No Director may be involved solely in any decisions regarding his/her own remuneration.

The terms of reference of the Remuneration Committee include the following responsibilities:

to consider the basic salary paid to the Directors and any `recommendations made by the Chairman of the Company for changes to that basic salary and to advise on and determine all performance–related formula relevant to the remuneration of the Directors;

to consider other benefits granted to the Directors; `

to consider and make recommendations in respect of any òther terms of the service contracts of the Directors and any proposed changes to those contracts;

to have regard to any published guidelines or `recommendations regarding the remuneration of directors of listed companies which the Remuneration Committee considers relevant or appropriate;

to consider each year whether the Shareholders at the ànnual general meeting should be invited to approve the remuneration policy; and

to assist the Board in preparing an annual report on the `remuneration policy of the Company.

As the members of the Board were appointed in connection with the admission of the Company to trading on AIM in October 2006 and the terms and conditions of such appointment were described in the Company’s Admission Document, a remuneration report has not been prepared for the purposes of this Annual Report of the Company.

NOMINATION COMMITTEEThe Nomination Committee is comprised of John Duggan, Roy Dantzic and Gualtiero Tamburini and met once during the year. The Nomination Committee is chaired by John Duggan. The committee’s main responsibilities include, but are not limited to making recommendations to the Board on the appointment of new Company Directors, preparing selection criteria and appointment processes for members of the Board (including making recommendations as to the composition of the Board) and reviewing, on a regular basis, the structure, size and composition of the Board.

The terms of reference of the Nomination Committee include the following responsibilities:

to implement Board decisions in relation to the appointment òf new Directors to the Board;

to establish procedures for the appointment of Directors ìncluding communicating with the Chairman of the Company;

to agree to job specifications and written terms of àppointment for Directors;

to seek advice from outside advisors in relation to àppointments;

to make recommendations to the Board in relation to àppointments including recommendations regarding membership of the Audit Committee; and

to observe to the Combined Code in relation to any `recommendations therein for appointments.

CORPORATE GOVERNANCE STATEMENT CONTINuED


AUDIT COMMITTEEThe Audit Committee consists of John Duggan, Roy Dantzic and Gualtiero Tamburini and meets at least twice a year and is currently chaired by Roy Dantzic, and the external auditor was present to the both meetings. The Audit Committee considers, amongst other matters, the Consolidated Financial Statements of the Company, including its annual and interim accounts, the effectiveness of the Company’s internal controls and risk management systems and the terms of appointment and remuneration of the Auditors.

The terms of reference of the Audit Committee include the following responsibilities:

to review the scope and results of the annual audit and its cost èffectiveness and the independence and objectivity of the Auditors;

to consider the appointment of external auditors, the audit `fee, and any questions of resignation or dismissal;

to discuss the Auditors’ engagement letter with the external àuditors before the audit commences, including the nature and scope of the audit, and other relevant matters;

to review the half year and annual Consolidated Financial `Statements, the accompanying reports to shareholders, the preliminary announcement of results and any other announcement regarding the Company’s results or other financial information before submission to the Board;

to review and approve the audit plans and conclusions of `Pirelli RE’s internal audit function so far as it relates to the activities of the Fund and the Company with regard to internal control; and

to review the effectiveness of the Company’s systems of ìnternal control.

CORPORATE GOVERNANCE OF THE FUNDThe corporate governance structure set out in the rules governing the Fund is aimed at providing active involvement of unitholders in the decision-making process of the Fund Manager with respect to important management decisions regarding the assets of the Fund.

As sole unitholder of the Fund, the Company has two specific mechanisms by which it approves material decisions of the Fund Manager. First, the rules governing the Fund provide that certain matters must be approved by the unit holders at a unit holders’ meeting. Secondly, certain matters must be approved by the fund advisory committee, which is elected by the unit holders. As the Company currently owns 100% of the units it, acting through its Board, currently controls 100% of the votes at any unitholders’ meeting and appoints all of the fund advisory committee members.

Board directors John Duggan and Roy Dantzic are members of the Fund Advisory Committee, together with Pirelli RE executive Mario Tornaghi*. The Fund Advisory Committee is chaired by John Duggan. It is through these representatives that the Company monitors the performance of the Fund Manager in executing the

Fund’s investment strategy and managing the Fund’s properties and approves the acquisition, refurbishment, redevelopment, re-conversion or disposal of individual properties or portfolios. The fund advisory committee is required to meet at least four times a year.

FREQUENCY OF MEETINGSIn the period from 01 January 2008 to 31 December 2008, the Board held six Board Meetings. The Management Board committees met separately as follows: The Nomination committee held one meeting; the Remuneration Committee did not convene as no changes to the remuneration were anticipated; the Audit Committee convened twice; and the Fund Advisory Committee held seven meetings during this period. All Board meetings took place in The Netherlands.

INTERNAL CONTROLSThe Directors have overall responsibility for reviewing the effectiveness of the Company’s internal controls. The processes used by the Directors to review the effectiveness of the internal controls are through the Audit Committee and the Corporate Manager reporting to the Board on a regular basis. There are limitations in any system of internal control, which can provide reasonable but not absolute assurance with respect to the preparation of financial information, the safeguarding of assets and the possibility of misstatement or loss.

CORPORATE MANAGER’S RESPONSIBILITIES AND REPORTINGAs stated above, the Corporate Manager provides corporate and administrative services to the Company. The Board has appointed the Corporate Manager as a proxy holder of the Company and as such the Corporate Manager has an ongoing power of attorney to provide such services to the Company. The accounting, treasury and tax activities of the Company include but are not limited to assistance in the preparation of the Consolidated Financial Statements of the Company, general book keeping, daily monitoring and management of the cash, supporting and assisting the external auditors and the provision of detailed information related to ongoing investments. The Corporate Manager is also responsible for the production of reports to assist the financial planning and control activities of the Company, including (based on the Board’s guidelines) the definition of the Company’s long-term plan and budget and the production of reports monitoring and comparing forecasts against actual data.

Furthermore the Corporate Manager is responsible for providing such services required to ensure that the Company meets its ongoing obligations under the Articles of the Company, the AIM Rules and any other applicable laws and regulations and is responsible for managing relations with the Company’s external legal advisors.

The Corporate Manager attends all meetings of the Board and all shareholder meetings. It is also responsible for coordinating and supporting the Company’s investor relations program.

SHARE DEALING CODEThe Company has adopted a share dealing code for the members of the Board and certain employees that is appropriate for a company whose shares are admitted to trading on AIM (particularly relating to dealings during close periods in accordance with Rule

*Replaced by Fabrizio Lauro in February 2009.


DIRECTORS’ REMUNERATION FOR THE PERIOD 01 JANUARY 2008 – 31 DECEMBER 2008

Directors €

Board of Directors

John Duggan Independent Director and Chairman

120,000 per annum

Roy Dantzic Independent Director 60,000per annum

Gualtiero Tamburini Independent Director 60,000per annum

Olivier de Poulpiquet Representative Director (Pirelli RE)

60,000per annum

(received € 56,451 as calculated pro-rata until

his resignation effective on 09

December 2008)

Richard Mully Independent Director 60,000 per annum

Fabrizio Lauro Representative Director (Pirelli RE)

60,000 per annum

(received € 3,549 as calculated pro-rata as of

his appointment effective 09

December 2008);

Nicholas James Non-Independent Director

60,000 per annum

(received € 3,549 as calculated pro-rata as of

his appointment effective 09

December 2008)

Audit Committee

Roy Dantzic Chairman 5,000

DIRECTORS’ SHAREHOLDING

For the period 1 January, 2008 - 31 December 2008, the Directors did not hold shares in the Company.

21 of the AIM Rules). The Company takes all reasonable steps to ensure compliance with such code by the members of the Board and any relevant employees.

RELATIONS WITH SHAREHOLDERSThe Company has a policy of active communication with its investors, including presentations at the time of interim and final results and at other times throughout the year and one-to-one meetings with investors and analysts.

The Board, including the chairmen of the Nomination, Remuneration and Audit Committees, will be available at the Annual General Meeting to answer questions from Shareholders in regards to their activities. The latest and historical financial and other information on the Company can be found at the Company’s website, www.spazioinvestment.com.

CORPORATE RESPONSIBILITYSpazio Investment is committed to operate in a safe, consistent, honest and responsible manner. Every action the Company takes is rooted in a belief that it has an obligation to uphold the interests of the people who work for the Company, its shareholders, the tenants it serves, the communities in which it operates and the environment it shares. The Company’s commitment to acting responsibly is embedded in the way it manages the business.

The Company actively fosters a culture of ”doing the right thing” among its staff as well as its external partners, notably those involved in the Company’s development activities.

In recent years, there has been a growing consensus among the business community in general and property developers in particular that the way the world is growing is no longer sustainable. The Company recognizes that there is a pressing need to embrace more viable ways of meeting the world’s present needs without compromising the ability of future generations to meet theirs. In response, the Company is committed to broadening its corporate responsibility culture to incorporate the principles of sustainable development.

CORPORATE GOVERNANCE STATEMENT CONTINuED

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008 (IN EuRO)

27 Spazio Investment N.V. Consolidated balance sheet

€ €

ASSETS Note 31 December 2008 31 December 2007

Non-current assets

Investment property 1 626,390,000 619,780,000

CURRENT ASSETS

Inventories 2 97,010,496 89,904,481

Trade receivables 3 2,007,725 5,094,683

Other receivables 4 466,428 1,977,195

Derivative financial instruments 5 - 5,035,512

Cash and cash equivalents 6 79,766,399 103,332,229

Total current assets 179,251,048 205,344,100

Total assets 805,641,048 825,124,100

EQUITY

Share capital 7 5,498,279 6,096,020

Share premium 8 274,486,750 308,956,491

Retained earnings 9 87,778,559 100,361,034

Total equity 367,763,588 415,413,545

LIABILITIES

Non-current liabilities

Bank borrowings and payables to other financial institutions 10 412,887,003 385,527,853

CURRENT LIABILITIES

Bank borrowings and payables to other financial institutions 10 115,060 61,476

Trade payables 11 11,691,007 20,564,041

Other payables 12 5,364,109 2,937,456

Tax payables 13 670,488 619,729

Derivative financial instruments 5 7,149,793 -

Total current liabilities 24,990,457 24,182,702

Total liabilities and equity 805,641,048 825,124,100

The notes on page 31 to page 50 are an integral part of these consolidated financial statements.

CONSOLIDATED INCOME STATEMENT FOR THE PERIOD FROM 1 JANuARY 2008 TO 31 DECEMBER 2008 (IN EuRO)

28 Spazio Investment N.V. Consolidated income statement


€ €

Note 01 January 2008-31 December 2008

01 January 2007-31 December 2007

Rental income 14 42,774,239 ` 42,629,650 `

Net gain/(loss) from fair value adjustment on investment property 15 (11,698,988) ` 22,983,450 `

Net gain on disposal properties 16 2,594,838 ` 5,827,100 `

Net gain on disposal inventories 17 2,742,690 ` 2,551,025 `

Other operating income 18 445,777 ` 1,202,626 `

Realised and unrealised gain/(loss) from fair value adjustment on financial assets 19 (12,185,305) ` 3,428,442 `

Management fees 20 (5,223,039) ` (5,172,963) `

Other costs 21 (9,970,828) ` (9,992,498) `

OPERATING RESULT BEFORE FINANCING COSTS 9,479,384 ` 63,456,832 `

Financial income 22 5,667,492 ` 3,767,350 `

Financial expenses 23 (23,715,590) ` (22,343,551) `

RESULT BEFORE TAX (8,568,714) ` 44,880,631 `

Tax expense 24 - ` - `

RESULT FOR THE PERIOD (8,568,714) ` 44,880,631 `

Basic and diluted earnings per share (Euro) 25 (0.30) ` 1.47 `

CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD FROM 1 JANuARY 2008 TO 31 DECEMBER 2008 (IN EuRO)

29 Spazio Investment N.V. Consolidated cash flow statement

€ €

Note 01 January 2008-31 December 2008


Result for the period 9 (8,568,714) ` 44,880,631 `

Adjustments for non-cash items:

- Financial expenses 23 23,715,590 ` 22,343,551 `

- Financial income 22 (5,667,492) ` (3,767,350) `

- Change in fair value of investment property 1 11,698,988 ` (22,983,450) `

- unrealised gain on assets held for trading / derivatives 12,185,305 ` (3,428,442) `

- Adjustment IPO costs - ` 51,649 `

Changes in working capital:

- Change in trade receivables/payables (5,786,076) ` 1,008,764 `

- Change in other and tax receivables/payables 3,791,707 ` 4,332,363 `

- Change in other and tax receivables/payables (VAT) 196,472 ` 48,291,061 `

Investment in inventories 2 (16,610,825) ` (43,568,114) `

Disposal in inventories 2 9,504,810 ` 7,151,975 `

Net cash flow generated / (absorbed) from operating activities (A) 24,459,765 ` 54,312,638 `

Acquisition of investment property 1 (67,358,988) ` (29,677,050) `

Acquisition cost plus additions to properties disposed 1 49,050,000 ` 54,000,500 `

Interest received 4,083,395 ` 1,997,040 `

Disposal / (investment) in financial assets at fair value through profit and loss - ` 20,419,228 `

Net cash flow generated / (absorbed) from investing activities (B) (14,225,593) ` 46,739,718 `

Interest paid 10 (24,546,845) ` (21,507,970) `

Dividend distribution of the profit 9 (38,412,634) ` (10,602,387) `

Proceeds of borrowings and payables to banks and other financial institutions 29,828,086 ` (16,483,643) `

Purchase of shares 9 (668,609) ` (35,028,081) `

Net cash flow generated / (absorbed) from financing activities (C) (33,800,002) ` (83,622,081) `

Total net cash flow generated / (absorbed) in the period (D=A+B+C) (23,565,830) ` 17,430,275 `

Cash and cash equivalents at the beginning of the period (E) 103,332,229 ` 85,901,954 `

Cash and cash equivalents at the end of the period (D+E) 79,766,399 ` 103,332,229 `


CONSOLIDATED STATEMENT OF CHANGES IN EQuITY FOR THE PERIOD FROM 1 JANuARY 2008 TO 31 DECEMBER 2008 (IN EuRO)

30 Spazio Investment N.V. Consolidated statement of changes in equity

Share capital Share premium Retained earnings Equity

Note € € € €

Equity at 31 December 2007 6,096,020 ` 308,956,491 ` 100,361,034 ` 415,413,545 `

Dividend 2007 8 - ` - ` (22,224,452) ` (22,224,452) `

Interim dividend 2008 8 - ` - ` (16,188,182) ` (16,188,182) `

Purchase of share capital 8 - ` - ` (668,609) ` (668,609) `

Cancelled acquired shares 7-8 (597,741) ` (34,469,741) ` 35,067,482 ` - `

Result of the period - ` - ` (8,568,714) ` (8,568,714) `


Share capital Share premium Retained earnings Equity

Note € € € €


Cost of IPO - ` 51,649 ` - ` 51,649 `

Dividend 2006 - ` - ` (3,962,400) ` (3,962,400) `

Interim dividend 2007 - ` - ` (6,639,987) ` (6,639,987) `

Purchase of share capital - ` - ` (35,028,081) ` (35,028,081) `

Result of the period - ` - ` 44,880,631 ` 44,880,631 `



31 Spazio Investment N.V. Notes to consolidated financial statements

INTRODUCTIONSpazio Investment N.V. (the “Company”, formerly Spazio Industriale Investments I B.V.), incorporated on 22 November 2005, is a public company (listed at Alternative Investment Market – London) with limited liability (naamloze vennootscap) domiciled in Amsterdam, The Netherlands. The address of the registered office is Royal Damcenter, Dam 7f, 1012 JS Amsterdam, The Netherlands.The principal activity of the Company is holding of investments in subsidiaries and associates.

The Company totally owns the units of the close-ended real estate investment fund “Spazio Industriale – Fondo Comune di Investimento Immobiliare di Tipo Chiuso” (the “Fund”). The Fund invests in real estate and operates in the development of land and buildings under renovation.

The consolidated financial statements were authorised for issue by the board of directors on 25 March 2009.

SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies used in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied, unless otherwise stated.

Basis of preparationPursuant to Regulation 1606 issued by the European Parliament and the European Commission in July 2002, the consolidated financial statements at 31 December 2008 of Spazio Investment N.V. have been prepared on the basis of International Financial Reporting Standards as adopted by the European union (“IFRS”) (including International Financial Reporting Interpretations Committee (“IFRIC”) interpretations).

The comparative figures in the consolidated income statement and the consolidated cash flow statement for the period from 1 January 2008 up to 31 December 2008 refer to the year 2007.

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates described in the paragraph “Accounting estimates and assumptions”. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.

The profit and loss account included in the Company financial statements is presented in abbreviated form in accordance with article 2:402 of the Dutch Civil Code.

The functional currency is the Euro. All values indicated in the Notes to these consolidated financial statements are expressed in Euro unless specified otherwise. All transactions and balance sheet positions are in Euro.

The consolidated financial statements have been audited by PricewaterhouseCoopers Accountants N.V..

Standards, amendment and interpretations effective from 1 January 2008Amendments to IAS 39 “Financial Instruments: Recognition and Measurement” and IFRS 7 “Financial Instruments: Disclosures”: reclassification of financial assets.

The amendments to IAS 39 introduce the possibility of reclassifications, in rare circumstances, of some financial instruments out of the fair value through profit or loss category to other category. The amendment also permits an entity to transfer from available-for-sale category to the loans and receivables category a financial asset that would have met the definition of loans and receivables if the entity has the intention and ability to hold that financial asset for the foreseeable future.

An entity shall not reclassify:a derivative; àny financial instrument that upon initial recognition it was `designated by the entity as at fair value through profit or loss.

These amendments have been endorsed by the European union on October 2008. A further amendment (“Reclassification of financial assets – Effective date of transition”), issued in November 2008, clarified the effective date and transition requirements of the earlier amendment issued in October. In particular any reclassification made from 1 July until 31 October 2008 shall apply form 1 July 2008, while any reclassification made on or after 1 November 2008 shall take effect only from the date when the reclassification is made.

The application of these amendments have not had an impact on the Company financial statements.

New standards or interpretationsAs required by IAS 8 (“Accounting policies, changes in accounting estimates and errors”), below is a brief description of new accounting standards or interpretations that have been issued but are not yet in force or not yet endorsed by the European union.

The Group has adopted none of these standards or interpretations in advance of their effective date.

IFRIC 11, ‘IFRS 2 – Group and treasury share transactions’, èffective from 1 January 2009, is not applicable to the Fund;IFRIC 12, ‘Service concession arrangements’, effective from 1 `January 2008 but not yet endorsed, is not applicable to the Fund;IFRIC 13, ‘Customer loyalty programmes’, effective from 1 `January 2009, is not expected to have a material impact on the Fund financial statements;IFRIC 14, ‘IAS 19 – the limit on a defined benefit asset, `minimum funding requirements and their interaction’, effective from 1 January 2009, is not applicable to the Fund;IFRIC 15, ‘Agreements for the Construction of Real Estate’. `This interpretation provides guidelines on determining whether an agreement for the construction of real estate units is within the scope of IAS 11 “Construction Contracts” or IAS 18 “Revenue”, defining the point in time in which revenues should be recognised. IFRIC 15, not yet endorsed by the European union, will become effective from 1 January 2009. The future application of this interpretation is not expected to have a material impact on the Fund financial statements since the Fund accounting treatment is already in line with the above changes;IFRIC 16, ‘Hedges of a Net Investment in a Foreign Operation’, èffective from 1 October 2008 but not yet endorsed by the European union, is not applicable to the Fund;

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSAS AT 31 DECEMBER 2008


IFRIC 17, ‘Distributions of non-cash assets to owners’, not yet èndorsed by the European union, will be effective for financial years beginning after 30 June 2009. The application of this interpretation is not expected to have an impact on the Fund financial statements;IFRIC 18, ‘Transfers of Assets from Customers’. This ìnterpretation, not yet endorsed by the European union, has been issued on January 2009 and will be effective from 1 July 2009. The application of this interpretation is not expected to have an impact on the Fund financial statements;IFRS 8, ‘Operating segments’, effective from 1 January 2009. ÌFRS 8 replace IAS 14, ‘Segment reporting’, and requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. The expected impact is still being assessed in detail, but it appears likely that the number of reported segments may increase;IAS 23 (amendment), ‘Borrowing costs’, effective from 1 `January 2009. This amendment, which is part of the project for convergence with uS GAAP (SFAS 34 Capitalization of Interest Cost), removes the option of immediately expensing borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. Therefore, borrowing costs are required to be capitalised as part of the cost of that asset. The future application of the amendment is not expected to have a material impact on the Fund financial statements since the Fund does not adopt itself of the option that was eliminated;IAS 1 (revised), ‘Presentation of financial statements’, effective `from 1 January 2009. Management is in the process of developing proforma accounts under the revised presentation requirements of these standards;IFRS 2 (amendment) ‘Share-based payment’, effective from 1 `January 2009 is not applicable to the Fund;IFRS 3 (revised), ‘Business combinations’ and consequential àmendments to IAS 27, ‘Consolidated and separated financial statements’, IAS 28, ‘Investments in associates’ and IAS 31, ‘Interests in joint ventures’, effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. Management will assess the impact of the new requirements regarding acquisition accounting, consolidation and associates on the Fund. The Fund does not have any investment in subsidiaries, joint ventures or associates;IAS 32 (amendment), ‘Financial instruments: presentation’, ànd consequential amendments to IAS 1, ‘Presentation of financial statements’, effective beginning January 1, 2009 is not applicable to the Fund, as it does not have any puttable instruments;IFRS 1 (amendment) “First-time Adoption of International `Financial Reporting Standards” and IAS 27 (amendment) “Consolidated and Separate Financial Statements” – Cost of an investment in a subsidiary, jointly controlled entity or associate. These amendments, endorsed by the European union on January 2009 and effective from 1 January 2009 are not expected to have a material impact on the Fund financial statements;IAS 39 (amendment) “Financial Instruments: Recognition and `Measurement – eligible hedged items”, not yet endorsed by the European union, will be applied retrospectively beginning

on 1 July 2009. The future application of these changes is not expected to have a material impact on the Fund financial statements;“Improvements” to IFRS: under the project begun in 2007, `the IASB has issued a series of amendments to IFRS in force. The amendments bring about accounting changes for presentation, recognition and measurement and also terminology changes. Such amendments, not yet endorsed by the European union, will become effective from 1 January 2009 (except for improvements to IFRS 5 which will become effective from 1 July 2009). The future application of these amendments is not expected to have a material quantitative impact on the Fund financial statements;IAS 40 Revised Companies applying the fair value model `will be required to account for all investment properties under construction at fair value from 1 January 2009, if the fair value can be reliably measured on a continuing basis. The application of this revised IAS 40 has no impact on the financial statement of the Company as the company choose IAS 2 as the accounting policies of inventories.

Consolidation areaThe Consolidation is based on the financial statements of the companies in the consolidation area, which were prepared as of the reporting date on the basis of IFRS as adopted by the European union.

Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In Assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The consolidation area covers one subsidiary – Spazio Industriale – Fondo Comune di Investimento Immobiliare di Tipo Chiuso (“Fondo Spazio Industriale” or the “Fund”), totally owned by Spazio Investment N.V..

The Fund started its activity on 28 December 2005, the date of authorisation of the Fund by Bank of Italy. All the financial statements used are expressed in Euro.

Consolidation criteriaThe consolidation criteria can be summarized as follows:

subsidiaries are consolidated on a line-by-line basis, according `to which:the assets, liabilities, costs and revenues shown in the –subsidiaries’ financial statements are carried in full, regardless of the interest held;the book value of equity investments is eliminated against the –corresponding shares of net equity;intercompany receivables and payables, as well as –intercompany expenses and revenues among the consolidated companies are eliminated, including dividends distributed within the Group;minority holdings are shown under a specific net equity item, –and minority interests in the profit or loss are stated separately in the income statement;

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINuED


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

Accounting standards and policiesBelow is a summary of the significant accounting standards and policies applied.

Investment propertyInvestment properties are properties which are held to earn rental income, for capital appreciation, or both and are not occupied by the companies consolidated in the Group.

Investment property comprises freehold land, freehold buildings, land held under operating lease and buildings held under finance lease.

Land held under operating lease is classified and accounted for as investment property when the rest of the definition of investment property is met. The operating lease is accounted for as if it were a finance lease.

Investment property is measured initially at cost, including related transaction costs. After initial recognition, investment property is carried at fair value.

The fair values are based on open market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction wherein the parties had acted knowledgeably, prudently and without compulsion.

An external, independent expert (CB Richard Ellis Professional Services S.p.A.), with appropriate recognised professional qualifications and recent experience in the rental of the category of property being appraised, values the portfolio on a quarterly basis.

Valuations reflect, where applicable, the type of tenants currently occupying the property or responsible for meeting lease commitments, the allocation of maintenance and insurance responsibilities between lessor and lessee, and the remaining economic life of the property. In addition physical inspections are conducted in order to assess the quality, technical features and conditions of the properties.

The valuations are prepared by considering the aggregate of the net annual rents received from the properties and where relevant, associated costs. A discount factor which reflects the specific risks inherent to the net cash flows is then applied to the net annual rents to arrive at the property valuation.

The discount rate and assumption regarding future real growth are significant value-driving factors in the valuation model.

The discount rate is the weighted average cost of borrowed capital and equity. The cost of borrowed capital is based on the market interest rate for loans. The cost of equity is based on a risk-free interest rate equivalent to the long-term government bond rate with the addition of a risk premium. The risk premium is specific to each property and can be divided into two parts – general risk and individual risk. The general risk adjusts for the fact that a real estate investment is not as liquid as a bond and the asset is affected by the general economic situation. The individual risk is specific to each property, and comprises a weighted assessment of the property’s category, location, and technical condition and the quality of the property and its tenant at the valuation date.

Future rental income is estimated based on the current lease and reasonable and demonstrable assumptions about rental income from future leases. In particular, at the end of the relevant lease contract, if appropriate, additional works and variations are assumed in order to convert the property to an alternative use and consequently to let or sell it at an adequate market value.

Any gain or loss arising from a change in fair value is recognised in the income statement.

Gains or losses arising from the disposal of investment property are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit and loss in the period of the disposal.

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment, and its fair value at the date of reclassification becomes its cost for accounting purposes. Property that is being constructed or developed for future use as investment property is classified as property, plant and equipment and stated at cost until construction or development is complete. At that time, it is reclassified and subsequently accounted for as investment property.

If an item of property, plant and equipment becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this item at the date of transfer is recognised in equity as a revaluation of property, plant and equipment under IAS 16. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the income statement.

InventoriesInventories consist of land for development and buildings under renovation in the normal course of the Fund’s activities, or during the construction process or development related to said activities.

Land for development and buildings under renovation are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price, less the estimated costs of completion and selling expenses. Cost includes incremental expenses and capitalisable financial charges, as described below in the “Financial expenses” note.


IAS 11 will be applied if a sales contract in relation to these projects has been signed.

Receivables and payables Receivables are recognised initially at fair value and subsequently measured at amortized cost, using the effective interest method, less provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivables are impaired.

The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the income statement.

Payables are recognised initially at fair value and subsequently measured at amortized cost, using the effective interest method.

LeasesWhen a group company is the lessee:

(i) Operating leaseLeases in which a significant portion of the risks and rewards of ownership are retained by another party, the lessor, are classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

(ii) Finance leaseLeases of assets where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in current and non-current borrowings. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The investment properties acquired under finance leases are carried at their fair value.

When a group company is the lessor:

(i) Operating leaseProperties leased out under operating leases are included

in investment property in the balance sheet. Lease income is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return.

(ii) Finance leaseWhen assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income.

Impairment of assetsAssets including goodwill that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Financial instruments

Derivative financial instruments

The Company uses financial instruments solely for hedging under IFRS.

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value.

The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

Derivatives not classified as hedges

In the case of fair value changes in derivatives not designated and qualified as hedges, these are immediately recognised to the income statement.

The Group does not use the possibility of hedge accounting and all changes in the fair value of the derivate financial instruments are accounted in the profit and loss.

They are measured at fair value even if they are contracts entered into to manage interest rate fluctuations and, more in general, to manage the Group’s operating risks, since the Group policy does not allow the contracting of derivatives for speculative purposes.

For 2008 the Fund does not apply hedge accounting.

Determination of fair value

The fair value of financial instruments listed on an active market is based on market prices as of the reporting date. The market price



used for derivatives is the bid price, while for financial liabilities the ask price is employed. The fair value of instruments not listed on an active market is determined according to valuation techniques, i.e. discounted cash flow analysis and option pricing models, based on a series of methods and assumptions relating to market conditions as of the reporting date.

Financial assets at fair value through profit and lossFinancial assets held for trading are classified as current assets and stated at fair value, with any resultant gain or loss being recognised in the income statement.

Transaction costs are directly recorded into profit and loss at trade date.

The fair value of financial assets classified as held for trading is their bid price at the balance sheet date.

Financial assets are derecognised when the rights to receive the cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.

Cash and cash equivalentsCash and cash equivalents comprise cash balances and cash deposits.

Cash and cash equivalents are booked at face value.

The maturity date is less than three months.

Bank borrowings and payables to other financial institutionsLoans are initially recognised at their fair value, net of transaction costs directly attributable to the issuing of the financial liability.

They are subsequently measured at amortized cost using the effective interest rate.

The effective interest method is a method of calculating the amortized cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering a debt repayment schedule drawn up in line with the relevant business plan but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts.

Share capitalShares are classified as equity when there is no obligation to transfer cash or other assets.Incremental costs directly attributable to equity transactions are recognised as a deduction from the proceeds.

Dividend distributionDividend distribution to the Company’s shareholders is recognised

as a liability in the Group’s financial statements in the period in which the dividends are approved.

Sale of assetsRevenues from the sale of assets are recorded only when all of the following conditions are satisfied:

most of the risks and benefits linked to ownership of the assets `have been transferred to the buyer;

the effective control over the assets sold and the normal level `of activities associated with the asset have ended;

the amount of revenue can be reliably determined; `it is probable that the economic benefits deriving from the sale `will be enjoyed by the Company;

the costs sustained or to be sustained can be reliably `determined.

Rental incomeGross rental income is determined based on contractual lease term entitlements and is recognised as lease services are rendered. Gross rental income does not include service charges, such as heating, electricity and security, which are directly charged to tenants. Rental income is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. Lease incentives are recognised on a straight-line basis over the shorter of the life of the lease or the year to the first break option. Differences that arise between the contractual lease payments and the periodic net lease income are capitalised in the balance sheet. Turnover based rents are recorded as income in the years in which they are earned.

InterestInterest is recognised on an accrual basis considering the effective yield of the asset.

Financial expensesFinancial expenses are charged to the income statement in the period in which they are incurred unless they are directly attributable to the acquisition, construction or production of a qualifying asset, in which case they are capitalised as part of the cost of that asset. The amount of financial expenses capitalised is the actual borrowing costs incurred on the loan specifically borrowed for the purpose of obtaining the qualifying asset.

A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

The capitalisation of financial expenses ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are completed.

Tax expenseIn the Netherlands, Dutch corporate tax is based on the fiscal results, taking into account the fact that certain income and expense items as reported in the profit and loss account are tax-exempt. The applicable tax rates are 20% over the first Euro 275,000 and 25.5% over the remainder for the year 2008. The


Dutch Tax Authorities have issued a “determination agreement ATR” stating that the Italian real estate property investment Fund is to be qualified as a transparent entity. In practical terms, this means that the Fund will be transparent from a Dutch corporate income tax point of view and the Company is treated as the direct owner of the underlying assets. Consequently, all income of the Fund should be treated as income of the Company and treated accordingly. Due to the operation of the Convention for the Avoidance of Double Taxation signed on the 8 May 1990 by the Government of Italy and the Government of The Netherlands (and specifically article 24, paragraphs 1 and 2 of the Treaty) income and capital gains arising from immovable property situated in Italy is effectively exempt from corporate taxation in The Netherlands. Accordingly no deferred tax is calculated.

Segment reportingThe Group has only one line of business (“investments in light industrial properties”) and operates through the Fund exclusively in Italy. Segment reporting is therefore not required.

FINANCIAL RISK MANAGEMENT POLICIESThe Company has no employees or executive management of its own. It relies solely on its service providers under contract to undertake all executive and operational activities relating to the property portfolio in accordance with the Board’s direction. In addition to their attendance at Board meetings, the Directors, through the Chairman, maintain a regular dialogue with the providers. In addition the Directors can call upon the services of the internal audit function of Pirelli RE Group to carry out periodic reviews.

Highlights of the Group’s risk management policies are discussed below.

All monitoring controls relating to the management of the Company and risk management policies are performed by Pirelli & C. Real Estate Società di Gestione del Risparmio S.p.A. on the basis of the service level agreement.

Types of financial risk

Credit riskCredit risk represents the Group’s exposure to potential losses due to default by its counterparties on their commercial and financial obligations.

Credit evaluations are performed on all tenants as a part of the due diligence on properties to be acquired; in particular only properties rented to prime tenants are considered. In addition, the exposure to credit risk is monitored on an ongoing basis by management using aging analysis.

To limit that risk, with regard to commercial counterparties, the Group has procedures in place to assess the financial solidity of its tenants, to monitor incoming payments, and to take credit recovery action should this become necessary. The aim of these procedures is to set credit limits for tenants and take appropriate actions when those limits are exceeded.

In some cases tenants are asked for guarantees, generally sureties from banks in excellent standing or personal guarantees. Collateral is requested more rarely.

As for financial counterparties, for the management of temporary excess funds or for the trading of derivative instruments, the Group does business only with intermediaries of high credit standing.

Receivables are recognised net of impairment calculated for the risk of counterparty default, which is determined in light of the available information on solvency and historical trends.

Where a debt passes its due date it is kept under constant review to determine whether a provision is necessary. In addition the provision is reviewed on a regular basis to determine whether a full write off is appropriate.

Exchange rate risk The Group mainly operates at the Italian market level; as a consequence it has no exposure to exchange rate risk.

Positions subject to exchange rate risk are essentially comprised of a very limited number of invoices payable and do not make up a sizeable proportion of that balance. Therefore, exchange rate fluctuation has no significant effect on the income statement.

Currency risk The Group totally owns a real estate fund that prepare its financial statements in Euro which is the Group’s reporting currency. For this reason the Group is not exposed to currency risk.

Interest rate risk Interest rate risk to which the Group is exposed mostly originates from long-term financing. Since these are variable-interest bearing loans, the Group is exposed to cash flow risk.The Group manages the cash flow risk on interest rates through the use of derivative contracts. The derivatives considered are exclusively those defined as hedging instruments by IAS/IFRS: typically interest rate collars, which mitigate the cost of the cap by setting a minimum limit (floor) on interest payable.

The purchase and designation of such derivatives as hedging instruments for the purposes of IAS 39 is decided on a case-by-case basis.

Holding other conditions constant, a hypothetical 0.50 percent increase or decrease in all currencies’ interest rates applicable to the floating-rate assets and liabilities and interest rate derivatives to which the Fund is exposed would, over the course of a year, increase the pre-tax profit by € 4,343 thousand (€ 4,981 thousand in 2007) or decrease the pre-tax profit by € 4,829 thousand (€ 2,576 thousand in 2007), respectively. The effect on equity is the same as the effect on the pre-tax profit.

Asset devaluation riskIn the second half of 2008 Spazio experienced a modest fall in asset values, as explained in the Chairman’s statement of this report. Should asset values continue to fall in the future this could potentially create a risk of a breach of our LTV banking covenants. The Board is committed to closely monitor Spazio’s financial position and the compliance with all banking covenants. Cash flow



from rental income, excess available cash from operations and the proceeds from sales in the pipeline could be used by Spazio to repay back debt and to maintain adequate headroom against banking covenants.

Liquidity riskThe main liquidity risk refers to the Group’s ability to fulfil commitments to repay bank borrowings. In particular, principal reimbursements are linked to the property sale process, while interest payable is timed to match rental income collection and fully covered.

The main instruments the Group uses to manage liquidity risk are financial plans and treasury plans, to allow the thorough and accurate measurement of incoming and outgoing funds.Discrepancies between these plans and the actual data are constantly analysed.

The cash flow is monitored on a monthly basis.

€ € € € €

within 1 year between 1 and 2 year

between 2 and 5 year

beyond 5 years total

Bank borrowings and payables to other financial institutions 115,060 412,887,003 413,002,063

Trade payables 11,691,007 11,691,007

Other payables 2,769,574 2,594,535 5,364,109

Tax payables 670,488 670,488

€ € € € €

within 1 year between 1 and 2 year

between 2 and 5 year

beyond 5 years total

Bank borrowings and payables to other financial institutions 81,120,894 102,463,731 52,438,923 149,565,781 385,589,329

Trade payables 20,564,041 20,564,041

Other payables 2,462,111 475,345 2,937,456

Tax payables 619,729 619,729

Based on the accelerated Business Plan approved by the Management Board on 9 December 2008 the actual reimbursement in the coming years may differ from the table above.

The maturities of financial liabilities outstanding at 31 December 2007 were as follows:

Financial liabilities outstanding at 31 December 2008 had the following maturities:


Capital risk managementThe Group’s objectives when managing capital are to maintain its ability to continue as a going concern in order to provide returns for unitholders and benefits for other unitholders and to maintain an optimal financial structure so as to reduce the cost of capital.

Risk of vacancyThe Income Producing Portfolio generates € 43.0 m of yearly rent mostly deriving from ten major tenants, which are principally telecommunications and utilities service suppliers (Telecom Italia S.p.A., Enel Group, Wind Telecomunicazioni S.p.A., Prima Comunicazione S.p.A. and RAI – Radiotelevisione Italiana S.p.A.), a fashion designer (Prada S.p.A.), logistics operators (Fiege Borruso S.p.A. and Bertola Servizi Logistici S.p.A.), providers of industrial components (ABB Cap S.p.A., Alstom Power Italia and ACC Group), and major retailers (SMA S.p.A.). Telecom Italia is the largest tenant, representing approximately 49% of the total annual passing rent of the portfolio as of 31 December 2008.

The total current vacancy of investment property based on GLA is about 3.9%, mostly allocated to (i) four conversion assets, consisting of light industrial/mixed use properties that are currently vacant, totalling approximately 53,400 sq m of surface area and having strong redevelopment and conversion potential thanks to their location and land size, and (ii) eight distressed properties to be sold to end users.

Given the existence of valid and binding leases with an average duration of five years (first lease term), the risk of a significant vacancy increase in the near future is considered to be low. In addition, the large majority of assets, especially those in the Telecom Italia portfolio, are located in central or semi-urban areas and, due to their location and nature, have considerable potential for alternative and more profitable uses (for most of the Telecom Italia assets, vacant possession could exceed the open market value based on current lease terms).

Accounting estimates and assumptionsThe preparation of the financial report requires management to make estimates and assumptions that could influence the book values of certain assets, liabilities, costs and revenues, as well as the information provided on contingent assets/liabilities as of the reporting date.

The following accounting estimates are critical to this report:

(a) IAS 2 – Valuation of inventory

Inventories, which are wholly held by the Fund, are booked at the lower of cost and net realisable value.

Inventories consist of land for development in the normal course of the Fund’s activities or during the construction process, or development related to said activities. Net realisable value is the estimated selling price, less the estimated costs of completion and selling expenses. Cost includes incremental expenses and capitalisable financial charges.

(b) IAS 40 – Valuation of investment property

Investment properties, all of which are held by the Fund, are kept to earn rental income or for capital appreciation or both. Investment properties are stated at fair values which are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an at arm’s length transaction wherein the parties have acted knowledgeably, prudently and without compulsion.

An external, independent expert (CB Richard Ellis Professional Services S.p.A.) with appropriate recognised professional qualification and recent experience in the property being appraised, values the portfolio every three months.

The valuations are prepared by considering the aggregate of the net annual rents received from the properties and where relevant, associated costs. A discount factor which reflects the specific risks inherent to the net cash flows is then applied to the net annual rents to arrive at the property valuation.

Valuations reflect, where applicable, the type of tenants currently occupying the property or responsible for meeting lease commitments, the allocation of maintenance and insurance responsibilities between lessor and lessee, and the remaining economic life of the properties. Any gain or loss arising from a change in fair value is recognised in the income statement.

Gains or losses arising from the disposal of investment property are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit and loss account in the period of disposal.

(c) IAS 39 – Valuation of derivative financial instruments

The Group uses derivative financial instruments to hedge its exposure to interest rate risk. In accordance with its treasury policy, the Group does not hold derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognised initially at cost and subsequent to initial recognition are measured at fair value.

The fair value of derivative financial instruments that are not traded in an active market is determined by using valuation techniques, i.e. discounted cash flow analysis and option pricing models.

Since the Group does not use the possibility of hedge accounting all changes in the fair value of the derivate financial instruments are accounted in the profit and loss.



Note 1 Investment propertyThis item totals € 626,390,000 (€ 619,780,000 at 31 December 2007) and is comprised of:

€ €



Balance at the beginning of the year 619,780,000 621,120,000

Additions:

- Acquisitions 63,920,000 28,907,500

- Capital expenditure 3,438,988 769,550

Net gain/(loss) from fair value adjustments on investment property (11,698,988) 22,983,450

Acquisition cost plus additions to properties disposed (49,050,000) (54,000,500)

Balance as at the end of the period 626,390,000 619,780,000

€ €



Balance as at the beginning of the year 89,904,481 53,488,342

Capitalised costs:

- Acquisition 33,000 8,695,000

- Capital expenditure 13,866,545 32,394,029

- Financial expenses 2,711,280 2,479,085

Total incremental costs in the period 16,610,825 43,568,114

- Costs of inventory sold (9,504,810) (7,151,975)

Balance as at the end of the period 97,010,496 89,904,481

The net gain on disposed property of € 2,594,838 (note 16), as listed in the income statement, refers to the properties sold in 2008.

The balance is the difference between the sales proceeds (€ 51,644,838) and the carrying amount (€ 49,050,000).

Note 2 InventoriesAt 31 December 2008 all inventories are valued at the lower of cost, including incremental expenses and capitalisable financial charges, and net realisable value.

The movement in inventories over the period is shown in the table below:

Inventories consist of land for development and buildings under renovation in the normal course of the Fund’s activities or during the construction process, or development related to said activities. These buildings and land are not intended for the Fund’s investment property portfolio.

In 2008 a total of 16 sale agreements were made, totalling € 12,247,500, for the disposal of 19 units in the renovated “Edificio 16” building along with 28 parking spaces.

The net gain on disposal of inventories of € 2,742,690 (note 17), as listed in the income statement, refers to the properties sold in 2008. The balance is the difference between the sale proceeds (€ 12,247,500) and the carrying amount (€ 9,504,810).

€ €

31 December 2008 31 December 2007

Trade receivables from third parties 2,007,725 5,094,683

Total 2,007,725 5,094,683


€ €


Non current Current Non current Current

Trade receivables from third parties - 2,054,584 - 5,104,245

Total gross trade receivables - 2,054,584 - 5,104,245

Provision for doubtful accounts - (46,859) - (9,562)

Total trade receivables - 2,007,725 - 5,094,683

€ €



Balance at the beginning of the year 9,562 -

Movement during the period 37,297 9,562

Balance as at the end of the period 46,859 9,562

Note 3 Trade receivables

Trade receivables are broken down below:

Of € 2,054,584 in total gross trade receivables (€ 5,104,245 at 31 December 2007), € 1,933,419 is past due (€ 1,094,746 at the close of 2007).

Receivables have been written down according to the Group policies described under “Credit risk” in the section “Financial risk management policies”.

Movements in the provision for doubtful accounts are shown below:

The addition to the provision charge for the period is recognised in the income statement under “Other costs” (note 21).

Trade receivables are secured by collateral in the amount of € 2,240,000 and by bank/personal guarantees totalling € 10,935,130.

The Directors consider that the carrying amount of trade receivables approximates their fair value.

Note 4 Other receivablesThis item totals € 466,428 (€ 1,977,195 at 31 December 2007) and mainly includes:

€ ` 155,195 in deferred charges, mainly referring to insurance premium;€ ` 96,722 in deferred charges, mainly referring to the registration tax on rents (IRE);€ ` 60,059 in costs associated with transactions to be completed next year.

There were no writedowns in 2008.

The Directors consider that the carrying amount of other receivables approximates their fair value.



Note 5 Derivative financial instruments

€ € €

31 December 2007 Fair Value Adjustment 31 December 2008

Portogruaro derivative 122,840 (533,419) (410,579)

Jumbo derivative 4,912,672 (11,651,886) (6,739,214)

Total 5,035,512 (12,185,305) (7,149,793)

At 31 December 2008 this item totals € (7,149,793) (€ 5,035,512 at 31 December 2007), corresponding to the fair value of the four interest rate collar contracts signed.

Two of derivatives of the same notional amount and carrying the same conditions have been taken out with Intesa Sanpaolo S.p.A. and Natixis to hedge the “Jumbo Loan” as described in note 10.

The significant terms and conditions of the above-mentioned derivatives are as follows:

CounterpartyInterest rate collar

Intesa Sanpaolo S.p.A.Interest rate collar

Natixis

Notional for the period from 31 December 2008 to 31 March 2009 150,010,507 150,010,507

Premium paid 519,000 519,000

Effective date 29 December 2006 29 December 2006

Expiry date 30 September 2013 30 September 2013

Interest rate cap 4.35% 4.35%

Interest rate floor 3.40% 3.40%

Fair value as at 31 December 2008 (3,369,607) (3,369,607)

CounterpartyInterest rate collar

Intesa Sanpaolo S.p.A.Interest rate collar

Natixis

Notional for the period from 31 December 2008 to 31 March 2009 15,454,390 15,454,390

Premium paid - -

Effective date 29 December 2006 29 December 2006

Expiry date 31 March 2011 31 March 2011

Interest rate cap 4.55% 4.55%

Interest rate floor 3.40% 3.40%

Fair value as at 31 December 2008 (205,290) (205,290)

The other two derivatives, of the same notional amount and carrying the same conditions, have also been taken out with Intesa Sanpaolo S.p.A. and Natixis to hedge the so-called “Portogruaro Loan” as described in note 10.

No premium has been paid for these contracts because the purchase price of the cap option at the time of their negotiation was the same as the sale price of the floor option.

The fair value has been appraised by an independent professional on the basis of market information provided by a commonly used financial information provider, such as Bloomberg or Reuters.


Note 6 Cash and cash equivalentsAt 31 December 2008 this item totals € 79,766,399 (with respect to € 103,332,229 in 2007) of which € 39,221,324 in restricted accounts (€ 64,331,074 in 2007), subject to the repayment of borrowings and interest due.

Note 7 Share capitalShare capital is related to the Spazio Investment N.V. shares and amounts to € 5,498,279.

The total authorised number of ordinary shares is 50,000,000 with a par value € 0.20 each and 100 preferred shares of par value € 0.20 each.

At the Balance Sheet date, a total of 27,491,295 ordinary shares of par value € 0.20 each and 100 preferred shares of par value € 0.20 each are issued and fully paid.

The movement that took place during the period from 1 January 2008 to 31 December 2008, for a total amount of € 597,741, refers to the cancellation of 2,988,705 ordinary shares acquired during the year following a share buy-back programme.

Note 8 Share premium As at 31 December 2008 the item, amounting to € 274,486,750, is related to share premium reserve, totally distributable.

The movement that took place during the period from 1 January 2008 to 31 December 2008, for a total amount of € 34,469,741, refers to the cancellation of the shares during the year, as explained in the note 7 above.

Note 9 Retained earningsThe balance of € 87,778,559 reflects:

- the initial amount at 1 January 2008, equal € 100,361,034;

- the movements that took place during the period from 1 January 2008 to 31 December 2008 were as follows:

decrease equal to ` € 22,224,452 related to the dividend distribution referring Spazio Investment N.V. 2007 result;

decrease equal to ` € 16,188,182 related to the interim dividend distribution referring Spazio Investment N.V. result from the period 1 January 2008 to 30 June 2008;

decrease equal to ` € 668,609 related to the reclassification to the retained earnings of the cancelled shares;

increase equal to ` € 35,067,482 related to the cancelled acquired shares of 2,988,705 depositary interests of the ordinary shares representing a total of 9.81% of the outstanding shares at 31 December 2007;

decrease equal to ` € 8,568,714 related to the result of year 2008.

Reference is made to note 6 of the Company financial statements regarding the part of retained earnings that can not be freely distributed (an amount of € 86,818,599 is not freely distributable to the shareholders).



Note 10 Bank borrowings and payables to other financial institutionsThis item refers to bank borrowings. The main loan terms, summarised in the following table, are explained in detail below:

€ €


Non current Current Non current Current

Jumbo Loan 358,923,905 38,505 339,410,018 53,568

Portogruaro Loan 47,887,958 5,876 34,125,868 6,036

Edificio 16 Loan 6,075,140 641 11,991,967 1,872

Bank overdraft - 70,038 - -

Total 412,887,003 115,060 385,527,853 61,476

The loan movements are presented in this table:

31 December 2007 Increases Decreases Loan arrangement

costs Interest due Interest paid 31 December 2008

€ € € € € € €

Jumbo Loan 339,463,586 54,240,000 (35,008,634) 282,521 21,183,484 (21,198,547) 358,962,410

Portogruaro Loan 34,131,904 14,268,092 (604,382) 98,381 2,802,908 (2,803,069) 47,893,834

Edificio 16 Loan 11,993,839 - (5,995,513) 78,686 543,998 (545,229) 6,075,781

Total 385,589,329 68,508,092 (41,608,529) 459,588 24,530,390 (24,546,845) 412,932,025

At 31 December 2008, bank borrowings (current and non-current) total € 412,932,025 and are broken down as follows:€ ` 358,962,410 for the property loan (“Jumbo Loan”) granted on 18 October 2006 by a syndicate of banks comprising Natixis – Milan branch, Intesa Sanpaolo S.p.A., Banco di Sicilia S.p.A., MCC S.p.A. and Banca di Roma S.p.A. for € 365,766,998 (€ 329,106,998 of credit facility, € 35,160,000 of revolving credit and € 1,500,000 of cash collateral line), stated net of € 6,843,093 in loan arrangement costs and € 38,505 in accrued interest at 31 December 2008;

€ ` 47,893,834 for the Portogruaro Site (“Portogruaro Loan”) granted on 18 October 2006 by a syndicate of banks comprising Natixis – Milan branch, Intesa Sanpaolo S.p.A., Banco di Sicilia S.p.A., MCC S.p.A. and Banca di Roma S.p.A. for € 14,904,110 (tranche 1), € 5,700,417 (tranche 2), € 15,622,877 (tranche 3) and € 15,134,189 (tranche 5 – cash collateral), stated net of € 3,473,635 in loan arrangement costs and € 5,876 in accrued interest at 31 December 2008;

€ ` 6,075,781 for the property under renovation (“Edificio 16 Loan”) granted on 18 October 2006 by a syndicate of banks comprising Natixis – Milan branch, Intesa Sanpaolo S.p.A., Banco di Sicilia S.p.A., MCC S.p.A. and Banca di Roma S.p.A. for € 6,113,258, stated net of € 38,118 in loan arrangement costs and € 641 in accrued interest at 31 December 2008.

Concerning the “Jumbo Loan”, during the year € 54,240,000 of the remaining part of the Facility Agreement was used to invest in the acquisition. € 35,008,634 has been reimbursed as a result of sales.

Concerning the “Portogruaro Loan”, during the year € 14,268,092 of the remaining part of the Facility Agreement was used to invest in the development assets and urbanization expenses of the Portogruaro Site, and € 604,382 was used to reimburse part of the Facility line – tranche 5.

Concerning the “Edificio 16 Loan”, during the year € 5,995,513 was reimbursed as a result of sales.

The Jumbo Loan taken out on 26 September 2006, with a duration of seven years extendable for a further three years at the borrower’s request, is intended to finance all the Fund’s properties and future acquisitions. It can be drawn down for a maximum total of € 530,967,703 (€ 402,033,831 by way of a credit facility, € 118,500,000 by way of revolving credit for future acquisitions and € 10,433,872 to finance VAT). The interest rate is equal to the three-month Euribor plus a spread that varies according to the type of credit line used (80 bps for the Facility and VAT lines, 100 bps for the Revolving line). The effective interest rate, determined in accordance with the


amortised cost method, is 4.858%. This loan is secured by a mortgage and assignments of receivables relating to insurance policies, lease agreements and any hedging agreements.

The Portogruaro Loan taken out on 26 September 2006, with a duration of seven years extendable for a further three years at the borrower’s request, is intended to finance the development of the Portogruaro Site. It can be drawn down for a maximum total of € 226,000,000 (€ 201,000,000 by way of a credit facility and € 25,000,000 to finance VAT). The interest rate is equal to the three-month Euribor plus a spread that varies according to the type of credit line used (150 bps for the Facility line – tranche1, 2 and 3, 80 bps for the Facility line – tranche 4 and the VAT line, 30 bps for the Facility line – tranche 5 drawn down for cash as a counterguarantee of a line granted for the issue of sureties to the municipalities of Portogruaro and Fossalta di Portogruaro for urban development costs). The effective interest rate, determined in accordance with the amortised cost method, is 4.942% for tranche 1, 2 and 3, 11.699% for tranche 4 and the VAT line and 4.077% for tranche 5. This loan is secured by a mortgage and assignments of receivables relating to insurance policies, lease agreements and any hedging agreements.

The Edificio 16 Loan taken out on 26 September 2006, with a duration of seven years extendable for a further three years at the borrower’s request, is intended to finance the purchase of the property and its subsequent renovation. It can be drawn down for a maximum total of € 27,200,000 (€ 26,000,000 by way of a credit facility and € 1,200,000 to finance VAT). The interest rate is equal to the three-month Euribor plus 80 bps. The effective interest rate, determined in accordance with the amortised cost method, is 5.291%. This loan is secured by a mortgage, an assignment of receivables arising from the sale of the land and a pledge on current accounts.

It should also be noted that the Management Company, in the name of and on behalf of the Fund, has signed an “Inter-creditor Agreement” along with other financing banks. This is designed to: (i) clarify the relationships between the Fund, and its various classes of creditors, and (ii) regulate the Fund’s payment priorities with the different classes of creditors.

The fair value of the above borrowings approximated their carrying values at the balance sheet date, since the impact of discounting is not significant. The fair values are based on cash flows discounted at a rate based on the latest applicable floating rates at the end of the period.

The Fund confirms that all the financial covenants are in compliance with the financing contracts as at 31 December 2008. The calculation of borrowings for the purpose of determining the Loan to Value ratio is set out below.

€ € € € € €

Bank Borrowingsa)

Loan arrangementcosts b)

Accrued interests c)

Outstanding Loana+b-c

Cashcollaterals

Outstanding Loannet of Cash Coll.

Jumbo Loan 323,798,530 6,843,093* 34,625 330,606,998 1,500,000 329,106,998

Jumbo Loan - revolving line 35,163,880 - * 3,880 35,160,000 - 35,160,000

Portogruaro Loan 47,893,834 3,473,635 5,876 51,361,593 15,134,189 36,227,404

Edificio 16 Loan 6,075,781 38,118 641 6,113,258 - 6,113,258

Total 412,932,025 10,354,846 45,022 423,241,849 16,634,189 406,607,660

€ €

OMV Outstanding Loannet of Cash Coll.

LTV LTVCovenant

Jumbo Loan 562,000,000 329,106,998 58.6% 65.0%

Portogruaro Loan 82,600,000 36,227,404 43.9% 65.0%

Edificio 16 Loan 20,490,000 6,113,258 29.8% 65.0%

* All “Loan arrangement costs” are included in Jumbo Loan

The covenants of the Fund at 31 December 2008 are in the tables here below:

LTV covenant: Loan to Value of Jumbo, Portogruaro and Edificio 16 Loans should not exceed 65% `


Global LTV covenant: the aggregate amount of financial indebtedness incurred by the Fund should not exceed 60% of the OMV `of the real estate assets and 20% of the value of the other assets


€ €

OMV Outstanding Loan Global LTV Global LTVCovenant

Jumbo Loan 562,000,000(1) 330,606,998

Jumbo Loan - revolving line 57,970,000(1) 35,160,000

unlevered Assets 7,570,000(2) -

Portogruaro Loan 82,600,000(3) 51,361,593

Edificio 16 Loan 20,490,000(3) 6,113,258

Total Real Estate Assets 730,630,000(3) 423,241,849 57.9% 60.0%

Cash & Other Assets 66,529,602(4) - 0.0% 20.0%

Fund total assets 797,159,602(5) 423,241,849

Global LTV Covenant figures 752,806,534(6) 423,241,849 56.2% 60.0%

€ €

OMV Outstanding Loannet of Cash Coll.

Prospective LTV Prospective LTVCovenant

Jumbo Loan 562,000,000 329,106,998

Jumbo Loan - revolving line - 35,160,000

Total 562,000,000 364,266,998 64.8% 80.0%

(1) The investment properties financed by the revolving line are ACC, RAI and SMA assets.(2) The unlevered assets are the Agrileasing portfolio and the investment property in Genova, Via Dino Col.(3) “Total Real Estate Assets” of € 730,630,000 is the total portfolio open market value as at 31 December 2008.(4) “Cash & Other Assets” includes € 53,186,847 of cash and cash equivalents.(5) “Fund total assets” of € 797,159,602 is the amount of the total assets as per Bank of Italy financial statements.(6) The OMV of “Global LTV Covenant” is calculated as the sum of the OMV of the total Real Estate Assets (€ 730,630,000) plus one third of the “Cash & Other Assets” (€ 22,176,534).

Prospective LTV covenant: in acquiring new assets, the aggregate amount of the Jumbo Loan (Facility line and Revolving line) should `not exceed 80% of the OMV of the properties purchased and owned by the Fund

ISCR covenant: the Interest Service Cover Ratio (calculated as the Annualised NOI – Net Operating Income - divided by Annualised `interest expense and fees based on the most recent quarters actuals) for the entire duration of the Facilities should not fall below 1.25x

01 October 2008-31 December 2008

Projectedover 12 months

ISCR of the Perioda/(b+c)

min ISCR

a) Projected NOI 8.1 31.9

b) Interests 3.5 13.8

c) Financing fees 0.1 0.5

ISCR Covenant 2.24x 1.25x


€ €


Trade payables to Pirelli Group 2,049,536 4,163,719

Trade payables to third parties 9,641,471 16,400,322

Total 11,691,007 20,564,041

Note 11 Trade payablesThese include the following amounts due to related parties:

At 31 December 2008, trade payables to Pirelli Group, amounting to € 2,049,536, are detailed as follows:€ ` 1,111,191 to the Management Company in relation to the management fees accruing at the reporting date as detailed under note 20 below;€ ` 355,328 to Pirelli RE Netherlands B.V. in relation to the management fees accruing at the reporting date as detailed under note 20 below;€ ` 354,728 to Pirelli & C. Real Estate Property Management S.p.A. (a fellow subsidiary wholly-owned by Pirelli & C. Real Estate S.p.A.) for the administration and management of the Fund’s current and future properties;€ ` 198,353 to Pirelli & C. Real Estate Agency S.p.A. (a fellow subsidiary wholly-owned by Pirelli & C. Real Estate S.p.A.) for sales agency services;€ ` 21,640 to Pirelli & C. Real Estate S.p.A. for closing costs regarding the IPO of the Company;€ ` 8,296 to Pirelli & C. Ambiente Site Remediation S.p.A. (a company controlled by Pirelli & C. S.p.A.) for environmental due diligence relating to the investment property acquisitions.

At 31 December 2008 trade payables to third parties of € 9,641,471 mainly relate to:urban development work carried out and costs for the construction of speculative buildings at the Portogruaro Site ( ` € 5,627,988);costs for the construction of Edificio 16 ( ` € 2,552,179);costs for legal and professional services of the Company ( ` € 577,843);costs for the administration and building management of the Fund’s investment properties ( ` € 380,477).

Following Pirelli & C. RE Group’s disposal of Pirelli & C. Real Estate Integrated Facility Management S.p.A. shares in 2008, Pirelli & C. Real Estate Integrated Facility Management S.p.A. has not been considered as related parties as at 31 December 2008, therefore the amount have been classified, as debits towards third parties.

Note 12 Other payablesAt 31 December 2008, this item totals € 5,364,109 and mainly consists of:

€ ` 2,577,500 in security deposits received on leases with Elettromeccanica S.p.A., Appliances Components Companies S.p.A. and RAI – Radiotelevisione Italiana S.p.A.;€ ` 2,000,000 paid by Progetto Magnolia S.r.l. (formerly named Spazio Industriale 2 S.r.l.) into one of the Fund’s restricted bank accounts to guarantee its environmental commitments regarding the properties in Portoferraio, Varese and Novara; the Fund will release the guarantee according to the state of progress of the restoration work;€ ` 529,000 in downpayments received against preliminary sale agreements for the Jumbo portfolio;€ ` 120,500 in downpayments received against preliminary sale agreements for Edificio 16;€ ` 73,177 of Directors’ remuneration.

Note 13 Tax payablesThe balance of € 670,488 refers to:

VAT payable in the amount of ` € 670,127;withholding taxes due to the authorities on services rendered by the Fund’s consultants, in the amount of ` € 361.

Note 14 Rental incomeRental income amounts to € 42,774,239, including € 21,526,428 from Telecom Italia S.p.A..

In the following 2 years ending 31 December 2010 the outstanding rental contracts that will expire represent about 4% of the total rental income 2008. In the following 2 years ending 31 December 2012 the outstanding rental contracts that will expire represent about 28% of the total rental income 2008.



The future minimum lease payments under non-cancellable operating leases in the aggregate and for each of the following periods:not later than one year ` € 42,368,460 of annual passing rent;later than one year and not later than five years ` € 136,430,187 of annual passing rent;later than five years ` € 44,808,553 of annual passing rent.

Note 15 Net gain/(loss) from fair value adjustment on investment propertyThe balance of € (11,698,988) is the difference between the fair value of investment property at 31 December 2008 and 31 December 2007, and between the fair value of investment property at 31 December 2008 and the related acquisition costs for investment property acquired during the year.

The fair values are based on open market values, i.e. the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction wherein the parties have acted knowledgeably, prudently and without compulsion.The fair value gains arise from the determination of market value on 31 December 2008 by an independent, professionally qualified appraiser.

Fair values have been appraised by an external, independent expert (CB Richard Elis Professional Services S.p.A.) with appropriate recognised professional qualifications. The fair value valuations are prepared by considering the aggregate of the net annual rents received from the properties and where relevant, associated costs. A yield which reflects the specific risks inherent to the net cash flows is then applied to the net annual rents to arrive at the property valuation. Valuations reflect, where applicable, the type of tenants currently occupying the property or responsible for meeting lease commitments, the allocation of maintenance and insurance responsibilities between lessor and lessee, and the remaining economic life of the property.

Note 16 Net gain on disposals propertiesThis item amounts to € 2,594,838 and refers to the net gains on properties sold during the year.The balance is the difference between the proceeds of sales (€ 51,644,838) and the carrying amount (€ 49,050,000).

Note 17 Net gain on disposals inventoriesThis item amounts to € 2,742,690.

During the year a total of 16 sale agreements were made, totalling € 12,247,500, for the disposal of 19 units in the renovated “Edificio 16” building along with 28 parking spaces.

The balance is the difference between the sales proceeds and costs (€ 9,504,810).

Note 18 Other operating incomeThis item, amounting to € 445,777, mainly relates to reimbursements and recoveries. Note 19 Realised and unrealised gain/(loss) from fair value adjustment on financial assetsThe item amounts to € (12,185,305) and reflects the unrealised loss on fair value of the four interest rate collar contracts at 31 December 2008 (for additional details refer to note 5 above).

Note 20 Management feesManagement fees, amounting to € 5,223,039, relate to the Management Company’s commission (€ 4,097,722) and to Pirelli RE Netherlands B.V. commission (€ 1,125,317).

Since 18 October 2006, when the Fund’s management was transferred from Pirelli & C. Real Estate Opportunities SGR S.p.A. to Pirelli & C. Real Estate Società di Gestione del Risparmio S.p.A. (“Management Company”) and the amended Regulations were approved, the remuneration due to the “Management Company” consists of a fixed fee (the “Management Fee”) calculated by applying 0.175% on a quarterly basis (0.7% per annum) to the “Fund’s Total Asset Value”.

“Total Asset Value” is defined by paragraph 9.1.1 of the Fund Regulations as the sum of the purchase or contribution value of individual properties, real property rights, and investments held by the Fund plus (i) the purchase or contribution costs of individual properties or real property rights; (ii) maintenance, improvement and new construction costs (such as costs for decontaminating land for the recovery,

€ €



Other real estate expenses 5,262,997 5,648,872

General and administrative expenses 2,236,827 1,848,175

Local property tax 2,471,004 2,495,451

Total costs for services 9,970,828 9,992,498


renovation, decontamination, regularization, restoration to original status, refurbishment and new construction of buildings, or for the new construction or restoration of installations and systems), including in both cases the related financial costs.

The Management Fee is calculated at the end of each quarter on the basis of the average between the Total Asset Value reported in the Fund’s latest quarterly report and that reported in the previous quarter. The quarterly fee is paid in full to the Management Company with effect from the first working day of the month after each quarter-end.

In any event, the Management Fee may not be less than € 530,000 on an annual basis (€ 132,500 on a quarterly basis). If the quarterly Management Fee, as calculated above, is less than € 132,500 in any on quarter, the Management Company is entitled to receive the sum of € 132,500 with reference to that quarter.

The total amount of management fees charged in the year (€ 4,412,941) includes € 315,219 in fees relating to development activities at the Portogruaro Site and Edificio 16 which have been capitalised to the value of those properties.

On 23 December 2008, the Management Company submitted a request regarding some changes to the Fund Regulations, concerning:1. the introduction of a cap on Management fees; `2. the replacement of the Management Company. `

Concerning the first point, an annual cap on Management fees was agreed in the amount of € 2,470,000, effective from 1 January 2010.

Regarding the second point, it was proposed that: (i) the Management Company not be replaced before 31 December 2010; (ii) in the event of a change of control for the Fund, the replacement could occur at any time (with the favourable vote of unitholders representing at least 50.01% of the units); and (iii) the Management Company be entitled to take six months’ worth of fees from the Fund, with a cap of € 1,235,000.

The amount of € 1,125,317 refers to the commission that Spazio Investment N.V. has to recognise to Pirelli RE Netherlands B.V.; this commission is payable for an amount equal to 0.15% on annually on the average between (i) the Aggregate Value of the Fund as reported in the quarterly report of the Fund relating to the quarter of reference and (ii) the Aggregate Value of the Fund is the aggregate historic acquisition cost or transfer value of the real estate assets, real property rights, shareholdings or other interests held by the Fund. In any event, the aggregate Management Fee shall not be less than € 350,000 per year.

An annual cap on Corporate Management fees was agreed in the amount of € 530,000, effective from 1 January 2010.

Note 21 Other costsIn detail:

General and administrative expenses” include € 37,297 of a provision for doubtful debtors to adjust the nominal value of trade receivables to estimated realisable value.

Included in the general and administrative expenses is an amount of € 135,000 including VAT (2007 € 126,000) relating tot the auditors fee for services rendered to Spazio Investment N.V. and its subsidiaries. The fee of PricewaterhouseCoopers Accountants N.V. was € 105,000 including VAT (2007 € 99,000). No audit related nor non audit services were rendered during 2008 (2007: 0).

Note 22 Financial incomeFinancial income amounts to € 5,667,492 and mainly relates to:

interest on accounts of the Fund of ` € 2,899,580;income from the four interest rate collar contracts of the Fund of ` € 1,998,245;interest on bank accounts of the Company of ` € 644,796.



Note 23 Financial expensesThese amount to € 23,715,590 and can be broken down as follows:

€ €



Interest owed on bank loans 24,530,390 21,412,879

Loan arrangement costs 715,994 1,897,310

Bank commission on unutilised credit facilities 821,769 1,086,145

Bank fees 302,873 379,647

Other financial charges 55,843 46,655

Total 26,426,869 24,822,636

Capitalized financial expenses (2,711,279) (2,479,085)

Total 23,715,590 22,343,551

Note 24 Tax expenseDue to the tax–exempt no tax has been calculated for the fiscal year.

Note 25 Earnings per share (EPS)Basic EPS is calculated by dividing the profit attributable to the Company’s shareholders by the weighted average number of ordinary shares in issue during the year.

Year ended 31 December 2008

Profit/(Loss) attributable to the Company’s shareholders (thousands of €) (8,569)Weighted average number of ordinary shares in issue 28,185Basic and diluted EPS (€ per share) (0.30)

Note 26 FundDuring the year 2008 the Fund reimbursed € 26,000,004 of share capital to the Company.In accordance with the Spazio Industriale Fund Regulations, on 13 February 2009 the Fund resolved to reimburse € 4,730.07 per unit, for a total amount of € 2,663,029.

Note 27 Contingencies and guaranteesThe Company has contingent liabilities in respect of bank and other guarantees, and other matters arising in the ordinary course of business. It is not anticipated that any material liabilities will arise from the contingent liabilities.With reference to the property in Via Martellona 9, Bagni di Tivoli, Rome, purchased on 24 March 2006 from Pace Immobiliare S.p.A., the purchase price paid by the Fund may be increased by a maximum of € 500,000 if certain conditions regarding the renegotiation of the property’s lease are satisfied by 28 April 2009.With regard to defects of an environmental nature in the properties in Portoferraio, Varese and Novara purchased on 18 October 2006, Progetto Magnolia S.r.l. (formerly named Spazio Industriale 2 S.r.l.) has paid € 2,000,000 into the Fund’s bank account by way of guaranteeing its obligations of restoration; the Fund will release this amount according to the state of progress of the restoration work.

Following the agreement made on 30 December 2005 to purchase the site from the company Portolegno S.a.s. di Iniziative Immobiliari 3 S.r.l. (“Portolegno”), a subsidiary of Pirelli & C. Real Estate S.p.A., the Fund has relieved Portolegno of its obligations previously given to third parties as follows:

the Fund has undertaken to pay the previous owners of the site the sum of ` € 1.5 m if a suitably identified part of the site is transformed from “agricultural” to “productive” use by 27 July 2008 at the latest. This occurred on 27 July 2008, so the obligation has expired;

€ €


Trade payables to Pirelli & C. Group 8,296 176,360

Trade payables to Pirelli & C. RE Group 574,721 2,309,489

Trade payables to Management Company 1,466,519 1,677,870

Other payables to Pirelli & C. RE Group 2,000,000 2,000,237

€ €



Management fees 5,538,258 4,326,485

Other costs 2,824,553 3,486,576

the Fund has taken over Portolegno’s commitments to the Municipalities of Portogruaro and Fossalta di Portogruaro under the urban `Planning Agreement in relation to urban development and building work on the site. After taking over these obligations, the Fund must give the aforesaid municipalities guarantees of up to € 15.1 m to secure the realization of the urban development work;the Fund has assumed the urban development costs on behalf of the company Zaccheo Ambiente S.a.s. di Zaccheo Sandrino & C. `(“Zaccheo Ambiente”) on some of the latter’s property.

Note 28 CommitmentsSpazio Investment N.V. had no commitments as of 31 December 2008.

Note 29 Events after the financial statements dateIn pursuit of its strategy of returning cash to shareholders, on 15 January 2009 the Company completed a tender offer. This resulted in the purchase by the Company of 4,545,448 of its Depository Interests from tendering shareholders at a price of € 5.50 per Depository Interest at a cost of approximately € 25 million. The Depository Interests purchased by Spazio will be held by the Company and the cancellation of such securities shall be proposed at the next annual general meeting of shareholders to be held on 28 April 2009.

On 16 January 2009 a preliminary sales agreement was signed with Studio Target S.n.c. for € 732,000, for the disposal of a unit in the renovated “Edificio 16” building in addition to two parking spaces.

On 20 January 2009 the Fund received an offer from Infogest S.a.s. for nine properties near Catanzaro (CZ) with a gross floor area of 13,878 sq m, let in their entirety to Telecom Italia S.p.A. for an annual rent of € 533,513 for a total amount of € 5,500,000.

On 10 March 2009 the Fund accepted an offer from Rondini S.r.l. for four properties in Tuscany with a gross floor area of 71,153 sq m, let in their entirety to Prada S.p.A. for an annual rent of € 4,230,259 for a total sales price of € 54,500,000.

Note 30 Related party transactionsBalances between the Companies of Pirelli & C. Group and Pirelli & C. Real Estate Group and the Management Company and companies in the latter’s Group at 31 December 2008 and transactions between the same are listed below:

Following Pirelli & C. RE Group’s disposal of Pirelli & C. Real Estate Integrated Facility Management S.p.A. shares in 2008, Pirelli & C. Real Estate Integrated Facility Management S.p.A. has not been considered as related party as at 31 December 2008.

Please refer to note 11 for trade payables and to note 20 for the management fees.All transactions are part of the Fund’s ordinary management and are settled under market conditions; there are no unusual or atypical transactions or nay with potential conflicts of interest.



51 Spazio Investment N.V. Company balance sheet

COMPANY BALANCE SHEET AS AT 31 DECEMBER 2008 AFTER APPROPRIATION OF RESuLT (IN EuRO)

€ €

ASSETS Note 31 December 2008 31 December 2007

Investment

Investments in Group Companies 1 342,054,855 414,205,520

Receivables

Other receivables 2 157,169 190,566

Other assets

Cash at banks 3 26,579,552 2,444,992

TOTAL ASSETS 368,791,576 416,841,078

Shareholders'equity

Share capital 4 5,498,279 6,096,020

Share premium 5 274,486,750 308,956,491

Legal / Revaluation reserve 6 86,818,599 112,979,096

Retained earnings 7 959,960 (12,618,062)

367,763,588 415,413,545

Short-term liabilities

Trade payables 8 954,811 1,271,458

Other payables 9 73,177 156,075

TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 368,791,576 416,841,078

52 Spazio Investment N.V. Company profit and loss account

COMPANY PROFIT AND LOSS ACCOuNT FOR THE PERIOD FROM 1 JANuARY 2008 TO 31 DECEMBER 2008 (IN EuRO)

Note € €



Corporate profit after tax (2,543,796) (1,932,058)

Result of subsidiaries after tax 1 (6,024,918) 46,812,689

PROFIT FOR THE PERIOD (8,568,714) 44,880,631

NOTES TO THE COMPANY FINANCIAL STATEMENTS AS AT 31 DECEMBER 2008

53 Spazio Investment N.V. Notes to the company financial statements

INTRODUCTIONThe description of Spazio Investment N.V.’s activities and structures, as included in the notes to the consolidated financial statements, also applied to the Company financial statements. The corporate accounts have been prepared in accordance with the financial reporting requirements of Part 9, Book 2 of the Netherlands Civil Code.

In accordance with article 2:402 of the Dutch Civil Code, the Company’s profit and loss account only shows the result of subsidiaries after tax as separate item.

The consolidated financial statements of Companies publicly listed in the European union must be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Commission. Consequently, the consolidated financial statements of the Group for the year ending on 31 December 2008 have been prepared accordingly.

In order to harmonise the accounting principles of the Corporate accounts with the consolidated accounts the Management Board has decided to adopt the provisions of section 2:362 subsection 8 of the Netherlands Civil Code, whereby the accounting principles applied in the consolidated accounts also apply to the Company financial statements of Spazio Investment N.V..

ACCOUNTING POLICIESAccounting principles as described in the notes to the consolidated financial statements also apply to the Company financial statements unless indicated otherwise.

INVESTMENT IN GROUP COMPANIES In accordance with section 2:362 subsection 8 of the Dutch Civil Code, subsidiaries are valued at net asset value. For determining the net asset value all assets, liabilities and profits and losses are subject to the accounting principles as applied to the consolidated financial statements.

INFORMATION ON THE BALANCE SHEET AND INCOME STATEMENT OF THE COMPANYThe following explanatory notes refer to the Company financial statements.

Note 1 Investment in Group CompaniesThe movements in investments in Group Companies are as follows:

€ €



Opening balance 414,205,520 348,427,146

Subsidiary acquisition - 33,500,000

Reimbursement of quotas (26,000,004) -

Result of subsidiaries (6,024,918) 46,812,689

Dividends from subsidiaries (40,125,743) (14,534,315)

Total 342,054,855 414,205,520

The Company owns 100% of an Italian fund named “Spazio Industriale – Fondo Comune di Investimento Immobiliare di Tipo Chiuso” (the “Fund”).

The Fund started its activity on 28 December 2005, date of authorisation of the Fund by the Bank of Italy.

On February 2008 the Company received a partial reimbursement of quotas from Spazio Industriale Fund’s for an amount of € 3.0 million, and a second partial reimbursement of € 23.0 million on August 2008.

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINuED


Note 2 Other receivablesThis item totals € 157,169 and mainly refers to prepaid insurance costs.

Note 3 Cash at banks At 31 December 2008 this item totals € 26,579,552 and refers to the cash and cash equivalents in current accounts with ABN-AMRO Bank in Amsterdam.

Shareholders’ equityThe movements in Shareholders’ equity are as follows:

Share capital

Sharepremium

Legal/Revaluation reserve

Retained earnings Equity

Note € € € € €

Equity at 31 December 2007 6,096,020 308,956,491 112,979,096 (12,618,062) 415,413,545

Dividend 2007 7 - - - (22,224,452) (22,224,452)

Interim dividend 2008 7 - - - (16,188,182) (16,188,182)

Reclassification regarding realised gain on investment properties sold

6-7 - - (7,685,713) 7,685,713 -

Purchase of share capital 7 - - - (668,609) (668,609)

Cancellation acquired shares 4-5 (597,741) (34,469,741) - 35,067,482 -

Result of the period - - (18,474,784) 9,906,070 (8,568,714)

Equity at 31 December 2008 5,498,279 274,486,750 86,818,599 959,960 367,763,588

Note 4 Share capitalShare capital is related to the Spazio Investment N.V. shares amounts to € 5,498,279 (after the cancellation of n. 2,988,705 shares equal to € 597,741).

The total authorized number of ordinary shares is 50,000,000 with a par value € 0.20 each and 100 preferred shares of a par value € 0.20 each.

At the Balance Sheet date, a total of 27,491,295 ordinary shares of par value € 0.20 each and 100 preferred shares of par value € 0.20 each are issued and fully paid.

Note 5 Share premium At 31 December 2008 the item, amounting to € 274,486,750, is related to share premium reserve totally distributable.

The movement that took place during the period from 1 January 2008 to 31 December 2008, for a total amount of € 34,469,741, refers to the cancelled acquired shares.

Note 6 Legal / Revaluation reserveLegal reserves in the Company balance sheet are reserves to be maintained by local legislation and comprise the revaluation reserve. The amount recognised by this reserve, totalling € 86,818,599, is not freely distributable.

The movements that took place during the period from 1 January 2008 to 31 December 2008 were as follow:

decrease equal to ` € 7,685,713 related to the reclassification of the amount regarding the realised gain (2007 adjustments) on investment properties sold in 2008;

decrease equal to ` € 18,474,784 related to the profit of 2008 not distributable.

A revaluation reserve is a restricted reserve under Dutch Civil Code. A brief description of the legal reserve is as follows:

Revaluation reserveThe revaluation reserve relates to investment property and derivatives financial instruments and comprises cumulative increase/decrease in the fair value of the property and derivatives financial instruments, net of deferred tax. This is a legal requirement following Article 390 Book 2 of the Dutch Civil Code.

Note 7 Retained earningsThe retained earnings are freely distributable to the shareholders.

At 31 December 2008 this item is positive equal to € 959,960.

The movements that took place during the period from 1 January 2008 to 31 December 2008 were as follows:decrease equal to ` € 22,224,452 related to the dividend distribution referring Spazio Investment N.V. 2007 result;decrease equal to ` € 16,188,182 related to the interim dividend distribution referring Spazio Investment N.V. result of the period 1 January 2008 - 30 June 2008;increase equal to ` € 7,685,713 related to the realised gain (2007 adjustments) referring investment properties sold in 2008;decrease equal to ` € 668,609 related to the reclassification to the retained earnings of the cancelled shares;increase equal to ` € 35,067,482 related to the cancelled acquired shares of 2,988,705 depositary interests of the ordinary shares representing a total of 9.81% of the outstanding shares at 31 December 2007;increase equal to ` € 9,906,070 related to the realised result of 2008.

Note 8 Trade payablesAt 31 December 2008 the item amounts to € 954,811 and includes an amount of € 376,968 due to related parties and in particular to Pirelli & C. RE Group (mainly due to management fees accrued at the reporting date) and € 577,843 legal and professional services to third parties.

Note 9 Other payablesAt 31 December 2008 the item amounts to € 73,177 and mainly refers to Director’s remuneration.

Note 10 Directors’ remunerationDirectors’ remuneration for the period 1 January 2008 – 31 December 2008 is detailed as follows:


Directors € €



Board of Directors

John Duggan Chairman 120,000 120,000

Roy Dantzic Independent Director 60,000 60,000

Gualtiero Tamburini Independent Director 60,000 60,000

Olivier de Poulpiquet Representative Director (Pirelli RE) up to 9th December 2008 56,451 60,000

Richard Mully Independent Director 60,000 60,000

Nicholas James Independent Director from 9th December 2008 3,549 -

Fabrizio Lauro Representative Director (Pirelli RE) from 9th December 2008 3,549 -

Audit Committe

Roy Dantzic Chairman 5,000 5,000

All members of the Board of Directors receive a fixed amount. They do not receive any other remuneration.


Note 11 Events after the balance sheet datePlease refer to note 29 of the consolidated financial statements for details.

Note 12 Related party transactions Balances between the Company and companies in the latter’s Group at 31 December 2008 and transactions between the same during the year then ended are listed below:

€ €


Trade payables to Pirelli & C. RE Group 376,968 927,397

€ €



Management fees (1,125,317) (1,103,295)

Other costs (48,501) (51,353)

Trade payables to Pirelli & C. RE Group are due to Pirelli RE Netherlands B.V. and Pirelli & C. Real Estate S.p.A., relate to management fees earned at the reporting date but not yet paid.

Note 13 Number of employeesThe Company has no employees.

AMSTERDAM, MARCH 25TH 2009BOARD OF DIRECTORS JOHN DUGGANROY DANTZICGUALTIERO TAMBURINIRICHARD MULLYNICHOLAS JAMESFABRIZIO LAURO

OTHER INFORMATION

57 Spazio Investment N.V. Other information

Spazio Investment N.V. is a public limited liability company listed to the Alternative Investment Market (AIM).

ARTICLE OF ASSOCIATION RULES WITH RESPECT TO PROFIT APPROPRIATION

Article 30. Profits.

From the profits - the positive balance of the profit and loss accounts - made in the most recently elapsed financial year first, if possible, on each Preferred Share a dividend shall be made of one € cent (€ 0.01).

Each year, after application of Article 30.1, and insofar as Preferred Profit Sharing Certificates are in issue, from the remainder of the profits, if possible, an amount shall be distributed to the holders of Preferred Profit Sharing Certificates, in accordance with the conditions and provisions thereof and to former holders of Preferred Profit Sharing Certificates holding rights as referred to in Article 4.3.

The Management Board may resolve that distributions or interim distributions to holders of Preferred Profit Sharing Certificates be made from the Distributable Equity. The provisions of Article 31.2 shall apply correspondingly.

The part of the profit remaining after application of Articles 30.1 and 30.2, shall be put at the disposal of the Shareholders’ Body. The Shareholders’ Body may allocate such remaining profits entirely or partially to the distributable reserves.

Article 31. Distributions charged to the Distributable Reserves and distributions in Shares.

Distribution of profits shall be made after adoption of the annual accounts if permissible under the law given the contents of the annual accounts.

Distributions on Preferred Profit Sharing Certificates and/or on Shares may be made only up to an amount which does not exceed the amount of the Distributable Equity and, if it concerns an interim distribution, the compliance with this requirement is evidenced by an interim statement of assets and liabilities as referred to in Section 2:105, subsection 4, of the Dutch Civil Code. The Company shall deposit the statement of assets and liabilities at the office of the Commercial Register within eight days after the day on which the resolution to distribute is published.

The Shareholders’ Body may, at the proposal of the Management Board, resolve that distributions to holders of Shares be made from the Distributable Equity. The provisions of Article 31.2 shall apply correspondingly.

The Shareholders’ Body may, at the proposal of the Management Board, resolve that a distribution of dividend on Ordinary Shares shall not be paid in whole or in part in cash but in kind.

The Management Board may resolve to make interim distributions and/or to make interim distributions at the expense of any reserve of the Company.

In calculating the amount of any distribution on Preferred Profit Sharing Certificates and/or on Shares, Shares held by the Company shall be disregarded.

30.1

30.2

30.3

30.4

31.1

31.2

31.3

31.4

31.5

31.6

58 Spazio Investment N.V. Other information

PROPOSED APPROPRIATION OF NET PROFITAccording to Spazio Investment N.V. Articles of Association, the appropriation of the net result for the period is decided upon at the Annual general meeting of Shareholders.

€ €



Legal / Revaluation reserve (18,474,784) 26,104,417

Retained earnings 9,906,070 18,776,214

Total (8,568,714) 44,880,631

The total amount of earnings that the Board has determined to retain is equal to € 1, 589,168 of which € 1,403,601 relates to the twelve-month period ended 31 December 2008 and € 185,567 relates to previous fiscal years’distribution adjustments. As at 31 December 2008 retained earnings show a positive amount of € 1.0 m which is the result of the recognition of the shares acquired during the year for a total value of € 0.7 m.

As described in the Chairman’s Statement, the Board has determined not to pay a dividend in respect of the six-month period ended 31 December 2008. Consequently of the € 17.6 m of income available for distribution, € 16.2 m has been distributed to shareholders as dividends in October 2008 and € 1.4 m has been retained by the Company.

AuDITOR’S REPORT

59 Spazio Investment N.V. Auditor’s report

60 Spazio Investment N.V. Auditor’s report

AuDITOR’S REPORT

Spazio Investment N.V. Financial calendar and advisors

FINANCIAL CALENDAR AND ADVISORS

FINANCIAL CALENDAR

REGISTERED OFFICERoyal DamcenterDam 7f1012 JS AmsterdamThe Netherlandsphone: +31 (0) 20 486.76.46fax: +31 (0) 20 486.78.98

INFO [email protected]

SHAREHOLDERS [email protected]

WEBSITE ADDRESSwww.spazioinvestment.com

AuDITORSPricewaterhouseCoopers Accountants N.V.

CORPORATE SOLICITORSLoyens & Loeff (Dutch)Paul Hasting (uk)

NOMAD & JOINT BROkERDeutsche Bank AG (uk)

JOINT BROkEROriel Securities Limited

COMMuNICATION ADVISORBrunswick Group LLP

Announcement of full year 2008 results 26 March 2009

Annual General Meeting 28 April 2009

Payment of Ordinary Dividend 4 May 2009

61

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