2011 Annual Report TKP lnvestments BV

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2011 Annual Report TKP lnvestments BV

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TKP Investments BV

Content 2011 Annual Report TKP lnvestments BV 1 Management Report 1.1 Introduction 1.2 About TKP Investments 1.3 Important market developments in 2011 1.4 Milestones of TKP Investments in 2011 1.5 Risk management 1.6 Outlook 2 Annual Accounts 2.1 Balance sheet as at 31 December 2011 2.2 Profit and loss account for 2011 2.3 Cash flow Statement for 2011 2.4 Notes 2.4.1 2.4.2 2.4.3 2.4.4

3 3.1 3.2

1 1 3 3 4 4 5 7 9 10 10 11 12 13

General Accounting Principles Notes to the balance sheet Notes to the profit and loss account

Other information Independent auditor’s report Designated use of results

13 13 14 18

20 20 22

2011 Annual Report

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Management Report

1.1 Introduction The year 2011 may be characterised as “coming of age”. TKP Investments has become increasingly independent. On 1 April 2011, the shares were transferred to AEGON Asset Management and from that moment onwards TKP Investments has no longer been operating as a subsidiary of TKP Pensioen, but as a sister within the AEGON Group. The move of TKP Investments to new premises at Europaweg in Groningen contributed to the continued independence. Last but not least, we saw a growth in the number of clients, which further reduced the dependency on the two “founding fathers” and broadened the solid base for professional and continuous service provision. In the course of the year, TKP Investments maintained close contacts with the boards of the pension funds regarding the development of the financial position and the investment decisions to be taken. The developments in the financial markets were very unfavourable for the coverage ratio of pension funds. Although the investment returns were generally positive, in particular the drop in interest rates caused problems. In 2011 an outline Pension Agreement was concluded between the social partners at central level, which the clients have to take into account. TKP Investments will continue to support and advise its clients in order to keep the pensions affordable in the long term. TKP Investments assisted the Pensioenfederatie (Pensions Federation) in the publication of the “Aanbevelingen Uitvoeringskosten” (Recommendations Implementation Costs). The objective is to give transparent insight into the costs in the reports from the 2011 financial year onwards. Transparency is an essential condition for clients to be in control and to make adjustments where necessary. As a result of the new organisational structure and the desire to communicate in a transparent and independent way, the communication of TKP Investments was reintroduced, with its own logo and the website www.tkpinvestments.com. In 2011, TKP Investments published various publications exclusively for its clients, such as market updates and further explanations of developments in the field of pension asset management. Moreover, it provided several publications for various journals. In respect of organisation, another milestone was reached in December, i.e. the successful switch of the total IT infrastructure of TKP Pensioen to the American AEGON IT Services and the British AEGON European Data Centre. External and internal appreciation cannot remain unmentioned here. External appreciation appeared amongst other things from the “Multi Manager of the Year Award” that was won by TKP Investments for the fourth consecutive time in 2011. Internal appreciation appeared from the results of the Employment Survey where employees clearly indicated to have confidence in the company, in each other and in the future. Proud employees are essential for the sustainable growth of TKP Investments. A solid basis for viewing the future with confidence. Roelie van Wijk Chief Executive Officer TKP Investments

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About TKP Investments

TKP Investments is a real pensions investor with over 20 years’ experience. Our success is determined by our client focus. With its integral approach, TKP Investments offers pension funds complete service provision in the field of asset management and balance sheet risk management, with fund boards being fully in control. TKP Investments’ service provision includes strategic and risk management advice, including activities in the field of Asset Liability Management (ALM). In addition, TKP Investments provides daily monitoring and management of investment portfolios and compiles reports for fund boards and regulators. In respect of asset management, TKP Investments uses a structured manager-of-managers investment process. This means that external asset managers manage the capital.

1.3

Important market developments in 2011

Financial markets European debt problems have determined the financial markets this year. European politicians failed to come up with decisive solutions, and the problems of Greece spread across Europe. This made investors doubt the creditworthiness of other European countries and the risk premiums for Spanish, Italian and Belgian government bonds, for instance, rose sharply. In addition the economic news went from bad to worse. Almost all published figures indicated a delay in growth. In particular in the third quarter of this year, the crisis situation in the financial markets was significant. The correlation between different assets was considerable. This meant dramatically lower share prices and a dropping interest rate for Germany and the Netherlands due to the flight of investors to the most creditworthy countries. Moreover, in the third quarter, the Euro dropped against most of the other currencies. In 2011 as a whole, the Euro declined over 2.5% in respect of the Dollar. The long-term interest rates (30 years swap interest) dropped in 2011 from 3.5% to 2.6%. Following the very problematic third quarter, the fourth quarter saw a slight recovery of share prices. However, this did not make up for the earlier drops in share prices, so that the stock markets globally (Dollar, Yen, Pound hedged against the Euro) ended the year with a loss of over 7%. Drop in coverage ratio of Dutch pension funds In 2011, the financial position of Dutch pension funds continued to receive a great deal of attention. The developments in the financial markets were very unfavourable for the coverage ratios of pension funds. Although the investment returns were generally positive, the drop in interest rates, in particular, caused problems, resulting in various pension funds having to put pension cuts on the agenda as a necessary policy instrument. Due to the extremely low interest rate, the Nederlandsche Bank decided to relax the rules for the calculation of the coverage ratio at the end of 2011, resulting in less pension funds being required to implement cuts (for the time being). Pension agreement The ambition of the pension agreement concluded in broad lines by the social partners at central level in 2011, is keeping the Dutch Pension System affordable in the long term. Pension funds need to make a choice in respect of the transfer of existing pension commitments to a new pension contract. This affects the choice between a nominal and a real pension commitment. By doing so, the choice also affects the investment policy.

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Transparency of costs The Pensioenfederatie published ‘Aanbevelingen Uitvoeringskosten’ in the autumn, to which TKP Investments, too, has contributed. The objective of these recommendations is to report the costs in a transparent and unambiguous way. TKP Investments, too, shall act in accordance with the recommendations by including the costs in a transparent way in the reports for the 2011 financial year.

1.4

Milestones of TKP Investments in 2011

Client development Obviously, in the course of the year, TKP Investments maintained close contacts with the boards of the pension funds regarding the development of the financial position and the investment decisions to be taken. Due to the unrest in the European bond markets the country risk was an important consultation theme, as investments that used to be considered to be very safe, were no longer so to a smaller or larger extent. Moreover, in the first half year, TKP Investments carried out transactions for its clients in respect of asset swaps. An asset swap is a method to take credit risk in respect of a country without currency or interest risk. In 2011, TKP Investments was successful in realising a further broadening of its client base. In 2011, Pensioenstichting Transport, Stichting Pensioenfonds Sanoma and Pensioenfonds Avebe selected TKP Investments for the provision of asset management services. In addition, two other pension funds have chosen for TKP Investments. New organisational structure As from 1 April 2011, TKP Investments is part of AEGON Asset Management, a globally operating organisation in the field of asset management. This merger has several advantages for the clients, such as reinforcement of the following key areas: Tax and Legal, Operational Risk Management and Compliance, IT, responsible investment, competencies in the field of derivative trading and research for strategic and tactical asset allocation. An important milestone that was reached in this area was the successful switch of the IT infrastructure of TKP Pensioen to the American AEGON IT Services and the British AEGON European Data Centre in December. Communication As a result of the new organisational structure, the communication of TKP Investments was reintroduced, with a TKP Investments logo and the website www.tkpinvestments.com. In 2011, TKP Investments published different publications exclusively for its clients, such as market updates and developments in the field of pension asset management, and also provided various publications for different journals. Moreover, TKPI Investments collaborated with TKP Pensioen in the field of communication by way of the publication of “Punt van Aandacht” (Point of Attention) and the organisation of seminars. Many clients attended the TKP seminar regarding the Pension Agreement in October. European Pensions Awards For the fourth consecutive time, TKP Investments won the Multi-Manager of the Year Award during the annual award ceremony of the prestigious European Pensions Awards. The European Pensions Awards are an initiative of the European Pensions Magazine. The award ceremony was held in London on 30 June. Anyone who is active in the field of pension provision and support activities for pension funds, such as asset managers, consultants and pension suppliers, may compete for the awards. Investment funds The assets under management by TKP Investments are invested in over 20 investment funds. They consist of both actively and passively managed funds in the investment categories shares, fixed interest values, property and alternative investments. The actively managed investments funds showed a varying result in 2011 in respect of their relevant benchmarks. In Annual report 2011

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2011, positive results were achieved by managers investing in emerging markets and Asia, high yield bonds and commodities. Moreover, the non-listed property portfolios in Europe and Asia achieved positive returns. Contrary to this, the results of managers investing in developed share markets were below benchmark. Several changes in the fund offering were implemented in 2011. The passive fund offering was extended for the share investment category. The European share fund was converted from active to passive management. In view of the relatively high costs it is difficult in the European market to achieve outperformance over multiple years with multiple managers at the same time. In the context of socially responsible investing, shares that are on the exclusions list were excluded. In January 2012 a passively managed global share fund will be started. In addition, the actively managed share fund was changed, investing no longer by way of regional funds but directly through the selected external managers by region and a number of globally investing managers. By doing so, the portfolio is divided over less external managers than was the case previously. In the course of the year, benchmarks for the euro government bond funds were adjusted following analysis of country risks in order to reduce specific country risks. In 2011, TKP Investments entered into a renewed agreement with AEGON Investment Management B.V. for the management by TKP Investments of hedge funds and private equity investments. Socially responsible investing In respect of the socially responsible investing policy the definition for the exclusion of companies by TKP Investment was tightened up. In addition to companies that are involved in controversial weapons, companies that do not comply with the UN Global Compact and with which the dialogue yields too little result were excluded. In this context the company Vedanta was added to the exclusions list. In addition, a policy was determined for investment in government bonds to exclude investment in certain countries in advance. In fact the TKP Investment funds did not invest in government bonds of such countries anyway, but this was now included formally in the policy. The dialogue with a number of countries that do not comply with the UN Global Compact was extended with the Human Rights theme. For a number of companies, the John Ruggie framework was used to conduct a dialogue. As a special representative of the United Nations, John Ruggie has developed a framework to improve the relationship between companies and human rights. Change in fee structure The fee structure for the asset management within the TKP investment funds was adjusted at the beginning of 2011, resulting in a more flexible and transparent structure. The management fee for TKP Investment is no longer charged within the investment fund but is directly charged to the participants outside of the investment funds. Further explanation of the results The total assets under management at the end of 2011 were € 13.7 billion, against € 11.5 billion at the end of December 2010. The increase in the managed assets was predominantly caused by the result of the existing portfolio and by taking over the management of an AEGON portfolio. The total turnover of TKPI is € 18.8 million for 2011, against € 17.9 million in 2010. The increase is € 0.9 million (5%). The profit after tax rose in 2011 in respect of 2010 from € 3.6 million to € 4.2 million. Profit after tax rose in particular due to a rise in the turnover in the second half of 2011.

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Risk management

The outcome of an annual multidisciplinary Risk Assessment is used to identify the risks. In the first instance the risk analysis focuses on the risk categories set out in the Handboek FIRM (Financial Institutions Risk Analysis Method) of the Nederlandsche Bank (DNB). In addition, the possible impact of identified risks (scenarios) is included in the forecasts. The impact of these risks for the equity capital is assessed in this respect. Subsequently, an assessment is made of the extent to which the outcome of the Risk Assessment fits into this and whether additions are required. In practice, the various risks are more or less related to each other. TKP Investments has a control structure based on the COSO framework for Enterprise Risk Management (ERM). This framework not only provides for internal control, but also for risk management. TKP Investments considers internal control to be an integral part of risk management. The identified risks are further explained below. The criterion for risk assessment is that TKP Investments exclusively manages investments for the account and risk of its clients. TKP Investments holds the view that the size of the equity capital is sufficient in the light of the identified risks. Description of the risks The key risks for TKP Investments and the mitigating measures are as follows: Environmental risks In order to minimise the environmental risks, durations and notice options of material contracts are aligned with the requirements arising from the business operations. Furthermore, the client service and sales function was extended considerably. In addition, regular client satisfaction surveys are conducted. Operational risks Operational risks include the processing risk, the risk of incorrect investment advice and liability risk. These risks are controlled by way of a system of control measures that are part of the ISAE 3402 report. For instance, use is made of standard software, checks of systems input and output, process and procedure descriptions available to all employees, contractual limitation of liability and a liability insurance. Outsourcing risks As TKPI has outsourced the asset management to external managers, and the fund accounting processes to Citi, TKP Investments runs outsourcing risks. An extensive selection process in respect of external managers and the daily monitoring of external managers, the contracts with Citi, the governance model, the review of the SOC1 reports (American version of ISAE 3402) of Citi and the additional checks ensure that the outsourcing risks are controlled sufficiently. The outsourcing processes are tested in the context of the ISAE 3402 inspection of TKP Investments. IT risks Due to the outsourcing of part of the work, TKP Investments runs IT risk for only a limited number of IT systems. IT risk means that the business operations may be temporarily impossible due to the breakdown of systems. The control measures consist of back-up procedures, a contingency plan or fall-back arrangements and periodic maintenance and replacement of IT systems. Moreover, the general IT controls are part of the ISAE 3402 report. Integrity risks The integrity risks of TKP Investments are controlled by way of internal guidelines, preAnnual report 2011

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employment screening, codes of conduct, e-learning modules for all staff, Customer Due Diligence measures and measures in the customer acceptance process. Within TKP Investments a compliance function has been implemented seeking to advise the relevant management to focus business operations on an interpretation of the business processes that guarantees compliance with legislation and regulations. Part thereof is the creation of awareness regarding the relevant legislation and regulations and the implementation of a monitoring programme. Legal risks Legal risks include situations in which legal and internal rules are not complied with and in which existing contracts have not been drawn up in conformity with the intention of TKP Investments. In addition to the assistance of the internal legal discipline and the lawyers of AEGON Asset Management, periodically external advice is sought regarding new regulations and agreements are drafted by reputable parties. Moreover, within TKP Investments, a compliance function has been implemented seeking to advise the relevant management to focus on an interpretation of business processes for the business operations that guarantees compliance with legislation and regulations. Part thereof is the creation of awareness regarding the relevant legislation and regulations and the monitoring of processes and procedures. Credit risks The credit risks run by TKP Investments are limited to the outstanding receivables from AEGON Nederland NV.

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1.6

Outlook

In 2012 TKP Investments will continue to provide its clients with high-quality, client-focused guidance and advice in the field of integral balance sheet management and asset management. The changes in legislation and regulation are closely followed in this respect and where necessary converted into advice. Clear communication with the board of the pension fund and the participants will continue to receive considerable attention at TKP Investments in 2012. The increase of the number of clients is favourable for the market position of TKP Investments, and TKP Investments will continue to seek further professionalization, innovation and improvement of the quality of service provision. TKP Investments has confidence in the developments going forward.

Groningen, 26 March 2012

R. van Wijk-Russchen RBA

drs. C. Luning RBA

Chief Executive Officer TKP Investments

Chief Investment Officer TKP Investments

mr. F.F.F. de Beaufort Member of the Management Board AEGON Asset Management

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Annual Accounts

2.1

Balance sheet as at 31 December 2011

Prior to profit appropriation, amounts x € 1,000

Assets

2011

2010

107

19

1,008 10,109 2,916 --------14,140

1,300 8,344 654 -------10,317

A. Fixed assets

1. Tangible fixed assets B. Current assets 1. Receivables and prepayments and accrued income 2. Receivables group companies 3. Liquid assets Total assets Liabilities C. Equity capital 1. Share capital 2. General reserve 3. Net result

1,500 2,727 4,156 -------

D. Provisions

1,500 1,600 3,627 ------8,383

6,727

47

37

E. Current liabilities 1. Creditors 2. Group companies 3. Accruals and deferred income

171 1,519 4,020 -------

0 2,077 1,476 ------5,710

Total liabilities

--------14,140

3,553 -------10,317

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2.2

Profit and loss account for 2011

Amounts x € 1,000

Turnover a. Fees Costs b. Staff costs c. Depreciations d. Additional costs Operational result e. Financial revenue and expenses Result before taxes f. Corporation tax Result after taxes

Annual report 2011

7,958 15 5,401

2011

2010

18,756

17,851

13,374 -------5,382

7,701 10 5,516

13,227 -------4,624

151 ------5,533

244 ------4,868

1,377 ------4,156

1,241 ------3,627

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Cash flow Statement for 2011

Amounts x € 1,000

2011 Cash flow from operational activities Income from clients Payments to suppliers and employees Cash flow from business operations Interest received Paid tax on profits

19,109 -11,383 ------151 -1,247 ------

Cash flow from operational activities Cash flow from investment activities Investments in tangible fixed assets

7,726

-1,096 ------6,630

2010 16,895 -13,056 ------244 -824 ------

3,839

-580 -----3,259

-103 ------103

-29 ------29

Cash flow from financing activities

-2,500 ------2,500

-1,902 ------1,902

Increase / Decrease cash

4,027

1,328

Balance liquid assets at beginning of financial year

8,998

7,670

13,025

8,998

Cash flow from investment activities Cash flow from financing activities Paid dividends (profit distribution)

Balance liquid assets at end of financial year

The liquid assets consist of cash and bank balances and the current account relation with AEGON Nederland N.V.

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Notes

2.4.1 General The Annual Accounts were drafted according to the regulations set out in Title 9 Book 2 of the Netherlands Civil Code and the Netherlands Annual Reporting Guidelines. On 1 April 2011 all shares TKP Investments B.V. were sold by AEGON Nederland N.V. to AEGON Asset Management B.V.

2.4.2 Accounting Principles Balance sheet valuation principles Unless stated otherwise, the assets and liabilities are valued against the nominal value based on historical cost price. Where necessary downward revaluation to a lower net realisable value took place. Assets and liabilities in foreign currencies were converted at the exchange rate on the balance sheet date. Tangible fixed assets The tangible fixed assets are valued against the acquisition cost or manufacturing cost, reduced by depreciations calculated in a straight-line manner, on the basis of the expected lifespan. Liquid assets These are the immediately due and payable assets in current account and savings accounts at banks. The liquid assets are valued at nominal value. Provisions TKPI does not employ staff directly. Use is made of personnel employed by AEGON Nederland N.V. Consequently, TKPI has no obligation to make provisions for pensions on the balance sheet, these are included in the annual accounts of AEGON Nederland N.V. The provision for anniversary bonuses is the cash value (at 3%) of the accumulated entitlements, taking into account a normal staff turnover. Taxes The taxes on the profits were calculated assuming the results according to the profit and loss account, according to the tax rates applicable to that year. Differences between the commercial and fiscal valuation of assets and liabilities are valued at nominal value at the applicable rate. As from 1 January 2003 TKP Investments is a fiscal unit with AEGON Nederland NV for turnover tax and as from 1 January 2004 also for corporation tax. TKP Investments is jointly and severally liable for commitments and debts arising from this. Setoff An asset and a loan capital item may only be set off in the annual accounts if and to the extent that: - A sound legal instrument is available to settle the asset and the loan capital item simultaneously; and - There is an emphatic intention to settle the balance as such or both items simultaneously.

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Principles for determination of the results The turnover and costs are attributed to the period to which they relate. Transactions in foreign currencies were converted at the exchange rate on the payment date. The turnover comprises the asset management fees received from clients, which were charged on the basis of the applicable rate structure. The still unsettled final accounts for the asset management fees were incorporated in the financial year. The costs are related to the operating expenses allocated to the financial year. Cash flow statement The cash flow statement is drawn up in accordance with the direct method. This means that all income and expenditure are presented as such. All amounts in the notes to the balance sheet and the profit and loss account are expressed in thousands of Euros.

2.4.3 Notes to the balance sheet Amounts x € 1,000

A1. Tangible fixed assets Statement of changes in 2011:

Hardware

Total

Book value at beginning of financial year Acquisitions in 2011 Depreciations in 2011

19 103 -15

19 103 -15

Book value at end of financial year

107

107

131 -25 ----107

131 -25 ----107

Cumulative acquisition value Cumulative depreciations Total

The tangible fixed assets are depreciated using the linear method on the basis of the expected lifespan (hardware: 3 years with a residual value of nil). For comparison of the figures, the statement of changes for 2010 has been included as well.

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Statement of changes 2010: Book value at beginning of financial year Acquisitions in 2010 Depreciations in 2010 Book value at end of financial year Cumulative acquisition value Cumulative depreciations Total

Hardware

Total

0 29 -10

0 29 -10

19

19

29 -10 ----19

29 -10 ----19 2011

2010

248 760 -----1,008

741 559 -----1,300

B1. Accounts receivable and accrued assets Still to be invoiced fees for asset management Additional accrued accounts receivable Total B2. Accounts receivable group companies The accounts receivable from group companies consist of a current account with AEGON Nederland N.V. B3. Liquid assets The liquid assets consist of the bank balances in current account and cash and are at the free disposal of TKP Investments B.V. C. Equity capital 1. Share capital The share capital as at balance sheet date consists of 1,500 shares of € 1,000 with a total of € 1,500,000. The authorised share capital as at balance sheet date is € 7,500,000, being 7,500 shares of nominal € 1,000. 2. General reserve Taking into account the solvability requirements of DNB, laid down in the Besluit prudentiële regels Wet op het financieel toezicht (BPR) (Prudential regulations decree under the Financial Supervision Act) € 1.127.762 of the reserves of 2010 were added to the general reserves. The remaining part of the 2010 results was paid out to the shareholders. 3. Net result Concerns the 2011 result after corporation tax.

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Development of equity capital The development of equity capital in 2011 is as follows:

Position on 31-12-2010

Share capital

General reserve

1,500

1,600

Net profit financial year 3,627

6,727

-2,500

-2,500

1,127

-1,127

0

------2,727

4,156 ------4,156

4,156 ------8,383

Dividend for 2010 in 2011 Added to general reserve Result for 2011 Position on 31-12-2011

------1,500

Total

2011

2010

37 10 ---47

29 8 --37

D. Provision anniversary bonuses Position at beginning of financial year Allocation borne by staff costs Position at end of financial year

The provision for anniversary bonuses is related to future commitments in the context of anniversary payments of employees. The provision for anniversary bonuses is the cash value (at 3%) of the accumulated entitlement, taking into account a normal staff turnover (90% retention). No account is taken of mortality risk. The total provision for anniversary bonuses has a term predominantly exceeding one year. 2011 2010 E2. Group companies Current Account TKP Pensioen B.V. Corporation tax to be settled with AEGON Nederland N.V. Debt AEGON Nederland N.V. to be set off Total

0 1,385

599 1,242

134 ------1,519

236 ------2,077

2011

2010

921 3,099 ------4,020

837 639 ------1,476

E3. Accrued liabilities Holidays and bonuses Accrued debts Total

The increase in the accrued debts is caused by turnover received in advance in 2012 of € 2.1 million (there was no advance turnover payment in 2010). As from 1 January 2003, TKP Investments is a fiscal unit with AEGON Nederland N.V. for turnover tax and as from 1 January 2004 also for corporation tax. TKP Investments is jointly and severally liable for commitments and debts arising from this.

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Commitments not included in the balance sheet Lease contracts for cars Car lease contracts have been entered into for eight members of staff. These have remaining terms ranging from 0 to 51 months. The total of commitments entered into under these lease contracts is € 0.4 million as at balance sheet date. Commitments shorter than 1 year Commitments of 1 to 5 years

€ 0.1 million € 0.3 million

Lease office premises The commitment entered into under the lease agreement regarding the premises at Europaweg in Groningen is € 0.5 million per year. The lease agreement has a remaining term to 1 January 2013. Commitments shorter than 1 year

Annual report 2011

€ 0.5 million

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2.4.4 Notes to the profit and loss account Amounts x € 1,000

a. Turnover: Asset management activities

2011

2010

18,756 -----18,756

17,851 ----17,851

b. Staff costs Amounts x € 1,000

Charged-on staff costs consist of: Gross salaries Pension costs Social insurance costs Additional staff costs Total

2011

2010

5,564 1,040 600 754 ------7,958

5,369 1,008 519 805 -----7,701

2011 369 2,864 1,324 844 ----5,401

2010 377 2,783 1,335 1,021 ----5,516

d. Additional costs Amounts x € 1,000

Housing costs Third party services Computer costs Additional costs Total

In 2011 the charged-on costs of TKP Pensioen were no longer included as a total item under the additional costs, but were divided over the underlying cost categories. The comparable figures for 2010 were adjusted to this. As a result of the new organisational structure the charged-on corporate costs of the previous shareholder AEGON Nederland NV decreased from € 0.9 million in 2010 to € 0.3 million in 2011. From now on, the charged-on corporate costs are borne by the current shareholder AEGON Asset Management, for 2011 this was € 0.2 million. Remuneration TKP Investments B.V. employs no staff. Use is made of staff employed by AEGON Nederland NV. The charged-on remuneration including social security costs, pension costs, perquisites and variable compensation of the directors under the articles of association of TKP Investments for 2011 was € 648,000.

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Related parties The transactions with related parties are carried out according to the “at arm’s length” principle. Transactions with the group companies are settled by way of a current account relationship.

Groningen, 26 March 2012

R. van Wijk-Russchen RBA

drs. C. Luning RBA

Chief Executive Officer

Chief Investment Officer

TKP Investments

TKP Investments

mr. F.F.F. de Beaufort Member of the Management Board AEGON Asset Management

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Other information

3.1

Independent auditor’s report

To: TKP Investments B.V..

Report on the financial statements We have audited the financial statements of TKP Investments B.V., Groningen, which comprise the balance sheet as at 31 December 2011 and the profit and loss account for the period from 1 January 2011 to 31 December 2011 and a summary of significant accounting policies and other explanatory notes.

Fund Management's responsibility The fund manager is responsible for the preparation and fair presentation of these financial statements in accordance with Part 9 of Book 2 of the Dutch Civil Code, and for the preparation of the manager’s report in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the fund’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion with respect to the financial statements In our opinion, the financial statements give a true and fair view of the financial position of TKP Investments B.V. as at 31 December, 2011 and of its result for the period from 1 January 2011 to 31 December 2011 in accordance with Part 9 of Book 2 of the Dutch Civil Code.

Report on other legal and regulatory requirements Pursuant to the legal requirement under Section 2:393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as a result of our examination whether the management board report , to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b-h has been annexed.

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Further we report that the management board report, to the extent we can assess, is consistent with the financial statements as required by Section 2:391 sub 4 of the Dutch Civil Code

Zwolle, 26 March 2012

Ernst & Young Accountants LLP

Signed drs. M. Koning RA

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Designated use of results

In accordance with the articles of association, the profits are at the disposal of the general shareholders’ meeting. Taking into account the solvability requirements of DNB, it was proposed to the general meeting of shareholders to pay out € 3,250,000 of the results to the shareholders and add € 906,000 to the general reserves.

2011 Annual Report

TKP Investments Europaweg 31-33, 9723 AS Groningen Postbus 5142, 9700 GC Groningen

www.tkpinvestments.com