Report of the Executive Board
Introduction
As we announced on December 11, 1985, the first steps were taken in the year
under review in the process which is intended to lead to the acquisition by AEGON
N.V., together with Postbank N.V., of a participating interest in our company, with
the object of guaranteeing the continued viability of FGH. Although, at the time of
writing, the outline of the agreement is known, the detailed arrangements have not
yet been agreed, so that we are not in a position to propose an amendment to the
articles of incorporation to stockholders. Let it suffice for this report that we have
included under the heading Other Information (page 48) a brief summary of the
agreement which we aim to reach; in the statement shortly to be sent to stockhol
ders a detailed report will be given of the background leading up to these
developments.
We are convinced that the considerable strengthening of our capital market position
due to the participation by AEGON N.V., in addition to Postbank N.V., creates the
conditions needed for us to continue to be able to perform our economic function
to best advantage despite the increasingly stiff competition which we expect as a
consequence of the liberalization of the money market and the capital market.
The year under review once again saw some improvement in the general economic
situation, but the existing stock of business premises proved sufficient to cater for
the increased level of activity, with the result that there was little to stimulate new
building. The most important transactions concerning new commercial property
took place in the urbanized west of the country, with prime locations and quality
accommodation being most in demand. Across the board, there has been hardly any
reduction in voids, so for the time being we cannot expect there to be an increase in
new building on any substantial scale. We do, however, expect some activity in the
field of renovation of older buildings.
In the homeowner sector we see the same situation. The existing housing stock is
essentially sufficient to meet demand so that expansion, compared with the rate of
expansion known in the past, will be limited. Even in the longer term, we do not
expect there to be any major change in this general picture, partly in the light of
demographic trends. However, as uncertainties concerning personal incomes
diminish, people’s interest in changing where they live to reflect their changing
circumstances and aspirations will obviously increase. We accordingly expect that
the number of homes changing hands will gradually pick up and that in the new
housing sector there will be renewed demand for certain types of accommodation
which are inadequately represented in the existing housing stock. If, for example as a
result of falling interest rates or increases in rents, the attractiveness of home
ownership increases, and there are signs pointing in that direction, then there may
well be a fundamental upturn in demand.
As regards rented housing, we feel it is possible that the situation is going to alter in
certain sectors. Changing attitudes with respect to the level of social security
benefits and income-related subsidies could mean growing interest in housing in the
lower rental brackets, including older property or property which for other reasons
is less well positioned in the market. This could result in an improvement in the
possibilities for operations in this sector and could accordingly hold somewhat more
realistic price levels in prospect.
As regards the development in earnings in 1985, we are not dissatisfied, although the
level continues to be too low. Net earnings amounted to NLG 10.6 million. The
addition to the reserve for general contingencies will amount to NLG 38 million.
We propose that stockholders add the whole of net earnings to equity reserves.
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