group's profile, so that the location
must meet specific requirements.
M IISTFHIMB WITHIN SECTORS
It was in 'the industrial real estate
market' that the separation of the
production process first became
apparent, one factor being the need
for efficiency gains. Separation of
the production process also made it
easier to conform to the government
environmental standards which must
be met when setting up a business.
The diversification currently also in
evidence here is taking the form of
clusters of similar types of activity.
By offering specialized industrial
sites, we can direct and cater for this
specific demand. This trend is
evident in Venlo, for example, which
has a concentration of transport
firms. In Heerenveen, an industrial
estate for large-scale international
operations is being developed in
response to this trend.
VINEX HAS YFT TO PROW ITSELF
In the structure of the Dutch housing
market the State has always aimed
at a sensible balance between
renting and buying, price groups and
densities. But even in this market
segment there are signs of a
tendency towards diversification.
For example, the various residential
districts differ in quality, making
them attractive to different target
groups. Towns with historic centres
have different qualities from a new
estate and are favoured especially by
single persons, the old and the
young. Families prefer to live in the
more spacious outer districts.
The variations in type of location
and hence in quality are reflected in
rents, purchase prices and land prices.
This is already apparent in the case
of existing residential developments.
In the case of newbuild, it is the
government that determines the
quality "on paper".
In practice this has yet to prove itself.
For instance, the Vinex districts
might in future be threatened if
residents are disappointed with their
quality. In the long run there could
be greater competition with existing
developments, since the next few
years will see large-scale investment
in the inner cities.
FIMANCTAI
In the reporting period the mortgage
portfolio of the core business grew by
over 20% to NLG 7,502.2 million.
At the end of the previous year the
corresponding portfolio stood at
NLG 6,267.2 million.
The gross profit was about NLG 5.6
million down at NLG 114.2 million,
due to such factors as the non
recurring expenses (NLG 4 million)
associated with the take-over and the
transfer of pension premium to the
FGH Pension Fund (NLG 3 million).
The disposal of the stake in
FGH Finance N.V. Curasao at the end
of 1997 had an additional negative
impact on this result of over
NLG 12 million in relation to the
previous financial year.
The stringent risk control policy
combined with a low interest rate
kept losses on bad debts to a very
low level. In response to price trends
of real estate and in the context of
the current policy on provisions
we have decided, for considerations
of prudence, to allocate NLG 9.4
million to the provision for 'Value
adjustments to receivables'.
In 1997 a small amount was actually
released from this reserve.
This brought the operating result
before tax to NLG 104.9 million.
The strong growth of the portfolio
boosted income from arrangement
fees. Since the other fees included
under "Interest" were down slightly,
this item produced a marginal
increase to NLG 25.1 million (1997
NLG 24.5 million).
At NLG 46.6 million, operating
expenses were around NLG 3.2
million higher than in the previous
financial year. Much of this increase
is due to the non-recurring take-over
expenses mentioned earlier and the
decision to transfer NLG 3 million
in pension premiums to the
FGH Pension Fund. Strengthening of
the personnel organization and
substantial investments in data
facilities were also factors which
increased costs.
The higher operating result before
tax and the transfer of
FGH Finance N.V. Curasao to
AEGON N.V. at the end of the 1997
financial year caused the tax liability
to increase in both relative and
absolute terms.
These developments led to a net
profit of NLG 67.8 million in 1998.
Expressed as a percentage of the
risk-weighted assets (BIS ratio), the
shareholders' equity is over 12%.
The proceedings concerning contra
vention of the law which began at
the end of 1992 and were initiated
by the Ministry of Finance once
again made little progress in 1998.
We have good reasons for remaining
confident of a favourable outcome.
TREASURY
In 1998 we raised NLG 513 million
in long-term resources. The fixed-
