Annreport2006

a nnua l r e p o r t

2006

“At Brantano storesyou will always findthe shoes you love”

The Belgian Group Brantano aims to achieve a leadership position in shoe distribution in Europe. It intends to do this with a single concept and under the Brantano name.

Brantano wants to be the reference in shoes for the entire family in the mid-market segment. To do this, it sells a wide range of ladies’, men’s and children’s shoes, sports shoes and accessories at the best value for money.

Brantano was listed on the Brussels Stock Exchange on 16 June 1997.

Core figures of the consolidated profit and loss account(2)

As per 31.12 in € million IFRS 2006 IFRS 2005 IFRS 2004 2003 2002

turnover 295.2 304.1 322.6 303.8 299.4

Gross margin 151.0 152.9 158.3 146.3 138.6

As a % of turnover 51,2% 50.3% 49.1% 48.2% 46.3%

recurring operating profit (eBIt) 9.7 19.1

As a % of turnover 3,3% 6.3% 0.0% 0.0% 0.0%

operating profit (eBIt) 35.9 18.8 19.9 15.9 3.0

As a % of turnover 12,2% 6.2% 6.2% 5.2% 1.0%

recurring operating cash flow (eBItDa) 19,6 28.2

As a % of turnover 6,6% 9.3% 0.0% 0.0% 0.0%

operating cash flow (eBItDa) 46,1 28.2 31.2 24.9 21.5

As a % of turnover 15,6% 9.3% 9.7% 8.2% 7.2%

Financial result -2.2 -2.2 -3.4 -5.1 -2.7

As a % of turnover -0,8% -0.7% -1.1% -1.7% -0.9%

pre tax result of continued activities 33.7 16.6 16.5 11.7 0.2

As a % of turnover 11,4% 5.5% 5.1% 3.8% 0.1%

post tax result of continued activities 29.2 10.5 9.6 5.7 0.3

As a % of turnover 9,9% 3.5% 3.0% 1.9% 0.1%

post tax result of non-continued activities 0.3 -3.4 -6.2 0.0 0.0

As a % of turnover 0,1% -1.1% -1.9% 0.0% 0.0%

net result after taxes 29.5 7.1 3.4 5.7 0.3

As a % of turnover 10.0% 2.3% 1.1% 1.9% 0.1%

Cores figures of the consolidated balance sheet and financial structureAs per 31.12 in € million IFRS 2006 IFRS 2005 IFRS 2004 2003 2002

Capital & reserves (bookvalue) 83.1 56.7 52.4 51.9 52.1

Fixed assets 54.4 65.0 65.4 79.4 108.9

total assets 146.0 146.0 152.8 169.6 187.8

Capital employed 88.4 98.9 103.6 115.7 150.5

Working capital 33.9 33.8 38.2 36.3 41.5

net financial debt -1.2 35.2 44.5 53.9 89.5

Market capitalisation 108.4 134.6 134.0 82.7 61.5

enterprise value 107.2 169.8 178.5 136.6 151.0

Consolidated financial core figures per share

As per 31,12 in € IFRS 2006 IFRS 2005 IFRS 2004 2003 2002

net result after tax 10.3 2.5 1.2 2.0 0.1

post tax result of continued activities 10.2 3.7 3.3 2.0 0.1

Cash flow after tax 13.8 7.0 7.3 5.7 6.8

Capital & reserves (bookvalue) 29.1 19.9 18.4 18.2 18.3

Gross dividend 1.5 1.3 1.2 1.0 1.0

net dividend 1.1 1.0 0.9 0.8 0.8

Closing price 38.0 47.2 47.0 29.0 21.6

total number of shares 2,852,040 2,852,040 2,852,040 2,852,040 2,852,040

Profitability and solvency ratios

As per 31.12 IFRS 2006 IFRS 2005 IFRS 2004 2003 2002

return on equity 41.8% 19.3% 18.2% 13.7% 1.7%

return on capital employed 38.4% 18.6% 18.1% 12.0% 2.0%

net financial debt / capital & reserves -1.4% 62.1% 85.0% 104.0% 172.0%

Capital & reserves / total assets 56.9% 38.8% 34.3% 30.6% 27.7%

net financial debt / eBItDa 0.0 1.2 1.4 2.2 4.2

Consolidated operational core figures

As per 31.12 IFRS 2006 IFRS 2005 IFRS 2004 2003 2002

number of stores 285 280 318 313 295

number of employees (in capita) 2,945 3,066 3,376 3,308 3,209

Investments (in eur million) 13.6 11.5 6.4 10.1 21.5

CoRe FIguReS(1) FoR the gRouP

(1) For definitions of various core figures; see glassary on page 96.

(2) The extraordinary result 2002-2003 is not presented separately in the consolidated profit and loss account.

2002 2003 2004 2005 2006

325.0

295.0

265.0

235.0

299.4 303.8

322.6

304.1295.2

turnover (in E million)

2002 2003 2004 2005 2006

52.0%

50.0%

49.0%

47.0%46.3%

48.2%

49.1%

50.3%

51.2%

Gross Margin (as a % of turnover)

2002 2003 2004 2005 2006

50.0

40.0

30.0

20.021.5

24.9

31.228.2

46.1

operating cash flow (eBItDa) (in E million)

2002 2003 2004 2005 2006

36.0

24.0

12.0

0.03.0

15.919.9 18.8

35.9

operating result (eBIt) (in E million)

2002 2003 2004 2005 2006

30.0

20.0

10.0

0.00.3

5.7

9.6 10.5

29.2

result after tax from continued operations (in E million)

2002 2003 2004 2005 2006

0

-25.0

-50.0

-75.0

-100.0 -89.5

-53.9-44.5

-35.2

net financiel debt (in E million)

1987

11

number of stores (cumul)

1988

16

1989

20

1990

35

1991

51

1992

60

1993

66

1994 1995

81

1996 1997

103

1998 1999

166

2000

242

2001

271

2002

295

2003

313

2004

318

2005

280

2006

285

7499

156

360

240

120

0

1.2

�annual report 2006 BRANTANO

TABle Of CONTeNT

Key figures of the Group Cover

Table of Content 1

Message from the Chairman 2

The Brantano Group 4

Strategy 4

Profile 5

Legal structure 14

Human Resources Policy 16

Corporate Governance 18

Report of the Board of Directors 30

Operating Report 2006 30

Financial Report 2006 34

Outlook 2007 39

Information for shareholders 40

Financial information 45

Consolidated annual accounts 46

Annual Accounts Brantano NV 73

General information about the Brantano Group 87

List of stores 90

Glossary 92

Useful information Cover

MeSSAGe fROM THe CHAIRMAN


In 2006, the Brantano Group generated revenues of EUR 295.2 million and a recurrent operating result of EUR 9.7 million.

As a result of poor weather, namely cold weather at the start of the summer season and warm weather dur-ing the entire winter season, there was a fall in revenues of 1.5% in existing stores in Belgium.

In the United Kingdom revenues in existing stores fell by 7.0% due to the negative influence of the weather and difficult market conditions; and a change in our sales’ strategy which places emphasis on generating higher quality turnover.

The gross margin improved in 2006 and rose from 50.3% of revenues in 2005 to 51.2% in 2006. In both Belgium (including Luxemburg) and in the United Kingdom costs have also risen. In the United Kingdom in particular, store rents and rental increased as a result of the large number of five-yearly rent reviews.

In 2006, we generated significant capital gains by selling real estate assets in Belgium (Lede in June and our participation in Brimmo NV in December) and thanks to store management in the United Kingdom (where we transferred the rental rights of Leamington and Oxford back to the owner). All the stores sold as well as the distribution centre in Belgium were rented back again. To this end long-term rental contracts were concluded with the new owner.

In 2006, we opened seven stores and closed five stores in the United Kingdom, and in the Middle East three stores were opened. In Belgium one store was opened and the store located in Lokeren burned down. As at 31/12/2006 our Group thus had 125 stores in Belgium (including Luxemburg), 147 stores in the United Kingdom, which, including the 13 franchising stores in the Middle East, bringing the total to 285.

In 2006, the organisation structure of the Group was changed into a more centrally steered organisation in order to be able to operate with greater flexibility.

Taking into account our operating results and the non-recurrent profit, the Board of Directors will propose to the General Meeting that the gross dividend is increased from EUR 1.35 per share to EUR 1.50 per share.

In 2006, the reference shareholders of Brantano announced that they were examining several options regarding the potential refinancing of their participations in the company’s capital. This process is still ongoing.

Seven openings are planned for 2007. For 2007, we foresee annual revenues of between EUR 300 million and EUR 310 million and, taking into account increased marketing costs in the United Kingdom and additional rental costs in Belgium, the Group is striving for a recurrent operating result (so with-out taking into account other operating revenues from store management) of between EUR 5 million and EUR 7 million.

In 2007, the Group will continue to work on repositioning Brantano as a national retailer in the British market. Major budgets are being allocated to the running of national marketing campaigns in Belgium and in the UK. The focus in both countries remains on higher quality revenue growth, and thus growth of the gross margin in percentage terms. In Belgium, the Group intends to reinforce its position as market leader.

The investment budget for 2007 amounts to EUR 9.0 million. EUR 2.1 million thereof will be allocated to the opening of new stores and EUR 5.0 million will be used for the renovation of existing stores.

Over the short-term our expansion plans will be focused on the United Kingdom. In addition we will continue to seek to expand into other European countries over the somewhat longer term.

The commitment and dedication of our employees is one of the most important reasons that our customers choose Brantano and that our suppliers place their trust in our Group. Our employees make the real difference for our company, our customers and the communities we are active in. On behalf of myself and the Board of Directors, I would like to thank them for their efforts. I would also like to thank our customers, suppliers and shareholders for placing their trust in our Group.

Sobradis NVChairman of the Board of Directors

represented byJoris BrantegemPermanent representative

� BRANTANO annual report 2006

VisionIn Brantano stores you will always find the shoes you love.

MissionBrantano intends to hold a leadership position in the distribution of shoes in Europe while remaining independent and profitable. It intends to do this with a single concept and under the Brantano name.

GoalsAt Brantano the customer is at the forefront. We give the customer value for money and in addition we strive to make it pleasant for the customer to shop at Brantano. In order to achieve this, Brantano adapts and innovates constantly and succeeds in surprising customers time and time again.

As a shoe retailer, Brantano aims to be the shoe specialist par excel-lence. It thus sells an extremely wide range of fashionable, high quality shoes for the entire family, sports shoes and accessories such as hand-bags, sportswear, socks and maintenance products.

In addition, Brantano intends to honour its responsibilities towards its other stakeholders. It does this by:

• Maximising shareholder value.• Motivating employees with fair remuneration and a pleasant

working environment, but also by way of recognition and by giving them the opportunity to develop their individual talent within the context of the Group’s strategy.

• Honouring its social responsibilities as an organisation within the community.

Strategic orientationThe Group will base its further development on the following strategic orientations:

1. Further growth and expansion of market share in existing countries through an increase in the number of sale points and further seg-mentation.

2. International expansion in Europe by setting up a proprietary distri-bution network and via alliances and selective acquisitions.

3. Increased revenue per store thanks to more active sales manage-ment in the stores, renovation of current store design and an indi-vidual approach to the customer.

4. Constant improvement and fine-tuning of the procurement strategy, primarily focused on quality, choice and exclusivity of products, as well as on greater inventory rotation.

5. Further increase in name recognition thanks to international ad-vertising campaigns and an increased market share thanks to traf-fic-generating communications as well as more regionally oriented marketing.

6. Greater automation of the distribution of goods with a view to achiev-ing just-in-time-in-the-right-place delivery.

THe BRANTANO GROup

Strategy Profile


Profile

Buying shoes at Brantano: something to suit everyone

So many people, so many shoes

Brantano intends to be the reference in shoes for the whole family. That means that the right shoe has to be available in the store for all mem-bers of the family and for all occasions. To achieve this, an extremely wide range of ladies’, men’s, youth and sports shoes are on offer. Each department has a broad range: from traditional shoes to sporty shoes to shoes that follow current fashion to the trendiest of collections.

In addition to shoes, sports apparel, handbags, belts, jewellery, suit-cases, maintenance products and such are on offer. The accessories form a whole with the shoes selection and vary according to the season and various fashion themes.

An average Brantano store has 15,000 pairs of shoes and 3,000 models on offer.


LadiesThe large variety of articles in our

ladies’ department guarantees that the fashion-conscious woman can

always find the pair she wants at the right value for money.

The collection always ranges from traditional models to basic shoes and trendier models. The shoe collection

is completed with accompanying accessories.

The ladies’ collection is the largest collection.

MenThe men’s department also has a broad range of different models so that all requirements and wishes in terms of style, functionality, quality and price can be met.

YouthThe youth collection includes a broad range of shoes that reflect the latest international trends in terms of sports and fashion. The youth collection is aimed at both boys and girls.


SportsThe sports’ department has a large

collection able to tempt both the fanatic and the occasional

sportsman of all ages. In addition to the functional sports’

shoes such as running, basketball and football

shoes, the collection also includes sporty

leisure shoes.

Textiles and accessoriesA Brantano store also carries an extensive collec-tion of sports’ apparel such as tracksuits, swimwear, T-shirts, sweaters, shorts and socks. The range of accessories is completed by suitcases, jewellery, belts, handbags, wallets, umbrellas and mainte-nance products.

ChildrenWithin the children’s collection the focus is mostly on functiona-lity and fun. Given that a good fit is crucial for children’s shoes, Brantano staff are trained to help our young customers. The col-lection includes both comfortable baby shoes and sturdy and fashionable shoes for boys and girls between 1 and 12 year old.


positioning and best value for money

Brantano positions itself in the mid-market segment. In this segment there is a strong trend towards a more fashionable collection and de-mand for continuous renewal during the season.

From a customer-centric point of view, correct price setting is essen-tial. Brantano thus applies the principle of the best value for money. The more expensive shoes are always of better quality than the less ex-pensive ones. This means that the customer can always make a choice according to his or her budget with the best quality.

All shoes must meet specific minimum quality requirements. Brantano thus does not offer extremely cheap shoes, nor any shoes from the expensive luxury segment.

The price of a pair of Brantano shoes varies between EUR 25 and EUR 125 on average.

Always something new

Given that fashion is increasingly a determining factor in the choice of shoes, collections follow each other in increasingly rapid succession. Customers expect to find the newest trends in the Brantano stores every time they visit. Consequently Brantano introduces new models in its stores throughout the season.

Thanks to spreading procurement over time and the continuous rene-wal of collections the offering in the stores changes constantly, which convinces customers to shop at Brantano.

An average of 2,500 new articles are launched each season.

A mix of in-house and international brands

Brantano strives to offer an optimal mix of own brands and interna-tional brands. With the exception of sports’ shoes, approximately 75% of the total range is brands developed in-house or models and own brands from suppliers that deliver exclusively to Brantano. The remai-ning 25% is international brands. The opposite is true of sports shoes (75% international brands and 25% own brands).

Brantano’s own brands include:Shoe Connection, Emilio Luca X, Caravelle, Mono Due, No Stress, Jouralle, Feet Street, Stone Creek, Grosvenor, Northwood, Mel & Co, B.L.O.X., M&E, Osaga, …

The company also offers international brands such as: Clarks, Hush Puppies, Ecco, Esprit, Mexx, Columbia, Wrangler, Bluehaven, Kickers, Nike, Adidas, Rucanor, Reebok, Fila, ...

Location and layout of the stores: crucially important

Attractive stores

Brantano strives to provide its customers with a pleasant shopping ex-perience. This requires: • Commercially attractive locations • Pleasantly designed stores • Attractive product presentation

Commercially attractive locationsBrantano stores are always located near to medium-sized and large cities. They are located on the periphery and always offer adequate parking space. Brantano mainly opts for locations next to other stores with large floor space or in shopping centres, which results in increased drawing power.

Pleasantly designed storesThe layout of the stores and the presentation of the products are based on the one hand on the easy shopping principle and on the other hand the fun the customer wants to experience when buying a pair of shoes. The various departments are thus very logically positioned and clearly labelled. A good layout gives customers inspiration and ideas. In an average Brantano store 30% of the total surface area is allocated to the ladies’ department. The men’s, youth and sports departments each take up about 20% while sports’ apparel, bags, maintenance pro-ducts and other accessories take up 10% of the total surface area.


Attractive product presentationThe shoes are presented by size and with the shoebox, so that the cus-tomer can easily see what Brantano has on offer in his or her size. This immediately gives the customer a view on the selection in his shoe size, which makes choosing the right pair simpler and more pleasant.

Thanks to the fact that both shoes are on offer the customer can try on the various pairs and take to the till the ones (s)he has selected. Specially designed presentation tables are used to display the latest fashion trends and put special offers and promotions in the spotlight.

International store concept

The stores in the various countries all have the same pleasant, contem-porary and functional design. Customers can immediately find their way in every store, as the stores are all laid out in the same way and products are presented in the same way.

Store management

Every year, the Group opens many new stores in well-researched loca-tions. Existing stores are continuously checked to determine whether relocation would enable increased revenue and profitability.

The indexation of rental prices, the matter of socio-economic licenses and the changing drawing power of commercial locations and retail parks is closely monitored. In this way Brantano can proactively take advantage of developments within the real estate market in Belgium, the United Kingdom and Luxembourg.

At the end of 2006 Brantano owned 2 stores in Belgium; the remaining stores are rented on the basis of long-term rental contracts.

�0 BRANTANO annual report 2006

Purchasing and stock management: the backbone of the Brantano concept

purchasing

The success of the Brantano concept starts with purchasing the right products. In order to stay abreast of the latest trends and developments within the shoe world the buying staff of the various departments visit various shoe trade fairs, fashion shows and boutiques all over the world. When compil-ing the collection the buyers’ focus is completely on our customers. The buyers always take into account who the customers are, what their tastes are, what they’re looking for and how we can best offer it to them. The buyers are our product experts. They build up collections from international models, develop collections with our own brands and determine the correct selection of materials and finishes.

The buyers closely follow trends in clothing, accessories and lifestyle in general in order to fit the shoes with the trends in that sector. Materials, textiles, colours and accessories chosen for with the new clothing collections are also immediately integrated into the compiling of the collections for the next season. The buying team works closely together with the merchandising team. On the basis of detailed sales data the merchandisers work out the optimal mix for the collection, the right quantities to order for every article and calculate the appropriate delivery date.

To ensure that Brantano can adapt to new trends, developments and the weather, only 80% of a new season’s collection is bought in advance. On the basis of the analysis of detailed sales data further purchasing is done in the course of the season and new articles are ordered.

Given the significant differences in consumer tastes in the various countries purchasing is organised per country, with the exception of sports’ shoes and sports’ textiles. The Group nonetheless realises major economies of scale given that the number of suppliers was significantly reduced and the countries buy an increasingly larger portion of the collection from the same manufacturers. Although models usually differ, volumes, purchases prices and terms and conditions of sale are discussed collectively. The increasing purchasing power of the Group thus improves margins and makes it possible to set competitive sales prices.

Stock management

In a retail company, stock is the most important asset and the right products have to be delivered to the stores at the right time in the right quantities. This is why Brantano has always invested heavily in monitoring and managing stocks.

Both the stock management system and the distribution system hinge on information technology that has been developed in-house and is continually being optimised. The stock management system follows every product via the barcode from the purchase order up to – and even after – the time it is sold. Every night, the sales figures from each store are sent via the computerised cash desk by modem to the central computer in each country and processed.

On the basis of this data, the restocking of the stores can begin the following day.

The transfer system is another important application in our distribution system. If there is no more stock available in the central warehouse to restock stores, the computer proposes stock movements based on historical data. A product that sells less well in certain sales outlets is transferred to a store where it will sell more quickly. This product can then be sold at the full price instead of being marked down in an end-of-season sale.

Integrated stock management system

Brantano is working together with IBM and i2 on an integrated stock management system. This system will enable the further optimisation of product range planning, stock management and the flow of goods to the stores.

The principle is that purchasing and sales of shoes are determined on the basis of automatically generated data on sales per store, division, product and measurement, supplemented with statistically supported planning proposals. This will enable the Brantano Group to improve its margins and stimulate sales by responding more quickly to booked and expected sales.

logistics

Given that smooth logistics processes and a flexible goods flow are crucial for a retail company, the distribution centres are equipped with a state-of-the-art sorting system which facilitates automatic dispatching to the various stores.

The stores are restocked twice each week on average.

��annual report 2006 BRANTANO

Communications: the engine driving name recognition

A range of communication channels

Brantano works continuously to build up the image of the brand name by carrying out marketing campaigns centred on the product.

Four pillars form the basis of these campaigns: • Broad choice • Quality • Fashion • Brands (e.g., Adidas, Nike, Clarks, Hush Puppies, etc.)

To gain recognition and attract new and existing cus-tomers, a mix of various media are used: radio, leaflets, advertisements in magazines and newspapers, TV, bill-boards, and the internet.

The marketing strategy is streamlined at an internation-al level, which ensures that the value and content of the “Brantano” brand is the same everywhere and that the Brantano image and the Brantano name are conse-quently developed in a consistent manner in Belgium, Luxembourg and the United Kingdom.

In order to adapt to local customers, marketing which is geared more to the short-term – and therefore traffic generating and more promotionally oriented – is worked out from country to country. But the broad outlines that apply to the Group as a whole are also implemented for marketing campaigns that are conducted at regional level: the campaigns must be young and dynamic, have a humorous touch and be directed towards the whole family. These national campaigns are completely inte-grated into the international marketing strategy.

The advertisements are a means to invite customers to visit our stores in an attractive and informative manner.

We strive to make the campaigns inviting and surpri-sing.


Staff: the direct link with our customers

At Brantano, the customer should be allowed to take his/her time to make his/her choice without being disturbed by pushy salespeople; that is why the stores work according to the self-service concept. If the customers require assistance, store staff is completely at their disposal. It is therefore important for employees to have a good understanding of what Brantano represents. After all, they are Brantano’s face to the outside world and must therefore communicate the Brantano concept and values externally. Consequently Brantano employees are carefully selected and afterwards thor-oughly trained.

Stores: “happy shopping experience”

The stores play an important role in building the Group’s image. Improving the happy shopping experience is always in the forefront. Everything is done to ensure that the stores always look contemporary and attractive. This is achieved by carrying out major modernisation on a regular basis (re-furbishing programme) as well as smaller renovations (such as new carpet, lighting, modified shelving, etc.) and by making use of all sorts of in-store communication in the stores.

Internet

In addition to dissemination of more general and financial information, the internet is used to announce and support marketing campaigns. Further-more, the websites of Brantano in Belgium and in the United Kingdom also have a webshop with photos and detailed information on more than 15,000 pairs of shoes. In Luxembourg Brantano issues an online catalogue. The webshop has been active in Belgium since October 2001. In the United King-dom the webshop was launched in March 2007.


�� BRANTANO annual report 2006

de GROep BRANTANO

Brantano NVThe company Brantano NV is the parent company of the Group and owns directly and indirectly 100 %² of the shares of the other Group companies. In addition Brantano NV sells shoes and related articles in Belgium via a network of stores under the trading name “Brantano”. On 31st December 2006 the company operated 117 points of sale in Belgium.

Brantano Luxembourg SABrantano Luxembourg SA is the Luxembourg subsidiary of the Group. It was established in May 1996 to give shape to expansion in the Grand Duchy of Luxembourg. On 31st December 2006 it had 4 stores.

Muys NVMuys NV is a company active in the shoe retail sector. It was acquired by the Group in January 1996 and has 3 points of sale under the name “Muys Shoes & Fashion” and 1 point of sale under the name “Estilogie”, all of which are located in East Flanders. It operates within its own niche market with its own profile.

Brantano UK LtdBrantano UK Ltd is the English subsidiary of the Group. This company was set up following the takeover of Shoe City Ltd on 31 January 1998. On 31st December 2006 it operated 147 shops in the United Kingdom under the “Brantano” name. The activities of the 13 franchising stores in the Middle East are also directed by Brantano UK Ltd.

Brantano Asia LtdBrantano Asia Ltd was founded on 7th April 2006. Brantano Asia Ltd manages the relationships with suppliers in the Far East, in particular as regards order follow-up, quality control, design input and prospecting.

Brantano Beheer BV –Brantano Nederland BVBrantano Beheer BV and Brantano Nederland BV are the Group’s Dutch subsidiaries. They operated the points of sale in the Netherlands, which were sold in 2005. Currently the brand strategy for the Group is steered and managed primarily by Brantano Nederland BV.

�. Situation on ��/�2/200�2. Rounded up

de GROep BRANTANO

Legal structure 1


NV

BRANTANO luxeMBOuRG SA

MuyS NV

BRANTANO uK lTd

100%

100%

60%

BRANTANO ASIA lTd

100%

40%

BRANTANO BeHeeR BV

100% BRANTANO NedeRlANd BV

100%


de GROep BRANTANOde GROep BRANTANO

Staff policy

The statement that our employees are the Group’s most important as-set is a factor that is integrated throughout the company and which can be found in each detail of the large and small links in our retail process. The motivation and professional expertise of our staff is ex-tremely important for the company’s future.

Recruitment is already very selective in the initial hiring process. An applicant cannot proceed to a second stage in the recruitment process without basic skills such as internal entrepreneurship, customer focus and flexibility.

Continuous work on enhancing skills also occurs during our staff’s careers in the company. These training courses are aimed at various aspects: the product, safety, customer friendliness, complaint han-dling, sales techniques, IT applications, management training, etc. It is extremely important for store staff to have optimum knowledge of all the collections, which is the only way that they can offer custo-mers excellent service. This is why the Group buyers communicate their knowledge of collection details, the trends for the upcoming seasons and technical aspects of the various products carefully and enthusiastically to the rest of the organisation.

Not only product and specialist knowledge but also the employees’ positive ‘state of mind’ is a priority for the company. The Group is con-vinced that developing motivated, well-trained employees will increase the organisation’s quality and power.

Creating and maintaining a pleasant working environment, in which employees can give the best of themselves and where they also have the opportunity to fulfil their ambitions, is crucially important for em-ployee motivation and also benefits the company. This is how Brantano has grown from a family business into an interna-tionally structured company with a corporate culture founded on the flexibility and enthusiasm of all the staff.

Brantano has a decidedly positive social climate.


Trend for staff numbers

At the end of December 2006 Brantano had 2,945 employees (or 1,655 converted into full-time equivalents).

Geographic breakdown

In the United Kingdom more staff work part-time than in Belgium. Given the flexible fiscal and social legislation in the United Kingdom, working hours can be more efficiently adapted to employee expecta-tions and sales.

The difference in full-time equivalents between Belux and the UK is mainly explained by the fact that the stores in the United Kingdom are open 7 days a week.

2002 2003 2004 2005 2006

employees 3,209 3,308 3,376 3,066 2,945

full-time equivalents 1,902 1,888 1,955 1,799 1,655

Belux uK Total

employees 852 2.093 2.945

% of total 28,9% 71,1%

full-time equivalents 757 898 1.655

% of total 45,7% 54,3%

Breakdown of staff according to place of employment

Of the total staff 88.6% works in the stores and 4.3% in the distribution centres. Finally, 7.1% of the total staff works at headquarters.

Brantano as a social employer

Brantano NV in Belgium has had a Workers Council and a Health and Safety Committee since May 2004, and a trade union delegation since July 2004. Brantano UK has had a “Brantano Consultation Forum” including employer and employee representatives since 2005.


The complete Corporate Governance Charter can be found on our website www.brantano.com in the “Investor Relations” section.

GeneralThe Belgian Corporate Governance Code came into force on 1 January 2005. This Code is primarily aimed at companies incorporated under Belgian law whose securities are traded on a regulated market (listed companies).

Brantano NV, a public limited company was listed on the Brussels Stock Exchange on 16 June 1997, and is now listed on Euronext Brussels.

Since its Initial Public Offering (IPO), Brantano has attached great importance to ensuring a transparent governance and management structure. This is shown by, among other things, the appointment of independent directors and the drafting of internal regulations.

Brantano therefore decided to make appropriate use of the opportunity created by the introduction of the Code to coordinate and fine-tune its existing corporate governance procedures that are included in the Brantano Governance Charter.

The intention was to amalgamate the applicable rules and codes of conduct into a single document, in order to provide more transparency for exter-nal stakeholders and to make it easier to apply the rules within the Company. It is evident that the rules contained in this Charter should be seen as complementary to the relevant Belgian legislation.

Brantano endeavours to comply with all nine principles cited in the Code:

(1) The Company has a clear governance structure

(2) The Company has an effective and efficient Board of Directors that makes decisions in the Company’s interests

(3) All directors are required to demonstrate integrity and commitment

(4) The Company has a rigorous, transparent procedure for the appointment and appraisal of the Board of Directors and its members

(5) The Board of Directors sets up special committees

(6) The Company establishes a clear structure for executive management

(7) The Company remunerates directors and executives fairly and responsibly

(8) The Company respects the rights of all shareholders and encourages their active involvement

(9) The Company ensures adequate disclosure of its Corporate Governance

de GROep BRANTANOde GROep BRANTANO

Corporate Governance


The “Brantano Governance Charter” is supplemented by a number of appendices that form an integral part of it:

- Internal Regulations of the Board of Directors

- Internal Regulations of the Audit Committee

- Internal Regulations of the Remuneration Committee

- Internal Regulations of the Strategic Committee

- Internal Regulations of the Executive Committee

- Protocol to Prevent Insider Trading

- The Charter of Ethics

- Departures from the Code

The “Brantano Governance Charter” was approved by the Board of Directors on 13 December 2005 and came into effect on 1 January 2006. The up-dated version was approved by the Board of Directors on 13 February 2007.

Departures from the CodeThe Board of Directors has deemed that it can sometimes be justified for the Company not to follow certain provisions of the Code. In this instance the Brantano Group deviates from the following provisions:

- Establishment of an Appointments Committee

- Composition of the Remuneration Committee

establishment of an Appointments Committee The Board of Directors has not established an Appointments Committee. The Board of Directors has decided that the competency to make recom-mendations and proposals for the appointment and evaluation of directions and the remuneration policy for non-executive directors will come within the remit of the full Board of Directors.

Composition of the Rumeration Committee

The Board of Directors has decided that, from the point of view of continuity, a Remuneration Committee consisting of two directors representing the reference shareholders and one independent director, all of them non-executive directors, is well-placed to evaluate the management and to make proposals.

20 BRANTANO annual report 2006

General Meeting of ShareholdersThe Annual General Meeting is held at the registered office on the second Wednesday of May at 2 pm.

An Extraordinary General Meeting may be convened whenever the Company’s interests require such and must be convened whenever the shareholders whose combined holdings represent one fifth of the subscribed capital request this.

The convening notices for the General Meeting of Shareholders state the agenda and are issued in accordance with the Belgian Companies Code.

Management and supervisionBoard of directors

Directors who represent the reference shareholders:

• Sobradis NV, chairman and director, represented by Joris BRANTEGEM, permanent representative

• Elba NV, vice-chairman and director, represented by Luc GEUTEN, permanent representative

• Mitiska NV, director, represented by Ginko BVBA, represented by Cedric OLBRECHTS, permanent representative

• Fortis Private Equity NV, director, represented by Brigitte BOONE, permanent representative

Directors who are involved in the day-to-day management and are also a member of the Executive Committee:

• Advimo NV, managing director, represented by Kurt MOONS, permanent representative

Independent directors:

• Jan SUYKENS, director

• Jean-Louis DUPLAT, director

• Bvba Theo Peeters, director, represented by Theo PEETERS, permanent representative

executive Committee

• Advimo NV, Chairman and Chief Executive Officer, represented by Kurt MOONS, permanent representative

• Stefaan VAN WEYENBERGH, Chief Retail Operations Officer

• Peter DE SMEDT, Chief Marketing and Property Officer

• Caroline LIDDON, Chief Buying Officer

• Roel DE KEYZER, Chief Merchandising Officer

• Christine VERMEERSCH, Chief Finance Officer

Auditor

• BVCV Grant Thonton, Lippens and Rabaey, Belgian Member Firm of Grant Thornton International, represented by Stefaan RABAEY

2�annual report 2006 BRANTANO

Board of Directors The Board of Directors is the highest decision-making body in the Company and is empowered to undertake any actions that are necessary or useful for the achievement of the Company’s objectives, with the exception of those reserved by law for the General Meeting.

The Board of Directors has established an Audit Committee, a Remuneration Committee and a Strategic Committee. These committees perform an ad-visory role. Final decision-making authority remains with the Board of Directors. The committees report to the Board of Directors after each meeting.

The Board of Directors has delegated the day-to-day management of the Company to the Chief Executive Officer, assisted by the Executive Committee.

Composition of the Board of directors

The Board of Directors must have at least three members, who do not have to be shareholders. The Board of Directors currently comprises eight members.

At least half of the members of the Board of Directors must be non-executive directors.

At least three directors have to be independent.

There is no age limit set for members of the Board of Directors.

The directors who represent the reference shareholders and the independent directors have taken on directors’ mandates and/or are members of the executive committee in various other companies:

• Joris Brantegem is also a director of different companies and holding companies in which Sobradis has invested.

• Luc Geuten is also the managing director of Mitiska and director in various companies in which Mitiska holds a stake. He is also a director of In-nogenetics, Axa Belgium, VPK Packaging, Retail Estates and Compagnie Het Zoute.

• Cédric Olbrechts is also the managing director of Mitiska and represents Mitiska Ventures on the board of directors of different companies of the Mitiska group, such as Retail Partners, AS Adventure group, Cap Nord and Net Fund Europe.

• Brigitte Boone is also a director of various companies in the Fortis Private Equity Group, such as Fortis Private Equity Belgium, the Netherlands, Spain, France and Asia as well as of various companies internationally in the Fortis Group. Furthermore, she is the director of a number of Fortis Private Equity’s participating interests, such as Studio 100, Outside Broadcast, Velleman group, Riva, Gemma Frisius-Fonds, Retail Partners, Fun and AS Adventure. She has also been appointed as a director of the non-profit associations IMEC and IBBT as the representative of the Flemish Govern-ment.

• Jan Suykens is also a member of the executive committee of Ackermans & Van Haaren and a director in various companies in the Ackermans & Van Haaren Group, such as DEME, Sofinim, Leasinvest, Bank Delen/Bank van Breda and Oleon.

• Jean-Louis Duplat is also a member of the advisory board at Bencis (Dutch-Belgian venture capitalist), director of Omega-Pharma, chairman of the board of directors of the unit trust Aedificia, director and chairman of the audit committee of the hospital group Chirec, senior advisor at Ernst & Young, chairman of Portolani and member of the proxy voting committee of Dexia asset management.

• Theo Peeters is also Chairman of Uitgeverij Lannoo and a Director of Eik and SN Airholding.

Appointments of the Board of directors

All of the Board of Directors terms of office run upto the General Meeting of 2009. The reappointment of all directors was approved by the General Meeting of Shareholders on 10 May 2006.

The members of the Board of Directors are appointed for a period of a maximum of three years in each case. However, as long as the General Meeting has not filled the vacancy for whatever reason, a director whose mandate has expired remains in office.

Resigning directors can be reappointed.

The General Meeting of Shareholders can dismiss a director at any time.

A majority of the directors is appointed from among the candidates proposed by Brafin SAK, a trust company under Dutch law, with a reg-istered office at Oosthoutlaan 4, 2215 ZJ Voorhout, the Netherlands, as long as the latter holds at least forty percent of the company shares directly or indirectly.

22 BRANTANO annual report 2006

Competences of the Board of directors

In addition to the competences stipulated by law and the articles of association the Board of Directors has the following tasks (non-limiting list):

- The Company’s general policy: The Board of Directors decides on the Company’s vision, mission, business concept and strategy, its willingness to take risks, its values and the main policy lines.

- The Board of Directors ensures that the required financial and human resources are available to enable the Company to achieve its objectives.

- The Board of Directors determines the structure of the Company’s executive Committee.

- The Board of Directors is responsible for the quality and completeness of the financial reports published.

- The Board of Directors approves all long-term commitments that fall outside the scope of the day-to-day management.

- The Board of Directors monitors the existence and operation of the internal control system, including adequate identification and risk manage-ment.

- The Board of Directors is responsible for the Company’s Corporate Governance structure and compliance with the provisions of the Code.

Operation of the Board of directors

In principle, the Board of Directors meets six times a year at intervals determined at the beginning of the year. In addition, the Board of Directors meets whenever this is considered useful or necessary for the effective operation of the Board of Directors. In 2006 the Board of Directors met 15 times.

The directors receive the dates, location and agenda of each meeting and any useful information in advance. The agenda principally includes the figures (e.g., budgets, audited interim and annual figures, five-year plan, etc.) per country and for the Group.

To allow the Board of Directors to access all the information they require to supervise the day-to-day management, the members of the Board of Direc-tors receive the Group’s operational figures each month.

The Board of Directors can only deliberate validly if at least half of its members are present or represented. The decisions of the Board of Directors are taken by a majority of cast votes.

General rules of conduct have been issued for the members of the Board of Directors and these are included in the “Brantano Governance Charter” on the website www.brantano.com under the section “Investor Relations”.


Special committees formed by the Board of directors

In order to perform its responsibilities and tasks effectively, the Board of Directors has set up specialised Committees to analyse specific issues and advise the Board of Directors on those issues.

The Audit Committee assists the Board of Directors in fulfilling its supervisory responsibilities in respect of control in the broadest sense. The Audit Committee is entrusted with the development of a long-term audit programme covering all of the Company’s business activities and is in particular entrusted with the following:- Financial reporting - Internal control and risk management - Internal Audit- External Audit

The Audit Committee met twice during 2006.

Chairman: • BVBA Theo Peeters, director, represented by Theo PEETERS, permanent representative

Members: • BVBA Theo Peeters, director, represented by Theo PEETERS, permanent representative • Jean-Louis DUPLAT, director • Fortis Private Equity NV, director, represented by Brigitte BOONE, permanent representative

Secretary: • Christine VERMEERSCH, Chief Financial Officer

The Remuneration Committee formulates recommendations to the Board of Directors:- in connection with appointments of members of the Executive Committee- in relation to the Company’s remuneration policy- in relation to remuneration of members of the Executive Committee

The Remuneration Committee met once during 2006.

Chairman: • Sobradis NV, chairman, represented by Joris BRANTEGEM, permanent representative

Members: • Sobradis NV, chairman, represented by Joris BRANTEGEM, permanent representative • Elba NV, vice-chairman and director, represented by Luc GEUTEN, permanent representative • Jan SUYKENS, director

Secretary: • Advimo NV, managing director, represented by Kurt MOONS, permanent representative

2� BRANTANO annual report 2006

The Strategic Committee formulates recommendations to the Board of Directors relating to the Company’s strategy.

The Strategic Committee:

- evaluates the Company’s mission, vision and strategy at least once a year and makes relevant recommendations to the Board of Directors

- assesses all important changes proposed by the Executive Committee or the Chief Executive Officer which affect one of the above fields and makes relevant recommendations to the Board of Directors

- discusses the five year plans before these are proposed to the Board of Directors, and makes relevant recommendations.

The Strategic Committee met three times in 2006.

Chairman: • Elba NV, vice-chairman and director, represented by Luc GEUTEN, permanent representative

Members: • Elba NV, vice-chairman and director, represented by Luc GEUTEN, permanent representative • Sobradis NV, chairman, represented by Joris BRANTEGEM, permanent representative • Advimo NV, managing director, represented by Kurt MOONS, permanent representative

Secretary: • Advimo NV, managing director, represented by Kurt MOONS, permanent representative

Corporate organisationWithin the context of its internationalisation the Brantano Group has drawn up a management structure in the form of a centrally governed organisa-tion starting from the specialisation of the members of management and their functional field, which is frequently cross-border.

This means that the strategy is implemented faster and more flexibly in the different countries via the knowledge, experience and insight of the mem-bers of management into all facets of the Brantano concept.An international management function with a more country-oriented responsibility, which always has a central reporting line, was only selected for certain commercial departments where the local input is highly important.

The management structure includes the Executive Committee and the International Management Team.

executive Committee

The members of the Executive Committee are appointed by and can at all times be dismissed by the Board of Directors.

The Executive Committee is chaired by the Chief Executive Officer and comprises the functional officers (the Chief Retail Operations Officer, Chief Marketing and Property Officer, Chief Buying Officer, Chief Merchandise Officer and the Chief Finance Officer.)

The Chief Executive Officer, supported by the Executive Committee (EC), is responsible for the day-to-day leadership and management of the Com-pany.

The EC is the body where decisions are taken that provide for the implementation of strategic decisions made by the Board of Directors, which are cross-border in scope, and the main purpose of which is economies of scale and uniformity. In meetings of the EC, the members shall always give priority to the Group’s interests.

The members of the EC will always attend and participate actively in EC discussions with an open mind, constructively and with the required creativity and commitment.


International Management Team

The International Management Team comprises:

- International Retail Operations Director UK

- International Retail Operations Director BELUX

- International Marketing Director

- International Property Director

- International Supply Chain Director

- International Buying Director UK

- International Buying Director BELUX

- International Merchandising Director UK

- International Merchandising Director BELUX

- International IT Director

- International Finance Director

- International Human Resources Director

From left to right and from top to bottom:- Kris De Moor (International IT Director)- Nico Bondroit (International Merchandising Director BELUX)- Anick den Hollander (International Retail Operations Director BELUX)- Stefaan Van Weyenbergh (Chief Retail Operations Officer)- Simon Cook (International Buying Director UK)- Ian Sheppard (International Supply Chain Director)- Terry Boot (International Property Director)- Caroline Liddon (Chief Buying Officer)

- Kirsti Bircher (International Merchandising Director UK)- Karen Staton (International Retail Operations Director UK)- Peter de Smedt (Chief Marketing and Property Officer)- Christine Vermeersch (Chief Finance Officer)- Kurt Moons (Chief Executive Officer)- Kristien Vanhaverbeke (International Buying Director BELUX)- Roel De Keyzer (Chief Merchandising Officer)


Remuneration and other details The total amount of payments allocated in 2006 to all directors of Brantano for their service as members of the Board of Directors and/or one of the Committees, excluding the remuneration of the CEO, is € 902,800. No directors’ fees were issued.

The payment made to the independent directors for attending meet-ings of the Board of Directors and respective committees of which the parties were members, was € 24,000 for Mr Jan Suykens, € 24,000 for Mr Jean-Louis Duplat and € 26,000 for BVBA Theo Peeters.

The total amount of remuneration for the last closed financial year awarded to the Executive Committee, including the CEO, amounts to € 1,779,558.

All payments to members of the Board of Directors and Executive Com-mittee concern the total cost as this was borne by the Brantano Group in 2006.

The members of the Board of Directors and Executive Committee have a total of 316,334 Brantano NV shares and 45,500 options in hand.

No unusual transactions occurred in the past and current financial year.

The Company did not grant any loans to members of the Executive Committee, the International Management Team and the Board of Directors.

The Board of Directors believes that the above information relating to payment and other benefits gives an adequate picture of the costs to the governance and management of Brantano.

The remuneration of the statutory auditor and the other people with whom the auditor works in carrying out its audit at Brantano NV and its related companies amounted to € 164,085 for 2006. Payments to the statutory auditor and other people with whom he works for special as-signments amounted to € 89,088. This related to taxation advice and support in the area of IFRS, the sale of the Brimmo participating inte-rest and intervention regarding a possible refinancing of the capital.


Policy relating the appropriation of the result The Board of Directors operates a dividend policy that takes account of:

• a fair payment to the shareholders in comparison with other compa-nies listed on Euronext Brussels.

• reserving adequate free cash flow for the Group’s own develop-ment.

The Board of Directors proposes to issue a dividend of € 4,361,040 for the 2006 financial year, subject to approval of the distribution of profits by the General Meeting on 9 May 2007. In this case it represents € 1.50 gross per share (which is € 1.125 net per share), an increase of over 10% compared with the dividend in 2005.

This dividend will be payable from 25 May 2007 on presentation of coupon number 10 at KBC, Fortis Bank and Petercam branch counters.

Charter of EthicsAs a professional, international and listed company, Brantano wishes to deal with all of its stakeholders in an ethical and carefully considered way. The Board of Directors and management wishes to extend this approach to all of our external and internal relations. This is why the Board of Directors approved our “Charter of Ethics” on 18 October 2000 following a proposal by the Executive Committee.

The Charter of Ethics is part of the Group Corporate Governance Char-ter.

To achieve the goals described in its strategy, Brantano commits itself to act ethically and responsibly at all times to its customers, employ-ees, business partners, society and shareholders.

Code of professional ethics

“We strongly believe that, apart from honesty, integrity and fairness, the following ethical responsibilities are indispensable key factors for profitable business and successful “corporate governance”:

Responsibility to our customers

• To attract present and future customers by supplying a wide range of quality products and tailor-made services in response to their needs and which contribute to their wellbeing when price, safety and the environment are concerned.

• To provide our customers with correct, accurate and relevant infor-mation.

• To compete in an ethically justified way ethically in the customer’s interest without secret agreements or collaboration with other shoe retailers. To comply with the applicable competition laws. To refrain from blackening a competitor’s reputation or the products he sells.


Responsibility to our employees

• To trust and respect our co-workers in all individual and human as-pects and recognise their merits. To appraise and reward the contri-butions and accomplishments of each individual person at specified times.

• To promote equal opportunities. To support a training and develop-ment policy that creates a fair and optimal use of human potential.

• To offer the opportunity of job involvement and participation in order to increase motivation and commitment. To maintain an open, posi-tive communication structure.

• To ensure effective health and safety conditions and education at work, thus contributing to continuous improvement in performance.

• To provide competent and exemplary management that is guided by the professional ethics stated in the charter, and management that helps our employees to accomplish their duties optimally by means of the necessary support, information and supervision.

Responsibility to our business partners

• To establish long-term trading relationships with our business part-ners that are driven by mutual benefits and fair business dealings.

• To reject any business partner that seriously violates the ethics and values stated in this Charter and to cancel existing contracts.

Responsibility to society

• To manage and control the business with all the required care to guarantee the continuity of our Group in the future and lasting employment for our employees.

• To comply with all applicable laws and regulations of the countries in which a Brantano structure is set up.

• To prioritise commonly accepted social values and public health & safety considerations. To respect the environment and natural re-sources in our business decisions.

Responsibility to our shareholders

• To continuously enhance the Group’s profitability and to generate a fair return.

• To secure our shareholders’ investments and assets and optimise al-location of resources through an efficient internal control structure at all levels of management.

• To provide suitable “corporate governance” within the legal limits. To report on the Group’s activities responsibly with transparent facts and figures that provide a faithful overview of our results”.

CommitmentThe Charter of Ethics was ratified by the Board of Directors and com-municated to all Brantano staff members.

The Executive Committee fully supports the Charter. The ultimate responsibility for supervising compliance with this Charter lies with senior management. However, each manager is obliged to ensure that the Code of Conduct is respected in his or her department.

The Brantano Group undertakes to implement an internal audit to pre-vent violations of the above-mentioned principles of the Charter. As it is, Brantano has developed strict procedures for all transactions and compliance with these is regularly checked. If a breach of the Code of Conduct is observed, this is reported to senior management and the internal auditors. A proven violation of the Code will inevitably lead to disciplinary measures by line management. The disciplinary measures and redress procedures have been explained clearly to all staff.

Brantano encourages all its staff to report any form of unethical beha-viour. A confidential, discreet ombudsman has been appointed for this purpose in each facility. The employee can count on protection during the subsequent independent, objective investigation.

The Code of Ethics has been set out for our employees as 15 rules of ethical conduct.



RepORT Of THe BOARd Of dIReCTORS

Operating report 2006

Belgium luxembourg uK Middle east Total

Brantano 116 4 147 13 280

Muys 3 3

estilogie 1 1

Schoencircus 1 1

Total 121 4 147 13 285

The shoe marketThe total market for shoe sales remains quite stable over the years. However, fashion is becoming increasingly important.

At the end of 2006, the Brantano stores (excluding Muys) had a market share of 10.7% of shoe sales in Belgium (source: GFK). Brantano therefore remains the market leader. The major competitors are Euro Shoe Unie (Shoe Discount, Shoes in the Box, Avance, Primo), Torfs and Berca. The other major players include supermarkets such as Makro and Carrefour.

At the end of 2006, Brantano had a market share of 1.7% in the UK (source: TNS Fashion Track). If shoe distributors alone are considered, Brantano ranks number two after C&J Clark. In the UK it is mainly clothing retailers and supermarkets such as Next, New Look, Asda and Tesco that are advancing. Other successful players include Marks & Spencer, Stylo Barrat and Stead & Simpson.

Store openingsAt the end of 2006, Brantano had 285 stores. Of these, 280 outlets operated under the Brantano name, three under the Muys name, one under the Estilogie name and one under the Schoencircus name.


LADIES = 36%

MEN = 21%

YOUTH = 17%

SPORT = 16%

TExTILES = 4%ACCESSORIES = 5%

Turnover per category according to sales value (percentage):In terms of sales value, ladies’ shoes represent the largest propor-tion of sales, followed by men’s shoes, sports’ shoes and youth shoes. Accessories include bags and maintenance products.

Updating of existing stores in Belgium and the United KingdomA programme to update all stores was launched in 2004. In this context, 14 stores were converted in Belgium in 2006. All of the stores will be refurbished by 2009. All outlets were changed over to the same concept in the United Kingdom in 2006. This is part of the repositioning of Brantano as a mid-market player and preceded the start of a new marketing campaign for 2007.

With its presentation of shoes by size and car parks just outside, Brantano has focused so far on purely functional buyers, so-called ‘run’ customers. The ‘fun’ element is also being introduced with the re-furbishing of the stores. A more spacious-looking store as a result of removing the ceiling and the use of industrial-style lamps, lower racks and special presentation and lighting should make the shopping experience more pleasant. A wider range of acces-sories has also been provided for customers.

New management structureTo implement the Group’s international strategy and to achieve its operating goals, a new management structure was designed in No-vember 2006. The new centrally organised structure starts from the management executives’ specialisation in their respective functional fields, and frequently extends beyond country borders.

This means that the strategy is realised more quickly and flexibly in the various countries thanks to the management’s knowledge, expe-rience and insight into all facets of the Brantano concept.

An international management function with more country-oriented responsibility was chosen for commercial departments, where local input is crucially important, although a central reporting line always exists.

The new management structure includes the Executive Committee and the International Management Team.


Belgium and LuxembourgOperational growth

In Belgium (including Luxembourg) the commercial strategy pursued by Brantano as the market leader is mainly aimed at increasing turnover and profitability in existing stores. As the existing store network covers almost the entire country, new stores are only being opened selectively in Belgium.

The turnover in Belgium (including Luxembourg) was € 136.3 million in 2006. Due to the poor weather, turnover was down by 2.1% compared with 2005 (€ 139.2 million). Negative growth of 1.5% was recorded in the existing stores (like-for-like stores). One store was opened and one closed due to fire in 2006. As a result, Brantano has 121 outlets in Belgium and four stores in Luxembourg at the end of 2006.

Old Shoes Collection Campaign

Brantano held its old shoes collection campaign in Belgium during the first weekend of March 2006. Customers were invited to bring as many old shoes as possible to one of the Belgian branches via the slogan “Make a nice gesture with an old pair”. This call was answered on a massive scale by customers and no fewer than 716,488 pairs of old shoes were brought in. As a result Brantano was able to support the “Stichting tegen Kanker” (Foundation against Cancer) and the “Kinderkankerfonds” (Children’s Cancer Fund) by € 189,886. This is the seventh year in a row that Brantano organised an initiative of this type. The “Stichting tegen Kanker” and “Kinderkankerfonds” are completely independent and can allocate the funds to projects that they choose. This campaign was also repeated in March 2007 with the slo-gan: “An old shoe can do wonders”.This campaign received a gold medal from the European As-sociation of Communications Agencies (EACA) during the selection of the best promotional marketing campaigns in Europe. This prestigious prize is awarded on the basis of in-novation, creativity, relevance to the market and result.

Sale of property

At the end of June 2006, the Group Brantano sold the owner-ship of its store in Lede. At the end of December 2006, it sold its property subsidiary Brimmo, which owned 19 premises located in Belgium and the distribution centre in Erembo-degem, Belgium. The trend in the property market and the interest in property in general as well as the conditions that Brantano was able to obtain in particular offered Brantano the opportunity to undertake this global property transac-tion. Brantano remains the tenant of the premises and has secured its commercial interests by concluding leases for 27 years subject to market compliant conditions. The transac-tion was undertaken at a global yield for Retail Estates NV of 6.62%. A capital gain of € 23.5 million was realised on these sales.

Marketing

Brantano entered into partnership with a new marketing agency, Flexus, in 2006. As the market leader, Brantano also wishes to have its position expressed more strongly through its marketing. The marketing campaigns in 2007 will reflect a focus on fashion and the fashion-conscious customer.


United KingdomOperational growth

A lot of hard work was done on repositioning Brantano as a mid-market player in the United Kingdom in 2006. The necessary pre-parations were made in all the crucial retailing fields (i.e., product, store layout, staff) to ensure readiness for the launch of the national marketing campaign in 2007. The new 2007 collections were pur-chased from a fashion perspective, all of the stores were converted and standardised and a range of training courses were organised for the store staff so that the customer can be given better service.

Turnover in existing stores

In the United Kingdom (including the Middle East) turnover of € 158.9 million was realised in 2006, compared with € 164.9 million in 2005. The total turnover was down by 3.7%. Expressed in pounds sterling, the total turnover fell by 4.0% and like-for-like by 7.0%.This negative growth is the result of the negative influence of the weather and difficult market conditions and the change in commer-cial strategy, where the emphasis is being placed on achieving more qualitative turnover.

New stores

Seven stores were opened and five closed in 2006. This means that Brantano has 147 stores in the United Kingdom.

Sale of rent contracts

In the United Kingdom, rent agreements are subject to rent reviews every 5 years. The rent is not indexed annually, but is adapted to re-flect market rental prices at the time of the 5-yearly rent review. The market rent is determined by the highest rent paid at that time in the relevant retail park. This can have a significant negative influence on the profitability of a store given that rent sometimes rises very substantially due to the review. However, it can also offer attractive opportunities. The owner is sometimes prepared to pay an exception-ally high price to free up a location so that it can be rented to a new tenant who is willing to pay a higher rent, which then acts as a point of comparison for the other tenants during the next rent review.

In this context Brantano transferred the rental rights to stores lo-cated in Leamington and Oxford back to the owner in 2006. A capital gain of € 5.7 million was made on these transactions.

Important events after 31 december

There were no important events after 31st December 2006.

st


Financial report 2006

In million € fy 2006 fy 2005Variation in

million €Variation in %

Turnover 295.2 304.1 (9.0) (2.9%)

Gross margin 151.0 152.9 (2.0) (1.3%)

% of turnover ��.2% �0.�%

Operating result (EBIT) 35.9 18.8 17.1 90.8%

% of turnover �2.2% �.2%

Recurring operating result (REBIT) 9.7 19.1 (9.5) (49.4%)

% of turnover �.�% �.�%

Operating cash flow (EBITDA) 46.1 28.2 17.9 63.5%

% of turnover ��.�% �.�%

Recurring operating cash flow (REBITDA) 19.6 28.2 (8.6) (30.4%)


Financial result -2.2 -2.2 0.0 2.0%

% of turnover -0.�% -0.�%

Pre-tax result on continued activities 33.7 16.6 17.1 102.6%

% of turnover ��.�% �.�%

Post-tax result on continued activities 29.2 10.5 18.7 178.0%


Post-tax result on discontinued activities 0.3 -3.4 3.7 107.3%

% of turnover 0.�% -�.�%

Net result after taxes 29.5 7.1 22.4 315.3%

% of turnover �0.0% 2.�%

Income statement

Turnover

During the 2006 financial year, the Brantano Group achieved a turno-ver of € 295.2 million, which represents a fall of 2.9% compared with the € 304.1 million that it achieved in 2005. Without exchange rate effects, turnover was down by 3.1%.

In the total group revenue of EUR 295.2 million, Belgium (including Luxembourg) accounts for EUR 136.3 million and the United Kingdom (including the Middle East) represents EUR 158.9 million. The turno-ver in Belgium (including Luxembourg) is therefore equal to 46.2% of the group total and the turnover for the United Kingdom (including the Middle East) 53.8%.


2006 2005 2004 2003 2002

Belux 46.2% 45.8% 41.2% 43.4% 43.6%

uK 53.8% 54.2% 51.1% 47.7% 44.3%

The Netherlands 5.1% 5.9% 9.4%

denmark 2.6% 3.0% 2.7%

Total 100,0% 100,0% 100,0% 100,0% 100,0%

The turnover in Belgium (including luxembourg) was equal to € 136.3 million. In comparison with 2005 (€ 139.2 million) turnover was down by 2.1%. Negative growth of 1.5 % was recorded in the existing stores (like-for-like stores). One store was opened in 2006 and one outlet was closed due to fire.

In the united Kingdom (including the Middle east) turnover of € 158.9 million was recorded over the four quarters of 2006 compared with € 164.9 million in 2005. Total turnover fell by 3.7%. Expressed in pounds sterling total turnover was down by 4.0% and like-for-like turnover by 7.0%.

Gross margin

The gross margin in the 2006 financial year was equal to € 151.0 mil-lion and comprised 51.2% of total turnover. In 2005 the gross margin was equal to € 152.9 million or 50.3% of turnover.

The significant improvement in the percentage gross margin was achieved thanks to a continuing focus on this margin during the purchasing process and stock management, on the one hand, and through the implementation of the new commercial strategy in the United Kingdom where discount sales were made later in the season and less deeply, on the other hand.

2002 2003 2004 2005 2006

325,0

295,0

265,0

235,0

299.4 303.8

322.6

304.1295.2

Development of turnover (in € million)

2002 2003 2004 2005 2006

52,0%

50,0%

49,0%

47,0%46.3%

48.2%

49.1%

50.3%

51.2%

Development of the gross margin (as a % of total turnover)

Development of the distribution of turnover per country (as a % of total turnover)


28,2

Operating result (eBIT) –

Recurrent operating result (ReBIT)

The operating result was € 35.9 million over the 12 months of 2006.

The operating result in 2006 was influenced by € 29.1 million through other operating yields from the sale of real estate and store manage-ment. In the United Kingdom the rental rights of two stores (i.e., Leamington in the first half of 2006 and Oxford in December 2006) were transferred back to the owner. The ownership of the Lede (Bel-gium) outlet was sold in the first half of 2006 and the Group realised a significant capital gain from the sale of its participating interest in Brimmo NV.

Operating costs rose both in Belgium and the United Kingdom in 2006. There was a major rise in store rent and rental charges in the United Kingdom due to a large number of five-year rent reviews.

The operating result in 2006 was negatively influenced by € 2.1 mil-lion in restructuring costs. Brantano adapted its organisational struc-ture at the end of 2006 to a more centrally directed organisation so the Group can work more flexibly, and it bore store closure costs.

2002 2003 2004 2005 2006

36,0

24,0

12,0

0,03.0

15.919.9 18.8

35.9

Development of the operating result (in € million)

In compliance with IFRS, marketing costs of € 0.85 million that were incurred at the end of 2006 for the national marketing campaign that was launched in March 2007 were included in the 2006 operating result.

While taking account of these non-recurrent yields and expenses the Group achieved a recurrent operating result (REBIT) of € 9.7 million. As a result the proposed recurrent operating profit of € 8.8 million (or € 11 million including the € 2.2 million in non-recurrent yields earned in the first half of 2006) was reached.

Operating cash flow (eBITdA) –

Recurrent Operating cash flow (ReBITdA)

An operating cash flow (EBITDA) of € 46.1 million was realised over the four quarters of 2006, compared with € 28.2 million during the 2005 financial year.

Without taking into account the non-recurrent yields and costs, the recurrent operating cash flow (REBITDA) is € 19.6 million.

2002 2003 2004 2005 2006

50,0

40,0

30,0

20,021.5

24.9

31.2

46.1

Development of the operating cash flow (in € million)

2006 2005 2004

Operating result (eBIT) 35.9 18.8 19.9

depreciation 10.2 9.4 11.3

Operating cash flow (eBITdA) 46.1 28.2 31.2

Calculation of operating cash flow (in € million)


financial result

A financial result of - € 2.2 million was realised during the four quar-ters of 2006, which is equal to the financial result of the previous year.

post-tax result on continued activities

The result from continued activities over 2006 is € 29.2 million com-pared with € 10.5 million in 2005.

Result from discontinued activities

The result from discontinued activities is € 0.3 million at the end of 2006. This positive result is the consequence of the release of provisions that were established at the expense of previous financial years.

Balance sheet

Assets (in millions of €)

2006 2005

Fixed assets 54.4 65.0

Current assets 90.9 80.0

Stocks �0.� ��.�

Other current assets ��.� �0.�

Liquidities �2.� ��.�

Assets from discontinued activities 0.6 1.0

Total assets 146.0 146.0

Assets

Investments

In 2006, Brantano invested € 13.6 million. Of this € 3.0 million was used for the opening of new stores, € 8.6 million for investments in existing stores and € 2.0 million for IT and other investment.

Development of investments:

(in € million) 2006 2005 2004 2003 2002

purchase of lands and buildings 0.1 1.1 0.5 1.7 6.3

Investment in new openings and reconversion of existing stores 11.5 7.8 4.9 6.2 11.7

IT, vehicles and other investments 2.0 2.6 1.0 2.2 3.5

Total 13.6 11.5 6.4 10.1 21.5


liabilities (in millions of €)

2006 2005

Capital and reserves 83.1 56.7

Non-current liabilities 18.3 46.3

Current liabilities 44.1 42.1

Non-current liabilities falling due during the year 0.0 �.�

Current liabilities 0.0 0.�

Trade debts 2�.� ��.�

Debts relating to taxation. remuneration and social security �.� �.�

Other short-term liabilities �2.2 �.�

Liabilities from non-continued activities 0.5 1.0

Total liabilities 146.0 146.0

liabilities

Capital and reserves

In 2006, the capital and reserves rose from € 56.7 million to € 83.1 million. On 31st December 2006, the capital and reserves are equal to 56.9% of the balance sheet total.

Net financial debt

On 31st December 2006, the net financial debt has been fully cut back and Brantano has a positive cash position of € 1.2 million. On 31st December 2005, the net financial debt was € 35.2 million. The gearing ratio, the ratio between the net financial debt and capital and reserves is –1.4% on 31 December 2006 compared with 62.1% in 2005.

Development of net financial debt ((in € million)

Prospects for 2007

2002 2003 2004 2005 2006

0

-25,0

-50,0

-75,0

-100,0-89.5

-53.9-44.5

-35.2

1.2


Prospects for 2007

Turnover

The Group predicts a consolidated annual turnover of € 300 to € 310 million for 2007.

Store openings 7 openings are planned in 2007.

Investments

The investment budget for 2007 amounts to € 9.0 million, of which € 2.1 million will be allocated to opening new shops and € 5.0 million to refurbish-ing existing shops.

Recurrent operating result (ReBIT)

The Group will continue to work on repositioning Brantano as a national retailer in the British market in 2007. Substantial budgets are being released for national marketing campaigns in 2007. The focus is being kept on more qualitative turnover growth. The Group wishes to reinforce its position as the market leader in Belgium.

The Group predicts annual turnover of € 300 to 310 million in 2007. And while taking into account the increased marketing costs in the United King-dom and additional rental costs in Belgium, it is endeavouring to achieve a recurrent operating result (without taking into account the other income from store management) of € 5 to 7 million.


INfORMATION fOR SHAReHOldeRS

The Brantano shareGeneral information

Brantano shares are quoted on the Euronext Brussels futures market (continuous segment) under the code BRAP (ISIN code: BE0003697118).

The Reuters symbol for the Brantano share is BRAN.BR, while the Bloomberg symbol is BRAP BB. Finally, on Datastream Brantano’s symbol is B:BRA.

The shares are registered or bearer, in denominations of 1, 10 or 100.

The shareholder can have his bearer shares converted to registered shares on request and vice versa. The transfer of ownership of registered shares occurs by notifying the company by sending the share certificate to the registered office of Brantano NV.

Brantano NV has signed a membership application for the Euroclear Belgium Dematerialisation services whereby the company has undertaken to adopt every measure required by the Rules and Dematerialisation laws (including an amendment of the articles of association before 01/01/2008, stating that no new bearer securities can be issued from this date on).

evolution of the number of shares

In May 1997, Brantano opened its capital to public participation through a combined offer for sale of 40% of its shares, i.e. 1,110,600 shares out of a total of 2,776,500 shares. A capital increase of € 4.8 million, represented by 64,540 shares, was implemented on 18 April 2000. The exercise of 11,000 warrants in September 2001 brought the total number of shares to 2,852,040. The exer-cise of 55,320 warrants on 24 January 2007 brought the total number of shares to 2,907,360.

Allocated options

The total number of lawfully exercisable options is 45,500 on 31/12/2006.As options are concerned, a possible exercise does not cause any dilution.

Shares held by Brantano NV

At the end of 2006, Brantano NV holds 45,500 of its own shares. These were purchased to cover the options.

Shareholder structure

The shareholder structure is as fol-lows:(1) Sobradis NV is the patrimony

company associated with Joris Brantegem’s family (son of the Group’s founder).

(2) Mitiska NV is a holding company that operates in specialist retail-ing in Europe and is controlled by Luc Geuten.

(3) Retail Partners is a holding com-pany that is 50.5% controlled by Mitiska NV and 49.5% by Fortis bank NV.

(4) Brafin SAK is a trust office under Dutch law in which Sobradis NV, Mitiska NV and Retail Partners BV have placed the larger part of their interest in Brantano.

Brafin SAK and Mitiska NV, both companies linked to Brantano NV, jointly hold an interest of 53.74% in Brantano NV. Sobradis NV also has a direct interest of 2.86% in the company. The percentage of freely negotiable shares (free float) is the-refore 43.40%.


NV43,40%2,86%

27,78% 3,10%

50,50%

6,29%

47,45%

69,12%

49,50%

fORTIS BANK NV MITISKA NV (2)

ReTAIl pARTNeRS BV (3)

BRAfIN SAK (4)

fRee flOAT

SOBRAdIS NV (1)


Stock market dataprice development

The price of the Brantano share closed at € 35.99 on 26 March 2007.This represents a fall of 34% over 15 months compared with the share price at the end of 2005 (€ 54.65).

Brantano was floated on the stock market at a price of € 28.00 in May 1997.

development of the Brantano share over the past 5 years

data per share since 2002 as of 31 december

The figures up to and including 2003 were compiled in accordance with BE-GAAP and the figures from 2004 have been compiled under IFRS.

Most important stock market ratios on the basis of the closing price on 31 december

The figures up to and including 2003 were compiled in accordance with BE-GAAP and the figures from 2004 have been compiled under IFRS.

01/2002 12/2002 12/2003 12/2004 12/2005 12/2006

Clo

sing

rat

e B

rant

ano

shar

e (i

n e

)

volu

me

(in

e t

hous

ands)

Brantano-share Volume

2006 2005 2004 2003 2002

Turnover per share 103.5 106.63 113.12 106.54 104.99

Result from continued operations 10.24 3.68 3.35 1.99 0.12

Cash flow 13.80 6.97 7.31 5.65 6.81

Gross dividend 1.50 1.35 1.20 1.00 1.00

Net dividend 1.13 1.02 0.90 0.75 0.75

Book value 29.14 19.89 18.36 18.19 18.26

Highest closing price 54.90 51.00 46.99 30.98 54.95

lowest closing price 35.60 42.50 27.98 15.05 21.20

Closing price on 31 december 38.00 47.20 46.99 29.00 21.55

2006 2005 2004 2003 2002

price/turnover 0.4 0.4 0.4 0.3 0.2

price/profit 3.7 12.8 14.0 14.6 179.6

price/cash flow 2.8 6.8 6.4 5.1 3.2

price/book value 1.3 2.4 2.6 1.6 1.2

dividend yield 3.9% 2.9% 2.6% 3.4% 4.6%

60,00

50,00

40,00

30,00

20,00

10,00

40

30

25

20

10

5

15

35


DividendThe Board of Directors will propose to issue a gross dividend of € 4,361,040 or € 1.50 per share (€ 1.125 net) to the General Meeting of Shareholders on 9 May 2007.

This dividend will be payable from 25 May 2007 onwards, on presentation of coupon number 10 at KBC, Fortis Bank and Petercam branch counters.

Investor relationsShareholders and investors who wish to obtain the annual report, press releases or other information about Brantano can contact:

Christine Vermeersch CFO Tel.: +32 (0) 53.85.00.00 e-mail: [email protected]

The electronic version of the annual report, extracts from the annual report, press releases, the share price, financial presentations and other Brantano Group data can also be found on the website http://www.brantano.com. This information is available in Dutch, French and English.

financial agenda

General Meeting of Shareholders 9 May 2007

Q1 2007 trading update 10 May 2007

Publication of turnover for H1 2007 16 July 2007

Publication of results H1 2007 23 August 2007

Q3 2007 trading update 15 November 2007

Publication of turnover in 2007 15 January 2008


fINANCIAl INfORMATION


fINANCIAl INfORMATION

Consolidated Annual Accounts

Consolidated Balance Sheet 46

Consolidated Statement of Changes in Equity 46

Consolidated Income Statement 48

Cash Flow Statement 49

Explanation of the Consolidated Annual Accounts 50

Commentary on the Consolidated Annual Accounts 70

Consolidated Auditor’s Report 72

Brantano nv Annual Accounts

Abbreviated Balance Sheet after Profit Allocation 73

Abbreviated Income Statement 74

Appropriation of Results 74

valuation Rules 75

Commentary on the Statutory Annual Accounts for Brantano nv 76

Capital Situation 77

Warrant plan 79

Statutory report of the Board of Directors 80


Consolidated annual accounts

Consolidated balance sheet

Assets (in € 000) Notes 31-12-2006 31-12-2005

Non-current assets 54.438 65.025

Intangible fixed assets 6 2,847 2,847

Consolidation differences

Tangible fixed assets 7 51,445 62,093

Land and buildings �,�� 2�,0��

Plant, machinery and equipment �,��0 �,0��

Furniture and vehicles �� 2�0

Other tangible fixed assets �0,��0 ��,��

Assets under construction 0 ��

Other non-current assets 8 146 86

Current assets 90,923 80,013

Inventories 9 60,722 55,668

Other current assets 10 17,470 10,490

Cash 11 12,730 13,856

Assets from discontinued operations 12 596 1,003

TOTAl ASSeTS 145,957 146,042

(in € 000)

Share Capital

Share premium account

Retained earnings

Other reservesTreasury shares TOTAlTranslation

differencesShare-based

payments

Balance 1 January 2005 3,821 5,195 48,235 (4,312) 319 (887) 52,372

Result from continued operations 10,507 10,507

Result from discontinued operations (3,413) (3,413)

Dividend (3,422) (3,422)

New stock option plan 155 155

Change in treasury shares (855) (855)

Change in translation differences 1,373 1,373

Balance 31 december 2005 3,821 5,195 51,906 (2,939) 474 (1,742) 56,716

Consolidated statement of changes in equity


liabilities (in € 000) Notes 31-12-2006 31-12-2005

Shareholders’ equity 13 83,096 56,716

Capital 3,821 3,821

Share premium account 5,195 5,195

Retained earnings 77,512 51,906

Other reserves (1,365) (2,464)

Treasury shares (2,067) (1,742)

Non-current liabilities 18,285 46,264

Long-term interest bearing loans and borrowings 14 11,973 39,453

Deferred tax liabilities 15 5,805 5,858

Long-term provisions 16 507 954

Current liabilities 44,112 42.089

Current instalments of interest bearing loans and borrowings 0 9,734

Interest bearing short-term debt 0 73

Trade payables 23,680 14,849

Amount payable regarding taxes, remuneration and social security 18 8,269 7,852

Other current liabilities 19 12,164 9,582

liabilities from discontinued operations 21 464 972

TOTAl lIABIlITIeS 145,957 146,042

(in € 000)

Share Capital

Share premium account

Retained earnings

Other reservesTreasury shares TOTAlTranslation

differencesShare-based

payments

Balance 1 January 2006 3,821 5,195 51,906 (2,939) 474 (1,742) 56,716

Result from continued operations 29,207 29,207

Result from discontinued operations 250 250

Dividend (3,850) (3,850)

New stock option plan 0

Change in treasury shares (326) (326)

Change in translation differences 1,099 1,099

Balance 31 december 2006 3,821 5,195 77,512 (1,839) 474 (2,067) 83,096

Consolidated statement of changes in equity


Consolidated income statement

INCOMe STATeMeNT (in € 000) Notes 31-12-2006 31-12-2005

TuRNOVeR 295,157 304,122

Turnover 22 295,157 304,122

Cost of sales (144,176) (151,186)

OpeRATING INCOMe 181,769 154,876

Gross margin 23 150,980 152,937

Other operating income 24 30,789 1,940

OpeRATING CHARGeS (105,113) (97,768)

Store costs (105,113) (97,768)

OpeRATING CASH flOW STOReS 76,656 57,108

OVeRHeAdS (30,591) (28,930)

OpeRATING CASH flOW BefORe TAx 46,066 28,178

Financial income 25 347 324

Financial charges 25 (2,590) (2,523)

CASH flOW BefORe TAx 43,822 25,978

Depreciation (10,150) (9,358)

ReSulT BefORe TAx 33,672 16,620

Taxes 26 (4,465) (6,113)

ReSulT fROM CONTINued OpeRATIONS 27 29,207 10,507

ReSulT fROM dISCONTINued OpeRATIONS 28 250 (3,413)

NeT ReSulT fOR THe peRIOd 29,457 7,093

2006 2005 31-12-2006 31-12-2005

earnings per share Number of shares 29 € €

Basic 2.808.378 2.819.646 10.49 2.52

Diluted 2.875.048 2.887.816 10.25 2.46


Cash Flow Statement

(in € 000) 31-12-2006 31-12-2005

CONSOlIdATed CASH flOW STATeMeNT

Cash flow from operating activities

Consolidated net result per Group share 29,457 7,093

Depreciation on set-up costs, consolidation differences, tangibles an intangible fixed assets 10,150 10,102

Depreciation on inventories and receivables 626 (1,438)

Addition to / take-back and expenditure of deferred taxes and tax deferrals (53) 157

Addition to / take-back and expenditure of provisions for risks and costs (447) 45

Changes in working capital requirements (705) 5,804

CASH flOW fROM OpeRATING ACTIVITIeS 39,029 21,764

Cash flow from investing activities

Acquisitions of tangible, intangible or financial fixed assets

* Set-up costs - -

* Goodwill - -

* Land and buildings (1,072) (1,803)

* Installations, machinery and equipment (1,855) (1,965)

* Furniture and vehicles (10) (46)

* Other tangible fixed assets (10,628) (7,327)

* Assets under construction (347)

* Financial fixed assets

Transfers of tangible, intangible of financial fixed assets

* Set-up costs, tangible and intangible fixed assets 14,541 2,511

Translation differences of tangible and intangible fixed assets (539) (734)

CASH flOW fROM INVeSTING ACTIVITIeS 437 (9,711)

Cash flow from financing activities

Increase in capital - -

Evolution treasury shares (326) (855)

Evolution share-based payments 155

Movements of debts of more than 1 year (27,480) (8,482)

Movements of debts of more than 1 year that fall due in this financial year (9,734) (402)

Credit institutions (73) (342)

Movement of translation differences 1,099 1,373

Dividend paid out (3,850) (3,422)

CASH flOW fROM fINANCING ACTIVITIeS (40,364) (11,975)

NeT MOVeMeNT Of CASH INVeSTMeNTS ANd lIQuIdITIeS (898) 77

Movement of cash investments and liquidities

Sum of cash investments and liquidities at the end of financial year on continued operations 12,730 13,856

Movement of cash position on discounted operations 227 (638)

Sum of cash investments and liquidities at the beginning of financial year on continued operations 13,856 13,140

NeT MOVeMeNT Of CASH INVeSTMeNTS ANd lIQuIdITIeS (898) 77


Explanation of the Consolidated Annual Accounts

1. Statement of Compliance

The Brantano Group is a company that is established in Belgium. The consolidation of the Brantano Group encompasses the annual accounts of the following companies: Brantano NV, Muys NV, Brantano Luxembourg SA, Brantano UK Ltd, Brantano Beheer BV, Brantano Nederland BV and Brantano Asia Ltd.

The changes to the consolidation circle in respect of 31st December 2005 relate to the sale of shares in the real estate subsidiary Brimmo NV to the Belgian closed end property investment company Retail Estates NV, the liquidation of Brantano SA and the establishment of Brantano Asia Ltd. This company looks after relationships with suppliers in the Far East, more specifically relating to order-tracking, quality control, design input and prospecting. All of the companies are consolidated integrally.

2. General information

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and with the standards and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that apply on the balance sheet date.

The consolidated financial statements are presented in euros applying the historical cost principle, with the exception of the proposal of the financial derivatives which are valued at market value.

The consolidated financial statements for 2006 (including the comparative figures for 2005) were approved by the Board of Directors on 13th February 2007.

3. Valuation Rules

3.1. Consolidation criteria

The consolidated financial statements are produced from the accounts of the parent company and its subsidiaries, as compiled at the end of the financial year. Subsidiaries are entities over which the parent company exercises control. Control is understood here as the parent company being in a position to determine directly or indirectly the financial and operating policies of an enterprise directly or indirectly in order to obtain benefits from its activities.

The consolidation is undertaken on a full consolidation basis, undertaking the necessary eliminations.

The full consolidation method consists of taking over in full the assets, liabilities, expenses and income of the consolidated enterprises. Minority interests, including those in the net income for the financial year, are mentioned under separate balance sheet and income statement headings.

3.2. Translation of foreign currency

The balance sheets of foreign subsidiaries are translated into euros at the closing exchange rate on the last day of the financial year. These subsidiaries’ income statements are translated using the average daily rate, i.e., the average of the rates for each working day of the year on the exchange market for the currencies in question. Differences arising from the use of the average daily rate for the results and the year-end closing rate for the balance sheet, are recognised in the equity heading “translation differences”.

3.3. Consolidation goodwill

Positive consolidation differences resulting from the acquisition of a new participation express the difference between the acquisition price and the underlying net asset value of the new participation at the time of acquisition.

Consolidation goodwill is not amortised, but is reviewed at every balance sheet date for any indications of impairment. Where such indications exist, a test is carried out to determine whether an impairment loss should be recognised.

3.4. Intangible assets other than positive consolidation goodwill

Formation expenses and trade mark registration costs are charged to the income statement as and when incurred.

The costs of other intangible assets are capitalized and amortised on a straight-line basis over five years.

Goodwill arising from mergers is not amortised, but is reviewed at every balance sheet date for any indications of impairment. Where such indica-tions exist, a test is carried out to determine whether an impairment loss should be recognised.


3.5. Tangible fixed assets

Tangible fixed assets are carried at cost. Ancillary costs and interest on any related bridging financing are capitalized.

Tangible fixed assets are depreciated on a straight-line basis, in accordance with their useful economic life, as from entry into service.

The following depreciation percentages are applied when closing annual financial statements:

At every closing date, the net carrying value is reviewed in order to estimate whether the net carrying value is higher than the market value. Where the net carrying value exceeds the estimated market value, the asset in question is written down to its market value.

3.6. Stocks

Raw materials, consumables and goods for resale are valued at cost using the FIFO method. The purchase price is increased by the purchase costs including customs, carriage, transport and distribution costs. All discounts (including financial discounts) are attributed to stock.

If the cost price is higher than the net realisable value, the valuation is adjusted to the lower net realisable value. The net realisable value is equal to the estimated normal sale price, less estimated sale-related costs.

Goods older than 36 months are fully depreciated.

3.7. Amounts receivable

Amounts receivable are carried at their nominal value. Where a collection risk exists, a valuation allowance is recognised.

Valuation allowances are applied whenever the realisation value of the accounts receivable is, in the opinion of the Board of Directors, lower than the carrying value, and as soon as repayment at due date is uncertain.

3.8. Short-term investments and cash at bank and in hand

Short-term investments and cash at bank and in hand are carried at their current value. All profits and losses resulting from such revaluation are taken into the income statement.

3.9. Equity

Cost of an equity transactionThe transaction costs of an equity transaction are recorded as a reduction in equity, net of the related tax benefit.

DividendDividends are recognised as amounts payable in the period in which they are allotted.

Treasury sharesWhere shares representing the company’s equity are purchased by the company or a subsidiary, the total amount paid, including directly attribut-able expenses, is deducted, net of taxes, from equity. Any income from the sale of these shares is recorded under equity.

3.10. Long-term provisions

Provisions are set up (i) whenever the group has a legal or de facto obligation as a result of a past event, (ii) it is probable that an outflow of resources embodying economic benefits will be required to settle this obligation and (iii) that a reliable estimate can be made of the amount of the obligation.

A provision for reorganisation costs is recorded where the Group has approved a detailed reorganisation plan and has created a valid expecta-tion that the reorganisation will be carried our by beginning to implement the plan or by informing the parties involved of the key features of the same.

Heading Straight-line

Buildings 3,33%

fixtures and fittings 5% & 10%

Installations and machinery 20%

Cars 20%

furniture 20%


3.11. Interest-bearing debts

Interest-bearing debts are carried at nominal amount excluding all related transaction costs. These latter costs are charged to income over the availability period.

3.12. Lease agreements

Lease agreements where all essential risks and benefits of ownership are transferred to the Group are treated as financial leases. Financial leases are capitalized at the inception of the lease agreement at the lower of the fair value of the leased property or the present value of the minimum lease payments.

The related obligations are recorded as long-term or short-term debts depending on their term. The interest portion of the lease is charged to income over the term of the lease. The tangible fixed assets obtained via financial leases are depreciated over their expected economic life as mentioned under ‘tangible fixed assets’.

Lease agreements where the lessor substantially retains the risks and benefits attached to ownership of the leased asset are treated as operating leases. For operating leases, lease payments are recognized as an expense in the income statement on a straight line basis over the lease period. The total value of discounts or benefits granted by the lessor is deducted from the lease costs over the life of the lease contract on a straight-line basis.

3.13. Employee benefits

Pension obligations

- Defined contribution plansThe contribution paid is immediately recognised in the income statement.

- Defined benefit plansThe carrying value of the defined pension plans is determined as the present value of the gross liabilities, taking into account unrecognised actuarial gains and losses and the fair value of the fund investments. In accordance with IAS 19 ‘Employee benefits’ actuarial profits or losses exceeding more than 10% of the present value of the gross obligations or the fair value of the fund investments spread over the expected average remaining period of service.

Share based payments

The fair value of share-based remuneration plans (warrants and option plans) are calculated based on the capital mutation method. In accordance with IFRS 2 “Share based payments”, the cost is recognised at the time of allotment.

3.14. Financial derivatives

It is Group policy not to speculate in financial derivatives. Brantano uses foreign currency forward contracts, interest rate swaps and other de-rivative instruments to control the impact of foreign currency and interest rate fluctuations. Such financial instruments are used only to hedge exposure to foreign exchange and interest rate risks. Gains and losses are recognised in the same period as the hedging is undertaken and are allotted to the covered assets or liabilities.

3.15. Income tax

The income tax for the financial year is based on the profits and losses of the enterprises in the Group, and is calculated according to local tax rules. Deferred tax liabilities and assets are defined according to the balance method, for all temporary differences between taxation based assets and liabilities and their balance sheet value for financial reporting purposes.

Deferred tax assets and liabilities are valued at the tax rates which are expected to apply at the time of realisation of the asset or the settlement of the obligation, based on tax rates and tax laws approved at or after the balance sheet date.

A tax asset is recognised in so far as it is probable that a future tax profit will be available with which the non-compensated tax losses and unused tax-offsettable assets can be offset.

3.16. Impairmant of assets

At every balance sheet date a judgement is made as to the existence of evidence of a possible impairment of an asset. Where such evidence exists, a test is undertaken to determine the value in use (the present value of the expected future cash flows) or, if higher, the realisable value. Where this is lower than the carrying value, an impairment is recognised and charged in full against the income statement.


3.17. Recognition of income

Income is recognised whenever it is probable that the economic benefits will derive to the group and when the income can be reliably valued.

Sales to retail customers are recognised at the time of registration of the sale in the store.

Otherwise income is recognised whenever the essential risks and benefits of the ownership of the goods have been transferred to the buyer. Income is recognized whenever (i) a convincing proof of agreement exists, (ii) delivery has taken place, (iii) the remuneration is established or can be reliably determined and (iv) collection is likely.

3.18. Earnings per share

The Group calculates ordinary and diluted earnings per share in accordance with IAS 33 “Earnings per share”. The ordinary earnings per share are calculated based on the weighted average number of shares outstanding during the period. The diluted earnings per share are calculated based on the weighted average number of shares outstanding during the period plus the diluting effect of the outstanding warrants during the period.

3.19. Segment information

The primary basis of segmentation for the Group is geographic, given that the risks and income are to a significant degree dependent on the country of operation. A secondary segmentation basis (“business segment”) is not applicable. The sale of shoes represents over 90% of total sales, making it the only secondary segmentation basis.


4. Consolidation criteria

a. Scope of consolidation

The consolidation of the Brantano Group encompasses the annual accounts of the following companies: Brantano NV, Muys NV, Brantano Luxembourg SA, Brantano UK Ltd, Brantano Beheer BV, Brantano Nederland BV and Brantano Asia Ltd.

b. Consolidation criteria

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and using the standards and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB in force on the balance sheet date.

The consolidated financial statements for 2006 comply with all of the IFRS performances and required clarifications applied to all accounting periods beginning on or after 1st January 2005.

The consolidated financial statements are produced from the accounts of the parent company and its subsidiaries, as drawn up at the end of the financial year. The consolidation is done trough global integration, after making the necessary eliminations.

The integral consolidation method consists of taking over the assets, liabilities, expenses and income of the consolidated enterprises in full. Mi-nority interests, including the results of the financial year, are mentioned under separate balance sheet and income statement headings.

The consolidated annual accounts are drawn up on the same date as the annual accounts included in the consolidation.

Integrally consolidated subsidiaries

Total number of shares

Total number of shares held by the

Brantano GroupShare of the capital

Muys NV BE 421.798.164 1,552 1,552 100%

Brakelsesteenweg 160, 9406 Ninove, Belgium

Brantano luxembourg SA LU 16725423 1,250 1,250 100%

Route d’Arlon 124, 1150 Luxembourg, Luxembourg

Brantano uK ltd 705316071 10,000,000 10,000,000 100%

Interlink WayWest, Interlink Business Park, LE67 1 LD Bardon Coalville Leistershire - UK

Brantano Beheer BV 8083.99.676.B.01 127,389 127,389 100%

Spoorlaan 438, 5038 CH Tilburg, The Netherlands

Brantano Nederland BV 8083.99.676.B.01 400 400 100%

Spoorlaan 438, 5038 CH Tilburg, The Netherlands

Brantano Asia ltd 1036799 150 150 100%

2001 Centrel Plaza, 18 Harbour Road, WanchaiHong Kong

c. Changes in the consolidation circle

The changes relative to 31.12.2005 in the consolidation circle concern the sale of shares in the real estate subsidiary Brimmo NV to the Belgian property investment company Retail Estates NV, the liquidation of Brantano SA and the establishment of Brantano Asia Ltd.


5. Segment reporting

The primary segmentation is a geographical segmentation based on the Brantano Group’s internal organisation and management structure and its internal financial reporting system: • Belux • UK • Discontinued activities (NL & DK)

2005

(in € 000) Belux uK discontinued operations

Other TOTAl

Turnover 139,160 164,962 304,122

Recurring operating cash flow stores 34,845 22,270 57,116

Assets 74,628 70,411 1,003 146,042

Liabilities 68,923 19,334 972 97 89,326

Investments 4,910 5,013 1.565 11,488

Depreciation and amortisation 4,145 4,927 286 9,358

2006

(in € 000) Belux uK discontinued operations

Other TOTAl

Turnover 136,290 158,866 295,157

Recurring operating cash flow stores 33,026 15,817 48,842

Assets 65,399 79,862 596 100 145,957

Liabilities 37,816 24,395 464 187 62,862

Investments 6,401 5,912 1,252 13,565

Depreciation and amortisation 4,490 5,029 631 10,150

The “other” column refers to investments that are managed at group level.

Reconciliation of the liabilities segment with the balance sheet total:

2006 2005

€ 000 € 000

Liabilities segment 62,862 89,326

Shareholders’ equity 83,096 56,716

TOTAl lIABIlITIeS 145,957 146,042


6. Intangible fixed assets

In February 2000 Brantano NV acquired all of the shares in Berca-Lux NV. A merger was then executed. The merger led to a merger goodwill of € 2,786 K that was activated under the intangible fixed assets. The goodwill is mainly justified by the favourable location of the stores and the existing lease contracts. The remaining € 61 K refers to the acquisition of Bootshoe in 2002.

The net book value of the goodwill can be analysed as follows:

Goodwill

€ 000

Opening

Purchase value 2,847

Accumulated special reductions in value

Book value on 31 december 2005 2,847

Changes during the year

end

Purchase value 2,847

Accumulated special reductions in value

Book value on 31 december 2006 2,847

The book value of the goodwill is assigned to the following cash flow generating units:

2006 2005

€ 000 € 000

Berca-Lux stores 2,786 2,786

Bootshoe stores 61 61

TOTAl 2,847 2,847

The realisation value for cash flow generating units as stated above is determined by an impairment test that is based on a detailed cash flow model. The Discounted Cash Flow analysis uses the future free cash flow forecasts (to be achieved in the following five years in normal circum-stances) and discounts these to the current value. The growth rate used represents the average long-term growth rate for the turnover in the cash flow generating units. This is evaluated annually by the Audit Committee.

The most important assumptions for the Berca-Lux and Bootshoe stores for Brantano management are stable profit margins, which are determined on the basis of historical data. Brantano is convinced that this is the best possible input for determining the future profit of these well performing stores.


7. Tangible fixed assets

(in € 000)land and buildings

plant, machinery

and equipment

furniture and

vehicles

Other tangible assets

Assets under

construc-tion

TOTAl

Gross carrying amount 30,390 15,032 2,023 85,019 132,464

Accumulated depreciation and impairment (10,212) (8,645) (1,618) (52,568) (73,043)

Carrying amount 1 January 2005 20,179 6,387 405 32,451 0 59,422

Gross carrying amount 32,113 16,678 1,866 90,821 347 141,826


Carrying amount 31st december 2005 21,019 7,084 210 33,433 347 62,093

Gross carrying amount 4,861 18,646 1,732 108,492 133,731


Carrying amount 31st december 2006 3,481 7,190 94 40.680 0 51,445

The carrying amounts for the plant, machinery, equipment and the other tangible fixed assets, for the periods represented in the consolidated annual accounts on 31st December 2006, are reconciled as follows:

(in € 000)land and buildings

plant, machinery

and equipment

furniture and

vehicles

Other tangible assets

Assets under

construc-tion

TOTAAl

Carrying amount 1 January 2005 20,179 6,387 405 32,451 0 59,422

Movements during the period:

- Acquisitions 1,803 1.965 46 7,327 347 11,488

- Disposals (NBV) (35) (119) (41) (808) (1,002)

- Depreciation (1,052) (1,579) (200) (6,371) (9,203)

- Net exchange differences 8 100 718 827

- Transfer 0

- Other changes 116 330 116 561

Carrying amount 31 december 2005 21,019 7,084 210 33,433 347 62,093

Movements during the period:

- Acquisitions 1,072 1,855 10 10,628 13,565

- Disposals (NBV) (15,102) (2) (5) (583) (15,692)

- Depreciation (1,124) (1,813) (122) (6,652) (9,711)

- Net exchange differences 6 66 (0) 467 539

- Transfer (3,040) 3,387 (347) 0

- Other changes 650 650

Carrying amount 31 december 2006 3,481 7,190 94 40,680 0 51,445


The tangible fixed assets are valued at their acquisition value and depreciated in accordance with their economic life.

IAS 36 “Impairment of assets” prescribes the procedure that an entity must apply so that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and the entity needs to recognise an impairment loss.

Brantano will perform the impairment test at the end of each year, based upon full year results. This impairment test is carried out on stores from Belgium, Luxembourg and UK. The test includes a comparison of the net book value of the fixtures and fittings of a store with the future perform-ance of a store.

To value the recoverable amount of a store, the Discounted Cash Flow method is performed. The DCF analysis uses the future cash flow projec-tions (to be realised in the normal course of business in the next 5 years) and discounts them to a present value. Those future free cash flows are discounted by the weighted average cost of capital (WACC). The calculated equity value of the store is compared with the net asset value (carrying amount).

Based upon the results of the impairment test performed an impairment of € 116 K was booked in 2006. The accumulated impairments of the tangible fixed assets amount to € 862 K on 31st December 2006.

The disposals in 2006 mainly refer to the sale of property in Belgium.

8. Other non-current assets

The other non-current assets relate to cash guarantees.

9. Inventories

The inventories of Brantano are goods for resale being shoes, shoe care, etc.

Raw materials, consumables and goods for resale are valued at cost using the FIFO method. The purchase price is increased by the purchase costs including customs, carriage, transport and distribution costs. All discounts (including financial discounts) are attributed to stock.

If the cost price is higher than the net realisable value, the valuation is adjusted to the lower net realisable value. The net realisable value is equal to the estimated normal sale price, less estimated sale-related costs. Goods older than 36 months are fully depreciated.

2006 2005

€ 000 € 000

Acquisition value 61,717 55,951

Less – write-down (2,422) (1,796)

Prepayments 1,427 1,513

TOTAl 60,722 55,668

The change in stocks can mainly be ascribed to a rise in the level of stock at Brantano UK. In 2005, the stock level of Brantano UK was generally too low at the end of December for the budgeted turnover in the first months of the year.

The carrying amount of inventories is not pledged as security for liability.

The following write-down is included in the cost price of the goods sold.

Write-down on 31st December 2005 1,796

Write-down on 31st December 2006 2,422

Movement (626)


10. Other current assets

2006 2005

€ 000 € 000

Trade receivables 1,570 865

Other short-term receivables 909 535

deferred charges and accrued income 14,991 9,090

Deferred charges 9,735 8,845

Prepaid rates 2,�� 2,2��

Prepaid rent and lease charges �,2�� ,��

Other ��

Accrued income 5,256 244

TOTAl 17,470 10,490

The trade receivables mainly relate to franchising receivables.

On 31st December 2005, the remaining short-term receivables mainly comprise a tax receivable (€ 241 K) and a VAT receivable (€ 257 K).

In 2006, these other short-term receivables comprise a claim against Brimmo relating to a loan (€ 350 K) from Brantano NV to Brimmo NV on the one hand and on the other a claim against Retail Estates relating to a price correction (€ 322 K) on the sale of the Brimmo shares. The other receivables on 31st December 2006 also include a tax receivable (€ 205 K) and a VAT receivable (€ 7 K).

The rise in both tax on property and on prepaid rent is related to significant rises in the rent and rental charges on stores due to a number of large five-yearly rent reviews and the increased number of stores in the United Kingdom.

The rise in the income to be posted is mainly ascribable to the transfer price of rental rights to the store in Oxford. Brantano had not been paid yet for this by the owner on 31st December 2006.

11. Cash

The cash comprises the following items:

2006 2005

€ 000 € 000

Cash 12,652 13,828

Forward exchange contracts 78 28

TOTAl 12,730 13,856

Brantano entered into foreign exchange forward rate agreements in order to secure its exposure to fluctuations in foreign currency exchange rates. The objective of these contracts is to neutralise the impact of foreign exchange rate movements on the Group’s operating result.

The difference between the order exchange rate and the hedged rate results in a cost or a revenue. On 31 December 2005 the market value of the currency forward contracts was € 28 K, while this was € 78 K for 2006.

12. Assets from discontinued operations

On 8th December 2004, the decision was made to sell the Dutch stores of Brantano Nederland to AS Watson. As of 17th March 2005, the Board of Directors decided to stop the Danish activities. All the assets and liabilities of Brantano Beheer BV, Brantano Nederland BV and Brantano Denmark respectively are reclassified among the assets and liabilities from discontinued operations.


On 31st December 2006, the assets from discontinued activities comprise both the assets from discontinued Brantano activities in the Nether-lands and Denmark.

2006 2005

€ 000 € 000

Brantano Netherlands 596 975

Other current assets 180 814

Cash 416 161

Brantano denmark (0) 28

Cash (0) 28

TOTAl 596 1.003

Ordinary shares

I. Movements in the number of shares

1. Number of shares, opening balance 2006 2,852,040

2. Number of shares issued

3. Number of ordinary shares withdrawn or reduced (-)

4. Number of cashed in, converted or reduced preferential shares (-)

5. Other increase (decrease)

6. Number of shares, closing balance 2006 2,852,040

II. Other information

1. Nominal value of shares

2. Number of shares held by the company or related parties 1,600,461

3. Interim dividend paid during the year

4. Diluted warrants 66,670

2006 2005

€ 000 € 000

Subscribed capital

At the end of the previous financial year 3,821 3,821

Modifications during the financial year

At the end of the financial year 3,821 3,821

13. Shareholders’ equity

Share capital

Share premium

There are no changes in the share premium in 2006.

Allocated warrants and stock optionsOn 31st December 2006, the total number of outstanding warrants was 66,670, which can lead to the creation of the same number of shares. Moreover 38,000 stock options were offered and accepted at the end of December 2004 and 12,500 stock options in December 2005. A possible exercise of the stock options will not lead to any dilution. The total number of lawfully excercisable options is 45,500 at the moment.


Own shares acquired

During 2006, Brantano acquired 7,490 shares at an average price of € 51.7 per share. The number of shares in Brantano’s hands therefore rises from 38,010 on 31st December 2005 to 45,500 on 31st December 2006. The book value of the own shares is € 2,067 K. On 31st December 2006, the share price was € 38.00.

Retained earningsThe change in retained earnings is caused by the net income of 2006 and the dividend declaration by the Annual General Meeting in 2006. Accor- ding to IFRS valuation rules, the proposed dividend with respect to the year 2006 for payment in 2007, is still included in the retained earnings on 31st December 2006. The board of Directors proposes to pay out a gross dividend of € 4,361 K or € 1.50 per share to the Annual General Meeting on 9th May 2007.

14. long-term borrowings

2006 2005

€ 000 € 000

Non-current long-term interest bearing loans and borrowings 11,973 39,453

Current installments of interest bearing loans and borrowings 9,734

Interest bearing short-term debt 73

TOTAl 11,973 49,260

2006 2005

€ 000 € 000

Bank garantees 1,367 1,532

Letters of Credit (L/C) 432 684

TOTAl 1,798 2,216

2006 2005

€ 000 € 000

Syndicated loan

- Revolving credit facility 30,000 30,000

- Amortising credit facility 0 35.000

Bilateral credit line 3,000 3,000

TOTAAl 33,000 68,000

The following off-balance sheet credit facilities are being used:

Credit lines available:

The declining credit line was repaid in full due to the sale of the shares in real estate subsidiary Brimmo at the end of 2006. The cash flow that was realised through the sale of these shares has partly contributed to a further reduction in the Group’s net financial debt burden.


15. deferred liabilities

The deferred taxes refer to temporary differences on the following items:

2006 2005

deferred tax impact

deferred tax impact

description of differences € 000 € 000

Non-current assets 3,899 3,463

Current assets 705 1,451

Inventories 1,538 1,600

Other current assets (846) (157)

Cash (forward contracts) 12 8

Non-current liabilities 1,152 978

Long-term provisions 1,152 978

Current liabilities 50 (34)

Interest bearing loans and borrowings (63) 25

Other current liabilities 113 (59)

TOTAl 5,805 5,858

16. long-term provisions

defined Benefit

plan

early retirement

litigation and other

loss making rental contract TOTAl

€ 000 € 000 € 000 € 000 € 000

Carrying amount 31 december 2005 776 37 141 954

Additional provisions 147 147

Used provisions (7) (127) (134)

Deposit (469) (469)

Translation difference 7 2 9

Carrying amount 31 december 2006 314 30 14 149 507

Provisions are recognised when Brantano has a present legal or constructive obligation as a result of a past event, it is probable, that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the obligation.

At the closure of every financial year, the Board of Directors lays down the provisions with care, sincerity and good faith. This is done by analysing all the firm’s accounts and by examining all matters that might give rise to uncovered risks.


2006 2005

€ 000 € 000

Early retirement 30 37

Defined benefit plan 314 776

TOTAl 343 813

Pensions and other employee obligations

The liabilities recognised for pensions and other employee remunerations in the balance sheet consist of the following amounts:

Defined benefit plans

The carrying value of the defined pension plans is determined as the present value of the gross liabilities, taking into account unrecognised actuarial gains and losses and the fair value of the fund investments. In accordance with IAS 19 ‘Employee benefits’, actuarial gains and losses exceeding more than 10% of the present value of the gross obligation or the fair value of the fund investments are recognised over the average working lives of the employees participating in the plan.

Brantano UK operates a funded benefit scheme for certain employees. The assets of the scheme are administrated by trustees in funds indepen-dent of the company. A full actuarial valuation is carried out every 3 years by a qualified independent actuary on a continuing valuation basis.

This actuary gives an annual update of the assets and liabilities, the contribution which would appear in the income statement and in the state-ment of total recognised gains and losses if the full requirements of IAS 19 were applicable in place, in accordance with the disclosure require-ments of the transitional arrangements of IAS 19.

This valuation shows the market value of the assets and whether the assets are sufficient to cover the benefits that had accrued to members. It also provides the assumptions which have the most significant effect on the result of the valuation.

The calculation of the net value of the defined plan (positive or negative) is stated in the valuation reports (triennial actuarial valuation and annual update in accordance with IAS 19). The actuarial profits and losses that may be large and highly fluctuating can be spread over time under IFRS.

When measuring its defined benefit liability, a company shall recognise only a portion of its actuarial gains and losses as income or expense if the net cumulative unrecognised actuarial gains and losses at the end of the previous reporting period exceeded the greater of:

(a) 10% of the present value of the defined benefit oblogation at that date or (b) 10% of the fair value of any plan assets at that date.

These limits are calculated and applied separately for each defined benefit plan.

The portion of actuarial gains and losses to be recognised for each defined benefit plan, as calculated above, is the excess divided by the expected average remaining working lives of the employees participating in that plan.

According to the actuarial calculation:

On 31st December 2005:

2005

£ 000 € 000

Defined Benefit Obligation 3,808

Fair value plan assets 2,935

Deficit in scheme 873

Unrecognized gains / losses (345)

Recognized portion actuarial gains / losses 4

liability recognized in balance sheet 532 776


2006

£ 000 € 000

Defined Benefit Obligation 4,002

Fair value plan assets 3,745

Deficit in scheme 257

liability recognised in balance sheet at 31st december 2005 532

One-off payment (321)

liability recognised in balance sheet at 31st december 2006 211 314

On the basis of the actuarial calculation the debt on the balance sheet is € 776 K on 31st December 2005.

Brantano adopts the policy of only recognising a portion of the actuarial gains and losses as income or expense if the net cumulative unrecogni-sed actuarial gains and losses at the end of the previous reporting period exceeds the greater of 10% of the present value of the defined benefit obligation at that date and 10% of the fair value of the plan assets at that date.

The portion recognised is this excess divided by the expected average remaining working lives of the employees.At the end of 2005 1/19th of the total actuarial losses (€ 4 K) are included in the income statement.

On 31st December 2006:

Due to a one-off payment of £ 321 K at the start of 2006 in accordance with the pension plan, the deficit remained at the same level as the previ-ous year.

Surrender of lease

In December 2000, Brantano UK concluded a lease agreement for the Ashford store for a lease period of 25 years, with a due date on 25th December 2025. This store was closed by Brantano UK during 2003, from the time that a lease agreement was concluded with a third party. However, the tenant was placed in receivership with the result that it repudiated the lease contract and Brantano UK was again legally obliged to pay the rent.

According to IFRS 37 a provision must be established to meet the future expected costs under this lease contract. On 31st December 2006 a provi-sion of € 149 K was set aside, which amounts to rent for one year and the related legal costs.

17. employee remuneration

17.1. Personnel cost

2006 2005

€ 000 € 000

Wages and social security costs (52.080) (50.141)

Share-based payments 0 (155)

Pensions - Defined benefit plan 0 (35)

TOTAl (52.080) (50.330)

An agreement was reached by the Company in the period concerned relating to fiscal and parafiscal regularisation of benefits awarded to manage-ment and other employees in the past. The net cost price of this fiscal and parafiscal regularisation by the Company was € 390 K.

Due to the agreements reached with the tax authorities it was possible to reach a definitive and final settlement concerning the financial conse-quences of a number of benefits awarded in the period 2001-2005.

The manner of fiscal regularisation applied by management (i.e., regularisation in personal tax) is favourable for the Company, now that the cost price for regularisation in income tax is not borne by the Company.

The approach whereby the Company bears the regularisation cost for payments that it granted in the past to its other staff ensures that good relations remain intact.

The Board of Directors therefore believes that the decision on fiscal regularisation is justified in the light of the Company’s interest.


17.2. Early retirement (see note 16)

17.3. Defined benefit plan (see note 16)

17.4. Share-based payments

On 31 December 2006 Brantano has four share-based payment plans. These payments are part of the Brantano senior management’s remunera-tion package.

The first plan has 11,350 warrants allocated on 18 October 2000. These warrants have an exercise price of € 79.33. The exercisability of the al-located warrants is extended until January 2007.

The second plan consists of 56,820 warrants granted on 28 March 2003. The measurement of the transaction is done at grant date and is based on the fair value of the warrants granted and the price paid by the employees. These warrants have an exercise price of € 17.38 and can be exercised in January 2007. Because it consists of European call options (options that can not be exercised before maturity) the Black Scholes model is used and results in a cost to the company of € 750.02.

The third one consists of 38,000 stock options offered and accepted at the end of December 2004 with a duration of 8 years. The stock options have an exercise price of € 42.45 and are exercisable in March and September of 2008, 2009 and 2010 respectively. The cost value of this plan was calculated in accordance with IFRS 2 ‘Share Based payments’ using the binomial model for European stock options. The impact on the balance sheet as per 31st December 2004 results in an option value of € 319 K.

The fourth stock option plan was signed at the end of 2005 whereby 12,500 options with a duration of 8 years were granted and accepted by the members participating in the plan. The stock options have a strike price of 46.99. Application of the above mentioned binomial model results in a cost value of € 155 K.

18. Amounts payable regarding taxes, remuneration and social security

2006 2005

€ 000 € 000

Taxes 2,839 3,201

Social security 5,430 4,651

TOTAl 8,269 7,852

19. Other current liabilities

2006 2005

€ 000 € 000

Accrued charges and deferred income 11,774 9,510

Accrued charges 10,130 8,162

Rent and store costs �,�� ,�2�

Other �,2�2 �,��

Deferred income 1,644 1,348

Other amounts payable 390 72

TOTAl 12,164 9,582

Accrued charges and deferred income mainly refer to rent and store costs


20. lease contracts

The lease contracts for the Belux and UK operations are as follows:

2006 2005

€ 000 € 000

Within 1 year 35,971 34,027

1 to 5 years 175,699 171,085

More than 5 years 283,894 307,028

TOTAl 495,564 512,139

No future rent indexations or rent reviews are included.

21. liabilities from discontinued activities

This section includes the liabilities of Brantano Nederland bv, Brantano Beheer bv and Brantano Denmark on both 31st December 2005 and 31st December 2006.

2006 2005

€ 000 € 000

Brantano Netherlands 404 601

Long-term provisions 117 117

Trade payables 61 82

Amounts payable regarding taxes, remunerations and social security 26 (14)

Accrued charges 200 416

Brantano denmark 60 371

Trade payables 12

Accrued charges 60 360

TOTAl 464 972

22. Turnover

During the 2006 financial year, the Brantano Group achieved a turnover of € 295,157 K, which represents a fall of 2.9% compared with the € 304,122 K realised in 2005. Of the total group turnover of € 295,157 K, Belgium (including Luxembourg) accounts for € 136,290 K and the United Kingdom (including the Middle East) represents € 158,866 K. The turnover in Belgium (including Luxembourg) thus accounts for 46.2% of the group total and the turnover for the United Kingdom (including the Middle East) 53.8%.

23. Gross margin

The gross margin in the 2006 financial year was equal to € 150,980 K and amounts to 51.2% of total turnover. In 2005, the gross margin was equal to € 152,937 K or 50.3% of turnover.


2006 2005

€ 000 € 000

Rental income 319 324

Recharged amounts and compensations 30,469 1,616

TOTAAl 30,789 1,940

24. Other operating income

The other operating income mainly comprises:

In 2006, the other operating income was influenced by € 29,134 K by results from the sale of property and store management. In the United King-dom the rental rights of 2 stores were transferred back to the owner. In the first half of 2006, the ownership of the store in Lede (Belgium) was sold and the Group realised a significant capital gain on the sale of its participating interest Brimmo nv in December 2006.

25. financial structure

2006 2005

€ 000 € 000

financial income 347 324

Exchange gains 2 30

Interests 275 279

Other 69 14

financial charges (2,590) (2,523)

Interest on loans (1,979) (1,975)

Bank Charges (398) (384)

Other (213) (164)

Of the total consolidated assets at the end of 2006, 56.9% are financed through capital and reserves compared with 38.8% in 2005.On 31st December 2006 the net financial debt has been completely paid off and Brantano has a positive cash position of € 1,173 K. At the end of 2005, the net financial debt was still € 35,215 K.


26. Income tax expense

2006 2005

€ 000 € 000

Current versus deferred income tax

Current income taxes (4,456) (5,036)

Deferred income taxes (9) (1,077)

Income taxes (4,465) (6,113)

Taxes related to result before taxes

Result for the year before tax 33,672 16,620

Theoretical tax rate 34% 34%

Theoretical taxes related to result before taxes (11,448) (5,651)

Disallowed expenses for tax purposes (353) (248)

Non taxable gain on the sale of shares 7,607

Investments Brantano UK non-qualifying for capital allowances (301) (216)

Notional interest Brimmo NV 31

Share-based payments (53)

Other differences (1) 54

Actual tax expense (4,465) (6,113)

27. Result from continued operations

The result from continued activities in 2006 is € 29,207 K, or 9.9% of turnover. In 2005, this was equal to € 10,507 K, or 3.5% of turnover.

28. Result from discontinued operations

The result from discontinued activities is € 250 K at the end of 2006. This positive result is the result of a release of provisions that were estab-lished at the expense of previous financial years.

29. earnings per share

The difference between the weighted average of shares and the diluted weighted average of shares in 2006 is due to the total outstanding war-rants of 66,670. 68,170 warrants existed in 2005. Brantano has 2,852,040 shares where the weighted average of shares is 2,808,378 while taking account of the purchase of own shares in 2006. For 2005 the weighted average number of shares was 2,819,646. Brantano paid out a dividend of € 3,850 K in 2006 to shareholders or € 1.35 per share.

The Board of Directors proposes to pay out a dividend of € 4,361 K for the 2006 financial year, after approval by the General Meeting of 9th May 2007. In this case, this represents € 1.50 gross per share, which is a rise of 11% compared with the dividend in 2005.


2006 2005

Basic earnings per share

Net income attributable to shareholders (€ 000) 29,457 7,093

Weighted average number of shares 2,808,378 2,819,646

Basic earnings per share (€) 10.49 2.52

diluted earnings per share

Net income attributable to shareholders (€ 000) 29,457 7,093

Weighted average of shares 2,875,048 2,887,816

Basic earnings per share (€) 10.25 2.46

30. Transactions with related parties

1. Transactions with subsdiaries

A loan of € 24,000 K with a duration of 15 years beginning on 1st January 2004 exists between the subsidiaries Brantano NV and Muys NV. 2. Transactions with the Board of Directors and the Executive Committee

No transactions occurred with the members of the Board of Directors and the members of the Executive Committee. The Company did not grant any loans to members of the Executive Committee, the International Management Team and the Board of Directors.

31. Rights and obligations not included in the balance sheet

2006 2005

€ 000 € 000

Business collateral offered by the firms included in consolidation or irrevocably promised on their own assets

5,000 25,000

Obligation arising from exchange rate transactions 10,691 3,348

32. financial transactions with directors and members of the executive Committee of the consolidated company

2006 2005

€ 000 € 000

Total amount of the remunerations to the directors or members of the Executive Committee of the consolidated company for their work with the consolidated company, its subsidiaries and associated companies, including the amount allocated to the aforementioned directors or members of the Executive Committee for their retirement pensions.

2,683 2,947


Commentary on the consolidated annual accounts

1. Results

The Group’s consolidated turnover for 2006 is € 295.2 million, which represents a fall of 2.9% compared with the turnover of € 304.1 million at-tained in 2005. Excluding exchange rate effects, turnover was down by 3.1%.

The gross margin for the 2006 financial year was € 151.0 million and is equal to 51.2% of total turnover. In 2005 the gross margin was equal to € 152.9 million or 50.3% of turnover. The significant improvement in the percentage gross margin is a result of the continuing focus on this margin in the purchasing process and during stock management. It is also due to the implementation of the new commercial strategy in the United Kingdom where discount sales are held later in the year and are less deep.

In 2006 the operating result was influenced by € 29.1 million by other operating income from the sale of property and store management. In the United Kingdom the lease rights of 2 stores were transferred back to the owner. In the first half of 2006 the ownership of the outlet in Lede (Belgium) was sold and the group realised a significant capital gain in December 2006 on the sale of its participating interest Brimmo NV.

Operating costs rose both in Belgium and in the United Kingdom during 2006. There was a major rise in store rent and rental charges in the United Kingdom due to a large number of five-yearly rent reviews.

The operating result in 2006 was negatively influenced by € 2.1 million in restructuring costs. On the one hand Brantano adapted its organisa-tional structure at the end of 2006 to a more centrally controlled organisation so that it can work more flexibly and on the other hand it bore the closure costs of stores.

€ 0.85 million in marketing costs incurred for the national marketing campaign launched in the United Kingdom in March 2007 are included in the operating result for 2006, in accordance with IFRS.

While taking into account these non-recurrent incomes and costs, the Group achieved a recurrent operating result (REBIT) of € 9.7 million.

An operating cash flow (EBITDA) of € 46.1 million was realised during the four quarters of 2006 compared with € 28.2 million during the 2005 financial year.

Without taking into acccount the non-recurrent income and costs, the recurrent operating cash flow (REBITDA) is € 19.6 million.

A financial result of - € 2.2 million was realised during the four quarters of 2006, which is equal to the financial result for the previous year.

The result from continued operations in 2006 is € 29.2 million, compared with € 10.5 million in 2005.

The result from discontinued operations is € 0.3 million at the end of 2006. This positive result is due to the release of provisions established at the expense of previous financial years.


2. Balance sheet

The consolidated balance sheet total in 2006 is down by 0.05% compared with 2005. The most important changes are as follows:

On the asset side:

The tangible fixed assets fell by € 10.6 million. This is mainly the result of the fact that the Brimmo participating interest is no longer part of the scope of consolidation.

At the end of 2006 the inventories (after depreciation) amounted to € 60.7 million. In comparison with the stock at the end of 2005 (€ 55.7 million) this represents a rise of € 5 million. There was insufficient stock in the United Kingdom at the end of 2005. The stock situation on 31 December 2006 is more optimum for achieving the budgeted turnovers in the first months of the year.

The other current assets amounted to € 17.5 million at the end of 2006, which implies a rise of € 7.0 million compared with the other current assets at the end of 2005 (€ 10.5 million). This is mainly the result of an accured income due to the surrender of a store in the United Kingdom (Oxford) to the owner.

The assets from discontinued operations fell from € 1.0 million in 2005 to € 0.6 million in 2006. On 31st December 2006 the assets from discon-tinued operations comprise the remaining assets of Brantano Nederland bv, Brantano Beheer bv and Brantano Denmark.

On the liabilities side:

The Group’s equity rose by € 26.4 million due to:The reservation of the group profit (€ 29.5 million), the positive movement of the translation differences of € 1.1 million, the impact of the pur-chase of own shares for an amount of - € 0.3 million and the dividend payment for 2005 (- € 3.9 million). The long-term liabilities fell by € 28.0 million. The financial debt was reduced by the yield from the sale of the Brimmo stake.

The liabilities from discontinued operations fell from € 1.0 million in 2005 to € 0.5 million in 2006. On 31st December 2006 the liabilities from discontinued activities concern the remaining liabilities of Brantano Nederland BV, Brantano Beheer BV and Brantano Denemark.

3. financial structure

At the end of 2006, 56.9% of the total consolidated assets were financed through capital and reserves, compared with 38.8% in 2005.

On 31st December 2006 the net financial debt is completely paid off and Brantano has a positive cash position of € 1.2 million. On 31 December 2005 the net financial debt was € 35.2 million. The net financial debt/equity ratio (gearing) is therefore – 1.4 % on 31 December 2006 compared with 62.1% in 2005.

4. Cash flow statement

Brantano invested € 13.6 million during 2006. In contrast, the Group realised an incoming cash flow of € 53.6 million through the net cash flow realised from operations (€ 39.0 million) and divestment of fixed assets (€ 14.5 million). A free cash flow of € 40.0 million was therefore realised in 2006.


Statutory Auditor’s Report

Statutory auditor’s report to the general meeting of shareholders of BRANTANO NV on the consolidated financial statements for the year ended december 31, 2006.

In accordance with the legal requirements, we report to you on the performance of the mandate of statutory auditor, which has been entrusted to us. This report contains our opinion on the true and fair view of the consolidated financial statements as well as the required additional state-ments and information.

unqualified audit opinion on the consolidated financial statements

We have audited the consolidated financial statements for the year ended 31 December 2006, prepared in accordance with International Finan-cial Reporting Standards as adopted by the European Union, which show a balance sheet total of € 145.957.370,25 and a profit for the year of € 29.456.609,46. Management is responsible for the preparation and the fair presentation of these consolidated financial statements. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting principles and making accounting estimates that are reasonable in the circumstances. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the legal requirements and the Auditing Standards applicable in Belgium, as issued by the Institute of Registered Auditors (Institut des Revi-seurs d’Entreprises / Instituut der Bedrijfsrevisoren).. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement, as to whether due to fraud or error. In accordance with the above-mentioned auditing standards, we considered the group’s accounting system, as well as its internal control pro-cedures. We have obtained from management and the company’s officials, the explanations and information necessary for executing our audit procedures. We have examined, on a test basis, the evidence supporting the amounts included in the consolidated financial statements. We have assessed the appropriateness of the accounting policies (1) and consolidation principles, the reasonableness of the significant accounting estimates made by the company, as well as the overall presentation of the consolidated financial statements. We believe that these procedures provide a reasonable basis for our opinion. In our opinion the consolidated financial statements for the year ended 31 December 2006 give a true and fair view of the group’s assets and li-abilities, its financial position, the results of its operation and cash flow in accordance with International Financial Reporting Standards as adopted by the European Union. Additional statements

The preparation of the consolidated Director’s report and its content are the responsibility of management.Our responsibility is to supplement our report with the following additional statements and information which do not modify our audit opinion on the consolidated financial statements:

• The consolidated Director’s report includes the information required by law and is consistent with the consolidated financial statements. We are, however, unable to comment on the description of the principal risks and uncertainties which the consolidated group is facing, and of its fi-nancial situation, its foreseeable evolution or the significant influence of certain facts on its future development. We can nevertheless confirm that the matters disclosed do not present any obvious inconsistencies with the information that we became aware of during the performance of our mandate.

Ghent, 22 February 2007

BVCV Grant Thornton, Lippens & Rabaey AuditorsBelgian Member Firm of Grant Thornton International

represented by Stefaan RABAEY

Statutory Auditor

Brantano NV Annual Accounts


In compliance with Article 105 of the Companies Code an abbreviated version of the statutory annual accounts of Brantano nv are included in this annual report. The annual report and annual accounts of Brantano nv and the statutory auditor’s report have been deposited and are also available on the website and at the registered office.The statutory auditor has issued an approved unqualified declaration relating to the statutory annual accounts of Brantano nv.

Abbreviated Balance Sheet after profit allocation

Assets (in € 000) 31.12.2006 31.12.2005 31.12.2004

fIxed ASSeTS 26,177 29,503 28,745

Intangible fixed assets 25 32 49

Tangible fixed assets 14,544 12,813 10,841

Financial fixed assets 11,607 16,658 17,855

CuRReNT ASSeTS 63,896 69,692 80,187

Amounts receivable after one year 23,270 24,000 24,000

Stocks & orders in execution 22,718 22,497 27,177

Amounts receivable within one year 10,848 18,397 23,804

Liquidities 6,439 4,266 3,648

Deferred charges and accrued income 621 532 1,558

TOTAl ASSeTS 90,072 99,195 108,932

liabilities (in € 000) 31.12.2006 31.12.2005 31.12.2004

CApITAl ANd ReSeRVeS 43,769 18,254 19,433

Capital 3,821 3,821 3,821

Issue premiums 5,195 5,195 5,195

Reserves 34,753 9,238 10,417

pROVISIONS ANd defeRRed TAxeS 4,486 3,325 1,910

Provisions for other risks and costs 4,470 3,305 1,884

Deferred taxes 16 20 26

lIABIlITIeS 41,817 77,616 87,589

Liabilities of more than one year 16,843 40,883 49,458

Liabilities of less than one year 23,017 35,593 36,826

Accured charges and deferred income 1,957 1,140 1,305

TOTAl lIABIlITIeS 90,072 99,195 108,932

Brantano NV Annual Accounts


Abbreviated Income Statement(in € 000) 31.12.2006 31.12.2005 31.12.2004

Operating income 136,575 145,987 148,969

Turnover 132,527 141,371 144,060

Other operating income 4,048 4,616 4,909

Operating charges (128,207) (140,267) (139,315)

Trading goods, raw and auxiliary materials 69,405 79,807 82,301

Services and other goods 26,076 27,943 25,339

Remuneration, social security charges and pensions 26,860 27,024 26,933

Depreciation and value reductions on tangible and intangible fixed assets 4,096 3,270 4,029

Increase (+) decrease (-) in amounts written off on stock, orders in execution and trade debtors 16

Increase (+) decrease (-) in provisions for risks and costs 1,165 1.420 289

Other operating charges 605 803 408

Operating result 8,368 5,720 9,654

Financial income 4,149 3,937 7,620

Financial costs (5,079) (5,169) (2,810)

profit on ordinary activities before taxation 7,438 4,488 14,464

Exceptional income 25,355 98 689

Exceptional costs (3) (94) (11,589)

profit for the financial year before taxation 32,790 4,492 3,564

Transfer from / Transfer to deferred taxes 8 5 7

Taxes on the result (2,909) (1864) (160)

profit for the financial year 29,889 2,633 3,411

Deduction/Transfer to tax-free reserves 4 10 12

profit to be allocated for the financial year 29,893 2,643 3,423

Appropriation of results

(in € 000) 31.12.2006 31.12.2005 31.12.2004

profit balance to be allocated 29,893 2,643 3,423

Profit to be allocated from the financial year 29,893 2,643 3,423

Addition/deduction from capital and reserves (25,532) 1,207 (1)

To the capital 0 1,207

To the reserves 25,532 1

profit for distribution (4,361) (3,850) (3,422)

Capital refund 4,361 3,850 3,422


Valuation RulesThe BE-GAAP valuation rules used for the Brantano nv statutory accounts differ from the valuation rules used for the consolidated accounts. The main valuation rules are stated below:

1. Formation costs and intangible fixed assets

The formation costs are depreciated on a linear basis over a 5 year period. The costs linked to the takeover of the business of the new stores and concession rights are included at their value calculated on the basis of the sliding scale method over a 10 year period.The merger goodwill linked to the takeover of NV Berca Lux is amortised over a 9 year period while taking account of the period of the trading lease.

2. Tangible fixed assets

Tangible fixed assets are carried at cost. The additional costs are booked at the expense of the income statement.

The tangible fixed assets are depreciated according to the sliding scale system. By virtue of the Royal Decree of 28 June 1983, passenger cars, cars for dual use and minibuses do not enjoy the sliding scale system. These vehicles have also been depreciated from this time according to the linear method.

As of the 1991 financial year, linear depreciation has been applied to fixed assets whose use is relinquished by the tax-payers that write off fixed assets.The following depreciation percentages were applied at the close of the annual accounts:

Sliding scale lineair

Buildings 5%

Fixtures and fittings 5% en 10%

Installations and machinery 20%

Cars 20%

Furniture 20%

3. Financial fixed assets

The shares are booked at their purchase price. They are valued each year separately using the accounting net asset value of the shares, the prob-able contractual value on sale or in accordance with the criteria that are used when purchasing shares when the stake was acquired at a price that deviates from its book value.

Write downs are applied when the estimated value, calculated as explained, proves to be lower than the book value and when, according to the Board of Directors’ view, the reduction in value is lasting, which is justified by the position, profitability and prospects of the stake.

The reductions in value are written back when the estimated value is higher than the book value that took account of the reduction in value and provided that the difference is lasting in the view of the Board of Directors.

4. Trading goods

Trading goods are valued at their purchase price (FIFO). The write-downs are applied as follows:

• Classic articles (i.e., articles that come into stock regularly): no write-downs were applied except in the case of damage.

• Fashion articles: a reduction in value is booked on fashion articles; the reduction in value is calculated on the basis of the season for which the goods were purchased.

The calculation is made as follows on the basis of the season:

- Current season (S0): no reduction in value

- Season SO – 1: write-down of 25% on stock value



- Season SO – 4 and earlier: write-down of 100% on stock value


5. Amounts receivable

The amounts receivable are valued at their nominal value or purchase price. Write-downs are applied if the realisation value is lower than the book value in the opinion of the Board of Directors and when the reduction in value is deemed to be lasting according to the Board of Directors.

6. Liquidities and financial investments

The cash deposits and liquidities are valued at their nominal value. Write-downs are applied to financial investments when the realisation value is lower than the acquisition value on the date of closure.

7. Provisions

The Board of Directors establishes the provisions carefully, sincerely and faithfully at the end of each financial year.

8. Debts

Debts are included at their nominal value.

9. Deferred and accrued items

Deferred and accrued items include costs and income relating to the elapsed or next financial year pro rata. They are booked at their nominal value.

10. Foreign currencies

Liabilities, claims and credits are converted at the closing rate at the end of the financial year. Exchange rate differences and translation differ-ences are included in the income statement.A positive conversion difference from the revaluation at the closing rate is booked to an accrued charges and deferred income account in accord-ance with the precautionary principle.

Commentary on the Brantano NV statutory annual accountsThe previous financial year covers a 12-month financial year.

The financial assets have developed as follows since the last statutory closure (on 31.12.05):

(€ 000) 31.12.05 + - 31.12.06

participating interests in associated companies

Muys NV 2,261 2,261

Brantano Luxembourg SA 31 31

Brimmo NV** 5,211 (5,211) -

Brantano UK Ltd 9,072 9,072

Brantano SA* - -

Brantano Asia Ltd 117 117

Claims by related companies - -

16,574 11,482

* The liquidation of Brantano SA was completed on 29/12/06** The shares in Brimmo NV were transferred to Retail Estates NV on 22/12/06.


Capital Situation

A. Registered capital Amounts (€) Number of shares

1. Subscribed capital

At the end of the previous financial year 3,821,135

Modifications during the financial year

Capital contribution -

At the end of the financial year 3,821,135

2. Composition of the capital

2.1. Types of share

- Shares without a stated nominal value 3,821,135 2,852,040

2.2. Registered or bearer shares

- Registered 1,637,855

- Bearer 1,214,185

Capital amount (€) Number of shares

C. Own shares held by:

The company itself 60,961 45,500

d. Obligation to issue shares as the result of the exercise

of subscription rights

• Number of subscription rights in circulation 66,670

• Amount of capital to be subscribed 89,324

• Maximum number of shares to be issued 66,670

e. Authorised unsubscribed capital 382,113 -


G. Shareholdership structure of the company on the date of the annual close, as it appears from the notifications that the company has received.

date of last declaration

Announced figures

at the last declaration

percentage compared

with the total number of shares

percentage relative to the total number of shares and

assigned warrants

Number of shares % %

• Brafin trust office under Dutch law , Oosthoutlaan 4, 2215 ZJ Voorhout - The Netherlands

21/02/2005 1,379,451 48.37% 47.24%(1)

• Mitiska NV Pontbeekstraat 2, 1702 Groot-Bijgaarden

21/02/2005 183,000 6.42% 6.27%(1)

• Brantano NV Kwadelapstraat 2, 9320 Erembodegem

21/02/2005 45,500 1.60% 1.56%(1)

==> Associated companies Brantano NV 21/02/2005 1,585,710 55.60% 54.30%(1)

• Unisel NV Hoogkamerstraat 1, 9100 Sint Niklaas

16/04/2003 87,325 3.06% 3.05%(2)

• Bestinver Gestion, S.G.I.I.C, SA C/Juan de Mena 8, 28014 Madrid - Spain

29/03/2006 298,311 10.46% 10.22%(1)

(1) Based on 2,852,040 shares and 68,170 warrants(2) Based on 2,852,040 shares and 11,850 warrantsPlease refer to page 41 for an overview of the current situation after the exercise of the warrants.

Chain of control

(1) Sobradis, an NV (equivalent to public limited company) with registered office at Wetteren, Serskampsteenweg 52(2) Retail Partners, a BV (equivalent to private limited company) with registered office at Utrecht (NL), Savannahweg 17(3) Mitiska, an NV, with registered office at Groot-Bijgaarden, Pontbeekstraat 2 (4) Fortis Bank, an NV, with registered office at Brussels, Warandeberg 3(5) Brafin SAK, a trust company under Dutch law, with a registered office at Voorhout (NL), Oosthoutlaan 4.

MITISKA NV 3fORTIS BANK NV 4

SOBRAdIS NV 1

fRee flOAT

ReTAIl pARTNeRS BV 2

BRAfIN SAK 5

49,50%

69,12%

50,50%

3,10%

6,27%

27,78%

2,85%

47,24%

43,64%

BRANTANO NV


Created warrants

Allocated warrants exercisable / period

Plan II (27.12.1999) 55,530 11,350 11.350 – Jan/2004 but extended to Jan/2007

Plan III (12.02.2001) 56,820 56,820 56,820 – jan/2007

Warrant plan

Overview

plan II

On 27th December 1999, Brantano NV created uncovered warrants which provide entitlement to registration for 55,530 new warrants, i.e. 2% of the then capital of Brantano NV (plan II). Of these, 11,350 warrants were allocated on 18th October 2000. These warrants have an exercise price of € 79.33. The allocation was made completely in accordance with the goal of the warrant plan. The warrants that were not yet allocated are cur-rently being held by Brantano NV on behalf of the final beneficiaries. The exercise period for the warrants in plan II is 5 years, but was prolonged until January 2007. The 11,350 shares issued were not exercised during January 2007 given that the stock market price on the exercise date was lower than the planned exercise price.

plan III

On 12th February 2001, partly inspired by the low stock market price, Brantano NV created uncovered warrants that provide entitlement to sub-scribe to 56,820 new shares, i.e. 2% of the current capital of Brantano NV (plan III). These warrants were all allocated on 28/03/2003.

They have an exercise price of € 17.38.They were exercised on 24 January 2007 to an amount of 55,320 shares.


Statutory report of the Board of Directors

Ladies and Gentlemen,

In accordance with the provisions of Articles 95 and 96 of the Companies Code, the Board of Directors is pleased to report to you on business during the 2006 financial year and to submit the annual accounts closing on 31st December 2006 for your approval.

All of the rules concerning the companies legislation and accounting legislation were taken into account in this case.

1. Annual accounts

ASSETS

Intangible fixed assets 25,350.38 0 %

Tangible fixed assets 14,543,819.52 16 %

Financial fixed assets 11,607,344.12 13 %

Amounts receivable after 1 year 23,270,000.00 26 %

Stocks & orders in execution 22,717,605.87 25 %

Amounts receivable within 1 year 10,847,680.46 12 %

Cash investments 1,729,000.01 2 %

Cash and cash equivalents 4,710,261.14 5 %

Deferred charges and accrued income 621,375.63 1 %

Total assets 90,072,437.13 100 %

LIABILITIES

Capital 3,821,135.32 4 %

Issue premium 5,194,902.72 6 %

Reserves 34,753,008.96 39 %

Provisions and deferred taxes 4,485,913.92 5 %

Debt maturing in more than 1 year 16,843,461.86 19 %

Debt maturing within 1 year 23,017,291.55 25 %

Accrued charges and deferred income 1,956,722.80 2 %

Total liabilities 90,072,437.13 100 %

INCOME STATEMENT

Turnover 136,574,698.46

Cost of sales (128,206,736.70)

Operating result 8,367,961.76

Financial result (930,451.10)

Extraordinary result 25,352,368.36

Deduction from deferred taxes 7,944.16

Deduction from tax-free reserves 4,090.62

Taxes (2,908,510.26)

Profit for the financial year 29,893,403.54


2. Important events that took place after the end of the financial year (Art. 96, 2° of the Companies Code)

In a deed executed before the notary Frederic Caudron at Aalst-Erembodegem, on 24/01/07 a capital increase was arranged to exercise warrants by the warrant holders and the capital was raised from € 3,821,135.32 to € 3,895,264.12, subject to the issue of 55,320 new shares without an indication of nominal value, through the contribution of € 961,461.60, including an issue premium of € 887,332.80. The issue premium has been booked in an unavailable account titled ‘issue premium’.

3. Important off balance sheet events

No significant off-balance sheet events occurred outside the balance sheet during the financial year.

4. Justification for additional payment to the statutory auditor

The board proposes to pay the statutory auditor, the private limited company in the form of a cooperative partnership, Grant Thornton, Lippens & Rabaey, represented by Mr Stefaan Rabaey, € 71,400 for its special assignments.This covers taxation advice and support in the area of IFRS, the sale of the Brimmo participating interest and possible refinancing of the capital.

5. Own shares

Due to the authorisation of the General Meeting of 10th May 2006 to the Board of Directors, the following transactions were performed during the course of the financial year:

Shares acquired:

Received shares:Number: 7.490Fraction value: EUR 1,3398Value of the capital: EUR 10.035,10Value of the payments: EUR 387.227,86

On 31st December 2006, the company had 45,500 shares with a fractional value of EUR 1.3398 per share which is EUR 60,960.90 in capital value.

6. Transactions in the context of articles 523 and 524 of the companies code

Report by the Board of Directors dated 18th May 2006 relating to the refinancing

Declaration of a conflict of interests in the sense of Article 523 of the Companies Code and determination of a conflict of interests in the sense of Article 524 of the Companies Code.

The directors below declare that they have a property interest that conflicts with the decision that is submitted to the Board of Directors:

-NV Sobradis, permanently represented by Joris Brantegem;

-NV Elba, permanently represented by Luc Geuten;

-NV Mitiska, permanently represented by Ginko BVBA, in turn represented by Cédric Olbrechts;

-NV Fortis Private Equity, permanently represented by Brigitte Boone;

-NV Advimo, permanently represented by Kurt Moons.

They declare the following to the Board:

“Sobradis NV, Mitiska NV, Fortis Private Equity NV and Advimo NV and its permanent representative are (directly and indirectly) holders of a significant number of shares in the company. They respectively hold 15.97%, 24.22%, 16.16% and 0.14% of the shares. Fortis Private Equity does not participate directly in the company, but does via Retail Partners B.V. Mitiska and Sobradis partially participate directly and partially indirectly (Mitiska via Retail Partners B.V. and Brafin SAK - Sobradis via Brafin SAK).

Advimo NV and its permanent representative also have 10,000 options that provide entitlement to the purchase of 10,000 existing shares, and 19,070 warrants that provide entitlement to subscribe for 19,070 new shares to be issued in the company. If these options and warrants are exer-cised in full, the shares sold or issued to Advimo would represent 1.00% of the total shares in the company.

In their abovementioned capacity of (direct and/or indirect) shareholder in the company or holder of options and warrants on shares in the com-pany Sobradis, Mitiska, Fortis Private Equity and Advimo and its permanent representative may claim a substantial portion of the yield from a possible Refinancing.


For this reason it must be assumed that the decision that forms the subject of agenda point 1, 2 and 3 (i) leads to a conflicting interest in the sense of Article 523 of the Companies Code for Sobradis, Mitiska, Fortis Private Equity and Advimo and its permanent representative and (ii) is related to transactions by the company with companies linked to it (i.e., transactions with Sobradis, Mitiska and Fortis Private Equity), in the sense of Article 524 of the Companies Code.”

The Board confirms that the decision to be taken also relates to transactions between Brantano and its directly and indirectly related shareholders.

decision

Joris Brantegem (Sobradis), Luc Geuten (Elba), Cédric Olbrechts (Mitiska), Brigitte Boone (Fortis Private Equity) and Kurt Moons (Advimo) leave the meeting.

After deliberation, the remaining directors decided the following:

• The decision is to be taken on whether and, especially subject to which conditions and circumstances, Brantano shall give access to the advi-sors of the controlling shareholders to non-public information and to management is subject to the procedure set out in Article 524 of the Companies Code. A committee is therefore formed made up of three independent directors, Jan Suykens, Jean-Louis Duplat and BVBA Theo Peeters, whose permanent representative is Theo Peeters (the “Committee”). This is entrusted with the task of drawing up the advice referred to in Article 524, §2 of the Companies Code after obtaining assistance from an expert of their choice;

• In view of the leak in the press, it is in the Company’s interest for the operation to be completed from now on in a structured way and according to the agenda.

• Partially in the light of this and in an initial phase, as Petercam’s assignment is exclusively limited to providing advice to the controlling share-holders about the feasibility of the operation, it is given immediate access to the requested information (including the business plan and market studies), as well as to management. Information can be given to Petercam at store level in this phase provided that it remains anonymous.

• The Committee is also asked to provide advice about the question of whether and in which circumstances the Company would be prepared to consider bearing half (or another portion) of the costs of the VDD, if a sale does not occur.

• The Board wishes Petercam (and possibly other advisors of the controlling shareholders that are not bound by professional secrecy) to genuinely adopt a confidentiality commitment to the company.

• Because the Committee will ultimately relate to the conditions and circumstances under which the Company can make information available to candidate purchasers at a later stage, no other measures can be admitted than those outlined above now and until the Board has deliberated and decided on the basis of this advice. In the light of this the Committee is requested to present its advice at the Board meeting on 14 June 2006. The Board does agree that the required offers for the exercise of the VDD shall be requested in the meantime.

The other directors joined the meeting again at this point.

Report from the Board of Directors dated 26th June 2006 relating to the refinancing

Advice from the Committee of Independent Directors

The Committee of Independent Directors explains its viewpoint, as it also appears from the draft advice which all members of the Board are able to inspect. A reference is made to the fact as a result of the applicability of Art. 523 of the Companies Code, members of the Board that are part of the Committee also make the relevant decision.

At the request of the Committee Petercam explains its viewpoint relating to the feasibility of the intended transaction, in view of the starting points proposed by the majority shareholders.

The importance of the 2006 half year figures are again emphasised in this context.

The Committee emphasises that its viewpoint is one of principle but confirms its readiness to deliberate on the matter again as current existing uncertainties are clarified further.

The Board duly notes the Committee’s conclusions as stated in this advice and adopts them. The final advice is appended as an enclosure.

In view of the Committee’s positive advice and the finalisation of the confidentiality commitment from Petercam to Brantano, the Board confirms that the management can answer the requests from Petercam, Linklaters, and the other advisor appointed by the majority shareholder concerning provision of information about the company and group.


Advice from the Committee of Independent Directors in application of Article 524 of the Companies Code.

Conclusion

The Committee (assisted by Koen Geens and Marieke Wyckaert, lawyers (Eubelius) as independent experts) has issued its advice on the assump-tion that the majority shareholders Sobradis Mitsika, Retail Partners and Fortis Private Equity, plan a transaction once the feasibility study en-trusted to Petercam is completed positively whereby a financial or industrial candidate purchaser is prepared to purchase 100% of the Company’s shares in a (obligatory or voluntary) public bid, but where Sobradis and Mitiska then return to a controlling structure above the Company.

The Committee cannot or does not wish to pronounce on the impact on the Company and its shareholders of such a public offer at this point. The Board of Directors shall issue the advice stipulated by Article 15 of the Royal Decree of 8th November 1989 at a suitable juncture.

As the requirements concerning confidentiality, proportionality and effectiveness explained further in this advice are fulfilled, the Committee adopts the view that:

(1) the Adopted Provision of Information to Petercam in the feasibility study phase does not cause a disadvantage to the Company and the costs that the Company incurs are negligible:

(2) the Planned Provision of Information to candidate purchasers with a view to the above described transaction does not cause any damage to the Company either;

(3) given the current transaction structure, there is no reason for the Company to bear any portion of the Vendor Due Diligence costs if these are ultimately borne by the majority shareholders.

Report of the Board of Directors dated 18th December 2006

Special assignment for the statutory auditor - Article 523 and 524 of the Companies Code.

Deliberation

With regard to this point on the agenda, NV Sobradis, NV Elba, NV Mitiska and NV Advimo announce that they are named directly or indirectly in an anonymous letter and/or the statutory auditor’s report and consequently have a personal direct or indirect property interest that may conflict with the interest of the Company in the sense of Article 523 of the Companies Code. They leave the meeting at this point.

A reference is then made to the discussions and decisions by the Board of Directors of 21st August 2006 and 13th November 2006 concerning an anonymous letter that the Company received this year. It referred to a number of irregularities in which the following persons were allegedly involved:

• Sobradis NV, Chairman of the Board of Directors, permanently represented by Mr Joris Brantegem (who is also the reference shareholder);

• Mitiska NV, Director and reference shareholder, represented by Ginko bvba, which in turn is represented by Cédric OLBRECHTS, permanent representative;

• Advimo NV, Director and managing director of the Company, permanently represented by Mr Kurt Moons;

A decision was made at the Board of Directors meeting of 13th November 2006 to apply the procedure described in Article 524 of the Companies Code for the decision on the consequences of the allegations against Sobradis NV and Mitiska NV, as these companies can be viewed as linked companies to Brantano NV in the sense of Article 11, 1° of the Companies Code.

The Board of Directors has informed the statutory auditor of the application of Article 524 of the Companies Code so that he can form a judgement concerning the accuracy of the data stated in the advice from the Committee and the Board of Directors minutes (in compliance with Article 524 of the Companies Code).

The Committee of Independent Directors, made up of Messrs Jan Suykens, Jean-Louis Duplat and BVBA Theo Peeters, represented by Theo Peeters, informs the Board of Directors of the advice that they have drawn up with the assistance of Koen Geens and Philippe Hinnekens from Eubelius as independent experts in accordance with Article 524 of the Companies Code.

A copy of this advice is appended to these minutes as appendix 1. The following is stated in the Committee of Independent Directors’ advice as a conclusion:

“Given that the statutory auditor’s investigation shows that the allegations in an anonymous letter relating to the Company’s reference sharehold-ers have not been proven and that in its view no (fiscal or parafiscal) regularisation is needed, the Committee deems that no further steps can and have to be taken in the Company’s interest.”


As to Elba NV (permanently represented by Mr Luc Geuten) and NV Advimo (represented by Mr Kurt Moons), the Board of Directors also notes that the statutory auditor did not note any irregularity during his investigation relating to Elba NV, Mr Luc Geuten, Advimo NV or Mr Kurt Moons or in which Elba NV, Mr Luc Geuten, Advimo NV or Mr Kurt Moons were involved. As a result the Company can and/or does not have to adopt any steps relating to the allegations made against Elba NV, Mr Luc Geuten, Advimo NV and/or Mr Kurt Moons either.

Decision

Following a discussion of the above, the Board of Directors decides:

(i) to support the motivated and clear advice drawn up in the sense of Article 524 of the Companies Code;

(ii) not to adopt any measures relating to the allegations made against Sobradis NV, Mr Joris Van Brantegem and, Mitiska NV;

(iii) in view of the statutory auditor’s investigation where no irregularities were found involving Elba NV, Mr Luc Geuten, Advimo NV and/or Mr Kurt Moons, it shall not adopt measures concerning Elba NV, Mr Luc Geuten, Advimo NV and/or Mr Kurt Moons either.

7. distribution of profits

While taking into account the above, we propose to distribute the result as follows:

Profit to be appropriated for the financial year 29,893,403.54

Withdrawal from the capital & reserves

Withdrawal from the remaining reserves

Profit to be distributed

Remuneration of the capital (4,361,040.00)

Addition to the remaining reserves 25,532,363.54

NIHIL

8. description of major risks and uncertainties (Art. 96, 1° Companies Code)

The Board of Directors holds the view that Brantano NV is not faced with significant risks and uncertainties.

9. information concerning circumstances that can influence the development of the company significantly (Art. 96,

3° of the Companies Code)

There were no developments that can influence the development of the Company substantially.

10. Research and development (Art. 96, 4° Companies Code)

In view of the nature of the Company, no work was performed in the area of research and development.

11. financial instruments

During the 2006 financial year, Brantano NV used financial instruments to protect itself against interest rate fluctuations and variations in foreign currencies.

12. Capital increases (Art. 608 Companies Code)

No capital increases took place during the 2006 financial year.


13. existence of Company branches

The Company does not have any branches.

We request you to approve the annual accounts and to discharge us for the mandate exercised during the past financial year.

Finally we thank all our staff, who have made an effort in the past financial year to ensure the company’s further development.

Erembodegem, 13th February 2007

THE BOARD OF DIRECTORS

Statutory Auditors’ Report

The Statutory Auditors’ report on the financial statements of Brantano NV is an unqualified audit opinion without any qualification or explanatory paragraph. In the additional statements and information the Statutary Auditor refers to the decisions of the Board of Directors regarding the ap-plication of Articles 523 and 524 of the Company Law.


General information about the Brantano Group


�. General information about the Company1.1 Identity

The Company name is Brantano and its registered office is located at 9320 Erembodegem, Kwadelapstraat 2.

1.2. Creation and duration

The company was created under the name “Brantano Purchasing Company” through a deed drawn up before the Notary Christian De Wulf, in Dendermonde, on 29th December 1987, published via an extract in the Annex to the Belgian State Gazette on the following twenty third of Janu-ary under number 880123-18. The articles of association were repeatedly amended and for the last time on 24th January 2007 through a deed executed before Notary Frederic Caudron in Erembodegem, published via an extract in the Annex to the Belgian State Gazette of the following 14th February 2007 under the number 07026333 (followed by a rectification published in the annexes to the Belgian State Gazette on 13th March 2007, under number 07039277).

1.3. legislation and legal form

Brantano is a public limited company governed by Belgian law.

1.4. description of the statutory object

According to Article three of the coordinated articles of association, the NV “Brantano” has the following object, which is quoted here literally:

“Article three: Object The company has the object, in Belgium and abroad, in its own name and in the name of third parties, on its own account or on behalf of third parties:

1. the retail and wholesale sale of shoes, boots, slippers, fancy leather goods, leather goods, travel articles, artificial leather goods, bags, sports articles, leisure articles, apparel and ready-to-wear articles, as well as the manufacture and production of these;

2. the execution and providing of all kinds of administrative and logistics services, transport and distribution activities of all types, including the collection of debts and general computer services, for both hardware and software;

3. buying, selling, building, rebuilding, managing, leasing and operating fixed and non-fixed assets of all types including commercial letting, leas-ing and franchising;

4. investing in, subscribing to, permanently taking over, issuing, buying, selling and trading in shares, shares without par value, bonds, certifi-cates, receivables, funds and other liquid assets issued by Belgian or foreign companies whether or not in the form of trading companies, ad-ministrative offices, agencies and associations with or without a (semi-) legal status;

5. managing investments and holdings in subsidiaries, fulfilling managerial functions, providing advice, management and other services to or in accordance with the activities which the company performs itself. These services can be provided by virtue of contractual or statutory appoint-ment and in the capacity of outside advisor or body vis-à-vis the client.

The company can undertake all industrial, trade, financial, fixed asset and non-fixed asset transactions in Belgium and abroad that can directly or indirectly expand or promote its business. It can acquire all fixed and non-fixed assets even if these are neither directly nor indirectly connected with the company’s object.

It can take interests of any manner whatsoever in all associations, business, companies, enterprises or partnerships that aim to achieve the same, a similar or related object or that can promote its business or facilitate the sale of its products or services, and it can cooperate or merge with these.” 1.5. enterprise number

The company’s enterprise number is 0432.980.383, RPR Dendermonde.

1.6. Inspection of the documents named in this annual report

The unconsolidated and since 1997 consolidated annual accounts, articles of association, annual reports and other information (as referred to in the Royal Decree of the third of July 1996 regarding obligations for occasional and periodic information and changes to this) that have been pub-lished for the shareholders can be obtained free of charge from the Company’s registered office. The unconsolidated and since 1997 consolidated annual accounts and additional reports have been filed with the National Bank of Belgium.

General information about the Brantano Group


The articles of association can be obtained from the court registry at the Commercial Court of Dendermonde, Aalst division. The Company’s annual reports will be sent to holders of registered shares on annual basis, as well as to persons who request them. They can also be obtained at the Company’s registered office.

2. General information relating to the capital2.1. Subscribed capital (article five of the coordinated articles of association)

The subscribed capital is € 3,895,264.12 and is represented by 2,907,360 shares with no par value. All of the shares are paid in full.

2.2. Authorised capital (Article 6 b of the coordinated articles of association)

For a period of five years from the announcement in the Annexes to the Belgian State Gazette (on 08/06/2002) of the deed amending the articles of association dated 17/05/2002, the Board of Directors is authorised to increase the subscribed capital one or more times by a maximum amount of € 382,113.

This competency applies to capital increases which must be subscribed in cash and to increases subscribed in kind. This competency of the Board of Directors also applies to capital increases through the conversion of reserves.

The competency of the Board of Directors can be renewed.

The General Meeting of Shareholders has drafted a report including justifications for the Board of Directors specifying the circumstances in which the Board of Directors can use the authorised capital and what objectives it should thereby pursue.

In the context of the authorised capital, the Board of Directors is competent to cancel or limit the preferential right allocated to the sharehold-ers in the context of the authorised capital in the interest of the Company and subject to respecting the conditions set out in Article 596 of the Companies Code. The Board of Directors is authorised to limit or cancel the preferential right to the benefit of one or more specific persons, even if they are not members of the staff of the Company or its subsidiaries.

On the occasion of an increase in the subscribed capital within the limits of the authorised capital, the Board of Directors is competent to request an issue premium. If the Board of Directors decides this, the issue premium must be booked to an unavailable reserves account which can only be reduced or booked out through a decision by the General Meeting of Shareholders taken in the way required for an amendment of the articles of association.

If no express authorisation is granted by the General Meeting to the Board of Directors, the authority of the Board of Directors to increase the subscribed capital through a monetary contribution with cancellation or limitation of the preferential right of existing shareholders or by a con-tribution in kind shall be suspended from the date of notification to the Company by the Banking, Finance and Insurance Commission of a public bid to take over the shares of the Company. This authority will be reinstated immediately after the conclusion of such a takeover bid.

The Board of Directors has the competence to amend the Company’s articles of association in accordance with the capital increase decided under its authority.

2.3. Acquisition of own shares (article 12 of the coordinated articles of association)

The General Meeting of Shareholders can decide to acquire its own shares or to dispose of these in compliance with Article 620 and following of the Companies Code.

The Board of Directors can alienate the Company’s shares listed in the first market of a stock exchange or the official listing of a stock exchange located in an EU Member State without the prior consent of the General Meeting of Shareholders.

The General Meeting of 10th May 2006 authorised the Board of Directors to acquire the maximum permitted number of shares by virtue of Article 620 of the Companies Code through purchase or exchange at a price equal to the price at which these shares are noted on a Belgian stock market at the time of purchase or exchange. This authorisation is valid for a period of eighteen months counting from the announcement of this decision in the Annexes of the Belgian State Gazette and can be extended in accordance with Article 620 of the Companies Code.


2.4. Origin and modifications of the capital

- The Company was formed through a deed dated 29th December 1987 (Belgian State Gazette 23/01/1988-18) with capital of € 30,986.69 repre-sented by 1,250 shares with no par value,

- In a deed dated 10th December 1991 (Belgian State Gazette 07/01/1992-18) the capital was successively increased by € 618,189.96, € 45,443.67, € 30,986.69, € 1,052,148.05, € 205,393.15 and € 1,487,361.15 respectively, through the absorption of Rimini nv, subject to creating 3,250 shares with no par value, the absorption of Napoli nv, subject to creating 250 shares with no par value, the absorption of Milano nv, subject to creating 167 shares with no par value, through the contribution of the “retail business” activity by Ravenna nv, subject to creating 5,581 shares with no par value, through the incorporation of reserves without creating new shares and through the contribution of cash subject to creating 7,862 shares, with no par value. After these transactions the capital amounted to € 3,470,509.35, represented by 18,360 shares with no par value.

- In a deed dated 29th September 1993 (Belgian State Gazette 23/10/1993) the capital was successively increased by € 29,353.77 through the absorption of Barletta nv subject to creating 150 new shares, with no par value, and by € 218,539.76 by incorporating reserves, without the creation of new shares. The capital then amounted to € 3,718,402.87, represented by 18,510 shares.

- In a deed dated 23th December 1994 the existing 18,510 shares were divided into categories, whereby the shares numbered 1 to 12,587 inclu-sive became category A shares and the shares numbered 12,588 to 18,510 inclusive became category B.

- In a deed dated 12th May 1997 the categories of shares were abolished and the shares were split with an existing share being exchanged for one hundred and fifty new shares. The capital then amounted to € 3,718,402.87 represented by 2,776,500 shares with no par value.

- Following a decision by the Board of Directors on 18th April 2000, the capital was increased from € 3,718,402.87 to € 3,806,397.64, through a contribution in kind subject to the issue of 64,540 new shares, with no par value, issued and subscribed subject to a price of € 73.82 per share, either subject to a global price of € 4,764,692.40, including an issue premium of € 72.46 per share, or subject to a global issue premium of € 4,676,697.64. The issue premium was booked in the blocked “issue premium” account.

- In a deed executed on 1st October 2001, a capital increase was arranged by the Managing Director to exercise warrants by the warrant holders and the capital was raised from € 3,806,397.64 to € 3,821,135.32 subject to the issue of 11,000 new shares with no par value, through the con-tribution of € 388,573.09, including an issue premium of € 373,835.41. The issue premium was booked in a blocked “issue premium” account.

- In a deed executed before notary Frederic Caudron at Aalst-Erembodegem, on 24 January 2007, a capital increase was arranged by the Manag-ing Director, the public limited company Advimo, to exercise warrants by the warrant holders and the capital was raised from three million eight hundred and twenty one thousand, one hundred and thirty five euros and thirty two eurocents (€ 3,821,135.32) to three million eight hundred and ninety five thousand, two hundred and sixty four euros and twelve eurocents (€ 3,895,264.12), subject to the issue of fifty five thousand three hundred and twenty (55,320) new shares without no designated nominal value, through the contribution of nine hundred and sixty one thousand four hundred and sixty one euros and sixty eurocents (€ 961,461.60), including an issue premium of eight hundred and eighty seven thousand three hundred and thirty two euros and eight cents (€ 887,332.80). The issue premium was booked to a blocked “issue premium” ac-count.


List of the shopsBelgium

Aalst

Anderlues

Arlon

Aywaille

Bastogne

Beauraing

Beringen

Beveren

Beyne-Heusay

Blankenberge

Borsbeek

Boussu

Braine L’Alleud

Bree

Brugge St-Andries

Brugge St-Kruis

Champion

Couillet

Dendermonde

Destelbergen

Diest

Diksmuide

Dilbeek

Dinant

Drogenbos

Eeklo

Essen

Eupen

Flawinne

Froyennes

Gembloux

Genappe

Genk

Gentbrugge (Estilogie)

Geraardsbergen

Gosselies

Grimbergen

Halle

Hannut

Hasselt

Heist o/d Berg

Herent

Herstal

Herzele

Hoeselt

Hofstade (Muys)

Houthalen

Huy

Ieper

Izegem

Jemappes

Jemeppe S/S

Knokke Heist

Koksijde

Kontich

Korbeek-Lo

Kuurne

La Louvière

La Louvière Nord

Laken

Lede

Ledeberg

Leuven

Libramont

Lier

Lommel

Maasmechelen

Maldegem

Malmedy

Marche-en-Famenne

Mariakerke

Mechelen

Mechelen-Zuid

Menen

Merksem

Messancy

Middelkerke

Mol

Montignies

Munkzwalm

Namen

Nimy

Ninove

Ninove (Muys)

Olen

Oostakker

Oostkamp

Ottignies

Oudenaarde

Overijse

Poperinge

Rocourt

Roeselare

Ronse

Schaarbeek

Seraing

Spa

St-Denijs Westrem

St-Gillis Waas

St-Joost ten Node (Schoencircus)

St-Joris Winge

St-Niklaas

St-Niklaas (Muys)

St-Pietersleeuw

St-Truiden

Ternat

Tienen

Tongeren

Torhout

Turnhout

Verviers

Vichte

Waregem

Waremme

Wavre

Wemmel

Wetteren

Wevelgem

Willebroek

Wilrijk

Zoersel

luxembourg

Foetz

Howald

Marnach

Strassen

uKAberdeen

Aberystwyth

Ashton Under Lyne

Aylesbury

Ayr

Banbury

Barrow

Basildon

Basingstoke

Bedford

Biggleswade

Birchwood

Birkenhead

Birmingham

Blackwood

Blyth


Bolton

Bournemouth

Bridgend

Brighton

Bristol Avonmeads

Bristol Emerson Green

Bristol Filton

Bromborough

Bulwell

Burton on Trent

Cardiff

Carlisle

Carmarthen

Chelmsford

Clydebank

Coatbridge

Colchester

Corby

Coventry

Crewe

Cwmbran

Doncaster , Centurion

Doncaster, Wheatley

Durham Dragon

Dumfries

Dundee

Durham

Eastbourne

Falkirk

Feltham

Flint

Fort Dunlop

Glenrothes

Glossop

Gloucester

Grantham

Greenford

Grimsby

Guiseley

Hamilton

Harlow

Hartlepool

Harwich

Heanor

Holyhead

Hull Hessle

Hull, Kingswood

Ilkeston

Inverness

Ipswich

Irvine

Kidderminster

Keighley

Llantrisant

Leeds Seacroft

Leicester

Leicester, Beaumont Leys

Leyland

Lincoln

Llanelli

Lowestoft

Malvern

Market Harborough

Merthyr Tydfil

Milton Keynes

Bletchley

Newark

Newcastle upon Tyne

Newport

Newport I.O.W.

Newton Abbot

North Shields

Northampton, St James

Northampton, Riverside

Northwich

Norwich

Oldbury

Oxford

Partick

Perth

Peterborough, Bourges

Peterborough, Serpentine

Pollockshaw

Ponders End

Prescot

Preston

Reading

Rhyl

Romford

Rotherham

Rugby

Scunthorpe

Selby

Sheffield, Heeley

Sheffield, Parkway

Shrewsbury

Slough

South Ruislip

Southampton

Southport

Spalding

St Helens

Stockton on Tees

Stoke on Trent

Edingburgh Straiton

Stratford

Strood

Sutton in Ashfield

Swalwell

Swansea morfa

Swansea, Cwmdu

Swindon

Tamworth

Telford

Thamesmead

Thetford

Thurrock

Truro

Uttoxeter

Lincoln Valentine

Wakefield

Walsall

Waterlooville

Whitehaven

Winsford

Wisbech

Wishaw

Worthing

Wrexham

Yeovil

York

Middle east

Serafi Mall, Jeddah (KSA)

Jarir Mall, Jeddah (KSA)

Azizya Mall, Riyadh (KSA)

Khurais Mall, Riyadh (KSA)

Granada Centre, Riyadh (KSA)

Mall of the Emirates, Dubai (UAE)

Deira City Centre, Dubai (UAE)

City Centre, Ajman (UAE)

Marina Mall, Abu Dhabi (UAE)

Mirdiff Mall, Mirdiff (UAE)

Anchor 4, Doha (Qatar)

Seef Mall, Manama (Bahrain)

The Centre Nwaidrat (Bahrain)


Glossary

Gross margin:

Turnover minus the cost of goods sold and write downs on stock.

Operating result (eBIT):Result from continued operations before interest and taxes (EBIT- Earnings Before Interest and Taxes).

Recurring operating result (ReBIT):Recurring result from continued operations before interest and taxes (REBIT- Recurring Earnings Before Interest and Taxes).

Cash flow after taxes:

Result from continued operations after taxes increased by depreciation, write downs and provisions.

Return on equity:

Result from continued operations after taxes divided by the average capital and reserves at the beginning and end of the financial year.

Result from continued operations after taxes:

Result from continued operations after taxes.

Capital employed:

Sum of the fixed assets and working capital.

like-for-like turnover:

Turnover earned in stores that had been open for at least 12 months on 1st January.

Net dividend:

Gross dividend minus withholding tax (25%).

Net financial debt:

Financial debt after deduction of liquidities and investments.

Operating cash flow (eBITdA):

Operating result plus depreciation (EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortisation).

Recurring operating cash flow (ReBITdA):Recurring operating result plus depreciation (REBITDA – Recurring Earnings Before Interest, Taxes, Depreciation and Amortisation).

Return on capital employed:

Operating result divided by the average capital employed at the start and end of the financial year.

enterprise value:

Sum of the net financial debt and market capitalisation.

Working capital:

Current assets minus short-term non-financial debt.

Registered office: BrantanoNV Kwadelapstraat2 9320Erembodegem Telephone:(32)–53–85.00.00 Fax:(32)–53–850020 RPRDendermonde Companynumber:BE.0432.980.383 Emailaddress:[email protected] Website:http://www.brantano.com

Stock exchange listing: EuronextBrussels

Annual report: ThisreportisavailableinDutch,FrenchandEnglish.Theconcordanceofthevarioustextswascheckedby BrantanoNV.Itassumesfullresponsibilityforthis. TheEnglishversionisatranslationoftheFrenchandDutchannualreport. CerapportestdisponibleenFrançais,NéerlandaisetAnglais. DitverslagisbeschikbaarinhetNederlands,hetFransenhetEngels.

Theannualreportcanalsobefoundonthewebsiteat:http://www.brantano.com

Financial calendar: 09/05/07: AnnualGeneralMeetingofShareholders 10/05/07 Activityreportfirstquarter2007 25/05/07: Dividendcouponnumber10becomespayable 16/07/07: Announcementrevenuefiguresfirsthalf-year2007 23/08/07: Announcementofresultsfirsthalf-year2007 15/11/07: Activityreportthirdquarter2007 15/01/08: Announcementrevenuefigures2007 07may2008at14:00: AnnualGeneralMeetingofShareholders

Addresses, telephone and fax numbers of the subsidiaries

Brantano Belgium and Luxembourg Brantano GroupKwadelapstraat2 JosephCardijnstraat669320Erembodegem 9420ErpeMereTel:+32(0)53.65.06.11 BelgiumFax:+32(0)53.66.50.08 Tel:+32(0)53.85.00.00 Fax:+32(0)53.85.00.20

Brantano UK Brantano AsiaInterlinkWayWest Rm.1111,11/F,Tower2,SilvercordInterlinkBusinessPark 30CantonRoadBardonCoalvilleLeistershire TsimShatTsui,KowloonLE671LDUnitedKingdom HongKongTel:+44(0)870.990.1601 Tel:+85323757520Fax:+44(0)870.990.1602 Fax+85223757376

USEFUL INFORMATION

“At Brantano stores you will always find the shoes you love”

Annreport2006

Documents