corporate responsibility report 2005...12 social performance 22 environmental performance 29...

It’s about Value...

CORPORATE RESPONSIBILITY REPORT

2005

Sonae Sierra

p.2CR ManagementSystem

1 CEO STATEMENT

2 CR MANAGEMENT SYSTEM

4 STAKEHOLDER ENGAGEMENT

6 OUR PERFORMANCE AT A GLANCE

8 ECONOMIC PERFORMANCE

12 SOCIAL PERFORMANCE

22 ENVIRONMENTAL PERFORMANCE

29 STATEMENT FROM CR ADVISORS

30 GRI CONTENT INDEX

FEEDBACK FORM

p.8Economic Performance

p.12SocialPerformance

p.22EnvironmentalPerformance

Report scopeThis Corporate Responsibility (CR) Report should beread alongside the Annual Review 2005 as all thedata and information presented relates to the yearending 31 December 2005. This is Sonae Sierra’ssecond CR Report, the first having been published in March 2005.

As far as possible, the data contained within thisreport covers all of Sonae Sierra’s operations acrossEurope and Brazil. Where this is not the case, detaileddata qualifying notes indicate the scope of theoperations covered. It is intended to cover all businessactivities, including ownership, development andmanagement of shopping and leisure centres.

The scale of Sonae Sierra’s activities, and hence thescope of information included in this report, hasincreased to 38 centres owned and co-owned bySierra (up from 31 in 2004), and 14 projects underdevelopment during 2005 (up from 12 in 2004).

For further information on any aspect of this report,please contact:

Elsa MonteiroHead of Institutional Relations, Environment and Communication Email: [email protected]

Company profile Sonae Sierra is an international company specialising in the ownership, development and managementof shopping and leisure centres. Operating across Portugal, Spain, Italy, Germany, Greece and Brazil,Sonae Sierra aims to achieve a leading position in its sector in all of these markets.

Sonae Sierra was incorporated in 1989 in Portugal and is now 50% owned by Sonae SGPS (Portugal)and 50% by Grosvenor (United Kingdom).

Sonae Sierra's strategy is multifaceted, encompassing sustained growth based on internationalexpansion and a culture of innovation and excellence. Indeed, Sonae Sierra has had a significant role in the modernisation of the shopping centre concept, having introduced new formats and integratingretail and leisure. Other innovative concepts in the shopping centre industry introduced by Sonae Sierrainclude themed and “green” shopping centres.

Corporate Responsibility Report 2005 1

It is only 15 years since we opened the firstmajor regional shopping and leisure centredestination in Portugal (CascaiShopping) andless than four months since we opened our38th shopping centre (Serra Shopping). Yet inthat short space of time, Sonae Sierra hasmade a substantial contribution to local andnational social and economic systems, anddirectly affected the quality of life of hundredsof millions of human beings. In the past yearalone: some 420 million visits were recordedat our centres; the sales generated by ourretail tenants in the centres that we managegenerated €3,604 million; 5,400 jobs werecreated as a result of our 2005 completeddevelopments; and we directly employed over700 people worldwide. To Sonae Sierra,therefore, Corporate Responsibility (CR) is notjust a ‘nice to have’ but rather a fundamentalprinciple of our core business!

A key component of our growth strategy isour programme of new developments, and asignificant opportunity to operate responsiblyarises from our policy of retaining long-termownership in the shopping centres that wedevelop. Our ongoing ‘development pipeline’depends upon our ability to deliver innovativeand modern design solutions, which respondto the needs of the local community andpublic authorities, both now and in the future.Ultimately, our economic success is reliant onour shopping centres’ continuing capacity tosatisfy social needs. Throughout this report,we provide case studies of projects atdifferent phases of development to illustrateparticular aspects of our CR performance.

Similarly, in managing properties already inoperation, our focus is not just on short termgains from rental income, but rather on thelong term relationships that we nurture withour tenants. After all, it is their strong salesperformance that underpins their ability to

pay us rent in the first place. It makes sensefor us to work in partnership with ourtenants, helping them to succeed andallowing them to operate to maximum levelsof efficiency. Within this report, we providecase studies of operational shopping centresto demonstrate how CR underpins ourmanagement activities.

We recognise CR reporting as a dynamic wayof engaging with our stakeholders on issuesthat matter to them. We owe them aresponsibility to be honest and transparentabout our performance, both good and bad,and to continuously improve this over time.

In this, our second stand-alone CR Report, weoutline our 2005 performance across a rangeof Key Performance Indicators (KPIs) andtargets set in 2004. We seek to avoidrepetition with our first CR Report by placinga lot more information on our corporatewebsite. Here we publish details of notablesuccesses, such as the certification of ourEnvironmental Management System (underISO 14001: 2004), and account for instancesof poorer performance, which we hope tolearn from and improve in future.

Of course, while it is important to evaluatewhere we have come from, we also recognisethe need to set our sights firmly on thefuture, towards the key challenges that lieahead. For a property investor such as SonaeSierra, we believe one critical challenge will bethe impact of climate change. We will need tofind increasingly sophisticated means ofavoiding greenhouse gas emissions, as well asadapting against the inevitable climaticchanges that may impact on our physicalassets. To assist us in this task we alreadymeasure, monitor and target energy useacross all of our sites and calculate theassociated carbon dioxide emissions.

Finally, I am deeply inspired by, and gratefulfor, the continued efforts made by SonaeSierra staff across all countries, to findinnovative and better ways of doing business,which make a positive contribution to society,the economy and the environment. In thesame way that we strive for perfection in allour activities, we have high expectationswhen it comes to CR. It is the commitmentand creativity of our staff that will ultimatelymake this happen!

We appreciate all your feedback. If you areable, please send us your suggestions andcomments which will be used to further refineour approach. We promise to respondindividually to those who want us to.

Álvaro PortelaCEO

CEO’s Statement

“We recognise CR reporting asa dynamic way of engaging

with our stakeholders onissues that matter to them.

We owe them a responsibilityto be honest and transparent

about our performance , both good and bad, and to continuously

improve this over time.“

CR Management

2 Sonae Sierra

The Company’s mission is to create value for its shareholders while taking into account

its social responsibilities towards the other important stakeholders such as partners,

tenants, employees, and local communities. We firmly believe that this balance is crucial

to achieve the sustained development of the Company. In order to achieve its vision and

mission, Sonae Sierra guides itself by corporate values and key principles of economic,

social and environmental responsibility.

Sonae Sierra’s CR policy encapsulates the Company’s commitment to sustainability, and

is accompanied by a set of long-term objectives that reflect the most significant risksand opportunities to the business. The implementation of the CR objectives through

a set of annual targets provides the means by which the Company translates core values

into actions.

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Sonae Sierra’s approach to CR is built around a cyclicalmanagement system, whose ultimate goal is to drivecontinuous improvements in performance.

CR GovernanceThe ultimate responsibility for CR rests with the CEO of Sonae Sierra, who reports to the Executive Board on all CR issues, includingenvironmental performance, and safety and health. In 2005, we established a CR Working Group made up of senior executivesacross the business, each of whom is allocated responsibility for one or more of the significant risks/opportunities listed on theopposite page. The Working Group meets quarterly and oversees the implementation of the CR policy, objectives and targets,tracks progress against these, and ensures effective communication of CR, both internally and externally.

Throughout the business, and across different functions and divisions, individuals have responsibility for implementing specificaspects of CR in their daily activities. Where applicable to their core jobs, this forms part of performance appraisals and linksthrough to remuneration and bonus schemes.

Corporate Values & Key Principles

VISION &MISSION

CR POLICY

CROBJECTIVES

TARGETS& KPIs

MONITORING & PROGRESS

REVIEW

VERIFICATION &VALIDATION

REPORTING

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àà

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à àEnvironment PolicySafety and health policy

Etcà

System


CR headline objectives and significant risks/opportunitiesListed below are the headline objectives of the Sonae Sierra CR strategy, followed by the issues which we believe continue to be ourmost significant business risks/opportunities. For each one of these, we have detailed objectives, targets and key performanceindicators (KPIs), around which we have structured the information included in this report and on our website (www.sonaesierra.com).

Ensuring that core businessactivities improve the quality oflife of those people that theyaffect

> Safety and health

> Employee relations

> Tenant and visitor satisfaction

> Community care

> Supplier loyalty

> Other stakeholder concerns

Safeguarding the environment forboth current and futuregenerations

> Land use

> Emissions to air, land and water

> Energy consumption

> Water consumption

> Waste production

> Transport

Making a positive contribution to economic prosperity

> Business strategy and planning

> Business ethics

> Corporate governance and riskmanagement

> Local economic benefits

> Job creation

> Financial impact on key stakeholdergroups

Sonae Sierra corporateresponsibility websitereviewDuring 2005, we undertook a comprehensive review of the CR content of our corporate website (www.sonaesierra.com in thecorporate responsibility area) and the Environment Portal(www.environment.sonaesierra.com). A key outcome of the review was a decision to include greater detail on our environmental impactsand performance, in addition to existing content on our approach to CR and environmental management.

The Sonae Sierra Environment Portal currently provides complimentaryinformation on our environment policy, objectives and managementsystem. Once relaunched, in the Summer of 2006, the EnvironmentPortal will contain more comprehensive descriptions of our activities,environmental impacts and management procedures, and case studies of our approach in action. Several interactive features will also beincluded.

As such, the Environment Portal will complement the annual CR reports, including more detailed information and regular environmentalnews updates.

4 Sonae Sierra

Stakeholder engagement is integral to an effective CR strategy. Indeed, understanding and

responding to stakeholder concerns and aspirations is a critical part of Sonae Sierra’s CR

strategy. We employ a wide range of communication methods to engage with each

stakeholder on their terms and in a way that suits their needs.

Over the past year, we have sought to further improve our understanding of the concerns

and CR expectations of some of our critical stakeholders. The two case studies contained

on the opposite page provide a summary of the findings from two extensive surveys

carried out, one with employees and the other with tenants.

Stakeholder Eng>

Sonae Sierra

Investors &Financiers Employees

Tenants

Suppliers

Visitors

GovernmentAuthorities

Local Community

Media


Sonae Sierra is a member of the Property Environment Group – this is a sustainability benchmarking network for property companies andshopping centres in the UK and mainland Europe (www.upstreamstrategies.co.uk/peg).

agementFeedback fromemployees on 2004CR ReportAs part of our commitment to stakeholder engagement, we askedfor feedback from all employees (as well as other stakeholders) onthe Company’s first CR Report. Out of the near 3,000 people towhom we distributed the report, 4% responded with feedback,the majority of these being employees. Contributions were alsoreceived from investors, visitors and suppliers.

Overall, employees indicated strong support for the content of the2004 CR Report, with the vast majority either agreeing or stronglyagreeing that the content and KPIs covered the issues theyconsider to be most relevant to Sonae Sierra’s business. Over 75%of employees who responded thought that the length of the reportwas good or excellent, and graphic representation was also ratedas good or excellent by over 80%. A number suggested that thereport was too long and that a summary report may be a usefuladdition for next year. This has prompted us to include a loose-leafExecutive Summary in this 2005 CR Report.

The targets set by Sonae Sierra were also generally seen as veryeffective, although in the detailed comments, some felt that thetargets should be more specific and performance related.

Below we list some specific comments made by employees,alongside our response:

“The report is too extensive. It is hard to assess whethersome of the goals have been achieved or not. The goalsshould be more specific.”

Response: For 2006, we have only included in this printed CRReport our performance related CR targets.

“Excessive use of foreign expressions and ‘neologisms’ in thePortuguese text.”

Response: We are trying to improve the quality of translation fromEnglish to Portuguese.

Feedback from 2005tenants survey During 2005, Sonae Sierra undertook some research into the CRrelated values of several major occupiers, who occupy retail units inSierra shopping centres in several different countries. This research,undertaken in-house, will be supplemented by more in-depth faceto face interviews and questionnaires with a small handful of majoroccupiers during 2006.

In addition, in January 2006, some CR related questions wereincorporated into the tenant surveys which are issued tomanagers of all retail units throughout the shopping centreportfolio in Europe. In analysing the responses, Sierra includedonly those shopping centres where at least 40% of tenantsresponded to the survey questionnaire. The initial findingssuggest that:

> 10% of tenants in Portugal, and just under 30% of tenants inSpain, claim to have a CR programme for their retail units.

> 23% of tenants in Portugal, and 19% of tenants in Spain,claim that their retail unit staff participate in social projects.

> 69% of tenants in Portugal, and 42% of tenants in Spain,claim to have an Environment Policy in place within theirretail units.

> Respondents in both Portugal and Spain rated the followingcharacteristics as being the most important environmentalactions that could be taken within individual centres:

– Natural plants within the centre and in car park areas.

– Ecological messages for tenants and visitors throughout thecentre.

– Segregated waste bins.

6 Sonae Sierra

Headline Performance Indicators 2005 Performance

Economic

EBITDA (€ million) 125.7

Dividend payout (%) 50.0*

Rental income (€ million) 269.7

Number of jobs created (No.) 5,400

Total taxes paid (€ million) 48.6

Total customer sales (€ million) 3,604

Social

Total number of Safety and health accidents amongst staff that led to injury lost time (No.) 4

Total spent on employee training and development (€ million) 0.66

Total spent on community investment activities (€ million) 0.16

Environmental

Total electricity consumption in owned centres under management (Gigajoules) 682,894

Total associated C02 emissions from building electricity use in owned centres under management (Tonnes) 69,380**

Total water use in owned centres under management (Cubic metres) 1,133,708

Total weight of waste to landfill / incineration in owned centres under management (Tonnes) 23,139

Total weight of waste reused / recycled / reclaimed in owned centres under management (Tonnes) 7,771

Total number and value of environmental fines paid (No. and €) 0

* Sonae Sierra dividend payout policy is to distribute 50% of the consolidated direct net profit after taxes and minorities.

** Conversion factors using the International Energy Agency data as outlined by GHG Protocol Initiative.

Our Performanceat a Glance

Listed below is a series of absolute performance indicators that are intended to provide a

quick summary of the scale of our CR impacts during 2005. They are not intended to provide

an indication of efficiency, nor to demonstrate performance over time. They are simply

provided as measures of the overall impact of our activities in 2005.

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Table 1 Progress against targets 2005Number of

CR impact area targets 0% 25% 50% 75% 100%

Business Management 2 1 1

Tenants & Visitors 3 1 1 1

Employees 4 1 2 1

Community 4 1 3

Other Stakeholders 1 1

Environment 19 1 2 5 11

TOTAL 33 3 2 7 6 15

For further details on these targets and a description of the extent to which each one was achieved, please see our website, www.sonaesierra.com in the corporate

responsibility area.

Targets for 2006Each year, Sonae Sierra sets itself a number of targets against each CR objective, which form the basis of the following year’s CR action plan and seek to ensure that we meet our goal ofcontinuous improvement in both management and performance.Responsibility for each target is allocated to senior executiveswithin the Company who are responsible for overseeing theirdelivery.

Listed below are only those 2006 targets that are quantitativeperformance improvement targets. Related to the same period, wehave also set ourselves a wide range of management targets whichcan be found on our website. Please see: www.sonaesierra.com formore details. In our 2006 CR Report, we will report on progressagainst all 2006 CR targets – both management and performance.

Progress against 2005 targetsSonae Sierra set itself 33 public targets in relation to different aspects of CR, for achievement during 2005. The table below summariseshow we performed against these, using the following classifications of achievement:

Percentage completion Level of progress achieved

0% No progress

25% Action initiated but little progress

50% Some progress, action half completed

75% Substantial progress

100% Target fully achieved

Our CR advisors, Upstream, have undertaken an audit of our performance against these targets to establish the level of progress achieved ineach case. For further details of their findings, see the Statement from CR advisors (page 29) of this report.

2006 CR Performance Targets Social Safety and health Achieve zero injury lost days amongst Sierra's direct employeesas a result of workplace accidents.

Achieve zero fatalities or preventable major injuries across theSierra portfolio.

EnvironmentalEnvironment: Development – Corporate WideEnsure that all projects achieve 100% of compliance with criticalenvironmental standards (ESRD).

At the time of each centre’s opening day, to have achieved ISO14001 certification for 100% of construction sites (by number).

Environment: Operations – PortugalIncrease the proportion of total waste recycled (by weight) by 5percentage-points in 2006 compared to 2005, aggregatedacross all Portuguese centres.

Environment: Operations – SpainIncrease the proportion of total waste recycled (by weight) by 5percentage-points in 2006 compared to 2005, aggregatedacross all Spanish centres.

Environment: Operations – GreeceIncrease the proportion of total waste recycled (by weight) by 10percentage-points in 2006 in the Greek centre.

Environment: Operations – BrazilIncrease the proportion of total waste recycled (by weight) by 6 percentage-points in 2006 compared to 2005, aggregated acrossall Brazilian centres.

Environment: Occupied OfficesCorporate wide: Increase the proportion of total waste recycled (by weight) by 10 percentage-points in 2006 compared to 2005,aggregated across all Sonae Sierra offices.

São Paulo offices: Reduce the total amount of paper/cardboardwaste (by weight) produced by 5 percentage-points in 2006compared to 2005.

01

02

03

04

05

73.8

96

98

107.6

126

EBITDA (€ million)

Business strategy and planningSonae Sierra’s business strategy remains the same, which is toensure growth through developing new shopping centres inlocations where there is demand. Additionally, we continue toretain a substantial investment interest in these centres once theybecome operational, and to add value through intensivemanagement of the whole portfolio. The success of this strategy isevident in the continuing growth in EBITDA over time.

Business ethicsOne of our targets for 2005 was to develop and publish a formalCode of Conduct for employees and suppliers, principally toaddress bribery and corruption, and to link this to a whistleblowing procedure for employees.

Published in December 2005, the Code of Conduct establishes andpromotes fundamental aspects of ethical behaviour that SonaeSierra’s Board believes should be adopted across all our activities.Over the course of 2006, we will be promoting the Code, issuing aprinted brochure and running workshops to explain to staff whatsits behind the Code of Conduct, and how it works.

Corporate governance and risk managementThe Board of Directors of Sonae Sierra has been expanded by theappointment of two new Directors, an Executive Director, and aNon-Executive Director.

Sonae Sierra’s ownership structure also changed as Grosvenorincreased its shareholding from 33% to 50% in December 2005.For more details on corporate governance at Sonae Sierra, pleasevisit: www.sonaesierra.com.

In terms of risk management, the Company continues to show asolid Balance Sheet, with a very comfortable level of indebtedness(asset gearing of 31.9%) and a high level of interest-rate hedging(66.1% of the interest-bearing debt).

Economic Performance

Figure 1 Continuous growth in EBITDA over five year period

01

02

03

04

05

Number of tenant contracts under managementGLA under management (000 m2)

0 500 1000 1500 2000

3,949

5,089

5,398

6,134

7,166

(000 m2)

“At Sonae Sierra, we believe that securing sustainable financial returns depends upon our

continued ability to provide high quality services to our tenants and the visitors to our

centres, while simultaneously securing social and environmental benefits so as to ensure

buy-in from local communities. We also consider that our contribution to economic wealth

creation goes clearly beyond the profit generated for shareholders. We pay taxes in

significant amounts, we maintain and continue to create highly qualified job positions in

the Company, and we generate business both for our suppliers and tenants.”Joaquim Ribeiro, Head of Finance, Planning and Control

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8 Sonae Sierra

Figure 2 Continuous growth in the number of tenant contractsand gross lettable area (GLA – 000m2) under management overfive year period

Figure 3 Geographical breakdown of markets (total rent receivedper country – € million) [GRI Reference: EC2]

Data qualifying note: The 2005 data encompasses the total rent received in

100% Sonae Sierra’s owned shopping centres under management.

Portugal

Spain

Brazil

Italy

Greece

156161

4764

23

Total rent received (€ million) 2004Total rent received (€ million) 2005

35

08

01

04

05

04

05

04

05

04

05

04

05

2 million m2 of gross lettable area (GLA) in38 shopping centres owned or co-ownedin Portugal, Spain, Italy, Greece and Brazil

537,000 m2 GLA in 14 projects underdevelopment in Portugal, Spain, Italy,Germany, Greece and Brazil

à

à

Data qualifying note: Please note that the data in Figure 1 of the 2004

CR Report was incorrect, it has been rectified here.


rmance

Table 2 Job creation resulting from completed developments [GRI Reference: LA2]

Serra MediterraneanLoureShopping Plaza Éboli Shopping Cosmos TOTAL

Total GLA of completed construction (m2) 38,943 31,070 17,681 45,958 133,652

Construction cost (€ million) 55 32 24 66 177

Number of jobs created 1,000 1,100 800 2,500 5,400

Number of jobs created per € million of construction cost 18 34 33 38 31

Number of jobs created per 100m2 of GLA 2.6 3.5 4.5 5.4 4

Data qualifying note: This data encompasses all 4 developments that were completed and inaugurated in 2005.

Local economic benefitsIn our new developments, we continue to allocate a number ofunits specifically for local retailers. In the case study to the right,Gálvez Joyeros, a high quality jewellers based in Toledo, andestablished in 1990, describe in their own words the experience of expanding their business from the high street to a shoppingcentre environment.

Job creationWe continue to monitor the number of jobs created by our new developments, although to date this has principally been done for marketing purposes. We are keen to standardise thecalculation methodology that we use to estimate the number of jobs created, and to revisit the accuracy of such figures afterinauguration to compare them with actual numbers of jobscreated. This is something which we will be looking to refine and formally approve during 2006.

Luz del Tajo: the experienceof Gálvez Joyeros“As a traditional high-street retailer, we approached theopportunity of expanding our business into Luz del Tajo withcaution. After careful consideration of the statistics providedby Sonae Sierra, we were confident that Luz del Tajo wouldbe a commercially sound investment for our business, andalso economically beneficial for Toledo and its region, whichhad historically looked to Madrid for shopping.

Where Gálvez Joyeros is concerned, Luz del Tajo has had ahighly positive effect on our business and changed our wayof thinking and our opinion of the possibilities that theseshopping centres can offer to retailers. Statistics have evenshown that customers at Luz del Tajo are becoming loyal toour brand, visiting our store many times each year, unlike ourhigh street stores which are more dependent on catching theattention of passing customers.

As a company, we feel that Sonae Sierra has done a good jobat Luz del Tajo, with accurate forecasts and a responsiveapproach to problem solving. We look forward to many moreyears of successful trading in Luz del Tajo.”

Juan Francisco Gálvez Soto, Manager, Gálvez Joyeros

EBITDA of€125.7 million

à Net Profit of€148.1 million

à

10 Sonae Sierra

Financial impact on key stakeholdersWe are aware of the significant financial impact we have on a wide range of stakeholders, be they our tenants, suppliers, investors oremployees. The diagram below builds on the 2004 CR Report (page 12), and depicts the financial and non-financial flows between SonaeSierra and some of our key stakeholders.

Figure 4 Illustration of Sonae Sierra’s financial impact on key stakeholder groups, and derived value of the relationships

Customers

Employees

Suppliers

Public Authorities

Investors / Financiers

Business space and growth opportunities

Rental income €269.7 million[GRI Reference: EC1]

Tenant sales performance€3,604 million[GRI Reference: EC13 (partial)]

GoodsandServices Total spend on supplies

€129.3 million[GRI Reference: EC3; EC11 (partial)]

Total payroll andbenefits €43.3 million[GRI REference: EC5]

Productivityandinnovation

Investment in local infrastructure and equipment €8.6 million[GRI Reference: EC12]

Subsidies received €0[GRI Reference: EC5]

Local taxes €48.6 million[GRI Reference: EC8]

Planning permission

Distributions toproviders of capital€43.1 million[GRI Reference: EC6]

Dividendpayouts50%

Capital

Sonae Sierra

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à

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à

à

Data qualifying note: The data in this diagram encompasses all centres under management.

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Case studies: Shopping centres under management

ISO 14001certificationCentro Colombo and NorteShopping wereawarded certification in accordance withISO Standard 14001:2004 in December2005. This was the culmination of a longjourney for both centres. Starting from initial concept stages, Centro Colombo andNorteShopping were carefully designed to satisfy SonaeSierra’s Environmental Management System requirements.Examples of innovative environmental practices implementedat both centres include:

> Optimised energy consumption by way of an intelligentBuilding Management System (BMS);

> Minimized water consumption through the use ofsophisticated timer systems for taps, and otherequipment;

> Installation of the latest waste segregation equipment.

ISO 14001 certification has had a positive impact at bothcentres by providing a means for engaging with interestedstakeholders (visitors, tenants, employees and suppliers).

Whilst we recognise that ISO 14001 certification does notrepresent an end in itself, we view certification as one morestep to more sustainable development, and an important toolto achieve our corporate commitment of continuousimprovement. There are also commercial benefits of costsavings associated with environmental efficiencies, which wefirmly believe have the potential to enhance the Company’sasset value.

Safety & HealthParque D. Pedro – setting thestandard in Brazil

The Sierra team at Parque D. Pedro is takingthe lead in the Personæ project in Brazil, byinvolving contractors and tenants in a rangeof innovative ways to implement an integratedSafety & Health Management System. Implementation of the system includes:

> The creation of an accident investigation commission thattreats accidents as a learning opportunity, and activelycommunicates its findings to all stakeholders and also toother Sierra shopping centres.

> The launch of a Safety Championship, based on thepopular "Damas" game (checkers), the main objectivebeing to train contractors on the technical aspects ofinspections.

> A partnership with a local disabled peoples' NGO,identifying physical barriers, high risk areas andemergency evacuation procedures.

> Regular Safety Preventive Observations, by the mainstakeholders (Sierra employees, contractors and tenants). More than 250 took place in the second half of 2005.

Personæ in Spanish shopping centres

The exemplary adoption of the Personæproject in Sierra’s shopping centres in Spainis the result of effective teamwork by allmembers of Property Management Spain. It is also testament to the visible commitment of theOperations Manager in Spain, who has been instrumental toPersonæ’s success in this country. The approach taken inSpain includes:

> Communication of at least two safety and health bestpractices per month by each centre, based on the QuickWins concept of Personæ, available to all via theCompany’s intranet.

> High frequency of Safety Preventive Observations on all sites, including by Regional Managers and CountryManager, allowing for early detection and correction of serious ‘non-conformances’.

> Involvement by Site Managers in the development ofSierra’s corporate Safety & Health Management System.

12 Sonae Sierra

Social Performance

12 Sonae Sierra

Safety and healthLaunched in September 2004 and devised inpartnership with Dupont (specialist safety andhealth advisors), Personæ is fundamental tothe sea change in safety and health culturethat Sonae Sierra hopes to embed amongstour staff, contractors and tenants.

2005 was very eventful for all involved inPersonæ, not least because the programmewas successfully launched across all countriesin which Sonae Sierra operates. This includedthe roll out of Safety Preventive Observations(SPO), as a key tool in the delivery of saferworking environments for all ourstakeholders. SPO visits identify ‘non-conformances’ which become opportunitiesto engage in awareness-raising interviewswith the people that can prevent those nonconformances to occur again. In essence, thesystem pre-empts safety and health hazardsbefore they occur. During 2005, 1203 hoursof SPO were performed. We will look toincrease this yet further next year, as SonaeSierra employees and contractors becomemore accustomed to our safety and healthpractices. Furthermore, there were 11.24‘non-conformances’ per hour of SPO. Thissuggests that on average, a little more than11 unsafe acts or behaviour-created unsafeconditions were detected per each hour ofobservation. We would expect this figure toinitially increase over time (i.e. in the first halfof 2006) as people become more capable inidentifying ‘non-conformances’. However, bythe second half of the year ahead, we wouldexpect to see the trend reverse, as peopleworking in our sites become aware of theirown contribution to everyone’s safety, andthe average level of ‘non-conformances’ perhour consequently decreases.

Sonae Sierra and Dupont have trained sitemanagers, tenants, and even Sonae Sierratop management representatives inundertaking effective SPOs. Centres acrossthe portfolio have also been sharing bestpractice, in some cases collaborating withlarger tenants, who have jointly delivered onthe Company’s safety and health objectives.

2006 is set to be yet another crucial yearfor Personæ, as we seek to consolidate thelessons learnt so far, and further embed thesafety culture throughout our ownoperations and those of the main keystakeholders, the tenants.

During 2005, we provided 201 hours ofsafety and health training. In all, 1,821people participated in this training,including Sonae Sierra staff and contractors.Figure 5 also shows how we substantiallyincreased the number of man hours ofsafety and health training, largely due to the launch of the Personæ programme.

During 2005, we also increased the numberof drills performed, with a total of 57 drillsacross 38 sites. This represents a total of 1.5 safety and health drills per site over the year.

Sonae Sierra’s impacts on society are many, varied and wideranging. Many are positive, some, unfortunately are negative.This section explores both these positive and negative impactsand Sonae Sierra’s performance relating to them.

“At Sonae Sierra, the safety and health of all our staff and those people we affect is of

paramount importance. Through implementing a new proactive risk assessment and

awareness-raising methodology of Safety Preventive Observations, we seek to embed a zero

accident culture across all our business activities. Of course, with a portfolio as geographically

spread as ours and the interdependence our activity has with contractors and tenants, this is a

major challenge, and we still have a long way to go. But we believe it is a critical area of

responsibility for us as an employer, landlord, client, partner and investor.”Pedro Soveral Rodrigues, Head of Safety & Health

Table 3 Total safety and health incidents which occurred during 2005 (Sonae Sierra staff) [GRIReference: LA7]

Safety and health incidents Total

Fatalities 0

Accidents (injuries with lost staff time) 4

No. of accidents with lost workday, per 100,000 hours worked 0.36

Data qualifying note: The data relates to incidents incurred as a result of work-related incidents amongstSonae Sierra’s direct employees only. It does not include tenants, visitors or suppliers.

04

05 4,396

840

0 1000 2000 3000 4000

Number of man hours 2004Number of man hours 2005

Figure 5 Total safety and health trainingprovided (number of man hours)

Data qualifying note: The data only relates to safety and health training provided under the Personæprogramme. Please note that the data in Table 6 ofthe 2004 CR Report was incorrect, it has beenrectified here.

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nce“A company is nothing without its people. This is especially so for Sonae Sierra, as we

require inspired and visionary staff to deliver our commitment to innovation and excellence,

and to achieve our mission of being a leader in all the markets in which we operate.

By investing in our staff, and respecting each individual for their unique potential, we

aim to create a culture which aligns and integrates both our corporate objectives and

our employees’ personal goals.”Luis Carvalho Marques, Director, Human Resources and Back Office

Employee relationsEmployee satisfactionSonae Sierra believes that, to some extent, the number of years thatemployees spend within the Company reflects their general contentmentlevels. However, due to rapid growth in employee numbers, we continueto have significant proportions of staff who joined the Company lessthan five years ago (see Figure 6, right).

During 2005, Sonae Sierra launched a new project aimed at developingand gradually implementing best practice ergonomic standards across allits relevant activities. The need arose in recognition of the very wide-ranging working environments which directly employed staff might beoperating in – ranging from Head Office staff to centre managementoffice staff and security control room staff.

Overseen by a cross-functional Working Group made up of both staffand external experts, the standards will include the following issues:

> Lighting levels and controls

> Noise levels

> Space requirements

> Furniture (desks and chairs)

> Furnishings (carpets and paints)

> IT equipment and accessories

During 2006 and 2007, ergonomic analyses will be conducted acrossdifferent workplaces within the Company in Iberian Peninsula –including design and construction, management and procurementfunctions – and staff will be interviewed to determine baselineperformance against the ergonomic standards. On the basis of thefindings of these analyses, Sonae Sierra will be putting into place a long-term action plan to address issues of non-compliance. At the same time,Sierra’s aim is to embed the ergonomic standards within standard safetyand health procedures that must be complied with at all sites and officesacross all countries.

Figure 6 Length of service at 31 December2005 (years)

<2 31%

2 to 5 34%

6 to 10 22%

>10 13%

>

709 Employees worldwide, 87% located in Europe

à

04

05 966

93505

1,503

€ per capita

(Portugal and Spain)

(Portugal and Spain)

(All countries)

14 Sonae Sierra

Figure 7Workforce (All staff)

Male 50%

Female 50%

Figure 8Workforce (Management staff)

Male 80%

Female 20%

Figure 9Workforce (Directors)

Male 93%

Female 7%

Figure 10Workforce profile by age

20-29 30%

30-39 44%

40-49 19%

50-59 6%

>60 1%

Training and development

Figure 11 Investment per capita in staff training and development forPortugal and Spain (€ per capita) [GRI Reference: LA9]

Data qualifying note: The data from 2004 refers to investment in training anddevelopment for Portugal and Spain only. The 2005 figures include one for Portugaland Spain only and another one for all countries in which Sonae Sierra hasoperations, including also Portugal and Spain.

> Continuing with our brand realignment programme, 47internal workshops took place during the year, involving staffacross all countries. The workshops served two main objectives:to inform staff about the purpose and meaning of the newbrand, highlighting the individual attitudes and values required;and to receive suggestions from staff about things which theyconsider should be changed within the Company. This resultedin a number of new procedures being introduced to addressemployees’ suggestions.

> Following a 360 degree evaluation, top management staffreceived coaching on how to bridge the gap between theirperformance in principle and in practice. In 2006, thisprogramme will be rolled out for middle management staff.We are also putting in place a series of informal meetingsbetween staff at all levels and Executive Board Members, aswell as inviting external speakers and opinion makers to makepresentations at more social events.

During 2005, Sonae Sierra continued to deliver extensive stafftraining and development opportunities, as illustrated by thefollowing examples:

> Several employees attended sustainability workshops organisedby the Business Council for Sustainable Development –Portugal. On the back of this, we are looking to develop toolsduring 2006 to facilitate the lessons learnt, being disseminatedto wider groups of staff.

> Over 20 different environmental training sessions took placeduring the year, ranging in duration from 45 minutes to onewhole day. These were targeted at a range of different businessactivities, environmental impacts, staff levels, and countries ofoperation. Examples of training provided including induction tothe corporate policy and EMS for new starters, wastemanagement training for centre management and technicalstaff, environmental communications for marketing executives,and implementing Environmental Standards for RetailDevelopments (ESRD) for project managers and architects.

Figure 12 Proportion of training undertaken by type (by number ofemployee hours)

Languages 56%

Behavioural 25%

Technical 19%

Remuneration and benefitsSonae Sierra continues to pay careful thought to the appropriate levels of remuneration and benefits for staff, introducing differingpackages at different levels of responsibility within the Company. During 2005, the Company spent a total of €43.3 million across allcountries. See Table 4 below.

Table 4 Total Sonae Sierra payroll and benefits in 2005, broken down by country (€)Payroll Benefits Total

(€) (€) (€)

Portugal 21,821,387 418,913 22,240,300

Spain 6,354,772 111,958 6,466,730

Brazil 7,706,521 230,191 7,936,712

Germany 4,173,528 40,914 4,214,442

Italy 1,342,486 390,851 1,733,337

Greece 631,377 12,278 643,655

Total 42,136,975 1,205,105 43,342,080

Data qualifying note: The total payroll figure includes Sonae Sierra spending in Holland. Benefits include Safety and Health at Work; Accidents at Work Insurance; LifeInsurance; Personal Accident Insurance; Health Insurance.

Equal opportunitiesSonae Sierra remains committed to the principal of equal opportunities and continues to monitor workforce diversity according to a rangeof different characteristics. See Figures 7, 8 and 9: Composition of workforce by gender and Figure 10: Composition of workforce by age[GRI Reference: LA1; LA11]

04

05 93.9%

93.3%

Occupancy index at Dec 2004Occupancy index at Dec 2005


> Safety and health training was of 5 different kinds: a PersonæRoad Show (started in late 2004) with 25 sessions performed in2005; a Foundation Training (basic explanation of the Safety &Health Management System) with 7 sessions; 5 “Train-the-trainer” sessions (where training was provided to sites on howto make effective safety presentations for staff, contractors andtenants); Safety Preventive Observations’ training (9 sessions);and, finally, 28 Foundation Training sessions delivered locally bySite Correspondents having previously attended the “Train-the-trainer”, to staff, contractors and tenants of each site.

Openness and communicationDuring 2005, Sonae Sierra launched an internal quarterly magazinecalled Horizons, created as a communication tool to inform allemployees of the latest news about the Company but also toreinforce the new brand attributes and image. Horizons is a usefultool to share good practices across all of Sonae Sierra’s operatingcountries, and to relay important corporate messages andbehaviours to employees. By sending the magazine directly toemployees’ home addresses, we have found that family membersalso benefit from being more informed about the Company.

Be Innovative programmeBe Innovative, launched by Sonae Sierra during 2005, isdesigned to inspire new ideas and foster innovation throughoutthe organisation, regardless of function or position.

Under the programme, employees are encouraged to submitnew ideas, all of which are evaluated by a representativepanel from across the business for their innovation and easeof implementation. Every quarter a winner is selected, andrewarded with a celebratory box of champagne. Every year,the best overall suggestion entitles the winner to €1,000vouchers to spend on a personal trip or adventure of theirchoice. All interesting suggestions are automatically sent tomanagers and directors for consideration and potentialimplementation.

In all, 113 suggestions were received during 2005, and nextyear employees will be encouraged to submit ideas related tospecific issues of relevance to Sierra’s business.

Figure 14 Tenant evaluation of selected operational factors during 2005 tenant surveys [GRI Reference: PR8 (partial)]

Data qualifying note: This data encompasses tenant survey findings at 13 shoppingcentres in Portugal and Spain (2004), and 23 in Portugal, Spain and Brazil (2005).Brazil does not include Shopping Plaza Sul. The figures are derived from overallaverages using results obtained from bi-annual tenant surveys undertaken at centresunder management, where tenants are asked to rank certain centre managementfactors on a scale of 1 (very bad) to 4 (very good).

Shopping centrecleaning

Flowers and plants

Safety of peopleand goods in theshopping centre

2004 Average (Portugal and Spain)2005 Average (Portugal, Spain and Brazil)

0405

0405

0405

0405

0405

Temperature ofthe shopping

centre

Safety of people andgoods in the car park

3.203.06

3.022.95

2.842.74

2.722.71

2.672.61

Average Tenant evaluation: 1 (very bad) to 4 (very good)

Figure 13 Average occupancy index at 31 December each year, by GLA[GRI Reference: PR8 (partial)]

Data qualifying note: This data encompasses all centres under management.

Tenant and visitor satisfaction

“Without tenants and visitors, ourshopping centres would be empty and wewould be out of business. Their successand satisfaction is our most valuable asset.Not only does our growth go hand in handwith that of our tenants, but we alsorecognise that we have valuable lessons tolearn from both them and their customers.Ultimately our challenge as a business is toensure that we continue to deliver a serviceoffer which meets their own thoughts andaspirations, and that requires very carefullistening and tuning in.”Antonio Casanova, Executive Director, Key Accounts, Marketingand New Technologies Business

Tenant satisfactionSonae Sierra continues to monitor tenant satisfaction through bi-annual surveys covering all centres under management. Westrive to maintain high levels of satisfaction amongst our tenants,as reflected in part by the high occupancy ratios across ourportfolio (see Figure 13). Figure 14 also shows how tenantsevaluated our performance in 2005 against a range of operationalfactors, including aspects such as safety and cleanliness.

International growth for Lojado Gato PretoLoja do Gato Preto is a home equipment store which wasoriginally founded in Portugal in 1986. Having successfullydesigned a unique style of its own, and thereby built thebrand, the Company now operates more than 20 stores inPortugal and 6 in Spain. The Company has grown successfullyalongside Sonae Sierra, and boasts an impressive reputationin both of these countries. With more than one third of thecompany's stores located in Sierra Centres, fostering positiverelationships has been crucial to the continued growth of Lojado Gato Preto as a successful and strong brand.

In 2005, this culminated with a nomination for the MAPICawards to recognise those retailers that have demonstratedthe most rapid and dynamic international growth in theprevious year. This was the first such nomination to bereceived by a Portuguese company, and is testimony in part tothe success that the tenant has benefited from in partneringwith Sonae Sierra.

16 Sonae Sierra

Accessibility 2005 saw a record 150 events for disabled persons across 15 of our centres.

CR/Environmental EngagementOver the course of 2005, Sonae Sierra has rolled out a range of environmental and safety awareness andtraining activities, as a tool to promote better performance across the Company's centres.

Arrábida Shopping: Environmental and Safety Workshop Arrábida Shopping (Portugal) provides an innovative example of environmental engagement with tenants. In November 2005,environmental and safety issues were combined, as part of a dynamic workshop for all tenants. Several experts were invited to providetraining on specific environmental and safety themes, providing both technical and practical information on issues such as internal airquality, energy efficiency, waste and effective fire management. Key messages from the workshop were disseminated through a notebook,which was made available to all participants after the event.

The session was well received, and many participating tenants suggested that similar practical and technical training events would beof use again in the near future.

Ensuring highest standardsof food hygiene for visitorsIn 1999, Sonae Sierra demonstrated its concern for foodsafety and hygiene by awarding exclusive responsibility forauditing and monitoring the legal compliance of restaurantand catering installations to the Portuguese VocationalTraining Centre for the Food Sector (CFPSA). This partnershipnow extends to the auditing of hygiene in cateringequipment and operations at all shopping centres operatedby Sonae Sierra throughout Portugal. Such audits includefood sampling, cleanliness swabs, quality checks on frying oil,air quality monitoring, and training.

Sonae Sierra continues to take seriously its responsibility forensuring that the public can rely on the safety and hygiene offood eaten in Sierra centres.

“A simple business relationship has evolved organically into avery healthy technical partnership which we believe leads tohigh levels of quality in service, and that is becoming bothpartners’ trademark.”

Maria Gracinda Ramos, Director, CFPSA

NorteShopping: AccessIn response to comments received from physically disabled visitors, NorteShopping (Portugal) decided to create 20 exclusive parkingspaces barred with a lockable chain and to distribute the access keys to regular customers with physical disabilities.

Applicants for a key were invited to fill in two forms, stating the nature of their physical disability. A direct mailing was also sent to allthe physically disabled people who had written to NorteShopping in the past, to inform them of this new service.

To date, 144 keys have been registered. Interest in the scheme has been far greater than expected, especially given the absence ofadvertising. NorteShopping has been able to successfully connect with a traditionally marginalised group of visitors, who now feel agreater affinity to the centre due to the special arrangements that have been put in place.

Figure 15 Visitor feedback on selected operational factors during 2005visitor satisfaction surveys [GRI Reference: PR8 (partial)]

Data qualifying note: A survey of visitor feedback has been undertaken in Brazil,though it did not use the same criteria as in Portugal and Spain. It is, therefore,excluded from the data above. Additionally, the 2005 average for 'Perceivedhygiene and meal preparation' excludes Spain, though in 2004 'Perceived hygieneand meal preparation' includes both Portugal and Spain. The figures are derivedfrom overall averages using results obtained from visitor surveys undertaken atcentres under management, where a random sample of visitors are asked to rankcertain centre management factors on a scale of 1 (very bad) to 4 (very good).

Perceived hygieneand meal preparation

2004 Average (Portugal and Spain)2005 Average (Portugal and Spain)

0405

0405

0405

Tenant mixvariety

Access facility tothe SC interior

3.103.39

Bathroomcleaning

0405

3.153.18

Shopping centrestaff attendance

(security, cleaning etc.)

0405

3.103.27

3.153.12

3.053.03

Visitor feedback: 1 (very bad) to 4 (very good)

0405

Temperatureinside the SC

2.953.01

0405

Car park security 2.722.78

Quality of visitor experience/satisfactionSonae Sierra continues to undertake twice yearly visitor surveys ateach of our operational centres. These surveys are crucial tools inevaluating visitor experiences, and we are grateful for all thefeedback received. A summary of the 2005 visitor feedback surveyresults can be found in Figure 15.

Sonae Sierra seeks to use its shopping and leisure centres for the benefit of the community wherepossible, and one important way of doing this is to hold events for particular groups or around specificthemes. During 2005, we held a total of 15 cultural events for centre visitors.

Community care

“Our shopping centres are more successful the more they interact with the communities

around them. Through active dialogue with local organisations and continued investment,

we seek to improve local community facilities, services and cultural events. Shopping

centres are an integral part of community life. We wish to integrate our centres into the

local fabric of towns and communities, such that they play an important role in the lives of

local residents, businesses and municipalities.”Ana Guedes Oliveira Sierra Investments, Managing Director

Mediterranean Cosmos:Community involvement -Local clean the beachcampaignMediterranean Cosmos, the first Greek shopping and leisurecentre that Sierra Charagionis and Lamda have developed inGreece, organised its first environmental event in July 2005“Mediterranean Cosmos: Clean Cosmos”.

The event was run in collaboration with the local municipalityand charity groups. Its purpose was to clean the beautifulbeach of Afytos, a traditional village beach resort, situated inHalkidiki, and only a short distance away from MediterraneanCosmos. Hundreds of volunteers of all ages gathered on asunny day to clean the beach. All helpers received a gift pack,containing a hat, t-shirt, beach bag, beach towels and snacks.

Centro Colombo: “Storiesthat Count” Christmas bookIn December 2005, Centro Colombo (Portugal) published“Stories that Count”, a book about human stories, hope,altruism, solidarity and care. 12 Portuguese writers wereinvited to publish stories in the book, and all contributed tothe idea with enthusiasm, believing in its value to encouragepeople to read.

Costing just €3 each, 50,000 books were published, 20,000of which were sold with “Público” newspaper. The other30,000 were made available at Centro Colombo.Furthermore, for every book sold, €1 was donated to the“Instituto de Apoio à Criança”, a social care charity forunprotected children. The money raised from total bookssales was to put towards the construction of a pedagogiccentre.


18 Sonae Sierra

Parque D. Pedro, Brazil:Parque LinearParque D. Pedro Shopping in Campinas, São Paulo, has beeninvolved since 1998 in a project to recover the primitivewoodland around the river “Ribeirão das Pedras”.

Recognising the importance of Parque Linear to local people,Parque D. Pedro privately financed three sections of thewoodland’s restoration (all located in the vicinity of theshopping centre) – an area equivalent to 38 football fields.

With intense environmental degradation through long termhuman abuse and neglect, Parque D. Pedro Shopping’sinvestment focus has been on:

1. The recovery of primitive woodland.

2. The preservation of wild fauna.

3. The control of overflow rain water.

4. The implementation of a cycle way and walking paths, to promote positive human use of the area.

Over the 5 years that Parque D. Pedro has been involved inthe project, 35,000 native trees have been planted.Furthermore, this flora improvement has provided better foodsupply and shelter to the existing wildlife. Indeed, from thefirst year, this project has identified the growth in 26 speciesof animals, including new migratory species.

Community investment During 2005, Sonae Sierra donated a total of €360,175 oncharitable and cultural initiatives, which includes donationsassociated with centres under development and owned centresunder management in all countries where Sierra operates.

During the year, Sonae Sierra also launched a formal employeevolunteering policy, under which all employees are entitled to 1 dayof work time per year to contribute to a charitable or communityinitiative of their choice. In the coming year, we will seek to identifythree or four strategic partnerships to enable us to contribute tosimilar objectives through both charitable giving and staff time.

In addition, partly as a result of Sonae Sierra allowing fundraisingwithin its owned centres under management, a total of €128,196was donated by visitors of Sonae Sierra centres to local charitiesand non-governmental organisations during 2005.

€128,196 donated to localcharities and non-governmentalorganisations by visitors ofSonae Sierra centres during2005.

à


Figure 16 Average number of days within which supplier invoices arepaid (by country) [GRI Reference: EC4]

Data qualifying note: This data averages the number of days within whichinvoices were paid for all countries where Sonae Sierra operates.

Spain

Portugal

Germany

20042005

0405

0405

0405

0405

0405

Greece

Italy

3535

3131

2626

2626

2526

Number of days

0405

Brazil 2020

GlobalAverage27.3

Figure 17 Media coverage received by Sonae Sierra during 2005according to areas of performance

Other

(non CR related press) 71%

Economic 9%

Environmental 9%

Social 11%

Data qualifying note: The data in this chart includes both positive and negativepress coverage for Sonae Sierra. It includes press coverage received by SierraCharagionis in Greece and Sierra Enplanta in Brazil.

Other stakeholder concerns

Media Following the publication of Sonae Sierra’s first CR Report in 2005, we made a series of presentations on its content to the media in andaround shopping centres, and co-ordinated one principal media event. Given that many journalists writing about Sierra focus on theCompany’s financial performance, it has been an awareness-raising and educational exercise to better inform the media of our wider CR performance. Figure 17 summarises our media profile in relation to different aspects of our sustainability performance.

“At Sonae Sierra, we believe that our

suppliers represent an extension of our

back office – largely invisible but crucial

in their contributions. We respect and

acknowledge their expertise, seeking to

learn from them in a partnership based

approach. Their loyalty and commitment

is essential, and one key challenge is to

help and encourage them to improve

their own social and environmental

performance.”João Correia Sampaio, Director, Property Management, Portugal

Supplier loyaltySierra continues to try to pay suppliers within a 30 day period. Indeed,in 2005, our average payment period (all countries), was 27.3 days.

The graph below (Figure 16) shows our average payment period bycountry.

20 Sonae Sierra

Planning & Design – Freccia RossaItalySonae Sierra created its Environmental Standards for Retail Development (ESRD), a tool designedto ensure that environmentally preferable technologies are included at the planning and designstages of a development so that its operational impacts are minimised. The efforts employedduring the development of Freccia Rossa Shopping Centre in Brescia, Italy, positively demonstratethe application of the ESRD. Due for completion in Spring 2007, the designers are set toimplement 100% of the mandatory requirements contained in the ESRD (where applicable) and asignificant number of the voluntary (non-critical) ones, including:Construction waste > Excavation soil to be reused on site and the remainder recycled off site.

> Demolition materials to be crushed to be reused for foundations or recycled off site.

Construction materials> Materials selected will have low toxic contents, low embodied energy, and be recyclable where possible.

Energy, heating and daylight> Glass surfaces to encourage natural light.

> An air curtain system and a floor radiation heating system to avoid thermal waste through the entrances automatic doors.

Water> A rainwater reservoir will be integrated into the basement to supply water for the toilets.

Transport> Cycling facilities will be provided on the public square.

> Cycle lanes running alongside the centre will be linked into existing city centre cycle networks.

Fulfilment of the non-critical guidelines is set to add value to the project, and be of major benefit for the local community.

Case studies: Projects under development

Construction – RioSulPortugalRioSul Shopping, in Seixal, Portugal, has attained the highest possible safety and health standards,with the help of a dedicated Safety Coordinator and Safety Technician, and permanent on-sitesafety and health contractors. Indeed, the standards set at RioSul Shopping have had a positiveknock-on effect for all other construction site managers in Portugal, and top level managementstaff within Sierra, all of whom look to RioSul Shopping as a best practice example.Site staff have been encouraged to change working practices and to apply the prevention principles on all technical processes and high riskactivities. A risk prevention system has been introduced, incorporating safe working procedures and risk assessments for constructionactivities and equipment. Site managers have also been making direct interventions where high risks have been detected.

Other best practice observed at RioSul Shopping construction site includes:

> Work platforms with anti-fall protection

> A requirement to perform all ‘formwork’ with a safety line and harness

> Guard rails surrounding all slab edges

> Emergency evacuation plans placed across the site

Sonae Sierra's Safety & Health team has performed training sessions with contractors and subcontractors, informing them of major safetyrisks, and preventive measures. Workers were also given special access to the safety team so that they could contact them in an emergency.

In addition, RioSul was an exemplary construction site in its implementation of environmental management procedures, and is the onlySonae Sierra construction project to date that has achieved ISO 14001:2004 certification for the EMS with zero non-conformances.


Completion – LoureShoppingPortugalThe concept of a “green” shopping centre was incorporated into LoureShopping right from itsdesign inception, and it became the first Sierra shopping centre in Portugal to receive ISO 14001:2004 certification, in recognition of its strong environmental management practices duringconstruction works. The EMS also addressed economic and environmental objectives, and is set tobecome a role model for future projects. Some of the most innovative features include:

Energy Efficiency

> Distinct illumination circuits and networks allowing partiallighting of areas according to the light requirements and theexisting day light.

> Glassed roofing to guarantee acceptable levels of naturallighting in the Mall areas without causing excessive heating andlighting.

Water efficiency and Wastewater> Taps triggered by infrared motion sensors, in order to increase

water consumption efficiency.

> Separate wastewater network for the wastewater produced incar parking areas, in order to retain oils spills that may occurand for the food court areas.

Waste Management > Infrastructures and necessary equipment for waste separation,

transportation and temporary storage were developed.

Noise and Vibration> The development of a specific project to comply with acceptable

and legal levels of noise emission to surrounding areas and tooptimise noise levels inside the Shopping Centre.

Air Pollution> Air Conditioning Equipment set up for use within the

development with an Ozone Depletion Potential (ODP) of zeroand low Global Warming Potential (GWP).

Materials> Setting of strict rules in order to prevent the use of

environmentally hazardous materials, to reduce theenvironmental impact and also to improve and guarantee theindoor air quality.

Ecology> The preservation, in the land modelling phase, of all the

existing trees within the construction site area and itsmaintenance and preservation during the construction works.

> The plantation, in the Green Park, of more than 800autochthon specimens of trees and vegetation, which have verylow needs in terms of water.

Management> Automated Building Management System set up to provide

real time data on various environmental indicators and help themanagement team enhance the Mall’s daily operation.

Green ParkThe Green Park area, perhaps the most visible aspect ofLoureShopping’s commitment to the Environment. Green Park is a12.5 acre space opened up to the community and all visitors, whichincluded the planting of more than 800 new specimens of trees andvegetation, a cycling lane and a twelve-pit maintenance circuit withexercise equipment.

If all of the above was not enough, LoureShopping alsoimplemented the Global Accessibility norm, which included thefollowing:

> Stairs with double handrail.

> Lifts with voice system in order to help people with difficultiesof vision.

> Detection systems to open doors.

> Toilets designed with disabled users in mind.

LoureShopping is a landmark development for Sonae Sierra.

22 Sonae Sierra

Environmental Performance

Environmental ManagementSystem One of the biggest successes achieved bySonae Sierra during 2005 was the formalcertification of the corporate EnvironmentalManagement System (EMS) according tothe international standard ISO 14001:2004.We believe that we might be the firstproperty company in Europe to achieve thisacross the entire business. Similarly, wecontinue to achieve ISO14001:2004certification for the on-site constructionworks of several of our major newdevelopments, and for a growing numberof our owned shopping and leisure centresunder management.

At the heart of our EMS is the annualtarget-setting programme, which has nowbeen incorporated within the wider CRtarget-setting process. Table 5 below

provides a breakdown of our achievementlevels against the environmentalmanagement and performance targets setfor 2005. We are pleased to announce that84 per cent of our environmental targetswere either fully achieved or substantiallyprogressed during the year, with only 5 percent (one target) remaining unachieved.

An illustration of our commitment to theenvironment is our endeavour to quantifythe investment made by the Company inimproving its environmental performance.One aspect of this is the total capitalinvestments on environmentalimprovements (development, ownedcentres under management, and our ownoffice occupation), which has been 1,477(€000s) in 2005.

“Our approach to

environmental management

is inherently driven by a

long-term approach to risk

management. Our efforts to

conserve natural resources,

prevent pollution, and

reduce waste reflect our

determination to maintain

a leadership position in

business efficiency and

environmental management.

We also believe that strong

environmental performance

contributes to market

differentiation and

competitive advantage.”Elsa MonteiroHead of Institutional Relations,Environment and Communication

At Sonae Sierra, we believe that economic and environmentalsuccess can co-exist. We strive to be a leader in environmentalmanagement, integrating environmental design features intoour developments, which, we believe, ultimately leads togreater economic profitability.

Table 5 Summary of progress against environmental targets 2005

Environmental Number ofimpact areas targets 0% 25% 50% 75% 100%

Development – corporate wide 5 3 2

Operations – Portugal 3 3

Operations – Spain 3 1 2

Operations – Brazil 4 2 2

Management systems – corporate wide 4 2 2

Total 19 1 0 2 5 11

% of Total 5% 0% 11% 26% 58%

>

During 2005 Sonae Sierra achievedcertification of the EnvironmentalManagement System (EMS)according to the internationalstandard ISO 14001:2004.

à


Performance

Monitoring and targeting programmesDuring the year Sonae Sierra has been working to further improve the accuracy and timeliness of environmental data reporting. The newimproved online EMS data collection tool will make this easier, and will also give onsite staff a user-friendly means of checking theirperformance against other centres in the portfolio. All property staff have been trained to use the online EMS data collection tool – whichwas re-launched following major improvements in 2005.

Similarly, environmental performance reporting at all different levels of management has been comprehensively overhauled to ensureconsistency across centres, construction sites and countries. Corporate performance against both management and development KPIs hasbeen reported quarterly to the main Sierra Board throughout 2005.

Sonae Sierra continues to take part in industry initiatives such as the Environmental Benchmarking for Shopping Centres projectcoordinated by Upstream, UK-based strategic sustainability advisors. We participate in this survey to benchmark our portfolio and propertiesagainst European peers and promote the adoption and sharing of good practice (GRI Reference: EN17). Industry initiatives, as well asinternal ‘league tables’, play a key part in motivating employees and ensure that Sierra remains at the forefront of the industry.

The table below provides a snapshot of some of Sonae Sierra’s absolute environmental impacts (unadjusted and non-normalised) arisingfrom the owned centres under management. This gives a sense of the scale of the impacts and is in keeping with the requirements of GRIcore indicators.

Table 7 Absolute impacts against selected GRI core indicators for calendar year 2005

Sonae Sierra owned centres underPerformance indicator and unit management (aggregated)

Total electricity consumption [GRI Reference: EN4 partial] 682,894 Gigajoules

Total water use, [GRI Reference: EN5] 1,133,708 cubic metres

Total amount of waste (See Figures 22 and 23 on pages 26 and 27 for waste destinations), [GRI Reference: EN11] 30,910 tonnes

Table 6 Portfolio coverage of environmental performance data presented in the 2005 CR Report (% by GLA floor area)

2002 2003 2004 2005

Electricity consumption 62 50 92 100

Water consumption 0 78 82 80

Waste 51 50 90 94

Visitors Transport 1 100 100 100 100

1 From visitor surveys undertaken on a random sample at individual centres.

Data Qualifying NotesOperation and management> All data in this section relates to owned centres under management, that have been in full operation for all 12 months of a calendar year. For 2005, this

includes 14 centres in Portugal, 10 centres in Spain and 7 centres in Brazil.

> Utility consumption that relates specifically and directly to individual tenants is not included here. For example, water data is principally for common serviceprovision. Inevitably, however, Sonae Sierra’s impacts are entwined with those of its stakeholders, e.g., the waste tonnage relates to waste also produced bytenants but handled by Sonae Sierra as a service.

> Data is now collected direct from properties as part of Sonae Sierra’s internet-based EMS, actual measurements are used wherever possible, with estimationkept to a minimum.

> Sonae Sierra is striving to improve and assure the quality of the data used in its monitoring systems. Obvious anomalies (e.g. due to broken water meters inSpain) have been removed from the dataset presented here, and reflected in the reduced comprehensiveness of coverage. For electricity and transport,however, the coverage of centres reported on here is now 100%.

> In a small number of cases, it has become clear that the 2004 data was incorrect. Where this is the case, we have updated such data in this report.

> It is estimated that aggregated data is accurate within a margin of ±5% for metered utilities and ±20% for waste and transport data.

Development> Sonae Sierra reports only on the environmental performance of completed and inaugurated centres that were under development. Of the 12 projects under

development during 2005, only 4 were completed and inaugurated during the year. These were Plaza Éboli (Spain), LoureShopping (Portugal), Serra Shopping(Portugal) and Mediterranean Cosmos (Greece). The data in this section covers three of the four (Mediterranean Cosmos is excluded) – with another project(Luz del Tajo – Spain) from the previous year by way of comparison.

02

03

04

05

747

748

586

591

kWh/m2 (mall and toilet area)/year

Demand for electricity varies in different years depending onweather conditions – in fact weather-driven variations can oftenaccount for as much as 10% of the total consumption (see Figure19 below). This may be part of the explanation for increases atseveral centres – particularly in Spain and Portugal. In fact, inSpain, one centre (Max Center) achieved energy reductions sincelast year. The other Spanish centres increased consumption by 1 to6%, except La Farga, where the refurbishment led to an increase inelectricity consumption by 21% (through the works themselves aswell as through the higher level of service provision installed at thecentre). In any case, Sonae Sierra uses environmental data and KPIsto actively understand its performance on a regular basis – anduses this to drive actions to rectify problems and seek continuousimprovement.

Figure 19 Electricity efficiency (excluding tenants) of the owned undermanagement portfolio, by country

EnergyOwned and managed portfolio

The slight uplift in consumption in the most recent year, by just 1%(see Figure 18), is largely explained by new properties – whose datais included in the portfolio total for the first time this year – assome of these are more energy-intense than other properties in theportfolio. The change for just those centres under managementthat were owned in both 2004 and 2005 is a 0.2% increase.

Figure 18 Electricity efficiency (excluding tenants) of the owned undermanagement portfolio

Portugal

Spain

Brazil

748747

not knownnot known

not knownnot known

02030405

02030405

02030405

705718

343423

600572

kWh/m2 (mall and toilet area)/year

24 Sonae Sierra

Land useSonae Sierra continues to be conscious of the need to makeefficient use of available land, often siting new shopping centreson previously developed land, and requiring remediation and clean-up techniques.

[GRI Reference: EN6] Sonae Sierra owns zero hectares of land located in areasdefined as biodiversity rich habitats.

[GRI Reference: EN7] Construction projects have the potential to damage naturalhabitats, threatening wildlife and plant species through disturbing activities.Similarly, careless property management and landscaping practices can causedamage to biodiversity. At Sonae Sierra, conservation and sensitive landscapingcontinue to form part of our standard procedures and, wherever possible, weseek to enhance the local wildlife quota.

Emissions to air, land and waterSonae Sierra continues to implement the detection, prevention and monitoring procedures, for both development and operation,for emissions to air, land and water.

[GRI Reference: EN16] No legitimate environmental fines were received by SonaeSierra during 2005.

[GRI Reference: EN13] In part due to active prevention procedures, there were zerosignificant spills of chemicals, oils, and fuels in 2005.

Plaza Mayor: Natureconservation Plaza Mayor centre is located in Málaga, Southern Spain.Before excavation works commenced in September 2005, aprotected species of turtle was identified so Sonae Sierracontributed to their relocation before the breeding seasoncommenced.

The turtles were collected during 5 days of field workundertaken by specialist scientists and transferred to therecovery centre of threatened fauna of Andalusia (Centro deRecuperación de Fauna Amenazadas de Andalucía, CREA).Each turtle was individually tagged, and its weight, sex andsize recorded. Once released the turtles will be able to live infreedom nearby to their original habitat.

Furthermore, during the work, one species of eel (Anguillaanguilla), thought to be extinct in that region, was found inthe Guadalhorce area.


Sonae Sierra and Climate Change –Committed to ClimateFollowing a pilot project to calculate greenhouse gas emissions associated with three Sonae Sierra sites undertaken in 2004 (see CR Report2004), Sierra sought in 2005 to use a similar methodology for emissions arising from all its shopping centres and offices in Europe andBrazil. The preliminary results are presented below.

Scope Activity CO2e Emissions(t)

1–Direct Emissions from: Fuel combustion on Company vehicles 613HFC leakage from cooling and refrigeration systems 1,084

Cogeneration systems 37,579Heat production in boilers 749

2–Indirect Emissions from: Production of electricity used 74,279

Total 114,304

Emissions presented in the table above are Scope 1 and 2, as classified by the Greenhouse Gas Protocol guidelines. In due course, SonaeSierra intends to calculate and publish Scope 3 (indirect emissions – voluntary reporting) and to publish Scope 1 and 2 emissions at regularthree months intervals.

Sonae Sierra is currently analysing potential greenhouse gas emissions reduction measures to be applied in relation to the three sitesincluded in the pilot so as to further improve its performance in mitigating climate change. Some of the measures being consideredinclude:

> Introducing carbon dioxide emissions as a selection criteria for Company fleet vehicles.

> Training on eco-driving for Sonae Sierra staff.

Sonae Sierra also achieved in 2005 the first place in the Index “Climate Change and Corporate Management – a ResponseIndex”, promoted by Euronatura, a Portuguese non-governmental organisation. The company has committed to continueparticipating in the Index, aiming to rank high. For more on the Index, see www.responsabilidadeclimatica.org.

Development portfolio

It should be noted that direct comparisons cannot be drawn between development projects – as their circumstances are so different. This istrue of all impact areas, not just energy. Nonetheless, through monitoring consumption during construction and upon completion, SonaeSierra seeks to ensure efficient use of these resources. With time, Sonae Sierra’s awareness of the energy requirements of differentconstruction techniques and practices will be factored into design considerations. The higher level of construction electricity consumption at LoureShopping seen in Table 8 could, in principal, be explained by the testing of external feature lighting prior to opening (the testswere done during a long period of time).

Table 8 Construction electricity indicator (completed projects)

Project completed in 2004

(as broad Completed projects during 2005 comparator)

Completed projects KPIs Serra Shopping LoureShopping Plaza Éboli Luz del Tajo

Construction electricity indicator (kWh/€ 000 construction cost) 4.84 20.05 9.66 5.97

Data qualifying note: This data only relates to electricity consumed during the construction process, and does not yet include other energy such as diesel.

Sonae Sierra is a “Carbonfree – The Seal of Climate Responsibility“ company, which implies that ithas made a strong corporate commitment to reducing and addressing its climate change impacts.For further details of the specific commitments required by this initiative see www.carbonfree.pt.

à

02

03

04

05

4.3

3.8

4.4

litres/visitor/year

not known

Solid WasteOwned and managed portfolio

There are two positive trends for reduced environmental impactdemonstrated in Figure 22 below. Firstly, the amount of wastebeing recycled at Sonae Sierra shopping centres is steadilyincreasing. Secondly, the amount of waste per unit of sales isdecreasing. Whilst it is too early to be certain, it is possible thatretailers are beginning to require less packaging (by weight) perunit of goods sold.

Figure 22 Total waste throughput and disposal method in the ownedunder management portfolio

WaterOwned and managed portfolio

There has been, overall, an increase in the amount of waterconsumed per visitor, but there are significant variations betweenproperties in different countries. See Figure 20 below.

Figure 20 Water efficiency (excluding tenants) of the owned undermanagement portfolio

The trend for Portugal (see Figure 21) is encouraging, and showsthe benefits of the extensive programme of water audits andmetering of specific end-uses. Improved efficiency is particularlymarked at NorteShopping (Portugal), where water consumptiondropped by 20% since last year.

Problems with consistent and reliable metering have been greatestin Spain and Brazil. The 2005 figures for Spain and Brazil are higherthan 2004 because centres whose data is included in theaggregated consumption for the first time are more water-intense(per visitor) than other properties in the portfolio. Nevertheless, 2 out of 8 Spanish and Brazilian centres (with at least 2 years ofreliable data) managed to decrease water consumption per visitor.For this reason, Sonae Sierra is considering extending water auditsthis year to Spain and Brazil. These will aim to improve end-usemetering, and thereby leads to better understanding and control ofmajor water uses, such as cooling towers.

Figure 21 Water efficiency (excluding tenants) of the owned undermanagement portfolio, by country

26 Sonae Sierra


There is a greater degree of consistency in the amounts of water consumed in different development projects. The consumption of water atthe most recently completed projects is in line with expectations, and is slightly lower than previous projects. See Table 9 below.

Table 9 Construction water indicator (completed projects)Project completed

in 2004(as broad

Completed projects during 2005 comparator)


Construction Water indicator (m3/€ 000 construction cost) 0.20 0.18 0.20 0.26

02

03

04

05

Reused/reclaimed/recycledLandfilled/incinerated

6.3 2.1

7.1 1.9

8.1 1.9

8.5 2.0

tonnes / € million sales (Purchasing Power Parity adjusted)

(19%)

(19%)

(21%)

(25%)

Composting organicwaste Following the huge success of NorteShopping’s (Portugal)waste segregation of organic matter – and its ensuing salethrough composting - Sonae Sierra decided to extend thisproject to other centres in Portugal, namely Arrábida Shopping,MaiaShopping and CascaiShopping in the last quarter of2005. The roll out continues at GaiaShopping, where facilitieshave been installed in January 2006.

Each scheme starts with an analysis of the types of wastebeing produced that lend themselves to composting. Then,special containers are distributed to tenants who segregateorganic waste before delivering it to the composting station.

With this initiative, in Portugal, Sonae Sierra has managed torecover about 620 tonnes of organic matter, representing 6%of the total waste produced in 2005 at the four centreswhere this separation process is already in place. For 2006 itis expected that this proportion will increase further, as moreand more centres begin to separate their organic waste andsell it for composting purposes.

Portugal

Spain

Brazil

4.84.2

not known

not known

02030405

02030405

02030405

4.0

3.22.9

4.8

3.0

2.6

not known

5.0

litres/visitor/year

TransportOwned and managed portfolio

Overall, the amount of visitors to our shopping centres has risen(see Figure 24), as the number of owned centres undermanagement has increased. Further, the proportion of visitorsarriving by means other than the private car has risen slightly.

Figure 24 Number of visitors (millions) arriving by different modes oftransport in portfolio of owned centres under management

The transport survey data, in Figure 25 below, suggests that therehas been the most significant drop in the proportion of visitorstravelling by means other than the private car at Brazilian centres,whilst it has increased at Spanish centres. Sonae Sierra will continueto incorporate alternatives to the private car in its developmentplanning, as well as making alternatives to the car as attractive aspossible at its shopping centres. Travel trends will continue to bemonitored to assess the effectiveness of new initiatives on sites.

Figure 25 Number of visitors (millions) arriving by different modes oftransport in portfolio of owned centres under management, by country



The amounts of waste produced per unit of construction costs has been fairly similar across the projects completed in the recent past asshown in Table 10 below. Encouragingly, the recycling rate is high. Whilst the rate for Serra Shopping is lower than hoped, this is in partdue to the fact that it is located in Covilhã (centre interior of Portugal) where there are fewer providers of waste recycling services.

Table 10 Construction waste and recycling indicator (completed projects)

Project completed in 2004

(as broad Completed projects during 2005 comparator)


Construction Waste indicator (tonnes /€ 000 construction cost) 0.15 0.11 0.12 0.11

Construction Recycling indicator (% of total waste sent for recycling or recovery) 62% 86% 89% 45%

Data qualifying note: The data relating to Plaza Éboli is for a 6 month period only (representing only part of the total construction period).

49

Visitors (millions)

0405

0405

0405

24 26

11546115

28411736

3442

Arriving by all other forms (other than private car)Arriving by private car

Portugal

Spain

Brazil

(30%)(29%)

(32%)

(41%)

(52%)

(45%)

The recycling rate has increased at 19 out of 23 shopping centres with data for both 2004 and 2005. This is reflected in the performance for each country in Figure 23. NonethelessSonae Sierra is undertaking further waste audits to identifyopportunities to improve waste management as well as enhance its data collection methodology – especially where waste cannot be weighed.

Figure 23 Total waste throughput and disposal method in the owned under management portfolio, by country

Portugal

Spain

Brazil

tonnes / € million sales (Purchasing Power Parity adjusted)

02030405

02030405

02030405

3.6 1.0

1.98.12.37.92.77.5

2.08.5

3.111.62.711.8

1.02.7

Reused/reclaimed/recycledLandfilled/incinerated

(19%)(19%)(22%)

(26%)

(19%)

(21%)

(22%)(26%)

not knownnot known

not knownnot known

04

05

Arriving by all other forms (other than private car)Arriving by private car

198 109

92175

Visitors (millions)

(34%)

(35%)

28 Sonae Sierra

Lessons to be learntAt Sonae Sierra, we are very conscious of the need to be honest and transparent about all aspects of our performance. This means beingable to disclose the instances where things went wrong, as well as those where things went well. In this section, therefore, we have soughtto do just that – by picking out particular events and initiatives that took place during 2005 that we feel we should have done better. It isintended to demonstrate that we take all failures in our performance seriously, and that corrective actions are instigated to ensure that welearn from our mistakes.

Importance oftenant relations in MediterraneanCosmos, GreeceUnfortunately, due to unforeseen difficulties arising duringthe construction of the Mediterranean Cosmos shoppingcentre in Greece, it opened with some defects therebyadversely affecting a number of the tenants. It has been verydifficult for Sonae Sierra to respond to tenant enquiries, dueto its inability to control the construction works necessary toresolve the defects. This situation has meant that SonaeSierra’s ambition to be an open and responsive landlord hasbeen compromised.

However, the situation is now improving, as goodrelationships with tenants have become of paramountimportance in solving the problems experienced. The centremanagement team has established an elected tenantassociation and is liaising directly with this body to ensurethat all tenants are informed of continued works andcompletion timetables.

This experience has reinforced a lesson that Sonae Sierra has always known, which is that good relationships with tenants are critical to business success. It has alsohighlighted the importance of setting exacting standards for construction quality to avoid any problems arising after inauguration.

Communicationwith localcommunity duringdevelopment ofAlexa, GermanyDuring the construction of our new shopping centre in Berlin,Alexa, a number of complaints were made about noise by localneighbours and other representatives in the local community. Asa result of a misunderstanding with our principal constructioncontractor concerning who would be responding to thesecomplaints, Sonae Sierra’s response was not as rapid as it shouldhave been and the situation received negative press coverage.

Once aware of the gravity of the community’s concerns,Sonae Sierra rapidly took steps to engage with those personsand organisations concerned, and put in place an extensivecommunity liaison programme to satisfy their enquiries. We set up a direct line for all questions related with thedevelopment, and clarified communication channels betweenSonae Sierra, the contractor, and local stakeholders.

The main lesson learnt is that noise problems should beeliminated through proper implementation of the EMS forconstruction works. If the EMS procedures are followed, noise levels should never reach levels where they give rise to complaints from neighbours, thereby contributing to the management of community relations. Of course, thesecond lesson learnt from this project is that local communityrepresentatives need open and regular communications about plans and progress of construction projects.

Safety and health, LoureShopping,PortugalOn 15 January 2005, a fatal accident occurred during the construction of LoureShopping. Tragically, thisled to a sub-contractor losing his life. The immediate cause of the accident was a heavy container whichfell from an elevated area 8m above ground. The worker, who had only been on site for 2 days, had notbeen provided with adequate training from the principal contractor regarding working practices in elevatedareas. The lifting equipment used had been subject to a modification, without a proper risk analysis.

Of course, Sonae Sierra was deeply saddened by this accident and distressed that it should havehappened on one of its own construction sites. It is of course difficult to eliminate risks on a constructionsite, and it is not easy for Sonae Sierra to control all sub-contractors and their own sub-sub-contractors ina robust way. Nonetheless, Sierra is keen to ensure that such an accident should never happen again.

In terms of learning from the experience, we have re-enforced the following key messages:

> Reinforce the practice of isolating areas under works being done at heights.

> Analyse the risk of changes in equipments.

> Conduct audits to see if people are following the safety rules, and to ensure that all of them received propertraining about their jobs’ risks.


Statement from CR advisors

At Upstream, we continue to be impressed with the level of commitment that Sonae Sierrademonstrates towards environmental excellence and, in particular, its efforts to further formalisethe Company approach to wider socio-economic areas of performance. 2005 was the first year in which Sonae Sierra set itself Corporate Responsibility (CR) targets covering social impacts rather than justenvironmental ones. Upstream has undertaken an audit to review the Company’s progress in achieving these targets, on the basisof the following:

> Meetings and face to face interviews with members of the Sonae Sierra CR Working Group to establish progress made and to identifyfuture challenges.

> A review of internal reports of progress against targets prepared for the Board of Directors by the Environment Department.

> A review of other documents and records demonstrating actions completed in support of management related targets.

> A detailed review of environmental performance data collected across the Company’s portfolio of owned centres under management.This involved a certain degree of error checking, validation and verification, but does not amount to a comprehensive audit coveringthe data source.

On this basis, Upstream’s audit concludes that a total of 45% of the targets have been fully achieved, three quarters of which areenvironmental. A further 39% of the CR targets have been substantially progressed, and many of these are likely to have been completedby the time this report goes to print. This is a good performance, and reflective of a company that is taking its publicly stated commitmentsseriously. There are, however, 15% (a total of five) of the targets against which little or no progress has been made during the year. Mostof these relate to social rather than environmental impact areas, which is perhaps unsurprising given the relatively recent introduction of aformal CR programme.

It is Upstream’s professional opinion that Sonae Sierra is now demonstrating a well developed awareness of its environmental and safetyand health risks, and that the management systems for such risks are increasingly embedded into its mainstream business conduct. Thereare nonetheless a series of challenges facing a company as complex as Sierra, many of which relate to management processes and control.These include the rate of growth of the Company – in terms of the number of employees and the scale of its activities, the geographicalspread of its activities, and associated cultural and language differences; and, linked to both of these, the data collection and informationmanagement tasks that underpin good management systems and controls.

In addition, in the 2004 CR Report, Upstream suggested a number of future priorities for Sonae Sierra in terms of CR. Whilst we recognisethat the Company has begun to address these under the auspices of the CR programme of work, we would suggest that they continue tobe appropriate focus areas for future years. Of most relevance is the importance of stakeholder dialogue and ensuring that the Company isboth aware of, and responsive to, the changing needs and concerns of its various stakeholder groups.

At Upstream, we very much look forward to our work with Sonae Sierra in 2006 and beyond, helping the Company to continue toimprove its performance, and to uncover the value associated with good economic, social and environmental performance.

Julie Hirigoyen, Director, Upstream, UK-based strategic sustainability advisors

GRI Content index Sonae Sierra continues to use the internationally recognised Global Reporting Initiative (GRI) 2002 Sustainability Reporting Guidelines asa framework to inform the structure and content of its annual CR Reports. Having published a full CR Report in 2004, containing detaileddescriptions of Sonae Sierra’s CR vision and strategy, governance structure and management systems, we have decided this year to publisha shorter report focusing on progress and performance during 2005. This is supplemented by a more comprehensive section on CR on theCompany website.

The list below should enable users of Sonae Sierra’s 2005 CR Report to gauge the extent to which we have included content prescribed bythe GRI Guidelines (2002) and to access relevant information contained elsewhere.

Vision and strategyStatement of organisation’s vision and strategy regarding its contribution to sustainable development See website: www.sonaesierra.com

Statement from the CEO describing key elements of the report CR Report 2005 page 1

ProfileOrganisational profile Brief summary in CR Report 2005

Inside Front Cover

See website: www.sonaesierra.com

Report scope CR Report 2005 – Inside Front Cover

Report profile CR Reports, Annual Reports, website

Governance structures and management systemsStructure and Governance See website: www.sonaesierra.com

Stakeholder engagement CR Report 2005 pages 4-5

Overarching policies and management systems See website: www.sonaesierra.com

Performance indicatorsEconomic Performance Indicators CR Report 2005 pages 8-11

Social Performance Indicators CR Report 2005 pages 12-19

Environmental Performance Indicators CR Report 2005 pages 22-27

30 Sonae Sierra

Feedback Form

1. Which stakeholder group do you belong to?

Investor/financier

Tenants

Visitors

Employees

Suppliers

Local community

Government authorities

Media

2. How strongly do you agree that the 2005 CR Report content and key performance indicators(KPIs) cover the issues you consider to be of most relevance to Sonae Sierra’s business?

Strongly agree

Agree

Disagree (please state which issues or KPIs you would like to see covered in future CR Reports in the Comments space below)

Strongly disagree (please state which issues or KPIs you would like to see covered in future CR Reports in the Comments space below)

.........................................................................................................................................

.........................................................................................................................................

3. Please rate the different aspects of the 2005 CR Report using the numbers below:[Scale: 1 = Excellent; 2 = Good; 3 = Average and 4 = Poor]

Written content: 1 2 3 4

Length: 1 2 3 4

Layout and design: 1 2 3 4

4. How effective do you believe the 2006 targets will be in enabling Sonae Sierra to furtherimprove its economic, social and environmental performance?

Very effective

Effective

Not very effective (please state which issues or KPIs you would like to see covered in future CR Reports in the Comments space below)

Not at all effective (please state which issues or KPIs you would like to see covered in future CR Reports in the Comments space below)

.........................................................................................................................................

.........................................................................................................................................

we

care

wha

t yo

u th

ink

fold

her

efo

ld h

ere

Please send the feedback form to:Sonae Sierra Environment Department

by FAX+351217582688

or

[email protected]

MAILRua Amílcar Cabral, nº 23,Quinta do Lambert1750-018 LisboaPortugal

5. To what extent does the quantitative data presented in this report provide meaningfulmeasures of our performance in practice?

The way we do business

Completely To some extent Not at all

Our investors and financiers


Our tenants


Our visitors


Our employees


Our suppliers


Local communities


Government authorities


The Media


6. To what extent does reading this CR Report demonstrate that Sonae Sierrais a responsible corporate citizen?


7. What do you see as the key challenges for Sonae Sierra, over the next few years?

Please describe..................................................................................................................

Please provide any additional comments or suggestions in the space below

.........................................................................................................................................

.........................................................................................................................................

Thank you!If you would like to receive a personal response to this feedback, please tick here(and provide your email address)

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www.sonaesierra.com

PORTUGALPORTOLUGAR DO ESPIDO, VIA NORTE

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