Annual Report 2006 - bib.kuleuven.be · Annual Report 2006 Robeco Groep N.V. Reports 2006 of the Supervisory Board & the Management Board

Annual Report

2006

Robeco Groep N.V.

Reports 2006 of the Supervisory Board & the Management Board

Contents

Preface

1 General information

Special The Investment Engineers

2 Report of the Supervisory Board

Special Experimental Garden

3 Corporate governance

Special Quantitative Strategies

4 Principles on fund governance

Special Clean Tech Private Equity: Financing the next wave of innovation

5 Report of the Management Board

Key figures

Challenges and achievements

Strategy – The next layer

Organization

Investment performance

Business development

Financial results

Compliance, risk management & internal audit

Corporate social responsibility

Robeco in 2007

Special Robeco’s expertise in a changing institutional environment

Addresses

Special Customized asset growth with Younique by Robeco

4

6

8

12

16

18

24

28

34

40

42

43

44

46

48

49

52

54

56

58

60

65

66

Financial Statements 2006

The annual financial statements are published in a seperate document.

Together with this report, these form Robeco Groep N.V.’s annual report over 2006.

A new identity

Those among you who have seen a Robeco annual

report before will probably have noticed that this year

Robeco has assumed a new visual identity. This new

look represents the important changes that Robeco has

undergone as an organization. Over the last ten years,

we have acquired more and more clients outside the

Netherlands and now Europe, the United States, the

Middle East and Asia are all important markets for us.

At the same time, institutional clients and distribution

partners have become increasingly important, and for

many of them we have evolved into strategic partners.

We have summarized our new brand identity in

three words: The Investment Engineers. These three

words enable us to make clear to our clients that our

portfolio managers and researchers are not only very

knowledgeable but, more importantly, that they use this

knowledge to achieve practical solutions and to deliver

superior investment results. It is not just a question of

having the necessary skills, what you are ultimately able

to achieve with these skills is what counts. Using

‘The Investment Engineers’ as the basis, we developed

a new logo and a new house style which reflect the

Robeco of today and tomorrow. You can read more about

‘The Investment Engineers’ on pages 8 through 11.

We are also revitalizing other aspects of our image.

In February 2004, Robeco was the first asset manager in

the world to introduce a clean-tech private-equity fund of

funds (and a follow-up fund was launched in September

2006). In December 2006, Robeco acquired SAM Group,

one of the world’s leading asset managers for sustainable

Preface

4 | Robeco Groep N.V. | Annual Report 2006

investments. This Swiss-based company has a dedicated

and uniquely positioned research department that carries

out systematic research to identify succesful companies

that meet sustainability criteria, and is universally

recognized for constructing and licensing the Dow Jones

Sustainability Indexes (DJSI), a joint initiative with Dow

Jones Indexes.

The introduction of Clean Tech Private Equity (see page

34 through 39) and the acquisition of SAM, has enabled

Robeco to seriously enhance its sustainable-investing

capabilities. This is important, not only because socially

responsible entrepreneurship contributes to a better

world, but also because environmental pollution and

depletion of natural resources will force mankind to

embrace more efficient and cleaner technology. Investing

in this area will generate attractive returns in the future.

This combination of factors makes sustainable investing

an inspiring activity, and an activity that requires inspired

investing, two words central to our mission statement.

We are convinced that by expanding our position in

sustainability investments now, we will create

a considerable competitive advantage for the future

which will enable us to provide our clients with best-in-

class sustainable capabilities.

In last year’s annual report we emphasized the

importance of integrity and acting in the best interests

of clients. In addition to this we also stressed the necessity

for asset managers to operate using a clearly formulated

set of their own corporate values, standards and

principles in order to safeguard that integrity. Since then,

Robeco has taken a further step to promote integrity by

introducing its own set of principles on fund governance in

January 2007.

Fund governance has been an important topic in the

fund-management industry for several years. One of the

main issues is the inherent potential conflict of interests

between the manager and the investors in the fund.

Robeco has now developed a set of clear, transparent

principles aimed at resolving conflicts of interests in

its fund-management activities. Robeco has drafted

these principles in the absence of uniform national or

international standards, anticipating the outcome of

discussions in the European and especially the Dutch fund-

management industry on this subject.

Of course, integrity and a strong brand cannot exist in

isolation. They need to be complemented by superior

investment results. This is why in 2006 our primary

focus was on strengthening and acquiring investment

capabilities that are of strategic importance. To further

boost innovation, we have established an ‘Experimental

Garden’, where new investment strategies can build up

a track record (see pages 16 through 17). We can now

offer our clients a truly all-weather product line, including

enhanced indexing and other beta strategies as well as a

number of unique alpha engines. We are convinced that

Robeco is ready for the future and we hope that you will

share this future with us.

George Möller

CEO Robeco Groep

Robeco Groep N.V. | Annual Report 2006 | 5


Supervisory Board

Paulus C. van den Hoek, chairman

Johan C. ten Cate, vice chairman

Gilles Izeboud

Philip Lambert

Petrus J.A. van Schijndel1

Diederik J.M.G. Baron van Slingelandt

Dirk P.M. Verbeek

Management Board

George A. Möller, chairman

Leni M.T. Boeren

Sander van Eijkern

Constant T.L. Korthout

Frank L. Kusse2

Niek F. Molenaar

Company Secretary

David H. Cross

1 As of 23 May 2006.2 As of 2 February 2007.

General information1

Supervisory Board

Paulus C. van den Hoek, chairman (68)

Dutch nationality. Appointed in 1997 and last

reappointed in 2004. Scheduled to resign and

eligible for reappointment in 2008.

Former Dean of the Dutch National Bar

(1981/84). Lawyer and partner at Stibbe in

Amsterdam since 1965. Supervisory director of

ASM International, Buhrmann, Robeco, Rolinco

and Rorento.

Johan C. ten Cate, vice chairman (60)

Dutch nationality. Appointed in 2001 and


eligible for reappointment in 2009. Member of

the Executive Board of Rabobank Nederland.

Gilles Izeboud (64)

Dutch nationality. Appointed in 2004. Scheduled

to resign and eligible for reappointment in 2008.

Partner and director at PricewaterhouseCoopers

(1977/2002). Former member of the Corporate

Governance Committee in the Netherlands.

Deputy justice of the Enterprise Section of the

Amsterdam Court of Appeal. Supervisory director

of Buhrmann, Endex, Robeco, Rolinco and

Rorento.

Philip Lambert (60)



Former Head of Corporate Pensions of Unilever N.V.

and PLC in London. Chairman of the investment

committee of Algemeen Burgerlijk Pensioenfonds

(ABP) and member of the investment committee

of ABN AMRO Pension Fund. Supervisory director

of Robeco, Rolinco and Rorento.

Petrus J.A. van Schijndel (56)



Member of the Executive Board of Rabobank

Nederland.

Diederik J.M.G. Baron van Slingelandt (60)




Former member of the Executive Board of

Rabobank Nederland.

Dirk P.M. Verbeek (56)




Member of the Executive Board of Aon

Corporation in Chicago and chairman of the

Executive Board of Aon Holdings in Rotterdam.

Supervisory director of Robeco, Rolinco and

Rorento.

Management Board

George A. Möller (59)

Dutch nationality. Employed at Robeco since 1 July 2004.

Former president of Amsterdam Exchanges N.V. and

member of the Management Board and Chief Operating

Officer of Euronext N.V. Supervisory director of Dubai

International Financial Exchange, member of the

Investment Committee of Egeria II. Chairman and Chief

Executive Officer since 1 July 2004.

Leni M.T. Boeren (43)

Dutch nationality. Employed at Robeco since 1 January

2005. Former Managing Director of Information

Services and member of the Operational Committee of

Euronext N.V. Head of the Robeco Direct business unit

since 1 January 2005.

Sander van Eijkern (42)

Dutch nationality. Employed at Robeco since 1989.

Head of the Robeco Alternative Investments (RAI)

business unit since 2000.

Constant T.L. Korthout (44)


Chief Financial Officer of the Robeco Group since 2002.

Frank L. Kusse (45)


Former Managing Director – Head of Gobal Retail, ABN

AMRO Asset Management. Head International Affairs

since February 2007.

Niek F. Molenaar (46)


Head of the Robeco Asset Management (RAM) business

unit since September 2004.


Special

Robeco’s client base is a reflection of our global ambition. Our international distribution partners and institutional

clients now play an important role in realizing our international reach. These changes have called for a repositioning

of the Robeco brand: the Rotterdam-based asset manager needed a more international identity with stronger

emphasis on business-to-business activities. Robeco summarises its new brand strategy in three words:

The Investment Engineers.

The Investment Engineers


These three words reflect the redefined positioning

of Robeco. The Investment Engineers demonstrates

exactly what the Robeco brand stands for: commitment,

consistency and craftsmanship (see ‘The Investment

Engineers – who we are and what we believe in’ on

this page) in addition to state-of-the-art expertise and

innovation in investing. Robeco is not just concerned

about the knowledge of its portfolio managers, but, more

importantly, about the skills with which those portfolio

managers are ultimately able to convert knowledge into

solutions. By launching The Investment Engineers, Robeco

wants to demonstrate that its portfolio managers use

their knowledge and skills to devise practical investment

solutions tailored to their clients’ needs, in order to

achieve superior results.

Distinctive positioning

Robeco’s new positioning is distinctive in a number of

ways. Most of Robeco’s competitors focus either on

input, such as the knowledge and the expertise of their

employees, or on output, for example the performance

achieved. None, however, focus on the investment

process, which is actually very important. In fact,

commitment, consistency and craftsmanship are Robeco’s

key traits. Positioning a brand around the process does

not necessarily mean that we will not also talk about

performance and output. In fact, it gives a refreshing new

distinctive angle from which to address these important

aspects of Robeco’s business.

The Investment Engineers – who we are and what we believe in

Commitment, consistency and craftsmanship are the key traits of The Investment

Engineers. Robeco provides a large number of skilled and specialized investment

teams in the US and Europe. We are experts in investing. We know the pulse of the

market. And with our broad product range, we are committed to deliver investment

solutions tailored to the needs of both private and institutional clients. At Robeco,

we are driven by solutions.

The Investment Engineers are known for their well-structured and model-based

approach. Our investment teams have the expertise needed to develop alpha

engines and sophisticated constructions. We design innovative products with

multiple performance drivers, which we refine and adapt to market developments.

This approach has proved its value over the years.

The Investment Engineers are highly motivated to succeed. We manage

investments carefully and consistently. We are geared to deliver superior results at

agreed upon risk levels. Robeco has focused on doing just that for over 75 years,

with solutions that really work.


Special The Investment Engineers


The asset manager Robeco

Robeco also developed a new logo and a new house

style for both printed material and the internet, using

The Investment Engineers as the basis. Robeco, the asset

manager, will use The Investment Engineers every time

it communicates with its target and existing audiences

through advertising or non-customized marketing.

Strengths and capabilities

The Investment Engineers also became the central

message in Robeco’s new pan-European campaign for

the business-to-business market in 2006. In this

campaign, Robeco communicates the strengths and

capabilities of The Investment Engineers: being able to

convert considerable investment knowledge into state-

of-the-art investment solutions and investment strategies

that realize steady outperformance (alpha engines).

The Investment Engineers in advertisements

In the pan-European advertising campaign, Robeco

substantiates the capabilities of The Investment Engineers

with examples of actual products and solutions. In other

words, Robeco’s products and investment solutions are

the direct proof of the capabilities of The Investment

Engineers. In all advertisements for the business-to-

business market an Investment Engineer, either a man

or a woman, is placed in an environment where he or

she does not belong, and is thus part of a metaphor that

establishes the link to the Robeco product or solution. The

Investment Engineer demonstrates a specific advantage

or a characteristic of the specific product, with a consistent

use of our newly developed corporate identity and the

colour turquoise. The basic elements of this business-to-

business campaign will be translated into a specific retail

campaign for the Netherlands.

One of the strengths of The Investment Engineers is to make volatility

profitable. In the advertising campaign, this strength is illustrated

with a picture of an Investment Engineer catching waves on a

surfboard. This strength is substantiated with Robeco’s Active Duration

Management: The Investment Engineers’ proprietary quantitative

duration model takes advantage of volatile interest-rate movements.

All advertisements will be supported integrally by separate

web pages on www.robeco.com where further details

are provided about the specific characteristics of every

claim and product as well as background information

and by special events for Robeco’s business partners, like

seminars and presentations.


The Investment Engineers make volatility profitable

Active Duration Management

Out- Informationperformance* ratio*

1 year (Aug 05 – Aug 06) 2.0% 1.2

5 year (Aug 01 – Aug 06) 1.4% 0.6

Since inception (Jan 95 – Aug 06) 2.0% 0.9

* Source Robeco duration model

This advertisement is intended to provide additional information on Robeco’s duration expertise. This expertise is offered by Robeco Institutional Asset Management B.V., which is registered

with the Netherlands Authority for the Financial Markets in Amsterdam. The value of your investments may fluctuate. Results obtained in the past are no guarantee for the future.

The Investment Engineers’ proprietary

quantitative duration model takes advantage

of volatile interest-rate movements. Based

on this disciplined and transparent approach,

highly skilled investment teams take

significant bets. This has resulted in strong

outperformance and a high information

ratio in the last 11 years.

For more information go to

www.robeco.com/duration or call

+31 10 224 2412.

Robeco is part of the Rabobank Group. Rabobank Group has been assigned the highest possible credit rating by leading

rating agencies.

Report of the Supervisory Board

We herewith present the Robeco Groep N.V. accounts for

the financial year 2006 together with the report of the

Management Board.

Composition of the Supervisory Board

The composition of the Supervisory Board changed in

2006. At the General Meeting of Shareholders on 23 May

2006 Mr. D.J.M.G. Baron van Slingelandt was reappointed

as supervisory director. At the same meeting Mr. P.J.A. van

Schijndel, member of the Executive Board of Rabobank

Nederland, was appointed as supervisory director of the

company with immediate effect. According to schedule,

Mr. D.P.M. Verbeek will resign at the General Meeting

of Shareholders to be held in April 2007. Mr. Verbeek

is eligible for reappointment. It is proposed that he be

reappointed as supervisory director of the company.

All supervisory directors, except Messrs. Ten Cate,

Van Schijndel and Van Slingelandt, are independent

within the meaning of the Dutch Corporate Governance

Code.For information about each of the supervisory

directors, please refer to page 7 of this annual report.

2



Meetings of the Supervisory Board

In 2006 the Supervisory Board met five times. Overall,

the Supervisory Board meetings were attended by almost

all the Supervisory Board members. The meetings were

also attended by the Management Board. The meeting

held in March was attended by the external auditor,

Ernst & Young, too. The members of the Management

Board were not present when their functioning and

remuneration were discussed. With the exception of the

discussion on his own performance and remuneration,

the CEO did attend these discussions.

As in the previous financial years, the Supervisory Board

met in the USA, this time at the Robeco Investment

Management (RIM) offices in Boston, in October for

a Supervisory Board meeting. Prior to this meeting

the management of Robeco Investment Management

and Harbor Capital Advisors gave presentations and

exchanged ideas with the Supervisory Board on various

business subjects, like, for example, the business

development, the investment policies, the US mutual-fund

market, regulatory developments and HR issues.

On the basis of frequent and detailed reporting, the

Supervisory Board discussed the company’s quarterly

and year-end results in the context of the budgetary

targets set, the investment results and the development

of assets under management with the Management

Board. Various strategic initiatives, based on the strategic

plan 2005-2009, approved in 2005, were extensively

discussed. The Supervisory Board approved the acquisition

of a 40% participation in AIM, a Belgian hedge-fund

manager and the acquisitions of a 64 % participation in

sustainable asset management (SAM Group), established

in Switzerland. The announcement of this acquisition

was made in December. Moreover, initiatives related

to proposed activities in Poland, Egypt and India were

frequently discussed in the Supervisory Board meetings.

In Poland initiatives are being undertaken to develop

a distribution network for Robeco products, while in Egypt

a newly founded local asset-management initiative has

been financed as a strategic partner. More recently

the Supervisory Board approved a 49% participation

in Canara Robeco Asset Management, an asset-

management joint venture with Canara Bank in India.

With respect to the existing foreign operations special

attention was paid to France; the newly appointed CEO of

Robeco France, Jean-Louis Laurens, presented his business

plan in the Supervisory Board meeting of May.

As for the Rotterdam operation the Supervisory Board

discussed the outsourcing project of Robeco Direct.

RAM’s proposals to further develop the institutional

business, were discussed in the context of a strategy

plan regarding the institutional market, presented to

the Supervisory Board. The Supervisory Board endorsed

Robeco’s rebranding operation, which was executed in the

fourth quarter of the year. Next to the above mentioned

issues the Supervisory Board, on the basis of reporting

from the Supervisory Board committees, discussed

subjects such as the risk related to the investment policy

and the instruments to control this risk, internal-audit

and compliance issues and HR related subjects. The

Supervisory Board discussed and adopted the Robeco

Fund Governance Principles, which serve among other

things as guiding principles to address conflicts of interest.

The integral text of these Principles, which apply to the

Robeco organization as a whole, is included in this annual

report, on pages 28 through 33. The Supervisory Board

discussed its own performance and that of its individual

members in addition to its profile, composition and

competence.

A compliance workshop was organized, attended by

all supervisory directors. In this workshop various cases,

derived from day-to-day business, were discussed.

The issues discussed concerned Robeco Groep N.V. and

all its subsidiaries, and also the investment institutions

for which management services are provided.

Supervisory Board committees

In its May meeting the Supervisory Board decided to

establish two committees from its members:

an Audit & Compliance Committee and a Nomination,

Remuneration & Corporate Governance Committee,

replacing the existing Audit & Remuneration Committee.

Both committees consist of three supervisory directors.

The Audit & Compliance Committee consists of Messrs.

Izeboud (chairman), Van den Hoek and Van Schijndel.

The Nomination, Remuneration & Corporate Governance

Committee consists of Messrs. Ten Cate (chairman),

Van den Hoek and Lambert.

In the September meeting of the Supervisory Board

the Audit & Compliance Committee Charter was adopted.

In this charter the objectives, roles and responsibilities of

the Audit & Compliance Committee with respect to both

internal audit and compliance are laid down.

The Audit & Remuneration Committee met three times,

the two new committees both met three times too. The

meetings were attended by the CEO and as far as audit

and compliance issues were concerned the CFO too.

Representatives of the external auditor, Ernst & Young, and

the head of the Internal Audit department attended the

meetings of the Audit & Remuneration Committee when

subjects related to audit were discussed, and they attended

the meetings of the Audit & Compliance Committee. Parts

of the meetings were also attended by the head of Corporate

Compliance and the head of Group Risk Management.

In the Audit & Remuneration Committee the medium-

term audit plan 2006-2010 and the Audit plan 2006

were discussed. The Audit & Compliance Committee

discussed various regulatory issues, amongst others,

the consequences of the Sarbanes-Oxley legislation and

an impact analysis of MiFID. The head of Fiscal Affairs

informed the Audit & Remuneration Committee on various

tax issues, like, for example, the fiscal monitoring of

investment funds/products, and a number of actual issues.

operational-risk-management issues were discussed on

the basis of a presentation given by the head of Group

Risk Management, while the state of affairs of Robeco’s

ICT was explained in a presentation given by the Chief

Information Officer. Compliance issues were extensively

discussed on the basis of quarterly compliance reports.

The Year Plan 2006 of Corporate Compliance was

discussed and endorsed. The Audit & Remuneration

Committee respectively the Nomination, Remuneration

& Corporate Governance Committee discussed various

issues related to the remuneration of the members of

the Management Board. The proposed allocation 2006

under the Equity Notes plan (see below in paragraph

IV) was discussed and agreed to. With respect to Human

Resources, the personnel development scheme and the

Succession & Continuity Plan 2006 were discussed on

the basis of a presentation given by the head of Human

Resources. A number of searches for top-management

functions were discussed as well.

Composition of the Management Board

Mr. S.T. Bichsel, responsible for International Affairs,

stepped down as member of the Management Board on

1 January 2006. Mr. F.L. Kusse was appointed in this

vacancy as of 2 February 2007.

Remuneration report

I Robeco’s remuneration policy

The structure of the remuneration policy for members

of the Management Board is in line with Robeco Groep

N.V.’s general remuneration policy. The objective of the

remuneration policy is to position Robeco Groep N.V.

competitively in the international asset-management

market, enabling it to attract and retain employees who

perform well. The employment package and remuneration

systems are also structured to promote a long-term

relationship with the organization.

The Supervisory Board’s Nomination, Remuneration

& Corporate Governance Committee decides on the


Report of the Supervisory Board

employment benefits for the individual members of the Management

Board. The remuneration package consists of the following components:

fixed remuneration, variable short-term remuneration (bonus), variable

long-term remuneration (equity notes) and fringe benefits.

II Fixed remuneration

The fixed remuneration component aims to provide a good and

competitive remuneration basis relative to the international

asset-management market, and taking into account the relevant

function’s level of responsibility, results and competences. The level of

responsibility is established using the Hay function-valuation system.

III Variable remuneration (bonus)

For the Management Board the variable remuneration component

depends on Robeco Groep N.V.’s gross result (worldwide). For

Management Board members who are responsible for a business unit,

this component is also linked to the relevant business unit’s results.

The ratio between the actual gross result and the budgeted gross result

determines the level of the eventual payment. Any bonus payments

are made in three installments. 60% is paid in the first year (after the

applicable financial year) and two other portions are deferred. The 30%

portion is paid in the second year and the 10% portion in the third year.

Both the deferred portions are converted into Equity Notes (see below

in paragraph IV). These E-notes vest at the end of these deferred periods

in year two and three. If the recipient is no longer employed by Robeco

Groep N.V. or has handed in his notice at the time of payment on or

before the day of vesting, the right to this remuneration component

lapses. In the course of the year the decision has been taken to

increase the variable component and at the same time to attach more

importance to the discretionary power to adjust bonus payments.

IV Equity notes (E-notes)

A limited group of employees (less than 5% of the total workforce),

including the Management Board, are given the opportunity to

participate directly in Robeco’s future value development through virtual

shares in Robeco Groep N.V. E-notes are a way of additionally rewarding

key employees with the aim of increasing their long-term commitment

to the group. In the case of the Management Board, the Nomination,

Remuneration & Corporate Governance Committee decides on whether

or not to grant E-notes and on the quantity to be granted.

In the case of all other employees, the Management Board decides on

whether or not to grant E-notes. The individual allocation of E-notes is

linked to the employee’s individual performance. There is also a link

to the contribution to the realization of the strategic targets of the

Robeco Group as a whole and the individual’s own business unit.

The E-notes represent a value that directly corresponds to the value

of Robeco Groep N.V., the valuation of which is based on ‘profit from

continuing operations adjusted downward for the expenses related to

the long-term incentive plans and adjusted for the results related to

the foreign-currency hedge’. E-notes have a minimum life of 4 years

and a maximum life of 6 years. During this life, dividend is generated.

V Investment notes (I-notes)

Next to the E-notes scheme an Investment notes (I-notes) scheme is

in place. This scheme enables employees, who are granted E-notes,

to invest themselves in additional ‘virtual shares’. Like E-notes,

the I-notes are linked to the value/earnings development of Robeco

Groep N.V. I-notes have a maximum life of 5 years, during which

dividend is generated. If I-notes are retained for the full 5 years the

investor receives a loyalty premium.

VI Fringe benefits

Robeco offers a competitive package of fringe benefits, which includes

a lease car, expense allowance, insurance, supplementary mortgage

benefit, and a pension plan made up of a final-salary plan and a

defined-contribution scheme.

Recommendation to adopt the annual financial

statements

We have taken note of the contents of the report presented by Ernst &

Young Accountants and recommend approval of the annual financial

statements. We concur with the Management Board’s proposal to

distribute no dividend.

Rotterdam, 22 March 2007

The Supervisory Board


Special

With the introduction of ‘The Investment Engineers’, Robeco has enhanced its positioning as an innovative asset

manager. One way of proving this positioning is introducing new investment strategies. However, new investment

strategies have an important handicap: their lack of track record. Although past performance does not guarantee

or reflect future results, when making a choice between different investment strategies, many investors regard the

track record as an indication of the asset manager’s ability within a certain strategy. This leaves the asset manager

and the investor with the same problem: how to develop or invest in new investment strategies?

Robeco Asset Management’s

Experimental Garden


Back tests

Investors often respond to this dilemma by either choosing

not to invest in unproven investment strategies or by

relying on the reputation of the asset manager. Asset

managers often use ‘back-tested results’ to determine

which new investment strategies to offer. In back testing,

the asset manager uses historical data to try to replicate

an investment strategy, as it would have been executed

in the past. This approach can be useful; however, it does

have some well-documented limitations. In practice, actual

results are often disappointing when compared to their

theoretical back-tested results.

Live tests

Robeco Asset Management established the ‘Experimental

Garden’ in 2005 in order to determine which new

investment strategies to offer in light of the limitations of

back testing. This concept involves thoroughly testing new

innovative investment strategies in ‘live’ conditions before

they are offered to the public. While the Experimental

Garden cannot guarantee results, it does provide more

confidence in new investment strategies. RAM’s Product

Initiative Committee selects new investment strategy ideas

to participate in the Experimental Garden. Strategies within

the Experimental Garden may be managed as a ‘paper’

portfolio, as part of another fund, as a fund seeded by

Robeco or in cooperation with a professional client.

Client pressure

If a paper portfolio is selected, the portfolio manager makes

investment decisions as though he or she were managing

a real portfolio, but without using any real money. To make

this simulation as realistic as possible, Robeco takes into

consideration both the timing of the investment and all

the relevant costs. The paper portfolio approach, however,

lacks the crucial pressure of a real, sizeable portfolio of

client assets. When seed capital is used, the Robeco Group

is the sole investor in the fund and assumes the investment

risk. This approach addresses some of the limitations of

the paper portfolio, as the fund manager has to deal with

‘client’ pressure from Robeco management. However,

because this approach is capital intensive only a limited

number of investment funds can be seeded at the same

time. A third option is to cooperate with a professional client

who is willing to seed a new investment fund. This approach

reduces the capital required by Robeco while benefiting

the client by allowing them to invest exclusively in a new,

innovative investment strategy at a low cost.

Graduation or termination

The Experimental Garden includes about ten new

investment strategies at any given time. The pre-defined

duration of the test period is dependent on the type of

strategy but it is generally longer than one year. At the

end of the test period, the investment strategy either

‘graduates’ and is then offered to Robeco clients or the

experiment is terminated and we have saved our clients

from making a disappointing investment. RAM expects to

launch 50% of the investment strategies that it tests, but

this figure is subject to the quality of the strategies tested.

Rating agencies like S&P and Morningstar have agreed to

take into account any live track record in assigning ratings.


Corporate governance3


Like in the past years, in 2006 corporate governance

remained a widely discussed subject. Although Robeco

Groep N.V. is not a listed company and, as such, is

not bound by the Dutch Corporate Governance Code

(hereafter referred to as the Code), Robeco Groep N.V.

does find it important to comply with the Code’s principles

and best-practice provisions where possible. It should

be noted here that the shares of Robeco Groep N.V. are

all held by one shareholder, the Coöperatieve Centrale

Raiffeisen-Boerenleenbank B.A. (‘Rabobank Nederland’).

As a result several of the Code’s principles do not apply or

are irrelevant.

Below you will find a list of the issues included in the Code

that are most relevant to Robeco Groep N.V. Furthermore,

the principles and best-practice provisions of the Code that

are not or cannot be applied by Robeco Groep N.V. and the

current corporate-governance structure are described and

explained.

I Compliance and enforcement of the Code

The corporate governance of Robeco Groep N.V. is

established in the company’s Articles of Association and

in the shareholder agreement between Robeco Groep

N.V. and Rabobank Nederland, which was made in 1997

and amended in 2004. Within this framework, Robeco

Groep N.V.’s Management and Supervisory Boards are

responsible for the company’s corporate-governance

structure and compliance with the Code. They are

accountable to Robeco Groep N.V.’s only shareholder,

Rabobank Nederland. Although Robeco Groep N.V. is not

listed on the stock-exchange, and as such, is not bound

by the Code, the company intends to comply as fully as

possible with the Code.

II The Management Board

Robeco Groep N.V. is managed by a Management

Board, currently consisting of six board members. The

Management Board is supervised by the Supervisory

Board. According to the appointment procedure, the

General Meeting of Shareholders puts forward a proposal

which should be approved by the Supervisory Board before

the General Meeting of Shareholders actually appoints a

member of the Management Board.

The Supervisory Board has undertaken that proposals for

appointments will not be rejected without good reason.

On account of the abovementioned nature of the

company the maximum four-year membership term for

board members as recommended by the Code is not

complied with and members of the Management Board of

Robeco Groep N.V. are appointed for an indefinite period.

After prior consultation with the Supervisory Board,

the General Meeting of Shareholders appoints one of

the members of the Management Board as chairman.

The General Meeting of Shareholders is also authorized

to suspend or dismiss any member of the Management

Board at any time. Dismissal arrangements for

Management Board members are determined reasonably

and fairly on a case-by-case basis.

The Management Board is responsible for managing

the company meaning that, among other things, it is

responsible for realizing the company’s strategical and

operational targets, policy and the resulting performance.

The Management Board reports to the Supervisory Board

and to the General Meeting of Shareholders on this.

Furthermore, the Management Board is also responsible

for compliance with all relevant legislation and

regulations, risk management and for the financing of all

the corporate activities. Finally, the Management Board


is responsible for the provision of information, relating to

the company and the Robeco Group, to the Supervisory

Board in order to enable it to satisfactorily execute its task.

As recommended by the Code, Robeco Groep N.V.’s

regulatory environment and its risk-management

structure are explained on pages 54 through 55

respectively of the report of the Management Board.

The remuneration policy for members of the Management

Board is explained in the report of the Supervisory Board.

The way in which it was implemented in this reporting

period is explained in the notes to the annual financial

statements. The remuneration policy for the coming years

(as included in the remuneration report) was adjusted at

the end of the reporting period and will soon be published

on the company’s website.

The remuneration per individual board member is found

in the notes to the annual financial statements. The

value of the options granted to the Management Board

and staff is also given here together with an explanation

of how this value is determined. As explained in the

remuneration report, members of the Management

Board and a number of employees are granted E-notes

in lieu of the profit-sharing plan (terminated) and the

management option scheme (which will no longer apply

to the Management Board).

Employees, except those participating in the E-notes

scheme, are granted options on shares in several Robeco

Group investment institutions. The granting of options

is based on the employee’s income. The exercise price is

based on the price of the underlying shares at the time

when the options are granted.

The company does not grant loans or guarantees to

members of the Management Board. Robeco Direct N.V.,

a 100% subsidiary of Robeco Groep N.V. and

a credit institution, can grant loans to members of the

Management Board under the same conditions that

apply to other Robeco employees. In the opinion of the

Management Board there were no conflicts of interest

or semblance thereof between the company and the

members of the Management Board in 2006.

Robeco Groep N.V. does not have separate regulations

covering securities transactions by members of the

Management Board. The applicable ‘Rules and

regulations regarding private investment transactions by

employees and insiders of Robeco Nederland B.V.’, which

are based on the regulations of the Dutch 1995 Act on the

Supervision of the Securities Trade, is published on the

company’s website. These rules should guarantee that any

insider trading or a semblance thereof, and any mixing of

business and private interests is avoided.

The company continuously strives to strengthen its

internal risk-management and control framework. During

the reporting period (see section 7 of the report of the

Management Board) various measures were taken,

including the efforts to participate in the Rabobank SOx

related initiatives. Robeco aims to issue the first full year

In Control Statement according to the Dutch Governance

Code in 2008.

III The Supervisory Board

It is the duty of the Supervisory Board to supervise

the Management Board’s activities and the general

developments at the company and its affiliated

enterprises. The Supervisory Board also advises the

Management Board. Robeco Groep N.V. has laid

down the specific tasks of the Supervisory Board in

the Articles of Association of the company and in the

abovementioned shareholder agreement. These tasks are

thus not laid down in separate regulations. Information

about the Supervisory Board’s activities in the past

financial year and the information required by the Code

can be found in the report of the Supervisory Board on

pages 12 through 15.

Corporate governance


The Robeco Groep N.V.’s Supervisory Board consists of nine

persons: four supervisory directors A, four supervisory

directors B and one chairman. There are currently two

vacancies. The chair cannot be a supervisory director B

nor an employee of Rabobank Nederland. Supervisory

directors A cannot be or have been supervisory directors B,

nor can they be employees of Rabobank Nederland. The

General Meeting of Shareholders appoints the supervisory

directors and is authorized to dismiss any supervisory

director at any time. Supervisory directors will be

appointed on the basis of a binding proposal consisting of

at least two persons, formulated by the Supervisory Board.

The Supervisory Board is structured in such a way that

it can satisfactorily fulfill its task and that its members

can operate critically and independently of each other,

the Management Board and any other participating

interests. It should be noted that two supervisory directors

are employed by Rabobank Nederland. In line with the

principle of the Code, each Robeco Groep N.V. supervisory

director is able to assess the general overall policy and has

the necessary expertise to fulfill his task. The Supervisory

Board meets the Code’s recommendation to have at least

one financial expert as supervisory director; please refer

to the short CVs of the supervisory directors on page 7. In

order to get a proper insight into the company and the

activities of Robeco Groep N.V. newly appointed members

of the Supervisory Board follow a customized introduction

program.

All members of the Supervisory Board also meet the

recommendation regarding the maximum number

of supervisory directorships at Dutch listed companies


(please refer to the information regarding supervisory

directors on page 7) and all the supervisory directors

(except for Messrs. Ten Cate, Van Schijndel and Van

Slingelandt) are independent within the meaning of

the Code.

In accordance with the Articles of Association and the

recommendation of the Code, the Supervisory Board

has drawn up a retirement schedule. According to this

schedule, supervisory directors should, in principle, resign

on the day of the General Meeting of Shareholders four

years after they were appointed. Reappointment can

take place with immediate effect but only after careful

consideration and not if the person involved has reached

or will reach the age of 72 in that year. No maximum term

is applied for supervisory directors, as recommended by

the Code. The company published the retirement schedule

on its website.

In close consultation with and after approval by the

Supervisory Board, the General Meeting of Shareholders

appoints a chairman and one of the supervisory directors

B as vice chairman. As mentioned above, the chairman

may not be a supervisory director B or an employee of

Rabobank Nederland. The chairman chairs the meetings

of the Supervisory Board and ensures that the Supervisory

Board functions satisfactorily. Furthermore, the chairman

of the Supervisory Board has regular contact with the

CEO on all issues relating to the responsibilities of the

Supervisory Board. The secretary of the company assists

the chairman of the Supervisory Board with the actual

organization of the meetings of the Supervisory Board.

In mid-2004 a presidium was formed consisting of the

chairman and the vice chairman of the Supervisory Board.

The vice chairman is a supervisory director B who, in

contrast to a supervisory director A, may be an employee

of Rabobank Nederland. This is indeed currently the case.

The CEO, in particular, keeps the presidium informed

and discusses issues with them. Prior to the meetings

of the Supervisory Board and the Audit & Compliance

Committee and the Nomination, Remuneration &

Corporate Governance Committee the items on the

agenda are discussed with the presidium.

The Supervisory Board has appointed an Audit &

Compliance Committee and a Nomination, Remuneration

& Corporate Governance Committee from among

its members. In conformity with the Tabaksblat

recommendations the two committees are not chaired by

the chairman of the Supervisory Board. Both committees

consist of three persons.

Corporate governance


The Audit & Compliance Committee and the Nomination,

Remuneration & Corporate Governance Committee have

taken on the tasks as described in the recommendations

of the Code. The Report of the Supervisory Board gives

details about the composition of both committees, the

number of meetings and the main items discussed in

these meetings.

In the opinion of the Supervisory Board there was no

conflict of interests or semblance thereof between the

company and the members of the Supervisory Board in

2006.

The General Meeting of Shareholders determines

the remuneration for the supervisory directors. This

remuneration is independent of the results of the

company. The notes to the annual financial statements

contain the information required by Dutch law (articles

2:383c through 2:383e of the Dutch Civil Code) about

the level and structure of the remuneration for each

supervisory director. The supervisory directors of Robeco

Groep N.V. do not receive shares and/or rights to shares

in the company as remuneration. The company does not

grant loans or guarantees to its supervisory directors.

IV Shareholders and the General Meeting

of Shareholders

Each year within six months of the close of the financial

year the General Meeting of Shareholders of Robeco

Groep N.V. is held in Rotterdam to discuss the reports of

the Management and Supervisory Boards, to adopt the

annual financial statements and to take decisions on the

dividend proposal and other items on the agenda.

The minutes of the General Meeting of Shareholders

are available for the shareholders within three

months of the meeting, in accordance with the Code’s

recommendations.

As Robeco Groep N.V. has only one shareholder, the

recommendations of the Code relating to proxy voting

are irrelevant. The other recommendations of the Code

relating to dividend and discharge are followed.

The recommendations of the Code with regard to supply

of information to the General Meeting of Shareholders

relating to price-sensitive information or analysts’ reports

do not apply, as Robeco Groep N.V. is not a listed company.

Finally, the recommendations relating to the

responsibilities of institutional investors do not apply to

the shareholder of Robeco Groep N.V. in that capacity

either. Robeco does have an active voting policy for most

of the investment funds and institutional mandates,

on the basis of which voting rights are exercised on the

underlying stocks. For more information on this subject,

please see pages 57 of this annual report, and the

company’s website, www.robeco.com.

V Financial reporting

The Management Board is responsible for the quality

and completeness of the published financial reports. The

Supervisory Board ensures that the Management Board

takes this responsibility.

Each year the General Meeting of Shareholders, at

the recommendation of the Supervisory Board,

commissions the external auditor to audit the annual

financial statements. The external auditor reports his

findings to the shareholder, the Supervisory Board and

the Management Board. Robeco Groep N.V. complies with

the Code’s recommendations relating to the internal and

external auditors. Robeco Groep N.V.’s annual financial

statements are published on the company’s website.


The asset-management industry has undergone fundamental changes over the past few decades. Whereas

in the past investing may have bore more resemblance to an art than to a science, today the opposite seems to

hold true. Modern-day portfolio managers are expected to understand and make use of quantitative concepts

such as ex-ante risk measurement and attribution, ex-post performance measurement and attribution, portfolio

construction and optimization algorithms and quantitative forecasting models. All these elements are intended

to support the portfolio manager in structuring and overseeing the investment process and in taking the best

investment decisions in a way that controls risk. One could compare today’s portfolio manager to a Boeing 747

pilot who uses many devices and indicators to guarantee a safe flight. As flight engineers are vital in modern

aviation, quantitative researchers are vital in modern asset management. Robeco Asset Management, with its

17 quantitative researchers, has one of the largest quantitative-research departments in Europe.

Quantitative Strategies

Special


Long-standing experience in quantitative

research

Robeco has been committed to quantitative investment

research since the early 1990s. From the outset

quantitative researchers have worked closely together

with fundamental analysts and portfolio managers to

develop quantitative investment tools. The key research

areas at that time were global duration allocation and

bottom-up stock selection. A significant amount of time

was spent on building and analyzing historical back-test

databases and on back testing quantitative strategies.

The first quantitative risk-management, portfolio-

management and forecasting models were introduced

into the investment process in the mid-nineties. Over the

years the quantitative research at Robeco has spread to

other areas such as currency allocation, asset allocation,

private equity, emerging-market equity and corporate-

bond investing.

In the last two areas Robeco has actually played

a pioneering role. At the end of the nineties Robeco

was among the first practitioners to investigate the

effectiveness of quantitative stock-selection strategies

across a broad range of emerging markets. Academic

papers based on this innovative research were published

in the Journal of Empirical Finance and Emerging

Markets Review. The research was conducted by Robeco

quantitative researchers and emerging-markets portfolio

managers in cooperation with a professor of the Erasmus

University in Rotterdam.

In terms of corporate-bond investing, Robeco was one

of the first asset managers in the world to develop

a quantitative corporate-bond selection model. The

research was carried out using a unique dataset that



Special Quantitative Strategies

coupled data on corporate bonds with data on the same

company’s listed shares. Since 2000 both these models

have played a major role in the emerging-market and

credit-investment processes respectively.

In 2005 Robeco developed an innovative approach

to measure the risk in corporate-bond portfolios. This

approach was adopted in 2006 by several leading

providers of risk-management solutions in the US.

Unique approach to quantitative research

Quantitative research within Robeco Asset Management is

organized in a unique way. Key elements in our approach

are an integrated quantitative-research team and a

close and intensive cooperation between quantitative

researchers and portfolio managers. We have opted for

a central research department, engaged in both equity

and fixed-income research, because it is our firm belief

that this creates synergy. Many of the research challenges

that one faces in terms of data gathering, data cleaning,

programming, back testing, and tool development are

similar for both equities and fixed income. For example,

when we started our innovative quantitative-research

efforts in the field of corporate-bond selection, we

benefited tremendously from our extensive experience in

stock selection. The exchange of experiences and ideas

between equity researchers and fixed-income researchers

has proved to be very fruitful and has led to many

innovative solutions.

Every researcher in the Quantitative Strategies depart-

ment has a strong theoretical background in quantitative

modeling. In terms of educational qualifications they have

at least an MSc degree in mathematics, physics or

econo metrics and many quants even hold a PhD degree.

The team maintains close relationships with leading

universities in the Netherlands. Several researchers have

a part-time appointment as Associate Professor at the

Erasmus University, and each year between five and eight

students carry out their final projects in the department.

Although the researchers are located in a central depart-

ment, they continuously and intensively cooperate with

portfolio managers and analysts from the investment

departments. Every quantitative research project at

Robeco is carried out by a project team consisting of

quantitative researchers and portfolio managers. In this

way we combine theoretical modeling knowledge and

experience with practical market knowledge and

experience. This cooperation is essential in order to develop

sound quantitative models that are applicable in the

investment process. Today more than fifteen quantitative

models are used in the investment process at Robeco. The

models cover all areas of traditional asset management,

including developed equity markets, emerging equity

markets, money markets, government-bond markets,

corporate-bond markets and currency markets.

Quantitative investment products

All quantitative models are used in the investment

process, but not all are used to the same degree.

Some models serve as an advisory tool for the portfolio

manager, whereas other models are at the very heart

of quantitative investment strategies and products.

We define a quantitative investment strategy as an

investment approach which derives its primary added-

value from quantitative signals. For example, since

1998 the active investment strategy of the Lux-o-rente

fund has been based solely on the signals provided by


the quantitative duration model. Due to the success of

this quantitative investment approach over many years,

assets under management in RAM’s quantitative duration

capability have grown to nearly EUR 6 billion today.

In 2003 a quantitative enhanced-indexing equity

capability was launched. This investment approach is

based entirely on the output of the quantitative stock-

selection model. The RAM Disciplined Equity team

is responsible for managing the enhanced-indexing

portfolios. Several new, innovative quant products were

launched in 2005 and 2006. In 2005 both an active

quant product for global mid-caps and a global long-

short quantitative hedge fund were started. In 2006 the

Disciplined Equity team added Quant Pacific, Emerging

Markets Enhanced Indexing and Conservative Equity

products to its range. This last product is very innovative in

the sense that it does not take a benchmark as a starting

point for stock-selection decisions, but instead has a pure

focus on absolute return and absolute risk. Assets under

management in quantitative equity products managed by

the RAM Disciplined Equity team have grown to over

EUR 6 billion today. In 2007 we expect to launch more

new quantitative investment strategies, both for equities

and for fixed income. In the same way that the flight

engineers leave the actual flying to the pilots, the

quantitative researchers leave the actual investing to the

portfolio managers. Robeco’s quantitative investment

engineers devote all their time and energy to developing

state-of-the-art quantitative models, strategies and

investment products and at the end of the day Robeco’s

clients profit from these investment-engineering efforts.

Principles on fund governance4


1. Introduction

Robeco is an organization that manages on a professional

basis assets entrusted to it by third parties. In this capacity

Robeco assumes a fiduciary responsibility. Robeco’s mission

statement is:

| To deliver superior results through inspired investing |

The company has defined a set of core values including

integrity, quality, client focus, result orientation – defined

as creating value for our clients – and cooperation.

These core values have been incorporated into a Code

of Business Conduct which describes our principles

with regard to the various aspects of the company’s

activities. It is important to ensure that Robeco delivers

on these principles through corporate governance.

Where Robeco’s interests are in line with the interests of

third-party customers this involves running a professional

organization with the necessary checks and balances.

When interests conflict, however, the issue becomes more

sensitive and the principles of fund governance come fully

into play.

2. Fund governance

Nevertheless Robeco would like to establish a global

corporate standard of its own that crosses geographical

boundaries. In Robeco’s view this means that paramount

attention must be given to managing potential conflicts

of interest. Should conflicts of interest nevertheless occur,

Robeco should deal with these situations in accordance

with its fiduciary duty to act in the best interest of the

investor. Robeco has defined the set of principles given

below for specific situations commonly defined as conflicts

of interest, mostly between Robeco as fund manager

and the investors in said funds. It is therefore that these

principles are restricted to the area of fund management.

When dealing with potential conflict-of-interest situations,

Robeco will primarily endeavor to reasonably and

fairly apply the specific principles defined herein. In

situations that may not be covered by these principles,

Robeco will in general seek to apply international best

practices to the extent available. Robeco pledges to

resolve any such situation, having due regard for the

interests of the investor and Robeco’s fiduciary duty, after

reasonable and fair consideration of all the relevant facts

and circumstances. We call this process ‘conscientious

consideration’. It is supported by a structure in which

Robeco is accountable for compliance with the principles

and the procedure to maintain them within

the governance structure of the Robeco Group.

The final part of Robeco’s fund-governance mechanism

is formed by a quarterly fund-governance review within

Robeco’s business operations.

These reviews are carried out by the Corporate Compliance

Department and they focus on all identified governance

issues as described below. The outcome of these reviews is

reported to the Audit & Compliance Committee of Robeco

Groep N.V.’s Supervisory Board, also on a quarterly basis.

3. Managing governance issues

3.1 Principles

Product quality

Robeco is firmly committed to the development of quality

products designed to provide added value for investors.

The timely consultation of all relevant parties involved

in the fundstructuring process improves such quality and


reduces reputational risk. All product proposals (since

2005) are therefore reviewed by the Product Quality

Committee (PQC) which focuses on product quality and

the identification and proper addressing of conflicts of

interest. The PQC consists of all statutory directors of the

Robeco Group as well as the head of Compliance and

the head of Risk Management.

Transparency

Robeco strives for an open relationship with the investors

by providing relevant, clear and understandable

information. This includes information on investment

policy, investments, risks, costs and management fees,

affiliated parties and outsourcing. Clearly Robeco observes

the applicable laws and regulations as a minimum

requirement. Examples are:

– The characteristics of a fund are clear, the risks are

explained and there are no ambiguous conditions.

– All fees charged by Robeco and their connection to

services rendered are clear.

– The maximum subscription and minimum redemption

prices in relation to the net asset value (NAV) are clear.

– All performance-related information is aligned with

Global Investment Performance Standards (GIPS)

guidelines.

Change in the conditions of a fund

During the lifetime of an investor’s investment it is

possible that a fund’s conditions may change. In that case

Robeco will suitably inform the investors in good time

in accordance with the applicable laws, regulations and

the fund’s conditions. Robeco strives to ensure that such

information is easily accessible, clear and understandable

for all investors. If the proposed changes have a negative

impact on conditions for the investor (e.g. a rise in fees),

or if changes in the investment policy of a fund are

proposed, the investor in an open-ended fund shall always

have the right to divest on the then prevailing conditions

within a reasonable period before the proposed changes

are effected.

Unforeseen costs in the lifetime of a fund

A fund may be confronted with unforeseen, extraordinary

costs and expenses. These may be caused by changes in

tax treatment, increased regulatory costs, administration

and custody fees, or by unusual circumstances such as

nationalization, a moratorium, market disruption or

other irregular market circumstances.

If the costs are the result of circumstances outside

Robeco’s control, or if the costs are made in the best

interest of the investors, such costs are in general borne

by the fund. In all other cases, Robeco shall bear these

costs or may elect to propose to change the conditions

such that these costs shall then be borne by the fund

(see ‘Change in the conditions of a fund’ above).

Best execution

In implementing and executing investment decisions,

Robeco shall as a general rule take reasonable steps to

obtain the best possible result, taking into account price,

costs, speed, likelihood of execution and settlement, size,

nature or any other relevant consideration. In particular,

transactions with members of the Rabobank group will be

executed on arm’s length terms customary in the market.

Fair allocation

Robeco may generally execute transactions on an

aggregated basis to obtain more favorable commission

rates or other transaction costs than if such orders

are placed individually. When aggregating orders, all

portfolios shall be treated fairly and systematically.

Transaction fees and soft commissions

Transaction fees only cover those services that directly

benefit the fund or the collectivity of the funds belonging

to the Robeco Group. Soft-commission arrangements


Principles on fund governance

are permitted as long as the services paid for with soft

commissions are directly instrumental for improving the

investment decision-making process, and on condition

that the transaction fees are customary and reasonable

relative to the brokerage services provided. Services paid for

with soft commissions may include research and securities

advice. These services improve the investment process

and are therefore beneficial to the investors in the Robeco

funds. In the annual reports of the funds the policy on soft

commissions is explained.

Securities lending

Robeco is transparent in a fund’s prospectus and annual

report with regard to the possibility of lending the portfolio

securities of such a fund (e.g. maximum percentage,

conditions, risks, counterparties). The risk/reward

relationship of lending activities for the fund shall in essence

be reasonable and fair and in line with market practice.

Robeco will act in accordance with best practices from the

ICGN Stock Lending Code of Best Practice, October 2005,

from the International Corporate Governance Network.

Personal interest and remuneration

Robeco endeavors to structure its remuneration systems in

line with market practices and in such a way that conflicts

with investors’ interests are avoided. Where potential

conflicts are conceivable, monitoring measures will be

implemented in order to ensure that these conflicts are

properly managed and addressed. We consider the fact

that staff and members of the Supervisory Board can

participate in Robeco’s funds a ‘stake of confidence’. Almost

all securities transactions involving staff or members of a

Supervisory Board are monitored. This is to ensure that we

can stay clear of appearing to act with inside information.

Costs and damages

As a result of operational errors Robeco’s ambition is to

deliver services to its clients through faultless processing.

Nevertheless, in a human environment operational errors

can never be entirely excluded. Damages exceeding a

certain de minimis hurdle and caused by errors in the

calculation of the net asset value of a fund shall always

be compensated by Robeco. For other operational errors,

Robeco carries, at its own expense, customary insurance

coverage for damages and costs incurred by the fund as a

consequence of operational errors by Robeco and these

damages shall be compensated by Robeco to the extent of

such insurance coverage.

Voting rights

Robeco, in its function as shareholder, acts as an engaged

shareholder and therefore makes use of the relevant

voting rights. Robeco may refrain from using voting rights

in case voting is not deemed in the interest of its clients

(e.g. when the costs of voting are disproportional, when

voting could lead to shareblocking while the portfolio

managers wish to keep their freedom of selling during

the blocking period, or when stock is lent to third parties).

The best interest of the client is a driving factor in

the consideration. The voting policy is published on the

relevant website.

With respect to the use of voting rights relating to stock

that is lent, it is both difficult and undesirable to have the

borrower vote for the stock. In case a situation is identified

in which voting our stock on loan in an upcoming share-

holders meeting may significantly influence the outcome

of the voting process and may have a significant impact

on shareholder value, Robeco will consider a recall of the

stock on loan.

Public communications

It is Robeco’s conviction that all public communications in

respect of its funds must give true, accurate and complete

information on the character, the costs, the risks and, if

included, the past performance of such product to the

extent reasonably practicable. Advertisements for Robeco


products will maintain a healthy balance between sound

commercial information as well as the technical facts

necessary for potential investors on which to build their

judgment. Robeco will be transparent in its commercial

information in a manner that is in line with the statements

below. Naturally, application of and compliance with

applicable legal and regulatory standards shall serve as

a minimum requirement.

Market abuse

Robeco has installed ‘Chinese walls’ in order to manage

the flow of price-sensitive information and other

confidential market information. Since Robeco is part

of the Rabobank Group, there is an organizational,

physical and personnel segregation up to the highest

possible level between Robeco and the other parts of the

Rabobank Group. Furthermore, there is an organizational,

physical and personnel segregation between the Robeco

business units to the extent that this is reasonably

necessary relative to their activities. This means that

employees report hierarchically only to their managers

and appropriate information-sharing barriers are in place

to prevent dissemination of sensitive market information.

No price-sensitive or confidential market information is

exchanged between business units other than is required

to effectively carry out their work.

3.2 International best practices

In specific conflict situations where the above principles

would not provide clear guidance Robeco endeavors to

apply international best practices to the extent available.

This means that Robeco may apply those standards that

are commonly applied by peers in comparable situations

and comparable markets or those standards which are

endorsed by organizations of market practitioners and

which are widely accepted and applied in the market.

Robeco will closely monitor the work currently undertaken

by IOSCO and other relevant organizations with regard

to fund governance and will review its procedures on

a continuous basis in the light thereof.

3.3 The principle on ‘conscientious

consideration’

However well defined and refined, a system of specific

principles, even while supplemented with a set of

international best practices, cannot always guarantee

sufficient external guidance to deal with specific conflict

situations. A fund-management organization should

reach a solution independently which does justice to

its fiduciary role and responsibilities. Robeco therefore

pledges that it shall, in all cases, endeavor to resolve any

governance issues having due regard for the interests of

the investor and Robeco’s own interest as a management

company, and after reasonable and fair consideration of

all relevant facts and circumstances. This process, which

we call ‘conscientious consideration’ shall be conducted

within the Management Board of Robeco Groep N.V. as

the highest authority within the Robeco management

organization.

4. Implementation and

enforcement of fund governance

The above mechanism of principles, international

best practices and conscientious consideration shall be

implemented within the Robeco organization in the

following manner:

1. Robeco has defined its best practices; this is the set of

business principles of the Code of Business Conduct. One

of these business principles is fund governance. Robeco

has identified the main areas for conflicts of interest

between the management organization on the one hand

and the investors in the funds on the other.


Principles on fund governance

2. Robeco’s Compliance department shall draw up a

review program in which it monitors the application of the

principles on fund governance. The focus of this program

will be on the acts and decisions of all relevant officials

and corporate functions relating to the management of

conflicts of interests.

3. The Compliance department shall inform the

Management Board of Robeco Groep N.V. and the Audit

& Compliance Committee at least four times per year

about the outcome of its compliance reviews. The Audit

& Compliance Committee is a sub-committee of Robeco

Groep N.V.’s Supervisory Board and consists in majority of

so-called ‘external’ supervisory directors, i.e. persons not

previously or currently employed by Robeco, Rabobank,

or any of its other affiliates.

4. The director(s) of the fund or the fund-management

organization will in the daily conduct of their business

encounter situations that are not covered by the above

principles or that require the principles to be updated.

The director(s) of the fund or the fund-management

organisation will meet with the statutory directors of

the Robeco Group to deal with these situations in order

to resolve these points through applying the concept

of ‘conscientious consideration’ and/or by amending

the principles themselves. The Audit & Compliance

Committee shall be kept informed about the outcome of

these discussions. The director(s) of the fund or the fund-

management organization can be invited at least once

a year to attend the meeting of the Audit & Compliance

Committee and to report on the issues mentioned above.

5. Robeco Groep N.V. has published its Code of Business

Conduct as well as the above principles on fund

governance on its website. The report of the Supervisory

Board of Robeco Groep N.V. shall contain a paragraph

specifically devoted to this subject. The annual reports

of the funds shall contain, in addition to the legal

requirements of the relevant regulator, a statement on

compliance with the principles on fund governance as of

2008.

5. In conclusion

The mechanisms provided for herein are a living

instrument offering standards and good practices.

To stay abreast of constantly changing circumstances

in the financial environment, Robeco will closely follow

developments in fund governance, identifying trends

and seeking remedies to new challenges.

Robeco is aware that trust and integrity play an important

role in the financial industry. It is Robeco’s sincere

intention that these principles on fund governance,

together with the Code of Business Conduct and further

internal policies will help to maintain a culture in which

professional and ethical behavior of the staff of Robeco is

recognized, valued and promoted.


Clean Tech Private Equity:

Financing the next wave of innovation

Special

Threats and opportunities: the need for clean tech

The world is entering into a particularly innovative period, caused by the inevitability of having to transform

current production and consumption patterns into more sustainable alternatives. The increasing scarcity of natural

resources and their rising prices, changing consumer preferences, measures combating climate change, stricter

environmental legislation and the need for businesses to remain competitive, are all trends that will accelerate this

transformation process.


There is a clear need for technology that allows us to

produce energy, materials, products and services in a

more efficient way, thereby using less natural resources

and creating less pollution and waste, while at the same

time securing an (uninterrupted) energy supply or stable

water quality, both now and in the future. This technology

is known as clean tech and comprises a wide range of

industry segments: from alternative energy to water

purification to advanced materials. Clean technologies

and products can be defined as those technologies or

products that increase the productive use of natural

resources, while eliminating or reducing environmental

impact, and adding economic value.

Clean tech is an important instrument in the bid to achieve

sustainable development, and a number of sustainability-

related drivers fuel the growth of clean tech. One major-

related sustainable challenge is that of meeting the

rising worldwide demand for energy, water and other

natural resources such as metals. The growth of China

and India has augmented this demand and has drawn

attention to the fact that reserves in natural resources are

finite. In addition, securing the supply of these resources

from politically unstable or undemocratic regimes

is increasingly problematic. Climate change and the

attempts to combat it (such as the Kyoto protocol) have

lead to increased emphasis on ‘low-carbon’ technologies

and products. All in all, the impetus for sustainable energy

technologies and for energy production from renewable,

locally available sources has never been stronger.

Meanwhile, worldwide pollution levels are still rising, and

the resulting degradation of our ecosystems is increasing.

Our consumption patterns are unsustainable in the sense

that in a year we use more of the planet’s resources

than it can annually regenerate. In response to this ,

consumer preferences are shifting towards sustainability,

creating a demand for green or clean-tech products. At

the same time, however, a large proportion of the world’s

population lives below the poverty line. It is clear that the

development of these poverty-stricken areas will only be

possible if it occurs in a much more resource-efficient way

than it did in the developed world.

Finally, technological innovation in recent years has driven

down the cost of cleaner, resource-efficient technologies,

making them competitive in terms of price and perfor-

mance. Other clean technologies are not competitive yet,

but will be in a couple of years given the rapid techno-

logical progress. This means that the time-to-market of

numerous clean technologies has been shortened to

periods that are acceptable to investors and financiers.

The clean-tech investment market

Investors are starting to recognize the opportunities

offered by clean tech and are starting to pour money into

this sector. As usual private-equity investors and venture

capitalists have been the first to identify and capitalize

on this trend. They are also in the best position to profit

from the value created within clean-tech companies, long

before public investors are given the opportunity to do so.


Special Clean Tech Private Equity

1. Cleantech Venture Network, Cleantech Venture Investment - Patterns & Performance, March 2005

2. New Energy Finance, study presented at European Energy Venture Fair 2006

North America

Europe

North America

Europe

2000

1800

1600

1400

1200

1000

800

600

400

200

01999 2000 2001 2002 2003 2004 2005

Cleantech venture investments North America and Europe

Am

ount

(USD

mill

ion)

300

250

200

150

100

50

0

Num

ber of deals

121 134

108

222

191205

246

106128

140

Source: Cleantech Venture Network, 2006


In a comprehensive study of the clean-tech investment

market, the Cleantech Venture Network found that

between 1999 and 2005, more than USD 8.2 billion of

venture capital was invested in North-American clean-tech

companies. Preliminary findings from a similar report

on European clean-tech venture capital show that total

European clean-tech venture investing from

2003 - 2005 was over USD 2 billion. In the last quarter of

2005, clean tech accounted for 9.1% of overall venture-

capital investments in North America, the highest

percentage ever recorded. Clean tech now ranks 5th in size

as an industry segment moving ahead of semiconductors

and just behind biotechnology, software, medical and

telecommunications. In our view it will move up the

ladder further and probably pretty fast as well.

Return drivers for clean tech

Research1 shows that the historical returns of investing in

clean tech have been good: a hypothetical portfolio of

North-American clean-tech companies in the period 1987-

2003 would have returned an estimated 6.2x invested

capital with an IRR of approximately 30%. A similar study2

for European clean-tech companies shows that in the

period 1999-2005 investors in these companies have

made an overall 86.7%. Robeco believes that conditions

are favorable for continuing to achieve above-average

returns in the future from clean-tech investing:

a. There is a strong demand for clean tech because

of the global drive towards sustainable development.

The issues of energy security, climate change and

depletion of natural resources are prompting a move

towards clean tech.

b. Innovation has driven down the cost of clean

technologies and many are now competitive in

terms of price and performance. Many companies

are already moving from the technology-develop-

ment stage to the market-development or

commercialization stage: they have developed their

clean technologies and are now introducing these to

and businesses in the biofuels and materials segment

c. There is a strong clean tech IPO market. After a



number of very successful solar-energy company IPOs,

2005 and the first half of 2006 saw a large number of

renewable-energy companies going public, evidence

of the increased investor appetite for clean tech.

London’s AIM (Alternative Investment Market) has

proved to be an especially attractive market for

clean-tech IPOs, followed by NASDAQ and Frankfurt.

d. There is a strong clean-tech M&A market, due to the

interest that large (industrial) corporations show

in this segment. They are looking to acquire clean

tech, often as a new technology to complement their

existing ones. Major corporations making clean-

tech venture investments include: BASF, Boeing, GE,

Honda, Intel, Norsk Hydro, Motorola, Royal Dutch

Shell, Siemens and Unilever.

Investing in clean tech through a fund-of-funds

To offer investors the opportunity to take advantage

of this shift towards more resource-efficient and clean

technologies, Rabobank and Robeco are introducing

Robeco Clean Tech Private Equity II (the ‘Fund’). This fund-

of-funds, which has a target size of USD 500 million, is the

successor to Robeco Sustainable Private Equity, a USD 200

million investment program that was launched in 2004.

Based on years of experience and research, Robeco

has developed an investment approach which enables

investors to take advantage of the specific opportunities in

clean-tech private equity. Robeco Clean Tech Private Equity

II will consist of a basket of approximately 15 to 25 of the

Robeco Clean Tech Private Equity II – Key points

– Target fund capitalization of USD 500 million

– Minimum commitment of USD 5 million

– Invests in resource-efficient technologies

– Predominantly private-equity fund investments (15-25 funds), with up to 40%

in direct (co-)investments

– Globally diversified across venture capital, mid-market transactions and large

buyouts

– Managed by a team of experienced private-equity investment professionals at

Robeco

– Advised by a team of dedicated clean-technology experts at Rabobank

– Provides financial and strategic advantages to investors


most prominent clean-tech private-equity funds in the

world. These funds will also act as a deal-flow accelerator,

enabling the Fund to select from the most attractive direct

co-investment opportunities that these clean-tech private-

equity funds offer to Rabobank and Robeco. Robeco’s

and Rabobank’s own attractive deal flow will be another

source of direct (co-)investment opportunities for the

fund. The Fund’s investments will be diversified across

clean-technology private-equity funds (60 - 100%) and

direct (co-)investments (0 - 40%). The investments of the

Fund will be further diversified in terms of private-equity

investment stage, geography, sector, technology and

time. In terms of technology and sector, the Fund will be

diversified across various sectors, including renewable

energy (solar, biofuels, wind, wave, and thermo), energy

efficiency, waste-to-energy, advanced metering, material

recycling and biomaterials, water technology and air

treatment technology.

Successful cooperation with Rabobank in the

field of clean tech

As the manager of the Fund, Robeco will be advised on

the clean-tech characteristics of transactions as well

as on clean-tech market developments by Rabobank’s

Corporate Social Responsibility department, which is in

charge of maintaining and further developing Rabobank’s

leadership in sustainability and clean technology.

Rabobank sees clean technology as one of its core value

drivers and therefore employs a number of experts in

energy and water technology and other areas in the

clean-technology universe. Rabobank and Robeco have

been actively looking at the clean-technology investment

market since 2003, and have over the past years built up a

comprehensive database containing detailed information

on over 180 clean-technology funds and direct co-

investment opportunities. In order to provide additional

added value for their investors, Rabobank and Robeco

will launch a new body dedicated to clean-tech research,

which will be a center of competence on the trends and

developments in clean-tech investing. Investors will be

granted access to this research.

The Robeco Clean Tech Certificate: designed

for the retail market

Robeco has decided to not only offer the clean-tech

fund-of-funds product to institutional investors, but also

to private investors. A special structure has therefore

been designed to enable private investors to invest in the

clean-tech segment: the Robeco Clean Tech Certificate

(the ‘Certficate’). The Certificate is issued by Robeco

Bank Holding and provides the investor with exposure to

the fund Robeco Clean Tech Private Equity II. In order to

profit as much as possible from the results of this Fund,

an investor in the Certificate will participate for 130% in

the Robeco Clean Tech Fund II. This means that Robeco

Bank Holding will pay the investor 130% of the difference

between the contributions and distributions. The

Certificate’s return will consist of semi-annual payments

during its life. The level and the timing of these

payments depend on the contributions and distributions



of the Robeco Clean Tech Fund II, but are not expected to

begin before year 5 or 6. Private-equity funds generally

need this sort of time frame to develop the full potential

value of their investments. The Certificate is traded

on the Euronext stock exchange, so that investors are

offered liquidity in this product. The issue price is EUR

1,000, so an investor can gain exposure to the clean-tech

private-equity market with a relatively small amount of

money.

Conclusion

The ‘Clean Tech Engineers’ made a lot of progress last

year. A number of attractive investments in clean-tech

private-equity funds were made already from the first

fund, Robeco Sustainable Private Equity. A follow-up

fund for the institutional market, Robeco Clean Tech

Private Equity II, was also launched and received with

great enthusiasm. Finally, a retail product based on

this – Robeco Clean Tech Certificate – was developed

and marketed to private investors in a large number of

European countries. We expect the success of clean tech

to continue and we are determined to play a trend-setting

role. In a few years, Robeco together with Rabobank,

have grown into one of the leading clean-tech investment

managers worldwide. We plan to consolidate this position

and further enhance our knowledge and expertise and

by doing so, we can make an actual contribution to

sustainable development.

Report of the Management Board5


Profile Robeco


Robeco is a pure-play asset manager with an active

investment style, offering a broad range of specialist,

alpha-generating products. Established in Rotterdam,

the Netherlands, in 1929, Robeco is now a leading

international investment boutique with asset-

management platforms in Europe and the US. Assets

under management currently amount to EUR 142 billion

(status on 31 December 2006).

Our mission statement is ‘To deliver superior results

through inspired investing’. ‘To deliver’ means to

actively offer our products and solutions, structuring

and packaging them where necessary, to fulfill clients’

needs and wishes. ‘Superior results’ refers to outstanding

investment returns which beat the benchmark, stand

out against our competitors’ performance and meet

our clients’ expectations. These are also results superior

to those that clients could achieve by investing directly

themselves. ‘To deliver superior results’ refers to our

results-oriented approach; trying hard is not enough

– achievements are what count. ‘Inspired investing’

indicates that we are passionate about what we do and

that we devise innovative investment opportunities. Our

pioneering work in the field of clean-tech private equity is

a good example of this.

Robeco offers a wide range of investment products and

solutions, based on specialized investment capabilities in

the major asset classes of equity, fixed income and money

market, and in alternative investments, such as hedge

funds and private equity. Robeco introduces innovative

structured and packaged products to the market which

combine the best-of-breed investment capabilities with

guarantees to accommodate the return, risk, regulatory

and liquidity requirements of our clients.

We have around 700 institutional and 1.5 million private

clients worldwide. Private investors are serviced via

banks and other distribution partners, and through direct

channels. To provide local services to our institutional,

B2B and retail clients, we have sales teams in Bahrain,

Belgium (also servicing Luxembourg), France, Germany,

Japan, Poland, the Netherlands, Spain (from where we

also service certain Latin American countries), Switzerland

and the US. The acquisition of SAM Group in December

2006 has now also given Robeco (indirect) sales offices in

Sweden and Australia.

Robeco is fully owned by Rabobank, one of the few

privately owned banks in the world with the highest credit

rating (AAA) from the major international rating agencies.

Rabobank also has the highest sustainability cluster score

within the banking sector.

Key figures


02 03 04 05 06

107.1

181.3

158.2

221.0233.6

97.7

106.6111.1

131.6

141.7

02 03 04 05 06

Assets under Management

(EUR x billion)

02 03 04 05 06

499.3

573.9

535.2

622.8

657.5

Operating income

(EUR x million)

Operating profit

(EUR x million)

02 03 04 05 06

70.6

112.8

127.9

152.0

193.0

Net profit

(EUR x million)

01 Market environment and achievements

A good year for equities in an increasingly

global market environment

Global equities had another good year as a strong

appetite for risk and ample liquidity propelled major

markets to double digit gains. The market environment

was positive with a short period of correction in the

second quarter of the year. The market for alternative

investments experienced ongoing interest which led to

greater diversification. The outlook for the market remains

positive and we expect an increase in volatility.

An eventful year for the bond markets

The bond markets were characterized by rising interest

rates and increasing demand for corporate bonds. The

year started with central banks worldwide increasing their

interest rates which resulted in downward pressure on bond

prices and therefore on bond market returns. At its August

meeting, the Fed decided for the first time in two years

not to raise interest rates. The rates for the euro zone were

increased once more in December to 3.5%. This was the

sixth time that the ECB had raised its interest rates by 25

basis points since December 2005. Corporate-bond market

returns were stronger than those of government bonds,

with the high yield part of the market leading the way.

Robeco’s business model is geared to

international developments

The continuing growth of the asset management industry

combined with a focus on core activities is a trend that

is constantly having an impact on profitability. Asset

management is becoming more and more international

with a trend towards groups with a global presence.

Financial institutions are being confronted with important

decisions relating to their asset management activities

in terms of manufacturing, distribution, general, niche

or exits. This means that a further consolidation within

the asset management industry can be expected.

Robeco’s business model is well adjusted to cope with

these developments through the organic growth of its

international activities as well as selective acquisitions and

new distribution and strategic agreements.

Within the institutional client segments, large institutional

clients such as pension funds are continuously having

to adjust to new legislation and changing market

circumstances which has led to a shift to specialist

mandates. Open or guided architecture continued to

become more prominent in 2006 and is resulting in

operational distribution-oriented models. Our cross-

border focus has led to new large institutional mandates

for all our business units in the different regions where

we operate: Europe, US, the Middle East and the Far East.

This shows that size is not the only factor but that the

international cooperation within our group is also really

taking off.

From a quantitative perspective, 2006 was a good year

for cash flow. Robeco met its corporate cash flow target

and managed to even exceed it in certain areas.


At the end of 2005, Robeco introduced a new strategic

motto for the coming years: “Invest in Europe, grow in

the US, seed in emerging markets.” The year 2006 was

the first full year Robeco has had to implement and live

up to its new strategic motto.

Invest in Europe

The key theme for Europe was the strengthening of our

strategically important investment capabilities through

development and acquisitions. In the hedge-fund sector,

Robeco’s position was strengthened by combining the

fund-of-hedge-funds teams in Rotterdam and New York

(Robeco Sage) and through the acquisition of a 40% stake

in hedge-fund manager Analytic Investment Management

(‘AIM’) in Belgium. AIM is one of Europe’s pioneers in

the field of systematic intra-day currency trading and

its investment strategy is based solely on quantitative

models. AIM exclusively manages institutional accounts

mostly for pension funds and hedge funds and had

assets under management of above USD 200 million

at the end of 2006. Early 2007, Robeco acquired the

remaining shares in Transtrend having acquired an initial

shareholding of 49% in 2002. Transtrend is a managed-

futures trader based in Rotterdam.

In terms of private equity Robeco enhanced its position

by expanding the private equity team and by introducing

products investing in clean technology both for

institutional investors (Robeco Cleantech Private Equity II)

and for private investors (Robeco Cleantech Certificate).

In the area of sustainability, Robeco concluded an

important transaction through the acquisition of a

majority interest in SAM Group, a leading Swiss asset

manager in the field of sustainable investing. Two leading

players in the world of sustainable investing Robeco and

SAM Group joined forces to form a global “powerhouse”

in sustainability investing, capitalizing on the booming

demand for sustainability products and services. SAM

Group is one of the world’s most visible and dedicated

asset managers for sustainability investments, universally

recognized for its water and energy funds and for

constructing and licensing the Dow Jones Sustainability

Indexes (DJSI), a joint initiative with Dow Jones Indexes.

Robeco and SAM Group have ambitious growth objectives

and will target new client segments and invest in product

development and new markets. Although Robeco has

taken a 64% stake in SAM Group, 36% of the shares

continue to be held by SAM Group’s management and

employees in order to keep interests aligned. SAM Group’s

assets under management and assets under advice

amounted to a total of CHF 10 billion at the time of the

announcement of the transaction.

In 2005 we adopted a hub-and-spokes model to facilitate

further growth in Europe and the US. To this end we

established the Financial Service Center in Rotterdam

in September 2006. This will make it easier to connect

investment engines from outside Rotterdam to our back

office, mid office and other supporting services.

A number of other projects connected with strengthening

our capabilities in European equities are also under

way. The institutional sales teams were strengthened in

2006. This led to promising new net cash flow within the

European continent. Robeco has added a number of new

products to its product range including six liquidity funds

developed in cooperation with Rabobank.

Other examples of new strategies are two opportunity

funds, Robeco Emerging Stars and Robeco European

Opportunities Equities, and a telecom hedge fund.

Furthermore, Robeco is now also able to offer investments

in real estate and commodities by making use of

sub advisors. The positioning of Robeco Direct in the

Netherlands was defined more clearly by the introduction

of a service concept named Younique by Robeco. This

service concept entails the removal of all transaction costs

for online buying and selling of Robeco investment funds.

All investment advice is therefore impartial and not aimed

at generating revenue. The first priority is to increase

customer’s investment returns. By abolishing transaction

costs any hurdle that may have existed to prevent clients

from taking Robeco’s advice has been completely

removed.

02 Strategy; implementation and realization


Robeco Direct’s Younique by Robeco, makes bespoke and

tailor-made investment advice available to the medium-

net-worth individuals. In short Younique by Robeco stands

for:

– Tailor-made advice and support in wealth growth;

– Access to a team of specialists on workdays from 8.00

hours to 21.00 hours and on Saturdays;

– No transaction costs for online buying and selling of

Robeco investment funds;

– Low initial amount for wealth management and

coaching from EUR 25,000.

Tailor-made investment advice from Younique by Robeco

is not limited to a one-off consultation. The service aims

to constantly help clients accumulate wealth.

This continuous support truly sets Robeco Direct apart.

This support is offered through two different concepts:

Wealth Coaching and Personal Wealth Management.

Younique by Robeco has significantly boosted cash

flow into the funds and also made Robeco Direct more

attractive to a younger client base.

Grow in the US

The goal for the past year for our US-based activities

was to grow organically at a substantial pace. Robeco

Investment Management had a difficult start but during

the year the circumstances improved and culminated in

successes which included two major mandates for our

emerging-markets strategy managed from Rotterdam.

Harbor Capital Advisors realized a significant cash flow,

breaking records once again and seeing their total

number of clients increase. The offices of Harbor Capital

Advisors will move from Toledo to Chicago early 2007

in order to gain better access to the relevant markets for

clients and asset-management professionals.

Seed in Emerging Markets

It is Robeco’s aim to be a truly international asset

manager. We have therefore defined certain key markets

where we want to be active. Some of these markets are

the high-growth markets of today and the major markets

of tomorrow. In 2006, Robeco realized a couple of goals in

terms of implementing this part of the strategy. Emerging

markets are defined as certain high-growth markets in

Eastern Europe, the Middle East and the Far East.

Poland has been identified as an interesting growth

market. In 2006, Robeco established a representative

office in Warsaw and registered a selection of funds from

the Capital Growth Fund range in Poland. A distribution

agreement was concluded in Poland with Bank BGZ

(of which Rabobank owns 35% of the shares) to sell a

selection of Robeco investment products. The goal is to

conclude similar agreements with other Polish distribution

partners in 2007.

In Saudi Arabia, which is strictly speaking not an emerging

market, a strategic alliance was concluded with Rana

Investment Company. Rana and Robeco are going to

develop investment products together for the Saudi

Arabian market. In Egypt, Robeco has co-financed a newly

founded Egyptian asset-management company called

Obelisk Portfolio and Investment Fund Management.

In the near future, Robeco expects to launch a ‘MENA’

(Middle East North Africa) equity fund for which Obelisk

is expected to be the local manager. The overall objective

of these two initiatives is on the one hand to increase the

distribution network in the Middle East and on the other

to build a regional investment capability.

In 2006 we explored opportunities in the Indian and

Chinese markets. Several steps have been taken by Robeco

to capitalize on these opportunities (see also pages 13 and

59). Our goal is to gain access to these large, promising

high-growth markets with large distribution power to sell

both local and international investment products.


03 The organization

RAM: Robeco Asset Management (Europe) comprises the European

equity, fixed-income and money-market investment departments,

the departments responsible for serving institutional clients and

supporting our third-party fund distribution activities in Europe.

RAI: Robeco Alternative Investments is our global alternative-

investments platform, offering (guaranteed) notes, certificates,

leveraged products, collateralized debt obligations, funds-of-hedge-

funds, single-strategy hedge funds and private-equity funds of funds.

RIM: Robeco Investment Management (US), which has its

headquarters in New York, is our institutional platform in the US,

offering a full range of disciplined and value equity, US fixed income

and US (fund of) hedge funds. RIM is made up of the original product

platforms of Weiss Peck & Greer, Boston Partners and Sage.

HCA: Harbor Capital Advisors, based in Toledo, is our US subsidiary that

offers a family of mutual funds through selecting and monitoring best-of-

breed external managers. HCA provides management services to Harbor

Funds, a mutual-fund complex, and to institutional segregated accounts.

Business units


Robeco Management Board

George A. Möller Chief Executive Officer

Leni M.T. Boeren Robeco Direct

Sander van Eijkern Robeco Alternative Inv.

Constant T.L. Korthout Chief Financial Officer

Frank L. Kusse International Affairs

Niek F. Molenaar Robeco Asset Management

Robeco Asset

Management

– Europe

– Traditional

products

Robeco Alternative

Investments

– Europe

– Alternative

products

Robeco Investment

Management

– United States

– Traditional &

alternative

products

Harbor Capital

Advisors

– United States

– Manager selection

– Mutual funds

Robeco Direct

– Netherlands

– Retail direct-sales

channel

International

Offices

– Europe, Middle

East, Japan

– Retail and Inst.

sales offices

Corporate departments

During the last year Robeco has worked on further implementing its

global strategy for the asset-management industry and incorporating

it into the organization. Robeco was established in Rotterdam in 1929

which means it has European roots but is at the same time gradually

moving towards becoming a truly global asset manager. In 2006, the

success of Robeco’s global activities was demonstrated by the fact

that RIM’s Premium Equity products were successfully sold in Europe

and that RAM’s emerging markets product in the USA. In both these

investment centers we create alpha that can be successfully used in the

other market. A further integration and exchange of US and European

sales people will ensure that this trend continues.


The transfer of Robeco’s funds-of-hedge-funds operation in the

US to Robeco Sage, coincided with the decision to integrate the

management of Robeco’s European and US funds-of-hedge-funds

activities under new leadership and under the Robeco Sage label.

We now have a global funds-of-hedge-funds operation that manages

well over USD 2 billion, has an excellent track record and will build a

presence in other parts of the world.

Robeco is currently in a phase where it is creating global capabilities

for its different product and subproduct lines. In this context Robeco

Sage has received a global mandate incorporating the hedge-fund

operations in Rotterdam to create a global offering. The same applies

for our fixed-income operations in Rotterdam and New York, for which

Robeco is currently establishing a Global Fixed Income Platform.

There have been no major changes to the Robeco organization.

A few minor changes are listed below:

– The Financial Services Center has been created to centralize all

reporting and performance measurement activities;

– Harbor Capital Advisors offices will move from Toledo to Chicago;

– Our German representative office has been relocated;

– Research institute IRIS (Institute for Research and Investment

Services) has been repositioned;

– The structured finance activities of the business units RAM and

RAI have been integrated into one team.

For 2007 Robeco foresees a steady growth of the organization in line

with the activities defined.

Management

Frank Kusse was appointed as a member of the Robeco Management

Board on 2 February, 2007. As International Director, Mr. Kusse is

responsible for managing a large part of Robeco’s international

business and international expansion. Mr. Kusse worked at ABN AMRO

Asset Management for over 19 years, from 2004 through 2006 as

Managing Director Global Retail where he was responsible for global

retail business and for activities in Brazil and Italy. From 1999 through

2004, as CEO of ABN AMRO Asset Management Asia Pacific in Hong

Kong, he led the company’s expansion in Asia.

Michael Abbott was named Chief Executive Officer of Robeco Sage

Capital as per 1 January, 2007. Robeco Sage is Robeco’s fund-of-hedge-

funds group. Mr. Abbott, spent six years with Goldman Sachs in various

management positions in the firm’s convertibles and structured-

products groups before leaving in 2002 to found Elysium Capital Group,

a macro discretionary hedge fund specializing in foreign exchange.

Lex Hoogduin, who joined Robeco in 2005 as Chief Economist, was

also appointed as head of IRIS in July 2006. Mr. Hoogduin is also

active as Professor of Monetary Economics and Financial Institutions at

the University of Amsterdam, the Netherlands.

In May 2006 Reinoud van den Broek became head of Institutional

Sales at Robeco Asset Management to run the Rotterdam-based sales

team. Before rejoining Robeco, Mr. Van den Broek was Chairman

of the management board of the Achmea business unit, Achmea

Pensions and shared responsibility for the merger process between

Achmea Pensions and Interpolis Pensions.

Jean-Louis Laurens was appointed head of Robeco France in January

2006. Before joining the company he was deputy CEO at AXA

Investment Managers.

RD: Robeco Direct is our direct distribution channel. In the Netherlands

the bank serves approximately half a million retail clients via Internet

and telephone and offers a wide range of financial products and

services which include mutual funds, savings products, mortgages,

insurances and brokerage services.

Robeco Direct also has a branch in Brussels: Robeco Bank Belgium and

a 100% subsidiary in France: Banque Robeco SA.

International Offices: Our sales offices in France, Belgium, Germany,

Spain, Switzerland, Japan, Poland and Bahrain are organized under

International Offices. These offices acts as a gateway for the business

units to sell their products.

IRIS: The Institute for Research and Investment Services has been a

joint venture between Rabobank and Robeco since 1990. IRIS operates

as an internal service provider for Rabobank and Robeco in the area

of independent research and publishing. IRIS provides strategic,

thematic, equity, product and portfolio research.

Group performance*

At group level, over the last twelve months, 72% of the

assets under management have outperformed compared

to the relevant benchmark.

Equity: strong 3-year track records for all

business units

All business units have excellent 3-year track records.

Over the last 3-year period 87% of equity investments

outperformed at corporate level, with each business unit

showing a percentage above 80%.

In 2006 60% of Robeco’s assets in equity outperformed

their benchmark with the domestic business unit

achieving 70% and the overseas business units 51%.

The fund Robeco (EUR 7.1 billion) outperformed its

benchmark by 0.2%, Rolinco (EUR 1.6 billion) beat its

benchmark by 2.8%, Robeco Emerging Markets Equities

(EUR 2.1 billion) underperformed its benchmark by -1.7%.

Robeco Chinese Equities (EUR 0.2 billion) showed a

performance of 65.1% and outperformed its benchmark

by 2.2%.

The USD 8.8 billion Capital Appreciation Fund

underperformed by 5.5% (after an outperformance of

9.1% in 2005 ).The USD 18.5 billion International Fund

realized an excess return versus the benchmark of 5.9%

(2005: +7.4%). Both funds are managed by Harbor

Capital Advisors. Robeco North American Equities (EUR

0.8 billion), which is managed out of New York by Robeco

Investment Management, underperformed by 1.1%.

Fixed Income

The period of outperformance by fixed-income assets,

which has lasted for several years, continues. The average

excess return versus the benchmarks amounted to 0.2%

over 2006. This year 86% of the assets outperformed and

for the last three years this figure is 93%.

In 2006 flagships Rorento (EUR 3.0 billion) and

Lux-o-rente (EUR 4.3 billion) had excess returns versus

their benchmarks of 0.2% and 0.6% respectively. The

Harbor Bond fund (USD 2.4 billion) outperformed by

0.2%.

Alternatives

Private equity fund of funds: Robeco Private Equity (our

listed fund of funds with EUR 0.02 billion in assets)

performed extremely well in 2006 with a return of

13.0%. As a reference, the MSCI World index of worldwide

equities had a return of 7.9%.

Hedge fund of funds, Robeco Sage Capital International

(the USD 0.7 billion offshore investment fund of Robeco

Sage) realized a return of 10.8% over 2006, which was

above its peer group’s average performance of 10.3%.

For managed futures, Transtrend’s Enhanced Risk USD

program (USD 1.8 billion) had a very good performance

of 12.0% over 2006, which was in line with its long-term

track record. As a reference USD cash returned 5.2% over

the same period.

Securitizations/CDOs: The performance of Robeco’s CDOs is

in line with expectations and all realized an excess coupon

over Euribor. For example the CDO AA Bond Jun 09 (EUR)

has so far realized an excess coupon of 2.4% over Euribor.

The results for our principal-protected products structured

on hedge-fund strategies were mixed. Some relatively good

performances were realized but unfortunately we also had

to face some disappointing returns. For instance the Robeco

Multi Market Bond Jul 03/13 (EUR) (EUR 0.3 billion) had

a performance of 4.5% over 2006. Whereas the Robeco

Diversified Income Bond Dec 04/14 (EUR) (EUR 0.2 billion)

had a performance of -3.3% and the Robeco Hattrick

Bond Apr 05/15 (EUR 0.6 billion) had a performance of

-1.9%. As a reference for all three examples, the EUR cash

performance was 2.9%.

04 Investment performance


Growth of assets under management

During 2006 Robeco’s assets under management

increased by 7.7%. This increase was driven by a cash

inflow of EUR 5.8 billion and an investment result of

EUR 5.0 billion. The investment result was negatively

affected by a EUR 6.3 billion depreciation of the

US dollar.

Cash flow

With a net cash flow of EUR 5.8 billion we exceeded the

target set for 2006. The institutional cash flow was strong

in Europe. In the US however we experienced cash outflow.

The new Rabo Liquidity fund range (EUR 2.0 billion) made

an important contribution to the institutional cash flow in

Europe. Inflow into retail funds was mainly generated by

Harbor Capital Advisors’ mutual funds.

05 Business development


Global business development

(EUR x billion)

AuM 31 December 2005

Investment result

Net cash flow

Other gains / losses

AuM 31 December 2006

Total

131.6

5.0

5.8

– 0.7

141.7

Retail

66.2

2.7

2.0

– 0.7

70.2

Institutional

65.4

2.3

3.8

0.0

71.5


European business development

Mutual funds generated an overall inflow of EUR 0.8

billion, mainly driven by fixed-income and balanced

funds. Robeco Flex-O-Rente and Robeco Global Bonds

especially showed considerable inflow of EUR 0.6 billion

and EUR 0.4 billion respectively. Equity funds however

experienced cash outflow and the considerable inflow into

Robeco Emerging Markets Equities (EUR 0.4 billion) was

offset by outflow from several other funds.

Sales of mutual funds via the European distribution

network continue to grow. Several new share classes have

been introduced in 2006. This enables us to better meet

the specific demands of our clients. This year Robeco also

established a presence in Poland and introduced several

tailor-made funds for the Polish market.

The performance of structured products was below

expectations. This was reflected in the cash flow into

retail structured products. The introduction of the Robeco

Emerging Mix Note was very successful, but on balance an

outflow of EUR 0.5 billion was recorded.

In 2006 considerable inflow was generated via

institutional products. Several large mandates were

won worth a total of EUR 2.0 billion. Institutional

funds experienced significant inflow mainly due to the

introduction of the Rabo Liquidity fund range.

European business development

(EUR x billion)

AuM at opening date

Investment result

Net cash flow


AuM at closing date

2006

86.0

3.8

4.4

– 0.7

93.5

2005

73.3

9.1

3.6

0.0

86.0

Business development


US business development

Mutual funds in the US generated EUR 2.7 billion in cash

inflow. Both Robeco Sage and Harbor Capital Advisors

generated substantial new investments from clients.

Institutional products recorded outflows of EUR 1.3 billion.

The majority of the withdrawals were in fixed income and

were related to lagging performance.

US business development

(EUR x billion)

AuM at opening date

Investment result

Net cash flow


AuM at closing date

2006

45.6

1.2

1.4

0.0

48.2

2005

37.8

9.7

– 1.9

0.0

45.6

Equities - 45%

Fixed income - 29%

Structured products - 7%

Balanced - 7%

Money market - 8%

Hedge funds - 4%

Private equity - 0%

Europe - 66%

US - 34%

Institutional - 50%

Retail - 50%

06 Financial results

Financial results

(EUR x million)

Operating income

Operating expenses

Operating profit

Non operating income

Tax

Minority interest

Net profit

Assets under management (EUR x billion)

2006

657.5

– 436.5

221.0

31.9

– 59.5

– 0.4

193.0

141.7

2005

622.8

– 389.2

233.6

– 8.3

– 72.8

– 0.5

152.0

131.6


In 2006 operating income improved by 6% to EUR 657.5

million. The main contributor to this increase in income

was the significant improvement in management

fees which was a direct result of the increase in assets

under management. The 8% increase in assets under

management was positively influenced by a net cash

inflow of EUR 5.8 billion and a EUR 11.3 billion positive

investment result. However, the dollar depreciation of

EUR 6.3 billion had a negative impact on the total assets

under management and the asset related revenues.

Furthermore, in 2006 Robeco generated a higher

performance fee income as a result of the improved

investment returns of performance-fee related products.

Traditional markets enjoyed solid returns in 2005 and

2006. As a result of this, in 2006, the appetite for

structured products diminished, not helped by their

lagging performance and structuring fees declined

accordingly. In 2005, Robeco had introduced several

structured products which resulted in EUR 2.0 billion in

cash inflow and significant related one-off net revenues.

In general the influence of alternative products, including

products with less standardized revenues, on the profit

and loss of Robeco is increasing and therefore results will

tend to be more volatile. Lower structuring fees meant

that their contribution to operating income was reduced

by 6%.

In the past two years Robeco has made substantial

efforts to improve its internal organization, strengthen its

internal audit and compliance departments and improve

internal procedures. in 2006 further steps were taken

with the introduction of IFRS, the ongoing improvements

to Business Continuity Management and the finalization

of the documentation of our administrative processes.

In addition, projects such as SOx, Basel II and new Dutch

legislative ‘In Control’ requirements have put a significant

burden on the organization. To maintain its external focus

on clients, product and performance, Robeco chooses to

use external employees in combination with in-house

experience for these projects. The large number of

external personnel employed for such temporary projects


is reflected in Other Expenses in 2006. Finally, in 2006

Robeco Direct and Robeco France repositioned their

strategy for the coming years which also had an impact

on the expenses incurred in 2006. Operating expenses

increased by 12% to EUR 436.5 million.

The effective corporate tax rate amounted to 24% in

2006 and 32% in 2005. The lower tax rate for 2006 was

primarily caused by a number of one-off tax benefits last

year and the impact of a decrease in the corporate tax rate

in the Netherlands as of 2007.

Shareholders’ equity amounted to EUR 960.5 million

at year end 2006, which represents an increase of EUR

163.3 million. The increase was, to a large extent, realized

through the 2006 net result of EUR 193.0 million, an

upward adjustment of the deferred tax assets relating

to acquisitions made in previous years and a negative

unrealized revaluation result on the investment portfolio.

Financial risks and the use of derivatives

By the nature of its activities, Robeco is exposed to market

risk, interest rate risk, credit risk and liquidity risk. Specific

risk types are described in note 43 of the consolidated

financial statements. Robeco uses derivatives to hedge

(part of) these exposures.

Due to Robeco’s overseas activities and the fact that

a significant part of its fee-income is related to USD

denominated portfolios, Robeco is particularly exposed

to changes in the EUR/USD exchange rate. This exposure

relates both to balance sheet and income statement

items. These currency risk exposures are hedged using FX

forward contracts. For income statement items the horizon

of the hedge is one (calendar-) year.

Robeco uses interest rate derivatives (mainly swaps) to

hedge part of the interest rate exposure in the ALM book

of its banking subsidiary, Robeco Direct. Additionally,

Robeco hedges substantial parts of its trading book

exposures resulting from the provision of seed capital,

the issue of structured products and secondary market

support for several products. Positions include both linear

and non-linear instruments.

All market, interest rate and credit risk exposures resulting

from these transactions are measured and monitored

periodically, consistent with regulatory (Dutch Central

Bank) requirements for trading and investment books.

All fair value movements related to these exposures

are recognized, in line with the IFRS requirements. For

selected items, hedge accounting applies. For a further

explanantion, reference is made to the accounting policies

and the notes to the consolidated financial statements.


07 Compliance, risk management &

internal audit

Overall management and control framework

During 2006 Robeco further strengthened its

management and internal control framework. A

considerable effort has been made to integrate

activities relating to the various internal control and

corporate-governance codes that affect Robeco and its

subsidiaries. These efforts are guided and supported by

our Risk Management, Internal Audit and Compliance

departments.

One very important project in 2006 was a SOx project,

initiated as a part of a Rabobank Group-wide project to

comply with the COSO guidelines to internal processes

relevant to financial reporting. This project was completed

successfully within the year. All activities that relate to SOx

compliance will now be integrated into the operational

risk management framework. For 2007 we foresee a

further integration of the control and monitoring activities

related to the different codes and a roll out to Robeco’s

international offices.

Risk management

In the field of risk management significant efforts were

put in place to further document processes, procedures

and related internal controls for the entire organization.

This project, initiated during 2005 was further embedded

in the operational risk-management framework to

prevent operational incidents and to provide for more

effective remedial action if required. In order to increase

awareness throughout the organization, identify possible

opportunities for improvement and most importantly

in order to comply with the Basel-II requirements for

operational risk management, Robeco initiated its so-

called Control & Risk Self Assessments in 2006.

As part of the management control framework, Robeco

further refined its economic capital model. The model

quantifies credit, market, interest rate, operational and

business risk and takes into account the diversification

benefits within and between risk categories and entities.

For operational risk, the international roll-out of Control

& Risk Self Assessments enables the allocation of

operational risk capital to the entities to become more

sophisticated and provides information on historical

losses and internal audit ratings. From 2007 onwards,

risk-adjusted return on capital calculations, which relate

economic capital to risk-adjusted returns, will become an

integral part of the management control cycle.

Risk governance has been further strengthened by the

installation of a Group Risk & Compliance Committee.

This committee, that monitors the completeness and

consistency of risk oversight throughout Robeco Group,

complements the local risk-management committees that

were already in place.

Internal audit

During 2006, the Internal Audit department participated

in the aforementioned SOx project, by testing the

operational effectiveness of the identified key controls.

Furthermore, Internal Audit developed a management-

control framework for Robeco and its subsidiaries that

supports a more integrated approach to the Group’s

control activities. This framework incorporates the various

codes to ensure that company-level controls are in place

and indicates which controls are relevant for an entity,

taking into account the size, complexity and applicable

rules and regulations. This framework will be the

prevailing standard for entity-level internal audits in 2007.

During operational and IT audits Measures of

Improvement are agreed upon with management in

order to increase the level of control. Quarterly follow-up

monitoring in 2006 showed that the implementation of

Measures of Improvement is meeting its goal.


Compliance

During 2006, our Compliance department developed

a set of policies for our organization that provide the

organization with a clear framework for a number of

areas. In addition, Robeco developed a set of fund

principles. Where Robeco’s interests are in line with

those of third-party customers this involves running a

professional organization with the necessary checks and

balances. When, however, interests conflict, the issue

becomes more sensitive and the principles of corporate or

fund governance come firmly into play.

Substantial efforts have been put into the further

development of the content of our information material.

In the Netherlands extra time and attention has been

spent on the information leaflet (‘de financiële bijsluiter’).

This gives the investor a good overview of a fund’s key

points in such a way that the investor is able to make a

well-considered decision regarding his/her investment.

Another important project was the timely and successful

implementation of several new rules and regulations

worldwide which were carried out in close consultation

with the legal department. This same approach will be

used for the implementation of The Markets in Financial

Instruments Directive (MiFID); anticipated in 2007, the

preparations for which already started in 2006.

In Control

In 2005 and 2006 significant efforts were made to build

a strong risk management & control framework, to further

upgrade the design and documentation of processes and

related internal control measures, to increase awareness for

both internal control and compliance to external laws and

regulations and to strengthen the risk management and

monitoring functions. In 2007, similar steps will be taken at

the foreign offices. Based on all these steps and achievements,

the Management Board of Robeco feels comfortable

regarding Robeco’s risk control and risk management.

In 2006 Robeco successfully completed its participation

in the Rabobank SOx related initiatives and issued an

In Control Statement regarding its fund management

activities as part of the annual reports of registered

funds in the Netherlands. For 2008 Robeco aims

to issue the first full year In Control Statement according

to the Dutch Corporate Governance Code.


08 Corporate responsibility

Corporate responsibility objectives for

2006 were met

In 2005 Robeco formulated two key objectives for 2006: to

strengthen its reputation in the field of socially responsible

investing (SRI) and increase the SRI assets under

management, such as SRI niche and overlay products, and

to increase the transparency of products and processes.

The second closing of Robeco Sustainable Private Equity I

and the launch of the engagement product have helped

to substantially increase Robeco’s sustainable assets under

management. Furthermore, by producing research reports

on, for example, clean technology and organizing and

sponsoring seminars Robeco has enhanced its reputation

in this field. The acquisition of SAM Group has significantly

increased Robeco’s presence in sustainable investing.

Moreover, SAM has extensive research skills in this area.

In terms of the second key objective; in 2006 a policy was

formulated on transparency. This policy has been adopted

by all business units. Furthermore several concrete projects

were realized. As part of the Younique by Robeco concept

online, transaction costs for Robeco funds were abolished.

The management fees of listed structured products were

harmonized and reduced to lowest level charged for any of

the tranches. Last but not least Robeco Direct established

a customer ‘sounding board’. The board consists of 18

customers who are encouraged to give their views and

opinions on Robeco’s products and services. Their views

will be used to help improve the products we offer.

Sustainable funds

In 2006 Robeco Sustainable Private Equity I had its final

closing. In combination with parallel investment vehicles


the total commitment amounted to USD 200 million.

At the end of 2006 well over 80% had been committed to

private-equity funds. The successor of this fund, Robeco

Clean Tech Private Equity II was introduced in December

2006. This is, in essence, an institutional product also

suitable for large family offices. Within the scope of this

fund we introduced a certificate which allows private

investors to participate: Robeco Cleantech Certificate.

Robeco Duurzaam Aandelen (sustainable equities; EUR 0.1

billion) had a good result in 2006. The fund’s performance

was 12.6%, which was better than the benchmark FTSE

4 Good’s performance of 7.8%. In terms of sustainable

investment funds however, the most important step was

the acquisition of the Sustainable Asset Management

(SAM) Group, one of the world’s leading asset managers

for sustainability investments. Besides knowledge and

a good reputation in the area of sustainable investments,

SAM adds global sustainable funds as well as theme-

based funds (water, smart energy and smart materials)

and sustainable indices (in collaboration with Dow Jones)

to Robeco’s sustainability fund range.

Responsible investing

By responsible asset management we mean being an

involved and active shareholder. Robeco therefore actively

exercises its voting rights and pursues discussions with

companies on corporate governance and sustainability

issues (engagement). In 2006 Robeco started the

engagement product for its first clients and engaged

with 80 companies. Not only corporate governance, but

also environmental and social issues were discussed with

these companies. The voting policy was continued in

2006. A new development was the fact that Robeco spoke

or was represented in 19 shareholders’ meetings in the

Netherlands. Furthermore in 2006 Robeco subscribed to

the United Nations Principles for Responsible Investing,

which provide a framework to incorporate social,

environmental and governance issues into traditional

investment portfolios. Robeco also joined the Enhanced

Analytics Initiative (EAI) as a full member. EAI is an

international collaboration of asset owners and asset

managers that encourages investment research that

considers the impact of extra-financial issues on long-term

company performance.

Internal organization

In terms of its internal operations, Robeco has

incorporated corporate responsibility into the financial

management reporting cycle. Management is kept

updated on the progress of the corporate-responsibility

objectives on a quarterly basis. The main achievements

of an environmental and social nature were the decisions

to start using FSC (Forest Stewardship Council) certified

paper worldwide for all printing purposes, to introduce

the ABC policy for lease cars (environmental classification)

and thereby increase the amount of energy-efficient

cars and to support several good causes and community

projects. As a result of the employee satisfaction survey,

the Human Resources department has developed several

career development programs. A third key objective

was added in 2006: to increase employee awareness of

Robeco’s social responsibility policy.

Outlook for 2007

In 2007 Robeco will remain focused on increasing

its sustainable and socially responsible assets under

management and on promoting transparency. The

acquisition of SAM Group will give the combined platform

new areas of growth for sustainable funds. SAM’s

sustainability expertise in long-only equity funds in mature

markets, combined with Robeco’s structuring, bond and

emerging-equity market capabilities will lead to product

innovation. Furthermore SAM’s products can be sold

through Robeco’s global distribution platforms. In 2007

Robeco will start engaging with companies on the subject

of responsible investment on behalf of its retail funds.


09 Robeco in 2007


The Management Board’s outlook for 2007 is positive.

From a market perspective we expect that prices for

securities will still continue their upward trend, but at a

slower pace and with increased volatility. Growth may

slow down somewhat because the US economy has

shifted down a gear compared to what we have become

accustomed to in recent years. Equity valuations are

generally reasonable so the appetite for ‘traditionals’

will remain healthy, and emerging markets in particular

– such as the ‘BRIC’ countries (Brazil, Russia, India and

China) – will continue to be popular with investors. As

the trend of rising interest rates is expected to slow,

fixed-income products are likely to regain some ground.

Expectations with regard to interest-rate movements and

inflation are compelling investors to focus on the short

term in 2007. Finally, with current market circumstances

and investor risk appetite, alternative products can expect

increased interest from both institutional and private

investors.

From an internal point of view, we are positive about

further realizing Robeco’s international expansion

both from a stand-alone perspective and together with

Rabobank. One important step in this area was taken in

March 2007, when Robeco entered into an alliance with

Canara Bank, one of the largest banks in India. In addition

to this, we will also continue our search to strengthen

our portfolio with specific investment capabilities both in

Europe and the US.

It is Robeco’s ambition to be able to offer a high profile

fiduciary-management proposition for existing and

new institutional clients in 2007. The acquisition of SAM

Group, in December 2006, has substantially increased our

presence in the field of sustainability investments and in

2007 this will be reflected in our product offering. In our

home markets we aim at continuous growth, using third-

party distribution (including Rabobank), institutional sales

and direct distribution. Internationally the priority will be

on third-party distribution and institutional sales.

All in all, Robeco is ready for a year of internatio-

nalization, good performance and healthy cash flow.

Rotterdam, 22 March 2007

The Management Board

Special

Robeco’s expertise in a changing

institutional environment

Introduction / trends

The increasing complexity of investment markets, combined with the pressure to meet future liabilities and tackle

the mountain of rules emanating from regulators, is stretching the internal resources of institutional investors

worldwide. This trend has resulted in a change in what these investors want.



Outsourcing is a developing trend in the institutional

investment market. Pension funds are increasingly

outsourcing their pension assets and insurers are opting

to have their technical reserves managed externally. At the

same time central banks which, particularly in emerging

markets, have growing levels of reserves are starting to

outsource their investments and are developing a greater

risk appetite.

Since 2003 the popularity of multi-manager and fund-of-

fund solutions has increased with private and retail banks.

This demonstrates just what a professional business

third-party asset management has become in a very short

period of time. Together with the growth of fiduciary

management, this represents yet another step in the

evolution of the investment markets.

Obviously institutions have moved away from placing big

balanced mandates with managers, towards selectively

awarding them to specialists in particular asset classes

or geographical markets. Traditional asset-management

products are being replaced by (enhanced) indexing

at the portfolio’s core , and specialist and alternative

investments in the satellite strategies.

These specialist funds are now being selected more and

more by fiduciary managers, who claim that they can

efficiently build portfolios on the basis of careful risk

budgeting and tactical asset allocation, and can use their

buying power to negotiate favorable contract terms for

clients.

Robeco’s institutional strategy

In anticipation of these trends Robeco honed its

institutional strategy at the end of 2005.

The core of this strategy is to focus on a more concentrated

range of active asset-management capabilities creating

value for institutional investors across all asset classes

(fixed income, equity and alternatives).

These capabilities will be offered to more institutional

target groups in order enhance our growth potential.

For example in 2006 Robeco started to actively target

multi managers and is already seeing the benefits of this

strategy.

Simultaneously we decided to offer fiduciary services to

institutional investors to help them combat the increased

complexity of pension-fund management.

Robeco’s strengths

Robeco thrives on a number of core strengths.

Globally we have made our name through the successful

application of quantitative investment techniques and

we are a pioneer in this field. Our Quantitative Strategies

department is manned by experts with outstanding

academic records in econometrics, mathematics,

economics or physics, some of whom are connected to

universities as assistant or associate professors.

Robeco can either act as advisor to institutional investors,

allowing them to draw upon the company’s research

expertise and quantitative analysis to provide strategic

asset allocation for their investment portfolios (a crucial


element in the fiduciary service towards pension funds) or

can directly harness the extensive range of quant products

we have developed in recent years.

While in the leading investment houses quantitative

analysis is always complemented by the human touch

– qualitative views and portfolio constructions – Robeco

has earned the title of ‘investment engineer’ with its long

track record and the pedigree of its model builders. It is

this skill that will also benefit institutional investors and

enable them to optimize the returns on their investment

portfolios.

In the future we will continue to emphasize our strategic

choice to offer actively managed products in all major

asset classes, both fixed income and equity. This means

global and European fixed income, enhanced cash and

high yield. In the equities universe our outlook remains

global, with a specialist focus on European, US and

emerging-market equities. We also expect the dynamism

of the alternative-investments markets to continue and

are committed to building on our reputation in this area

and creating more alpha (market outperformance)

engines as overlays for portfolios.

The experience of our investment teams is reflected in

the impressive breadth of our client base which includes

pension funds, insurers and central banks worldwide.

Around half of Robeco’s EUR 142 billion assets under

management are from institutional investors.

In the past we have also been rewarded for the high level

Special Robeco’s expertise in a changing institutional environment


of our client service and the quality of our consolidated

reporting.

We are keen to offer a senior level of account

management and a high standard of client service. It is

this, in combination with our transparency of information,

knowledge sharing and risk management awareness,

that makes Robeco a seasoned partner in investment

management in the eyes of pension fund professionals.

Robeco and fiduciairy management

Pension funds and insurance companies are turning to

companies that have in-depth knowledge of financial

markets and sufficient credibility to provide strategic

advice. This requires the ability to execute consolidated

reporting of positions, performance monitoring, manager

selection and to handle the relationship with the

custodian.

These requirements play to the strength of Robeco’s

existing asset-management and strategic investment

skills. Pension funds worldwide acknowledge Robeco as

their partner in strategic investment issues. They trust us

to manage their portfolio against a liability benchmark,

while they maintain control and the final responsibility for

their participants and future pension liabilities. They also

ask us to assess the consequences of outsourcing (part of)

their activities: how to retrieve control, and still retain and

develop the necessary knowledge within their pension

and investment committee; and how to communicate

investment results to their participants.

We are convinced that the ultimate solution depends on

the way the pension fund is structured, the goals it tries

to achieve, its ambitions in terms of contribution and

indexation levels and finally the level of expertise the

pension fund has and wants to retain. We have developed

an approach which systematically guides pension funds

through these questions.

Dutch institutions have shown particularly strong interest

in Robeco’s existing fiduciary services. They take comfort

from the fact that while we are a well-known international

investment manager with a strong investment track

record, we are also Rotterdam-based. This means that we

are Dutch native speakers with a thorough understanding

of the local regulatory climate and excellent contacts in

the Dutch political arena. As a result of this our knowledge

of the investment culture and market in the Netherlands is

better than that of our overseas competitors.



Headquarters

Robeco Groep N.V.

Coolsingel 120

3011 AG Rotterdam

The Netherlands

Postbus 973

NL-3000 AZ Rotterdam

Tel. + 31 10 224 1224

Fax + 31 10 4115288

Internet: www.robeco.com

Offices Robeco Europe

Brussels – Robeco Bank Belgium

Louizalaan 81, box 6

1050 Brussels

Belgium

Tel: +32 2 533 1600

Fax: +32 2 533 1699

Internet: www.robeco.be

Frankfurt am Main – Robeco

Deutschland

Taunusanlage 17

60325 Frankfurt am Main

Germany

Tel: +49 69 959 0858

Fax: +49 69 959 0850

Internet: www.robeco.de

Paris – Banque Robeco S.A. and

Robeco Gestions S.A.

21, Boulevard de la Madeleine

75039 Paris

France

Tel: +33 15 535 4535

Fax: +33 15 535 4501

Internet: www.robeco.fr

Zurich – Robeco (Schweiz) AG

Uraniastraße 12

8001 Zurich

P.O. Box 2068

Switzerland

Tel: +41 1 227 7272

Fax: +41 1 227 7200

Internet: www.robeco.ch

Madrid – Robeco Asset

Management Spain

Paseo de la Castellana 41 - 6b

28046 Madrid

Spain

Tel: +34 91 702 0705

Fax: +34 91 702 0671

Internet: www.robeco.com/esp

Offices Robeco USA

Robeco Investment Management

(RIM)

– Boston

28 State Street, 21st floor

Boston, MA 02109

United States

Tel: +1 617 832 8200

Fax: +1 617 832 8222

Internet: www.boston-partners.com

– New York

909, Third Avenue, 32nd floor

New York, NY 10022

United States

Tel: +1 212 908 9500

Fax: +1 212 908 9672

Internet: www.robecoinvest.com

Harbor Capital Advisors

Toledo

One SeaGate, 14th floor

Toledo, Ohio 43666

United States

Tel: +1 800 422 1050

Internet: www.harborfunds.com

Other

Robeco Antilles

Robeco Antilles N.V.

Ara Hill Top, unit A5

Pletterijweg Oost 1

Willemstad, Curaçao

Netherlands Antilles

Tel: +59 99 465 8177

Fax: +59 99 465 7449

Robeco Middle-East

Bahrain - Robeco Group

Suite 401 - 2, 4th floor, Entrance Four

Manama Centre

Government Avenue

P.O.Box 1552

Manama, Kingdom of Bahrein

Tel: +973 1722 6625

Fax: +973 1722 6640

Robeco Japan

Robeco Institutional Asset

Management B.V. Japan

Tokyo Sankei Building 16F

1-7-2 Otemachi, Chiyoda-ku

Tokyo 100-0004 Japan

Tel: +81 3 5200 8222

Fax: +81 3 5200 8229

Addresses

Special

In the Netherlands Robeco Direct is our direct distribution channel, serving around half a million private clients

and offering a wide range of products and services for asset accumulation, including investment funds, savings

products, mortgages, insurance and brokerage services.

Robeco Direct services its clients according to the ‘customer advocacy ‘principle: we put the success of the client

first, a principle which extends beyond customer satisfaction. Robeco Direct wants its customers to be successful in

terms of their investments because in the end the client’s success will also benefit the company.

Customized asset growth

with Younique by Robeco


Younique by Robeco

All the aspects of this unique client approach come

together in the service concept ‘Younique by Robeco’.

Robeco Direct introduced this service to the retail market

last May and at the same time was the first market party

to dispense with transaction costs for online purchase

and sell orders for Robeco funds. This means that every

recommendation Robeco Direct makes is altruistic and

its first priority is to optimize returns for the client. By

dispensing with transaction costs any barrier that existed

to following up on recommendations have been removed.

Younique by Robeco enables Robeco Direct to make

customized asset growth available for mid-net-worth

investors. In a nutshell Younique by Robeco stands for:

– A customized service, advice and support for asset

growth

– Access to a team of specialists

– No transaction costs for online purchase and sell

orders for Robeco funds

– Low minimum deposit of EUR 25,000 for Personal

Asset Management [Persoonlijk Vermogensbeheer ]

and Asset Coaching [Vermogenscoaching]

The client comes first

Robeco Direct’s clients know that Younique by Robeco will

give them the advice and guidance that suits their needs.

The way in which clients wish to manage their assets will

determine the service Robeco Direct offers. This leads

not only to client-driven recommendations but also to

continual support to ensure asset growth. Personal advice

from Robeco Direct incorporates all the client’s wishes

and requirements from financial situation to investment

experience and the client’s maximum risk threshold. It

also incorporates possible future plans, the client’s interest

in financial affairs and the amount of time the client

wishes to spend managing his assets.

Would you rather do it yourself or let someone

else do it for you?

Customized asset growth with Younique by Robeco is not

limited to giving a one-off recommendation. The service

aims to continue to advise clients on their asset growth.

This continual support given by experts makes Robeco

Direct’s approach really different. Robeco Direct offers two

ways of doing this: Personal Asset Management and Asset

Coaching.

In both of these options Robeco Direct checks what the

effects of market developments are on clients’ individual

investment portfolios. The client will be given personal

advice to make any necessary adjustments. The most

important difference between the two services lies in

the decision-making process attached to actually taking

a different course of action. The Asset Coaching option

allows the client to decide whether to follow the advice

given, which is free of charge and without obligation. This

is in contrast to Personal Asset Coaching where Robeco

Direct carries out the adjustments it advises directly. The

same low initial deposit of EUR 25,000 applies for both

types of asset guidance.


Forrester forms the basis

The basic principle behind Robeco Direct’s customized

approach is the segmentation of financial customers as

defined by Forrester Research. According to this renowned

research bureau, financial customers can be divided into

the following:

– DIY investors

– team players

– outsourcers

– avoiders

Each segment regards their finances in a different way

and also wishes to be kept informed about their assets in

a different way. Robeco Direct has developed a suitable

service for each of these groups both in terms of financial

advice and guidance. Asset Coaching is, for example,

available in three types Alert [Alert], Planned [Gepland]

and Peace of Mind [Rust]. The first type targets DIY

Investors who manage their own asset growth with

the help of tips and information from IRIS (Institute for

Research and Investment Services). The second type

targets team players who need personal support and

like to work together with Robeco Direct’s specialists.

The last type is for the outsourcers and the avoiders who

would rather let someone else handle the management

of their assets. Especially for this last group, Personal

Asset Management is a solution that aims to achieve

asset growth in a responsible and worry-free way with the

options of doing it yourself or letting someone else do it

for you.

Do it yourself or let someone else do it for you?

A summary of the differences

Asset Coaching: make your own investments with the support of a coach in

the background

– make the investment decisions yourself

– monthly portfolio check by Robeco Direct and where necessary practical and

up-to-date advice

– adjust your investments yourself without incurring any costs

– no costs are charged for advice

Personal Asset Management: let someone else take care of your investments

– specialists make the investment decisions

– weekly portfolio check by Robeco Direct

– investments are directly adjusted where necessary by Robeco Direct’s

experts without any transaction costs being incurred.

– management fees are low and straightforward in structure. (EUR 40 per

month and 0.05% of the managed assets).

Special Younique by Robeco


Working together with clients to improve the

service

In order to make sure that the service contributes to

client success, Robeco Direct is involving its clients more

and more in the formulation of this service. This is also

the reason why Robeco Direct started up KlankBoard

(which means sounding board) at the beginning of 2006.

KlankBoard is a Robeco Direct advisory body made up of

private investors. The group has been put together in such

a way that it exactly mirrors the whole client base. The

members of the KlankBoard think in the broadest possible

terms about all aspects of Robeco Direct’s service that are

important to all the clients. The KlankBoard acts as a think

tank, sparring partner and critical consumer all rolled into

one. In this way Robeco Direct and the client are together

continually looking for opportunities to improve.

Winner Customer Relationship Management

(CRM) Award 2006

Robeco Direct’s ideas and approach have been rewarded,

not only by its clients but also by a jury of professionals.

In 2006 Robeco Direct was named as the winner of the

CRM Award. This prize is awarded to the organization that

is considered to give the best example of client-oriented

entrepreneurship to other organizations. This is not the

first time that Robeco Direct has won the prize: in 2003

the CRM Award was also won by Robeco Direct. The

jury of professionals felt that Robeco Direct had made

significant progress in the move from client-oriented

entrepreneurship to ‘giving customer-driven and altruistic

advice’. Robeco Direct also has all the necessary conditions

in place to continue its drive to achieve success for its

clients.




I

This Robeco annual report and the information contained

herein has been prepared and is presented by Robeco

Groep N.V., incorporated in the Netherlands. It is solely

intended to supply the reader with general information

about the investment-management activities and

Assets under Management of Robeco Groep N.V. and its

subsidiaries worldwide. It does not constitute an offer

to sell or solicitation of an offer to buy any investment

product or program offered by Robeco Groep N.V. or any

of its subsidiaries, and is not intended to be used as the

basis for an investment decision with respect to any such

product or program or a decision to retain Robeco Groep

N.V. or any of its subsidiaries to provide such services.

Readers should be aware of the fact that the shares in

the capital of Robeco Groep N.V. and the shares in the

capital of all its subsidiaries are not listed on any stock

exchange and are not otherwise for sale to the public. The

information in this Robeco annual report is not intended

to solicit the purchase or sale of any securities in any

investment funds or other financial products of Robeco

Groep N.V. and its subsidiaries in any country where the

offering and/or distribution thereof is not allowed or not

available to the public. Readers of this Robeco annual

report should be aware of the fact that they are solely

responsible for full compliance with all laws and/or other

regulations in their respective jurisdictions with respect

to any decision on such purchase or sale. Robeco Groep

N.V. only provides investment-advisory services, including

investment advice with respect to investment products

and programs, through its authorized local subsidiaries.

All its banks, investment-adviser subsidiaries and affiliates

are registered with their respective local regulators.

II

This annual report may contain statements that amongst

others relate to future net profit and operating expenses.

These statements are not historical facts nor do they

contain any guarantee of future performance, but are

statements of future expectations or forward-looking

statements based on management’s current views and

assumptions and involve known and unknown risks and

uncertainties that could cause actual results, performance

or events to differ materially from those expressed or

implied in such statements.

Actual results,performance or events may differ materially

from those expressed or implied in such statements due

to, without limitation, [I] general economic conditions,

[II] performance of financial markets, [III] interest-rate

levels, [IV] currency exchange rates, including but not

limited to the EUR/USD exchange rate, [V] changes in

laws and regulations, including monetary convergence

and the European Monetary Union, [VI] changes in the

policies of central banks and/or foreign governments,

[VII] cost overruns and [VIII] competitive factors, in each

case on a global, regional and/or national basis.

Except as required by law Robeco Groep N.V. on behalf

of itself and its subsidiaries expressly disclaims any

obligation or undertaking to update or revise any

statements of future expectations or other forward-

looking statements contained herein whether as a result

of new information, change of events, circumstances or

conditions on which any such statement is based on, or

otherwise .

Disclaimer

Documents

Annual Report 2006 - bib.kuleuven.be · Annual Report 2006 Robeco Groep N.V. Reports 2006 of the Supervisory Board & the Management Board