In 2006, Robeco's assets under management increased by 7.7% (EUR 10.1 billion) to EUR 141.7 billion. The inflow of new money from clients totaled EUR 5.8 billion, making 2006 one of the best years that Robeco has ever experienced in terms of cash flow. Robeco has further strengthened its activities in the field of sustainable investing through its acquisition of the Swiss SAM Group. Net profit for 2006 amounted to EUR 193 million, an increase of EUR 41 million compared to 2005.

Strong cash inflow
The net cash inflow of EUR 5.8 billion is evenly spread over our European and US activities and over private and institutional investors. That international cooperation between the various entities is working well is demonstrated by the fact that two large institutional mandates (worth a combined USD 1 billion) were committed in North America for the emerging-markets strategy that is managed out of Rotterdam The introduction of the Rabo Liquidity Funds (EUR 2.0 billion) also made a significant contribution to the growth of our institutional business. The net cash flow into retail products came largely from the United States, where investment funds of subsidiary Harbor Capital Advisors had a net cash inflow of USD 3.5 billion - a new record. Cash outflow occurred mostly in structured products. Institutional investors account for EUR 71.5 billion of the total assets under management of EUR 141.7 billion and retail investors account for EUR 70.2 billion.

Investments affect operating profit
Robeco made substantial investments in the organization in 2006. Important projects were the strengthening of the internal organization; setting up a Shared Service Center containing a number of back- and mid-office competencies; starting the outsourcing of Robeco Direct's back office; and launching activities in India, Poland and Saudi Arabia. As a result of these investments, operating profit fell 5.4% in 2006. Net profit, on the other hand, increased by EUR 41 million (27%).


Acceleration in sustainable investing
Robeco has considerably strengthened its activities in the field of sustainable investing in 2006. The acquisition of a 64% stake in the Swiss company Sustainable Asset Management, one of the most prominent asset managers in the world in the field of sustainable investing, springs immediately to mind. SAM Group enjoys international recognition for its water and energy funds and for constructing the Dow Jones Sustainability Indexes, a joint initiative with Dow Jones. SAM Group possesses a unique research department, which identifies companies worldwide that are both financially sound and also fulfill certain sustainability criteria. In 2006, Robeco Clean Tech Private Equity was also introduced as a follow-up to Robeco Sustainable Private Equity, the first sustainable private-equity fund-of-funds in the world, which was introduced at the beginning of 2004. Robeco, having introduced its first sustainable product in 1995, was the first major Dutch asset manager to launch a sustainable equity fund in 1999.

Other activities of a sustainability-related nature in 2006 were the signing of the United Nations Principles for Responsible Investment and joining the Enhanced Analytics Initiative, an international alliance for institutional investors that is geared to promoting non-financial investment research. The assets under voting, i.e. the assets for which Robeco votes at shareholders' meetings of the companies in which it invests, increased in 2006 to nearly EUR 24 billion. The SRI assets under management rose from EUR 320 million at the end of 2005 to EUR 2.6 billion (including SAM Group) at the end of 2006.

Equity performance more than satisfactory for the third consecutive year
On a group-wide basis, 72% of the assets under management outperformed their respective benchmarks over a twelve-month period. For equities this figure was 60%, so the performance of equity investments in 2006 slightly lagged the strong years of 2004 and 2005. Over a three-year period, 87% of the assets invested in equities enjoyed an outperformance. This amounted to an annual average of 1.7%. The Robeco flagships Robeco (EUR 7.1 billion) and Rolinco (EUR 1.6 billion) achieved outperformances of 0.2% and 2.8% respectively versus their benchmarks. Robeco Emerging Markets Equities (EUR 2.1 billion) slightly underperformed its benchmark by 1.7%. Robeco Chinese Equities (EUR 0.2 billion) realized a return of 65.1%, beating its benchmark by 2.2%. Robeco's largest fund in the United States, Harbor International (USD 18.5 billion), beat its benchmark by as much as 5.9%.


Fixed-income continues to maintain high levels
After the very strong years of 2003, 2004 and 2005, in which Robeco became one of the leading bond houses in Europe, 2006 also proved to be a year of outperformance. 86% of the assets invested in bonds outperformed their benchmarks last year. The average excess return was 0.2 percentage points. Over a three-year period, 93% of the fixed-income investments have outperformed their benchmarks. Flagship funds Rorento (EUR 3.0 billion) and Lux-o-rente (EUR 4.3 billion) outperformed their benchmarks in 2006 by 0.2 percentage points and 0.6 percentage points respectively. The Harbor Bond fund (USD 2.4 billion) realized an outperformance of 0.2 percentage points.

Alternative investments were mixed
Transtrend's Diversified Trend Program (Enhanced Risk) (EUR 2.2 billion) achieved an excellent return of 12.0% in 2006, in line with the long-term average. The Robeco Hattrick Bond (EUR 0.6 billion) that was introduced in March 2005 is still encountering some difficulties. This product realized a lower-than-expected return of -1.9%. The fund-of-hedge-funds Robeco Sage International (USD 0.7 billion) realized a return of 10.8% in 2006, a result that was better than the market average of 10.3%.

Invest in Europe, grow in the US, seed in emerging markets
Robeco's ambition to become a leading international asset manager by the end of 2009 was translated into a strategic motto in late 2005: 'Invest in Europe, grow in the US, seed in emerging markets'. Investments in Europe in 2006 involved strengthening the European equities investment team; the acquisition of a 40% interest in the Belgian company Analytic Investment Management (AIM), which specializes in systematic intraday currency trading using quantitative models; the acquisition of a 64% interest in SAM Group; strengthening our structuring and packaging capabilities; strengthening our institutional sales team; enhancing the positioning of Robeco Direct through the introduction of the Younique-by-Robeco service concept; the elimination of online transaction costs for Robeco funds and reinforcing Robeco's position in France. Growth in the United States should come in particular from the expansion of Robeco Investment Management's target groups to include third-party distributors.

In the emerging markets, activities were started in 2006 in Poland, where a distribution agreement was signed with Bank BGZ, a bank with a large network of offices. More distribution agreements with other Polish banks will be signed in 2007. Furthermore, Robeco entered into an alliance with Rana Investment Company in Riyad, Saudi Arabia (strictly speaking not an emerging market), in 2006. Rana and Robeco intend to develop investment products together for the Saudi Arabian market. Robeco considers it to be vitally important to sow seeds now in countries and regions which will play an important role on the world economic stage in the future. Examples are China, India and Eastern Europe.

The Investment Engineers
Realizing Robeco's international ambitions called for radical adjustments of the brand policy. The salmon-pink logo with the percentage sign was replaced by a powerful text logo with a professional international image. Robeco's new baseline 'The Investment Engineers' stresses the fact that we use our knowledge and expertise to find real solutions for our clients. Knowledge in itself is not what Robeco focuses on, but rather on how that knowledge is used.

Fund governance
Trust and integrity are of cardinal importance in the investment industry. In 2006, Robeco took a further step to promote integrity by introducing a framework of fund-governance principles set in solid rules and regulations. One of the main points of interest is the way in which potential conflicts of interest between clients who invest in the funds and the manager are handled. In the absence of a general, internationally accepted framework of principles for fund governance, Robeco drew up its own 'Principles on Fund Governance' in 2006.

Outlook for 2007
The outlook for 2007 is positive, both for the financial markets and for Robeco. Stock prices are expected to continue their upward trend in 2007, albeit at a lower pace and with more volatility than in 2006. Investments in emerging markets, such as Brazil, China and India, will remain popular. As the trend of rising interest rates is expected to slow, fixed-income products are likely to regain some ground. Interest in alternative investments is expected to increase among both retail investors and institutional investors.

2007 looks likely to become a good year for the further realization of Robeco's international growth strategy. An important step was taken in March 2007, when Robeco set up Canara Robeco Asset Management in India, a joint venture with Canara Bank, which is one of India's largest banks. Canara Bank has 30 million clients, including pension funds in the public sector. In that same month, Robeco announced its entry into the Egyptian market via a stake in Obelisk Portfolio and Investment Fund Management SAE, a recently established Egyptian asset manager. In 2007, Robeco will look further for investment capabilities to enable it to strengthen its product supply, both in Europe and the US.

In 2007, Robeco expects to expand its institutional proposition to include manager selection and will then be able to offer its institutional clients all services in the area of fiduciary asset management. The acquisition of SAM Group will be reflected in Robeco's product range in 2007.