independent valuations, page-20

SmartInvestor,

Did you look at the specifics of the VCS and the properties portfolio?

I don't think writedowns will be that high over the 6 months period to 31 Dec 08, especially for the properties portolio.

I would expect a writedown of c. 10% for the properties portfolio considering favorable exchange rate movements (I mean AUD/EUR) over the period, and that over 50% of its properties are in Australia. Its European expsoure is mainly in Germany and France (Euro denominated) plus not too many in the UK.

With regard to valuation, debt market conditions, investor interest in properties/cap rates, economic conditions, actual active property management to enhance revenue should all be taken into accounts. It's not just one factor.

I was told by Investor Service that its German Akitis fund's cap rate increased by 30bps only, and due to active property management, the value of the portfolio actually increased by EUR10mln.

If they could do it to their FUM, they may as well do it for their own properties.

I still believe that VPG should be able to meet most of its interest cover covenants (some are at group level, some at project/asset level). Hence, if it breaches/is close to breach gearing covenants due to non-cash writedowns, I would expect the banks to be willing to either waive the covenant breach, or amend the covenants for a period of time before economic recovery.