GB Engl indd Windsor AG by xeniawinifredzoe


									                           WINDSOR AG

Business Report 2006

Business Report 2006


    Letter to Shareholders                                           6

    Report of the Supervisory Board                                  8

    Report on the Group’s state of affairs                           11

    1       Economic Environmen                                      12
    1.1     The economic development in Germany                      12
    1.2     Upward trend in German real estate market                12
    1.3     Our property locations                                   13
    1.3.1   Berlin                                                   13
    1.3.2   Leipzig                                                  14
    1.4     The Business Model of the WINDSOR Group                  15

    2       Business development                                     16
    2.1     General development                                      16
    2.2     Dependency Report                                        16

    3       The Present Economic Situation                           18
    3.1     Earnings Situation                                       18
    3.2     Financial and Assets Position                            19

    4       Essential Business Transactions
            after 31 December 2006                                   19

    5       Risk Report                                              20
    5.1     Risks in Refurbishment, Portfolio and Sales Operations   20
    5.2     Risks due to Issuing Private Equity                      21
    5.3     Risk due to Loss of Receivables                          21
    5.4     Risks due to Outside Capital                             22
    5.5     Risks due to Personnel Leaving                           22
    5.6     Other Risks                                              22

    6       Prospects                                                23
    6.1     Enduring Economic Upswing in 2007                        23
    6.2     Economic Perspectives for Berlin and Brandenburg         23
    6.3     Positive Development of the Property Segment             24
    6.4     Business development                                     24
    6.5     Conclusion                                               25

                                                  Table of Contents

Group Balance Sheet                                              27

Group Profit & Loss Account for the Period from
1 January to 31 December 2006
(Balance sheet pursuant to IFRS)                                 28

Group Accounts as at 31 December 2006
(Accounting pursuant to IFRS)                                    30

Group Statement of Stockholders’ Equity                          32

Group Cash Flow Account for the Period
from 1 January to 31 December 2006                               34

Group Notes for the Business Year from
1 January to 31 December 2006                                    36

Development of Group Investment Assets as
of 31 December 2006                                              58

Audit Certificate of the Auditor                                 60

The WINDSOR Share                                                62

Financial Calendar 2007                                          63

Imprint                                                          65

    Letter to Shareholders

    Dear Shareholders,

    Our work has been fruitful: 2006 was a record year for WINDSOR AG. We
    not only managed to double the balance sheet total, but even quadruple the
    sales and net income for this year.

    Germany’s economic engine is running at full speed - Berlin market on the
    According to the economic barometer of ZEW (Centre of European Economic
    Research), German is again considered Europe’s economic booster, in particular
    in view of an anticipated economic growth of approx. 2.5% in 2007. Thanks to
    this, the domestic demand is gaining further momentum which will have also an
    impact on the private owners’ and investors’ desire for residential properties.

    Berlin’s property market has experienced a record year in 2006. It was not only
    the sales of office space that reached an all-time high, but also the total sales
    volume regarding estates, buildings and flats soared by a record 58%. However,
    this has just been the beginning, because foreign investors are ever more pushing
    into Germany, and in particular into Berlin, whose market is rated undervalued
    by experts after long years of price stagnation. WINDSOR AG is well prepared for
    such a development and provided the proper financial basis by raising funds in
    order to ensure its successful activities at the location of its headquarters also in
    the future.

    The year 2006 showed that our business model works properly and yields high
    income. Nevertheless, we have adapted the model to the current opportunities
    and chances opening up in the market, for instance by issuing private equity. We
    not only follow the development of G-REIT’s very attentively, but are also strategi-
    cally prepared. As soon as there occur promising and lucrative prospects, WIND-
    SOR AG is determined to make use of them.

                                         Report of the Supervisory Board

Our core business with its lines of refurbishment and development, privatization
and portfolio will ensure a positive earnings situation also in the current business

The employees of WINDSOR AG and its subsidiaries are a highly committed and
well interacting team who have proved how efficient proper cooperation can be.
We owe these employees not only our thanks, but also our trust for the future,
because market competence and knowledge are part and parcel of our guarantee
for success and have decisively contributed to this positive annual yield.

We hold on to our successful course
Dear shareholders, we thank all those who have put their trust in us in the past.

For the business year 2007, optimum prerequisites have been ensured both in
terms of personnel and financial conditions to be able to continue our successfully
started strategy. Thanks to this, WINDSOR AG offers you the opportunity to join in
this successful course also in the future.

Dr. Volker Voigtsberger                       Heiko Zybell
(Director)                                    (Director)

    Bericht des
                of the Supervisory Board

    Meetings of the Supervisory Board
    In the period under report from 1 January 2006 to 31 December 2006, the Board
    of Directors of WINDSOR AG has steadily kept us informed, both verbally and in
    writing, about the business development of the company and its subsidiaries. We
    thoroughly discussed basic questions of our business policy and strategy as well
    as existing risks and risk management at joint meetings as well as additional tele-
    phone communication with the Board of Directors. The information we gained in
    this way convinced us of the Board’s proper conduct of business. Due to its small
    size, the Supervisory Board did without the formation of committees dealing with
    the subjects concerned. Six Supervisory Board meetings took place during the
    year under report, all of which were fully attended and therefore constituted a

    Selected main topics at the meetings
    The major items discussed at the Supervisory Boards meetings were the corporate
    business development and the performance achieved.

    In addition, the Board of Directors presented WINDSOR AG‘s controlling system
    at the meeting on 20 February 2006. The Supervisory Board approved, more-
    over, the share repurchasing program during its meeting on 13 June 2006. An
    item on the agenda of the Supervisory Board’s meeting on 19 June 2006 was,
    among others, the approval of both the Group annual and financial statements
    of the business year 2005. At the meeting on 25 August 2006, share block sales
    were discussed. On 6 September 2006, the Supervisory Board consented to the
    capital increase based on authorized capital as decided by the Board of Directors
    on 5 September 2006. The supplementary resolution taken by the Board of Direc-
    tors on 13 December 2006 with regard to the resolution of 5 September 2006
    concerning the capital increase was also approved by the Supervisory Board on
    13 December 2006.

    Members of the Supervisory Board
    The composition of the Supervisory Board changed during the business year 2006
    as follows: At the Supervisory Board’s meeting held on 19 June 2006, Mr. Markus
    Wenner was elected chairman of the Supervisory Board, and Mr. Roderich Schätze
    was elected his deputy. Dr. Albert Wahl is now an ordinary member of the Supervi-
    sory Board.

    Annual statements
    The annual financial statements presented by the Board of Directors and the
    consolidated financial statements of WINDSOR AG for the financial year as at
    31 December 2006, the report on the Group’s state of affairs as well as the report on
    relations with subsidiaries (dependent company report) were audited by the audi-
    tors Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Berlin, appointed

                                         Report of the Supervisory Board

by the General Meeting of shareholders, and were endorsed without reservation.

The annual accounts, the Group accounts, the annual business report, the propo-
sal for utilizing the balance profit and the audit reports of the auditor were sent
to all Supervisory Board members in due time before the accounts meeting on
28 June 2007.

We approvingly took note of the audit and, following our own review of the annual
accounts, the Group accounts, the corporate report, the management report and
the report on the Group’s state of affairs, the Supervisory Board had no objections.
The Supervisory Board endorses the annual report compiled by the Management
as well as the consolidated financial statements which are thus approved.

Dependent Companies Report
The report provided by the Board of Directors in accordance with section 312 AktG
(Stock Corporation Act) concerning the relations with subsidiaries was submitted
to the Supervisory Board and examined by it. According to section 312 AktG par
3 AktG, the auditor provided the following audit certificate:

„As a result of our obligatory audit and assessment, we confirm that

1. The factual information in the report is correct;
2. The company’s consideration with regard to the legal transactions stated in the
    report was not unduly high;
3. And that there are no circumstances concerning the activities indicated in the
   report that would suggest an assessment significantly different from that of the
   Board of Directors.”

The examination of the dependent companies report by the Supervisory Board did
not lead to any objections. The Supervisory Board concurred with the results of
the audit. Consequently and based on the result of its own review, the Supervisory
Board does not raise any objections to the statement of the Board of Directors at
the end of this report on the relations with associated companies.

Thanking the Employees
We would like to thank all employees as well as the Board of Directors of the
WINDSOR Group for their excellent performance during the previous financial year
and wish them much success for the year 2007!

Berlin, 16 March 2007

Markus Wenner
(Supervisory Board Chairman)

Report on the Group’s state of affairs

     Economic growth of 2.7%        1.       Economic Environment

                                    1.1      The economic development in Germany
                                    In 2006 the German economy experienced an upswing with a real growth rate
                                    of 2.7% on the previous year, the like has not been seen since the boom year
                                    2000. The positive impetus mainly resulted from the jumpstart of the domestic
                                    economy with a growth rate of 1.5% in the price-adjusted GDP. However, the
                                    upward trend was also due to special effects caused, for instance, by the soccer
                                    world championship. In the year 2006 for the first time ever, the gross fixed
                                    assets investments also increased by 6.4% as a strong economic incentive, in
                                    particular, building investments (source: i.a. Federal Statistical Office in February
                                    2007). In addition, following years of stagnation, in 2006 private consumption
                                    was boosted again at the end of the year which also was due to a certain antici-
                                    patory effect of the announced increase in value-added tax. Last but not least,
                                    the situation in the labour market improved thanks to the economic upswing:
                                    the rate of unemployed decreased from over 11% in 2005 to approx. 10.3% in
                                    2006, and 9.8% in early 2007 (source; Hamburgisches WeltWirtschafts Institut,
                                    Bundesagentur für Arbeit). This noticeable decrease in the number of unemplo-
                                    yed in particular contributed to the generally positive mood among the popula-
                                    tion which was reflected in the friendly expectations of the economy.

                                    The foreign trade balance of 2006 also showed a surplus of EUR 161.9 billion.
                                    Due to this, Germany even ranked among the top leaders of the G8 states last
                                    year and was considered the driving force of the economic development in
                                    Europe. Economists believe that this is the quality seal of the German economic
                                    upswing (Wirtschafts-Ausblick of IWF).

Thrilling real estate and invest-   1.2      Upward trend in German real estate market
                    ment market     After numerous difficult years, the upswing has also reached the German
                                    real estate branch, which turned out to be especially profitable in terms of
                                    office markets and letting of commercial areas. In 2006, nearly 3.23 million
                                    square metres of office space were traded at the most important office loca-
                                    tions Munich, Berlin, Frankfurt am Main, Duesseldorf, Hamburg, Cologne,
                                    Leipzig, Stuttgart and Essen. This meant an increase in office space tra-
                                    ding by almost 17% on the previous year, and is the second best result
                                    with Berlin ranking among the top locations (Atisreal, 10 January 2007).

                                    Foreign investors’ demand for residential and commercial properties in Ger-
                                    man towns has clearly continued also in 2006. Thanks to very well-priced rents
                                    and high yields, Germany, and especially the Berlin capital, are considered
                                    one of the most thrilling investment markets in Europe. Even though the inte-
                                    rest rate is growing slowly, the conditions remain highly attractive for inves-
                                    tors from home and abroad, particularly in view of the low purchase prices.

                                                               Report of the Group’s state of affairs

Berlin‘s record figures      1.3      Our Property Locations

                             1.3.1     Berlin
                             Living in Berlin is getting more and more comfortable: with regard to quality
                             of life (health, education, environment, security etc.), the capital meanwhile
                             belongs to the twenty most attractive metropolises worldwide. Also, as far as
                             the image is concerned, Berlin is one of the most favoured cities and attracts lots
                             of visitors. Thus, in 2006 the number of overnight accommodations in this city
                             reached an almost record-breaking number (Berlin Statistical Office).

                             The population of the capital grows steadily now as before, nearing the 3.4 mil-
                             lion limit in the year 2006.

                             However, it’s not only the record numbers of visitors to Berlin: In 2006 the total
                             of foreign investors’ acquisitions equalled nearly EUR 14 billion in the German
                             capital (Focus online of 5 March 2007). Thereof, in 65 transactions properties
                             amounting to over EUR 1 billion were purchased, and buyers often preferred
                             property block offers (Businessmagazin, 1 March 2007). Since Berlin property
                             prices remained almost stable, foreign investors highly appreciated the low risk
                             of depreciation.

                             Due to this, the run of foreign investors on the Berlin real estate market resulted
                             in clearly more German companies setting up their branches here. In general,
                             the mood of the Berlin economy has considerably turned for the better last year
                             and, for the first time since 2000 the capital accomplished an economic growth
                             of 1.5%. This, in turn, is reflected in the number of unemployed which essenti-
                             ally decreased for the first time in the last few years, leading to increased emp-
                             loyment with more social security contributions in Berlin as compared to other
                             German federal states. In general, tradesmen also consider the prospects on the
 Brandenburger Tor, Berlin   Berlin market advantageous now as before (IHK: Building industry - finally more
                             light than shadow).

                             All in all, the Berlin real estate market achieved a record high in 2006. In the
                             ranking list of the German cities featuring the largest turnover with regard to
                             office space, Berlin advanced to the second place behind Munich and before
                             Frankfurt. In 2006, Berlin’s office space turnover was approx. 586,000 m2, thus,
                             reaching an all-time high. The rate of office vacancies has not changed, but is
                             lower, in percentage terms, than that of other comparable large cities like Frank-
                             furt am Main, Köln, Düsseldorf, Leipzig and München. Just Hamburg, Essen and
                             Stuttgart show even lower vacancy rates.

                                        The demand for both residential property and rented apartments in the medi-
                                        um and lower segments has further increased. The total turnover at the Berlin
                                        property market reached the new record level of EUR 16.6 billion (Berliner Mor-
                                        genpost and City-Report Region Berlin) in the year under report. The proportion
                                        of owned property in Berlin was 13% and belonged to the lowest in Germany,
                                        which also means, in view of the growing buying power, further potential for
                                        the sales of real property.

Leipzig - centre of growth              1.3.2     Leipzig
                                        Based on its excellent traffic infrastructure as well as its fair grounds that are
                                        second to none on a European scale, Leipzig is considered a hub regarding future
                                        markets and a link between international markets. Already in 2005, Leipzig was
                                        rated as one of the most successful cities in the new federal states and has been
                                        considered since then, together with Dresden, the largest centre of growth in
                                        eastern Germany. In this context, Leipzig mainly benefited from the new branches
                                        of the Porsche and BMW companies set up there. Within the area of the so-called
                                        northern tangent, connecting the BMW works and the airport, further interesting
                                        investment opportunities are anticipated. Until 2008, the Leipzig/Halle airport
                                        is planned to become the main European hub of the express airfreight service
                                        provider DHL. The Quelle mail-order company and the Amazon Internet provider
                                        have moved their logistics centres to Leipzig. The population has permanently
                                        grown over the last few years, and the purchasing power per capita has shown
                                        a slightly increasing trend since 2006. Nevertheless, the implications of the great
                                        east-west differences can still be felt in Saxony. Generally, however, the year 2006
         Neue Messe, Leipzig            is considered one of the most successful years since the reunification. The total
                                        turnover of industrial enterprises rose by 36% (Leipzig Chamber of Industry and
                                        Commerce, Economic Report 2006/2007) in the period from January to Novem-
                                        ber 2006 on the previous year. With about 105,000 m2, the demand for office
                                        space was ca. 17% higher on the Leipzig office space market as compared to the
                                        previous year. At the same time, this was the best turnover achieved since the year
                                        2000. The Leipzig office space market has been characterized by a markedly stab-
                                        le demand for office space for over ten years now. The demand here has focussed
                                        on downtown areas and the locations around the urban ring during the period
                                        under report. To an increasing degree, smaller apartments in the inner city area
                                        are sought on the residential buildings market.



                          A9                              LEIPZIG
                           MARKRANSTÄDT                               B6


                   A38         MARKLEEBERG

                                                              Report on the Group’s state of affairs

         Four pillars        1.4      The Business Model of the WINDSOR Group
                             The business model of the WINDSOR Group which is based on the following stra-
                             tegic business segments

                             • Property sales
                             • Development and refurbishment of own and third-party property
                             • Purchase, optimization and management of existing property

                             turned out to be very successful in 2006, too. The model has been expanded by
                             the private equity segment.

                             Our profound knowledge of the Berlin real estate market, the realization of the
                             experience gained in further markets such as Leipzig and Potsdam as well as a
                             conservative purchasing strategy serve to reduce the risks of loss to a minimum.
                             This is the reason why exclusively real estates or existing properties were bought
                             in promising locations or locations suitable for development featuring a sound
                             building fabric and attractive facades. In this conjunction, we also made a point
                             of acquiring properties for block sales to investors from home and abroad as well
                             as preparing properties for marketing purposes.

        WINDSOR Group

Sales   Develop-     Portfolio   Private
          ment      properties   equity
         & refur-

           Business development     2             Business Development

                                    Business development from 2004 - 2006 (Group information acc. to IFRS, in EUR)

                                                                                     2004          2005          2006
                                                                                    TEUR           TEUR         TEUR
                                        Balance sheet total                         11.766        36.541        68.890
                                        Equity                                      10.744        12.323        19.100
                                        Sales revenues                              11.560         6.958        28.487
                                        EBIT                                         2.804         1.569        13.103
                                        Net income of the year (profit after tax)    2.912         1.579         8.069

The most successful business year   2.1       General Development
                                    The reporting period has been the most successful year in the WINDSOR Group’s
                                    chronicle since 1993. Revenues were achieved from construction services (EUR
                                    5.5 million), the sale of apartments and buildings (EUR 15.6 million), the sale of
                                    investment shares (EUR 6.8 million) as well as from letting properties.

                                    Moreover, private equity capital (EUR 2.5 million) was provided and, thus, the
                                    business segment was expanded by a crucial area.

                                    Further profit participation capital of EUR 5.2 million was taken up. Due to this,
                                    WINDSOR AG has issued profit participation certificates equal to a total EUR 23.6
                                    million. They are used, and serviced, according to the securities prospectus.

Planned sales proceeds exceeded     2.1.1     Sale of Properties
                                    As far as the sale of individual residential units, buildings or blocks of purchased
                                    or existing properties is concerned, the WINDSOR Group uses both a corporate
                                    team and external sales partners.

                                    When purchasing properties, the WINDSOR Group’s attention is mainly focussed
                                    on a high degree of letting and good maintenance conditions. The company con-
                                    centrates on housing estates with apartment sizes according to demand, which
                                    guarantees fast letting in case empty property.

                                    An essential contribution to the result was the sale of all shares in GMW Liegen-
                                    schaftsgesellschaft mbH with its real property assets to a foreign investor.

                                    The sales proceeds planned for 2006 were clearly exceeded.

                                                            Report on the Group’s state of affairs

  Yields above average   2.1.2     Development and refurbishment of Group-owned and external properties
                         The refurbishment business successfully contributed to the business performance
                         also in 2006. Long years of experience, together with professional controlling and
                         strict requirements regarding purchased properties as well as high building quality,
                         yielded above-average return.

                         Because normally large parts of the privately-owned residential property were sold
                         already at the beginning of the refurbishing activities, financing based on outside
                         funds was not necessary.

                         Prominent persons, as owner-occupiers or investors, from all over the FRG have
                         bought residential property from us.

                         During the period under report, two properties were completed on time and in
                         high quality for external customers. The acceptance by the property owners took
                         place according to schedule in December 2006. Furthermore, two refurbishment
                         properties, one in Berlin and another one in Leipzig as well as one property in
                         Potsdam were acquired.

Know-how of long years   2.1.3     Purchase, optimization and management of existing real estates
                         Thanks to the sound capital basis at the company’s disposal, the WINDSOR Group
                         is able at any time to take short-term decisions on purchasing existing property.
                         The good and time-proven contacts with funding banks are also helpful in this

                         Prior to purchasing, existing properties are examined based on the following
                         investment criteria:

                         • Acquisition, as far as possible, of complete housing estates or houses
                         • Central urban locations and good traffic connections
                         • High letting rates with permanent rent surpluses
                         • Modernized or qualitatively well refurbished buildings and apartments
                         • High potential with regard to value and rental development in the medium term

                         Before a potential acquisition, we carry out, at the very beginning, a profound
                         inspection as well as thorough and complete examination of rent documents kept
                         in the building administration in order to identify lack of maintenance, arrears in
                         rent payment as well as legal disputes and other cost-related aspects and to take
                         them into account for computation purposes. Based on these findings, a detailed
                         property calculation is performed considering all cost components such as cost of
                         acquisition, administration, maintenance and funding). The acquisition of proper-
                         ties is taken into consideration only if there is a clearly promising return or if the
                         property shows a corresponding potential for rent increase. Our company handles
                         these tasks in a disciplined and price-conscious manner. Moreover, our company
                         can rely in this context both on long years of experience of our Board of Directors
                         and of our employees in this line of business.

                             In 2006, further 16 properties were bought and thus the existing volume of
                             property grew to 45,442 m2 of rentable space in the meantime. At the end of
                             the year 2006, the portfolio comprised still 38,458 m2, because 6,984 m2 could
                             profitably be sold as one block. One property featuring 2,018 m2 was sold in early

                             Our properties are regularly subjected to thorough inspections and are therefore
                             steadily optimized, which enables us to find, and realize, sales potentials.

     New business segment    2.1.4    Issue of private equity
                             Private equity stands for the capital investment in an enterprise which is, as first,
                             dependent on external capital from investors and, later on, participates in the
                             economic success together with the capital investors. Private equity shareholdings
                             are not traded on the stock exchanges but rather handled in direct contact with
                             the management of the companies involved. It is deemed a specific advantage
                             that speculative effects, for instance, price bubbles on stock exchanges are of
                             no importance for private equity, but that the focus is on the development of an
                             enterprise rather than its stock exchange value.

                             This further business segment was opened up by providing private equity to an
                             investor amounting to EUR 2,500,000. It serves for developing a health centre at
                             the attractive Bergmannkietz in Berlin with a investment requirement of approx.
                             EUR 30 million and with attractive interests and secured by a property charge.

        Legal transactions   2.2      Dependency Report
                             Depending on the circumstances known to us at the time when the legal trans-
                             actions were performed with the controlling company as well as other associated
                             companies, the WINDSOR Group has achieved adequate consideration from
                             each legal transaction. We were not at a disadvantage caused by measures or
                             omissions based on instructions of the controlling company.

Sales proceeds quadrupled    3        The Present Economic Situation

                             3.1      Earnings Situation
                             The year 2006 was the most successful year in the company’s history. The sales
                             revenues have nearly quadrupled on the previous year soaring to EUR 28.47 milli-
                             on. The net income for the year has increased to EUR 8.0 million and, thus, more
                             than quintupled as compared with the year 2005. This result already includes the
                             expenses of issuing the remaining profit participation certificates. Consequently,
                             the return on equity rose to 42% after 13% in the previous business year.

                                                                       Report on the Group’s state of affairs

Balance sheet total has doubled   3.2     Financial and Assets Position
                                  Major changes in the financial position of the WINDSOR Group are the following:

                                      IFRS-Zahlen                           31.12.2006   31.12.2005         Changes
                                                                                 TEUR         TEUR             TEUR
                                      Short-term assets                        46.245        33.288         +12.957
                                      Long-term assets                         22.645         3.253         +19.392
                                      Total assets                             68.890        36.541         +32.349
                                      Short-term liabilities                    9.944         3.824          +6.120
                                      Long-term liabilities                    39.846        20.394         +19.452
                                      Equity                                   19.100        12.323          +6.777
                                      Total liabilities                        68.890        36.541         +32.349

                                  During the business year 2006, the balance sheet total has nearly doubled. The
                                  external funds received from the issuance of profit participation certificates were
                                  used, as scheduled, for the acquisition of existing real estates and refurbishment
                                  properties. This resulted, among other aspects, also in increased long-term lia-
                                  bilities mainly to financial institutions. In late 2006, the WINDSOR Group had
                                  EUR 11,055,000 in form of liquid funds and EUR 1,534,000 of its own shares at
                                  its disposal. The equity increased by EUR 6,777,000 on the previous year which
                                  was tantamount to an equity ratio grew by EUR 6,777,000 on the previous year,
                                  which meant an equity ratio of 28%.

     No extraordinary business    4              Essential Business Transactions after 31 December 2006
                                  Since 31 December 2006, no unexpected extraordinary business transactions
                                  have taken place. Nevertheless, the following items are worth mentioning:

                                  • The property Blücherstraße 9/11 covering a residential and commercial area of
                                  2,018 m2 was sold.

                                  • From 14 to 28 February 2007 (subscription period for current shareholders), the
                                  capital was increased from EUR 1,000,000 of common shares issued to the bearer,
                                  without principal value (unit shares), to EUR 10,000,000.00 of nominal capital,
                                  based on a resolution by the Board of Directors approved by the Supervisory
                                  Board in 2006. Now the share capital amounts to EUR 9,235,066.00.

Careful planning and experience   5        Risk Report

                                  5.1    Risks in Refurbishment, Portfolio and Sales Operations
                                  The WINDSOR Group’s business operations are exposed to various risks.

                                  The risks in real estate trading are in the calculation of sales prices and periods.
                                  Sales prices may sometimes be lower than the planned sales totals and thus det-
                                  rimentally affect the return like the exceeding of a planned sales period (higher
                                  interest expenditure). If properties cannot be completely sold, risks occur due
                                  to higher administrative expenses of letting activities as well as the lack of return
                                  flows of liquid funds from sales. Apart from high-quality residential units, the cur-
                                  rent taxation and economic policies, the changes of which may lead to either risks
                                  or chances, play a decisive part for quick sales.

                                  In the context of its sales transaction, the WINDSOR Group sometimes grants
                                  rental guarantees which are, however, only slightly higher than actual rents. From
                                  the company‘s viewpoint, granting of rental guarantees means a potential risk
                                  only in case of vacant properties. Yet, this risk can be overcome by active rent

                                  Since the most extensive building measures are performed in the development
                                  and refurbishment of company-owned and external properties, this area is espe-
                                  cially prone to risks with regards to higher, non-budgeted expenses or increased
                                  building time expenditures, than, in turn, means more funding costs. These risks
                                  are met with the help of careful planning, experienced project managers and
                                  suitable risk allowances in the pertinent calculations. Moreover, at regular inter-
                                  vals comparisons are carried out between planned parameters and actual results
                                  as regards funding and meeting construction stage deadlines. In addition to the
                                  WINDSOR Group’s personnel, also independent experts are involved in the qua-
                                  lity management in parallel with the construction work thanks to which technical
                                  Standard are complied with at any time.

                                  As for warranty liability, the legally stipulated cash retention sums are withheld
                                  from the subcontractors (5% of the final invoice grand total), or the company has
                                  got the necessary bank guarantees. Consequently, respective security can be reali-
                                  zed in case of subcontractor insolvency.

                                  The WINDSOR Group runs construction risks only to a limited degree as far as
                                  investments in existing properties are concerned. Therefore, the typical risks in
                                  project development are kept low. The potential vacancy risk regarding existing
                                  real estate is predictable based on a controlled portfolio mix as well as the location
                                  and quality of the building. External factors like the infrastructure and social envi-
                                  ronment of existing properties are carefully examined, and their later develop-
                                  ment will be watched. Possible maintenance backlog is also identified at this stage
                                  and as soon as possible eliminated after acquisition.

                                                   Report on the Group’s state of affairs

                Possible rises of real estate market prices mean both chances and risks for the port-
                folio business. Rising prices or interest rates in capital markets without adequate
                rent increases may result in decreased property purchases, because they no longer
                yield the necessary return. On the other hand, price rises lead to value increases of
                the properties already bought. As at 1 January 2007, the Berlin senate has decided
                to increase the realty transfer tax to 4.5% for purchasing real estate. This tax incre-
                ase comes simultaneously with a 810% increase in the municipal collection rate
                of the real property tax.

Due Diligence   5.2      Risks due to Issuing Private Equity
                In the year under report, a loan was granted to a company as private equity secu-
                red by a property charge. The risks consist in the probability that the company
                may be unable to pay or, for any other reason, has to file a petition in bankruptcy
                thus resulting in non-repayment of the loan and non-payment of interest. In this
                case, the WINDSOR Group can acquire the project on favourable conditions and
                complete it at its own cost, or realize the property charge. For the purposes of
                hedging contractual risks, a statutory due diligence has been performed.

                5.3      Risk due to Loss of Receivables
                The company considers risk in terms of loss of receivables from buyers of residenti-
                al property in the sales and refurbishment business very small, because all sales are
                effected through an escrow account. A sale is completed only if the buyer proves
                to have sufficient funds available for purchasing the property.

                The risk of loss of individual rentals due in the portfolio business is rated as low
                because of the small amounts of individual rentals due and is partly compensated
                by tenancy security deposits.

                There occurs a minimized risk as far as refurbishment activities for third parties are
                concerned, as the client pays in line with the ongoing construction progress.

            Cap financin   5.4       Risks due to Outside Capital
                           The WINDSOR Group has taken up outside capital for the operative implementa-
                           tion of its business model and will use outside capital in the future too. Because
                           the repayment of principal is done mainly based on continuous rental income or
                           proceeds from sales, future arrears in return flows from projects or refurbishments
                           can have harmful repercussions like rental reductions, vacant properties or arrears
                           in rent payment.

                           The current interest trend poses a further risk. Following an all-time low, interest
                           rates will be going up in the next few years. Funding of property projects comple-
                           ted or planned by the company was done, among others, based on loans from
                           credit institutions. The trends in the capital market, as a whole, as well as project-
                           related financing terms and conditions can have both positive and negative impli-
                           cations for the company’s property, financial and earnings situations.

                           By applying innovative financial resources (cap financing on EURIBOR basis), both
                           the advantageous interest rate and the flexibility of a possible resale of a property
                           are used. By using fixed interest rate caps, the risk of a future interest develop-
                           ment is limited.

     Competent core team   5.5       Risks due to Personnel Leaving
                           The fact that the Board of Directors is led by two heads ensures proper leadership
                           of the WINDSOR Group even in case of loss or departure of one person. The close
                           cooperation within the management as well as together with the competent core
                           team of the WINDSOR Group enables the company to be temporarily run by just
                           one person.

                           5.6       Other Risks
                           The crucial risks have been described above. We want to generally point out that
                           there are numerous other risks that might occur such as company-specific, legal
                           and tax-related risks, risk caused by economic development regarding interest
                           rates as well as risk with regard to changes to official permissions to be obtained.

                                                            Report on the Group’s state of affairs

    Positive prognoses   6        Prospects

                         6.1       Persistent Economic Upswing in 2007
                         In the FRG government’s annual economic report of 2007, a clear growth of the
                         German economy of at least 2% is anticipated also this year. The German economic
                         institutes have also repeatedly anticipated higher growth levels in their prospects:
                         According to the Institut für Weltwirtschaft (Institute for the World Economy), a
                         growth rate of 2.8 % is probable; based on its computations, the Ifo Institute (Ins-
                         titute for Economic Research) in Munich predicted also approx. 2%, too; and the
                         Rheinisch-Westfälische Institut für Wirtschaftsforschung (RWI) corrected its original
                         prediction from 1.9% to 2.3%. Only the International Monetary Fund, IMF, dam-
                         ped all positive prognoses a little by assuming an economic growth of just 1.8% for
                         the Germans owing to the risen value-added tax. Hand in hand with the positive
                         trend since the beginning of the year, the number of unemployed dropped below
                         4 million, and the unemployment statistics are predicted to settle at this level in
                         the course of the year. According to the GfK prognosis, private consumption, too,
                         will gain impetus increasing by 0.5%. Possible negative effects like the increase of
                         pension and health insurance premiums will largely be compensated by generally
                         lower wage incidental costs and the stabilization on the energy market.

                         According to the DIW economic barometer, the most important driving power of
                         the economic upswing in the first quarter of the year 2007 is the above-average
                         expansion of the industrial production as well as the further strong results of the
                         building industry.

Gross domestic product   6.2        Economic Perspectives for Berlin and Brandenburg
         equals 1.5%     As shown above, Berlin’s economy experienced a sound boost already in 2006.
                         The index of economic climate in Berlin-Brandenburg increased from 110 to 128
                         points, reaching its peak in 2006. According to IHK Berlin, the growth rate in this
                         region will be even higher than anticipated in 2007. So far, IHK has assumed an
                         increase of the Berlin gross domestic product in 2007 of up to 1.5%. There are
                         further reasons suggesting further growth: The increased impetus of the Germa-
                         ny-wide economic development, that can be profitable also for Berlin enterprises;
                         the high export rate of Berlin which was well above 14% in early 2007; and the
                         depreciation possibilities ceasing to exist at the end of 2007 which will cause many
                         entrepreneurs to make their investments earlier. In the building industry, a better
                         situation regarding placement of orders could be seen at the beginning of 2007 as
                         compared to the same period in the previous year. Notwithstanding the increase of
                         the value-added tax rate, the private consumption continued to develop positively:
                         The turnover in retail trade (excepting cars) was 4.2% points higher in January on
                         the previous year. Moreover, the GfK consumption climate index rose again. The
                         influx of tourists continues at an unchanged rate, too. In January 2007, the number
                         of visitors to Berlin was 9.3% above the level of the previous year, and the number
                         of overnight accommodations increased by 8.6%.

Investment magnet Berlin   6.3       Positive Development of the Property Segment
                           In view of the extensive inflow of orders and the general economic development,
                           a positive trend in the building industry can be expected also in the further course
                           of the year 2007, though the changes will be smaller. According to the prognosis
                           of Zentralverband des Deutschen Baugewerbes (Central Association of German
                           Building Industry) there should be a growth rate in the residential construction
                           segment of around EUR 1.5 billion. It must be expected that the increased demand
                           will mainly be spurred by the qualitative and quantitative requirements regarding
                           the offer of rented apartments. The building demand will boost the construction
                           of residential buildings still more than during the previous years (Building Industry
                           Report of the Central Association of German Building Industry 2006/2007).

                           On the whole, further recovery and stabilization of the real estate market, in par-
                           ticular also in Berlin, can be expected. In terms of the Berlin office market, rent
                           increases and fewer vacancies are expected. Thanks to high yields with regard to
                           high-quality residential properties, Berlin will be an investment magnet also in the
                           future: As far as the awareness of investors is concerned, the German capital ranks
                           catches up more and more with other global metropolises like New York and Paris
                           (Immobilienbrief dated 13 February 2007).

                  G-Reit   6.4       Business Development
                           In view of the current economic developments and trends, the WINDSOR Group
                           will continue its promising strategy in 2007, too.

                           In addition to the core competences in the areas of brokerage and development as
                           well as to making use of the advantageous market situation, private equity capital is
                           increasingly utilized in order to invest into attractive property projects. The targets
                           aimed at are the substantial consolidation of this positive business development
                           and the chosen way as well as the continuation of success of the preceding year.

                           The WINDSOR Group envisages very great opportunities in the “Gesetz zur Schaf-
                           fung deutsche Immobilien-Aktiengesellschaften mit börsennotierten Anteilen“
                           (Act on creating German public limited, listed real estate companies (Reit Act)”
                           that will hopefully be enacted during the first quarter of 2007. G-Reit is meant to
                           establish itself thanks to linking the advantages of investment in property with the
                           advantages of fungibility of shares thus constituting a new investment class. The
                           experience gained in other countries are promising. However, prognoses are hard-
                           ly possible at present. We position ourselves in such a way that we have the option
                           also to launch a “WINDSOR-REIT”, provided that the statutory framework has been
                           created. The WINDSOR Group assumes that the sales and profit of 2007 will be on
                           par with those of the previous year or even higher if the prognoses regarding REIT
                           come true. The investment volume for 2007 will be around 50 million.

                                                         Report on the Group’s state of affairs

Geared to the future   6.5      Conclusion
                       Following the flourishing business year 2006 and the capital increase in February
                       2007, the WINDSOR Group is well geared, both in strategic and financial terms, to
                       the chances and changes on the market.

                       The persistent economic upswing has finally also reached Berlin, i.e. a market whe-
                       re the WINDSOR Group has traditionally gained experience and competence for
                       long years. Nevertheless, the expansion of the business segments started in 2006
                       will also be continued in Leipzig, and further locations as e.g. Potsdam and Dres-
                       den are taken into account. Thanks to its provident planning and sound financial
                       basis, the company is able to flexibly respond to the current changes in the real
                       estate market as soon as lucrative opportunities open up for further yields.

                       Berlin, 16 March 2007

                       Dr. Volker Voigtsberger                       Heiko Zybell
                       (Director)                                    (Director)

Group Balance Sheet

Group Profit and Loss Account for the Period from 1 January to 31 December 2006
(Balance sheet pursuant to IFRS)
                                                                                                           Previous Year
                                                                 Notes             EUR              EUR           TEUR

     1.   Sales revenues                                           8.1                    28.486.847,81           6.958
     2.   Reduction of inventory of finished
          and unfinished products                                  8.2                     -3.439.232,92           -252
     3.   Other operating results                                                          5.698.764,85              15
     4.   Cost of materials
          a) Expenses of properties
            and bought services                                    8.2   -13.296.284,18                          -1.932
          b) Disposal of participation book values                 8.2     -676.347,67                              -24
                                                                                          -13.972.631,85         -1.956
     5.   Personnel expenses
          a) Wages and salaries                                            -555.008,47                             -272
          b) Social security contributions and
            expenses for pensions etc.                                       -63.263,13                             -44
                                                                                            -618.271,60            -316
     6.   Depreciation of intangible assets of
          fixed assets and tangible assets                         8.3                        -16.586,26            -17
     7.   Other operating expenses                                 8.4                     -3.035.866,31         -2.863
     8.   Operating performance (profit from operation)                                   13.103.023,72           1.569
     9.   Other interest and similar income                        8.5                     1.279.564,46           1.028
 10.      Income from participations                                                           3.448,28               3
 11.      Depreciations of securities of current assets                                        -2.082,15              0
 12.      Interest and similar expenses                            8.6                     -2.981.062,91         -1.502
 13.      Financial result                                                                 -1.700.132,32           -471
 14.      Deconsolidation (Disposal success)                       8.7                      -547.976,59              15
 15.      Annual surplus before income tax (profit before tax)                            10.854.914,81           1.113
 16.      Taxes on income and gains                                8.8                     -2.728.073,23            469
 17.      Other taxes                                                                         -57.531,00             -3
 18.      Annual surplus (profit after tax)                                                8.069.310,58           1.579
 19.      Minority shareholdings                                                              -60.548,43              0
 20.      Group annual surplus after minority shareholdings                                8.008.762,15           1.579
 21.      Profit brought forward from previous year                                        2.422.824,29           6.275
 22.      Allocations to revenue reserves
          a) to the statutory reserve
          b) to the reserve of own shares
          c) to other retained earnings                                           0,00                           -4.756
                                                                                           -1.533.802,82         -5.431
 23.      Balance sheet profit                                                             8.897.783,62           2.423

Group Balance Sheet

Group Balance Sheet as at 31 December 2006 (Accounting pursuant to IFRS)

                                                                                                           Previous Year
                                              Notes               EUR               EUR             EUR           TEUR

     Liquid funds                               5.1                        11.055.125,42                          8.599
     Receicables from supplies & services       5.2                        16.508.241,06                          4.704
     Inventory                                  5.3
     1. Unfinished and finished products                15.634.038 ,23                                            1.407
     2. Down payments made                                 170.779,30                                             7.061
                                                                           15.804.817,53                          8.468
     Other assets                               5.4                         2.876.844,55                        11.517
     Short-term assets                                                                     46.245.028,56        33.288

     Intangible assets                          5.5                           11.584,00                              10
     Plant & equipment                          5.5                           23.720,00                              67
     Down payments made
     for income-yielding properties             5.6                           68.696,48                           2.699
     Other assets                               5.4                         2.636.804,44                              0
     Financial investments                      5.7                             1.500,00                              2
     income-yielding properties                 5.6                        19.900.000,00                              0
     Deferred tax liabilities                   5.8                             2.247,08                            475
     Long-term assets                           5,4                                        22.644.552,00          3.253

                                                                                           68.889.580,56        36.541

                                                                            Group Balance Sheet

                                                                                     Previous Year
                                            Notes            EUR             EUR             TEUR

Provisions                                   5.9     1.002.217,27                           1.539
Liabilities to credit institutions          5.10     4.194.550,47                               41
Liabilities from supplies
& services                                  5.10     2.320.434,11                             363
Other liabilities                           5.10     2.425.974,75                           1.881
Short-term liabilities                                               9.943.176,60           3.824

Provisions                                   5.9      278.246,85                                 0
Bonds (profit participation certificates)   5.12    23.580.800,00                          18.387
Liabilities to credit institutions          5.10    14.384.513,19                           2.007
Deferred tax                                5.11     1.602.431,80                                0
Long-term liabilities                                               39.845.991,84          20.394

Nominal capital                             5.13     9.000.000,00                           9.000
Revenue reserves
1. Statutory reserve                        5.13      900.000,00                              900
2. Provisions for own shares                5.13     1.533.802,82                                0
3. Other revue reserves                     5.13      302.628.50                                 0
Balance sheet profit                        5.13     8.897.783,62                           2.423
                                                    20.634.214,94                          12.323
Reduced by cost price of own shares                 -1.533.802,82                                0
                                                                    19.100.412,12          12.323
                                                                    68.889.580,56          36.541

Group Statement of Shareholders Equity as at 31 December 2006

                                                                    Equity paid in

                                                                Subscribed capital   Capital reserve
      EUR EUR                                                                 EUR              EUR

     1.    State as at 1 January 2005                               2.250.000,00      1.993.722,68
     2.    Period profit                                                     0,00              0,00
     3.    Transfers to other accounts (equity increase etc.)       6.750.000,00     -1.993.722,68
     4.    State as at 31 December 2005                             9.000.000,00               0,00
     5.    Period profit                                                     0,00              0,00
     6.    Adjustment due to first consolidation                             0,00              0,00
     7.    Adjustment due to de-consolidation                                0,00              0,00
     8.    Profit from sale of own shares                                    0,00              0,00
     9.    Own shares / reorganization                                       0,00              0,00

     10.   State as at 31 December 2006                             9.000.000,00               0,00
     11.   Reduction by own shares                                           0,00              0,00
     12.   State as at 31 December 2006                            9.000.000,00               0,00

                                                                                      Group Balance Sheet

Generated equity
                                                              Others    Shares of external
Statutory Reserve    Balance sheet   Revenue reserves      own shares             partners            Total
             EUR              EUR                EUR             EUR

     225.000,00      6.275.459,82               0,00             0,00                0,00     10.744.182,50
            0,00     1.578.641,79               0,00             0,00                0,00      1.578.641,79
     675.000,00     -5.431.277,32               0,00             0,00                0,00              0.00
     900.000,00      2.422.824,29               0,00             0,00                0,00     12.322.824,29
            0,00     8.008.762,15               0,00             0,00          60.548,43       8.069.310,58
            0,00             0,00               0,00             0,00           1.319,46           1.319,46
            0,00             0,00               0,00            0,00          -61.867,89         -61.867,89
            0,00             0,00        302.628,50             0,00                 0,00       302.628,50
            0,00    -1.533.802,82               0,00     1.533.802,82                0,00              0,00

     900.000,00      8.897.783,62        302.628,50      1.533.802,82                0,00     20.634.214,94
            0,00             0,00               0,00            0,00                 0,00      1.533.802,82
    900.000,00      8.897.783,62        302.628,50      1.533.802,82                0,00     19.100.412,12

Group Cash Flow Account for the Period from 1 January to 31 December 2006

                                                                                                                   Previous year
                                                                          EUR              EUR              EUR           TEUR

 Ongoing business operations
     1.   Annual net income before tax                           10.845.914,81                                            1.113
     2.   Profit from own shares                                   302.628,50                                                 0
     3.   Depreciations                                             16.586,26                                                17
     4.   Income from disposal of fixed assets                   -6.122.435,33                                           -2.776
     5.   Income from interest / shareholdings                   -1.283.012,74                                           -1.031
     6.   Interest cost                                           2.981.062,91                                            1.502
     7.   Changes due to initial consolid. or de-consolidation      -60.548,43                                              -25
     8.   Operating income before changes of working capital                      6.689.195,98                           -1.200
     9.   Increase of receivables from supplies and services
          and other receivables and RAP                          -6.893.685,48                                           -2.716
 10.      Increase of reserves                                   -7.337.160,09                                           -7.341
 11.      Increase of liabilities from supplies and services
          and other liabilities as well
          as reserves of RAP                                      3.311.307,27                                            1.708
 12.      Issued but not yet paid profit partic. certificates             0,00                                              148
 13.      Changes due to interest evaluation                     -4.592.414,72                                                0
 14.      Changes in taxes and deferred taxes                    -2.728.073,23                                              469
 15.      CF from corporate operations                                           -18.240.026,25                          -7.732
 16.      Interest received                                        874.538,60                                               420
 17.      Interest paid                                          -2.446.245,34                                              -31
 18.      Taxes paid                                                -57.531,00                                               -3
                                                                                  -1.629.237,83                            -386
 19.      CF from current business operations                                                     -13.180.068,10         -8.546
     1.   Acquisition of investment capital                                      -12.623.518,85                             -11
     2.   Acquisition of financial assets                                          -676.347,67                                0
     3.   Payments from sale of invest. capital                                   1.718.574,00                            3.000
     4.   Payments from granting loans                                            -5.656.400,00                          -5.506
     5.   Payments from loan repayments                                          12.751.585,01                            2.149
     6.   Acquisition of own shares                                               -1.533.802,82                               0
     7.   Down payments made on income-yielding properties                           -68.696,48                          -2.705
     8.   CF from investments                                                                      -6.088.606,81         -3.073

 Financing activities
     1.   Increase of liabilities to banks                                       16.531.789,22                            1.630
     2.   Payments received from profit participation capital                     5.193.400,00                          18.239
     3.   CF from financing activities                                                            21.725.189,22         19.869
 Cash flow                                                                                         2.456.514,31           8.250
 Liquid funds
     1.   31 December 2006/31 December 2005                                      11.055.125,42                            8.599
     2.   31 December 2005/31 December 2004                                       8.598.611,11                              349
                                                                                                   2.456.514,31           8.250

The volume of non-discretionary funds amounts to EUR 1,130,000,00 assigned to a vendor of a property as
a security until the completion of purchase.

Group Balance Sheet

     Group Notes for the Business Year
     from 1 January to 31 December 2006

     (1)        General Information
     The consolidated financial statements of WINDSOR AG, Berlin, for of the present
     year from 1 January to 31 December 2006 were compiled in accordance with the
     International Financial Reporting Standards (IFRS) of the International Accounting
     Standards Board (IASBI). The new standards approved by the IASB were taken
     into account from their effective date.

     (2)        Scope of Consolidation
     In addition to the WINDSOR Group, the following companies were incorporated in
     the Group consolidated financial statements for the current financial year as at 31
     December 2006: GMW Liegenschaftsgesellschaft mbH, Berlin, Projektgesellschaft
     VOGU mbH, Berlin, VOCON GmbH, Berlin, 22. Projektgesellschaft Mitte mbH,
     Berlin, 23. Projektgesellschaft Mitte mbH, Berlin as well as WINDSOR Fondsverwal-
     tungsgesellschaft mbH, Berlin. The consolidations completed are as follows:

     •     GMW Liegenschaftsgesellschaft mbH (from 1 January 2006, balance sheet
           date of first consolidation; until 31 December 2006, balance sheet date of de-
     •     Projektgesellschaft VOGU mbH (from 28 September 2004, balance sheet date
           of first consolidation)
     •     VOCON GmbH (from 28 September 2004, balance sheet date of first conso-
     •     22. Projektgesellschaft Mitte mbH (from 16 June 2005, balance sheet date of
           first consolidation);
     •     23. Projektgesellschaft Mitte mbH (from 16 June 2005, balance sheet date of
           first consolidation);
     •     WINDSOR Fondsverwaltungsgesellschaft mbH (from 27 March 2003, balance
           sheet date of first consolidation).

     (3)        Consolidation Principles
     The annual accounts of all companies incorporated in the Group have been com-
     piled based on uniform methods of balance sheet accounting and valuation.

     The consolidation was carried out for the first time in the financial year 2001. In
     the consolidation of capital, the acquisition values of shareholdings were set off
     against the proportional value of equity shares at the time of the first inclusion
     into the consolidated financial statements. The remaining differential amount was

                                                          Group Balance Sheet

taken into account as goodwill of WINDSOR Fondsverwaltungsgesellschaft mbH,
because of lacking eligibility for inclusion in assets or debts. This value was further
developed as at 31 December 2006.

In the financial year 2006, GMW Liegenschaftsgesellschaft mbH was acquired;
this company was sold as at 31 December 2006. When netting the capital and
the book value of the shareholding of WINDSOR AG in GMW Liegenschaftsge-
sellschaft mbH, there was a difference totalling EUR 655,676.18 as a result of the
first consolidation as at 1 January 2006. The company’s nominal capital equal EUR

The active difference equal to a total of EUR 655,676.18 has been attributed
to the hidden reserves (existing income-yielding properties), at the same time
causing deferred taxes of EUR 255,060.75. It was necessary to indicate goodwill
equal to the deferred taxes.

In conjunction with the first consolidation of GMW Liegenschaftsgesellschaft
mbH, die following assets and liabilities were taken on with reference to IFTS 3 as
at 1 January 2006:

                                                               EUR                EUR

 Short-term assets                                       31.500,00

 Long-term assets                                     1.811.986.21       1.843.486,21

 Short-term liabilities                                                  1.833.995,26

With regard to the acquisition, the investment volume in existing income-yielding
investment properties were increased by EUR 655,676.18, thus bringing the funds
of long-term assets to a total of EUR 2,467,662.39. Due to this increase, deferred
taxes boosted long-term liabilities by EUR 255.060,75. On balance, the long-term
liabilities amount to EUR 255,060.75.

Because of the sale it was necessary to deconsolidate the company in the context
of the consolidation performed so far. The loss from disposal due to the deconsoli-
dation is equal to 547,976.59. By selling the GMW Liegenschaftsgesellschaft mbH
(94%), WINDSOR AG achieved sales proceeds amounting EUR 6,800,000.00.
The grand total achieved, including the loss from disposal resulting from the
deconsolidation of the above-mentioned engagement, equals 5,575,675.74.

     There were no provisions and prepaid expenses or income to be eliminated in the
     present Group financial statement between the companies involved.

     In conjunction with the consolidation of debts, it was necessary to account for
     existing receivables and liabilities between the companies involved totalling EUR

     Interim results and internal sales equal to EUR 41,805.38 had to be eliminated in
     the present Group financial statement. In the year 2006, WINDSOR AG realized an
     advance distribution of EUR 300,000 provided by Projektgesellschaft VOGU mbH
     für 2006. Because of the consolidation, this advance distribution is not included in
     the accounts.

     (4)      Estimates and Assumptions
     The preparation of the Group financial statements requires estimates and assump-
     tions that can influence the amounts of asset values, liabilities and financial
     obligations as at the balance sheet date as well as the revenues and expenses of
     the year under report. The actual amounts may differ from these estimates and
     assumptions. Basically, the estimates relate to the calculation of reserves.

                                                          Group Balance Sheet

Notes on the consolidated Group financial statements

(5)      Accounting and Evaluation Methods
All receivables and liabilities are denominated in EURO.

5.1   Cash assets as well as credit balances are stated at their nominal values.

5.2   Receivables from supplies and services are stated at their nominal values
      reduced by required adjustments of individual items due to recognizable
      individual risks. As far as the general risk of loss is concerned, general bad
      debt charges were rendered. The receivables resulting from supplies and
      services mainly concern those from the sale of a shareholding (EUR 6.8
      million) as well as from building activities, rentals due, receivables from the
      sale of owner-occupied apartments as well as from the sale of residential
      buildings (EUR 6.7 million).

5.3   Included in the provisions are, among others, complete and incomplete
      services valued at purchase and production prices. According to IAS 2, all
      costs were taken into account incurred in conjunction with the acquisition
      or creation of the respective provisions. Costs of outside capital were not

      Due to lacking prerequisites, IAS 11 (manufacturing orders) could not
      be applied. Realized partial profits were therefore not stated and, thus, it
      was not necessary to apply the Percentage-of-Completion-Method (PoC

      The composition is as follows:


        Ongoing building projects                                         121.669,84

        Unfinished products (refurbished properties)                    3.085.407,39

        Finished products (flats, tenement houses etc.)                12.426.961,00

      Among the advance payments effected with regard to provisions, advance
      payments to subcontractors amounting to EUR 171,000 are indicated for
      building services to be provided.

     5.4   Other Short-Term and Long-Term Assets
           The assets comprise receivables from third parties, prepaid expenses as well
           as the remaining short-term and long-term assets.

           All receivables from associated companies (GCI Management AG) accoun-
           ted for in the Group financial statements as at 31 December 2005 were
           settled in the business year 2006.

           During the year, GCI Management AG was granted a further loan (use in
           the GCI Group: Group cash pool) amounting to EUR 5.0 million, in order to
           achieve an attractive interest in the short run.

           Both loans carried an interest of 5% and 6% p.a. and could be terminated
           by the parties giving three-month notice by the end of month. The second
           loan, including incurred interest, was re-paid also in the year 2006 already.

           GCI BrideCapital AG, a wholly-owned subsidiary of the listed GCI Manage-
           ment AG, has become a shareholder of WINDSOR AG as at 31 December
           2006. Therefore, GCI Management AG constitutes a closely associated enti-
           ty pursuant to IAS 24.

           ClickRich AG has been granted a loan amounting to EUR 152.400 and bea-
           ring an interest of 9.6% p.a. This loan can be terminated by three-month
           notice. As at the balance sheet date, there are residual receivables equal to
           EUR 44,300 including interest. Taking IAS 24 into consideration, it is poin-
           ted out that Mr. Ax (Board member of WINDSOR AG until 15 March 2007)
           is also Board member of ClickRich AG.

           Other Short-Term Assets
           The assets shown in the balance sheet at the balance sheet date are mainly
           short-term loan receivables from third parties or from companies with which
           a participatory relationship exists. These loan receivables total approx. EUR
           1.86 million.

           Furthermore, this item includes tax refunding claims amounting to EUR
           0.13 million. Apart from short-term prepayments, also the effected advance
           payments regarding sales commissions are indicated. The remaining short-
           term assets are, among others, capitalized interest payments due to banks as
           well as other assets.

                                                        Group Balance Sheet

      Long-term other assets
      In 2006, WINDSOR AG granted an investor a loan equal to EUR 2.5 million.
      It serves for refunding a property being erected by this investor at present.
      This loan bears an attractive interest. The loan is secured by a registered
      junior charge. The remaining long-term assets are prepayment items.

5.5   The tangible assets as well as intangible assets are valued at purchase prices
      by applying IAS 16 and IAS 38. Business values or company goodwill values
      are not stated at the balance sheet date.

      In case the value of assets, determined based on the above principles, is
      higher than the value to be allocated as at the balance accounting date,
      this would be taken into consideration by unplanned depreciation. The
      value to be allocated is determined by using the net sales proceeds or - if
      it is higher - the cash value of the estimated future cash flow from utilizing
      the asset. IAS 36 (IFRS) “Impairment of Assets“ was applied in this sense.
      There has been no need of further depreciation during the current financial
      year until 31 December 2006.

5.6   Down Payments Made for Income-Yielding Properties
      The balance sheet handling of properties kept as financial investments is
      stipulated by IAS 40 . Properties kept as financial investments are defined
      as follows:
      They serve for realising rental income and/or are kept over a prolonged
      period of time for value increase purposes. According to IAS 40, the chosen
      valuation method has to be applied in a uniform manner to all income-yiel-
      ding properties.

      In the year 2006, such kind of down payments were made by WINDSOR
      AG for income-yielding properties at a total amount of TEUR 68.7.

      WINDSOR AG acquired a great number of such income-yielding properties
      during 2006. The follow-up valuation of the kept income-yielding proper-
      ties is carried out based on the “fair value model”.

      As of the balance accounting date, WINDSOR AG kept income-yielding
      properties serving only for the purpose of achieving rental income. The
      market values total EUR 19.9 million as at the balance accounting date.

      The valuation based on market values causes deferred taxes as at 31

     December 2006, cf. the explanations on the profit and loss account. The
     purchase costs at WINDSOR AG increased by EUR 4.6 million. As far as the
     deconsolidated GMW Liegenschafts-gesellschaft mbH is concerned, there
     were property additions in the individual balance account statement based
     on IAS amounting to EUR 1.72 million. Because GMW Liegenschaftsgesell-
     schaft mbH was sold, the corresponding income-yielding properties were
     disposed of and are, therefore, no longer included in the consolidated
     financial statements.

     Consequently, all required property additions total EUR 6.32 million. The
     above-mentioned property addition requirement is recorded in miscella-
     neous operative earnings, less EUR 0.65 million (correction at Group level
     because of the first consolidation of GMW Liegenschaftsgesellschaft mbH).
     The increase or development results from the Group’s investment capital as
     at 31 December 2006 (page 58).

     The rental income from income-yielding properties of WINDSOR AG which
     has been received during the past year, equalled EUR 0.60 million in the
     financial year 2006. The amount of the income-yielding properties recor-
     ded in the profit and loss account and directly attributable to WINDSOR
     AG’s income-yielding properties was equal to EUR 0.56 million. The directly
     attributable expenses also comprise interest expenditures as well as one-
     time costs of raising funds (handling fees). Leaving interest expenses etc.
     out of account, the operating costs would amount to EUR 0.29 million.

     Expert opinions were available for evaluating the income-yielding proper-
     ties kept for financial investment purposes. The expert opinions were provi-
     ded by Mr. Dipl.-Ing (FH) Peter Marr. Mr. Marr works as an expert in asses-
     sing building defects and specializing in the evaluation of real estates and
     buildings in Leipzig and Berlin. Mr. Marr is a member of “Bundesverband
     Freier Sachverständiger e.V.” (Federal Association of Independent Experts)
     registered under the membership number 1490/3724.

     Referring to IAS 40, the following applies to the evaluation of all expert

     The first step was to determine all land values, in each case, based on the
     standard rental values and the respective pertinent real estate areas. As a
     second step, the corresponding yield values of the income-yielding proper-
     ties were determined. This was based on the following assumptions: The

                                                         Group Balance Sheet

      rents are calculated by means of sustained rents achieved e.g. on the Berlin
      market. Here, fine adjustment was done based on the values of the individual
      city districts and the respective standard rental values. In terms of facility
      management expenses, depreciations ranging from 14 to a maximum 18
      percentage points were applied. The expert used various property interest
      rates (4.5% to 5.25%) as well as various multipliers that corresponded with
      the residual utilization period of the corresponding buildings and were pro-
      perly determined. Adding up the ground values and the return values results
      in the respective yield value of the existing income-yielding property.

      The third step consisted in the computation of tangible assets. For this
      purpose, the expert determined the manufacturing costs applying corres-
      ponding additions and reductions. Additions were included, for instance,
      for building incidental costs. Moreover, the expert used respective reduc-
      tions due to economic value depreciation reflecting the corresponding age
      of the buildings and the pertinent wear and tear of the property. Adding
      up the ground values and tangibles values resulted in the relevant tangible
      asset value of the existing income-yielding property.

      As a fourth step, the current values of the corresponding income-yiel-
      ding properties were determined. Taking market value adjustments into
      account, the corresponding current values were computed whose amounts
      vary between the values of yields and the tangibles.

5.7   The shareholdings of the financial assets were valued at their acquisition
      costs by applying the IFRS 3 provisions in the individual annual accounts of
      WINDSOR AG. Due to the consolidation performed, however, they are not
      recorded in the Group accounts. Only the shareholding in Projektgesellschaft
      Prenzlberg mbH is clearly shown.

5.8   Deferred taxes were capitalized pursuant to IAS 12 at a total amount of
      TEUR 2.2. Charged deferred taxes are capitalized by means of tax losses not
      used yet from previous years, as long as future taxable income can be anti-
      cipated with sufficient certainty.

                                     5.9   Other provisions are created by taking IAS 37 into account if it is probable
                                           that a liability exists and a reliable estimate of the respective amount is pos-

                                           Short-term provisions.
                                           The short-term provisions principally concern rent security guaranty provisi-
                                           ons of WINDSOR AG (TEUR 52.0), annual accounting und auditing costs of
                                           the companies included, holiday provisions as well as provisions for subcon-
                                           tractors, amounting to EUR 0.50 million and that concern WINDSOR AG. The
                                           taxes on return concern essentially Projektgesellschaft VOGU mbH and total
                                           EUR 0.26 million. The consolidated provisions situation is as follows:

                                                    1.1.2006   Consumption      Disposal         Addition     31.12.2006
     Consolidated                                      TEUR          TEUR          TEUR             TEUR            TEUR
     Bonuses 30                                          30             0            30               30
     Costs of auditing & annual financial accounting     32            32             0               66              66
     Holiday bonus of employees                           7             7             0               11              11
     AR remuneration                                     45            45             0                0               0
     Others                                               6             4             0               78              80
     Rental guarantees etc.                               0             0             0               51              51
     Receivables of subcontractors                     1.413         1.399           14              505             505
     Taxes on return                                      6             6             0              259             259
                                                       1.539         1.523           14            1.000            1.002

                                           No provisions were created for the Supervisory Board, because the corres-
                                           ponding invoices are already available.

                                           Long-term provisions
                                           The long-term provisions mainly concern rental guarantee provisions of the
                                           WINDSOR Group amounting to TEUR 273.

                                                    1.1.2006   Consumption      Disposal         Addition     31.12.2006
     Consolidated                                      TEUR           TEU          TEUR             TEUR            TEUR
     Others                                               0             0             0                5               5
     Rent guarantees etc.                                 0             0             0              273             273
                                                          0             0             0              278             278

                                     5.10 The liabilities from supplies and services, other short-term liabilities as well
                                           as liabilities to credit institutions and have been taken into account at their
                                           amounts of repayment.

                                                         Group Balance Sheet

      The short-term liabilities to credit institutions are loans that were used
      for refunding of properties already sold. These loans are cleared in 2007,
      because the corresponding properties have been disposed of.

      The other liabilities amount to EUR 2.4 million, thereof EUR 1.9 million
      stem from the interest of profit participation certificates placed in 2005 and
      2006. In addition, this item comprises liabilities from value-added tax equal
      to EUR 0.24 million regarding WINDSOR AG. The remaining liabilities relate
      to individual items of the Group.

      The long-term liabilities to credit institutions are loans that were used for
      acquiring properties.

5.11 Deferred Tax Obligations
      In conjunction with the higher valuation of the existing income-yielding
      properties of WINDSOR AG, it became necessary to carry deferred tax obli-
      gations as liabilities. In this context, reference is made to the explanations
      in subsection 5.6.

5.12 Borrowings (Profit Participation Certificates of WINDSOR AG)
      The item of borrowings regarding liabilities contains exclusively capital
      from issued profit participation certificates. Profit participation certifica-
      te capital constitutes a mezzanine-financing instrument featuring both
      aspects of equity as well as of outside capital. When preparing accounts
      pursuant to IFRS, only outside capital can be shown. Under ISIN DE
      000A0EQVT2, a tranche of EUR 23.4 million is traded in the open market of
      the Frankfurt stock exchange. All holders of profit participation certificates
      receive a payout of 8% of the nominal value prior to the profit share payout
      for WINDSOR AG’s shareholders. The holders of profit participation certifi-
      cates issued in 2005 and 2006 have been entitled to dividend distribution
      since 1 January 2006, i.e. at 100% for the financial year 2006. The rights of
      the owners of profit participation certificate are secured by creating junior
      charges. The profit participation certificates are made out to owners and
      are split up in 500,000 shares each having a nominal value of EUR 100,000.
      The sale of profit participation certificates has ceased.

     5.13 Equity
          WINDSOR AG’s nominal capital amounting to EUR 9.0 million has been
          denominated in 9.0 million shares with an aggregate nominal value of EUR
          1.00 each. In the previous year, the capital increase of EUR 6.75 million was
          performed by capitalization of reserves, EUR 2 million of which stem from
          investments of shareholders (drawing on capital reserves) and EUR 4.75
          million stemming from profits of the company for that taxes have already
          been paid. Based on a General Meeting’s resolution on 18 July 2005, the
          Board of Directors was authorized, with the consent of the Supervisory
          Board, to increase the nominal equity again until 30 June 2010 by issuing
          new shares against contributions in kind or cash contributions, once or
          several times, however, by a maximum of EUR 4.5 million.

          Based on a resolution of the General Meeting on 25 August 2006, the Board
          of Directors was authorized to issue, once or several times, profit participa-
          tion certificates made out to the holder. The profit participation certificates
          can be added bearer warrants, or they can be connected with a conversion
          right of the bearer for a maximum period of 10 years beginning from the
          date of their issuance. The rights of warrants respectively conversion entitle
          bearers to obtain shares of WINDSOR AG as specified more in detail by the
          conditions underlying the conversion profit-sharing rights.

          The Board of Directors is further authorized to issue, once or several times,
          cum-warrant bonds and/or convertible bonds with a maturity of 10 years
          at most, until 31 July 2011 instead of, or along with, profit participation
          certificates, and to grant the bearers/creditors of cum-warrant bonds con-
          version rights for new shares of the company as specified more in detail by
          the conditions underlying the cum-warrant-bonds respectively external
          bonds rights.

          The total amount of the profit participation certificates, cum-warrant-
          bonds and/or external bonds issued in this conjunctions must not exceed
          a maximum value of EUR 50,000,000.00. Cum-warrant-bonds respectively
          convertible bonds rights may be issued only for company shares at a pro-
          portional amount of the nominal capital up to EUR 3,600,000.00. Profit
          participation certificates, cum-warrant bonds and convertible bonds can
          also be issued by direct or indirect majority holding companies of WIND-
          SOR AG; in this case, the Board of Directors is authorized to take on a
          guarantee for the company for repaying the bonds and to securitize the
          granting of option and conversion rights. The nominal capital is condi-

                                                   Group Balance Sheet

tionally increased by a maximum EUR 3,600,000.00 through issuing up
to 3,600,000 new shares made out to bearer [contingent capital l/2006].
The contingent capital increase serves for granting rights to the bearers of
warrants respectively convertible profit-sharing certificates, warrants and
convertible bonds, that are issued, according to the above authorization,
by the company or an investment company of WINDSOR AG with direct or
indirect subscription rights until 31 July 2011.

The Board of Directors and the Supervisory Board have been authorized,
for purposes of employees’ participation in the company, to issue up to
900,000 equity options for obtaining up to 900,000 shares at a compu-
tational proportion of the nominal capital of up to EUR 900.000,00 based
on an equity options programme until depending on the approval of the
Board of Directors with the Supervisory Board’s consent by 1 August 20011.
The equity option programme is meant for the following participants: The
members of WINDSOR AG’s Board of Directors as well as the employees
of the company and its associated companies. Based on the equity option
programme, up to 900,000 equity options are allocated. Up to 90% of
the issued equity options can be made out to the members of the Board
of Directors of WINDSOR AG, and up to 10% of the equity options can be
made out to the remaining persons with subscription rights (employees of
the company and associated companies including executives). Should the
quota for the members of WINDSOR AG’s Board of Directors not be used,
the remaining equity options can also be allocated to the other persons
having subscription rights. The nominal capital of the company in conditi-
onally increased by up to EUR 900,000.00 by issuing up to 900,000 shares
made out to bearer of the company (contingent capital II/2006). The con-
tingent capital increase is performed only provided that the bearers of equi-
ty options issued by WINDSOR AG from 1 August 2006 to 1 August 20011,
according to the resolution of the General Meeting on granting authoriza-
tion, will utilize their option right and the company will not provide its own
shares for fulfilling the option rights. The new shares participate in profit
from the beginning of the financial year of their issuance.

Purchasing of company-own shares in 2006 resulted in the necessity to
reduce the existing equity pursuant to the IFRS provisions. The portfolio
of company-own shares amounted to 280,800 shares as at 31 December
2006. In this conjunction, a reserve had to be created out of the balance
sheet profit.

            In the other profit reserves, the income from the sale of company-own
            shares is shown which is to be recorded directly in the equity item, rather
            than in the Group profit and loss account.

            For the development and composition, reference is made to the changes in
            equity statement (page 32).

     (6)        Asset Analysis
     For the composition and development of the investment capital, reference is
     made to page 58.

     As far as the financial assets are concerned, there are the following shareholdings
     of the company that are, however, not openly stated due to the consolidation
     in the Group balance statement. Only Projektgesellschaft Prenzlberg mbH is still
     openly shown, because WINDSOR AG, following the sale in 2005, holds just 6%
     in the above-mentioned company.

     The following shareholdings are stated only in the individual account of WIND-
     SOR AG pursuant to IFRS:

       Name and registered offices of the companies                        Share quota %
       22. Projektgesellschaft Mitte mbH, Berlin                                    100
       23. Projektgesellschaft Mitte mbH i.G., Berlin                               100
       Projektgesellschaft VOGU mbH, Berlin                                         100
       VOCON GmbH, Berlin                                                           100
       WINDSOR Fondsverwaltungsgesellschaft mbH, Berlin                             100

     (7)        Contingent Liabilities and Other Financial Commitments
     In 2006, WINDSOR AG has taken on a capped, indefinite, directly enforceable
     guarantee amounting to EUR 2.218 million for loans of a former subsidiary that
     serve for refunding of properties. The company concerned was GMW Liegen-
     schaftsgesellschaft mbH acquired in 2006. This company was further sold alrea-
     dy in late 2006. The new investor will refund this capped directly enforceable
     guarantee as soon as the general conditions regarding the new funding of GMW
     Liegenschaftsgesellschaft mbH have been settled.

     The other financial obligations are within the usual business transactions.

                                                      Group Balance Sheet

Based on a contract certified by a notary on 29 December 2005, WINDSOR
AG acquired the property located in Berlin, Provinzstr. 103/Schwabstr. 28. The
purchase price deposited in 2007, equals EUR 0.946 million. The estate was han-
ded over on 1 March 2007.

Based on a contract certified by a notary on 21 November 2006, WINDSOR
AG acquired the real estate located in Leipzig, Wolfgang-Heinze-Straße 45. The
purchase price deposited in 2007, equals EUR 0.57 million. The estate was han-
ded over on the first day of the month following the date of the complete deposi-
ting of the purchase price.

Explanations regarding Profit and Loss Account

(8)      Expenses and income of the financial year will be taken into account
upon their realization - regardless of the date of payment. Proceeds from the
sale of assets and from services are realised, once the essential opportunities
and risks have been transferred and the amount of the anticipated considerati-
on can be reliably estimated.

Tax deferments are made in terms of the differences between the valuations of
the commercial balance sheet and the taxation balance sheet in line with IAS.
The tax deferments are formed at amounts equal to the anticipated tax bur-
den of the subsequent financial years.

8.1   Sales proceeds result from the sale of shareholdings (EUR 5.7 million) as
      well as revenue from construction services (EUR 5.5 million) and project
      control. Moreover, revenue was achieved from the sale of occupant-owned
      apartments (EUR 9.8 million) and houses (EUR 5.8 million) as well as from
      letting properties.

      For purposes of a uniform representation in the Group balance account of
      WINDSOR AG as well as the Group balance account of GCI Management
      AG, the revenue from the sale of shareholdings is not stated as other ope-
      rating income. WINDSOR AG has instead chosen a gross representation,
      where the realized sales proceeds are shown under the item turnover
      proceeds and the book value disposal is stated under the materials expen-
      diture item.

     8.2   The reduction in the inventory of finished and unfinished products as well
           as materials expenses include the costs that mainly relate to the sale and
           modernisation of owner-occupied apartments as well as charges of buil-
           ding services rendered. Furthermore, under this item all property expenses
           are summarized relating to the properties let.

           The item „Expenses for services received” in the Group profit and loss
           account is composed as follows:

             Goods and materials expended for owner-occupied apartments           1.989
             Goods and materials expended regarding tenement houses               5.006
             Handling of building orders / modernization services                 4.747
             Operating costs of properties                                        1.314
             Others                                                                 240

           The reduction in investment book value results from the sold GMW Liegen-
           schaftsgesellschaft mbH.

           The other operating revenues mainly include additions to existing income-
           yielding properties. In this context, reference is made to the statements
           under sub-section 5.6.

     8.3   The depreciations contain planned depreciations of tangible assets and int-
           angible assets equal to TEUR 17. The tangible assets and intangible assets
           are depreciated on a straight-line basis over various periods of useful life
           (3-13 years).

     8.4   The other operating expenses include, among others, sales commissions
           amounting to TEUR 1,217 for sold owner-occupied apartments connected
           i.a. with the operated properties of Projektgesellschaft VOGU mbH and
           WINDSOR AG. In addition, EUR 1.6 million were spent to place further
           profit participation certificate capital. The remaining operating expenses
           relate to a great number of individual items e.g. rent, advertising and travel
           expenses, legal advice and consultation expenses etc.

     8.5   Other interest and similar income
           Basically, these items mean income attributable to WINDSOR AG. As alrea-
           dy described in subsection 5.4, GCI Management AG was granted a loan.

                                                       Group Balance Sheet

      For the mentioned loans repaid in 2006, WINDSOR AG received an interest
      income amounting to EUR 342,481.89 in 2006. By placing further profit
      participation certificates in the year 2006, income was received (differences
      between the market value and nominal value) adding up to a total of
      EUR 342,862.35. The remaining interest income results from granted loans
      that have to bear corresponding interest, and also from depositing liquid
      funds with German financial institutions.

8.6   8.6 Interest and Similar Expenses
      These items stem mainly from expenses for interest of the profit participa-
      tion certificates capital placed in 2005 and 2006. The financial result was
      thus encumbered with EUR 2.3 million in 2006. The profit participation
      certificates issued after 31 December 2005 and subscribed prior to the
      distribution in 2006 for 2005 have borne interest equal to EUR 0.4 million.
      Interest amounting to EUR 1.9 million regarding the pending distribution
      for 2006, will result in an outflow of liquid funds only in the financial year
      2007. The remaining interest and similar expenses related to the loans bor-
      rowed in order to refinance properties.

8.7   Deconsolidation
      As far as deconsolidation is concerned, reference is made to the statements
      in section 3.

8.8   Taxes on Income and Earnings
      Due to higher valuation (income-yielding properties), the taxes due lead,
      among others, to a negative profit contribution. This item consists of the
      following as at 31 December 2006:

       Deferred taxes of WINDSOR AG                                            -1.973.162,96
       Deferred taxes of 22. Projektgesellschaft Mitte mbH                           -686,40
       Taxes on income and earnings of
       22. Projektgesellschaft Mitte mbH                                           -3.634,19
       Latente Steuern der 23. Projektgesellschaft Mitte mbH                        1.591,62
       Deferred taxes of GMW Liegenschaftsgesellschaft mbH
       incl. deferred taxes at Group level due to first consolidation            -387.431,05
       Taxes from income and earnings of VOCON GmbH                                -1.147,65
       Deferred taxes of VOGU mbH                                                -103.008,02
       Taxes from income and earnings of
       Projektgesellschaft VOGU mbH                                              -260.594,58
       Total                                                                   - 2.728.073,23

     The deferred taxes are computed based on the temporary differences
     according to the „liability method” by applying an expected actual tax rate
     amounting to 38.9%. With reference to IAS 12.81 c (ii), the following tax
     rates were worked out:

                                                                        2006            2005

       Tax rates                                                          %                %

       Legal effective tax rate                                         38,9            38,9

       Actual tax rate                                                  25,3            -42,2

     The legal effective tax rate implies corporation tax and the solidarity tax
     contribution (effective rate: 21.89%) as well as the trade tax (effective rate:
     17.01%). As to the actual tax rate in 2005, a negative tax rate is indicated.
     This is based, in general, on the tax-free sale of a shareholding at WINDSOR
     AG as well as on the fact that tax-deductible losses brought forward and
     current tax losses have been capitalized in the form of deferred taxes. As at
     31 December 2006, a tax rate of 25.3% is determined. This increase is due,
     among others, to the fact that the capitalized losses brought forward by 31
     December 2005 had to be released affecting losses, because the prerequi-
     sites are no longer existing. Due to the tax-free disposal of shareholdings, a
     tax rate of just 25.3% was stated.

                                                        Group Balance Sheet

Deferred taxes relate to the following items as at 31 December:

                                                               2006            2005

                                                               TEUR            TEUR
  Deferred tax claims from loss brought forward
  and current tax-related losses                                  2             475

  Deferred tax claims from higher valuations and
  existing losses brought forward,
  on balance                                                   1.602               0

(9)        Earnings per Share
The earnings per share are computed based on dividing the annual surplus by the
number of shares issued. For determining the undiluted earnings per share, the
number of ordinary shares of the weighted average number of ordinary shares in
issue during that period is to be used pursuant to IAS 33.19. Dilution effects are
not to be taken into account. This results in the following:

                                                                 2006          2005
                                                                  EUR           EUR
  Net income for the year                               8.069.310,58    1.578.641,79
  djusted by shareholdings of external partners           -60.548,43           0,00
  Net income for the year                               8.008.762,15    1.578.641,79
  Number of shares (weighted average)                      8.745.348      5.343.750
  Earnings per share                                             0,92          0,30

     Other Statements

     (10)         Statements on members of corporate bodies:

     Members of Board of Directors
     Surname                  First name            Position               Power of representation
     Voigtsberger             Dr. Volker            Board member           Alleinvertretungsberechtigt
     Ax 1)                    Carsten               Board member           Alleinvertretungsberechtigt
     Zybell 2)                Heiko                 Board member           Alleinvertretungsberechtigt

        Mr. Ax was recalled effective as of 15 March 2005 from his position as a Board member. On the occa-
     sion of the premature termination of his employment contract, Mr. Ax was granted a compensatory
     payment amounting to EUR 175,000.00, which amount is to be allocated to the financial year 2007 for

     economic reasons.

          Mr. Zybell was appointed member of the Board of Directors as at 10 March 2007.

     In the year 2006, the total remuneration of the Board members equalled EUR
     268,663.34. For the directors‘ fees, reserves were created at EUR 30,000.00 which
     were paid in 2007.

     Supervisory Board members
     Surname                  First name            Position                 Occupation
     Wenner                   Markus                Chairman                 Management consultant
     Schaetze                 Roderich              Deputy Chairman Lawyer
     Dr. Wahl                 Albert                                         Management consultant

     In the year 2006, the total remuneration of the Supervisory Board members
     equalled EUR 45,000.00.

     (11)         Number of Employees
     During the period under report, the following companies did not employ any

     • WINDSOR Fondsverwaltungsgesellschaft mbH
     • 22. Projektgesellschaft Mitte mbH
     • 23. Projektgesellschaft Mitte mbH
     • VOCON GmbH
     • Projektgesellschaft VOGU mbH

     During the period under report, 11 employees, on an average, worked at

                                                           Group Balance Sheet

WINDSOR AG and the deconsolidated GMW Liegenschaftsgesellschaft mbH.
Without the deconsolidated GMW Liegenschaftsgesellschaft mbH, there
would be an average number of employees of 10.

(12)     Statements on Financial Instruments pursuant to IAS 32
Risk management policy and security measures
As far as the risk management policy is concerned, we refer to our statements in
the report on the Group’s state of affairs in 2006.

Risks from outside capital and changes of interest rates
The Group acquired outside capital for the operational implementation of its busi-
ness model. Since the payment of interest and repayment of principal (Kapital-
dienst) is mainly based on rental income and proceeds from selling residential
units, future delays in receipts from projects or refurbishments could have reper-
cussions in the same way as rent reductions, vacant properties or rent arrears.

A further risk is posed by the current trend of interest rates. Following historically
low interest rates, they may possibly rise again in the coming years.

Liabilities to banks totalling EUR 3.9 million were or are discharged in 2007,
because the corresponding properties were sold. Because of the completed refun-
ding, there are no risks of interest changes regarding the mentioned loans.

Fixed interest periods until 28 April 2007 and 30 December 2007 have been spe-
cified for liabilities to banks equal to EUR 1.2 million and EUR 1.9 million, respec-
tively. By applying innovative financial instruments (Cap financing based on
EURIBOR), the advantageous interest rate is used after the period of fixed interest
rates, but also the flexibility is ensured in case of a possible onward sale of the pro-
perty. The transactions implying corresponding interest protection instruments
feature a period of up to 30 December 2010 and 28 April 2011, respectively.

Apart from the liabilities to banks mentioned above, there are further liabilities
to banks stated until 31 December 2006 on a Group-wide scale totalling approx.
EUR 11.5 million, that have been secured by corresponding financing instruments
(Cap financing based on EURIBOR) with regard to the interest rate level. Among
other measures, the risks of future interest rises are reduced by means of firmly
capped interest rates.

     The terms of interest protection transactions are as follows:

                                                                              Mio. EUR
      Term until 30 September 2008                                                 1,8
      Terms until 30 June 20011 in each case                                       4,3
      Terms until 30 September 20011 in each case                                  5,4

     The remaining financial liabilities are not subject to a risk of interest change,
     because the conditions are firmly agreed until the end of the term.

     Bad debt risk
     Bad debt risk regarding receivables from buyers of residential property in the
     sales and refurbishment business is rated very low, because all sales are effected
     through escrow accounts.

     The bad debt risk regarding receivables from rent payment for properties was
     taken into account by corresponding individual and general provision against bad
     and doubtful debts.

     (13)       Date of release for publication
     No essential events have occurred after the date of accounts until 16 March 2007.

     Berlin, 16 March 2007

     Dr. Volker Voigtsberger                                 Heiko Zybell
     Director                                                Director

Group Balance Sheet

Development of Group Investment Capital as at 31 December 2006

                                                                                          Purchase and manufacturing costs

                                                                   State as of                                                            State as of
                                                                  1 Jan 2006                   Addition                   Deduction     31 Dec 2006
                                                                         EUR                        EUR                         EUR             EUR

     I.   Intangible assets                                        14.230,80                 259.715,75               -255.060,75         18.885,80
     II. Tangible assets
          1. Other assets, plant and
            equipment                                              84.876,68                  16.269,26                   -62.453,54      38.692,40
          2. Down payments made                                     5.782,76                        0,00                   -5.782,76            0,00
                                                                   90.659,44                  16.269,26                   -68.236,30      38.692,40
     III. Income-yielding properties1)
          1. Income-yielding properties                                  0,00            17.933.586,71               -2.626.001,43     15.307.585,28
          2. Down payments made                                2.699.207,93                   71.486,51              -2.701.997,96        68.696,48
                                                               2.699.207,93              18.005.073,22               -5.327.999,39     15.376.281,76

     IV. Financial assets                                           1.500,00                        0,00                       0,00         1.500,00

                                                               2.805.598,17              18.281.058,23               -5.651.296,44     15.435.359,96

      Increase/maximum valuation of income-yielding properties (these are property additions marked by negative signs).

                                                                                     Group Balance Sheet

                      Cumulative depreciations                                            Book values

State as of                                                State as of      State as of                   State as of
1 Jan 2006         Addition                Disposal      31 Dec 2006      31 Dec 2006                   31 Dec 2005
      EUR              EUR                       EUR             EUR              EUR                           EUR

 4.270,80         3.031,00                       0,00       7.301,80        11.584,00                       9.960,00

23.653,68        13.555,26               -22.236,54        14.972,40        23.720,00                     61.223,00
      0,00            0,00                       0,00            0,00             0,00                      5.782,76
23.653,68        13.555,26               -22.236,54        14.972,40        23.720,00                     67.005,76

      0,00    -5.656.413,29            1.063.998,57     -4.592.414,72    19.900.000,00                          0,00
      0,00            0,00                       0,00            0,00       68,696,48                   2.699.207,93
      0,00    -5.656.413,29            1.063.998,57     -4.592.414,72    19.968.696,48                  2.699.207,93

      0,00            0,00                       0,00            0,00         1.500,00                     1.500,00

27.924,48     -5.639.827,03            1.041.762,03     -4.570.140,52    20.005.500,48                  2.777.673,69

     Auditor’s Certificate

     We render the following unqualified auditor’s opinion to the consolidated annual
     financial statement and the report on the Group’s state of affairs for the financial
     year 2006 of WINDSOR AG, Berlin, as amended by annex 1, and signed on 16
     March 2007:

     „Auditors’s Opinion

           We have audited the Group’s consolidated financial statements, comprising
           the balance sheet, income statement, statement of changes in sharehol-
           ders‘ equity and cash flows, cash flows analysis, the notes and the report on
           the Group’s state of affairs prepared by WINDSOR AG, Berlin, for the busi-
           ness year - for the financial year from 1 January till 31 December 2006. The
           Board of Directors is responsible for preparing the Group annual accounts
           in accordance with the International Financial Reporting Standards (IFRS)
           applied in the EU and the supplementary directives under § 315a par 1
           HGB (German Commercial Code). We are responsible to provide an opi-
           nion based on our audit of the Group’s annual accounts and the report on
           the Group’s state of affairs.

           We conducted our audit of the annual accounts in conformance with
           § 317 HGB (German Commercial Code) taking the German generally
           accepted standards for orderly auditing annual accounts into considerati-
           on specified by the Institut der Wirtschaftsprüfer (IDW) (German Institute
           of Auditors). These standards require that we plan and conduct the audit
           in such a way that misstatements materially affecting the presentation of
           the financial and income statement and the report on the Group’s state of
           affairs, are recognized with reasonable reliability. For audit purposes, the
           knowledge of the business activities and the economic and legal environ-
           ment of the Group as well as possibly anticipated misstatements are taken
           into account. For effectiveness of the accounting-related internal control
           system as well as evidence supporting the disclosures in the consolidated
           statements and in the report on the Group’s state of affairs of the Group
           have mainly been evaluated by random sampling. The audit comprises
           an assessment of the annual financial statements of the companies inclu-
           ded, the determination of companies consolidated, the accounting and

                                     Audit Certificate of the Auditor

      consolidation principles applied and the principal assessment of the Board
      of Directors as well as the evaluation of the overall presentation of the
      Group‘s annual statement and the report on the Group’s state of affairs.
      We believe that our audit constitutes a reliable basis for our opinion.

      Our audit has not led to any objections.

      In our opinion based on the findings gained by the audit, the Group annual
      statement of WINDSOR AG, Berlin, conforms to the IFRS principles applied
      in the EU, as well as the supplementary regulations under commercial
      law pursuant to § 315a par 1 HGB (German Commercial Code) and give
      a true and fair view and accurately present the assets, income and the
      financial position of the Group, in compliance with the principles of orderly
      accounting. The report on the Group’s state of affairs is in conformity with
      the annual statement, it generally presents a true understanding Group’s
      position and suitably describes the chances and risks of the future develop-

Berlin, 16 March 2007

Deloitte & Touche GmbH

(Nienhoff)                                                      (ppa. Werner)
Auditor                                                         Auditor

The WINDSOR Share / The WINDSOR Profit Participation Certificate

                      WINDSOR shares
                      Symbol                          WIR.ETR
                      ISIN number                     DE0006190705
                      WKN                             619070
                      Nominal capital                 EUR 9.235.066
                      Type                            No-par bearer shares
                      No. of shares                   EUR 9.235.066
                      Stock ex. segment               Open market
                      Listed at stock ex.             At Frankfurt stock exchange
                      Opening price (5 Dec 2005)      EUR 6.05
                      Per share performance in 2006   EUR 0.92

                      WINDSOR profit part. cert.
                      Symbol                          WIR1.FSE
                      ISIN number                     DE000A0EQVT2
                      WKN                             A0EQVT
                      Type/certification              Bearer instruments, global certificate
                      Application purpose             Exclusively property investment
                      Security                        Registration of junior land registry
                      Basic value per certificate     EUR 100 (minimum investment)
                      Lifeterm                        Minimum term until 31 Dec 2011,
                                                      thereafter terminable
                      Annual distribution             8% p.a. relating to nominal value of the
                                                      profit participating certificate (depending
                                                      on balance sheet profit of WINDSOR AG)
                                                      entitled to dividend payment from
                                                      1 Jan 2006
                      Date of payment                 Subsequently as at the first bank working
                                                      day following the General Meeting of
                                                      WINDSOR AG
                      Market place                    Frankfurt stock exchange
                      Offering prospectus   

                                           Financial Calendar

Financial calendar                                              2007
25 July 2007         General meeting of
                     WINDSOR AG at 11 am
                     in Goldberger Saal of
                     Fasanenstraße 85, 10623 Berlin
26 July 2007         Distribution of profit participation certificates
                     (1st bank. day after GM)
August 2007          Half-year accounts



Kochstraße 28
10969 Berlin

Phone: 030/ 88 67 22-0
Fax:   030/ 88 67 22-99

Investor Relations:

Inquiries to be sent to:

Members of corporate bodies

Supervisory Board:
Chairman of the Supervisory Board:           Markus Wenner (chairman since 19 June 2006)
Deputy chairman of the Supervisory Board:    Roderisch Schätze (deputy chairman since 19 June 2006
Member of the Supervisory Board:             Dr. Albert Wahl

Board of Directors:                          Dr. Volker Voigtsberger
                                             Heiko Zybell

Registered office: Berlin, Amtsgericht (District Court) Charlottenburg, HRB 88633

State: 29 June 2007

Concept, design and production: Ambrax Sales, Berlin
Photographs: Ambrax / Pilz Fotodesign

Investor Relations
Kochstrasse 28

10969 Berlin                                                                                                            Fax: 030 / 88 67 22-99

Surname:....................................................... ..............First name: ...................................................................

Postcode: ......................Town: ....................................Street: ...........................................................................

Phone: ......................................................... ..............Email: ............................................................................

             I request to regularly send me corporate news / press releases etc.

                           I do not yet have my own shares.
                           I own shares (private investor).
                           I own shares (institutional or qualified investor acc. to § 27 WpPG).

             I am an investor in profit participation certificates; please send me information, please

                           Send me the sales prospectus by email, pleas.
                           Send me information for holders of profit participation certificates on aregular basis, please
                           (for example, about the next distribution date etc.).

             I am interested in buying an apartment / house in Berlin, without any obligation.
             Send me information or contact me, please.

                           As an investment (purchase of an apartment for profitability purposes).
                           As a global investor ((purchase of a house for taxation & profitability purposes)
                           For my own use.

..........................................................                     .................................................
Date                                                                           Signature

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