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					Our team,
your success.
Annual Report 2004
Westdeutsche ImmobilienBank
Centre of Competence for Real Estate Financing
in the WestLB Group


Westdeutsche ImmobilienBank (WIB) was formed on 1 January 1995 as a public sector
institution. WIB is a specialist bank headquartered in Mainz and a wholly owned
subsidiary of WestLB AG.

The two savings banks associations in North Rhine-Westphalia, Rheinischer Sparkassen-
und Giroverband (RSGV) and Westfälisch-Lippischer Sparkassen- und Giroverband (WLSGV)
each hold a 30.372% interest in WestLB AG. NRW.BANK holds an interest of 38.041%.
NRW.BANK is owned by the federal state of North Rhine-Westphalia with a 64.74%
stake and the regional associations of the Rhineland and Westphalia-Lippe, which each
hold around 17.63%. Westdeutsche ImmobilienBank’s liabilities are backed both by its
own assets and by WestLB AG based on a letter of comfort.

In addition to the Bank, the WIB Group includes Westdeutsche ImmobilienHolding GmbH,
the holding company for the management and service companies. The executive bodies
of WIB are the Guarantors’ Assembly, the Administrative Board and the Managing Board.
The Bank is under the supervision of the Bundesanstalt für Finanzdienstleistungsaufsicht
(BAFin – Federal Financial Supervisory Authority) and is a member of the Sicherungsreserve
(Reserve Fund) of the Landesbanken/Girozentralen (state banks/central giro institutions)
in the Deutsche Sparkassen- und Giroverband e.V. (German Giro and Savings Bank
Association), Bonn.

WIB offers its customers a broad range of products supplemented by the services of
WestLB and its equity investments. The product range includes

  Domestic and international finance
  – Portfolio finance
  – Consortium finance, syndicated loans and securitisation
  – Real estate finance and project finance
  – Real estate investment banking
  – Real estate joint ventures
  – Municipal loans
  Savings bank and medium-sized company business
  Pfandbrief issues
  Residential financing, including ImmoBankdirekt
  – Direct business
  – Cooperative ventures
  – Credit factory
  Real estate consulting and management
  Closed-end real estate funds

Above and beyond its branches in Germany, WIB is represented internationally in
Europe and the USA by our London branch and our representative offices in New York,
Paris and Madrid.

Close links to WestLB AG’s product range mean that WIB can provide its customers with
a large number of services that include all of the capital market-oriented products and
services of WestLB AG in addition to WIB’s real estate-specific expertise.



                                                                                             Key Figures
      At a Glance




  2   Foreword by the Managing Board


      Markets
 4    Real Estate Financing on the German and International Markets
10    Interview with Georg von Werz, TMW Property Funds AG
12    Real Estate Joint Ventures as Teamwork

16    Savings Banks, Small and Medium-sized Companies and the Municipal Loans Sector
20    Interview with Yvonne Schoppmeyer, Kreissparkasse Steinfurt
24    Public Private Partnership Financing
26    Interview with Sandra Arendt, HOCHTIEF Projektentwicklung GmbH

 28   Standardised Construction Financing


      The Company
34    Treasury
36    Employees

      Selected Projects in 2004


      Financial Report
40    Combined Management Report
59    Report of the Administrative Board
61    Report of the Guarantors’ Assembly

 64   Balance Sheet
 66   Profit and Loss Account
 68   Notes to the Annual Financial Statements
 78   Auditor’s Report on the Annual Financial Statements

 80   Consolidated Balance Sheet
 82   Consolidated Profit and Loss Account
 84   Cash Flow Statement
 85   Segment Reporting
 88   Statement of Changes in Group Equity
 90   Notes to the Consolidated Financial Statements
101   Auditor’s Report on the Consolidated Financial Statements


      Names and Locations
102   Members of the Managing Board, Senior Managing Director and Heads of Branches
      and Central Departments
103   Service Companies
104   Contacts
106   Glossary
Key Figures




Key Figures for the Group

                                                                          2004        2003
                                                                       € million   € million
Business volume                                                        23,589.4    22,105.3
Total assets                                                           21,538.8    20,063.0
Reported equity                                                           767.1       630.9
Operating result (before risk provisions/remeasurement gains)              50.1          7.3
Income taxes                                                                0.2        – 1.9
Net income/net loss for the year                                         – 95.4          5.0
Net retained profits                                                       42.7          2.6




Key Figures for the Bank

                                                                          2004        2003
                                                                       € million   € million

Balance sheet
Business volume                                                        23,169.2    21,632.0
Total assets                                                           21,306.5    19,809.3
Total receivables                                                      19,193.9    18,415.9
Securities                                                              1,837.4     1,109.6
Certificated liabilities                                               10,976.2     8,013.7
Reported equity                                                           848.5       684.2
Profit and loss account
Net interest income                                                       122.5        81.4
Net commission income                                                      – 0.1        1.8
Net income on financial operations                                           1.2        1.6
General administrative expenses                                            79.4        67.8
Operating result (before risk provisions/remeasurement gains)              49.2        16.4
Income taxes                                                                 3.3        1.2
Net income/net loss for the year                                        – 135.7         2.7
Net retained profits                                                           –        2.5
New business
Total                                                                   3,481.8     4,689.6
Commercial use                                                          2,343.0     3,524.7
Residential use                                                         1,100.6     1,164.9
Public sector                                                              38.2           –




                                                                       Number      Number
Employees incl. staff on parental leave (at year-end)                       460         476




Rating

Standard & Poor’s rating for Westdeutsche ImmobilienBank
– long-term                                                       A+
– short-term                                                     A-1
Mortgage Pfandbriefe                                            AAA
Public sector Pfandbriefe                                       AAA
Ten years of Westdeutsche ImmobilienBank (WIB): We
build on what we have achieved to meet the challenges
facing our customers in a competitive environment. Using
our expertise and experience in the real estate business,
we will cooperate with our partners, WestLB AG and the
savings banks, to consolidate and expand our leading
role as a real estate bank in association with the savings
banks.
    Foreword by the Managing Board




                                                                        Weak economic environment impacts real estate
                                                                        business

    (from left to right) Klaus Neuhaus (member of the Managing Board)   The real estate market in Germany, as well as in some other
    Claus-Jürgen Cohausz (Senior Managing Director)                     European countries, is still suffering from the ongoing weak
    Dieter Groh (Chairman)                                              economic environment. In Germany, only brief, isolated signs
                                                                        of recovery were to be seen in 2004. Internationally, the
                                                                        markets differ according to their respective economic and real
    Westdeutsche ImmobilienBank was founded in 1995 as the              estate cycles. However, forecasts point to an improvement,
    subsidiary of three Landesbanken (the German state banks).          and individual positive developments are already noticeable.
    Over these ten years, it has performed well in turbulent times,     Foreign investors are increasingly discovering the German
    and has successfully weathered the cycles of the property           market. Rising prices are being recorded primarily in London,
    market in Germany and internationally.                              Paris, Madrid and Stockholm, and also in Budapest, Prague
                                                                        and Warsaw – for the first time in some time.
    Since its foundation, the Bank has grown continuously and
    expanded its activities. Organic growth has remained the
    key focus, enabling the opportunities and risks of possible         WIB – a network partner for the savings banks
    expansion to be assessed precisely.
                                                                     WIB’s strategy is focused on business with German and
    In 2003, the most significant change to date occurred: all       international customers, and cooperation with the savings
    WIB shares were acquired by WestLB AG. Since then, WIB           banks:
    has been the subsidiary of a European commercial bank that
    is also the central bank for the Sparkassen (savings banks) and     Commercial real estate business is one of the mainstays of
    hence an important partner of the savings banks for products        WIB. The Bank is well positioned on the German and on the
    and services.                                                       most important international markets in this area.
                                                                        Intensifying cooperation with the savings banks, together
                                                                        with WestLB AG, is a key component of WIB’s business
    Close integration with the WestLB Group                             strategy.
                                                                        Cooperation with the savings banks covers the entire WIB
    As a specialist bank and centre of competence for real estate       product range in commercial real estate and standardised
    financing, WIB is closely integrated with WestLB AG’s functions,    building construction finance, as well as Pfandbrief issuance.
    structures and processes. Its positioning within the WestLB         WIB supports the savings banks in their competition with
    Group was finalised in the previous fiscal year. The links have     the direct banks, and offers them a refinancing platform
    created further market opportunities and additional potential       following the abolition of the Anstaltslast (Maintenance
    for customers and for both institutes, which WIB is exploiting      Obligation) and Gewährträgerhaftung (Guarantee
    together with WestLB AG.                                            Obligation).




2
 Markets                          The Company                            Financial Report                      Names and Locations




Consistent implementation of the new                                 3. The key development on the market for private construction
business model                                                          financing is the expansion of the direct banks, and
                                                                        consequently heavy pressure on terms and conditions. WIB
The resulting strategic and business decisions have been                provides the savings banks with the opportunity to face
systematically implemented in WIB’s new business model.                 this competition through cooperation. The savings banks
WIB focuses on three key points:                                        can offer standardised construction financing at attractive
                                                                        conditions, both via a multi-client-enabled Internet platform
1. Domestic and foreign investors. WIB is a well-known and              and in branch banking, in direct competition with local
   popular finance partner in the German real estate market,            competitors. In addition, WIB offers construction financing
   and is represented in a wide range of different real estate          processing services in the form of modular credit service
   projects. The innovative financing solutions offered meet            packages. In this way, savings banks can optimise their
   the needs of various target groups. The Bank’s business              offering in line with their individual needs, defend their
   activities also includes real estate investment banking and          market share and also reach new target groups.
   real estate joint ventures. WIB’s international orientation
   facilitates loan portfolio diversification, the selective
   exploitation of different real estate cycles and thus effective   Optimum combination of strengths within the network
   management of the portfolio in terms of risk and earnings.
   WIB is well-known and established abroad as a result of           The new business model, which combines the strengths of
   its ten years of activity. Focus countries include the USA,       WIB, WestLB AG and the savings banks, is a forward-looking
   the UK, France, Spain, the Benelux countries and selected         foundation that reflects market developments and focuses on
   parts of Central Europe. The excellent performance of             customer wishes. Concentrating on the core competencies of
   WIB’s international business has shown in recent years how        the individual institutes and bundling strengths brings added
   important a continuous foreign strategy and an international      value for the whole Sparkassen Finance Group. These factors
   presence are.                                                     form the basis that will be continuously expanded by the
                                                                     network to ensure success through the optimum combination
2. As part of its business with savings banks, small and             of strengths.
   medium-sized companies and the municipal loans sector,
   WIB is intensifying cooperation with the savings banks
   across the whole range of real estate financing in Germany        The Managing Board
   and abroad, and in real estate investment banking. In its real
   estate financing, WIB offers mid-market customers products
   that are tailored to their requirements. Cooperation with the
   public sector is also being stepped up. WIB is demonstrating
   its expertise in public private partnership projects in the
   field of public building construction that are being tendered
   at European level. This market has sizeable potential and
   will grow strongly in coming years.



                                                                                                                                        3
    “The goal of structurin g real estate financing
    is individual optimisati on for our customers.”


                                                      Intensified international commitment

                                                      Economic change over recent years has led to concentration
                                                      among financial service providers – a development that has
                                                      had a significant effect on the German banking market in
                                                      particular.

                                                      A further result are cross-border activities aimed at ensuring
                                                      an adequate risk diversification of the credit portfolio. This is
                                                      especially important for German commercial banks in view of
                                                      the weak domestic economic environment of the past several
                                                      years.

                                                      In consequence, we have expanded our customer segments,
                                                      and stepped up our international exposure. WIB has pursued
                                                      this business strategy from the beginning by supporting
    2000 Avenue of the Stars                          national and international customers who invest both in local
    WIB is the lead manager and administrative        markets and in the rest of Europe and/or North America.
    agent for the 15-storey class A office building
    in Century City, Los Angeles. Leasable space:
    778,947 sq. ft. (72,364 sq. m.). Syndicated       Our offering – non-standardised financial structures
    loan totalling US$220,000 thousand.
    The co-agents are two US banks. Planned           As the real estate product specialist within the WestLB Group,
    completion: September 2006.                       we primarily offer structured financing. This comprises
                                                      individual, non-standardised financing that is tailored to our
                                                      customers’ requirements, and that combines multiple debt,
                                                      mezzanine capital and equity instruments with capital market
                                                      products and derivatives.                                           “Our expertise in short-term equity financing
                                                                                                                          can be seen from the total volume of €1 billion
                                                                                                                          that we have made available to selected
                                                                                                                          customers over recent years.”


                                                                                                                          Roland Fuchs
                                                                                                                          Managing Director, International Investors
                                                                                                                          Department Continental Europe




4
    “The combination of cross-enterprise products with the
    goal of optimally fulfilling customer wishes underscores
    our Company’s business philosophy.”




                                        Alexander Saur
                                        Executive Director, Origination & Structured
                                        Finance Continental Europe




6
 Markets                          The Company                           Financial Report                      Names and Locations




At a glance
  Internationalisation of financial services                          Equity substitute loans
  Continuation of successful foreign strategy                         Integrated product offering with WestLB AG
  Structured, individualised financing                                Securitisation of receivables
  Mid- and long-term portfolio financing




Standardised financing can be divided into fungible and non-        Capital components of real estate investment
fungible transactions by including the criterion of risk. In this
context, the term “fungible” applies to all risk classes that       If a real estate investment is broken into its possible
can be efficiently placed on the capital market – within an         potential parts, the following capital components result:
acceptable timespan and taking advantage of arbitrage – and
in a standardised form. Financing that does not fulfill this          Senior debt secured by real property
criterion is non-fungible in the capital markets sense of the         Mezzanine debt
word.                                                                 Limited capital as equity substitute
                                                                      Equity
In practice, structured financing transactions that are specially
tailored to the customer contain fungible and non-fungible          The capital components mentioned can be combined with each
elements.                                                           other. They represent different risk classes; some are fungible,
                                                                    others are not. Modern structured financing, which weighs up
                                                                    the specific conditions of each individual transaction, is the
                                                                    result of an optimisation process by the bank for the customer’s
                                                                    benefit.

                                                                    The ability to use the capital markets, in addition to the
                                                                    traditional banking market, to bear risk broadens the business
                                                                    base for every real estate financer. WIB cooperates closely
                                                                    with WestLB AG, which has excellent access to the capital
                                                                    market, in this area.




                                                                                                                                       7
                          The benefits for our customers

                            Transaction structures tailored to customer requirements
                            Opportunity for differentiated price structures
                            Financing structures with varying maturities
                            Diversification of risk relating to individual loans
                            Access to capital market for real estate investors
                            Increase in loan commitment volumes




    Financing of active portfolios a particular challenge              High returns generated using leverage

    Traditional financing has its limitations when it comes to long-   In the case of mid-term acquisition financing, investors focuses
    term portfolio financing covering an acquisition, investment       on using as little equity as possible, so as to generate a high
    and divestment phase. In this case, the financing structure must   return through leverage. In our view, the key issue here is the
    enable flexible acquisition (possibly by revaluing individual      creation of different risk classes via additional debt components.
    properties as a result of conversion and reletting), as well as    Our aim is to offer the customer an optimum structure.
    guaranteeing a low-cost holding period and ensuring maximum        The risks are reflected in differentiated security levels with
    flexibility when selling individual properties.                    corresponding differences in price. This form of financing
                                                                       – which is extremely popular in the US and the UK in
    In this regard, cross-border financing, e. g. for newly-launched   particular – is becoming increasingly significant in Germany
    funds and credit facilities for the planned renovation or          as well.
    extension of individual properties, represents a particular
    challenge. In the case of newly-launched funds, the properties     Short-term finance that serves as a limited equity substitute
    in the portfolio are not yet known at the time the agreement       is not reserved exclusively to closed-end real estate funds.
    is concluded. WIB has structured a large number of such            Rather, it is an additional type of financing, which preserves
    complex financing transactions in recent years, in particular      the customer’s financial room for manœuvre for subsequent
    for portfolio investments in the USA and Western Europe.           investments in selected cases. This type of financing is offered
                                                                       at a higher price in line with the risk involved, and is based
                                                                       on collateral levels that go beyond the collateral relating to
                                                                       individual properties.




8
Markets   The Company       Financial Report                            Names and Locations




                        Strengthening earnings potential throughout
                        the Group

                        We will continue to secure and expand our market position
                        as an innovative partner in real estate financing with leading-
                        edge products.

                        The expansion of the traditional banking market as a result of
                        capital market access for individual sections or entire financing
                        forms enables us to extend the WIB customer base, thus
                        strengthening the earnings potential for the whole Group.

                        By breaking down financing into different risk components,
                        we are able to provide a broad product offering combining the
                        tried and tested with the new. This is another advantage of
                        our links with WestLB AG.




                        General Motors building
                        Short-term equity financing with WIB as lead manager. Class A office
                        building with 50 storeys and a leasable space totaling 1,918,500 sq. ft
                        (around 178,234.4 sq. m.) in a premiere location in midtown Manhattan,
                        south of Central Park. Stunning, unblockable view of Central Park and
                        the New York skyline from the third storey and above. The property is
                        owned by the current Jamestown Fund no. 26.




                                                                                                  9
     Georg von Werz, Chairman of the Managing Board,
     TMW Property Funds AG




     Mr. von Werz, as a property fund initiator, you                   Thanks to our partnership with TMW Pramerica Immobilien
     are particularly affected by developments in the                  GmbH, which belongs to the international company Pramerica
     investment fund sector. What types of funds do you                Real Estate Investors – the real estate subsidiary of the
     develop and what are your target groups?                          Prudential Financial, Inc., USA (PFI)* insurance and financial
                                                                       group – we have excellent world-wide access to the real estate
     We mainly set up property funds for institutional investors.      and private equity markets.
     Our clients are security-oriented, conservative investors with
     an international focus who utilise their global diversification
     to lower their portfolio risk.                                    What is your strategy for financing these funds?

     TMW Property Funds AG’s current products include two              Our focus is on implementing a portfolio approach. This
     special property funds investing in Europe and one closed-        means that an aggregate view of the properties and equity
     end property fund focused on Asia. This fund invests around       investments takes top priority. In our opinion, portfolio finance
     €1.6 billion in properties in Japan, Hong Kong, South Korea,      can only be implemented sensibly if the portfolio’s investments
     Singapore, Malaysia, Thailand and China. We also manage           are in a single legal jurisdiction and involve a single borrower.
     three funds invested in the USA, the first of which has existed
     for more than ten years. Our current US fund, managed by          A key advantage of portfolio finance is the ability to use
     TMW Property Funds AG, is the USPF III fund exclusively           financial covenants, such as loan-to-value and debt-service-
     for German institutional investors, which closed in 2001. Out     coverage ratios at the portfolio level. This enables us to offset
     of the total committed funds of approximately US$1.5 billion,     possible weaknesses at the individual property level within the
     almost US$800 million to date has been invested in ten            portfolio. We also appreciate the flexibility of portfolio finance
     properties that were mainly financed by a syndicate, lead         as well as the high degree of standardisation in arranging
     managed by Westdeutsche ImmobilienBank.                           finance for new properties and property sales.

     Although this fund closed in 2001, we viewed the prices in the    In addition, derivatives (e. g. interest rate swaps) can be used
     USA as excessive in many cases, and have as yet been unable       to hedge the risk of interest rate changes at portfolio level in
     to achieve our investment goals to the desired extent.            a customised, risk adjusted manner that is tailored to funds’
                                                                       specific investment and divestment strategies.




     * Prudential Financial, Inc., USA (PFI) is not part of the
       Prudential plc Group, which is headquartered in the UK.



10
 Markets                          The Company                            Financial Report                     Names and Locations




                “At the moment, we see substantial
                market potential on the periphery of
                the European Union and in Asia.”




What countries and types of real estate do you mainly This assumption of a recovery in the property rental markets
invest in for diversification purposes?               and the related positive rental expectations should again
                                                                     ensure a constant inflow of investments in 2005.
Our analyses indicate that the markets in Central and Eastern
Europe and the Asian real estate markets in particular display
a low correlation with the classic investment locations in           REITS*, which are already established in the USA,
Western Europe and the USA. Investments in retail properties         will probably be introduced in Germany in 2006 as
are suitable for diversifying risk at the individual property        tax-privileged real estate shares. What do you think
level within portfolios with a heavy focus on office premises.       of this product?

Attractive risk-adjusted property returns will ultimately continue   The success of tax-privileged real estate shares depends
to depend on a solid political and institutional framework, a        primarily on the concrete structure of the legal framework
dynamic economic environment and the diversification potential       for this investment vehicle. German REITS will be a sensible
of the relevant market. We continually track structural,             addition to the range of available property investments
demographic and social trends that affect the macroeconomic          – provided that the legal framework based on internationally
situation.                                                           accepted standards.

At the moment, we see not only the diversification effects we        We consider REITS to be a risk management tool in the sense
are looking for, but also considerable market potential on           that there is only a minimal correlation between the returns
the periphery of the European Union and in Asia. The above-          produced by direct and indirect real estate investments. This
average economic growth and low correlation of these markets         can be used to reduce risk as part of a strategic portfolio
with the established major real estate investment strongholds        management policy.
make these locations attractive for our company.
                                                                     The successful introduction of German REITs would lead to
                                                                     increased market efficiency and risk reduction in the property
What is your assessment of how the US market is                      investment segment thanks to improved liquidity and
developing?                                                          transparency.

There appears to be no material difference to the previous
year in the outlook for institutional real estate investments in
2005. We expect that real estate market fundamentals will
continue to improve due to the positive economic environment
and labour market situation. In the office market in particular
we see opportunities in the course of the year for improvement
in the ratio of available space to demand.

                                                                     * Real Estate Investments Trusts



                                                                                                                                      11
     “A real estate joint venture is the best example of how
     efficient cooperation between all participants in a major
     project leads to success.”




                              Real estate joint venture as teamwork

                              Westdeutsche ImmobilienBank is engaged in large-scale
                              real estate projects via real estate joint ventures, to which
                              it contributes its expertise. A project company is used to
                              unite the partners, who may include municipal authorities,
                              development companies, construction firms, engineering
                              offices, property owners, tenants, leaseholders and users.
                              Key factors for successful implementation are a good location,
                              appealing and functional architecture with flexible space design,
                              fungibility and the potential for third-party use, an optimised
                              mix of tenants and the best possible rental conditions.



                              The benefits of a real estate joint venture are:

                                  Risk distribution among the project partners
                                  Integration of additional expertise
                                  Use of an extensive network
                                  Raising the project’s profile
                                  Increasing financial room for manœuvre
                                  Increasing the chances of implementation at an early
                                  project phase
                                  Guaranteeing the project’s economic independence
                                  Securing off-balance sheet financing




12
Markets   The Company   Financial Report                           Names and Locations




                                           “TeamBanking means leveraging all the
                                           Bank’s resources – including and in particular
                                           for real estate joint ventures – to be able to
                                           provide the customer with an end-to-end
                                           offering covering all aspects of financing.
                                           Another important factor for success is
                                           integration and cooperation with our WestLB
                                           colleagues.”


                                           Andreas Fohrmann
                                           Project Manager, Real Estate Joint Ventures




                                                                                            13
     The “Lenbach-Gärten” real estate joint venture                       the late Otto Steidel. Construction work began at the end
                                                                          of 2004, and completion of the whole complex as a single
     Munich’s most exclusive residential district is being built on the   construction project is planned for the end of 2006/beginning
     former grounds of the Ludwig-Maximilians-University, right           of 2007.
     by the Old Botanical Garden. This real estate joint venture, the
     “Lenbach Gärten”, is a €300 million project. Together with the
     Frankonia Eurobau Group from Nettetal in the Lower Rhine             A far-reaching view as the foundation for success
     region, Provinzial Versicherung from Münster and two more
     companies from the insurance sector, WIB is constructing a           The luxury hotel, with 160 rooms and 28 suites, is leased to
     district in Munich’s Max suburb with luxury apartments, office       the British group Rocco Forte Hotels. The office complex, with
     buildings and a five-star plus hotel, via a specially founded        around 12,500 sq. m. and high quality of use, was leased to
     project company, Frankonia Eurobau Max-Viertel GmbH.                 a world-famous consultancy firm before construction began.
                                                                          The apartments, which are designed as loft apartments and
     The open-plan environment, designed by leading landscape             luxury doorman apartments in the American style. Particularly
     architects, will give this area a particularly attractive design.    desirable are the 35 apartments opposite the Old Botanic
     People walking from the city centre or from the train station to     Garden, equipped with the highest security standards and
     the Museum Mile in future will experience and appreciate this        with their own roof gardens and patios, offering a view as far
     flair.                                                               as the Alps.

     The site, which has a total area of around 22,300 sq. m.,
     was acquired at the end of 2003. Following an architects’
     competition, the jury chose the design submitted by Hilmer
     and Sattler, a well-known team of architects, and the office of




14
 Markets                             The Company                          Financial Report                               Names and Locations




                                                                                                                           Five-star luxury hotel
                                                                                                                           with 15,000 sq. m.
                                                                                                                           of gross floor space:
                                                                                                                           160 units, 8 meeting
                                                                                                                           rooms, 1 banquet hall,
                                                                                                                           1 bar, 1 restaurant
                                                                                                                           and a health centre
                                                                                                                           with a sauna and
                                                                                                                           swimming pool.
                                                                                                                           Operator: Rocco
                                                                                                                           Forte Hotels Group,
                                                                                                                           30 year lease.


                                                                                                                           The building’s organic
                                                                                                                           design allows it to
                                                                                                                           blend harmoniously
                                                                                                                           with the form of the
                                                                                                                           Old Botanic Garden.




The “Lenbach-Gärten” project
The name honours Franz von Lenbach, a
“painter prince”, who in the late 19th century
was one of the most sought-after portrait
artists in Europe, and who lived and worked
in the neighbouring Lenbachhaus, now
Munich’s Städtische Galerie.




                                                   The approximately 63,000 sq. m. of cross-lettable space is divided into: around
                                                   20,000 sq. m. gross floor space of offices, a 15,000 sq. m. hotel, apartments (luxury
                                                   doorman apartments, lofts) with around 28,000 sq. m. of gross floor space, and a total
                                                   of around 600 parking spaces. The open spaces, designed by well-known landscape
                                                   architects, give the area a particularly attractive flair. The planned piazzetta opposite
                                                   the St. Boniface Abbey, which will theme catering and water features, will be a
                                                   recreation area in the midst of a lively quarter.


                                                                                                                                                    15
                          Markets                             The Company                           Financial Report                           Names and Locations




“Thanks to the coopera tion between the
savings banks and WIB , customers have
direct access to our wid eranging offering.”
                                                                         Cooperation with the savings banks in
                                                                         North Rhine-Westphalia and Brandenburg

                                                                         Cooperation and knowledge transfer allow our partners to
                                                                         leverage greater market potential.

                                                                         This means that customers can be offered a wide range of
                                                                         additional offerings.

                                                                         Westdeutsche ImmobilienBank is the savings banks’ partner
                                                                         for real estate financing and real estate services. As a subsidiary
                                                                         of WestLB AG, WIB contributes its many years’ experience
                                                                         and its specialist real estate expertise to this cooperation with
                                                                         the savings banks.

                                                                         For the savings banks, cooperation with Westdeutsche
                                                                         ImmobilienBank means expanding their own field of
                                                                         operations for the customer’s benefit. The result: increased
                                                                         cross-selling opportunities and customer satisfaction, and
                                                                         hence stronger customer loyalty.




                         “Bank services today, as in the past, revolve
                         around personal trust. We have to keep
                         on earning this, as well as providing good
                         service for our customers.”


                         Werner Doetsch
                         Managing Director, Loans, North

                                                                                                                                                                     17
                                                      “Personal advice offers the opportunity to
                                                      demonstrate our professional expertise, and
                                                      thus establish a relationship of trust with
                                                      the savings banks and their customers. But
                                                      not every consultation involves a concrete
                                                      transaction. Often the savings bank or the
                                                      customer are simply looking for advice, rather
                                                      than action. We see this type of service as an
                                                      investment in future business.”


                                                      Kai Oertel
                                                      Director, customer support for the savings
                                                      banks in the Rhineland




     “WIB increasingly focuses on cooperation
     with the savings banks in the middle-market
     customer segment. Together with the savings
     banks, we minimise risk through our selective,
     qualitative market approach.”


     Gerhard Schulenberg
     Director, customer support for the savings
     banks in Westphalia and Brandenburg




18
 Markets                         The Company                           Financial Report                          Names and Locations




                      At a glance
                        Cooperation between WIB and the savings banks
                        Reciprocal knowledge transfer
                        Exploiting new market potential
                        Advantages for savings bank organisations




Depending on their wishes and requirements, savings bank
customers have access to WIB’s broad product range. This
covers real estate financing in Germany and abroad, and
the whole range of real estate investment banking offerings,
including structured cash flow financing, equity, mezzanine
and special financing as well as portfolio financing and
portfolio transactions.

This offering is supplemented by WIB’s subsidiaries, which
provide real estate services as well as the design and marketing
of closed-end real estate funds.                                   Bero-Center, Oberhausen
                                                                   Together with the local savings bank, WIB is financing the acquisition
Experience to date shows the enormous potential of a joint         and revitalisation of the shopping centre in Oberhausen town centre,
market and customer approach.                                      which offers around 25,725 sq. m. of retail space and 1,500 parking
                                                                   spaces.


Benefits for the savings banks from cooperation with
Westdeutsche ImmobilienBank

  Access for the savings banks and their customers to WIB’s
  high-quality product offering and bundled expertise
  Expansion of the savings bank organisation’s position in the
  area of real estate financing through consortium finance
  provided by savings banks, WestLB AG and WIB
  Pooled issues, jointly implemented by WIB and WestLB AG,
  offer refinancing benefits
  Inclusion of WIB in real estate joint ventures gives the
  savings banks the opportunity, among other things, to
  leverage a broader network




                                                                                                                                            19
     Yvonne Schoppmeyer
     Senior Relationship Manager at Kreissparkasse Steinfurt




                                         Ms. Schoppmeyer, Kreissparkasse Steinfurt is
                                         financing a long-term care facility together with
                                         Westdeutsche ImmobilienBank (WIB). Can you
                                         tell us about this project?

                                         In 2004, one of our department’s clients, a private investor,
                                         planned to develop a care facility for the elderly with room
                                         for in-patient care for 66 residents in a first-rate city-centre
                                         location. The property is currently under construction.

                                         Our bank had arranged sole financing in 2003 of the first
                                         phase of this investor’s construction project – an assisted
                                         living facility with 28 flats catering for the elderly – which is
                                         located immediately next to the care facility. Both properties
                                         are let for the long term to a professional operator of long-
                                         term care facilities.




                “We will continue to draw on the expertise of our colleagues
                at WIB in the future in developing specialised financing deals
                for our clients, for instance in the case of public private
                partnership (PPP) projects with public-sector institutions.”




20
 Markets                          The Company                            Financial Report                        Names and Locations




You worked directly with WIB’s specialists.                          This brief outline of the situation demonstrates that the market
What kind of support did WIB provide for this                        for properties geared toward seniors, whether assisted living
special-purpose property?                                            facilities or nursing homes, can be described as a growth market.

For one thing, WIB was able to help Kreissparkasse Steinfurt
with its extensive expertise in financing this type of special-      How do you view your bank’s partnership with WIB
purpose property. Later on during negotiations, we were able         going forward?
to jointly provide the financing for the building as a consortium.
                                                                     From our point of view, there are a number of possibilities for
                                                                     close cooperation with WIB.
What is your assessment of the market for properties
for seniors?                                                         Financing special-purpose properties, such as in the case
                                                                     described, is a major one. Another opportunity that has already
Various market analyses indicate that a major shift will continue    arisen is financing properties for our clients which, for example,
in the coming years on a demographic and societal level.             are located outside our lending area and which we cannot
Germany’s overall population will shrink further in the coming       provide alone due to our bank’s credit policies. We will
decades, but the proportion of citizens aged 60 and older will       continue to draw on the expertise of our colleagues at WIB in
rise further.                                                        the future in developing specialised financing deals for our
                                                                     clients, for instance in the case of public private partnership
The majority of people requiring assistance and nursing              (PPP) projects with public-sector institutions.
care are still cared for today by relatives or friends. However,
another trend we have observed is that average family sizes
are continuing to decrease and the proportion of one-person
households, including elderly households, is increasing. In
addition, the mobility required of today’s working population
means that family members requiring care often can no longer
be cared for by their own family.




                                                                                                                                          21
     “To develop tailored financing concepts for
     municipalities, one has to take an all-round view
     of the budget situation.”




                 “Personal contact with customers is necessary for the effective
                 coordination of customer wishes and a bank’s internal and external
                 requirements. This applies to the back office as well.”


                 Frank Figgen
                 Executive Director, Municipal Loans




22
 Markets                         The Company                            Financial Report                      Names and Locations




                      At a glance
                        Financial situation in the public sector
                        Expansion of municipal lending in Germany
                        Sale of municipal products via WestLB
                        Bundling the strengths of WIB, WestLB and the savings banks




All-round view of municipal budgets                                 Cooperation with the savings banks in
                                                                    North-Rhine Westphalia and Brandenburg
The financial situation in the public sector in Germany remains
extremely tight. Against a background of major funding gaps,        Cooperation with the savings banks in North-Rhine Westphalia
a rapid increase in burdens due to social transfers and all-time    and Brandenburg will develop just as closely as with the
lows in investment, tailored financing concepts are required. It    WestLB sales force in this business area. As part of the revised
is not simply a case of covering isolated financial bottlenecks.    cooperation business, WIB and the savings banks will operate
Rather, municipal budgets must be viewed with an all-round          jointly on the market for public sector customers. The division
approach.                                                           of labour will be that the savings banks provide customer
                                                                    support, while WIB handles product design.
The Managing Board of WestLB AG therefore decided mid-
year to expand Westdeutsche ImmobilienBank into the Group           We expect a significant strengthening of the market position
centre of competence for municipal lending in Germany. WIB          of the Sparkassen Finance Group in the future as a result of
focuses on the optimal product design for loans with terms          bundling the respective expertise of WIB, WestLB and the
and service levels that are geared to market requirements.          savings banks. This will apply not only to municipal lending,
                                                                    but also to overall business with municipal authorities.

Efficient integration with WestLB specialists

Municipal loans are arranged by WestLB AG’s public sector
customer support officers. This ensures that the municipal
authorities receive financing that is tailored to their needs
since, in addition to municipal loans, it usually makes sense to
use further financial products to improve the municipal budget
situation.

For example, many municipal authorities obtain expert advice
from WestLB AG’s customer support offers and assistance in
the use of interest derivatives, which can significantly optimise
interest burdens. WestLB AG, as a traditional major financer of
public sector budgets, is particularly innovative in developing
new products for municipal authorities.




                                                                                                                                       23
     “The financing of a public private partnership is an important
     component in a competitive offering.”




                                                      The public sector has an immense
                                                      investment backlog. This situation has
                                                      sparked discussion about the cooperation
                                                      between cities, municipalities and district
                                                      authorities with private-sector service
                                                      providers to a previously unheard-of
                                                      degree. The advisory group “PPP im
                                                      öffentlichen Hochbau” (Public Private
                                                      Partnerships in Public Building
                                                      Construction), which was set up by
                                                      the Federal Ministry of Transport,
                                                      Construction and Housing, plays a major
                                                      role here. A number of federal states
                                                      have since joined this initiative.

                                                      Cooperation between public authorities
                                                      and the private sector, as part of PPP
                                                      projects in the public building construction
                                                      sector tendered throughout Europe,
     Günter Schmitz                                   covers the construction and renovation
     Managing Director                                of buildings, as well as a large number
     Real Estate InvestmentBanking                    of services such as property management,
                                                      facility management, and the outsourcing
                                                      of additional services from cleaning to
                                                      supplying caretakers. The value of these
                                                      contract services generally exceeds the
                                                      construction costs several times over.




24
 Markets                          The Company                                Financial Report                    Names and Locations




At a glance
  Investment backlog among cities and district authorities              Financing of the biggest PPP project in public building
  Cooperation between public authorities/private sector                 construction in Germany
  Pan-European PPP projects in public building construction             Renovation of 49 schools in the Offenbach district
  Westdeutsche ImmobilienBank’s PPP expertise                           Financing of the construction of Gladbeck town hall
  Contracts awarded to WIB proof of success                             Market development of PPP projects from 2005 to 2009
                                                                        Project cooperation HOCHTIEF/WIB




Financing is an important component of a competitive offering,        Development of the PPP market in Germany until 2009
and Westdeutsche ImmobilienBank has proven its expertise in           Total volume (2005 to 2009) around €19.6 billion*
this sector. For example, WIB provided support for a series of
measures for HOCHTIEF Projektentwicklung GmbH, a subsidiary            3.5
of HOCHTIEF AG in Essen, as well as working together with
                                                                       3.0
other construction companies.
                                                                       2.5

                                                                       2.0
Schools in the Offenbach district – financing of the
                                                                       1.5
biggest PPP project in public building construction
in Germany to date                                                     1.0

                                                                       0.5
Acting as an agent, Westdeutsche ImmobilienBank together
                                                                        0
with Helaba (Landesbank Hessen-Thüringen) is financing the
biggest PPP project in public building construction in Germany:                  2005         2006        2007   2008        2009
the renovation of 49 schools in the Offenbach district. The
district’s private partner is HOCHTIEF Projektentwicklung                      Schools
                                                                               Administrative buildings
GmbH, Essen. The syndicated loan is financing renovation                       Hospitals
measures spread over five years. The project company, which             * HOCHTIEF’s own estimate                Amounts in € billion
was founded specifically for this project, will operate the schools
for a period of 15 years. The total contract volume amounts to        Source: HOCHTIEF PPP Solutions
around €410 million. The conclusion of the contract marked
the successful end of the negotiations between the district and
HOCHTIEF, which had been conducted for over a year with               The total contract volume of around €44 million includes both
our support.                                                          investment and the operation of the building for 25 years.

                                                                      Westdeutsche ImmobilienBank offers both interim construction
PPP project: new Gladbeck town hall building                          financing and long-term municipal financing.

Westdeutsche ImmobilienBank is financing the new Gladbeck
town hall building. The existing PCB-contaminated building
material will be professionally removed and disposed of by
HOCHTIEF. A new building will be subsequently built and
linked to the remaining town hall building.




                                                                                                                                        25
     Sandra Arendt
     Member of the Management
     Public Building Construction branch
     HOCHTIEF PPP Solutions GmbH




                                           Ms. Arendt, financing is of central importance for
                                           you as a bidder for PPP projects. What do the public
                                           authorities attach particular importance to?

                                           Public authorities expect a one-stop tender for these projects,
                                           comprising planning, financing, construction and renovation,
                                           as well as operation. In view of this, it is essential for the
                                           financing partner to be involved at an early stage in the
                                           optimisation of a binding offer, and to be a reliable partner
                                           during the concept and submission phases. The time frame
                                           for the projects is always extremely tight. Before a contract
                                           is awarded, an average of six to eight offers are submitted
                                           and an intensive negotiation process takes place.

                                           Often the public authorities make decisions very late in the
                                           process on relevant key financing data such as collateral, the
                                           waiver of defences, fixed interest rates, maturities and the
                                           distribution of risk, in line with the rights they reserved in the
                                           course of the tendering process. This means that the financing
                                           partner has to be extremely flexible in order to offer solutions-
     “Our second PPP project,              driven concepts. For example with the Gladbeck town hall

     the new town hall building
     in Gladbeck, was also a
     success in collaboration
     with WIB.”




26
 Markets                          The Company                            Financial Report                       Names and Locations




project, the option to grant a waiver of defences or to use          Each project has its own particular feature that must be taken
project financing was not selected until the last stage of the       into consideration in special financing solutions, so we cannot
tender, meaning that both methods of financing had to be             rely on standard models.
pursued during the process.
                                                                     The recipe for success is having flexible and innovative
                                                                     partners in the areas of construction/renovation, facility
Which projects did you work on with WIB, and how                     management, and especially in financing.
do you rate the role of the financer with a view to
solutions-driven cooperation?
                                                                     In your opinion, what characterises the market for
Westdeutsche ImmobilienBank supported us successfully with           PPP projects? And how is it set to develop?
the development of a customised tender for the “Renovation
and management of schools in the Offenbach district” pilot           We are expecting tender volumes for 2005 to amount to
project. This required the optimisation of the financing structure   around €2 billion, and that they will increase to €6 billion
with regard to interest rate hedges as well.                         annually in the period up until 2009.* This corresponds to a
                                                                     total volume of €20 billion for that period. This may appear to
Because this was not a standard product, we developed a              be a lot, but the Deutsche Institut für Urbanistik (DIFU – the
highly customised solution, which contributed to our being           German Institute of City Planning) has calculated municipal
able to submit successful and cost-effective tender together         investment requirements totalling €690 billion in the period
with Westdeutsche ImmobilienBank to the Offenbach district.          up to 2009 – of which around €80 billion alone is for schools.
Mr. Rügert and his team were responsible for this. Mr. Rügert        By way of comparison: if the actual amount required for
managed the project in a highly committed and highly flexible        schools were tendered – as it is in the UK, where one in five
manner: when the approval of the responsible bodies at WIB           projects are PPP projects – this results in €16 billion just for
was required following negotiations on a Friday evening, it          schools in the period up to 2009. The tender volume of €20
was there on the Monday morning in time for the submission           billion until 2009 only represents just under 3% of what is
of the tender.                                                       actually needed, as calculated by the DIFU. The question is
                                                                     how much the public authorities can or will put out to tender.
Our second PPP project, the new town hall building in Gladbeck,      We estimate that the need in the school sector, and also for
was another joint success with WIB. A further project that           hospitals, is extremely large. Developments in the administrative
cannot be named yet is about to be awarded, and we are               buildings area will be relatively moderate.
confident that we will reach a deal with the local authorities.




                                                                     * see Graphic page 25


                                                                                                                                         27
     “WIB offers standardis ed
     construction financing at top
     conditions and is a str ong
     partner for the savings banks.”

        Private construction financing:
        a market in flux

        The market for construction financing
        is changing rapidly. The provider side
        is being affected by numerous factors
        including globalisation, the rapid
        expansion of direct banks and product
        specialisation. The immense cost pressure
        and the increasingly shorter technology       “The Private Customers department covers
        cycles, coupled with increasing automation,   a particular segment in the German market
        demand constant process optimisation          for housing construction financing. We focus
        and product standardisation in order to       consciously on customers who need little
        remain competitive. The customer side is      advice. This cost advantage is reflected directly
        also characterised by dramatic change.        in improved terms. The combination of the
        Today, the Internet offers countless          regional proximity of the savings banks and
        opportunities to compare the products         their advisory experience with our process-
        and conditions offered by different           oriented product range, which is supported
                                                      by state-of-the-art IT technology, creates
                                                      excellent opportunities to expand the
                                                      Sparkassen-Finanzgruppe’s market share in
                                                      the retail financing area, despite the strong
                                                      competition from direct banks.”


                                                      Uwe Jablonka
                                                      Managing Director, Private Customers




28
     “In the brokerage business, our customers are the
     cooperation partners who in turn advise the end customer.
     Our primary task is therefore to create the preconditions
     for optimum advice with our products.”


     Guido Schwering
     Director, Private Customer Sales




30
 Markets                         The Company                           Financial Report                        Names and Locations




providers. Loans can be arranged extremely quickly online          customer business from regional banks, insurance companies,
with very little effort. Sociodemographic changes also represent   broker organisations and individual brokers, validate it and
a challenge for financial services providers, as customer          then pass it on in the desired quality to the banks, and hence
preferences also change. In turn, this impacts the products        to WIB. These sales teams often use intelligent Internet solutions
offered.                                                           to enable the efficient implementation of financing wishes.

                                                                   Due to the standardisation and continuous optimisation
Cooperation partners: the mainstay of the private                  of its processes, as well as its refinancing opportunities,
customer business                                                  Westdeutsche ImmobilienBank is able to offer particularly
                                                                   attractive interest conditions. Finding the most favourable
Westdeutsche ImmobilienBank has been operating successfully        terms is of key importance to the customer’s decision.
for years throughout Germany in the area of private construction
financing. Two sales channels are used. One is our cooperation
with around 50 external professional partners, who acquire
private customers on a cross-regional level. These partners are
the mainstay of the private customer business, with a revenue
share of 80 percent. The bank’s cooperation partners include
Internet marketplaces, which offer cost-effective solutions to
private customers with little need for advice and standardisable
financing requirements. However, WIB also works with so-
called “bundling brokers”. These select standardisable private




                                                                                                                                        31
     ImmoBankdirekt: attractive conditions for end                     WIB – the savings banks’ real estate centre of
     customers                                                         competence

     WIB offers construction financing via the Internet                WIB offers savings banks the opportunity of processing
     (www.immobank-direkt.de) and a service centre under the           standardised construction financing as well as further services,
     product name ImmoBankdirekt. The customer can access              such as the loan service, in the form of modular packages.
     information on current construction financing conditions
     online around the clock.                                         This enables the savings banks to profit from WIB’s opportunities
                                                                      as product specialist, while increasing their competitive edge
     ImmoBankdirekt is an independent sales channel of WIB            against local competitors and the direct banks. The modular
     and is directed primarily at interest-sensitive end customers.   offering allows the advisory expertise of the savings banks to be
     Systematic product and process standardisation, lean processing coupled with WIB’s standardised products, as well as providing
     and the absence of a cost-intensive branch structure enables     products for customers who use the Internet and do not require
     rapid processing times and very attractive financing conditions. in-depth advice. This increases customer satisfaction and
     This sales channel mainly involves the service centre, Internet- customer loyalty.
     based systems and automatic selection processes. Continuous
     optimisation of transaction processing guarantees the high       Benefits for saving banks from the cooperation with WIB
     standard.
                                                                         Established customer relationships are maintained
                                                                         New customers gained
                                                                         Complementary offering for online customers
                                                                         Solution for the tough competition with the direct banks
                                                                         and local competitors
                                                                         Rapid processing times and decisions
                                                                         Long-term fixed interest rates of up to 20 years
                                                                         Further opportunities for portfolio management and
                                                                         refinancing




32
 Markets                         The Company                       Financial Report                          Names and Locations




                      At a glance
                        Changes in the market for construction financing
                        Cooperation partner for private customer business
                        ImmoBankdirekt as a sales channel
                        Expansion of savings bank offering
                        NORD/LB as a partner in the construction financing business




NORD/LB: WIB’s cooperation partner

In 2004, we gained a further important partner for this
offering from the Sparkassen Finance Group. ImmoBankdirekt
cooperates with NORD/LB Norddeutsche Landesbank
Girozentrale in standardised construction financing. NORD/LB
brokers financing for customers who prefer direct bank terms
and conditions and online processing for ImmoBankdirekt.

Every customer has the choice of obtaining their real estate
financing as a result of face-to-face advice in the NORD/LB real
estate centres, or online via ImmoBankdirekt. The customer                            Mittelbrandenburgische Sparkasse
can gain online access via the Internet and by telephone.                             in Potsdam brokered the financing
                                                                                      of this property for WIB.
As part of this cooperation, NORD/LB uses the benefits
generated by the cooperation with ImmoBankdirekt: it
strengthens customer loyalty, facilitates new customer
acquisition and at the same time enables cross-selling
effects.




                                                                                                                                   33
     “WIB adapts
     promptly to
     rapidly-changing
     investor preferences
     by offering tailored
     products.”



34
 Markets                         The Company                        Financial Report                           Names and Locations




                      At a glance
                        Change in refinancing conditions
                        Market debut for jumbo mortgage Pfandbrief
                        Pfandbrief as main refinancing instrument
                        New investor groups
                        Flexible adaptation to investor preferences
                        Stepping up credit customer support




Capital market-oriented refinancing strategy                     Income-oriented Treasury activities

Westdeutsche ImmobilienBank has positioned itself well           In addition to its successful interest rate book management,
with regard to the changes in refinancing conditions after the   Treasury will step up support for WIB credit customers in
abolition of the Anstaltslast (Maintenance Obligation) and       2005. Customers will be provided with advice in the area
Gewährträgerhaftung (Guarantee Obligation) by broadening         of interest rate and currency management with the aim of
its refinancing base. In addition to private placements, the     continuously improving their own refinancing conditions, so
traditional large buyer group, new investor groups have been     as to increase the return on their real estate investments.
opened up – particularly through the successful placement of
initial benchmark bonds and the rapidly growing placement of
structured bonds. The investor, as the customer, takes first     Overall allocation of the jumbo mortgage Pfandbriefe
place in liabilities management.                                 by region (in € million)

                                                                    Germany                                               542.75
The Pfandbrief will form the main refinancing instrument
in the coming years. Unsecured refinancing requirements             Austria                      107.0
will tend to decline, and will be solved cost-efficiently by        Netherlands                75.0
securitisation measures or Group-wide solutions.                    Norway                    65.0
                                                                    Luxembourg                62.5
                                                                    China                     60.0
Successful debut on the jumbo market                                Finland              27.9
                                                                    Denmark            18.0
Last year, WIB made its successful debut on the market for
                                                                    United Kingdom     17.5
jumbo mortgage Pfandbriefe. At €1 billion, purchase orders
                                                                    Switzerland        15.0
for the first five-year jumbo mortgage were for more than
double the volume. The foreign placement ratio was almost           Spain              8.0
50 percent, and the share of institutional investors was very       Sweden             7.5
high at 97 percent.

16 percent of the bonds were placed with central banks. The
bond increased in value by more than five basis points against   Overall allocation of the jumbo mortgage Pfandbriefe
the swap curve in the first three months following the issue.    by investor type (in € million)

                                                                    Banks                                                 400.5
                                                                    Funds                                               373.65
                                                                    Central banks                      125.0
                                                                    Insurance                   64.0
                                                                    Retail               28.0
                                                                    Other              15.0


                                                                                                                                     35
                     Markets                              The Company       Financial Report                      Names and Locations




“Everything we do is based on customer
orientation, reliabi lity and expertise.”

                    “WIB has highly-qualified, expert and motivated
                    employees, with whom it can successfully meet
                    the challenges of the future.”




                    “Our staff’s experience, expertise and              A year of dramatic changes is over – another year that
                    commitment are the Bank’s key strengths             demanded a lot from each and every one of us. Not only did
                    in a competitive environment. We would              we have to meet our daily challenges, we also had to address
                    like to thank all our employees for their           and deal with these changes.
                    achievements and dedication. We would
                    also like to thank both the Staff Council           The integration and positioning of WIB as the centre of
                    and the Works Councils for their close              competence for real estate financing within the WestLB Group
                    and constructive cooperation.”                      was completed in 2004. The close links with WestLB AG and
                                                                        continuous interchange increase the business opportunities
                    Klaus Neuhaus                                       for both sides and allow them to exploit market potential.
                    Member of the Managing Board
                                                                        At the same time, the situation on the real estate markets
                                                                        remains difficult and competition is still tough. However, the
                                                                        adjustments we made in the past financial year have set the
                                                                        course for the future. Thus every change offers opportunities
                                                                        and new possibilities.




                                                                                                                                         37
                          At a glance
                            WIB as part of the WestLB Group
                            New business model
                            Personnel development – an important component of personnel policy
                            Customer- and success-oriented TeamBanking




     New business model:                                               Personnel development:
     Well equipped for the future                                      Focused, needs driven development

     To improve our competitive edge, we have expanded our             We lay great emphasis on personal and professional development
     business model and adapted the Bank to altered circumstances.     to secure our position for the future and to further expand on it.
     Each and every one of us is called on to play a part in filling   For example, a broad range of specialist topics were discussed
     this business model with life. The foundation is already in       in seminars and explored in interdepartmental project groups.
     place: our vast product expertise, our extensive real estate      Personnel development is an important component of our
     knowledge and our excellent positioning, particularly on the      personnel policy, as the expertise and specialist knowledge
     international real estate markets, provide good access to our     of each individual is our guarantee for the future. We will also
     target customers. We must build on this. We are broadening our    be intensifying cooperation with WestLB AG in this area.
     product range together with WestLB AG and in cooperation          Personnel exchanges between the two institutes ensure
     with the savings banks, thus opening up new sales channels        knowledge transfer and network formation. In addition, WIB
     and new domestic business opportunities, particularly with        will be included in WestLB’s mentoring programme. Here,
     middle-market customers and private clients.                      too, this will ensure an ongoing exchange by having mentors
                                                                       advise mentees from the other institution in each case.



                                                                       Providing new answers together

                                                                       WIB’s corporate culture identifies both with the Bank itself
                                                                       and with the WestLB Group – both inwardly and outwardly in
                                                                       the actions of each and every one of us. Customer orientation,
                                                                       expertise and reliability are the most important values that our
                                                                       employees convey. In addition, we are united by a common
                                                                       guiding principle: that of taking responsibility together, finding
                                                                       solutions together, providing new answers together.

                                                                       These are fundamental aspects of our work for the customer’s
                                                                       benefit. As the centre of competence for real estate financing
                                                                       in the WestLB Group, we will continue to build on our strengths
                                                                       and core competencies, generating synergy effects and
                                                                       optimising processes. Cooperation within the Group provides
                                                                       new impetus for a successful future.




38
Markets   The Company       Financial Report                     Names and Locations




                        One team. One word. TeamBanking.

                        Goals-driven cooperation in solving complex tasks, prompt
                        and efficient project work thanks to direct communication, an
                        all-round approach based on cross-departmental teamwork, as
                        well as trust-based cooperation with WestLB specialists. That
                        is TeamBanking from WIB’s perspective.

                        Our confidence in ourselves, based on our expertise and
                        experience, is the foundation for the Bank’s continued growth
                        and for our customers’ loyalty.




                        Bronze sculpture
                        by Professor Stephan Balkenhol
                        in front of the Westdeutsche
                        ImmobilienBank building in Mainz




                                                                                        39
Selected Projects
in 2004
   “In order for a property to stand the test of time, it must
   be not only architecturally outstanding. As an asset, it must
   also be optimally positioned in terms of the market and the
   return generated, which makes high demands of its financing.
   Meeting these requirements is the benchmark for our
   commitments in Germany and abroad.”




                            Battery Park City Site 19 B
                            WIB is a consortium member for a letter of credit issued
                            by Helaba New York as lead manager amounting to
                            US$ 111,230 thousand. This luxury apartment building with
                            268 residential units on 24 floors, a total of 24,500 sq. m. of
                            residential space, 500 sq. m. of retail space, and 58 underground
                            parking spaces was built in accordance with Green Guidelines.
                            It is situated in a popular residential area in Battery Park City
                            on the Hudson River.
Shopping centre Avenida M40,
Leganés/Madrid
WIB is the sole underwriter and
agent. Total financing amounts to
€68.25 million. Leasable space totals
48,320 sq. m. on three levels, and
2,440 parking spaces are also
available. The centre was opened
in April 2004.




                                        Montigny le Bretonneux
                                        WIB is financing the purchase of a number of retail properties for
                                        CBRE Investors France’s newly launched “Commerces Rendement”
                                        real estate fund. This property comprises 10,885 sq. m. of leasable
                                        space and around 500 parking spaces.
                                                 Celine, Paris
                                                 Purchase financing provided by WIB for
                                                 a special fund managed by Commerz Grundbesitz-
                                                 Spezialfondsgesellschaft in a first-class location in
                                                 the centre of Paris. A modernised office building
                                                 with 2,843 sq. m. of leasable space.




Intercontinental Hotel and Residences
500 Atlantic Avenue in Boston (Massachusetts).
The loan was underwritten jointly by
Westdeutsche ImmobilienBank and Hypo Real
Estate. The construction financing loan
amounts to US$ 255 million. The 20-storey
mixed-use building being constructed directly
on the waterfront comprises 424 hotel rooms,
130 luxury apartments and three floors of
underground parking spaces. The project
development is being managed by Intell
Management and Investment Corporation.
City-Atrium, Brussels
WIB is the lead manager for the purchase financing and financing
of leasehold improvements to this office building, which offers
47,784 sq. m. of leasable space and 297 parking spaces.




                        “Since its foundation, Westdeutsche ImmobilienBank has
                        expanded its activities in the key markets in Europe and
                        North America. The increasing international presence
                        of WIB projects demonstrates its high profile and global
                        experience.”
                                         Grafenberg office park
                                         Düsseldorf




WIB is the lead manager for portfolio
financing totalling €140 million for
office buildings in Germany granted to
Deka Immobilien Investment GmbH’s
open-ended real estate fund.




                                                                Fleethof
                                                                Hamburg




                                         Office World
                                         Stuttgart-Weilimdorf
                                              Moorhouse, London
                                              WIB and WestLB London are involved in the financing
                                              of this office property, completed at the end of 2004, in
                                              a prime location in the heart of the City of London. The
                                              building comprises 319,272 sq. ft. (around 29,500 sq. m.)
                                              on 16 storeys. The ground floor and a lower ground floor
                                              are earmarked for retail space. Total financing under
                                              the lead management of Hypo Real Estate amounts to
                                              £120 million. The property was developed by Hammerson
                                              plc, one of the largest real estate companies in the UK,
                                              and Pearl Assurance, a major UK fund manager.




Jade Beach I
WIB is involved in financing the
construction of a residential complex
comprising 248 residential units in Sunny
Isles Beach, Miami-Dade County, Florida.
Consortium financing totals US$164 million.
HSBC Securities (USA) Inc. is the sole lead
arranger.
     Combined Management Report

                         Focus on Core Competencies as a Centre of Competence within
                         the WestLB Group

                         In 2004, the Managing Board systematically drove forward and completed the
                         process of integration into the WestLB Group. Westdeutsche ImmobilienBank (WIB)
                         is the centre of competence for real estate financing and therefore a core business
                         area within the WestLB Group. In the course of this bundling of activities, the Bank
                         was able to extend its business activities as a highly competent partner for real
                         estate investments.

                         WIB’s new business model is based on three pillars: real estate financing in Germany
                         and abroad, joint business with the savings banks and Pfandbrief issuance.

                         WIB is closely integrated into the Group’s management and monitoring systems and
                         into its sales and product strategy. These tight links optimally combine the strengths
                         of WestLB AG and WIB. By bundling their strengths, they can partner with customers
                         to provide a wide range of tailored solutions and thereby increase business potential.
                         Customer requirements can be satisfied as fully as possible by deploying and
                         effectively combining the relevant specialists at the two companies. Furthermore,
                         the processes for taking decisions on loans have been optimised and customers can
                         therefore continue to benefit from WIB’s proven strengths, and particularly its fast
                         decision-making channels.

                         The new business model involves more intensive cooperation with the savings banks,
                         particularly in North Rhine-Westphalia and Brandenburg. The basic idea behind this
                         is to turn WIB into the mortgage bank within the savings banks group. This model
                         emphasises the savings banks’ sales expertise and proximity to customers in their
                         local markets, while WIB, as a centre of competence and recognised player in the
                         international financial markets, provides the savings banks and their middle-market
                         corporate customers with attractive products and services. These products primarily
                         consist of commercial loans in Germany and abroad, real estate joint ventures and
                         structured financing solutions as part of real estate investment banking. Numerous
                         joint financing activities are proof of the positive cooperation to date. Cooperation
                         also offers advantages in the area of residential financing. In ImmoBankdirekt, the
                         Bank has a high-performance, multiclient-enabled online banking system complete
                         with loan servicing. WIB can either act as a broker or process the loans itself, thus
                         achieving economies of scale. This means that WIB can support the savings banks
                         in their increasing competition with the direct banks. Many savings banks are already
                         taking part in the scheme, and at the end of the year, another important cooperation
                         partner in the shape of NordLB from the savings bank finance group was acquired.

                         WIB is a recognised Pfandbrief issuer in the market and in the past fiscal year
                         continued to broaden its investor base both nationally and internationally by
                         successfully placing its first jumbo Pfandbrief. It is well prepared for the
                         requirements of the new Pfandbriefgesetz (Pfandbrief Act). Pool issues with the
                         savings banks can be used to counter the increased cost of refinancing following
                         the abolition of the Anstaltslast (Maintenance Obligation) and Gewährträgerhaftung
                         (Guarantee Obligation).




40
Financial Report            Management Report              Balance Sheet              P&L   Notes   Auditor’s Report




In addition to its strategic reorientation, WIB also paved the way for its future
earnings power and growth at the level of its balance sheet in 2004. An injection of
core capital from WestLB AG substantially strengthened its equity base. WIB also
managed to significantly increase its operating result. The Bank measured the risks
relating to both its lending and its investment business conservatively. 2004 thus
saw the foundations laid for successful development within a strong group.

Market Trend: Continued Weakness in Germany and Europe

Although exports did well, the continued lack of domestic demand put the brakes
on Germany’s economic growth in 2004. As a result, real estate markets in Germany
and several European countries experienced continued weakness.

Vacancy rates in the nine largest German office markets rose again, by around 15%
on average. However, in the fourth quarter, the rise in vacancy rates eased and there
was also a decline in sites under construction. Average and prime rents remained
under pressure and softened in many cases, although this varied depending on the
location and quality of the properties concerned. In some cases, rents for high-
quality modern office space in good locations stabilised. The expansion in retail
space remains strong despite subdued overall expectations. This trend is being
boosted by the construction of new shopping centres in particular. Rents mainly
stagnated. Lessors in low footfall areas and standalone locations can often only
avoid relatively long vacancies by offering rent concessions. Overall, the transaction
volume was almost unchanged year-on-year at the five main German investment
locations. However, open-ended funds – the main buyer group in Germany, usually
accounting for more than a third of total sales – invested considerably less and at
the same time were more active abroad. This was offset by investment by other
groups of investors, such as private investors, insurance companies and special funds.

The residential financing market was characterised by aggressive pricing on the
part of new competitors. In particular, foreign direct banks and their subsidiaries
achieved appreciable sales growth.

Europe also failed to show signs of a significant economic recovery. In the main
European office markets, rents continued their downward trend but tended to
stabilise. Vacancy rates ceased to rise in the final quarter but in some cases were
still in double figures, ranging from around 6.5% in Paris, Rome and Vienna to
16% in Frankfurt and 18% in Stockholm. In Paris and Lisbon, vacancy rates started
to drop back again towards the end of the year.

Bucking the European trend, rents in London’s office market rose sharply. In
particular, the European finance industry is consolidating its operations in favour of
London. The UK’s residential real estate market has been characterised by a sharp
rise in prices in recent years, as a result of which growth is now expected to fall.




                                                                                                                       41
     In the USA, the economic upturn driven by domestic demand continued in 2004,
     although momentum eased towards the end of the year. The real estate markets
     were stable, with investment demand from both American and European institutional
     investors rising and prices remaining high. Vacancy rates in the US office market
     fell in the year under review. There were signs of greater competitive pressure
     affecting margins and risks.

     Lending Business: Focus on Return Target

     After new business reached a record €4.7 billion in 2003, loan commitments
     amounted to €3.5 billion in the year under review. Demand from WIB’s main
     customer groups, such as open-ended real estate funds, was noticeably more
     muted. However, investor business yielded an average return of 19.8%, well above
     the 15% target.

     At 45% (previous year: 42%), the International Investors unit continued to generate
     the largest and at the same time most profitable share of new business. This WIB
     unit operates mainly in the target countries of North America, the United Kingdom,
     France, Spain and the Benelux countries and in selected locations in central Europe.
     A particularly encouraging trend was recorded by the representative office in
     New York, which almost doubled its volume of new business.

     In the national lending business, which accounted for 35% of new business as in
     the previous year, the reduction in investments by open-ended real estate funds
     was particularly noticeable in the year under review. However, the return increased
     encouragingly, thus further closing the gap to the performance delivered by new
     business abroad.

     After the volume of new business doubled in 2003, residential financing was affected
     by aggressive pricing on the part of new competitors in 2004. WIB put achieving its
     margin target before its sales target in 2004. The Private Customers department
     sells both to end customers directly via WIB’s website and via cooperation partners.
     These are banks, savings banks, financial service providers and companies that offer
     residential financing over the Internet. With a 20% share (previous year: 23%) of
     the Bank’s total new business, the Private Customers department contributes to risk
     diversification with its small-volume, low-risk transactions. As of 31 December 2004,
     this business area accounted for 14.4% of total receivables from customers
     (previous year: 12.2%).

     The percentages accounted for by properties abroad and in Germany were more
     evenly matched. 46% (previous year: 61%) of new business was accounted for by
     loans for properties abroad and 54% (previous year: 39%) by loans for properties
     in Germany. Commercial financing represented 72% (previous year: 77%) of new
     business, and residential financing 28% (previous year: 23%). Numerous residential
     properties were financed in the USA in particular. The bulk of the commercial
     properties are used as offices, followed by industrial estates, shopping centres,
     multi-purpose buildings and public-sector facilities.




42
Financial Report            Management Report               Balance Sheet            P&L   Notes   Auditor’s Report




Joint Venture Finance: Success in Leasing Properties

In its real estate joint ventures, the Bank offers a financing product and provides
proportionate equity together with selected partners. In addition to the selection of
properties, mainly consisting of German office buildings and retail properties, WIB’s
key criterion is the appropriate distribution of opportunities/risk between the Bank
and the other parties involved in the project.

WIB’s joint venture finance activities continued to be a success in 2004. Although
German rental markets were characterised by low demand and a growing amount
of vacant space, all projects made progress in letting, particularly in the second half
of 2004. As of the balance sheet date, the Bank was managing 17 projects (previous
year: 18) with an investment volume of around €1.1 billion (WIB’s share: around
€325 million).

Real Estate Investment Banking: A Growing Contribution to Earnings

In 2004, several Public Private Partnership (PPP) projects were successfully completed
and others begun in cooperation with large construction companies. Among other
things, WIB was involved in Germany’s largest PPP project to date, covering the
maintenance of schools in the Offenbach district. An agreement concluded for
structuring a large commercial real estate portfolio made a substantial contribution
to earnings. Further earnings were generated within the banking Group through
cross selling.

The Real Estate Investment Banking department participated in bidding consortia
for several major transactions in Germany in 2004 as large residential real estate
portfolios and companies were sold off. The department’s activities also extend to
the marketing and brokerage of real estate portfolios and the analysis of complex
financing structures.

New Business Area: Municipal Lending in Germany

In 2004, WIB extended its business activities to include municipal lending in
Germany and in doing so took over portfolios totalling €1.7 billion from WestLB AG
by the end of the year. As well as traditional municipal loans, the product range
includes cooperative ventures and loans awarded by purchasing borrowers’ notes.
Customer service leverages the existing access channels to public sector customers
across Germany in cooperation with WestLB AG.

The WIB Group: Restructuring of Equity Investments

In 2004, WIB continued to consolidate its investment portfolio, a process begun in
the previous year. In particular, the real estate services provided by its subsidiaries
were bundled within Assetis GmbH in the year under review as planned. With this
company, the WIB Group has a centre of competence for real estate services that
supports and supplements the Bank’s real estate investment activities. Assetis was
fully consolidated in the consolidated financial statements as of 31 December 2004.




                                                                                                                      43
     The WIB Group comprises 13 (previous year: 10) strategic subsidiaries that were
     fully consolidated and 29 (previous year: 19) companies that were included in
     the consolidated financial statements as associates. Ahead of adopting the IASs
     (International Accounting Standards), goodwill existing as of 1 January 2004 and
     arising on first-time consolidation was deducted from group reserves.

     As part of its operating activities, the Bank is also invested in a further 42 (previous
     year: 47) companies. These are property and project companies belonging to the
     Bank and its subsidiaries, which are active in the fund segment and the joint venture
     business, for example. In the course of restructuring its shareholdings, the Bank
     withdrew from active new project development business.

     The WIB Group’s business activities continue to be dominated by the Bank.
     WIB accounts for around 98.1% of the Group’s consolidated total assets, and
     the subsidiaries included in the consolidated financial statements for 1.9%.

     Shareholdings: Successful in Services and Fund Business

     In the first year of the merger, Assetis had already successfully proven its consulting
     and management skills by analysing and taking over large real estate holdings.
     It generated sales of €30.0 million. Assetis manages a portfolio of 140 (previous
     year: 147) properties with a total rental area of around 1.4 million square metres
     and a market value of around €2.0 billion on behalf of fund companies, institutional
     and private investors. In 2004, it took over the management of a large real estate
     portfolio comprising 153 properties and useable space of 1.0 million square metres.

     Due to the caution brought about by the economic climate, the project management
     order book in the fiscal year was dominated by support assignments for relatively
     small construction projects; lead contractor agreements were largely non-existent.
     Overall however, Assetis was able to hold its ground amid difficult conditions.
     Individual declines in centre management orders were offset by Assetis taking over
     management assignments from larger real estate portfolios.

     Allvaris GmbH generated sales of €4.1 million (previous year: €9.3 million). Sales
     fell due to the fact that business areas were transferred from Allvaris to Assetis as
     part of the restructuring of the Westdeutsche ImmobilienHolding (WIH) Group.

     In the past fiscal year, WestGkA Gesellschaft für kommunale Anlagen mbH generated
     sales of €10.0 million (previous year: €24.1 million). The company acts as a property
     and investment partner for public and private customers, offering services in the
     areas of municipal development, land improvement and property development as
     well as construction management and development. WestGkA also manages four
     projects still in its portfolio.




44
 Financial Report            Management Report              Balance Sheet            P&L   Notes   Auditor’s Report




As in previous years, WestProject & Consult Gesellschaft für Projektentwicklung und
Consulting mbH, whose activities are focused solely on winding up its portfolio,
generated an insignificant amount of sales revenue. It manages three projects still
in its portfolio.

WestFonds Immobilien-Anlagegesellschaft mbH manages 46 (previous year: 43)
fund companies which it launched and are still in the market, with a volume of
around €1.8 billion (previous year: €1.7 billion). WestFonds Solar 1, with an investment
volume of around €21.8 million, was newly designed and launched in the past fiscal
year. This fund is a new product line for renewable energies. WestFonds 7, with an
office property in Hanover leased under a long-term agreement and an investment
volume of around €32 million, was also launched. In the year under review, the volume
of fund equity placed was increased to €32.2 million (previous year: €25.6 million).

Profit and Loss Account: Operating Result Doubled, Overall Results
Impacted by High Risk Provisions

There was a gratifying trend in net interest income in 2004. It rose to €115.5 million
within the Bank (previous year: €71.6 million), and to €108.5 million within the
Group (previous year: €64 million). The increase in the portfolios and therefore in
the volume of interest-bearing investments had an impact. In addition, the Treasury
contribution to net interest income improved substantially.

The companies Assetis and Aurelis KG produced positive investment results.

Commission received developed in line with new business and stood at €14.4 million
within the Group and €12.4 million within the Bank (previous year: €13.7 million
within the Bank and the Group). Commission paid of €12.5 million (previous year:
€11.9 million) consisted largely of brokerage fees paid to cooperation partners
in the Private Customers department. These one-off costs will be offset by higher
future interest income.

Within the Bank, other operating income of €5.4 million includes reversed provisions
and income from services rendered to subsidiaries. Within the Group, sales by and
changes in the assets of the subsidiaries included in consolidation are reported
under the other operating income of €88.4 million. The year-on-year increase
is attributable mainly to the first-time consolidation of Assetis. Other operating
expenses within the Group increased in line with this.

Administrative expenses amounted to €92.6 million within the Group (previous
year: €78.7 million) and €65.3 million (previous year: €60.3 million) within the
Bank. Staff expenses within the Bank fell in line with the slight reduction in the
number of employees. Non-staff expenses rose by around 14% to €29.5 million
due, among other factors, to increased expenses in connection with the bundling
of portfolios and the transfer to WIB of employees. The increase in staff expenses
including social security contributions within the Group is the result of the full
consolidation of Assetis.




                                                                                                                      45
     In 2004, the residual book value from the partial takeover of DIHB Industrie- und
     Handelsbeteiligungen GmbH was written down in full (€7.7 million). As a result,
     amortisation, depreciation and write-downs on intangible and tangible assets rose
     year-on-year to €14.1 million.

     At €49.2 million, the operating profit before risk provisions was considerably higher
     than that for the previous year (€16.3 million). As a result, the Bank’s cost-income
     ratio improved, falling from 78.2% to 61.9%. The consolidated operating profit
     before risk provisions increased to €50.1 million (previous year: €7.3 million).

     The Bank adopted conservative measurement criteria for its loan portfolio and in
     particular gave appropriate consideration to the continued difficult conditions in
     Germany’s real estate markets. With regards to its shareholdings, the book value
     of WIH was reduced by €34.9 million, reflecting the restructuring of the WIH
     Group. Overall, extensive provision was made for all discernable risks within the
     Bank and the Group.

     With measurement losses on loans of €106.0 million (previous year: loss of
     €97.7 million including an appropriation to the reserves), the Bank is adopting a
     cautious approach to risk provisioning. These risks relate exclusively to commitments
     in Germany, with a large proportion in eastern Germany.

     Due to the reversal of a write-down, the International Investors unit posted a positive
     result after risk provisions of €3.2 million. The high quality of the international
     portfolio is reflected in its good rating structure and strong regional diversification.
     Regular stress tests are carried out as part of the credit risk control activities. In
     these tests, the international portfolio compellingly proved its stability, even in the
     case of sharp negative changes in market parameters.

     In the year under review, the Bank took over expenses of €48.6 million from WIH.
     These mainly include the results of the subsidiaries, book value adjustments for
     WestFonds and ITCM KG, and expenses in connection with the planned partial sale
     of Assetis. WestFonds’s result was impacted by provisions for two portfolio properties,
     while the results of WP&C and WestGkA were impacted by project development
     charges. These take account of changed rents, property values and marketing
     delays as a result of market developments.

     The Bank’s operating loss after risk provisions amounted to €132.4 million (previous
     year: operating profit of €3.9 million). After adjustment for income taxes totalling
     €3.3 million, the net loss for the period amounted to €135.7 million (previous year:
     net income of €2.7 million). This was covered by transfers from capital reserves of
     €90.6 million and from other reserves of €45.1 million.

     An operating loss of €95.2 million (previous year: operating profit of €3.1 million)
     after risk provisions and before income taxes was reported at Group level. After
     deduction of income taxes of €0.2 million, the consolidated net loss therefore
     amounted to €95.4 million (previous year: net income of €5.0 million). After the
     transfers from the Bank’s capital and other reserves, net retained profits of €42.6
     million remain at Group level.




46
Financial Report            Management Report              Balance Sheet               P&L   Notes   Auditor’s Report




Total Assets: Further Increase in Receivables from Customers

As of 31 December 2004, the Bank’s total assets had increased year-on-year by
€1.5 billion to €21.3 billion. The Group’s total assets rose in line with this to
€21.5 billion.

Refinancing and Equity: First Jumbo Pfandbrief Successfully Placed

At the balance sheet date, WIB had raised funds totalling €15.6 billion (previous
year: €12 billion) by issuing Pfandbriefe, bearer debt securities, borrowers’ note
loans and registered securities. Gross sales of these issues in 2004 amounted to
€6.2 billion (previous year: €5.8 billion). At the end of the year, loan refinancing
via borrowings from banks amounted to €5.9 billion, including €0.7 billion of
registered securities (previous year: €8.4 billion).

Additional long-term refinancing was raised in order to counter the expected
deterioration in the refinancing situation following the abolition of the Anstaltslast
and Gewährträgerhaftung in July 2005. The placement of the first benchmark
products in the market for unsecured securities and jumbo mortgage Pfandbriefe
also significantly expanded the Bank’s investor base, especially in countries outside
Germany.

In 2004, the rating agency Standard & Poor’s (S&P) awarded WIB a bank rating
of “A+/A-1” and granted its highest credit rating of “AAA” to WIB’s public sector
Pfandbriefe and mortgage Pfandbriefe.

After adjustment for the €300 million injection of equity, the subordinated liabilities
and profit participation capital, the Bank’s reported equity amounted to €1,383 million
(previous year: €1,219 million). Due to the improvement in equity, Tier I capital
increased to 7.3% after adjustment for the net loss for the period. This lays the
foundations for a good capital market rating following the abolition of the
Gewährträgerhaftung in July 2005.

Due to the improvement in its capital resources, the Bank postponed the securitisation
of loan portfolios scheduled for 2004. It has securitisation plans in the future, as
part of a loan conduit programme and for risk and liquidity management purposes.

Employees: Moderate, Targeted Consolidation

The WIB Group employed 748 people at the end of 2004 (previous year: 770). The
headcount at WIH and its equity investments stood at 288 people (previous year:
294). The Bank employed 460 staff (previous year: 476). This moderate reduction
was achieved though natural turnover, particularly as a result of employees taking
retirement. 207 of the Bank’s staff were employed in Mainz and 209 in Münster.
The average age was 40 years. 47% of the staff were women and 53% were men.

The Managing Board would like to thank all employees for their hard work during
the past fiscal year.




                                                                                                                        47
     Locations: Proven Sales Teams in Germany and Abroad

     In addition to its headquarters in Mainz, WIB is represented at a total of 10 locations
     in Germany and abroad. The Bank continues to serve its customers in Germany via
     four branch offices (Hamburg, Düsseldorf, Mainz and Munich), two processing centres
     (Mainz and Münster) and the Funds Trustee Unit (Mannheim). Residential business
     and real estate joint ventures are handled from Münster. European and international
     customers are served by the Bank’s four foreign locations (its branch in London as
     well as representative offices in Madrid, New York and Paris) and by its headquarters
     in Mainz. In addition, WestLB AG’s existing locations abroad are increasingly being
     leveraged for joint sales activities.

     The service companies of the WIB Group, WIH, Assetis, Allvaris and WestFonds are
     domiciled in Düsseldorf.

     Anstaltslast and Gewährträgerhaftung: A Change in the Legal
     Environment

     On 17 July 2001, the European Commission and the Federal German Government
     reached an understanding on the Anstaltslast (Maintenance Obligation) and
     Gewährträgerhaftung (Guarantee Obligation). A transitional period of four years
     was agreed for the implementation of the agreed measures. There will be no change
     to the basis of liability for existing refinancing by public banks; liabilities entered
     into during the transitional period will be covered by the principle of legitimate
     expectations until the end of 2015. In 2002, the State government of the Rhineland-
     Palatinate incorporated the relevant provisions in the State’s legislation, thus
     ensuring legal and planning certainty for WIB.

     WestLB AG ensures that WIB can meet its obligations by acting as the latter’s
     statutory guarantor as well as by issuing a letter of comfort.

     Risk Report

     Integrated End-to-End Controls and Risk Culture
     Risk management is an integral part of the Bank’s end-to-end strategic and
     operational risk control processes and is tightly integrated with the WestLB Group’s
     risk control and monitoring activities. In this context, WIB pursues its goal of
     generating an appropriate return for shareholders on the basis of conscious risk
     tolerance levels and in line with its risk-bearing capacity. With this goal in mind,
     WIB controls and monitors its risks extensively using risk management principles
     and rules as well as through the design of the Group’s organisational structures
     and processes.

     Organisational Separation of Functions and Risk Categories
     Risk monitoring is functionally and organisationally independent of and separate
     from risk assessment.




48
 Financial Report             Management Report              Balance Sheet              P&L             Notes            Auditor’s Report




Risk Management at WIB

Risk categories                                                             Departments responsible

                                       Risk Assessment                                              Risk Monitoring

Default Risks
– Credit and property risks            Credit departments                                           Risk Management
                                                                                                    (Individual and portfolio exposures)
– Investment and project risks         Strategic and Operational Investments (equity investments)   Investee Management/Risk Management
– Country and counterparty risks       Credit departments/Treasury                                  Risk Management
Market/liquidity Risks                 Treasury                                                     Risk Control/Risk Management
Operational Risks
– Legal risks                          Legal and Tax                                                Risk Management
– Personnel risks                      Personnel                                                    Risk Management
– Other operating risks                Organisation/IT and Administration                           Risk Management
Business Risks                         Departments and investees                                    Financial Control/Risk Management



The Risk Management department operates independently of the other departments
and reports directly to the responsible Managing Board members and to the WIB
Group’s Group Risk Committee.

The independent Internal Audit department checks workflows and operations, Risk
Management and Financial Control and the internal control system, and reports
directly on its findings to the Managing Board.

WIB is embedded strategically and operationally in the WestLB Group’s risk
management system for all of the categories and types of risk discussed.

Default Risk

The main default risks to which WIB is exposed are credit and investment risks;
counterparty and country risks are of minor importance. As the unit responsible for
risk monitoring, the Risk Management department performs the following tasks:

  methodological expertise and standards setting for the lending business in close
  consultation with WestLB AG’s Credit Risk Management unit,
  implementation of regulatory requirements,
  management of selected individual risks through corresponding votes and
  analysis of loan portfolios.

Lending Business

The rules governing the Bank’s lending business are laid down in its credit manual.
In addition to assigning responsibilities, this sets out the general and specific legal
framework, business policy regulations drawn up by the Bank’s executive bodies in
the form of a lending policy, and a lending strategy, which is to be reviewed on an
annual and as-needed basis. Since 1 October 2004, WIB has been active in municipal
lending in Germany as well as in real estate financing as part of WestLB AG’s new
credit risk strategy. Its joint lending business with the savings banks, which got
under way in 2004, is also of considerable strategic importance.




                                                                                                                                            49
     In the year under review, the Bank largely completed the measures affecting its
     organisational structures and workflows, which are being carried out with the aim
     of implementing the Mindestanforderungen an das Kreditgeschäft (MaK – Minimum
     Requirements for Banking Activities by Credit Institutions). As planned, the Bank
     will implement the necessary changes in the IT department by 31 December 2005.

     Individual Transaction Level

     The front office aspects of the lending business are handled by the Bank’s domestic
     and foreign branch offices. In addition, the loan administration units responsible for
     real estate business with investors, companies and for private customer financing,
     which act as the back office, as well as the Risk Management department, the
     Managing Board and the Credit Committee, which is the highest decision-making
     body, are also involved in awarding loans. All decision-making documents are
     submitted, along with the front-office and back-office votes and an opinion issued
     by the Risk Management department, to the relevant decision making body at WIB.
     Loan applications that are the responsibility of WIB’s Credit Committee are forwarded
     to it via WestLB AG’s Credit Committee so as to ensure uniform credit risk control
     throughout the WestLB Group. Loan monitoring documents are drawn up by the
     back office once a year in line with predefined criteria, supplemented by an opinion
     issued by the Loan management department where required by the level of authority
     at which a decision is to be taken, and approved by the relevant decision making
     authority. Internal ratings and collateral valuation processes, and in particular
     property rating and property appraisal, are especially important for monitoring and
     control in the lending business.

     In 2004, both commercial property ratings and the rating process for corporate
     customers and private investors were enhanced in accordance with the requirements
     of Basel II. The previous process, with rating categories from 1 to 6, was replaced
     with more differentiated ratings from A1 to D5 and an additional rating category E
     as the default category in accordance with Basel II. The scorecard developed in
     cooperation with DSGV is used for retail residential financing loans. This rating
     process will in future provide the Bank with a tool to determine how much capital
     must be made available as risk-weighted assets for regulatory purposes. Furthermore,
     the rating process serves as a key risk parameter for quantitative credit risk
     management.

     The Property Appraisal unit centrally commissions property appraisals for all
     applications in excess of €300,000; these are performed by selected appraisers who
     are familiar with the Bank’s requirements. The unit then reviews the reasonableness
     of the results. Reviews of lending and market values are generally conducted every
     three years or on an as-needed basis.

     The departments concerned determine provisioning requirements for the Bank’s
     lending business on an ongoing basis. To do this, properties furnished as collateral,
     which are important for the Bank’s real estate loan business, are valued around the
     time of the loan. The Loan Management department monitors the development of
     provisioning requirements centrally and reports on this to the Managing Board.




50
 Financial Report              Management Report                 Balance Sheet             P&L             Notes              Auditor’s Report




Portfolio Level

The development of credit risks is also monitored by means of portfolio analyses, which
are submitted on a quarterly basis to the Managing Board and the Administrative
Board. Total customer loans* amounted to €14.9 billion as of 31 December 2004 and
were therefore almost on a par with the previous year (previous year: €15.0 billion).
The €0.9 billion reduction in the commercial loan portfolio contrasts with a €0.8 billion
increase in the residential loan portfolio.

As of 31 December 2004, the customer loan portfolio was distributed among the
individual rating categories as follows.



Rating Structure




       No              Rating 1       Rating 2       Rating 3        Rating 3/4     Rating 4       Rating 4/5      Rating 5      Rating 6
       rating          (A1–A2)        (A3 – B1)      (B2 – B4)       (B5 – C1)      (C2 – C3)      (C4 – C5)       (D1– D2)      (D3 – E)
       11.4            25.4           15.7           20.0             9.4           6.2            3.7             2.0           6.2
        7.8            15.5           21.3           19.5            13.3           6.4            5.6             2.4           8.3

       31. 12. 2003
       31. 12. 2004

  Rating categories 1 to 6 = old rating 2003; rating categories A1 to D5 = new rating 2004; E = default category                       in %




At €8.5 billion, 57.1% of the receivables from customers and guarantees fall into
the good rating categories between A1 and B4 (previous year: 61.1%). Including the
rating categories between B5 and C3, 76.9% of the loans have a satisfactory risk
structure (previous year: 76.8%).

The shift between rating categories 1 and 2 (old rating) is attributable mainly to the
changes made to the rating system in 2004.




* Receivables from customers, including guarantees and disbursement commitments but
  excluding credit institutions and public bodies

                                                                                                                                                 51
     With regard to location, 59.9% or €8.9 billion (previous year: 52.0%) of the portfolio
     represents loans relating to German properties. In terms of international property
     locations, the Bank’s largest sub-portfolios are the USA at 8.9% or €1.3 billion
     (previous year: 11.6%), ahead of France at 8.2% or €1.2 billion (previous year:
     10.3%) and the United Kingdom at 6.4% or €1.0 billion (previous year: 8.6%).
     The remaining portfolio was mainly distributed across various EU member states,
     Canada and Switzerland.

     Scenario analyses performed in the year under review on the loan portfolios in the
     USA, the UK and France reveal a pronounced risk stability for the loans concerned
     in individual segments.

     In the course of its Treasury activities, WIB only concludes transactions with selected
     prime-rated counterparties. It monitors risks on an as-needed basis as well as using
     the loan monitoring procedures that must be carried out at least once a year.

     Equity Investments

     WIB’s investment portfolio is managed and monitored centrally by the Bank’s Equity
     Investments department, which is also responsible for decentralised financial control
     at Westdeutsche ImmobilienHolding (WIH).

     In addition to their byelaws, the equity investments use special guidelines for project
     developments, which were drawn up by the Bank’s Risk Management department.
     Decision-making documents concerning equity investments are prepared by the
     companies and forwarded to WIB’s Managing Board by the Equity Investments
     department after they have been examined and a vote cast. In accordance with the
     responsibilities stipulated in the Articles of Association, the approval of the
     Administrative Board or the Credit Committee is also obtained where applicable.

     Strategic investments produce medium-term planning once a year; compliance with
     this is monitored via quarterly comparisons of actual and forecast figures. The Bank’s
     responsible bodies receive regular reports on this, which also address business
     developments and WIB’s risk position. In the case of operational shareholdings,
     project developments and fund companies are controlled on an ongoing basis, and
     the results of this are also reported regularly to the responsible bodies at WIB.

     Market Price Risk

     The Risk Control department is responsible for monitoring WIB’s market price risks
     independently of the trading units.

     The “Strategic Guidelines” approved by the Bank’s bodies represent the framework
     that has been established by the Bank to enable the Treasury department to perform
     its activities. The measurement and monitoring of market risk positions and the
     related reporting requirements as laid down by the Mindestanforderungen an das
     Betreiben von Handelsgeschäften (MaH – Minimum Requirements for Credit
     Institutions for the Performance of Trading Transactions) are the responsibility of
     Risk Control. Risk Control prepares a separate report on a monthly basis which
     provides information on the Bank’s risk and earnings position. The Assets/Liabilities
     Management Committee meets on a weekly basis to discuss the business activities
     of the Treasury department in the light of current and anticipated macro-economic




52
 Financial Report           Management Report             Balance Sheet               P&L            Notes          Auditor’s Report




developments. Risk Control monitors the positions controlled by the Treasury, and
the Assets/Liabilities Management Committee decides on more extensive strategic
measures.

Interest rate and currency risks are quantified using a value-at-risk model based on
the Monte Carlo simulation process in accordance with the WestLB Group’s uniform
processes and parameters. The daily value-at-risk (VaR) calculation is based on a
confidence level of 95% for a holding period of one day. The results are reported
on a daily basis to the Bank’s Managing Board and WestLB AG’s Market Risk
Management department. In addition, stress tests are performed on a weekly basis
for interest rate and currency risks. The analyses are made available to the Assets/
Liabilities Management Committee and WestLB AG for risk control purposes. The
utilisation of the VaR limit is monitored by Risk Control and reported to the member
of the Managing Board responsible for monitoring. The average utilisation of the
VaR limit was 55.3% in the year under review. Utilisation of the limit at the end of
the year was 72.8%. There were also VaR sub-limits for the equity investment and
Treasury portfolios.



Changes in VaR limit utilisation in the year under review

100


 90


 80


 70


 60


 50


 40


 30


 20


 10


  0
      2. 1. 2004       18. 3. 2004          2. 6. 2004          17. 8. 2004            1. 11. 2004           in %



Foreign exchange risks are of minor importance to WIB since assets are fully
refinanced in the same currency, and therefore only part of the credit margin is
subject to exchange rate risks. Open foreign currency positions are restricted using
volume limits. For investments in a real estate fund, there is a stop-loss limit.

The Bank’s risk-bearing capacity in relation to key risks for the year under review
was derived from the aggregate present value of the Bank.




                                                                                                                                       53
     In fiscal year 2004, WIB entered into derivatives transactions almost exclusively
     for hedging purposes. These transactions were concluded both for individual risk
     positions in the case of interest rate and exchange rate risks (micro-hedges) and in
     order to manage the Bank’s overall risk position (macro-hedges). As a non-trading
     book institution, WIB is not involved in any trading book transactions.

     Liquidity Risks

     Liquidity and financing risks are controlled by WIB’s Treasury department in close
     consultation with WestLB AG’s Asset/Liability Management department. Liquidity
     and refinancing risks will be of greater significance following the abolition of the
     Anstaltslast and Gewährträgerhaftung in mid-2005. In 2004, the Bank raised additional
     refinancing funds through unsecured securities and by issuing its first jumbo
     Pfandbrief with the aim of securing funding on favourable terms. Following the
     abolition of the Anstaltslast and Gewährträgerhaftung, it will primarily use Pfandbriefe
     for refinancing. In 2004, WIB’s mortgage Pfandbriefe and public sector Pfandbriefe
     were again awarded an “AAA” rating by the rating agency S&P.

     Liquidity risk is limited and controlled using Liquidity Principle II. A liquidity gap
     analysis is used to monitor the refinancing risk. Market liquidity risk is of minor
     importance to the Bank in view of the markets prescribed for trading as defined
     by the MaH. In the year under review, the liquidity ratio according to Principle II
     was an average of 1.37 (previous year: 1.27). The regulatory requirements were
     consistently fulfilled during the fiscal year.

     Operational Risks

     Operational risks relate to the threat of losses which are caused by the inadequacy
     or failure of the Bank’s business processes, technology, or staff, or which arise as
     a result of external events. This definition includes legal risks. Risk self-assessment
     methods, the risk event database and risk indicators form the basis of active
     operational risk management. They are used for risk analysis, measurement, control
     and monitoring and are specified centrally. Continuing on from the risk inventory
     carried out in 2002, WIB took part in the WestLB Group’s quick risk self-assessment
     in July of the year under review. Any losses occurring are entered in a database, which
     also serves as the basis for applying methods for the quantitative measurement
     of operational risks. Together with WestLB AG, WIB is developing quantification
     processes for measuring risks so that it can meet the criteria of the Advanced
     Measurement Approach under Basel II.

     Legal risks can arise in particular from threatened or ongoing legal action, the incorrect
     use of contract standards and the inappropriate application of legal regulations.
     Central responsibility for limiting these risks lies with the Legal and Tax department,
     which provides the departments with the appropriate support. Standard contracts
     have been developed for all material transactions occurring in WIB’s national
     lending business; these contracts are subject to regular examination by the Legal
     and Tax department. Selected international law firms are commissioned to draw
     up contracts with an international reach. Sufficient provisions were set up for risks
     relating to litigation costs.




54
Financial Report            Management Report              Balance Sheet            P&L   Notes   Auditor’s Report




The Personnel department is primarily responsible for limiting personnel risks
within the WIB Group. Staff shortages in risk-sensitive business processes as well
as excess staff levels and the resulting unused capacity are countered by sound
personnel planning at a department level. WIB counters qualitative risks by means
of a careful recruitment process, which focuses on the tasks to be performed and
personality profiling, plus a subsequent probationary period. Employees’ performance
is assessed regularly during the term of their employment with the Bank under an
ongoing goals agreement and evaluation process.

The Organisation/IT and Administration department is responsible for analysing
and controlling technology and business process risks. Organisational structures and
workflows are tailored to internal and external requirements and are modified to
reflect changing conditions as appropriate. Comprehensive task and requirements
profiles and the integration of control provisions preclude errors or even illegal acts
and represent an indirect method of risk prevention.

The Bank has a three-tier IT security system. The client/server networks in operation
at all branches are linked via a wide area network. The central network computers
in operation at the Bank’s headquarters in Mainz are situated in three separate data
centres. The redundant design of these computers guarantees continuous operations.
Some of the servers, particularly for SAP, have been moved to a data centre located
outside the Bank building in order to reduce the risk of damage in the case of a
total blackout.

Business Risks

Business risks relate to uncertainties in the development of the Bank’s results due
to strategy- or planning-related uncertainties and to changes in the Bank’s overall
economic, legal, technical, or social environment. The Administrative Board monitors
compliance with any business or risk policy requirements laid down by the Guarantors’
Assembly. Business risk management is the responsibility of the Managing Board,
which regularly reviews the Group’s strategic focus. In this process, the Managing
Board is supported in particular by the Board Administrative Staff/Group
Development department, which calculates the Bank’s risk-bearing capacity as part
of its calculation of capital adequacy requirements and draws up the Bank’s budgets
and its three-year planning. The department prepares management information on
all departments/units and is responsible for ongoing development of management
methods.




                                                                                                                     55
     Bank’s Overall Risk Position

     WIB’s overall risk position in accordance with the regulatory requirements laid
     down in Principle I is as follows:



     Overall risk position in accordance with Principle I

     Risk-weighted assets                                31 Dec. 2004           31 Dec. 2003
                                                             € million              € million
     Balance sheet transactions                               12,064                 13,079
     Off-balance sheet transactions                             1,015                    905
     Derivatives transactions                                      82                     62
     Guarantees and collateral                                – 1,608                – 2,173
     Total                                                     11,553                 11,873
     Equity ratio (%)                                            13.5                   10.2
     Overall ratio (%)                                           13.5                   10.2




     Risk-weighted assets remained largely constant year-on-year. Due to a €300 million
     injection of core capital, the Bank was able to substantially improve its solvency ratio.
     After adjustment for the net loss for the period, the core capital ratio amounted to
     7.3%. The requirements of Principle I were met throughout the year under review.

     Outlook: Expansion of Business Activities

     The strategic reorientation implemented in 2004 has given WIB more room for
     manoeuvre. Together with the risk adjustment performed and the capital increase,
     this has put the WIB Group on the right track for a successful future, both strategically
     and in balance sheet terms, in close cooperation with the Sparkasse Finance Group.

     The Bank’s sales activities will be systematically expanded and its staffing levels
     increased, so as to enable us to continue to offer what are by international standards
     first-rate products and services on the market. This will be flanked by coordinated
     customer support in collaboration with WestLB AG. We also plan to introduce a
     uniform, Group-wide IT-based sales management system, amongst other things.
     Despite regional differences, the domestic market is in a weak position overall. We
     can therefore expect stabilisation but not a pronounced recovery. However, market
     opportunities exist in the form of heavier investments by foreign investors and
     increasing demand for credit from major domestic customer groups. The falling
     number of speculative completions in the rest of Europe is likely to stabilise the
     market, while the trend towards cross-border portfolio financing will continue. We
     expect markets in the USA to remain stable at a high level, while customer demand
     abroad is also likely to remain stable at, or increase on, its high levels. WIB will
     continue its successful foreign strategy, which focuses on the expansion of existing
     relationships with customers. WIB sees particular business potential in loans to
     closed-end institutional real estate funds launching cross-border pan-European




56
Financial Report             Management Report              Balance Sheet            P&L   Notes   Auditor’s Report




funds. Further new business is intended to be generated by increased collaboration
with WestLB AG’s foreign sales units and focused expansion into other countries.
The combination of lending and the securitisation of loan components will be
facilitated at Group level by structured financial products. The Bank will expand its
business volume in Germany in the new Small/Medium-Sized Companies and Public
Sector Departments, which will also serve to further increase customer diversification.
The credit process in small-volume commercial business will be largely standardised
to achieve cost advantages. Despite expanding business activities, we intend to
retain the overall staffing structure in the Bank.

Demand for residential financing can be expected to remain the same in 2005, as
can stiff ongoing price competition. In this context, the market share of the direct
banks that offer standardised construction financing with a low level of personal
advice is set to rise further. WIB has been successful in this segment with
ImmoBankdirekt for a number of years. Loan processing is workflow-based, and is
supported by a corresponding IT system and electronic credit files. The system’s
multiclient capability enables it to be used as a credit factory by third parties. This
in turn creates economies of scale and at the same time offers customers the entire
value chain at attractive conditions. In addition to strengthening our relationships
with existing cooperation partners and NRW.BANK, we are also planning to increase
our collaboration with saving banks in particular.

The rental success recorded in 2004 allowed the Real Estate Joint Ventures department
to lay the foundations for successfully concluding further projects in 2005. The
Bank will continue its successful strategy of expanding its joint-venture business
with first-class partners and attractive properties in a moderate, focused manner.

The new structure of the Treasury department led to a significant improvement in
its contribution to earnings in the past fiscal year. Along with further expansion of
Treasury’s structural contribution to earnings, we are aiming to achieve commission
income that is independent of the capital market by providing advisory services for
credit customers in the field of interest rate and currency management. Moreover,
we plan to adjust our refinancing base in line with the changed capital market
requirements by further expanding our three pillars – private placement, benchmark
products and structured capital market funding, and to provide the Bank with cost-
effective funding after the abolition of the Gewährträgerhaftung (Guarantee
Obligation).

The Bank will continue to focus on its core competencies in its equity investments
as well. In line with this, the acquisition of a majority investment in Assetis by a
strategic partner is currently in preparation. These measures also include a significant
reduction in the Group workforce. Assetis expects stable, slightly higher results for
2005, which will benefit the bundling of WIB’s real estate service activities and its
establishment on the market.

Cost management will continue in 2005 with the aim of further improving efficiency.
The opportunities to achieve significant reductions have already largely been
implemented, due to the measures already performed. The Bank therefore aims to
maintain non-staff expenses at the same level over the next few years, and to review
cost drivers on an ongoing basis.




                                                                                                                      57
     As always, it will pay particular attention to fulfilling the criteria for a consistently
     stable rating.

     With goals including expanding the customer base and in particular increasing the
     services available to savings banks and their customers, the Bank’s focus for 2005
     is on a substantial increase in new business. We are aiming for further improvement
     of the operating result thanks to corresponding effects on net interest and commission
     income. The Managing Board expects an improvement in the remeasurement losses
     recorded due to the conservative measurement criteria adopted. However, if the
     domestic market continues to deteriorate significantly, effects on the portfolio cannot
     be ruled out. The measures already implemented and those currently underway lead
     to us to expect appropriate medium-term contributions to earnings from our equity
     investments.

     Overall, the Bank plans, by systematically continuing on this track, to generate
     satisfactory results and increasing operational income contributions for 2005 at both
     Bank and Group level, followed by positive business development in subsequent
     years.



     Mainz, 18 March 2005




     Dieter Groh                                   Klaus Neuhaus




58
Financial Report            Management Report              Balance Sheet            P&L           Notes          Auditor’s Report




Report of the Administrative Board

In fiscal year 2004, the Administrative Board and its committees monitored and
advised the management as stipulated by the law and the Articles of Association
and issued decisions on the transactions presented to them requiring their approval.
During the year under review, the Managing Board briefed them regularly and
comprehensively on all relevant issues concerning the business development of WIB
and the WIB Group. In addition, the Supervisory Board Chairman and the Managing
Board were in regular contact about current issues. Particular attention was paid to
strategic decisions. The further integration of WIB into WestLB AG’s management
and monitoring systems was coordinated in close cooperation with these bodies.

The Administrative Board held four meetings in the year under review. In its meeting
on 27 May 2005, the Board approved the resolutions concerning the audit of the
2003 annual and consolidated financial statements. Among other measures, the
Administrative Board approved the credit risk strategy developed by the Managing
Board and the lending policy and strategy for 2004 in its other meetings and by
circulating written documents. The Administrative Board also approved changes in
the Shareholding Management department, particularly the investment of a strategic
partner in Assetis GmbH. Moreover, the addition of a new department, Domestic             Dr. Norbert Emmerich
Municipal Loans, was approved on 30 September 2004. In connection with the
strategic reorganization, the Administrative Board approved conditions for joint
real estate and property development finance with North Rhine-Westphalia’s and
Brandenburg’s savings banks. In December 2004, the Administrative Board took
note of the planning for 2005 – 2007 and approved a new assignment of decision-
making powers for the lending business. The Administrative Board and its committees
received reports from the Managing Board regularly and upon request concerning
the risk situation and risk management, changes in the loan portfolio and project
developments, as well as key bank projects, such as the implementation of Basel II.
The sub-committees reported to the Administrative Board regularly about their
activities.

In November 2004, the Administrative Board approved the retraction of the
appointment of Jürgen Stinner as a Managing Board member and Chairman of the
Managing Board and of Dr. Jörg Lauer as a Managing Board member, and approved
the appointment of Klaus Neuhaus to the Managing Board and of Dieter Groh to the
position of interim Managing Board Chairman. The Administrative Board also
approved the reallocation of duties.

The Administrative Board’s Credit Committee passed resolutions on loan commitments
presented by the Managing Board in eight meetings and by circulating written
documents. Moreover, the Committee also took note of the analyses and reports
submitted to it and prepared decisions for the Administrative Board concerning
the lending business. The results of the audit of the commercial real estate lending
business and project development risks by the Group auditing department of
WestLB AG were discussed in the Credit Committee.

The Business Coordination Committee set up in 2003 for the purpose of consultation
and coordination between the guarantors and WIB met four times in the year under
review, most recently on 6 May 2004. The Committee mainly discussed issues of
business policy and resolved restructuring measures for the WIH Group. In May 2004,
the Administrative Board decided to dissolve this committee, which was staffed
from its ranks, and resolved instead to increase the number of Administrative Board
meetings. The responsibility assigned to the Business Coordination Committee for
decisions about strategic investments has again been assumed directly by the
Administrative Board. The Articles of Association and the byelaws of the Administrative
Board and its committees were amended accordingly.
                                                                                                                                    59
     The Administrative Board engaged Ernst & Young AG Wirtschaftsprüfungsgesellschaft
     to audit the annual financial statements as well as the consolidated financial statements
     of WIB for fiscal year 2004, including the management report. The auditors issued
     unqualified audit opinions on these statements.

     The Administrative Board performed the auditing and reporting duties as assigned
     to it by law and the Articles of Association in connection with the adoption of the 2004
     annual and consolidated financial statements. The Audit Committee is responsible
     for the preparatory work relating to these tasks. At its meeting on 23 May 2005,
     the Audit Committee discussed the findings of the auditor’s report in detail in the
     presence of the auditor. The Audit Committee and the Administrative Board audited
     the annual financial statements and management report prepared by the Managing
     Board and discussed the auditor’s reports. After completing their audit, they did not
     raise any objections.

     In December 2003, WIB introduced its own corporate governance rules that are
     based on the requirements of the German Corporate Governance Code for listed
     companies. Under these rules, the Managing Board and Administrative Board of
     the Bank made a voluntary undertaking that exceeds the statutory regulations. The
     Administrative Board, Managing Board and the employees of the Bank identify with
     these guidelines that ensure responsible corporate management and control at WIB.
     WIB’s corporate governance rules were changed in December 2004 to reflect the
     amendment to the Articles of Association. In fiscal year 2004, WIB complied with
     its corporate governance rules in full.

     The Administrative Board would like to wish the Managing Board success with the
     further implementation of the new strategy and to thank all of the Bank’s employees
     for their hard work.



     Mainz, 23 May 2005

     The Chairman of the Administrative Board




     Dr. Norbert Emmerich
     Deputy Chairman of the Managing Board
     WestLB AG




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Financial Report           Management Report             Balance Sheet          P&L            Notes          Auditor’s Report




Report of the Guarantors’ Assembly

In the year under review, the Guarantors’ Assembly of Westdeutsche ImmobilienBank
performed the duties assigned to it by law and the Articles of Association. In its
two meetings, the Guarantors’ Assembly was provided with detailed information by
the Managing Board on the business development of the Bank and the Group and
passed resolutions on transactions of fundamental importance. The focus was on
the strategic reorientation of the Bank and its integration into the WestLB Group.

The 2003 annual and consolidated financial statements were adopted at the meeting
on 27 May 2004. An amendment to the Articles of Association for the purpose of
restructuring the sub-committees of the Administrative Board was approved by
circulating written documents.

In November 2004 the Guarantors’ Assembly in conjunction with the Administrative
Board issued decisions concerning changes in Managing Board staffing and approved
the reallocation of duties.

The concept developed by the Managing Board for the strategic reorientation of
the Bank and the planning for 2005 – 2007 were presented to and taken note of by      Dr. Thomas R. Fischer
the members of the Guarantors’ Assembly in December 2004. The Assembly also
approved the addition by WestLB AG of € 300 million to the capital reserves for the
purpose of further reinforcing the Bank’s equity base.

At the proposal of the Administrative Board, the Guarantors’ Assembly adopted the
2004 financial statements of Westdeutsche ImmobilienBank on 23 May 2005 and
resolved to cover the loss with withdrawals from the capital and revenue reserves.

The Guarantors’ Assembly received the consolidated financial statements and Group
management report of Westdeutsche ImmobilienBank, and appointed the auditor of
the annual financial statements of the Bank and the Group for fiscal year 2005.

The Guarantors’ Assembly would like to wish the Managing Board success with the
further implementation of the new strategy and to thank all of the Bank’s employees
for their hard work.



Mainz, 23 May 2005

The Chairman of the Guarantors’ Assembly




Dr. Thomas R. Fischer
Chairman of the Managing Board
WestLB AG




                                                                                                                                 61
62
Financial Report   Management Report   Balance Sheet   P&L   Notes   Auditor’s Report




Annual Financial
Statements
of Westdeutsche
ImmobilienBank
(Bank)




                                                                                        63
     Balance Sheet as of 31 December 2004

     Assets

                                                               2004               2004                2004    31 Dec. 2003
                                                                  €                  €                   €     € thousand
      1. Cash funds
         a) cash in hand                                                     14,320.36                                 (16)
         b) balances with central banks                                  12,316,379.24                              (6,378)
            of which:                                                                        12,330,699.60           6,394
            with Deutsche Bundesbank €12,286,908.30

      2. Receivables from banks
         a) payable on demand                                             43,881,463.09                           (298,807)
         b) other                                                      2,127,082,783.14                         (2,151,353)
                                                                                           2,170,964,246.23      2,450,160

      3. Receivables from customers                                                       17,022,965,980.11    (15,965,787)
         of which:
         secured by mortgages €4,181,024,859.36
         municipal loans €4,757,760,148.31

      4. Bonds and other fixed-income securities
         a) bonds and notes
            aa) issued by public sector issuers       855,871,429.58                                              (51,861)
            ab) issued by other issuers               927,175,829.55                                             (835,380)
                of which:                                              1,783,047,259.13
                eligible as collateral with
                Deutsche Bundesbank €1,774,956,501.57
         b) own bonds and notes                                          49,820,747.17                           (217,843)
            nominal amount €48,094,000.00                                                  1,832,868,006.30     1,105,084

      5. Shares and other non-fixed-income securities                                          4,500,030.73         (4,500)

      6. Investments in non-affiliated companies                                             27,767,911.49         (27,071)

      7. Investments in affiliated companies                                                 50,710,577.30         (61,630)

      8. Trust assets                                                                        57,598,338.68         (31,032)
         of which:
         trustee loans €57,598,303.68

      9. Equalisation claims on public authorities
         including bonds due from conversions                                                  6,457,686.04        (12,915)

     10. Intangible assets                                                                     5,192,118.53         (7,666)

     11. Tangible assets                                                                       4,959,596.24        (13,399)

     12. Other assets                                                                        51,807,880.72         (60,938)

     13. Prepaid expenses                                                                    58,423,334.98         (62,761)

     Total assets                                                                         21,306,546,406.95    (19,809,337)




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Equity and Liabilities

                                                                 2004                    2004                 2004      31 Dec. 2003
                                                                    €                       €                    €       € thousand
 1. Liabilities to banks
    a) payable on demand                                                       6,715,777.15                                  (20,180)
    b) with agreed maturities or periods of notice                         5,932,335,924.44                               (8,412,837)
                                                                                                   5,939,051,701.59        8,433,017
 2. Liabilities to customers
    other liabilities
    a) payable on demand                                                     100,524,697.66                                 (238,974)
    b) with agreed maturities or periods of notice                         2,723,254,054.84                               (1,775,133)
                                                                                                   2,823,778,752.50        2,014,107
 3. Certificated liabilities
    a) bonds issued                                                                               10,976,204,266.92        8,013,749

 4. Trustee liabilities                                                                              57,598,338.68            31,032
    of which:
    trustee loans €57,598,303.68

 5. Other liabilities                                                                                76,707,389.51            52,737

 6. Deferred income                                                                                  21,133,751.99            21,228

 7. Provisions
    a) for pensions and similar obligations                                    7,394,903.00                                   (5,823)
    b) for taxes                                                               6,161,918.04                                   (1,062)
    c) other                                                                  15,699,658.58                                  (18,023)
                                                                                                     29,256,479.62            24,908

 8. Subordinated liabilities                                                                        313,322,970.29           313,323

 9. Profit participation capital                                                                    221,000,000.00           221,000

10. Equity
    a) subscribed capital                                                    400,000,000.00                                  400,000
    b) capital reserves                                                      443,370,114.07                                  234,000
    c) revenue reserves
       ca) legal reserves                                         0.00                                                            (0)
       cb) statutory reserves                             5,122,641.78                                                        (5,123)
       cc) other reserves                                         0.00                                                       (42,659)
                                                                                  5,122,641.78
   d) net retained profit                                                                 0.00                                (2,454)
                                                                                                    848,492,755.85           684,235




Total equity and liabilities                                                                      21,306,546,406.95       19,809,337

 1. Contingent liabilities
    a) liabilities on endorsed bills of
       exchange settled with customers                                                 0.00                                       (0)
    b) liabilities on guarantee and warranty agreements                      860,936,424.44                                 (419,926)
    c) liabilities on assets pledged as
       collateral for third party liabilities                                             0.00                                    (0)
                                                                                                    860,936,424.44           419,926
 2. Other obligations
    Irrevocable loan commitments                                                                   1,001,730,799.87        1,402,710

 3. Assets under management                                                                            3,005,798.35            3,395




                                                                                                                                         65
     Profit and Loss Account

     for the period from 1 January – 31 December 2004

                                                               2004               2004             2004    31 Dec. 2003
                                                                  €                  €                €     € thousand
      1. Interest income from
         a) lending and money market operations       903,534,939.97                                          (759,380)
         b) fixed-income securities and
            government debt                            53,189,473.18                                           (48,013)
                                                                       956,724,413.15

      2. Interest expenses                                             841,220,831.26                         (735,824)
                                                                                          115,503,581.89        71,569

      3. Current income from
         a) shares and other
            non-fixed-income securities                                     136,098.39                             (132)
         b) investments in non-affiliated companies                       6,825,771.23                           (9,739)
         c) investments in affiliated companies                                   0.00                               (0)
                                                                                            6,961,869.62          9,871

      4. Income from profit-pooling,
         profit-transfer agreements or
         partial profit-transfer agreements                                                         0.00             (0)

      5. Commissions received                                            12,416,058.35                         (13,669)

      6. Commissions paid                                                12,485,536.10                         (11,882)
                                                                                             – 69,477.75         1,787

      7. Net profit on financial operations                                                 1,149,509.27         (1,640)

      8. Other operating income                                                             5,431,089.58         (3,774)

      9. General administrative expenses
         a) staff expenses
            aa) wages and salaries                     28,006,773.81                                           (29,224)
            ab) social security contributions
                 and expenses for pensions and
                 other employee benefits                7,804,719.21                                             (5,248)
                 of which:                                               35,811,493.02
                 for pension expenses €3,815,170.97
         b) other administrative expenses                                29,519,374.11                         (25,869)
                                                                                           65,330,867.13        60,341

     10. Amortisation and depreciation
         of intangible and tangible assets                                                 14,113,549.18         7,479

     11. Other operating expenses                                                            384,868.40          4,475

                                                                       Carried forward:    49,147,287.90        16,346




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 Bank




for the period from 1 January – 31 December 2004

                                                     2004                   2004                2004      31 Dec. 2003
                                                        €                      €                   €       € thousand
                                                              Brought forward:         49,147,287.90            16,346

12. Write-downs and adjustments to
    receivables and certain securities and
    additions to provisions for credit risks                                          103,187,817.35            95,277

13. Write-downs and adjustments to investments
    in non-affiliated and affiliated companies and
    securities treated as fixed assets                                                 29,759,116.39                 0

14. Income from write-ups of investments
    in non-affiliated and affiliated companies
    and securities treated as fixed assets                                                      0.00           108,380

15. Expenses from the assumption of losses                                             48,593,400.56            25,579

16. Result of ordinary operations                                                    – 132,393,046.40            3,870

17. Income taxes                                                     3,271,352.87                               (1,226)

18. Other taxes not included under
    “Other operating expenses”                                         78,011.32                                 (– 82)
                                                                                        3,349,364.19             1,144

19. Net income/net loss for the year                                                 – 135,742,410.59            2,726

20. Withdrawals from capital reserves                                                  90,629,885.93                 0

21. Withdrawals from revenue reserves
    a) legal reserves
    b) statutory reserves
    c) other reserves                                                                  45,112,524.66                 0

22. Appropriations to reserves
    a) legal reserves                                                       0.00                                    (0)
    b) statutory reserves                                                   0.00                                  (273)
    c) other reserves                                                       0.00                                    (0)
                                                                                                0.00               273

Net retained profit                                                                             0.00             2,454




                                                                                                                           67
     Notes to the Annual Financial Statements as of 31 December 2004

                            I. General Information

                            Basis of Preparation

                            The annual financial statements of Westdeutsche ImmobilienBank (WIB) were
                            prepared in accordance with the provisions of the Handelsgesetzbuch (HGB –
                            German Commercial Code) and the Verordnung über die Rechnungslegung der
                            Kreditinstitute (RechKredV – German Bank Accounting Regulation).

                            Accounting Policies

                            Assets and liabilities were measured in accordance with sections 252 ff. of the HGB
                            and the supplementary provisions for credit institutions laid down in sections 340 ff.
                            of the HGB.

                            Receivables and liabilities were offset in accordance with section 10 of the
                            RechKredV.

                            All receivables are carried at their principal amount. Discounts retained on the
                            disbursement of loans are distributed across the term of the loan or the fixed-
                            interest period and are deducted from the receivables portfolio. Liabilities are
                            carried at the redemption amount, with discounts being transferred to prepaid
                            expenses.

                            Premiums on receivables or liabilities are allocated to prepaid expenses or
                            deferred income as appropriate.

                            Ratable interest is disclosed along with the underlying receivable or liability
                            in each case.

                            Appropriate risk provisions were set up for all discernible risks from the loan
                            portfolio.

                            Long-term investments (investment portfolio) are measured at cost, whereas securities
                            held as part of the liquidity reserve are measured at the strict lower of cost or market.
                            In the case of long-term investments (investment portfolio), differences between
                            cost and the redemption amount are reversed ratably in income.

                            Investments in affiliated and non-affiliated companies are carried at cost. Write-
                            downs to the fair value were charged in the case of expected lasting impairment.

                            Depreciation and amortisation were charged on tangible assets and intangible
                            assets with finite useful lives in line with the options available under tax law.
                            Low-value assets were written off in full in the year of their acquisition.

                            In accordance with section 6a of the Einkommensteuergesetz (EStG – German
                            Income Tax Act), a provision for pensions was set up in accordance with actuarial
                            principles.

                            Provisions were set up in the amount dictated by sound business judgement; they
                            take into account all discernible risks and uncertain obligations.




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 Bank




Currency translation was performed in accordance with section 340 h of the HGB
and Accounting Principle IDW BFA 3/95. WIB does not distinguish between “special
cover” (micro hedging) and cover in the same currency. As a result, all expenses
and income from currency translation are recognised in the profit and loss account.
Assets and liabilities in foreign currency and spot forex transactions are translated
at the European Central Bank rates at the balance sheet date. Uncompleted forward
transactions are translated at the forward rate on the balance sheet date, unless
they were entered into to hedge interest-bearing positions. If forward transactions
are clearly intended as hedges for interest-bearing positions, the swap premiums
are deferred ratably and reported in net interest income.



II. Balance Sheet and Profit and Loss Account Disclosures

Receivables from Banks

Receivables from banks are broken down as follows:


                                                        2004                  2003
                                                         €m                    €m
Payable on demand                                        43.9                298.8
With a residual maturity of:
– up to three months                                    712.2                540.9
– between three months and one year                     276.7                104.2
– between one year and five years                       879.6                979.8
– more than five years                                  258.5                526.5
Total                                                 2,170.9               2,450.2
of which:
– From affiliated companies                              96.2                   9.0



Receivables from Customers

Receivables from customers are broken down as follows:


                                                        2004                  2003
                                                         €m                    €m
With a residual maturity of:
– up to three months                                    923.8                 826.4
– between three months and one year                     916.9               1,296.6
– between one year and five years                     8,740.3               4,944.4
– more than five years                                6,442.0               8,898.4
Total                                                17,023.0              15,965.8
of which:
– Undated                                               330.1                345.4
– From affiliated companies                             341.8                348.9



Undated transactions are included in receivables from customers with a residual
maturity of up to three months.

Receivables from customers include subordinated receivables amounting to
€9.9 million resulting from subordination agreements.




                                                                                                                   69
     The following table shows the Company’s portfolio of receivables secured by
     mortgages:


                                                              2004                  2003
                                                               €m                    €m
     With a residual maturity of:
     – up to three months                                      97.6                  67.3
     – between three months and one year                      149.3                 125.0
     – between one year and five years                      2,098.4                 358.8
     – more than five years                                 1,835.7               2,274.5
     Total                                                  4,181.0               2,825.6
     of which:
     – From affiliated companies                               17.3                  43.3



     This item consists exclusively of receivables classified as property loans under the
     Hypothekenbankgesetz (German Mortgage Bank Act).

     Bonds and Other Fixed-income Securities

     The Company’s portfolio of these securities has the following structure:


                                                              2004                  2003
                                                               €m                    €m
     Bonds and notes                                        1,832.9               1,105.1
     Of which:
     – Publicly traded                                      1,832.9               1,105.1
     – Not publicly traded                                      0.0                   0.0
     Of which:
     – Receivables from affiliated companies                    0.0                  25.3
     – Receivables from non-affiliated companies                0.0                   0.0
     Total                                                  1,832.9               1,105.1



     The issuers of these bonds can be broken down as follows:


                                                              2004                  2003
                                                               €m                    €m

     Bonds and notes issued by public issuers
     eligible as collateral with Deutsche Bundesbank
     – maturing in the following year                          16.4                   1.9
     – not maturing in the following year                     839.5                  50.0
     Bonds and notes issued by other issuers
     eligible as collateral with Deutsche Bundesbank
     – maturing in the following year                         149.6                 359.0
     – not maturing in the following year                     769.5                 448.1
     Other
     – maturing in the following year                           0.1                   0.2
     – not maturing in the following year                       8.0                  28.0
     Own bonds
     – maturing in the following year                           1.4                   9.9
     – not maturing in the following year                      48.4                 208.0
     Total                                                  1,832.9               1,105.1




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 Bank




These holdings were classified and managed separately by their designated purpose.
As a result, the portfolio can be broken down into the following sub-areas, which
must be treated differently for measurement purposes:


                                                                  2004                     2003
                                                                   €m                       €m
Liquidity reserve                                             1,436.3                     817.4
Investment portfolio                                            396.6                     287.7
Total                                                         1,832.9                   1,105.1



The investment portfolio in the amount of €396.6 million (previous year: €287.7 million)
forms part of the Company’s fixed assets and was measured in accordance with
section 253 (2) of the HGB.

Shares and Other Non-fixed-income Securities

None of the securities reported under this item in the total amount of €4.5 million
(previous year: €4.5 million) are marketable. They consist of investment certificates
which are allocated to the liquidity reserve.

Investments in Affiliated and Non-affiliated Companies

A separate list of investments has been deposited with the Mainz Local Court in
accordance with section 285 no. 11 of the HGB.

Fixed Assets

The following table provides an overview of the changes in fixed assets. The
amounts stated for bonds and fixed-income securities, including the equalisation
claims item, do not include ratable interest. The changes in the fiscal year include
additions and disposals as well as changes in the assets due to the ratable reversal
of premiums and discounts.


Amounts in € m         Acquisition/    Additions     Disposals     Transfers      accumulated     Depreciation/        Net book          Net book
                        production        during        during                    depreciation     amortisation       value as of       value as of
                               cost   fiscal year   fiscal year                           and        charge for
                                                                                  amortisation       fiscal year

                                                                                                                    31 Dec. 2004      31 Dec. 2003
Bonds/fixed-income
securities                   287.1         108.6           1.8             0.0             0.0              0.0            393.9             287.1
Investments in
affiliated companies          63.7          25.0           0.0             0.0            38.0             35.9             50.7              61.6
Investments in
non-affiliated
companies                     27.8           0.7           0.0             0.0             0.7              0.0             27.8              27.1
Intangible assets             16.4           2.8           0.0            20.3            34.3              8.0              5.2               7.7
Office and operating
equipment                     36.7           0.4           2.0           – 20.3            9.8              6.1              5.0              13.4
Total                        431.7         137.5           3.8             0.0            82.8             50.0            482.6             396.9


An amount of goodwill carried in intangible assets was written off in the year under
review. The software was reclassified from office and operating equipment to
intangible assets.



                                                                                                                                                       71
     Trust Assets

     The Trust assets item primarily consists of trustee loans to customers totalling €57.6
     million (previous year: €31.0 million).

     Other Assets

     Other assets mainly consist of foreign currency adjustment items amounting to
     €32.0 million, shares in companies of €6.7 million and tax refunds in the amount of
     €7.8 million.

     Prepaid Expenses

     This item includes the following:


                                                                2004                  2003
                                                                 €m                    €m
     Premium from receivables                                   18.4                   25.5
     Discount from issuing business                             24.1                   16.2
     Discount from liabilities                                   3.7                    4.2
     Upfront payments on swaps                                  10.3                   12.8
     Other                                                       1.9                    4.1
     Total                                                      58.4                   62.8


     Liabilities to Banks

     Liabilities to banks are broken down as follows:


                                                                2004                  2003
                                                                 €m                    €m
     Payable on demand                                           6.7                   20.2
     With a residual maturity of:
     – up to three months                                      973.5                1,831.8
     – between three months and one year                       963.4                1,852.0
     – between one year and five years                       2,988.6                3,696.1
     – more than five years                                  1,006.8                1,032.9
     Total                                                   5,939.0                8,433.0
     of which:
     – To affiliated companies                               1,654.9                1,936.3



     Liabilities to Customers

     Liabilities to customers are broken down as follows:


                                                               2004                   2003
                                                              Mio €                  Mio €
     Payable on demand                                         100.5                 239.0
     With a residual maturity of:
     – up to three months                                      109.5                   85.8
     – between three months and one year                         8.5                  422.7
     – between one year and five years                         394.9                  230.7
     – more than five years                                  2,210.4                1,035.9
     Total                                                   2,823.8                2,014.1
     of which:
     – To affiliated companies                                   0.0                    0.1
     – To non-affiliated companies                              29.4                   17.5

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 Bank




Certificated Liabilities

Of the certificated liabilities totalling €10,976.2 million (previous year: €8,013.7 million),
€1,361.7 million is due in the following year.

Trustee Liabilities

Trustee liabilities relate primarily to customers and amount to €57.6 million
(previous year: €31.0 million).

Other Liabilities

The Other liabilities item comprises in particular €22.2 million (previous year:
€22.2 million) in pro rata interest from subordinated liabilities and profit
participation rights and liabilities to Westdeutsche ImmobilienHolding (WIH)
totalling €48.6 million (previous year: €26.6 million).

Deferred Income

This item includes the following:


                                                              2004                    2003
                                                               €m                      €m
Discounts                                                      18.0                    17.1
Premium from issuing business                                   0.7                     0.7
Other                                                           2.4                     3.4
Total                                                          21.1                    21.2



Subordinated Liabilities

The following subordinated loans account for more than ten percent of all
subordinated liabilities:

Currency             Principal amount in € m      Interest rate in %                Maturity
EUR                                     125.0                     4.8             2003 – 2013


All subordinated liabilities comply with the requirements of section 10 (5 a)
sentence 1 of the Kreditwesengesetz (KWG – German Banking Act). No extraordinary
call rights have been granted. Expenses in relation to subordinated liabilities
totalled € 16.9 million (previous year: €12.5 million).

Foreign Currency Items

At the balance sheet date, assets denominated in foreign currency amounted to
€2,923.9 million (previous year: €3,511.7 million), while foreign currency liabilities
amounted to €2,922.2 million (previous year: €3,406.1 million).

Profit and Loss Account

A geographical breakdown of the interest income, current income from shares and
other non-fixed-income securities, commission income, net income on financial
operations and other operating income totalling €982.6 million reveals that €922.3
million relates to Germany and €60.3 million to the United Kingdom.


                                                                                                                            73
     III. Supplementary Disclosures

     Other Financial Obligations

     Annual rental and lease obligations amounted to €4.8 million, and other obligations
     to €3.7 million per annum.

     WIB is a member of the Sicherungsreserve (Reserve Fund) of the Landesbanken/
     Girozentralen (Central Savings Banks). At the balance sheet date, the Bank had an
     obligation to make additional payments to this fund in the amount of €14.8 million
     (previous year: €11.2 million).

     Securities with a nominal value of €1,126.9 million (previous year: €503.0 million)
     were deposited as collateral for open market transactions with the Deutsche
     Bundesbank as of 31 December 2004.

     Securities with a nominal value of €237.6 million are assigned as collateral to
     secure payment obligations from the issuance of credit-linked notes.

     Coverage

     Coverage is broken down as follows:


                                                              2004                     2003
                                                               €m                       €m
     Mortgage Pfandbriefe requiring cover                   3,229.9               2,018.8
     To cover specific assets
     – Receivables from customers/banks                     4,051.3               2,524.9
     Cover overhang                                           821.4                 506.1
     Public sector Pfandbriefe requiring cover              3,199.5               4,038.4
     To cover specific assets
     – Receivables from customers/banks                     5,486.5               4,536.8
     Cover overhang                                         2,287.0                 498.4
     Other Pfandbriefe requiring cover                      5,925.0               3,245.0
     To cover specific assets
     – Receivables from customers/banks                     6,759.7               7,970.3
     Cover overhang                                           834.7               4,725.3




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 Bank




Derivative Transactions

Derivative transactions were entered into to hedge interest rate and currency
fluctuations and are allocated to the investment portfolio.

In compliance with the extended reporting requirements for derivative financial
instruments under the Bilanzrechtsreformgesetz (BilReG – German Accounting
Legislation Reform Act), the disclosure of fair values has been added to the
presentation of derivatives volumes.

Market prices were used to measure derivative financial instruments wherever
available. If market prices do not exist or cannot be reliably determined, the fair
values are determined on the basis of standard market price models or discounted
cash flows.


Amounts in € m                                               Positive       Negative
                              Notional amounts            fair values     fair values

                                2004             2003          2004              2004

Interest rate risks
Interest rate swaps          14,398.8      11,174.0            214.1            490.7
FRAs                              0.0           0.0              0.0              0.0
Caps, floors                    120.0           0.0              0.0              0.0
Interest rate options
– Calls                         577.0         260.0             14.7              0.0
– Puts                          878.0         710.0              0.0             15.8
Exchange-traded contracts
– Calls                         500.0             0.0            0.3              0.0
– Puts                            0.0             0.0            0.0              0.0
Total                        16,473.8      12,144.0            229.1            506.5
Currency risks
Currency forwards                28.0            28.7            0.9              0.9
Currency swaps/
cross-currency swaps             98.9         103.8             33.5              0.0
Total                           126.9         132.5             34.4              0.9
Credit derivatives
– Calls                       1,014.0       1,329.8              0.0              0.0
– Puts                            0.0           0.0              0.0              0.0
Total                         1,014.0       1,329.8              0.0              0.0



Number of Staff

In fiscal year 2004, the Bank employed an average of 204 (previous year: 210)
female and 239 (previous year: 225) male staff. The total headcount includes 1
(previous year: 2) trainees.




                                                                                                                    75
     Corporate Governance Rules

     In December 2003, WIB compiled its own Corporate Governance Rules, which
     are based on the provisions of the German Corporate Governance Code for listed
     companies. The Managing Board and Administrative Board of the Bank have thus
     made a voluntary commitment that goes beyond the statutory requirements. The
     Bank’s Administrative Board and Managing Board and its employees identify with
     these guidelines, which strengthen responsible corporate management and control
     at WIB.

     WIB’s Corporate Governance Rules were amended in December 2004 in accordance
     with the amended Articles of Association. The latest version of WIB’s Corporate
     Governance Rules can be accessed on the Internet at www.westimmobank.com
     (“Portrait”/ “Corporate Governance”).

     In fiscal year 2004, WIB was fully compliant with its Corporate Governance Rules.

     Remuneration Paid to Executive Bodies

     The total remuneration paid to the Managing Board amounted to €1.0 million
     (previous year: €0.9 million). Former members of the Managing Board received
     €0.2 million (previous year: €0.2 million).

     The members of the Administrative Board and the Guarantors’ Assembly received
     €0.04 million (previous year: €0.2 million).

     Pension provisions for former members of the Managing Board amounted
     to €3.6 million.



     Mainz, 18 March 2005




     Dieter Groh                               Klaus Neuhaus




76
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 Bank




Members of the Administrative            Alternate Members of the                   Dr. Norbert Emmerich
Board                                    Administrative Board                       Member of the Managing Board
                                                                                    WestLB AG
Dr. Norbert Emmerich                     Klaus Michael Geiger                       (from 1 May 2004)
Chairman                                 Member of the Managing Board
Member of the Managing Board             WestLB AG                                  Dr. Rolf Gerlach
WestLB AG                                                                           President
(from 1 May 2004)                        Gerhard Roggemann                          Savings Banks and Giro Association of
                                         Former Member of the Managing Board        Westphalia-Lippe
Robert Restani                           WestLB AG
Chairman                                 (until 26 April 2004)                      Wolfgang Schäfer
Former Alternate Member                                                             Regional Director
of the Managing Board                    Rainer Schmitz                             Regional Association of Westphalia-Lippe
WestLB AG                                Alternate Member of the Managing Board
(until 26 April 2004)                    WestLB AG                                  Member of the Managing Board
                                         (from 1 May 2004)
Dr. Matthijs van den Adel                                                           Jürgen Stinner
Vice Chairman                            Josef Thiebach                             Chairman
Member of the Managing Board             Central Loan Management department         (until 8 November 2004)
WestLB AG                                WestLB AG
(from 21 January 2004)                                                              Dieter Groh
                                         Matthias Wargers                           Chairman
Gerhard Knoke                            Special Projects department
Group Finance department                 WestLB AG                                  Dr. Jörg Lauer
WestLB AG                                                                           (until 8 November 2004)
                                         Members of the
Marcus Kramer                            Guarantors’ Assembly                       Klaus Neuhaus
Chief Credit Risk Officer                                                           (from 8 November 2004)
WestLB AG                                Dr. Thomas R. Fischer
(from 8 December 2004)                   Chairman                                   Appointments of legal represen-
                                         Chairman of the Managing Board             tatives and other employees of
Klaus Neuhaus                            WestLB AG                                  Westdeutsche ImmobilienBank
Central Loan Management department       (from 21 January 2004)                     to statutory supervisory boards
WestLB AG                                                                           in accordance with section
(until 7 November 2004)                  Dr. Matthijs van den Adel                  340 a (4) sentence 1 of the HGB
                                         Vice Chairman                              (Handelsgesetzbuch – German
Bank Employee Representatives            Member of the Managing Board               Commercial Code)
                                         WestLB AG
Raimund Bär                              (from 21 January 2004)                     Jürgen Stinner
Employee                                                                            Deka Immobilien Investment GmbH,
Westdeutsche ImmobilienBank              Robert Restani                             Frankfurt
                                         Vice Chairman                              (29 May 2004 until 8 November 2004)
Dr. Wolfram Pika                         Former Alternate Member
Employee                                 of the Managing Board                      WestInvest Gesellschaft für
Westdeutsche ImmobilienBank              WestLB AG                                  Investmentfonds mbH, Düsseldorf
(until 31 December 2004)                 (until 26 April 2004)                      (until 16 December 2004)

Birgit Schilling                         Dr. Karlheinz Bentele                      W. Jacobsen AG, Kiel
Employee                                 President
Westdeutsche ImmobilienBank              Savings Banks and Giro Association         Dr. Jörg Lauer
(from 1 January 2005)                    of the Rhineland                           WestInvest Gesellschaft für
                                                                                    Investmentfonds mbH, Düsseldorf
                                                                                    (until 1 July 2004)



                                                                                                                                 77
     Auditor’s Report on the Annual Financial Statements

     We have issued the following opinion on the financial statements and management
     report:

     “We have audited the annual financial statements, together with the bookkeeping
     system and the management report of Westdeutsche ImmobilienBank, Mainz, for
     the fiscal year from January 1, 2004 to December 31, 2004. The maintenance of
     the books and records and the preparation of the annual financial statements and
     management report in accordance with German commercial law and supplementary
     provisions in the articles of incorporation are the responsibility of the Company’s
     management. Our responsibility is to express an opinion on the annual financial
     statements, together with the bookkeeping system, and the management report,
     based on our audit.

     We conducted our audit of the annual financial statements in accordance with
     Sec. 317 HGB [“Handelsgesetzbuch”: German Commercial Code] and the generally
     accepted German standards for the audit of financial statements promulgated by
     the Institut der Wirtschaftsprüfer [in Deutschland] (IDW). Those standards require
     that we plan and perform the audit such that misstatements materially affecting the
     presentation of the net assets, financial position and results of operations in the
     annual financial statements in accordance with [German] principles of proper
     accounting and in the management report are detected with reasonable assurance.
     Knowledge of the business activities and the economic and legal environment of
     the Company and evaluations of possible misstatements are taken into account in
     the determination of audit procedures. The effectiveness of the accounting-related
     internal control system and the evidence supporting the disclosures in the books and
     records, the annual financial statements and the management report are examined
     primarily on a test basis within the framework of the audit. The audit includes
     assessing the accounting principles used and significant estimates made by
     management, as well as evaluating the overall presentation of the annual financial
     statements and management report. We believe that our audit provides a reasonable
     basis for our opinion.

     Our audit has not led to any reservations.

     In our opinion, the annual financial statements give a true and fair view of the net
     assets, financial position and results of operations of the Company in accordance
     with [German] principles of proper accounting. On the whole, the management
     report provides a suitable understanding of the Company’s position and suitably
     presents the risks to future development.”



     Frankfurt am Main, March 23, 2005



     Ernst & Young AG
     Wirtschaftsprüfungsgesellschaft




     Müller-Tronnier                              Hultsch
     Wirtschaftsprüfer                            Wirtschaftsprüfer



78
Financial Report   Management Report   Balance Sheet   P&L   Notes   Auditor’s Report




Consolidated
Financial Statements
of Westdeutsche
ImmobilienBank




                                                                                        79
     Consolidated Balance Sheet as of 31 December 2004

     Assets

                                                               2004               2004                2004    31 Dec. 2003
                                                                  €                  €                   €     € thousand
      1. Cash funds
         a) cash in hand                                                     14,320.36                                 (23)
         b) balances with central banks                                  12,334,095.76                              (6,378)
            of which:                                                                        12,348,416.12           6,401
            with Deutsche Bundesbank €12,304,624.82

      2. Receivables from banks
         a) payable on demand                                             50,286,193.89                           (306,141)
         b) other                                                      2,135,152,547.91                         (2,157,120)
                                                                                           2,185,438,741.80      2,463,261

      3. Receivables from customers                                                       17,054,404,288.10    16,003,404
         of which:
         secured by mortgages €4,181,024,859.36
         municipal loans €4,757,760,148.31

      4. Bonds and other fixed-income securities
         a) bonds and notes
            aa) issued by public sector issuers       855,871,429.58                                              (51,861)
            ab) issued by other issuers               927,175,829.55                                             (835,380)
                of which:                                              1,783,047,259.13
                eligible as collateral with
                Deutsche Bundesbank €1,774,956,501.57
         b) own bonds and notes                                          49,820,747.17                           (217,844)
            nominal amount €48,094,000.00                                                  1,832,868,006.30     1,105,085

      5. Shares and other non-fixed-income securities                                          4,500,030.73         4,500

      6. Investments in non-affiliated companies                                             41,197,566.38         41,566

      7. Investments in associates                                                           31,091,534.98         50,947

      8. Investments in affiliated companies                                                   2,172,288.61         2,223

      9. Trust assets                                                                        57,598,338.68         31,031
         of which:
         trustee loans €57,598,303.68

     10. Equalisation claims on public authorities
         including bonds due from conversions                                                  6,457,686.04        12,915

     11. Intangible assets                                                                     5,487,270.53        49,106
         of which:
         goodwill €0.00

     12. Tangible assets                                                                     16,894,222.26         27,238

     13. Other assets                                                                       229,851,265.01        202,173

     14. Prepaid expenses                                                                    58,464,639.29         63,107

     Total assets                                                                         21,538,774,294.83    20,062,957




80
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 Group




Equity and Liabilities

                                                                 2004                    2004                 2004      31 Dec. 2003
                                                                    €                       €                    €       € thousand
 1. Liabilities to banks
    a) payable on demand                                                      18,082,980.98                                  (20,488)
    b) with agreed maturities or periods of notice                         6,151,559,411.59                               (8,634,315)
                                                                                                   6,169,642,392.57        8,654,803
 2. Liabilities to customers
    other liabilities
    a) payable on demand                                                     100,524,697.66                                 (238,974)
    b) with agreed maturities or periods of notice                         2,723,254,054.84                               (1,790,134)
                                                                                                   2,823,778,752.50        2,029,108
 3. Certificated liabilities
    a) bonds issued                                                                               10,976,204,266.92        8,013,749

 4. Trustee liabilities                                                                              57,598,338.68            31,032
    of which:
    trustee loans €57,598,303.68

 5. Other liabilities                                                                                85,212,799.98            73,825

 6. Deferred income                                                                                  21,427,144.81            21,764

 7. Provisions
    a) for pensions and similar obligations                                   18,388,384.00                                  (14,379)
    b) for taxes                                                               7,260,302.68                                   (3,477)
    c) other                                                                  77,797,165.95                                  (55,580)
                                                                                                    103,445,852.63            73,436

 8. Subordinated liabilities                                                                        313,322,970.29           313,323
    of which:
    due in less than two years €0.00

 9. Profit participation capital                                                                    221,000,000.00           221,000

10. Equity
    a) subscribed capital                                                    400,000,000.00                                 (400,000)
    b) capital reserves                                                      324,129,635.28                                 (220,741)
    c) revenue reserves
       ca) legal reserves                                         0.00                                                            (0)
       cb) statutory reserves                             5,122,641.78                                                        (5,122)
       cc) other reserves                                         0.00            5,122,641.78                                    (0)
    d) group reserves                                                                     0.00                                    (0)
    e) equalisation item for shares
       of other shareholders                                                 – 4,771,598.55                                   (2,432)
    f) consolidated net retained profits                                     42,661,097.94                                    (2,622)
                                                                                                    767,141,776.45           630,917




Total liabilities                                                                                 21,538,774,294.83       20,062,957

 1. Contingent liabilities
    a) liabilities on endorsed bills of
       exchange settled with customers                                                 0.00                                       (0)
    b) liabilities on guarantee and warranty agreements                    1,048,854,016.94                                 (639,665)
    c) liabilities on assets pledged as
       collateral for third party liabilities                                            0.00                                     (0)
                                                                                                   1,048,854,016.94          639,665
 2. Other obligations
    Irrevocable loan commitments                                                                   1,001,730,799.87        1,402,710

 3. Assets under management                                                                            3,005,798.35            3,395


                                                                                                                                         81
     Consolidated Profit and Loss Account

     for the period from 1 January – 31 December 2004

                                                               2004               2004             2004    31 Dec. 2003
                                                                  €                  €                €     € thousand
      1. Interest income from
         a) lending and money market operations       906,016,661.50                                          (761,110)
         b) fixed-income securities and
            government debt                            53,189,473.18                                            (48,013)
                                                                       959,206,134.68

      2. Interest expenses                                             850,726,992.50                         (745,100)
                                                                                          108,479,142.18        64,023

      3. Current income from
         a) shares and other
            non-fixed-income securities                                     136,098.39                             (132)
         b) investments in non-affiliated companies                       5,879,785.71                           (8,285)
         c) investments in affiliated companies                              99,876.63                             (155)
                                                                                            6,115,760.73          8,572

      4. Result from associated companies                                                   2,548,348.66         1,036

      5. Income from profit-pooling,
         profit-transfer agreements or
         partial profit-transfer agreements                                                    17,092.10            22

      6. Commissions received                                            14,412,629.91                          (13,669)

      7. Commissions paid                                                12,485,536.10                          (11,876)
                                                                                            1,927,093.81          1,793

      8. Net income on financial operations                                                 1,149,509.27         1,640

      9. Other operating income                                                            88,435,075.50        48,213

     10. General administrative expenses
         a) staff expenses
            aa) wages and salaries                     42,062,017.73                                            (36,078)
            ab) social security contributions
                 and expenses for pensions and
                 other employee benefits               13,792,401.33                                             (8,426)
                 of which:                                               55,854,419.06
                 for pension expenses €5,160,225.55
         b) other administrative expenses                                36,711,606.53                          (34,200)
                                                                                           92,566,025.59         78,704

     11. Amortisation and depreciation
         of intangible and tangible assets                                                 17,192,293.73        16,151

     12. Other operating expenses                                                          48,779,475.79        23,056

                                                                       Carried forward:    50,134,227.14         7,388




82
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for the period from 1 January – 31 December 2004

                                                     2004                 2004               2004      31 Dec. 2003
                                                        €                    €                  €       € thousand
                                                              Brought forward:      50,134,227.14             7,388

13. Write-downs and adjustments to
    receivables and certain securities and
    additions to provisions for credit risks                                       110,730,605.25           103,358

14. Write-downs and adjustments to investments
    in non-affiliated and affiliated companies
    and securities treated as fixed assets                                          34,594,130.56                 0

15. Income from write-ups of investments
    in non-affiliated and affiliated companies
    and securities treated as fixed assets                                                   0.00            99,079

16. Expenses from the assumption of losses                                              10,971.49                13

17. Result of ordinary operations                                                  – 95,201,480.16            3,096

18. Income taxes                                                      57,700.92                            (– 1,936)

19. Other taxes not included under
    “Other operating expenses”                                       124,152.63                                 (70)
                                                                                       181,853.55           – 1,868

20. Net income/net loss for the year                                               – 95,383,333.71            4,964

21. Withdrawals from capital reserves                                              136,425,259.71                 0

22. Appropriations to reserves
    a) legal reserves                                                      0.00                                  (0)
    b) statutory reserves                                                  0.00                                (273)
    c) other reserves                                                      0.00              0.00                 0

23. Profit/loss attributable to shareholders
    outside the Group                                                               – 1,619,171.94            2,068

Net retained profits                                                                42,661,097.94             2,622




                                                                                                                        83
     Cash Flow Statement in Accordance with GAS 2 – 10

     The reported cash and cash equivalents include the “Cash funds” and “Bonds and notes issued by public sector issuers eligible
     as collateral with central banks” balance sheet items. There are no restrictions on disposal.



     €m                                                                                                       2004          2003
     1.           Net income for the year (including minority interests in net income)
                  before extraordinary items                                                                 – 95.4           5.0
                  Non-cash items included in net income and reconciliation with
                  cash flows from operating activities
     2.     +     Write-downs, write-ups and depreciation on receivables, tangible and financial assets      133.6          132.8
     3.     +     Change in provisions                                                                        30.0           29.1
     4.     –     Change in other non-cash items                                                              – 3.0          – 7.0
     5.     +/–   Gain on disposal of financial and tangible assets                                             0.0       – 125.7
     6.     –     Other adjustments (net)                                                                  – 116.7         – 77.0
     7.     =     Subtotal                                                                                   – 51.5        – 42.8
                  Change in working capital
     8.           Receivables
     8a.    +      – from banks                                                                              302.6        – 577.5
     8b.    +      – from customers                                                                        1,011.7      – 1,123.4
     9.     –     Securities (except those treated as financial assets)                                    – 611.1          145.7
     10.    –     Other assets relating to operating activities                                             – 26.3            7.5
     11.          Liabilities
     11a.   –      – to banks                                                                             – 3,470.7       – 895.0
     11b.   +      – to customers                                                                             784.3       1,179.6
     12.    +     Certificated liabilities                                                                  1,758.3         502.8
     13.    +     Other liabilities relating to operating activities                                           11.1          21.7
     14.    +     Interest and dividends received                                                             941.1         805.0
     15.    –     Interest paid                                                                             – 818.5       – 686.0
     16.    +     Proceeds from extraordinary items                                                             0.0           0.0
     17.    –     Payments for extraordinary items                                                              0.0           0.0
     18.    +     Income taxes paid                                                                             2.1           4.4
     19.    =     Cash flows from operating activities                                                     – 166.9        – 658.0
     20.          Cash receipts from the disposal of
     20a.   +      – financial assets                                                                         21.3          236.4
     20b.   +      – tangible assets                                                                           4.3           47.7
     21.          Cash payments for investment in
     21a.   –      – financial assets                                                                      – 118.3         – 39.7
     21b.   –      – tangible assets                                                                          – 0.8          – 3.3
     22.    +     Cash receipts from the disposal of consolidated companies and other business units            0.0         112.8
     23.    –     Cash payments for the acquisition of consolidated companies and other business units          0.0        – 31.5
     24.    –     Changes in funds relating to other investing activities (net)                                 0.0            0.0
     25.    =     Cash flows from investing activities                                                       – 93.5         322.4
     26.    +     Cash receipts from the issue of capital (capital increases, sale of own shares, etc.)      273.0          234.5
     27.          Cash payments to owners and minority shareholders
     27a.   –      – dividends paid                                                                            0.0            0.0
     27b.   –      – other payments                                                                            0.0            0.0
     28.    +     Changes in funds relating to “other capital” (net)                                           0.0          125.0
     29.    =     Cash flows from financing activities                                                       273.0          359.5
     30.          Net change in cash funds (lines 19, 25, 29)                                                 12.6           23.9
     31.    –     Change in cash funds from exchange rate movements,
                  changes in Group structure and the measurement of cash funds                                – 6.7        – 29.7
     32.    +     Cash funds at beginning of period                                                             6.4          12.2
     33.    =     Cash funds at end of period                                                                 12.3            6.4




84
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 Group




Segment Reporting in Accordance with GAS 3

Segment reporting is based on data used for external financial reporting and the
internal management information system. Segments in the primary reporting format
are derived from WIB’s customer-oriented organisational structure.

Segment reporting includes the following reportable segments:

  National Investors mainly deals with customers based in Germany. This segment
  also comprises real estate investment banking and real estate joint venture
  activities.

  International Investors is primarily responsible for customers based outside
  Germany.

  The Private Customers segment includes private residential financing, which is
  processed via the “ImmoBankdirekt” Internet platform, among other channels.

  The Investments segment comprises the Bank’s Equity Investments department,
  the Bank’s direct investments and the companies included in the consolidated
  financial statements. Intersegment sales have already been eliminated.

The Services segment includes income and expenses that are not directly
attributable, and the earnings contribution from asset/liability management.

The segment result was calculated in accordance with Group accounting policies
and allocated to the individual segments to reflect the proportionate segment income
and expense. The segment income reported under net interest income is calculated
according to the market rate method and allocated to the Investors/Private Customers
segments. The segment income represents the result of ordinary operations.
Segment assets comprise receivables, securities and equity investments. Segment
liabilities were not disclosed due to global refinancing.




                                                                                                                    85
     Breakdown by Department

     €m                                    National   International      Private         Equity   Services   Consolidation   Consolidated
                                          Investors       Investors   Customers    Investments                                   Amount
     Net interest income
        2004                                  46.4            45.6          13.7          – 7.0        9.8             0.0          108.5
        2003                                  27.3            46.2          12.1          – 7.5     – 14.1             0.0           64.0
     Current income
        2004                                    4.1             0.0          0.0            4.6        0.1           – 2.7            6.1
        2003                                    4.6             0.0          0.0            9.1        0.0           – 5.1            8.6
     Result from associates
        2004                                    0.0             0.0          0.0            0.0        0.0             2.5            2.5
        2003                                    0.0             0.0          0.0            0.0        0.0             1.0            1.0
     Net commission income
        2004                                    1.7             6.2        – 6.6            2.9      – 2.3             0.0            1.9
        2003                                    3.4             6.7        – 8.8            0.9      – 0.4             0.0            1.8
     Net income on financial operations
        2004                                    0.0             0.0          0.0            0.0        1.1             0.0            1.1
        2003                                    0.0             0.0          0.0            0.0        1.6             0.0            1.6
     Income
        2004                                  52.2            51.8           7.1            0.5        8.7           – 0.2          120.1
        2003                                  35.3            52.9           3.3            2.5     – 12.9           – 4.1           77.0
     Staff expenses
        2004                                   9.7              5.6          4.9          23.8        14.6           – 2.6           55.9
        2003                                   8.1              6.5          4.3          11.2        14.4             0.0           44.5
     Non-staff expenses
        2004                                   3.7              2.6          1.2          10.3        21.4           – 2.4           36.7
        2003                                   2.6              2.9          1.3          11.6        18.7           – 2.9           34.2
     Amortisation and depreciation of intangible
     and tangible assets
        2004                                   0.2              0.1          0.1            2.6       13.7             0.4           17.2
        2003                                   0.2              0.1          1.2            8.8        5.8             0.0           16.1
     Administrative expenses
       2004                                   13.6              8.3          6.2          36.6        49.7           – 4.6          109.8
       2003                                   10.9              9.5          6.8          31.6        38.9           – 2.9           94.8
     Other operating income/expense
        2004                                    1.0             0.0          0.0          38.0         4.1           – 3.4           39.7
        2003                                    0.5             0.0          0.0          31.1       – 1.2           – 5.2           25.2
     Operating profit before risk provisions
       2004                                  39.6             43.5           0.9            1.9     – 36.9             1.0           50.1
       2003                                  24.9             43.4         – 3.5            2.0     – 53.0           – 6.4            7.4
     Risk provisions
        2004                                 105.9            – 3.2          3.0         121.5       – 2.9          – 79.0          145.3
        2003                                  47.8              3.8          3.7         – 55.4      30.9           – 26.5            4.3
     Result of ordinary operations
       2004                                  – 66.3           46.7         – 2.1        – 119.6     – 34.0            80.0         – 95.2
       2003                                  – 22.9           39.6         – 7.2           57.4     – 83.9            20.1            3.1
     Expense/income ratio
       2004                                     0.3             0.2          0.9            1.0        3.9                            0.7
       2003                                     0.3             0.2          2.1            0.9      – 2.8                            0.9
     Other segment amounts
     Segment assets
        2004                                8,207.5        4,016.1       2,440.8         143.2     6,368.9          – 18.3       21,158.2
        2003                                6,600.6        4,761.4       1,932.8         161.4     6,239.1          – 11.4       19,683.9
     Regulatory risk items
        2004                                5,389.0        4,025.1       1,343.9          85.3      726.1              0.0       11,569.4
        2003                                5,464.7        4,641.7         878.4         102.6      805.4              0.0       11,892.8
     Tied-up capital
        2004                                 431.1           322.0         107.5            6.8       58.1                          925.6
        2003                                 437.2           371.3          70.3            8.2       64.4                          951.4
     Return on tied-up capital
        2004 (%)                             – 15.4           14.5         – 2.0      – 1,752.6     – 58.6                         – 10.3
        2003 (%)                              – 5.2           10.7        – 10.2          699.3    – 130.2                            0.3




86
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 Group




Result by Geographical Segment

€m                                                   Germany             Great Britain          Consolidation           Consolidated amount

                                                    2004       2003       2004     2003          2004         2003          2004       2003
Net interest income                             103.6          59.7        4.9       4.3           0.0            0.0      108.5       64.0
Current income                                    6.1           8.6        0.0       0.0           0.0            0.0        6.1        8.6
Result from associates                            2.5           1.0        0.0       0.0           0.0            0.0        2.5        1.0
Net income on financial operations                1.4           0.8        0.5       1.0           0.0            0.0        1.9        1.8
Net commission income                             1.2           1.4        0.0       0.2           0.0            0.0        1.2        1.6
Income                                          114.8          71.5        5.4       5.5           0.0            0.0      120.2       77.0
Staff expenses                                      54.5       42.6        1.4       1.9           0.0            0.0       55.9       44.5
Non-staff expenses                                  35.6       33.1        1.1       1.1           0.0            0.0       36.7       34.2
Amortisation and depreciation of
intangible and tangible assets                      17.2       16.1        0.0       0.0           0.0            0.0       17.2       16.1
Administrative expenses                         107.3          91.8        2.5       3.0           0.0            0.0      109.8        94.8
Other operating income                              39.7       25.2        0.0       0.0           0.0            0.0       39.7       25.2

Operating profit before risk provisions             47.2        4.9        2.9       2.5           0.0            0.0       50.1         7.4
Risk provisions                                 145.3           4.3        0.0       0.0           0.0            0.0      145.3         4.3

Result of ordinary operations                   – 98.1          0.6        2.9       2.5           0.0            0.0      – 95.2        3.1
Expense/income ratio                                 0.7        0.9        0.5       0.5                                      0.7        0.9
Other segment amounts
Segment assets                                20,524.3     18,827.3      891.6     976.9       – 257.7      – 120.3      21,158.2   19,683.9
Regulatory risk items                         10,753.4     10,906.8      889.4     999.3        – 73.4       – 13.3      11,569.4   11,892.8
Tied-up capital                                  860.3        872.5       71.2      79.9          – 5.9        – 1.0        925.6      951.4
Return on tied-up capital (%)                   – 11.4          0.1        4.1       3.1                                   – 10.3        0.3




                                                                                                                                               87
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                                                                                                                                                    Group




     Statement of changes in Group equity in accordance with GAS 7

                                                                                                               Parent company                                                                                              Minority shareholders


                                     Subscribed        Uncalled     Capital   Revenue    Own shares       Accumulated other gains and                   Equity         Own shares          Equity    Minority           Accumulated other gains and               Equity   Total Group
                                         capital         unpaid    reserves   reserves      held for   losses recognised directly in equity         reported in        not held for                 interest in      losses recognised directly in equity                       equity
                                                   contributions                         redemption       Currency          Other items            consolidated        redemption                       equity          Currency            Other items
                                         Share                                                           translation                              balance sheet                                                       translation
                                         capital                                                       adjustments                                                                                                   adjustments



     Balance as at
     31 December 2003                   400.0               0.0     225.9         2.6          0.0                 0.0                  0.0             628.5                 0.0         628.49          2.4                        0.0                    0.0    2.4         630.9


     Proceeds from issue of shares         0.0              0.0        0.0        0.0          0.0                 0.0                  0.0                0.0                0.0            0.0          0.0                        0.0                    0.0    0.0            0.0


     Acquisition/redemption
     of own shares                         0.0              0.0        0.0        0.0          0.0                 0.0                  0.0                0.0                0.0            0.0          0.0                        0.0                    0.0    0.0            0.0


     Dividends paid                        0.0              0.0        0.0        0.0          0.0                 0.0                  0.0                0.0                0.0            0.0          0.0                        0.0                    0.0    0.0            0.0


     Changes in the
     consolidated Group                    0.0              0.0        0.0        0.0          0.0                 0.0                  0.0                0.0                0.0            0.0        – 7.2                        0.0                    0.0   – 7.2         – 7.2


     Other changes                         0.0              0.0     103.4      135.4           0.0                 0.0                  0.0             238.8                 0.0         238.8           0.0                        0.0                    0.0    0.0         238.8


     Consolidated net income
     for the period                        0.0              0.0        0.0    – 95.4           0.0                 0.0                  0.0            – 95.4                 0.0         – 95.4          0.0                        0.0                    0.0    0.0        – 95.4


     Other gains and losses
     recognised directly in equity         0.0              0.0        0.0        0.0          0.0                 0.0                  0.0                0.0                0.0            0.0          0.0                        0.0                    0.0    0.0            0.0


     Comprehensive income                     –               –          –          –             –                    –                      –              –                   –                           –                          –                    –


     Balance as at
     31 December 2004                   400.0               0.0     329.3       42.7           0.0                 0.0                  0.0             771.9                 0.0         771.9         – 4.8                        0.0                    0.0   – 4.8        767.1




88                                                                                                                                                                                                                                                                                       89
     Notes to the Consolidated Financial Statements as of 31 December 2004

                            I. General Information

                            Basis of Preparation

                            The consolidated financial statements of Westdeutsche ImmobilienBank Group
                            (WIB) were prepared in accordance with the provisions of the Handelsgesetzbuch
                            (HGB – German Commercial Code) and the Verordnung über die Rechnungslegung
                            der Kreditinstitute (RechKredV – German Bank Accounting Regulation). The following
                            section provides a discussion of those transactions that are treated differently in the
                            consolidated financial statements than in the single-entity financial statements, or
                            that require additional information under the consolidated reporting rules.

                            Information that can be included either in the balance sheet or in the Notes is
                            included in the Notes.

                            The Westdeutsche ImmobilienBank Group comprises 84 companies in addition to
                            Westdeutsche ImmobilienBank itself. 13 of these companies are fully consolidated
                            and 29 companies are included at equity in the consolidated financial statements
                            using the purchase method of accounting. Changes in the number of companies
                            consolidated in comparison with the previous year are due to the first-time
                            consolidation of five fully consolidated companies and eleven associated companies,
                            and the deconsolidation of three fully consolidated companies. Carrying amounts
                            were eliminated in the course of the first-time consolidation of fully consolidated
                            and associated companies at the date when the equity interests were acquired.
                            The inclusion of the companies carried at equity resulted in a negative value of
                            €34.5 million, due to start-up losses incurred by project developments.

                            Consolidation Principles

                            The financial statements of the individual Group companies were prepared using
                            the uniform accounting policies applied at Westdeutsche ImmobilienBank.
                            Receivables and liabilities between companies included in the consolidated financial
                            statements were eliminated, as were intercompany profits, expenses and income.

                            The book values of the investments in the companies included in consolidation were
                            eliminated against the proportionate equity using the purchase method of accounting.
                            Until 31 December 2003, goodwill arising from consolidation was reduced by
                            straight-line amortisation over a period of 15 years. As of the beginning of the year
                            under review, net goodwill from previous periods and goodwill from first-time
                            consolidation are deducted directly from Group reserves.

                            Non-consolidated Companies

                            42 of the 85 Group companies were not included in consolidation as they were only
                            of minor importance to the presentation of the Group’s net assets, financial position
                            and results of operations.

                            Accounting Policies

                            The financial statements of the companies included in consolidation were prepared
                            using the uniform accounting, measurement and recognition policies applied at
                            Westdeutsche ImmobilienBank.




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 Group




Assets and liabilities are measured in accordance with sections 252 ff. of the HGB
and the supplementary provisions for credit institutions laid down in sections 340 ff.
of the HGB.

All receivables are carried at their principal amount. Discounts retained on the dis-
bursement of loans are distributed across the term of the loan or the fixed-interest
period and are deducted from the receivables portfolio. Liabilities are carried at
the redemption amount, with discounts being transferred to prepaid expenses. The
option to capitalise deferred taxes was exercised.

Premiums on receivables or liabilities are allocated to prepaid expenses or deferred
income as appropriate.

Ratable interest is disclosed along with the underlying receivable or liability in
each case.

Adequate risk provisions were set up for all discernible risks from the loan portfolio.

Long-term investments (investment portfolio) are measured at cost, whereas securities
held as part of the liquidity reserve are measured at the strict lower of cost or market.
In the case of long-term investments (investment portfolio), differences between
cost and the redemption amount are reversed ratably in income.

Investments in affiliated and non-affiliated companies are carried at cost. Write-
downs to the fair value were charged in the case of expected lasting impairment.

Depreciation and amortisation were charged on tangible assets and intangible
assets with finite useful lives in line with the options available under tax law.
Low-value assets were written off in full in the year of their acquisition.

In accordance with section 6 a of the Einkommensteuergesetz (EStG – German
Income Tax Act), a provision for pensions was set up in accordance with actuarial
principles.

Provisions were set up in the amount dictated by sound business judgement; they
take into account all discernible risks and uncertain obligations.

Currency translation was performed in accordance with section 340 h of the HGB
and Accounting Principle IDW BFA 3/95. WIB does not distinguish between “special
cover” (micro hedging) and cover in the same currency. As a result, all expenses
and income from currency translation are recognised in the profit and loss account.
Assets and liabilities in foreign currency and spot forex transactions are translated
at the European Central Bank rates at the balance sheet date. Uncompleted forward
transactions are translated at the forward rate on the balance sheet date, unless
they were entered into to hedge interest-bearing positions. If forward transactions
are clearly intended as hedges for interest-bearing positions, the swap premiums
are deferred ratably and reported in net interest income.




                                                                                                                       91
     II. Balance Sheet and Profit and Loss Account Disclosures

     Receivables from Banks

     Receivables from banks are broken down as follows:


                                                             2004                   2003
                                                              €m                     €m
     Payable on demand                                        50.3                 306.2
     With a residual maturity of:
     – up to three months                                   720.3                  546.7
     – between three months and one year                    276.7                  104.1
     – between one year and five years                      879.6                  979.8
     – more than five years                                 258.5                  526.5
     Total                                                 2,185.4                2,463.3
     of which:
     – From affiliated companies                            100.5                     9.0



     Receivables from Customers

     Receivables from customers are broken down as follows:


                                                             2004                   2003
                                                              €m                     €m
     With a residual maturity of:
     – up to three months                                    923.8                  826.4
     – between three months and one year                     948.3                1,334.2
     – between one year and five years                     8,740.3                4,944.4
     – more than five years                                6,442.0                8,898.4
     Total                                                17,054.4               16,003.4
     of which:
     – Undated                                              330.1                  345.4
     – From affiliated companies                            341.8                  348.9



     Undated transactions are included in receivables from customers with a residual
     maturity of up to three months.

     Receivables from customers include subordinated receivables in the amount of
     €9.9 million.

     The following table shows the Group’s portfolio of receivables secured by
     mortgages:


                                                             2004                   2003
                                                              €m                     €m
     With a residual maturity of:
     – up to three months                                     97.6                   67.3
     – between three months and one year                     149.3                  125.0
     – between one year and five years                     2,098.4                  358.8
     – more than five years                                1,835.7                2,274.5
     Total                                                 4,181.0                2,825.6
     of which:
     – From affiliated companies                              17.3                  43.3




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 Group




This item consists exclusively of receivables classified as property loans under the
Hypothekenbankgesetz (German Mortgage Bank Act).

Bonds and Other Fixed-income Securities

The Group’s portfolio of these securities has the following structure:


                                                         2004                  2003
                                                          €m                    €m
Bonds and notes                                        1,832.9               1,105.1
Of which:
– Publicly traded                                      1,832.9               1,105.1
– Not publicly traded                                      0.0                   0.0
Of which:
– Receivables from affiliated companies                    0.0                  25.3
Total                                                  1,832.9               1,105.1



The issuers of these bonds can be broken down as follows:


                                                         2004                  2003
                                                          €m                    €m

Bonds and notes issued by public issuers
eligible as collateral with Deutsche Bundesbank
– maturing in the following year                          16.4                   1.9
– not maturing in the following year                     839.5                  50.0
Bonds and notes issued by other issuers
eligible as collateral with Deutsche Bundesbank
– maturing in the following year                         149.6                 359.0
– not maturing in the following year                     769.5                 448.1
Other
– maturing in the following year                           0.1                   0.2
– not maturing in the following year                       8.0                  28.0
Own bonds
– maturing in the following year                           1.4                   9.9
– not maturing in the following year                      48.4                 208.0
Total                                                  1,832.9               1,105.1



These holdings were classified and managed separately by their designated purpose.
As a result, the portfolio can be broken down into the following sub-areas, which
must be treated differently for measurement purposes:


                                                         2004                  2003
                                                          €m                    €m
Liquidity reserve                                      1,436.3                 817.4
Investment portfolio                                     396.6                 287.7
Total                                                  1,832.9               1,105.1




                                                                                                                    93
                                                     The investment portfolio in the amount of €396.6 million (previous year: €287.7 million)
                                                     forms part of the Company’s fixed assets and was measured in accordance with
                                                     section 253 (2) of the HGB.

                                                     Shares and Other Non-fixed-income Securities

                                                     None of the securities reported under this item in the total amount of €4.5 million
                                                     (previous year: €4.5 million) are marketable. They consist of investment certificates
                                                     which are allocated to the liquidity reserve.

                                                     Investments in Affiliated and Non-affiliated Companies

                                                     As of the balance sheet date, the companies included in consolidation held invest-
                                                     ments in other companies totalling €41.2 million (previous year: €43.8 million).

                                                     The list of investments required under section 285 no. 11 and section 313 (2) of the
                                                     HGB has been deposited with the Mainz Local Court.

                                                     Investments in affiliated companies not included in consolidation amounted to
                                                     €2.2 million (previous year: €2.2 million).

                                                     Fixed Assets

                                                     The following table provides an overview of the changes in fixed assets. The
                                                     amounts stated for bonds and fixed-income securities, including the equalisation
                                                     claims item, do not include ratable interest. The changes in the fiscal year include
                                                     additions and disposals as well as changes in the assets due to the ratable reversal
                                                     of premiums and discounts.


     Amounts in € m         Acquisition/    Additions     Disposals    Transfers   accumulated    Depreciation/       Net book        Net book
                             production        during        during                depreciation    amortisation      value as of     value as of
                                    cost   fiscal year   fiscal year                       and       charge for
                                                                                   amortisation      fiscal year

                                                                                                                   31 Dec. 2004    31 Dec. 2003
     Bonds/fixed-income
     securities                   287.1         108.6           1.8          0.0            0.0             0.0           393.9           287.1
     Investments in
     affiliated companies            2.6         25.5          25.6          0.0            0.3             0.0             2.2             2.2
     Investments in
     non-affiliated
     companies                    112.8          11.7          42.1          0.0           10.1             0.0            72.3            92.5
     Goodwill                     104.1           0.0          41.4          0.0           62.7             7.7             0.0            49.1
     Intangible assets              0.5           6.3           0.0         20.3           21.6             0.9             5.5             0.0
     Land and buildings            23.2           0.4           0.0          0.0           12.4             0.0            11.2            12.9
     Office and operating
     equipment                     43.1           4.3           7.0       – 20.3           14.4             0.0             5.7            14.3
     Total                        573.4         156.8         117.9          0.0         121.5              8.6           490.8           458.1




94
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 Group




The Westdeutsche ImmobilienBank Group did not use its land and buildings for its
own business purposes. An amount of goodwill carried in intangible assets was written
off in the year under review.

Trust Assets

The Trust assets item consists in particular of trustee loans to customers totalling
€57.6 million (previous year: €31.0 million).

Other Assets

This item includes the following:


                                                            2004                  2003
                                                             €m                    €m
Land and buildings held as current assets                   99.6                   78.9
Foreign currency adjustment items                           32.0                   25.3
Receivables from the disposal of
shares in companies                                          0.0                   12.0
Deferred tax assets                                         14.5                   10.2
Receivables from the tax authorities                         8.4                    8.6
Shares in companies                                          6.8                    6.8
Construction projects in progress                            6.6                    0.0
Other                                                       62.0                   60.4
Total                                                      229.9                  202.2




Prepaid Expenses

This item includes the following:


                                                            2004                  2003
                                                             €m                    €m
Premium from receivables                                    18.4                   25.5
Discount from issuing business                              24.2                   16.2
Discount from liabilities                                    3.7                    4.2
Upfront payments on swaps                                   10.3                   12.8
Other                                                        1.9                    4.4
Total                                                       58.5                   63.1




                                                                                                                        95
     Liabilities to Banks

     Liabilities to banks can be broken down by maturity as follows:


                                                                   2004                    2003
                                                                    €m                      €m
     Payable on demand                                              18.1                    20.5
     With a residual maturity of:
     – up to three months                                        1,067.8                 1,921.2
     – between three months and one year                         1,053.5                 1,958.2
     – between one year and five years                           2,998.4                 3,722.0
     – more than five years                                      1,031.8                 1,032.9
     Total                                                       6,169.6                 8,654.8
     of which:
     – To affiliated companies                                   1,709.4                 1,936.3



     Liabilities to Customers

     Liabilities to customers are broken down as follows:


                                                                   2004                    2003
                                                                    €m                      €m
     Payable on demand                                             100.5                  239.0
     With a residual maturity of:
     – up to three months                                          109.5                   100.9
     – between three months and one year                             8.5                   422.7
     – between one year and five years                             394.9                   230.7
     – more than five years                                      2,210.4                 1,035.8
     Total                                                       2,823.8                 2,029.1
     of which:
     – To affiliated companies                                       0.0                     0.1
     – To non-affiliated companies                                  29.4                    17.5


     Certificated Liabilities

     Of the certificated liabilities totalling €10,976.2 million (previous year: €8,013.7 million),
     €1,361.7 million is due in the following year.

     Trustee Liabilities

     Trustee liabilities relate primarily to customers and amount to €57.6 million
     (previous year: €31.0 million).




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 Group




Other Liabilities

The main components of this item, which totalled €85.2 million (previous year:
€73.8 million), are obligations to make capital contributions, trade payables, pro
rata interest from subordinated liabilities and profit participation rights, as well as
tax liabilities.

Deferred Income

This item includes the following:


                                                           2004                   2003
                                                            €m                     €m
Premium from issuing business                                0.7                    0.7
Other                                                       20.7                   21.1
Total                                                       21.4                   21.8



Subordinated Liabilities

The following subordinated liabilities account for more than 10% of all subordinated
liabilities.

Currency            Principal amount in € m     Interest rate in %              Maturity
EUR                                    125.0                   4.8            2003 – 2013


The subordinated liabilities in the amount of €313.3 million (previous year:
€313.3 million) comply with the requirements of section 10 (5 a) sentence 1 of the
Kreditwesengesetz (KWG – German Banking Act). No extraordinary call rights have
been granted. Expenses in relation to subordinated liabilities totalled €16.9 million
(previous year: €12.5 million).

Foreign Currency Items

At the balance sheet date, assets denominated in foreign currency amounted to
€2,816.9 million (previous year: €3,511.7 million), while foreign currency liabilities
amounted to €2,815.1 million (previous year: €3,406.1 million).

Profit and Loss Account

A geographical breakdown of the interest income, current income from investments
in non-affiliated and affiliated companies, shares and other non-fixed-income
securities, commissions received, net income on financial operations and other
operating income totalling €1,070.4 million reveals that €1,021.3 million relates to
Germany and €49.1 million to the United Kingdom.




                                                                                                                           97
     III. Supplementary Disclosures

     Other Financial Obligations

     Annual rental and lease obligations amounted to €4.8 million (previous year:
     €6.8 million), and other obligations to €3.7 million per annum.

     Westdeutsche ImmobilienBank is a member of the Sicherungsreserve (Reserve
     Fund) of the Landesbanken/Girozentralen (Central Savings Banks). At the balance
     sheet date, the Bank had an obligation to make additional payments to this fund in
     the amount of €14.8 million (previous year: €11.2 million).

     Securities with a nominal value of €1,126.9 million (previous year: €503.0 million)
     were deposited as collateral for open market transactions with the Deutsche
     Bundesbank as of 31 December 2004.

     Securities with a nominal value of €237.6 million are assigned as collateral to
     secure payment obligations from the issuance of credit-linked notes.

     Two consolidated companies are members of WestLB GmbH’s welfare fund.
     Pension provisions not covered by income from the welfare fund’s investments total
     €8.1 million (previous year: €5.9 million).

     Coverage

     Coverage in accordance with the Pfandbriefgesetz (Pfandbriefe Act – German Act on
     Pfandbriefe and Related Bonds Issued by Public Sector Credit Institutions) is broken
     down as follows:


                                                              2004                     2003
                                                               €m                       €m
     Mortgage Pfandbriefe requiring cover                   3,229.9               2,018.8
     To cover specific assets
     – Receivables from customers/banks                     4,051.3               2,524.9
     Cover overhang                                           821.4                 506.1
     Public sector Pfandbriefe requiring cover              3,199.5               4,038.4
     To cover specific assets
     – Receivables from customers/banks                     5,486.5               4,536.8
     Cover overhang                                         2,287.0                 498.4
     Other Pfandbriefe requiring cover                      5,925.0               3,245.0
     To cover specific assets
     – Receivables from customers/banks                     6,759.7               7,970.3
     Cover overhang                                          834.7                4,725.3




98
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 Group




Derivatives Transactions

In compliance with the extended reporting requirements for derivative financial
instruments under the Bilanzrechtsreformgesetz (BilReG – German Accounting
Legislation Reform Act), the disclosure of fair values has been added to the
presentation of derivatives volumes.

Market prices were used to measure derivative financial instruments wherever
available. If market prices do not exist or cannot be reliably determined, the fair
values are determined on the basis of standard market price models or discounted
cash flows.

Derivative transactions were entered into to hedge interest rate and currency
fluctuations and are allocated to the investment portfolio.


Amounts in € m                                               Positive       Negative
                              Notional amounts            fair values     fair values

                                2004             2003          2004             2004

Interest rate risks
Interest rate swaps          14,398.8      11,174.0            214.1            490.7
FRAs                              0.0           0.0              0.0              0.0
Caps, floors                    120.0           0.0              0.0              0.0
Interest rate options
– Calls                         577.0         260.0             14.7              0.0
– Puts                          878.0         710.0              0.0             15.8
Exchange-traded contracts
– Calls                         500.0             0.0            0.3              0.0
– Puts                            0.0             0.0            0.0              0.0
Total                        16,473.8      12,144.0            229.1            506.5
Currency risks
Currency forwards                28.0            28.7            0.9              0.9
Currency swaps/
cross-currency swaps             98.9         103.8             33.5              0.0
Total                           126.9         132.5             34.4              0.9
Credit derivatives
– Calls                       1,014.0       1,329.8              0.0              0.0
– Puts                            0.0           0.0              0.0              0.0
Total                         1,014.0       1,329.8              0.0              0.0




                                                                                                                    99
      Disclosures in Accordance with Section 285 No. 14 of the HGB

      Name                Registered office      Register no.          Location of register
      WestLB AG           Münster                HRB 6400              Münster
                          Düsseldorf             HRB 42975             Düsseldorf


      Number of Staff

      In fiscal year 2003, the Group employed an annual average of 327.3 (previous year:
      261) female and 398.0 (previous year: 291) male staff. The total headcount includes
      1 (previous year: 2) trainees. The increase is the result of the first-time consolidation
      of two fully consolidated companies.

      Corporate Governance Rules

      In December 2003, WIB compiled its own Corporate Governance Rules, which
      are based on the provisions of the German Corporate Governance Code for listed
      companies. The Managing Board and Administrative Board of the Bank have thus
      made a voluntary commitment that goes beyond the statutory requirements. The
      Bank’s Administrative Board and Managing Board and its employees identify with
      these guidelines, which strengthen responsible corporate management and control
      at WIB.

      WIB’s Corporate Governance Rules were amended in December 2004 in accordance
      with the amended Articles of Association. The latest version of WIB’s Corporate
      Governance Rules can be accessed on the Internet at www.westimmobank.com
      (“Portrait”/“Corporate Governance”).

      In fiscal year 2004 WIB was fully compliant with its Corporate Governance Rules.

      Remuneration Paid to Executive Bodies

      The total remuneration paid to the Managing Board of Westdeutsche ImmobilienBank
      amounted to €1.0 million (previous year: €0.9 million); this is broken down into a
      fixed component of €0.7 million and a variable component of €0.3 million. Former
      members of the Managing Board received €0.2 million (previous year: €0.2 million).

      The members of the Administrative Board and the Guarantors’ Assembly received
      €0.04 million (previous year: €0.2 million) from the Group.

      Pension provisions for former members of the Managing Board amounted
      to €3.6 million.



      Mainz, 18 March 2005




      Dieter Groh                                 Klaus Neuhaus




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 Group




Auditor’s Report on the Consolidated Financial Statements

We have issued the following opinion on the consolidated financial statements and
group management report:

“We have audited the consolidated financial statements and the group management
report prepared by Westdeutsche ImmobilienBank, Mainz, for the fiscal year from
January 1, 2004 to December 31, 2004. The preparation of the consolidated financial
statements and group management report in accordance with German commercial law
is the responsibility of the Company’s management. Our responsibility is to express
an opinion on the consolidated financial statements and the group management
report based on our audit.

We have conducted our audit of the consolidated financial statements in accordance
with Sec. 317 HGB [“Handelsgesetzbuch”: German Commercial Code] and the
generally accepted standards for the audit of financial statements promulgated by
the Institut der Wirtschaftsprüfer [in Deutschland] (IDW). Those standards require
that we plan and perform the audit such that misstatements materially affecting the
presentation of the net assets, financial position and results of operations in the
consolidated financial statements in accordance with [German] principles of proper
accounting and in the group management report are detected with reasonable assurance.
Knowledge of the business activities and the economic and legal environment of
the Group and evaluations of possible misstatements are taken into account in the
determination of audit procedures. The effectiveness of the accountingrelated internal
control system and the evidence supporting the disclosures in the consolidated
financial statements and the group management report are examined primarily on a
test basis within the framework of the audit. The audit includes assessing the annual
financial statements of the companies included in consolidation, the determination
of the companies to be included in consolidation, the accounting and consolidation
principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements and the group
management report. We believe that our audit provides a reasonable basis for our
opinion.

Our audit has not led to any reservations.

In our opinion, the consolidated financial statements give a true and fair view of the
net assets, financial position and results of operations of the Group in accordance
with [German] principles of proper accounting. On the whole, the group management
report provides a suitable understanding of the Group’s position and suitably presents
the risks to future development.”



Frankfurt am Main, March 23, 2005



Ernst & Young AG
Wirtschaftsprüfungsgesellschaft




Müller-Tronnier                              Hultsch
Wirtschaftsprüfer                            Wirtschaftsprüfer



                                                                                                                     101
      Members of the Managing Board, Senior Managing Director and
      Heads of Branches and Central Departments

      Members of the Managing Board          Roland Fuchs                        Robert Mohr
                                             Managing Director                   Accounting and Reporting
      Dieter Groh                            Rhine-Main and Continental Europe
      Chairman                                                                   Ewald Neumann
                                             Regina Leslie                       Funds Trustee Unit
      Klaus Neuhaus                          Branch Manager
                                             Madrid Representative Office        Thomas Plagemann
                                                                                 Real Estate Joint Ventures
      Senior Managing Director               Klaus Schreiner
                                             Managing Director                   Heinz-Josef Rensmann
      Claus-Jürgen Cohausz                   United Kingdom                      International Investors/
                                                                                 National Investors
                                                                                 Loans, South
      Market Area and Branch Heads,          Heads of Central Departments
      National and International Investors                                       Rainer Spielmann
                                             Elvira Dettweiler-Scholz            Risk Management
      Jörg Basche                            Personnel
      Managing Director                                                          Günter Schmitz
      South Germany                          Werner Doetsch                      Real Estate InvestmentBanking
                                             National Investors                  National
      Karl-Ernst Bröcker                     Loans, North
      Managing Director                                                          Alexander van Echelpoel
      North Germany                          Volkhard Fröhlich                   Treasury
                                             Equity Investments
      Anne-Isabelle Carbonnières                                                 Martin Weber
      Branch Manager                         Heinrich Hunecke                    Board Administrative Staff/
      Paris Representative Office            Legal/Tax                           Group Development

      Andrew S. Cooper                       Uwe Jablonka
      Managing Director                      Private Customers
      North America                          ImmoBankdirekt

      Heribert Eisenburger                   Klaus-Henning Loss
      Managing Director                      Internal Audit
      North Rhine-Westphalia and Benelux
                                             Heinz Friedrich Mauer
                                             Organisation/IT/ Services




      April 2005



102
 Markets                     The Company                       Financial Report   Names und Locations




Service Companies



Managing Directors                   Addresses

Oliver Priggemeyer                   Westdeutsche ImmobilienHolding
Westdeutsche                         GmbH
ImmobilienHolding GmbH               Völklinger Straße 4
                                     40219 Düsseldorf
Axel Felke                           Germany
(from 2 August 2004)                 Tel. + 49 211 90101-01
Manfred Vidahl                       Fax + 49 211 90101-099
Hermann Müller                       info@immobilienholding.de
(until 2 August 2004)
Allvaris GmbH                        Allvaris GmbH
                                     Völklinger Straße 4
Volkhard Fröhlich                    40219 Düsseldorf
(from 18 January 2005)               Germany
Hubert Müller                        Tel. + 49 211 90101-610
Oliver Priggemeyer                   Fax + 49 211 90101-602
Rainer Bodenburg                     info@allvaris.de
(until 18 January 2005)
Werner Hegemann                      Assetis GmbH
(until 18 January 2005)              Völklinger Straße 4
Assetis GmbH                         40219 Düsseldorf
                                     Germany
Rainer Hamann                        Tel. + 49 211 90101-03
Klaus-Henning Hoffmann               Fax + 49 211 90101-399
WestFonds                            info@assetis.de
Immobilien-Anlagegesellschaft mbH
                                     WestFonds
Ulrich Gerken                        Immobilien-Anlagegesellschaft mbH
Armin Moser                          Völklinger Straße 4
WestGkA Management                   40219 Düsseldorf
Gesellschaft für kommunale           Germany
Anlagen mbH                          Tel. + 49 211 90101-04
                                     Fax + 49 211 90101-402
                                     vertrieb@westfonds.de

                                     WestGkA Management
                                     Gesellschaft für kommunale
                                     Anlagen mbH
                                     Völklinger Straße 4
                                     40219 Düsseldorf
                                     Germany
                                     Tel. + 49 211 90101-05
                                     Fax + 49 211 90101-599
                                     info@westgka.de




                                                                                                        103
      Contacts


      Westdeutsche ImmobilienBank   Hamburg Branch                 New York Representative Office
                                    Karl-Ernst Bröcker             Andrew S. Cooper
      Große Bleiche 46              Schauenburger Straße 23        780 Third Avenue, 14th Floor
      55116 Mainz                   20095 Hamburg                  New York, NY 10017
      Germany                       Germany                        USA
      Tel. + 49 6131 9280-7300      Tel. + 49 40 323214-10         Tel. + 1 212 5880-065
      Fax + 49 6131 9280-7200       Fax + 49 40 326243             Fax + 1 212 5880-992
      info@westimmobank.com         hamburg@westimmobank.com       ny@westimmobank.com

      Piusallee 7                   North-Rhine Westphalia/        London Branch
      48147 Münster                 Benelux Branch                 Klaus Schreiner
      Germany                       Heribert Eisenburger           Woolgate Exchange
      Tel. + 49 251 4888-7698       Völklinger Straße 4            25 Basinghall Street
      Fax + 49 251 4888-7790        40219 Düsseldorf               London EC2V 5HA
      muenster@westimmobank.com     Germany                        United Kingdom
                                    Tel. + 49 211 90101-02         Tel. + 44 20 7020-5401
                                    Fax + 49 211 90101-263         Fax + 44 20 7020-5418
                                    duesseldorf@westimmobank.com   london@westimmobank.com

                                    Munich Branch                  Rhine-Main/Continental Europe Branch
                                    Jörg Basche                    Roland Fuchs
                                    Lenbachplatz 2 a               Große Bleiche 46
                                    80333 München                  55116 Mainz
                                    Germany                        Germany
                                    Tel. + 49 89 552504-25         Tel. + 49 6131 9280-7477
                                    Fax + 49 89 552504-20          Fax + 49 6131 9280-7483
                                    muenchen@westimmobank.com      mainz@westimmobank.com

                                    Private Customers              Madrid Representative Office
                                    ImmoBankdirekt                 Regina Leslie
                                    Uwe Jablonka                   c/ Serrano, 37, 5a plta.
                                    Servatiiplatz 5                28001 Madrid
                                    48143 Münster                  Spain
                                    Germany                        Tel. + 34 91 43280-32
                                    Tel. + 49 251 4888-7769        Fax + 34 91 43280-51 + 65
                                    Fax + 49 251 4888-7780         madrid@westimmobank.com
                                    ibdirekt@westimmobank.com
                                    www.immobank-direkt.de         Paris Representative Office
                                                                   Anne-Isabelle Carbonnières
                                                                   6, rue Lamennais
                                                                   75008 Paris
                                                                   France
                                                                   Tel. + 33 1 4075-7696
                                                                   Fax + 33 1 45611358
                                                                   paris@westimmobank.com




104
 Markets                      The Company                  Financial Report   Names und Locations




National Investors                    Real Estate Joint Ventures
Administration, North                 Thomas Plagemann
Werner Doetsch                        Piusallee 7
Piusallee 7                           48147 Münster
48147 Münster                         Germany
Germany                               Tel. + 49 251 4888-7660
Tel. + 49 251 4888-7610               Fax + 49 251 4888-7787
Fax + 49 251 4888-7784                muenster@westimmobank.com
muenster@westimmobank.com
                                      Funds Trustee Unit
International Investors/              Ewald Neumann
National Investors                    Karl-Ludwig-Straße 23
Administration, South                 68165 Mannheim
Heinz-Josef Rensmann                  Germany
Große Bleiche 46                      Tel. + 49 621 428-2382
55116 Mainz                           Fax + 49 621 428-2252
Germany                               mannheim@westimmobank.com
Tel. + 49 6131 9280-7816
Fax + 49 6131 9280-7158
mainz@westimmobank.com

National Real Estate Investment
Banking
Günter Schmitz
Große Bleiche 46
55116 Mainz
Germany
Tel. + 49 6131 9280-7270
Fax + 49 6131 9280-7307
mainz@westimmobank.com




                                                                                                    105
      Glossary


      Arbitrage                                       Cross-selling effect                         Fungibility/
                                                                                                   fungible Substitutability,
      Business transaction that exploits the          Cross-selling is a sub-area of customer      tradeability
      price differences for the same products         relationship management (CRM). The
      (e. g. securities or currencies) on different   sale of several complementary products       Fungibility
      markets (e. g. various stock markets) to        combines strategic effects, such as          Tradeability due to the interchangeability
      make a profit.                                  increasing customer satisfaction and         of certain assets, particularly on the stock
                                                      intensifying customer loyalty. These         exchange. The measure of fungibility of
                                                      advantages will be produced to a greater     a security or commodity is determined
      Benchmark bond                                  extent in the future as a result of the      by its interchangeability. In the case of
                                                      cooperation between WIB, WestLB AG           real estate, fungibility primarily describes
      A bond that is considered by the market         and the savings banks.                       the potential for third-party use and
      to be a standard reference, as it is issued                                                  saleability of the property.
      by an issuer at an interest rate that is
      regarded as a benchmark by market               Divestment/divestment phase                  Fungible
      participants. A benchmark bond thus                                                          A security or a commodity that is highly
      forms the yardstick for performance             The sale of fixed assets that are not        marketable due to certain characteristics.
      assessment.                                     replaced by new investments. The
                                                      divestment phase describes the period
                                                      in which the sale occurs.                    Interest rate derivatives
      Consortium financing
                                                                                                   In banking, derivatives are financial
      Cooperation, particularly between banks,        Equity financing                             products derived from the classic forms
      to provide solutions for major financing                                                     of investment (e. g. shares, bonds,
      requirements. The purpose of this               Equity financing refers to every form of     gold) such as futures, options, swaps, or
      type of financing to raise particularly         equity financing, such as direct interests   certificates, as well as non-standardised
      high-volume loans, to avoid exceeding           or participation certificates. It can take   forward transactions (e. g. forwards).
      exposure limits and/or to distribute the        many forms.                                  Interest rate derivatives are used to
      risk across several contractual partners.                                                    hedge interest rate fluctuations.
      In consortium financing, one bank takes
      over the role of lead manager.                  Facility management
                                                                                                   Leverage effect
                                                      Services relating to the planning,
                                                      management and financial control of          An investor takes on debt at lower
                                                      a property with the aim of reducing          interest rates or more favourable
                                                      investment and operating costs long-         conditions than he would earn as the
                                                      term. Integrated facility management         return on his investment. The difference
                                                      includes technical, commercial and           between the interest expense and the
                                                      infrastructure services.                     additional return is the leverage effect.




106
 Markets                          The Company                            Financial Report   Names und Locations




Mezzanine capital                              Public Private Partnership (PPP)

In terms of financing structures,              Partnership between public authorities
mezzanine capital occupies a position          and private investors to implement
between equity and debt. Mezzanine             infrastructure projects. PPP is an
finance is generally subordinated and          innovative form of cooperation between
assumes a function similar to equity.          the public sector and business.



Pooled issue/credit pooling                    Scoring

Risk- and profitability-oriented loan          The qualitative assessment of operating
portfolio management. This helps               risk in standardised transactions,
to reduce credit risk and thus helps           performed by awarding points for various
reduce pressure on economic capital            different aspects. The result of the
requirements.                                  scoring process generally serves as the
                                               basis for the loan decision.

Portfolio/real estate portfolio
                                               Workflow optimisation
The sum total of assets is described as
the portfolio. This generally comprises        A method of simplifying and accelerating
equity investments, loans, securities and      work processes aimed at improving
real estate. Portfolio management plays        efficiency (in line with WIB’s formula
an important role in the real estate section   for success, expertise plus speed). For
of a portfolio. It covers the systematic,      example, Internet- and intranet-based
goals-driven planning, management and          systems can be used to optimise repetitive
control of a real estate portfolio with the    or standardised work processes. This
aim of ensuring long-term, sustainable         is especially true in the case of internal
returns.                                       information exchange between
                                               departments.

Private placement

A process by which securities are not
publicly offered. In a private placement,
the issuing bank approaches selected
investors (institutional investors or
investment companies) and places large
parts of the issue with them. Private
placement enables rapid fund raising,
as there is no need for a preliminary
examination or admission to the stock
exchange. No legal deadlines have to
be met.




                                                                                                                  107
Acknowledgements




Westdeutsche ImmobilienBank
Große Bleiche 46
55116 Mainz
Germany
Tel. + 49 6131 9280-7300
Fax + 49 6131 9280-7200

Editor
Marketing/PR, Westdeutsche ImmobilienBank

Conception, Creation und Production
WestTeam Marketing GmbH, Düsseldorf

English Translation
Fry & Bonthrone Partnerschaft, Mainz-Kastel

				
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