Vonovia SE

Annual Report • Jun 20, 2005

2004Annual Report 2004

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Annual Report 2004

Contents

Dear Sirs,

In the financial year 2004, Deutsche Annington Immobilien Group has successfully continued its business model. We can once again present a convincing performance in our three core business areas – housing management, sales and condominium facility management. This is also reflected in our operative results, which have improved once again.

The process of integrating the regional housing companies into a single group with uniform market presentation has gained a dynamic growth of its own, resulting in synergetic energies with a positive effect on results. The commercial and technical processes have been continuously improved. We have reinforced our portfolio by appropriate acquisitions, and made specific investments in modernization and maintenance of our own units. We have continued our option-to-buy scheme with great success: since the start of tenant privatization, more than 10,000 apartments have been sold, primarily to the current tenants.

We have also made further investment in our staff. A group-wide personnel development program has been implemented for further qualification of our senior executives. We now offer training opportunities to school leavers.

Another focal aspect over the last twelve months has been the development of new customer-oriented support and services for our tenants and owners. We are confident that we shall also continue to be successful in future when our customers are convinced of our services expertise. All employees in our Group are currently showing great commitment in working towards this aim.

Dr. Volker Riebel

Chairman of the Management Board Deutsche Annington Immobilien GmbH The German economy has revived slightly in 2004 following three years of stagnation, without seeing a sustained upswing. Growth remained way behind global economic recovery. Altogether the gross domestic product increased by 1.6 percent.

There is continued concern about the weak labor market and low level of private consumption. Nor have all branches and regions profited to the same extent from the positive development. The economic recovery was carried almost exclusively by the export sector, which contributed around three quarters of the growth rate.

The number of completed new housing units in Germany remained on the same low level as in the previous years. The housing market showed non-uniform development; in West Germany, it is the economically underdeveloped regions in

particular which are affected by vacant properties. By contrast, some conurbation areas saw a growth in demand for rented accommodation, so that the residential property market improved slightly compared to the previous year, without experiencing any comprehensive, sustained revival.

Deutsche Annington Immobilien Group has continued to consolidate its position on the German residential property market in the financial year 2004. We have pursued active portfolio management, continuously optimized the propertybusiness processes in the company, and given the company a more distinct profile. Sales figures and results fulfilled our expectations.

Deutsche Annington Immobilien GmbH, Düsseldorf, manages the Group as strategic and operative management holding.

Property portfolio and new purchases

At the end of the financial year, the regional operative housing companies in the Group were managing 70,773 rented units and 539 commercial units throughout Germany. As an addition to our

Our core business areas are:

• • Renting out residential and commercial property
• • Selling condominiums, mainly in the framework of tenant privatization
• • Management of residential

portfolio in the commercially attractive greater Hamburg area, we acquired a residential complex from Allianz Lebensversicherungs-AG with 322 units. The apartments are well equipped, arranged in suitable designs for families and offer good traffic links to the city center. Management of the properties was transferred to Deutsche Annington Heimbau AG, Kiel, which has been part of our Group since 2003 and has further apartments and units in the catchment area of Hamburg.

In the key residential market of North Rhine-Westphalia, we acquired around 4,500 residential units and 33 commercial units from the energy and water utility RWE. The units are located in Essen and Cologne. Most of the apartments were originally built between 1961 and 1970 to house employees of the RWE Group. Ownership was transferred in early 2005. Altogether, Deutsche Annington now therefore manages around 75,000 rented residential units throughout Germany.

These purchases fit in with our strategy of extending our portfolio by integrating property which is suitable for privatization; this is then efficiently managed and successively offered to the tenants, other owner-occupier users and capital investors for purchase, in full compliance with the statutory and additionally agreed tenant protection regulations.

Structure and organization

Our Group with its five regional units constitutes an nationwide organization offering us the specific benefits of being able to implement strategic and operative innovations swiftly while at the same time cultivating our closeness to the customer base. The units remain firmly anchored in local business, but profit from greater centralization of key business management functions, while at the same time making full use of synergetic energies and the development of centers of excellence for specific management functions. This increases efficiency in the Group and accelerates the integration of recent portfolio additions.

The corporate image elaborated together with the staff makes a prime contribution to integration and a uniform identity. The new Corporate Design (CD), which has been implemented through the company throughout the year, is an expression of the successful change processes in the company and a uniform market image.

Deutsche Annington Immobilien GmbH,

National Düsseldorf Erfurt

Deutsche Annington Service GmbH,

NORTH

Deutsche Annington Heimbau AG, Kiel

EAST

Deutsche Eisenbahn-Wohnungs-Gesellschaft mbH, Leipzig BWG Bundesbahn-Wohnungsbaugesellschaft Kassel GmbH

SOUTH

SIEGAU Eisenbahn-Siedlungsgesellschaft Augsburg mbH Baugesellschaft Bayern mbH, Munich Eisenbahn-Wohnungsbaugesellschaft Nürnberg GmbH, Nuremberg Bundesbahn-Wohnungsbaugesellschaft Regensburg mbH

SOUTHWEST

BWG Frankfurt am Main Bundesbahn-Wohnungsgesellschaft mbH Eisenbahn-Wohnungsbau-Gesellschaft Karlsruhe GmbH "Siege" Siedlungsgesellschaft für das Ver-

kehrspersonal mbH Mainz

WEST

Wohnungsgesellschaft Ruhr-Niederrhein mbH Essen

Deutsche Annington Rhein-Ruhr GmbH & Co. KG, Essen

Eisenbahn-Wohnungsbaugesellschaft Köln mbH, Cologne

Deutsche Annington Rheinland Immobiliengesellschaft mbH, Cologne

Deutsche Annington Fundus Immobiliengesellschaft mbH, Cologne

Positive rental situation

All Group companies increased occupancy levels in their rented units during 2004. Together with general market developments in many regions, this trend has also resulted from increased efforts in the regional companies. Incentive schemes have been set in place for senior executives and staff to accelerate the renting out of vacant properties. The regional companies also make active use of additional marketing instruments such as weekend viewing, service evenings, open days and participation in local

property exchanges as well as regional property trade-fairs. All vacant apartments are also offered through the internet on Deutsche Annington's website. This also applies to condominiums and houses for sale.

The regional companies in the south and southwest of Germany report nearly full occupancy. In other regions, particularly the Rhine/Ruhr conurbation, the level of vacancies has continued to decrease and is below the market average. For the large part, the portfolios consist of marketable 3-room apartments with between 60 and 75 m2 living space which are high in demand particularly when located in central areas or in residential areas close to the cities.

Increase in housing management earnings

During the financial year, turnover and earnings from housing management increased by 15.8 % to EUR 309.5 million (last year: EUR 267.3 million). This increase is due primarily to the management earnings from the portfolio of Deutsche Annington Heimbau in Schleswig-Holstein, which affected sales for the first time in the financial year. In addition, in some regions we managed to implement a moderate increase in the cold net rent when concluding new rental agreements. As far as the remaining portfolio is concerned, existing rents were raised where tolerated by the market within the statutory extent and as permitted by the rental agreements, primarily after modernization work.

It was with concern that we watched the development of prices for the cold and hot operating costs, which are outside our influence as landlords. The increase in 2004 was way above the general price increase rate. In the interests of our customers, here we are making great efforts to open up potential saving possibilities, and at least to limit the increase in incidental rental costs. We have already achieved noticeable progress by means of cooperation agreements, contracting to cover large shares of the portfolio, and internal benchmarking.

Investment to save energy

In order to save heating costs, we plan to modernize an additional 660 apartments in Duisburg, Frankfurt, Kiel, Cologne and Munich during the financial year 2005 by using funds available from Kreditanstalt für Wiederaufbau (KfW – Reconstruction Loan Corporation). The measures focus on thermal insulation for the façades, insulation for the roof and basement, and the installation of central heating.

1.4

1.2

1.0

0.8

01/2004

Vacancy development 2003–2004 / West Germany – adjusted to sales

06/2004 01/2005

associations. The purchase of owneroccupied or rented residential property is also acquiring considerably greater significance as a contribution to old-age provisions and to capital formation. We therefore presume that in future too the market will continue to provide purchasers for existing residential property in medium to good locations.

Deutsche Annington Service is growing

Professional management of the condominium complex has a major influence on how satisfied the former tenants are with their purchased property. The subsidiary Deutsche Annington Service GmbH (DASG), Erfurt, manages the shared property for condominium owners according to the German Condominium Act (Wohnungseigentumsgesetz – WEG). It is responsible for efficient management of the complex, implements resolutions taken by the owners' meeting and is contact partner

for the owners at the interface between special and shared property. For capital investors, DASG offers complete management of the special property. It also provides a wide range of planning and technical services for condominium owners when it comes to maintenance and modernization of the special and shared property, through to individual modification of the condominium to new needs and requirements as the residents reach a more advanced age.

At the end of the financial year, DASG was already responsible for facility management for 570 (last year: 400)

owners' associations with altogethermore than 13,000 condominium andDeutsche Annington's portfolio.

part ownership units. In future, DASG will also be offering its services nationwide to condominium owners' associations which were not originally part of

Successful sales

The option-to-buy scheme has been continued with great corporate success in 2004, once again achieving the sales target. Notarized sales agreements were concluded for altogether 4,002 apartments (last year: 3,176), primarily with the previous tenants.

As a result, the number of apartments sold since tenant privatization began in 2002 has increased to altogether 9,505. Referred to the total number of 23,209 apartments offered for privatization from

our portfolio up to now, this corresponds to a privatization rate of 41 percent. We attribute the high acceptance of the option-to-buy program to thorough advice and counseling for the tenant households about the advantages of owning their own home, together with careful project planning of the resulting owners'

12 In 2004, Deutsche Annington Immobilien GmbH generated Group turnover of EUR 569.5 million. This is an increase of EUR 65.8 million (+13.1 %) compared to last year. It results primarily from the management earnings from the new acquisitions in the portfolio of Deutsche Annington Heimbau and the renewed increase in earnings from the sale of condominiums, more than compensating for the lack of rental proceeds following sales out of the portfolio in the context of the tenant privatization program.

Improved operating results

The operating results improved from EUR 150.5 million to EUR 160.9 million (+6.9 %) in 2004. This is due primarily to proceeds from tenant privatization. The profit on sales of around 30 % is thus once again on the same high level as last year.

The parent company, Monterey Capital I S.à.r.l., Luxembourg, continues to grant the Group a long-term loan. The annual results before interest on this shareholder's loan amounted to EUR 65.8 million. After interest on the loan amounting to EUR 35.3 million and tax on income, the annual profits amount to EUR 30.5 million (previous year: EUR 16.9 million), including the contribution made by the holding and financial result which improved by around EUR 14 million.

Other

255.7

309.5

4.3

2004

569.5

Service and tenant orientation is becoming increasingly significant for the market success of housing companies. Together with the housing unit as such and the price, the creation of long-term customer relations is playing an ever larger role at Deutsche Annington.

The satisfaction of tenants and owners with the company's services is an important prerequisite for sustained corporate success. This is why service and customer orientation have become firmly anchored in the corporate culture and corporate image.

We see ourselves as a modern services company which reinforces its competitive ability with innovative offers and comprehensive quality management.

Fast repair service

Small and mini repairs in the rented property can have a great effect. If they are performed quickly, reliably, efficiently and simply, the tenant feels that he is being taken seriously, and the customer relationship is consolidated. Our tenants can report their repair requests and technical emergencies in and around the building round the clock on 365 days a year regardless of business and opening hours, by placing a toll-free phone call in the regional Service Management Centers. The centers then commission specialized partner companies of skilled tra-

desmen to perform this unscheduled maintenance work quickly, usually within 24 hours. We use random surveys among our customers to control the efficiency and quality of the work that has been carried out.

This approach to technical facilities management offers us commercial advantages. The standardized, system-supported processes of order acceptance via order processing through to quality control and accounts with reference to standard service items result in considerable reductions in internal costs.

Complaints management

The significance of functioning complaints management for customer satisfaction and loyalty cannot be put high enough. This is why we do not consider complaints from our customers as a nuisance factor interrupting daily business. We see them as a chance to stabilize a jeopardized, difficult customer relationship again and to obtain input for the ongoing improvement of our quality management. A complaints manager has been appointed in every region who monitors local processing of incoming customer complaints. He reports to the

regional management and central complaints management. As an executive position, he is directly answerable to the Group management. Such active complaints management simplifies cooperation with the tenants, improves our image and thus makes a contribution to the success of the company. Satisfied tenants are less likely to feel the need to move and therefore more likely to be interested in purchasing their apartment.

Incidental rental expenses

Incidental rental expenses are another area where our quality management is active. Public charges, costs for water supply and disposal, waste disposal fees, heating and electricity have all seen drastic price increases. In the interests of our customers, we make great efforts with innovative operating costs management at least to curb these price increases, for which we as housing company are not responsible. Detailed analysis, internal benchmarking, information and transparency help us to open up potential saving possibilities. We monitor contracts on a

continuous basis and use our purchasing power to the best possible effect when services are being re-tendered.

As far as registering heating costs is concerned, we are currently converting to automatic radio-based meter reading procedures. Together with cost advantages, this offers the tenants far greater convenience. There is no longer any need to hang around waiting for the man to read the meter, the meters are read at far shorter intervals and the tenants can check their consumption levels themselves. In many residential complexes, we have outsourced high-cost waste disposal to service companies in order to achieve clear reductions in costs. The company

supports our customers in separating and sorting waste, gives tips on avoiding waste and is responsible for cleaning the waste collection points.

Annington Wohnen Plus

We offer our older customers a model character customer loyalty service which meets with a great echo and broad acceptance. Most elderly people would like to spend their final years in the home and social neighborhood which has become so familiar to them over the decades. Relocating to a residential home is usually rejected. Preference is given to a self-determined, independent form of living which also helps to sustain physical and mental forces.

On the other hand, with increasing age there is frequently a need for assistance in daily routines or even for home care. But in many cases, the elderly do not claim these services because they and their family have no idea about what is available in the region, are put off by the bureaucratic procedures involved or simply do not know where to start. There are also information gaps referring to benefits under the care insurance. This is where the services offered by Annington Wohnen Plus come into play.

Our subsidiary Deutsche Annington Service GmbH (DASG) advises, informs, coordinates and mediates home helps and qualified home nursing and care services. In estates with a large share of senior citizens, special advice offices are set up with specially trained staff who are involved in establishing regional networks of these services. The services are selected according to quality criteria which have been developed by us together with the University of Witten/Herdecke. The advice service is free of charge for customers of Deutsche Annington.

After testing the Annington Wohnen Plus concept in the Duisburg advice center, it is now being implemented in Essen, Frankfurt, Geesthacht and Cologne. The Annington Wohnen Plus advice offices are also equipped as sample apartment. Here elderly customers coming to us for advice can see how even small technical adjustments and modifications such as a floor-level shower, additional handles, removal of barriers and stumbling edges or the installation of emergency call systems can contribute to a sustained improvement in the quality of life with advancing

age. This service addresses in particularthose customers purchasing apartments,where DASG plans and coordinates themodification work on request.

Deutsche Annington Immobilien GmbH Group Management Report for Fiscal Year 2004

A. Background of the Group

Under the agreement dated December 14, 2000, Deutsche Annington Immobilien GmbH (hereinafter referred to as "DAIG" or the "Company") acquired between 94.1% and 94.9 % of the shares in ten German Rail regional housing companies and 100% of the shares in Deutsche Eisenbahn-Wohnungs-Gesellschaft mbH (hereinafter referred to as "DEWG" and with all subsidiaries collectively referred to as the "EWG housing companies") from Bundeseisenbahnvermögen (hereinafter referred to as "BEV"). After all prerequisites had been met, the purchase and assignment agreement became legally effective as of February 14, 2001. The basis for this privatization agreement includes, among other things, legal stipulations regarding the continued existence of the EWG housing companies as an operational welfare facility of BEV and regarding housing for rail workers. EWG Essen, Frankfurt, Kassel and Nuremberg also acquired land and housing in the new federal states from BEV.

In 2003, the Company indirectly acquired a majority shareholding in BIG-Heimbau AG, Kronshagen/Kiel, which manages some 10,000 apartments of its own in Schleswig-Holstein. The Company acquired around 4,500 rental apartments from RWE SystemsImmobilien GmbH & Co. KG, Essen, at the end of 2004.

B. Business Activities of the Group

The Deutsche Annington Immobilien Group rents out residential and commercial property and with around 70,000 of its own units (incl. former RWE apartments), is one of the largest housing companies in Germany. In addition, the Company is actively promoting the option-to-buy scheme and manages residential properties in accordance with the German Condominium Act ["Wohnungseigentumsgesetz": WEG]. The Group is controlled by DAIG, which has established itself as the operating and strategic holding company for all group companies since fiscal year 2001. It advises and steers the course of the operating companies in operational, legal and residential facility management matters. In this regard, focus was placed on the introduction of a standard IT system, the design and establishment of the sales organization for the option-to-buy scheme, the development and implementation of the sales program, the setting up of group reporting and the preparation and introduction of group-wide procurement and maintenance guidelines as well as the harmonization of facility management standards and service functions.

	Apa rtm ents	cial Com mer uni ts	Gar age s	Park ing spac es	Oth er
Own uni ts	64,9 66 *	458	6,58 0	9,89 0	1,59 3
ed u Leas nits	1,48 7	7	38	76	83
ted Ren unit s	171	0	171	0	20
Trus t	4,14 9	74	138	251	481
TOT AL	70,7 73	539	6,92 7	10,2 17	2,17 7

C. Portfolio Management

The total number of the Group's own apartments, leased apartments, commercial units, garages and parking spaces as of December 31, 2004 is presented below:

D. Rental Situation

The positive trend in the core rental business continued in 2004 with the number of vacant properties continuing to decrease. Almost full occupancy was achieved at the five regional companies in Augsburg, Frankfurt, Karlsruhe, Munich and Nuremberg. In other regions, in particular in the conurbation Rhein/Ruhr, the level of vacancies has continued to decrease and is below the market average. In addition, a program to prevent rent debts was successfully launched group-wide in the fiscal year.

E. Housing Management

Rent was increased to the extent permissible by law, primarily following modernization of housing whether or not subject to rent restrictions, and pursuant to Sec. 558 BGB ["Bürgerliches Gesetzbuch": German Civil Code]. In accordance with the current version of the Rental Reform Act [Mietrechtsreformgesetz], rent may only be increased by a maximum of 20 % over a period of three years up to the regular comparable rent.

Within the scope of the privatization agreement concluded with BEV, which also applies to the EWG housing companies, rent may only be increased by 3 % plus the costof-living index for tenants who are beneficiaries to the agreement.

* excluding RWE apartments

F. Modernization and Maintenance

For building maintenance including modernization and decorative repairs, the Group spent a total of EUR 62.8m in 2004 including capitalizable development expenses. Based on the average total living space in 2004 of 4,291,148 m2, this corresponds to a cost of EUR 14.63/m2 (figures do not include the former RWE apartments).

The funds were used for individual and overall modernization measures. In Duisburg-Wedau, a multiple-family unit is being converted into 24 apartments geared toward the needs of pensioners. Full occupation was already secured prior to the completion of the modifications.

For 2005, ongoing maintenance and modernization of EUR 12.80/m2 is planned forthe residential properties in DAIG's own portfolio.

G. Organization and Personnel

The organizational restructuring at the EWG housing companies aimed at further centralization within the regions and the integration of Deutsche Annington Heimbau AG were continued in 2004.

Five regional organizational units have been established and the new portfolios purchased in the fiscal year will be integrated into these units. These units should optimizeportfolio management and create more flexible and efficient structures.

• North (Kiel)

• East (Deutsche Eisenbahn-Wohnungs-Gesellschaft mbH Leipzig, Kassel)

• South (Munich, Nuremberg, Regensburg, Augsburg)

• Southwest (Mainz, Frankfurt, Karlsruhe)

• West (Cologne, Essen)

In fiscal year 2004, an annual average of 59 wage earners and 444 salaried staff were employed. Employees are remunerated in line with the collective agreement for salaried employees and wage earners in the housing industry.

As part of its group-wide personnel development program, DAIG invests in further training for its future generation of managers. To this end, it collaborates with Führungsakademie im Europäischen Bildungszentrum der Wohnungs- und Immobilienwirtschaft (FWI) in Bochum. Participants learn management skills and methods for structuring and tackling management tasks in a custom module-based program. In addition, all companies train staff in property and housing management and office communication.

H. Important Events in the Fiscal Year

On June 1, 2004, DAIG acquired 322 apartments in the Hamburg area from Allianz Lebensversicherungs-AG. Management of the properties was transferred to Deutsche Annington Heimbau AG; one third of its total portfolio of 10,000 apartments is also in the catchment area of Hamburg.

DAIG acquired around 4,500 apartments with total living space of around 30,000 m2 from RWE Systems Immobilien GmbH & Co. KG, Essen, at the end of 2004. The risks and rewards associated with ownership were transferred at the beginning of 2005. Most of the apartments originally built to house employees of the RWE Group are in Cologne, the Cologne area and Essen.

I. Sales

The companies have been promoting the option-to-buy scheme since 2002 and are being supported by experienced sales partners. The privatization measures in the EWG housing companies have been approved by the bodies specified in the privatization agreement concluded with BEV.

By the end of 2004, a total of 9,505 apartments had been sold, mainly to tenants, since the time of the launch of the option-to-buy scheme. With 23,209 apartments offered for sale, this corresponds to a privatization ratio of 41%. In 2004, 4,002 apartments were sold.

Founded in 2003, Deutsche Annington Service GmbH (DASG), Erfurt, as the legally appointed administrator pursuant to the German Condominium Act ["Wohnungseigentumsgesetz": WEG], manages the new condominium associations Germany-wide. At the end of 2004, DASG managed around 570 condominium associations with more than 13,400 residential and partly owned units. Thus within two years of its foundation, DASG has managed to become a medium-sized facility management company for condominiums in Germany. It maintains ten regional offices and employs 49 staff. The Technical Services and Planning department offers the owners maintenance and modernization services for commonly owned property as well as services regarding modifications to individually owned property.

J. Economic Situation

The composition of assets, equity and liabilities as of December 31, 2004 is presented below:

a) Composition of Assets

Almost all of the Group's assets relate to land and properties of the subsidiaries. The start-up and business expansion expenses result from the fact that the parent company made use of the option pursuant to Sec. 269 HGB in 2001.

b) Composition of Equity and Liabilities

Fixed assets are mainly financed long-term by liabilities. Liabilities to banks contain a syndicated loan of EUR 692,462k under the management of Landesbank Hessen Thüringen (HeLaBa) and the Reconstruction Loan Company (KfW). The loan runs until 2017 and was used to finance the acquisition of shares in the EWG housing companies. In addition, the parent company of DAIG, Monterey Capital I S.à.r.l., Luxembourg, granted the Company a long-term loan of EUR 271,325k (as of December 31, 2004). This loan also runs until 2017.

With regard to the EWG housing companies, there are also numerous loans for property financing, mainly secured by mortgages.

As of December 31, 2004, the Group's equity totaled EUR 456,213k. The equity ratio is 17 %. Including the shareholder loan, the economic equity ratio is 28 %. The minority interests relate to the minority interests of the shareholders BEV and Sparda-Bank München e.G. in the EWG housing companies and the minority shareholders at Deutsche Annington Heimbau AG. The decrease in minority interests is largely due to the fact that almost all of the minority interests of Deutsche Annington Heimbau AG were bought out.

Com n of Ass itio ets pos	As o f D ec.	4 31, 200	As o f D ec.	31, 200 3
	k EUR	%	k EUR	%
and bus Star ines ansi t-up s exp on e xpen ses	6,28 3	0	54 12,5	0
d as Fixe sets
Inta ngib le as sets	461	0	688	0
plan d eq Prop uipm erty, t an ent	9,66 2,23 9	85	2,26 7,65 0	88
l ass Fina ncia ets	54,2 60	2	371	0
	4,39 2,29 0	87	2,26 8,70 9	88
Cur rent ts asse	326 ,033	13	305 ,501	12
aid e Prep xpen ses	333	0	674	0
TOT TS AL A SSE	2,62 7,03 9	100	7,43 2,58 8	100

f D 4 As o 31, 200 ec.		f D As o 31, 200 3 ec.
k EUR	%	k EUR	%
75	0	26	0
,745 201	7	125, 000	5
,169 235	9	,146 205	8
24 19,2	1	39,0 81	1
456 ,213	17	369 ,253	14
141	0	187	0
06 57,5	2	34 52,9	2
271 ,325	11	336 ,822	13
1,84 4 1,32	70	7,64 1,82 7	71
530	0	595	0
2,62 7,03 9	100	7,43 2,58 8	100

c) Profitability

With sales of EUR 569,497k, earnings before taxes came to EUR 150,925k (26.5 % return on sales). The economic result (=net result before interest on the shareholder loan) came to EUR 65,780k (11.6 % return on sales). After the deduction of EUR 35,271k for interest on the shareholder loan, net income for the year came to EUR 30,509k.

d) Financial Position

The Group remained solvent at all times throughout fiscal year 2004. As of December 31, 2004, the Group had cash and cash equivalents of EUR 66,298k. The Group will again be able to meet its payment obligations at all times in 2005.

K. Anticipated Development and Risks to Future Development

No

economic risks which would have a sustained negative effect on net assets, financial position and results of operations are evident at present. We are confident that the current excellent rental situation will continue. Our companies comply with the requirements of German Law on Control and Transparency in Business ["Gesetz zur Kontrolle und Transparenz im Unternehmensbereich": KonTraG].

were

The option-to-buy scheme is still enjoying successful results. Over 600 apartments sold during the first three months of 2005. The option-to-buy scheme continues to be a vital factor for the Company's future success.

The Group plans to acquire additional housing portfolios in the future.

The anticipated inflow of funds from the option-to-buy scheme is expected to reduce debt. This will lead to an improvement in the financial result. The expected income from the option-to-buy scheme is also expected to contribute to the Group continuing to make a profit (after shareholder interest).

Düsseldorf, April 8, 2005

Deutsche Annington Immobilien GmbH

The Management

fita bili Pro ty	4 200	200 3
	k EUR	k EUR
Sale s	,497 569	,664 503
Ope ult ratin g res	150, 925	152, 201
sult (bef shar ehol der Eco ic re inte rest) nom ore	65,7 80	72,1 27
NET R T INC OM E FO HE YEA R	30,5 09	16,9 92

Deutsche Annington Immobilien GmbH, Düsseldorf Consolidated Balance Sheet as of December 31, 2004

AS SE T S			QU IT Y A AB TI ES E ND LI ILI
	04 Dec . 31 , 20	Dec . 31 , 20 03
	R k EU	R k EU
A. BUS SS S TAR T-U P AN XPA NSI ON SES INE D E EX PEN	6,28 3	54 12,5	A. E QU ITY
			Sub scrib ed c al I. apit
TS B. F IXE D A SSE			ital II. Cap reser ve
I. In ible tang asset s			III. Reta ined ings earn
chis ndu l rig hts a nd s imil ghts and 1. Fran es, i stria ar ri ts asse			IV. Min ority inte rests
and licen ch r ight d as ses i n su s an sets	251	460
dwil l 2. Goo	210	228
	461	688	ITE B. S PEC IAL MS
plan d eq II.P uipm rope rty, t an ent			Spec ial it em f or in nd a llow vest t gra nts a men ance s
d an d lan d rig hts w ith r esid al bu ildin 1. Lan enti gs	6,62 2,11 8	2,24 8,24 7
d an d lan d rig hts w ith c l and oth er b uild Lan ercia ings 2. omm	67 13,2	13,3 39	C. A CCR UAL S
d an d lan d rig hts w itho ut b uild 3. Lan ings	742	480	rual s for Acc sion 1. pen s
4. Lan d wi th h ered bui ldin hts o f thi rd p itary g rig artie s	20	21	Tax uals 2. accr
Buil ding thir d-pa rty l and 5. s on	2,05 5	2,36 3	Oth ls 3. er ac crua
6. Tech l equ and hine nica ipm ent mac s	21	133
Oth furn and fixt uipm iture 7. er eq ent, ures	3,24 9	2,87 7
8. Paym ents unt on acco	608 103,	0	D. L IAB ILIT IES
Pre- tion 9. truc exp cons ense s	79	190	Liab ilitie bank 1. s to s
	2,23 9,66 9	2,26 7,65 0	Liab ilitie othe r len ders 2. s to
l ass III. Fina ncia ets			ived 3. Paym ents unt rece on acco
Shar affi liate d co es in nies 1. mpa	50	55	4. Ren t lia bilit ies
2. Equ ity i tme nts nves	15	15	Liab ilitie s fro m th ird-p real 5. arty esta te m nt anag eme
Lon rm i 3. g-te nves tme nts	52	63	6. Trad yabl e pa es
4. Oth er lo ans	194	235	Liab ilitie shar ehol ders 7. s to
hare affil iated 5. Paym s in pani ents unt on acco on s com es	46 53,9	0	Oth er li abili 8. ties
Oth er fi ial a 6. nanc ssets	3	3
	54,2 60	371
	4,39 2,29 0	2,26 8,70 9	COM E. D EFE RRE D IN E
ENT ETS
C. C ASS URR
I. In orie vent s
k in 1. Wor pro cess	84,1 71	84,9 94
Oth er in orie 2. vent s	6,22 2	6,79 9
	90,3 93	91,7 93
II. R eceiv able d ot her asset s an s
bles 1. Ren eiva t rec	3,29 1	1,83 6
ivab les f thir d-pa eal e 2. Rece rty r state t rom ma nage men	244	398
Oth ade ivab les 3. er tr rece	267	304
4. ivab les f the sale of p Rece rties rom rope	140, 179	176, 739
Rece ivab les f pani es in whi ch e quit y in e he ld 5. vest ts ar rom com men	393	0
Oth 6. sets er as	24,9 68	13,1 88
	169 ,342	,465 192
Che cks, cash han d an d ba nk b alan III. on ces	66,2 98	43 21,2
	326 ,033	305 ,501
D. P REP AID EX PEN SES	333	674

TOTAL ASSETS

2,627,039

2,587,438

Dec 04 . 31 , 20	Dec . 31 , 20 03
R k EU	R k EU
75	26
,745 201	125, 000
,169 235	,146 205
24 19,2	39,0 81
456 ,213	369 ,253
141	187
25,9 31	26,0 57
3,38 0	2,96 7
95 28,1	23,9 10
06 57,5	34 52,9
1,61 5,65 7	4,49 1,59 9
84,8 20	99,5 25
87,8 58	86,3 31
4 3,77	2,08 0
5	5
26,3 98	15,7 00
,325 271	336 ,822
22,8 12	29,5 07
2,64 2,11 9	2,16 4,46 9
530	595

TOTAL EQUITY AND LIABILITIES 2,627,039

2,587,438

Deutsche Annington Immobilien GmbH, Düsseldorf Consolidated Income Statement for Fiscal Year 2004

Deutsche Annington Immobilien GmbH, Düsseldorf Consolidated Cash Flow Statement for Fiscal Year 2004

	R k EU
		R k EU
Sale 1. s
a) f real esta te m nt rom anag eme	,495 309	267 ,255
b) from the sale of p rties rope from thir eal e	,698 255 9	,254 233 5
c) d-pa rty r state t ma nage men d) from oth ade	3,79 505	2,86 290
er tr	569 ,497	,664 503
k in	-824
Dec (pri incr ) in 2. pro rease or y ear: ease wor cess k ca lized Own 3.	18	3,91 8 50
pita wor 4. Oth erati ng i er op ncom e	9,60 8	6,91 4
t of hase d go ods and 5. Cos ices serv
purc a) Real esta te m nt e anag eme xpen ses	,374 -156	-129 ,676
b) t of s for sale Cos ertie prop	146 -23,	685 -19,
c) Cos t of othe ods and ices r go serv	-113	-124
	,633 -179	-149 ,485
6. boo k va lues of p for sale Net rties rope	-134 ,556	-123 ,530
el ex Pers 7. onn pens es
a) d sa larie Wag es an s	049 -28,	-24, 416
b) al se nd o ther ben efit Soci curi ensi ty, p cost on a s ther eof f ld-a k (p k) ensi EU R 3, 766 rior : EU R 3, 027 or o ge p ons: year	-8,3 00	-7,0 13
	-36, 349	429 -31,
d de ngib le as and plan d eq Am ortiz atio iatio inta uipm 8. n an prec n on sets prop erty, t an ent ell a itali zed busi star t-up as w s cap ness exp ense s	-40, 153	-37, 309
Oth erati 9. er op ng e xpen ses	-36, 683	592 -20,
me f 10. Inco ity i tme nts rom equ nves	761	157
me f oth d lo loan 11. Inco er in vest ts an ng-t rom men erm s	12	32
Oth er in d sim ilar inco 12. teres t an me	2,74 1	3,45 1
and lar e Inte simi 13. rest xpen ses	,530 -122	-136 ,631
14. lt fro rdin Resu ctivi ties m o ary a	31,9 09	19,2 10
15. Inco me t axes	-1,3 51	-2,1 67
16. Oth er ta xes	-49	-51
me f or th Net inco 17. ar e ye	30,5 09	16,9 92
Prof rryfo d fro 18. it ca rior rwar m p year	,146 205	490 188,
Min ority inte in i e/los 19. rests ncom s	-486	-336
ined 20. Reta ning ear s	,169 235	,146 205

e pe Am d de fixe d as ortiz atio iatio sets n an prec n on n of Am ortiz atio star t-up exp ense s osal of la nd f le at boo k va lue Disp or sa net (+)/ decr (-) ls Incr in ac ease ease crua (+)/ decr (-) in th ecial Incr item ease ease e sp -cash Non inte rest expe nses of in s de ferre d in Paym prio ent teres t exp ense r yea rs Oth ash inco er n on-c me n th e dis l of othe r fix ed a Loss ssets es o posa (+)/ (-) ade ivab les a nd o ther Dec incr in in orie vent s, tr ts rease ease rece asse Dec (+)/ incr (-) in re ceiv able s fro m th e sal e of land rease ease decr ade bles and othe r lia bilit Incr (+)/ (-) in tr ies paya ease ease Cash flow from ratin tivit ies ope g ac Cash flow from inv estin tivit ies g ac	33,8 82 6,27 1 134, 556 4,57 2 -46 17,0 17 -56, 936 -18 120 675 -11, 36,5 60 26,8 42 ,654 221
2.
Cash d fo plan d eq ngib le as pai r inv in p uipm ent/ inta estm ents rope rty, t an sets Cash d fo r the of co nsol idat ed c pai uisit ion anie acq omp s Cash ived from osal s of fina l ass ncia ets rece	-140 ,473 612 -19, 55
disp
Cash d fo in f cial pai r inv inan estm ents asset s	949 -53,
Cash flow from inv estin tivit ies g ac	,924 -213
Cash flow from fina 3. ncin tivit ies g ac Cash ived from ibut ions ontr	76,7 94
ity c rece equ Cash d to pai min ority inte rests	343 -20,
Cash ived from the of lo and shor long bor rais ing rowi rece ans t or -term	235 ,474
ngs Cash of l and sho lon rm b win ents rt or oans orro	-225 ,952
g-te rep aym gs Cash of s hare hold er lo ents ans	648 -28,
rep aym Cash flow from fina ncin tivit ies	37,3 25
g ac
4. Cash and cash ivale at th d of the iod nts e en per equ
Cha sh a nd c ash vale (sub l of 3) in ca equi 1 to nts tota nge	45,0 55
Cash and cash ivale t the beg f the iod inni nts a equ ng o per	43 21,2
Cash and cash ivale f the ed a t the e of pani quir tim isitio nts o equ com es ac acqu n	0

	4 200	200 3
	R k EU	R k EU
Cash flow from ratin tivit ies ope g ac
Net inco me f or th riod e pe	30,5 09	16,9 92
d de fixe d as Am ortiz atio iatio n an prec n on sets	33,8 82	31,0 38
n of Am ortiz atio star t-up exp ense s	6,27 1	6,27 1
osal of la nd f le at boo k va lue Disp net or sa	134, 556	123, 530
(+)/ decr (-) ls Incr in ac ease ease crua	4,57 2	63 -1,1
Incr (+)/ decr (-) in th ecial item e sp ease ease	-46	187
-cash Non inte rest expe nses	17,0 17	56,9 36
of in s de ferre d in Paym prio ent teres t exp ense r yea rs	-56, 936	,084 -105
Oth ash inco er n on-c me	-18	-50
n th e dis l of othe r fix ed a Loss ssets es o posa	120	54
ade ivab les a nd o ther Dec (+)/ incr (-) in in orie rease vent s, tr rece ts ease asse	675 -11,	5 1,77
(+)/ (-) able s fro m th e sal e of land Dec incr in re ceiv rease ease	36,5 60	745 -66,
(+)/ decr (-) ade bles and othe r lia bilit Incr in tr ies ease ease paya	26,8 42	692 -17,
Cash flow from ratin tivit ies ope g ac	,654 221	46,0 49
Cash flow from inv estin tivit ies g ac
Cash ived from disp osal s of othe f pro y, pl and r ite equi pert ant nt rece ms o pme	55	57
Cash d fo plan d eq ent/ ngib le as pai r inv in p uipm inta estm ents rty, t an sets rope	-140 ,473	-4,8 68
Cash d fo r the of co nsol idat ed c pai uisit ion anie acq omp s	612 -19,	294 -12,
Cash ived from disp osal s of fina ncia l ass ets rece	55	558
Cash d fo in f cial pai r inv inan estm ents asset s	949 -53,	-79
Cash flow from inv estin tivit ies g ac	,924 -213	-16, 626
Cash flow from fina ncin tivit ies g ac
Cash ived from ibut ity c ions rece ontr equ	76,7 94	15,0 00
Cash d to pai min ority inte rests	343 -20,	-171
Cash ived from the of lo and shor long bor rais ing rowi t or -term rece ans ngs	,474 235	82,6 23
Cash of l and sho lon rm b win ents rt or g-te rep aym oans orro gs	-225 ,952	,671 -230
Cash of s hare hold er lo ents rep aym ans	648 -28,	0
Cash flow from fina ncin tivit ies g ac	25 37,3	-133 ,219
Cash and cash ivale at th d of the iod nts e en
equ per Cha sh a nd c ash vale (sub l of 3) in ca 1 to nts tota	45,0 55	,796 -103
equi nge Cash and cash ivale t the inni f the iod	43 21,2	776 123,
beg nts a per equ ng o Cash and cash ivale f the ed a t the e of tim isitio	0
pani quir nts o com n equ es ac acqu Cash and cash ivale at th d of the iod		1,26 3
nts equ e en per	66,2 98	43 21,2
Com of c ash and cash ivale posi tion nts equ
Cash and cash ivale nts equ	66,2 98	43 21,2
Cash and cash ivale at th d of the iod nts e en per equ	66,2 98	43 21,2

5. Composition of cash and cash equivalents

Analysis of Fixed Assets and Business Start-up Expenses for the Fiscal Year from January 1 to December 31, 2004

	ISIT CT ST AC QU ION AN D P RO DU ION CO					AC CU	LAT TIZ ATI TIO MU ED AM OR ON /DE PRE CIA N			T B NE OO K V ALU ES
Jan	4 . 1, 200 R k EU	Add itio ns R k EU	als Dis pos R k EU	lass ifica Rec tion s R k EU	04 Dec . 31 , 20 R k EU	4 Jan . 1, 200 R k EU	Add itio ns R k EU	ls Rev ersa R k EU	04 Dec . 31 , 20 R k EU	04 Dec . 31 , 20 R k EU	Dec . 31 , 20 03 R k EU
BUS INE SS S TAR T-U P AN D
EXP AN SIO N E XPE NSE S	25,0 85	0	0	0	25,0 85	12,5 31	6,27 1	0	18,8 02	6,28 3	54 12,5
ETS FIX ED ASS
Inta ngib le as sets
anch ind ial r ight d 1. Fr ises, ustr s an lar r ight d as and licen simi sets s an ses
ch r ight d as in su s an sets	1,50 0	119	87	0	1,53 2	1,04 0	314	73	1,28 1	251	460
oodw ill 2. G	285 1,78 5	0 119	0 87	0 0	285 1,81 7	57 1,09 7	18 332	0 73	75 6 1,35	210 461	228 688
plan d eq Prop uipm erty, t an ent
1. L and and land righ ith r esid enti al bu ildin ts w gs	1,66 2,33 9	33,8 51	140, 247	-177	6 2,22 5,09	83,4 22	62 31,1	6,11 6	468 108,	6,62 2,11 8	2,24 8,24 7
and and land righ ith c l and oth er b uild 2. L ercia ings ts w omm	15,0 56	891	269	-9	15,6 69	1,71 7	735	50	2,40 2	67 13,2	13,3 39
and and land righ itho ut b uild 3. L ings ts w	480	4	118	376	742	0	0	0	0	742	480
4. L and with her edit ary b uild righ ts of thir d pa ing rties	21	0	1	0	20	0	0	0	0	20	21
uild third ty la nd 5. B ings on -par	3,16 3	0	300	0	2,86 3	800	221	213	808	2,05 5	2,36 3
echn ical nd m achi 6. T equi pme nt a nes	192	13	117	0	88	59	8	0	67	21	133
ther furn and fixt 7. O ipm iture ent, ures equ	6,80 3	1,90 8	223	0	8,48 8	6 3,92	1,42 4	111	5,23 9	3,24 9	2,87 7
8. P ents unt aym on acco	0	608 103,	0	0	608 103,	0	0	0	0	608 103,	0
9. P ucti nstr re-co on e xpen ses	212	79	0	-190	101	22	0	0	22	79	190
	6 2,35 7,59	140, 354	141, 275	0	6,67 2,35 5	46 89,9	33,5 50	6,49 0	006 117,	9,66 2,23 9	2,26 7,65 0
l ass Fina ncia ets
1. Sh in af filia ted pani ares com es	55	0	0	-5	50	0	0	0	0	50	55
2. E quit y in vest ts men	15	0	0	0	15	0	0	0	0	15	15
3. L inv term estm ents ong-	63	0	11	0	52	0	0	0	0	52	63
4. O ther loan s	260	3	44	0	219	25	0	0	25	194	235
hare affil iated 5. Paym s in pani ents on unt on s com acco es	0	53,9 46	0	0	53,9 46	0	0	0	0	53,9 46	0
ther fina l ass 6. O ncia ets	3	0	0	0	3	0	0	0	0	3	3
	396	49 53,9	55	-5	54,2 85	25	0	0	25	54,2 60	371
			141 ,417

Schedule of Liabilities – Consolidated Financial Statements of Deutsche Annington Immobilien GmbH as of December 31, 2004

Statement of Changes in Equity – Consolidated Financial Statements of Deutsche Annington Immobilien GmbH as of December 31, 2004

		Pare	Min orit y inte rest s
	Sub scrib ed ital cap R k EU	Cap ital rese rve R k EU	ned Ear soli date d e quit con y R k EU	Equ ity R k EU	Equ ity R k EU	soli date d Con ity equ R k EU
Bala f Jan 1, 2 003 nce as o uary	26	0	490 188,	516 188,	14,4 77	202 ,993
tribu he c al re Con tion apit to t serv e		15,0 00		15,0 00		15,0 00
Shar ehol der's f rec eivab les wai ver o		110, 000		110, 000		110, 000
dend Divi t 20 03 pay men					-171	-171
iel Min oriti es K					24,4 39	24,4 39
Con solid ated for the y inc net ome ear			16,6 56	16,6 56	336	16,9 92
Bala f De ber 31, 200 3 nce cem as o	26	125 ,000	205 ,146	330 ,172	39,0 81	369 ,253
Bala 004	26
f Jan 1, 2 nce as o uary		125, 000	,146 205	330 ,172	39,0 81	369 ,253
Cap ital incr ease	49			49		49
tribu he c al re Con tion apit to t serv e		76,7 45		76,7 45		76,7 45
dend 04 Divi t 20 pay men					-24	-24
of m Acq uisit ion inor ity i nter ests da-B anke Spar n					-755	-755
of m Kiel Acq uisit ion inor ity i nter ests					564 -19,	564 -19,
Con solid ated for the y inc net ome ear			30,0 23	30,0 23	486	30,5 09
Bala f De ber 4 31, 200 nce as o cem	75	,745 201	,169 235	436 ,989	24 19,2	456 ,213

		Due in				ther eof
		o 1 up t yea r		e th an 5 mor yea rs	al Tot	red b secu y tgag mor es
		R k EU	5 y R k EU	R k EU	R k EU	R k EU
Liab ilitie bank s to		81,7 27	185, 899	1,34 8,03 1	1,61 5,65 7	684 ,871
s	Prio r yea r:	661 152,	240 ,100	1,20 1,73 8	4,49 1,59 9	,348 775
Liab ilitie othe r len ders s to		6,38 4	16,1 40	62,2 96	84,8 20	78,9 58
	Prio r yea r:	6,19 6	17,0 22	76,3 07	99,5 25	61 91,3
ived Paym ents unt rece on acco		87,8 58	0	0	87,8 58
	Prio r yea r:	86,3 31	0	0	86,3 31	0
t lia bilit Ren ies		3,76 9	0	5	4 3,77
	Prio r yea r:	2,07 6	0	4	2,08 0	0
Liab ilitie s fro m th ird-p real arty esta te m	nt anag eme	5	0	0	5
	Prio r yea r:	5	0	0	5	0
Trad yabl e pa es		26,1 94	198	6	26,3 98
	Prio r yea r:	15,4 62	238	0	15,7 00	0
Liab ilitie shar ehol ders s to		61,6 19	0	,706 209	,325 271
	Prio r yea r:	62,2 52	0	274 ,570	336 ,822	0
Oth er li abili ties		22,8 12	0	0	22,8 12
	Prio r yea r:	29,5 07	0	0	29,5 07	0
TOT AL		,368 290	202 ,237	1,62 0,04 4	2,64 2,11 9	763 ,829
	Prio r yea r:	354 ,490	,360 257	2,61 1,55 9	2,16 4,46 9	866 ,709

Deutsche Annington Immobilien GmbH Notes to the Consolidated Financial Statements for Fiscal Year 2004

A. General Disclosures on the Consolidated Financial Statements and Explanations on the Accounting

Deutsche Annington Immobilien GmbH (hereinafter referred to as "DAIG" or the "Company") prepares consolidated financial statements in accordance with German accounting provisions pursuant to Secs. 290 et seq. HGB ["Handelsgesetzbuch": German Commercial Code]. The consolidated financial statements were voluntarily supplemented by a consolidated cash flow statement. The consolidated balance sheet and consolidated income statement are classified in accordance with the form prescribed for housing companies. The consolidated income statement has been prepared according to the cost-summary method. In order to improve the clarity of the financial statements, the items are summarized in the consolidated balance sheet and consolidated income statement and separately disclosed and explained in these notes to the consolidated financial statements.

The classification of the consolidated balance sheet has not changed over the prior year. The sales proceeds and expenses are presented in gross amounts as in the prior year; the corresponding items are "sales from the sale of properties", "net book values of the properties for sale" and "cost of properties for sale".

Business relations with the minority interests Bundeseisenbahnvermögen (BEV) and Sparda-Banken are presented in the notes to the consolidated financial statements; as a result, separate disclosure of the individual balance sheet items is not required.

B. Disclosures on the Group of Consolidated Companies and Investment Holdings

As of year-end, DAIG directly or indirectly held the following majority shareholdings; with the exception of two companies that were not consolidated due to their immateriality, all companies were fully consolidated.

soli dati Con on	IG's sha f DA re o ital k stoc cap	ult 4 Res 200	Equ ity f D 004 ec. 3 1, 2 as o
	%	EUR	EUR
fully solid ated con	94.9 02	6,98 7.56 2,29	26.9 21,7 01,0 2
fully solid ated con	94.9 10	17,5 51,8 09.8 9	,488 101, 251 .87
fully solid ated con	94.9 01	24,6 35,5 27.5 8	24,9 76,8 69.9 0
fully solid ated con	94.9 02	36.1 17,5 20,3 5	92,4 67,3 4 92.2
fully solid ated con	94.9 07	1,86 1,18 1.17	26,4 55.4 31,5 0
fully solid ated con	94.9 11	13,6 51,0 75.8 0	62,6 35.0 27,3 2
fully solid ated con	94.9 40	8,58 5,50 9.39	66,3 6 57,0 50.8
fully solid ated con	94.8 74	26.0 13,3 83,1 0
fully solid ated con	94.9 07	7,05 7,41 6.65	49,7 06,2 75.1 1
fully solid ated con	94.9 04	5,68 1,25 6.50	46,5 4 38,7 80.9
fully solid ated con	100. 000	0.00 1)	6,45 9.41 2,55
fully solid ated con	100. 000	2) 0.00	48,1 10.1 7
fully solid ated con	95.7 5) 98	3) 0.00	2,04 5,16 7.52
fully solid ated con	95.7 98 5)	7,95 1,08 3.95	42,6 79,9 37.1 3
fully solid ated con	100. 000 5)	0.00 4)	56.5 20,7 90,3 5
fully solid ated con	100. 000 5)	49,1 45.2 -3,9 8	40,2 80.6 75,8 5
olid ated not cons	100. 000	04.0 -9,7 0	13,4 78.0 0
fully solid ated con	5) 100. 000	501 ,008 .37	7,49 9,96 9.08
olid ated not cons	100. 000	-10, 271 .00	13,1 82.0 0
fully solid ated con	100. 000 5)	-1,4 42.7 87,7 7	38,5 12,2 57.2 3

SIEGAU, Eisenbahn-Siedlungsgesellschaft Augsburg mbH, AugsburgWohnungsgesellschaft Ruhr-Niederrhein mbH, EssenBWG Frankfurt am Main Bundesbahn-Wohnungsgesellschaft mbH, FrankfurtEisenbahn-Wohnungsbau-Gesellschaft Karlsruhe GmbH, KarlsruheBundesbahn-Wohnungsbaugesellschaft Kassel mbH, KasselEisenbahn-Wohnungsbaugesellschaft Köln mbH, Cologne"Siege" Siedlungsgesellschaft für das Verkehrspersonal mbH, MainzBaugesellschaft Bayern mbH, Munich 69,933,330.73Eisenbahn-Wohnungsbaugesellschaft Nürnberg GmbH, NurembergBundesbahn-Wohnungsbaugesellschaft Regensburg mbH, RegensburgDeutsche Eisenbahn-Wohnungs-Gesellschaft mbH, LeipzigDeutsche Annington Service GmbH, ErfurtDeutsche Annington Haus GmbH, KielDeutsche Annington Heimbau Aktiengesellschaft, KielHVG-HEIMBAU-Verwaltungsgesellschaft mbH, KielDeutsche Annington Erste Wohnungsbeteiligungsund Verwaltungs GmbH & Co. KG, EssenDeutsche Annington Erste Beteiligungsgesellschaft mbH, EssenDeutsche Annington Zweite Wohnungsbeteiligungsund Verwaltungs GmbH & Co. KG, EssenDeutsche Annington Zweite Beteiligungsgesellschaft mbH, EssenDeutsche Annington Rhein-Ruhr GmbH & Co. KG, Essen

1) After profit transfer of EUR 3.917.956,23

2) After loss absorption of EUR -199.220,503) After profit transfer of EUR 8.025,08

4) After loss absorption of EUR -3.561.270,99

5) Indirect equity investment (share estimated)

C. Consolidation Principles

In capital consolidation, the acquisition cost of the equity investments is offset against the book values of the Group's share in equity pursuant to Sec. 301 (1) Sentence 2 No.1 HGB; the Heimbau Group was consolidated for the first time according to the purchase method of accounting as of December 31, 2003. Any remaining difference is allocated to assets provided that the book values of the respective assets deviate from their fair value at the time of acquisition. Any remaining debit difference is recognized as goodwill.

Receivables, liabilities, sales, expenses and income between the companies included in the consolidated financial statements are offset.

D. Notes to the Accounting and Valuation Methods

General

The consolidated financial statements combine the individual financial statements ofthe consolidated group companies in accordance with the housing classification provisions and with due regard to the provisions under German commercial law on consolidation.

If required, the financial statements of the subsidiaries are included following adjustment to uniform accounting and valuation principles stipulated by DAIG.

Accounting Options

Use was made of the accounting option of capitalizing "start-up expenses" in 2001. In this regard, Sec. 248 (1) HGB (prohibition of capitalizing formation costs) and Sec. 269 Sentence 2 HGB were observed. The capitalized expenses will be written off on a straightline basis at a rate of 25 % from 2002 onward.

Tax deferrals were made pursuant to Sec. 306 HGB for consolidation entries which have an effect on income. Deferred tax liabilities arose due to the fact that the book values for land and buildings at some EWG housing companies as reported in the consolidated financial statements are higher than in the tax balance sheet and due to the release of reserves pursuant to Sec. 6b EStG ["Einkommenssteuergesetz": German Income Tax Act] in the consolidated financial statements. On the other hand, lower book values for land and buildings at a number of EWG housing companies in the consolidated financial statements as against the tax balance sheet and the existing tax losses carried forward would have resulted in considerable deferred tax assets. To remain consistent with the prior year, however, deferred tax assets were only recognized in the amount reported for deferred tax liabilities and were offset against this item.

Intangible Assets

All intangible assets acquired for a consideration (IT software) were carried at acquisition cost and, as in the prior year, amortized on a straight-line basis at a rate of 33.33%. Goodwill is being amortized over a period of 15 years.

Property, Plant and Equipment

All property, plant and equipment with the exception of technical equipment and furniture and fixtures were revalued within the context of first-time consolidation and are subject to straight-line depreciation over their remaining useful lives. The maximum remaining useful life is 50 years.

Furniture and Fixtures

Furniture and fixtures are written off applying the straight-line depreciation method based on rates of between 10 % and 25 %.

Low-value assets were fully expensed in the year of acquisition and disclosed as disposals in the analysis of consolidated fixed assets.

Financial Assets outstanding.

Long-term loans were valued on the basis of the nominal value of the residual amount

Other financial assets were valued at acquisition cost.

Current Assets

Work in process was carried at the acquisition cost of the allocable operating expenses not yet invoiced. Heating and repair materials were valued at acquisition cost. Heating oil supplies were valued according to the LIFO method.

Receivables and other assets were stated at nominal value. Specific bad debt allowances were made to account for all recognizable risks.

Prepaid Expenses

Discounts are disclosed as prepaid expenses and released over the term of the loans.

Accruals

Pursuant to Sec. 253 (1) HGB, accruals take account of all recognizable risks and contingent liabilities according to prudent business judgment.

Accruals for pensions are valued on the basis of actuarial principles according to the "Teilwertverfahren", a method similar to the "entry age method", pursuant to Sec. 6a EStG using an interest rate of 6 % and the 1998 mortality tables by Dr. K. Heubeck.

Other accruals were recognized for contingent liabilities pursuant to Sec. 249 (1) HGB.

Liabilities

Liabilities are stated at the amount repayable. The residual terms of liabilities are shown on page 32 of the notes to the consolidated financial statements (Schedule of Liabilities).

E. Notes to the Consolidated Balance Sheet

Assets

The development of the individual fixed assets is shown on page 30/31 of the notes to theconsolidated financial statements (Analysis of Fixed Assets).

Capitalized start-up expenses relate to money procurement expenses and legal and consulting fees incurred in connection with the commencement of the Group's operations.

The item "land and land rights with residential buildings" comprises the following:

Disposals of "land and land rights with residential buildings" are mainly due to thesuccess of the current option-to-buy scheme.

Additions to assets are largely attributable to the acquisition of RWE units in Essen and Cologne, however, these units will not be contractually transferred until 2005. As a result, this addition is reported in payments on account. A smaller portfolio in the Hamburg area, which is managed by Deutsche Annington Heimbau AG, was purchased in the fiscal year and is reported under additions to assets.

The item "work in process"be invoiced and "other inventories"

contains allocable operating and heating expenses yet to contain heating oil supplies and repair materials.

Specific bad debt allowances and individual write-downs were made on "rent receivables". Specific bad debt allowances are assessed systematically via the tenants' accounts.

"Receivables from third party-real estate management" are chiefly due from the shareholder BEV for the trust-based management of housing portfolios in the new federal

states.

The item "other assets" includes a tax refund claim of EUR 725k. This mainly results from the withholding taxes in connection with the distribution of dividends by subsidiaries to the parent company in fiscal year 2004.

Receivables break down as follows:

As in the prior year, there were no receivables due in more than one year as of Decem-

ber 31, 2004.

Apa rtm ents	cial Com its mer un	Gar age s	Park ing spac es	Oth er
64,9 66 *	458	6,58 0	9,89 0	1,59 3

bles Rec eiva	Dec 04 . 31 , 20 Tot al	Dec . 31 , 20 03 Tot al
	k EUR	k EUR
bles Ren eiva t rec	3,29 1	6 1,83
ivab les f thir d-pa eal e Rece rom rty r state ma nage men t	244	398
Oth ade ivab les er tr rece	267	304
ivab les f the sale of p Rece rties rom rope	140, 179	176, 739
Rece ivab les f pani es in whi ch e quit y in e he ld vest ts ar rom com men	393	0
Oth sets er as	24,9 68	13,1 88
TOT AL	169 ,342	,465 192

* excluding RWE apartments

Equity and Liabilities

Equity

Subscribed capital amounted to EUR 75k as of December 31, 2004 (prior year: EUR 26k).

By shareholder's resolution of June 23, 2004, capital was increased by EUR 24k and the shareholder contributed EUR 6,976k to the capital reserve.

By shareholder's resolution of September 28, 2004, capital was increased by a further EUR 25k and the shareholder contributed EUR 29,769k to the capital reserve.

On December 21, 2004, the shareholder made another contribution of EUR 40,000k to the capital reserve.

Minority interests in income/loss were, as in the prior year, calculated taking into account the contractual restrictions relating to dividend claims of a minority shareholder. The minority interest in income/loss amounts to EUR 486k for fiscal year 2004.

Special Items

The special item for investment grants and allowances includes EUR 141k for grants received for investments in the new federal states.

Accruals

As of December 31, 2004, accruals for pensions totaled EUR 25,931k. In 2004, EUR 3,081k was added, EUR 2,384k utilized and EUR 823k reversed.

Other accruals

break down as follows:

Liabilities

The composition of liabilities according to residual term and the securing mortgages are shown on page 32 of the notes to the consolidated financial statements (Schedule of

Liabilities).

Liabilities to banks

contain a loan of EUR 692,462k (including accrued interest) granted by a banking syndicate under the management of Landesbank Hessen-Thüringen (HeLaBa) and the Reconstruction Loan Company (KfW). The remaining amount relates to numerous mortgage loans taken out in connection with the acquisition and development of land and buildings as part of operations.

	04 Dec . 31 , 20	Dec . 31 , 20 03
	k EUR	k EUR
Dec ive r epai orat rs	9,01 8	6 9,71
Phas ed r etire men t	5,63 6	3,73 9
ding s fro al es Out inv oice stan tate ent m re man agem	2,48 1	2,98 9
bon Man ent agem uses	2,24 7	1,97 2
Defe rred inte ma nanc e	1,53 8	552
rued Acc atio vac n	934	2,00 7
Oth ndin g inv oice utsta er o s	604	848
Aud it of fina l sta ncia tem ents	471	528
Tax advi ices sory serv	178	146
Pub licat ion	64	57
loye r's li abili Emp ty in sura nce	48	45
Oth er	4,97 6	1,31 1
TOT AL	28,1 95	23,9 10

Derivatives were concluded to secure medium and long-term liabilities. The fair values of these derivates as of the balance sheet date were as follows:

The fair values were determined by the respective banks. The derivatives relate to the loan granted by the banking syndicate.

Liabilities to other lenders mainly relate to loans taken out by Bundeseisenbahnvermögen. These funds served to acquire, develop and overhaul land and buildings. In return, the lender was generally granted occupancy rights.

The loan from the parent company, Monterey Capital I S.à.r.l., plus accrued interest is disclosed under liabilities to shareholders (EUR 271,325k).

Providing that incidental expenses have not been invoiced, prepayments of operating expenses received from tenants are disclosed under payments received on account.

EUR 525k of other liabilities relates to tax on investment income payable in 2005 and which corresponds to the tax receivables for tax on investment income disclosed underother assets. EUR 4k (prior year: EUR 32k) relates to liabilities for social security.

k Ban	of deri T vati ype ve	inal Nom t am oun	val s of Fair De 004 c. 3 1, 2 ue a
		EUR	EUR
inka khar dt HSB C Tr Bur us &	Floo r	50,0 00,0 00.0 0	305 .04 -20,
inka khar dt HSB C Tr us & Bur	Cap	50,0 00,0 00.0 0	42.1 8
HSB C Tr inka khar dt us & Bur	FRA	100, 000 ,000 .00	-186 ,290 .39
HeL aBa	Cap	50,0 00,0 00.0 0	0.02
HeL aBa	Floo r	50,0 00,0 00.0 0	-78, 276 .97
HeL aBa	Swa p	306 ,775 ,128 .72	-24, 380 ,020 .28
Dre sdne r Ba nk A G	Floo r	50,0 00,0 00.0 0	,168 -189 .00

Bala she et it nce em	k va lue Boo 4 200	Of w hich fro m/t o the shar eho lder	k va lue Boo 200 3	Of w hich fro m/t o the shar eho lder
	k EUR	k EUR	k EUR	k EUR
Oth er fi ial a /wo rk in ssets nanc pro cess	84,1 74		84,9 97
of w hich from rda- k Spa Ban		0		11
of w hich from BEV		0		0
ivab les f thir d-pa eal e Rece rty r state t rom ma nage men	244		398
of w hich from Spa rda- Ban k		14		0
of w hich from BEV		77		5
Oth sets er as	24,9 68		13,1 88
of w hich from Spa rda- Ban k		0		0
of w hich from BEV		2,08 8		2,22 8
Che cks, cash han d an d ba nk b alan on ces	66,2 98		43 21,2
of w hich from Spa rda- Ban k		105		227
of w hich from BEV		0		0
Liab ilitie bank s to s	1,61 5,65 7		4,49 1,59 9
of w hich from Spa rda- k Ban		41,7 12		514 108,
of w hich from BEV		0		0
Liab ilitie othe r len ders s to	84,8 20		99,5 25
of w hich from Spa rda- k Ban		0		0
of w hich from BEV		25 39,2		45,4 24
Oth er li abili ived ties/ ents unt paym rece on acco	670 110,		115, 838
of w hich from k -Ban		218		9
of w hich from BEV		63 13,1		237

Other business relations with the other shareholders exist for the balance sheet items

listed below:

F. Consolidated Income Statement

Maintenance expenses of EUR 61,806k are disclosed under real estate management expenses. Allocable real estate tax of EUR 9,592k is also included in the real estate man-

agement expenses.

Other operating expenses include write-downs on rent and operating expenses (EUR 3,719k), IT services (EUR 3,577k) and legal and consulting fees (EUR 2,708k).

EUR 35,271k of interest and similar expenses relates to shareholder loans (prior year: EUR 55,134k).

For information on minority interests in profit/loss, we refer to the disclosures on equity.

G. Other Notes

Trust Assets and Liabilities

Trust assets and liabilities totaling EUR 13,291k result from the trust-based management of properties and rent deposits (prior year: EUR 11,684k).

Unrecognized Obligations

The following unrecognized obligations resulting from rent, leasing and license agreements exist:

yab le i Pa n 2 005	5k EU R 2 ,35
yab le b and Pa 06 20 20 09 etw een	R 4 1k EU ,13

The amounts relate to leasing, license and maintenance agreements for IT.

Contingent Liabilities

As of the balance sheet date, a bank guarantee of EUR 56,330.07 had been issued by Dresdner Bank AG, Essen, to secure a rent deposit for offices. Due to possible utilization under bank guarantees, there are contingent liabilities of EUR 10,368k against the subsidiary Deutsche Annington Heimbau AG.

Employees

In fiscal year 2004, an annual average of 59 wage earners and 444 salaried staff were employed (prior year: 61 wage earners and 373 salaried employees).

Remuneration of Executive Bodies

Pursuant to Sec. 314 (1) No. 6 a) and b) HGB, the Company has elected not to disclose management remuneration pursuant to Sec. 286 (4) HGB.

Management

Dr. Volker Riebel ChairmanDavid Pascall CBE

General manager General manager General manager

dwi öhn ber Dr. Lu g S (si De 4 ) 9, 200 gen nce cem
ich alow ski (sin pril 5) Uw e M ce A 6, 200

Members of the Supervisory Board

Fraser Duncan (Vice Chairman)

Guy Hands (Chairman) Chief Executive Officer TFCP Executive Vice President TFCP Sir Thomas McPherson Chairman of Annington UK

Consolidated Financial Statements

The company which prepares the consolidated financial statements for the largest group of companies is Monterey Capital I S.à.r.l., Luxembourg. The company which prepares the consolidated financial statements for the smallest group of companies is Deutsche Annington Immobilien GmbH, Düsseldorf. The consolidated financial statements are available in Düsseldorf. Deutsche Annington Immobilien GmbH is registered under HRB No. 41246 in the Düsseldorf commercial register.

Düsseldorf, April 8, 2005

Deutsche Annington Immobilien GmbH

The Management

H. Audit Opinion

We have audited the consolidated financial statements and the group management reportprepared by Deutsche Annington Immobilien GmbH, Düsseldorf, for the fiscal year from January 1 to December 31, 2004. The preparation of the consolidated financial statements and group management report in accordance with German commercial law are 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 conducted our audit of the consolidated 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 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 accounting-related 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.

Eschborn/Frankfurt am Main, April 8, 2005

Ernst & Young AG Wirtschaftsprüfungsgesellschaft

VölkerWirtschaftsprüfer Enzenhofer Wirtschaftsprüfer

Deutsche Annington Immobilien GmbH

Gladbecker Straße 3 40472 Düsseldorf

Phone: 0211-43 71 79-0 Fax: 0211-43 71 79-22 www.deutsche-annington.com info@deutsche-annington.com