Grenke AG — Annual Report 2007

Feb 13, 2008

GRENKELEASING AG GROUP

FINANCIAL REPORT FOR FISCAL YEAR 2007

GRENKELEASING®

KEY FIGURES OF GRENKELEASING AG GROUP AND THE GRENKE GROUP

	Jan. 1 to Dec. 31, 2007	Change in %	Jan. 1 to Dec. 31, 2006	Unit
Key figures of GRENKE Group including franchise partners
New business of GRENKE Group	509,171	11	459,996	EURk
- of which: Germany	301,786	2	296,855	EURk
-of which: International	207,385	27	163,141	EURk
New business of franchise partners	96,306	75	55,002	EURk
- of which: Factoring business (Germany)	48,799	117	22,500	EURk
Key figures of GRENKE Group leasing business excluding factoring
New business GRENKE Group leasing business	460,372	5	437,459	EURk
Contribution margin 2 of new business	65,120	7	60,730	EURk
Number of new contracts	60,000	5	56,955	Units
Share of IT products in the lease portfolio	87	-	87	per cent
Share of corporate customers in the lease portfolio	100	1	99	per cent
Mean acquisition value	7.7	-5	8.1	EURk
Mean term of contract	45	-2	46	Months
Volume of leased assets	1,512	11	1,365	EUR m
Number of current contracts	201,854	9	185,413	Units
GRENKELEASING AG Group, consolidated figures
Net interest income from leasing business	62,389	1	61,696	EURk
Expenses from settlement of claims	-17,139	13	-15,148	EURk
Profit from insurance business	16,733	10	15,228	EURk
Profit from new business	20,418	8	18,875	EURk
Profit from disposals (income exceeding the calculated residual value)	1,892	-41	3,185	EURk
Result from currency translation difference	-76	-	-5	EURk
Other operating income	1,170	33	879	EURk
Costs of new contracts	12,834	2	12,564	EURk
Costs of current contracts	4,781	13	4,236	EURk
Project costs and basic distribution costs	10,723	25	8,559	EURk
Management costs	10,089	3	9,837	EURk
Other costs	1,736	20	1,448	EURk
EBIT (Earnings before interest and taxes)	45,224	-6	48,066	EURk
Other interest result	-393	34	-293	EURk
Income/Expenses from market valuation of financial instruments	-16	-136	44	EURk
EBT (Earnings before taxes)	44,815	-6	47,817	EURk
Net profit (consolidated net profit pursuant to IFRS)	32,125	5	30,510	EURk
IFRS earnings per share	2.35	5	2.23	EURk
Dividend	0.60	9	0.55	EUR
Embedded value of the lease portfolio (incl. Equity before taxes)	320	10	291	EUR m
Embedded value of the lease portfolio (incl. Equity after taxes)	293	14	257	EUR m
Cost/income ratio	47.3	9	43.4	per cent
Return on equity (ROE) after taxes	14	-	15	per cent
Average number of employees	411	8	384	persons

GROUP MANAGEMENT REPORT FOR FISCAL YEAR 2007	3
General	3
Business Profile	3
Fiscal Year 2007 Economic Conditions and Industry Performance Significant Developments During the Fiscal Year Report on the Results of Operations Report on the Financial Position and Net Assets Additional Information Sales and Customer Structure Structure of the Supplier Base Research and Development Personnel and Stock Option Programs Changes in the Executive Bodies Report on the Remuneration of Executive Bodies	6 6 7 9 11 12 12 13 13 13 14 14
Disclosures Pursuant to Sec. 289 (4) and 315 (4) HGB	17
Corporate Governance	18
Risk Management Report	18
Events of Particular Significance After the Close of the Fiscal Year	24
Report on Forecasts and the Outlook for the Group	24
CONSOLIDATED FINANCIAL STATEMENTS FOR FISCAL YEAR 2007	27
Income Statement for Fiscal Year 2007	27
Balance Sheet as of December 31, 2007	28
Cash Flow Statement for Fiscal Year 2007	30
Statement of Changes in Equity for Fiscal Year 2007	32
Statement of Recognized Income and Expense for Fiscal Year 2007	33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR FISCAL YEAR 2007	34
AUDITORS' REPORT	87
SUPERVISORY BOARD REPORT	88
2008 CALENDAR AND CONTACT PERSONS	91

GROUP MANAGEMENT REPORT FOR FISCAL YEAR 2007

GENERAL

Below we present the management report for the GRENKELEASING AG Group for the fiscal year ended December 31, 2007. The Group traces its origins back to a sole proprietorship established in 1978. GRENKELEASING AG was founded in 1997 and had its IPO on the Frankfurt Stock Exchange in April 2000. GRENKELEASING AG (hereinafter referred to as the "AG") and Grenke Investitionen Verwaltungs KGaA (hereinafter referred to as the "KGaA") are two separate entities in a unitary enterprise, the AG being the operating company and the KGaA the holding company. Both entities were originally founded to bundle the activities of the various companies controlled by Wolfgang Grenke.

The GRENKELEASING AG Group established a franchise model in order to tap into foreign markets and expand with new products. We do not hold a stake in the legally independent franchise companies, but we do have the option to acquire them at pre-defined terms, generally after four to six years. Under its franchise agreements, GRENKELEASING AG provides expertise, operational infrastructure, services and the right to use its name. Furthermore, leases are usually refinanced by selling lease receivables or through sale and leaseback agreements, which means that the refinancing of the franchisee's new business creates new business for the GRENKELEASING AG Group.

The following management report presents the development of the GRENKELEASING AG Group except where the GRENKE Group including franchise partners or the franchise model are explicitly mentioned. Additional information on the development of the Group's franchise partners is presented in the relevant sections of the 2007 Annual Report outside of this management report.

BUSINESS PROFILE

Business Model

GRENKELEASING was born out of the business idea of providing economical lease financing for small-ticket IT products through standardized, IT-based processes. By doing this, we carved out a new market which did not exist before GRENKELEASING was formed. At that time, as today, we positioned ourselves in a market segment not covered by the large majority of other lease providers, particularly the subsidiaries of IT manufacturers and banks.

We now finance products with a net value of at least EUR 500. In fiscal year 2007, the mean value of the leases concluded in the GRENKE Group, including by franchise partners, was EUR 7,673, compared with EUR 7,681 in the prior year (adjusted by the factoring agreements received in 2006).

Such a small volume can only be financed economically by a company whose business processes are aimed at very low costs per contract . This is one of the most significant barriers to entry into our market. Accordingly, GRENKELEAS-ING's business model focuses on standardization, efficiency, speed, and automation. All of the Group's lease contracts are managed centrally at our head office in Baden-Baden, Germany. Sixty-five percent – as many as 82 percent in Germany – of all of the GRENKE Group's financing inquiries, including those received by franchise partners, are made using our online tool.

Our internally developed IT-based scoring procedure, which is optimized on an ongoing basis, enables us to calculate default rates. We attach great importance to our independence and therefore do not rely on any specific IT product manufacturers, are not dependent on any particular banks for refinancing, and also have a highly diversified portfolio of lessees.

We sell our lease financing through independent specialist reseller partners who offer their customers various financing options at points of sale. A decisive factor for choosing GRENKELEASING in this process is a competitive price which we achieve through our cost-efficient business process and wide range of refinancing options. A simple contract structure and process speed are also key factors.

We help our dealers to conclude their transactions fast by making prompt contract and payment commitments, usually within 10 minutes. In addition, as the only lease provider in the small-ticket area, we provide comprehensive individual and personal support for our specialist reseller partners through our local sales staff. Our extensive support in all areas relating to leasing make us a partner for success for our dealers.

We market our business model in two ways: First, we are growing in many European countries through our own subsidiaries and branch offices. Second, we are also expanding into new countries through our franchise model. This allows us to retain personnel who show the entrepreneurial spirit required to establish a new local subsidiary. The franchisees receive access to expertise, proven management tools, and back office support from GRENKELEASING and may use the brand names "GRENKE" and "GRENKELEASING". Our review in connection with the refinancing of the lease agreements, which occurs during the term of the franchise agreement, ensures that we are thoroughly familiar with the receivables portfolio of the franchisee at all times. Because the franchisee uses our brand name, the company is already established in the market by the time it is acquired, if this option is used.

The Group's Growth Strategy

The GRENKELEASING AG Group is a growth company. Our proven strategy focuses on two lines of development: new countries and new products. Here the focus is currently on growth in new countries. Our traditional small-ticket IT leasing business allows us to quickly grow in new countries and regions. In the past few years, we have systematically expanded our presence in Europe. Here we have already tapped into significant growth sources or are standing on the threshold of a new phase of substantial growth in the near future.

GRENKELEASING AG has its head office in Baden-Baden, Germany. In Germany, the Group has branches in 20 cities. The Group also has subsidiaries in Austria, Belgium, the Czech Republic, Denmark, France, Ireland, Italy, the Netherlands, Spain (Barcelona), Sweden, and Switzerland. Franchise partners of the Group have been active in Hungary, Norway, Poland, and the UK for several years. In fiscal year 2007, two new franchise partners were gained in Spain (Madrid) and Romania.

In our established markets we focus on growth with new products; our expansion here follows two tracks. This applies especially to the German market where we operate a nationwide network of offices and know the market thoroughly. Once we have launched, tested and enhanced our new products in Germany, we subsequently introduce them into our established foreign markets. We are currently developing two new products as part of our franchise model: factoring of small receivables, which is not currently available in the market in this form, and vehicle leasing.

Our prime objective is to build up a large network as fast as possible, which allows cost-effective and efficient access to customers. The number of financing inquiries is therefore a key performance indicator in our business. The GRENKE Group, including franchise partners, had 118,407 lease inquiries in the fiscal year (106,891 excluding franchise partners), of which 56,589 were made abroad (of which 45,539 excluding franchise partners abroad). Sixty thousand new lease agreements for the GRENKE Group (54,819 excluding franchise partners) were generated from these inquiries, of which 27,481 were abroad (of which 22,836 excluding franchise partners abroad). This resulted in a 5.3 percent increase in the number of new agreements concluded compared with the prior year for the GRENKE Group, including franchise partners (excluding franchise partners this figure was 2.7 percent).

Development and Structure of Services

In the small-ticket market, we finance a broad information technology portfolio with a focus on IT equipment, printers, software, photocopiers, and telecommunications products. We also offer our specialist resellers and customers a wide variety of contracts. Furthermore, the franchise partners of GRENKELEASING AG offer factoring and auto leasing.

The structure of the portfolio remained largely the same as in the prior year. It is determined by the type and extent of the use of products in office environments in German and European small and medium-sized companies and is not actively shaped by the Group. The same applies for the structure of the industry.

Today, information technology is used in all offices in every industry. Therefore, our focus prevents the creation of risk concentrations in individual industries or regions. Our focus on small-ticket items also contributes to the diversification of our receivables portfolio.

Corporate Management

Equity Ratio and Return on Equity Are Key Targets

The focus of corporate management is achieving a ROE sustainable high rate of return on equity while maintaining a solid equity base. The goal is an equity ratio of at least 16 percent with a return after taxes of 16 percent. We believe that both of these figures are important to ensure a good rating for our Company and to strengthen our stock's performance on the stock exchange.

The stability of our profitability based on the Group's track record, which has been successful for decades, is the key here. With our sophisticated and proven scoring model, we have demonstrated that we can so precisely calculate risks to our business that we can manage the default rates of our portfolio and the risk premiums of our financing to achieve a positive risk-return trade-off. Particularly in phases when investors have an increasing risk awareness, we consider the combination of a high rate of return after taxes with a low risk profile to be attractive for investors.

The equity ratio was 17.9 percent in fiscal year 2007, which continued to be above our medium-term target. In light of the current uncertainties on the international capital markets, we feel more than comfortable with this slight overcapitalization. For additional information on the capital structure, please see the corresponding disclosures in the notes to the financial statements.

Despite the equity base exceeding the target, we came very close to achieving the desired return on equity at 14.2 percent in fiscal year 2007. At 15.9 percent, we almost reached our target return based on a target equity ratio of 16 percent. However, we still want to improve our returns even further and we expect a rise in particular due to the fact that in the next few years, the number of mature, and therefore more profitable, subsidiaries will increase, and the number of new companies in the investment phase of their lifecycles will thus decrease.

Flexible Liquidity Management With a Wide Range of Refinancing Instruments

Day-to-day business is geared to ensuring the Group's continuous solvency. To do this, GRENKELEASING AG reserves enough funds at all times to refinance its own lease receivables as well as those of its subsidiaries. The AG manages the Group's cash for the group companies in a cash pool.

We have dealt with financing partners such as Commerzbank AG and Stadtsparkasse Baden-Baden for many years. We arrange asset backed commercial paper (ABCP) programs through special purpose entities which are assisted by Deutsche Bank AG (Rheingold), WestLB (Compass), and SEB AG (Kebnekaise). These are also our major partners for revolving credit facilities.

We have also issued promissory note loans, debentures, and bonds under a debt issuance program (DIP). The DIP is supported by Deutsche Bank, WestLB, and HSBC. Finally, a new financing instrument was used for the first time in 2006, when we placed an ABS bond.

The GRENKELEASING AG Group is committed to transparency. Each new refinancing instrument that we have developed has been structured in such a way that it has to be fully accounted for in the financial statements from the very beginning. We have consciously avoided using off-balance sheet structures. This policy will continue to apply in the future to ensure complete transparency of the Group's obligations at all times.

Despite an increase in new business, the ABCP programs are still far from being exhausted in fiscal year 2007 (45.1 percent as of December 31, 2007). The programs are revolving, i.e. expiring refinancing can be replaced by new arrangements. Additional funds can be raised by issuing promissory note loans under the DIP. Combined with the strong equity base of the GRENKELEASING AG Group, this gives us enough scope to refinance strong growth in new business over the next few years.

FISCAL YEAR 2007

Economic Conditions and Industry Performance

Economy as a Whole

Once again, the emerging countries were behind the robust growth of the global economy in 2007. China in particular, with its continued double-digit growth, as well as India and Russia were among the global economic drivers. Accordingly, institutions such as the International Monetary Fund (IMF) also expect strong growth in global GDP of 5.2 percent for 2007.

This is all the more remarkable given that the largest economy in the world, the US, has been dogged by the effects of the real estate and mortgage crisis which emerged in the summer of 2007, with signs of an economic downturn becoming quite apparent later in the year. The US Federal Reserve – together with other major central banks – pumped massive amounts of funds into the money markets shaken by growing loss of confidence in the wake of the subprime crisis, and even significantly reduced short-term interest rates. Whether these measures can reduce the spillover of the turbulence from the financial markets to the real economy remains to be seen, but this seemed less and less likely by the end of 2007.

By contrast, the economy in the euro area continued to perform strongly at the end of 2007. Neither the marked strength of the euro nor crude oil prices, which have increased significantly since the middle of 2007, have slowed economic growth in Europe. Therefore, real growth of 2.0 percent is forecast for the euro area for 2007.

In Germany, the increase in the VAT rate at the beginning of the year initially slowed growth. Sluggish consumer spending put a damper on the economy for the entire year. However, very strong investment activities and the consistently good export business offset this effect. The improvement on the labor market and thus the increase in employment also continued. Thus the German economy saw strong growth again in 2007, with real GDP increasing by 2.5 percent.

Industry Performance

There is only very little meaningful data on the development of the section of the leasing market which is relevant to us. This is partly due to the fact that the leasing market is extremely fragmented (in Germany alone there are an estimated 2,000 leasing companies) and partly to the fact that small-ticket IT leasing is not a market segment in its own right and is only targeted by relatively few companies.

Thus the competitiveness of the market varies more if marginal participants whose focus is on other areas of leasing join or leave the market rather than if the volume of small-ticket IT leasing itself fluctuates. Abroad, there are usually fewer statistics available on the market as a whole. This applies in particular to those countries where lease financing is still not very widespread, i.e. where there is particularly strong growth potential.

Altogether, all statistics, studies and surveys indicate that the penetration of IT appliances into offices will, with fluctuations, continue to grow mid term and that leasing as a method of financing will enjoy higher than proportionate growth. This applies in particular to small and medium-sized enterprises, our target market, whereas lease financing is already much more prevalent in large companies.

Significant Developments During the Fiscal Year

Expansion Abroad Continues to Be Successful

In fiscal year 2007 we successfully continued our growth strategy. A number of our activities abroad now make an important contribution to the Group's performance. We are continuing to achieve good growth rates in France, and in Italy we were able to expand rapidly in 2007. In line with this, an eighth branch was opened in Lille in November, and in Italy the "cell division" process began in the third quarter with a second branch in Genoa.

At the beginning of the year we did not have sufficient sales capacity to develop our business in Switzerland due to a shortage of specialists on the local labor market. In the second half of the year, however, we were able to return to growth of 10.2 percent and thus partially offset the downturn of the first six months. Contribution margin 2 rose again in absolute terms, meaning that the DB2 margin there is considerably higher than the group average.

In Spain, in the past fiscal year we carefully evaluated options for further expansion through another branch. This tied up local employee capacity and for a time, development of new business was sluggish, but took off again toward the end of the year. Due to regional particularities, in the second quarter we decided to conclude an agreement with a franchisee for the area around Madrid in addition to our own subsidiary in Barcelona.

The business development of the franchisees was pleasing in fiscal year 2007, which is indirectly reflected in net profit and the consolidated balance sheet as a result of their refinancing. In the UK and Poland in particular, franchisees recorded considerable growth. This demonstrates the success of our market penetration strategy using our franchise model. By concluding a further franchise agreement in Romania in the second quarter of 2007 we extended this model to another market.

Business Tax Reform Enacted in Germany

The uncertainty over the future tax treatment of lease payments in Germany has been relieved, signifying an end to the negative effect this was having on our sales activities. As we mainly serve small companies, as a rule lease payments should continue to be tax-deductible for our customers. They will benefit greatly from the special provisions directed at them.

The majority of uncertainties surrounding the future tax situation for GRENKELEASING AG have also been clarified. However, it is not yet clear how interest components under forfaiting or ABS structures will be treated for trade tax purposes. Clarity is not expected until the first half of 2008.

Financial Markets Under Strain Due to Subprime Crisis

The state of the international financial markets in fiscal year 2007 was not pleasing. A crisis in mutual confidence on the interbank market developed due to increasing defaults on subprime financing on the US real estate market. The ensuing shortage of refinancing was so severe that, as lenders of last resort, the world's central banks repeatedly had to provide substantial amounts of additional liquidity. In addition, certain collateralised instruments were particularly hard hit by negative investor sentiment.

The GRENKELEASING AG Group's refinancing was however barely affected by this. We had considered that the historically low interest rate spreads of the past would not last and thus took advantage of them to secure ourselves considerable refinancing volumes on favorable terms. Thus we have not had to make use of the market since summer 2007 and have merely tested the receptiveness with two smaller tranches, which were placed up quickly and at attractive conditions.

We anticipate that the markets will return to normal in the future but that interest rate spreads will then be at the levels experienced in 2004 and 2005, i.e. above the low levels of 2006 and the first half of 2007, as the risk awareness of market players has grown. This will mean that risk premiums will be higher.

However, this does not imply that our interest margin will shrink. On the contrary, we anticipate that small-ticket leasing will become less attractive to marginal participants whose IT infrastructure is not as advanced as ours. We thus believe that they will either position themselves less aggressively than in the past or even withdraw from the market altogether. This will enable us to pass higher refinancing costs on to our customers and maintain the net achievable interest margin.

GRENKELEASING Rating Confirmed

We are pleased to report that we received confirmation of our counterparty rating from Standard & Poor's at the end of October 2007. The Group's long-term rating is BBB+ with a stable outlook and our short-term rating is A2. Our standing on the capital markets thus remains good and we can continue to use our wide range of refinancing instruments at attractive conditions.

Report on the Results of Operations

The GRENKELEASING AG Group's new business picked up slightly in fiscal year 2007, rising from EUR 405.0m to EUR 412.9m year on year. The foreign markets were once again the drivers of growth, while business in Germany slowed due to the restrained market mood and our clear focus on revenues. Contribution margin 2 developed very well despite the turbulence on the international money markets and rose from 14.3 percent to 14.5 percent in the reporting year.

In fiscal year 2007, we reached our goal of achieving net profit for the period on a par with the prior year. Following net profit of EUR 30.5m in 2006, earnings prior to special effects came to EUR 30.6m, and, including a non-recurring positive tax effect of EUR 1.5m which partially resulted from a change in deferred taxes, net profit for the period came in at EUR 32.1m.

Net interest income from leasing business was satisfactory. We were able to pass on in full higher refinancing costs, which had increased in the wake of the subprime crisis, also managing to generate slightly higher net interest income. Expenses from the settlement of claims were higher in fiscal year 2007 than in the prior year due to our expansion into new markets, but this was as expected.

We manage our business with a view to a positive risk-return trade-off, accepting a rising loss rate as long as it is covered by higher interest premiums. The current rate is still far below our internal threshold, proving that our risk management system is well equipped to cope with the present phase of vigorous expansion abroad with its rapid growth in new markets.

Insurance and new business thrived yet again in fiscal year 2007. This is the outcome of our relatively new contribution margin 2 control system, whereas the decline in profit from disposals is due to the fact that in prior years not all components of earnings were included in the key performance indicators. We generate lower margins from disposals than in the other areas of our business. In order to improve the quality of new business, we aim for a high contribution margin 2 in sales and have made a conscious decision to abandon low-margin business. This could lead to declining income in certain positions during the remaining terms of agreements which were concluded previously.

On the cost side, our healthy expansion abroad led, as predicted, to start-up costs in the fiscal year which will not be recouped by additional earnings until future periods. Major items are personnel and administrative expenses involved in the expansion of the group headquarters in Baden-Baden and the start-up of foreign subsidiaries. Operating expenses also rose considerably, with rents for new or larger office premises, relocation costs and costs of our expanding vehicle fleet increasing in line with sales activities. The costs of the new offices opened in 2006 are reflected in expenses for a whole period in fiscal year 2007.

Consulting and audit fees also increased noticeably in fiscal year 2007. Apart from the legal advice required to reduce the risks of our foreign expansion, costs in connection with the tax audit of a foreign subsidiary and investigating the effects of the business tax reform in Germany were also incurred in the fiscal year. Last but not least, depreciation was substantially higher in fiscal year 2007 as a result of the higher level of property, plant and equipment.

Overall, the Group's earnings before taxes stood at EUR 44.8m, slightly short of the 2006 figure of EUR 47.8m. Net profit after taxes for the period came to EUR 32.1m, against EUR 30.5m in the prior year. With an average of 13,682,454 shares (basic and diluted), earnings per share were EUR 2.35, compared with EUR 2.23 in the prior year.

Report on the Development of the Segments

The primary segments that the GRENKELEASING AG Group operates in are its geographical regions. Regional segmentation makes a distinction as to whether lessees are based in Germany, France, Switzerland, or in another country. The "other countries" segment comprises the subsidiaries in Austria, Belgium, the Czech Republic, Denmark, Ireland, the Netherlands, Spain, and Sweden.

The comments relating to the Group on the income statement in the previous chapter – particularly on rising refinancing costs, the decrease in profit from disposals, and the costs of expanding into other countries – apply equally to the segments. This has led to narrowing profit margins in the segments in the fiscal year. The following special factors also had a bearing on the segments:

In Germany, we are the uncontested number one in the small-ticket IT leasing market, with a very high level of market penetration. This means that our new business is growing within the confines of the market for IT products. In fiscal year 2007, we maintained our focus on high-yield business in a sluggish market, deliberately forgoing very lowmargin deals. This was the main reason for the fall in new business to EUR 253.0m after EUR 274.4m in the prior year.

During the first half of 2007, customers were still noticeably unsure as to the future tax treatment of lease payments. However, contrary to our expectations, the second half of the year did not see a substantial upswing in business. Especially in the typically strong year-end business, we were not willing to push up volumes at the expense of profitability.

Segment revenue in Germany was constant (EUR 92.7m; FY 2006: EUR 93.0m), whereas the segment result was down to EUR 24.6m, against EUR 28.4m in the prior year. Margins were steadier than in our two other large segments, France and Switzerland. This is particularly encouraging given that most administrative expenses for the international expansion are incurred at the group headquarters in Baden-Baden, and therefore in the Germany segment.

France is still the Group's most important foreign market and remains the cornerstone of our growth. New business was up yet again, by 20.2 percent from EUR 85.5m in the prior year to EUR 102.8m in the fiscal year. This high growth was generated with a contribution margin 2 of 14.2 percent (after 15.0 percent in the prior year) that was just under the Group's figure of 14.5 percent. We are continuing to expand across France, opening another office in Lille in 2007 to underpin our strong growth there.

The substantial growth in new business in recent years is reflected in the segment revenue, which was up to EUR 32.1m in the fiscal year, against EUR 25.9m in the prior year. The segment result could not keep pace as France was responsible for a large portion of the fall in profit from disposals. Nevertheless, the segment result rose from EUR 13.7m in fiscal year 2006 to EUR 14.5m in 2007.

The lack of qualified staff slowed our sales efforts in Switzerland in the first half of the year. However, we succeeded in hiring suitable staff despite the tight labor market and grew again by 10.2 percent in the second half. This took new business in the fiscal year to EUR 16.8m, close to the prior-year level of EUR 17.9m. Switzerland is still by far our highest-margin market: in fiscal year 2007, the contribution margin 2 improved yet again from 17.3 percent to 21.0 percent.

The segment revenue mirrors the excellent performance of recent years, rising to EUR 7.1m against EUR 6.8m in fiscal year 2006. At EUR 3.1m, the segment result was lower than that of the prior year (EUR 3.6m), primarily as a result of high staff turnover and increased office expenses.

On the whole, our smaller subsidiaries in the various foreign markets performed very well. The combined revenue of the "other countries" segment rose visibly from EUR 12.1m in the prior year to EUR 17.5m in fiscal year 2007. The segment result grew substantially, from EUR 2.2m to EUR 2.6m. The most important companies are the subsidiaries in Italy and Spain, which we report on separately as they now exceed the EUR 10m threshold for new business.

Italy is experiencing unusually strong growth at the moment, its new business more than tripling in the fiscal year to EUR 16.6m compared with EUR 5.1m in the prior year. At the same time, the contribution margin 2 improved significantly from 10.3 percent to 13.3 percent. New business in Spain consolidated as employees were busy preparing for decisions on the further course of expansion there, and stood at EUR 12.1m compared with EUR 11.9m in the prior year. Here too, our contribution margin 2 improved, from 9.2 percent to its current 12.4 percent.

Report on the Financial Position and Net Assets

The GRENKELEASING AG Group has a balance sheet of high quality. At year-end, its equity ratio stood at 17.9 percent, against 17.1 percent in fiscal year 2006. The moderate increase in total assets from EUR 1,180.0m in the prior year to EUR 1,261.4m in the fiscal year was outstripped by the increase in equity from retained earnings. This solid equity base makes a significant contribution to our investment grade rating, enabling refinancing at good rates. At year-end 2007, the Group had cash and cash equivalents of EUR 53.4m, a significant increase on the prior year's EUR 46.4m.

The main items on the Group's balance sheet are lease receivables and the liabilities from refinancing. As in the prior year, at year-end, they account for some 80 percent and 70 percent, respectively, of total assets. The Group still has a very low level of liabilities to banks, taken out to finance investments in buildings.

The Group uses a range of instruments to secure its liquidity and can thus react flexibly to changes in interest spread on the capital markets. The following table shows the expected cash outflows as of December 31, 2007 due to contractual obligations.

				Payments due (in EURk)
	Total	Within 1 year	1–3 years	4–5 years	Later than 5 years
Financial liabilities	1,006,473	390,261	565,485	45,396	5,331
Lease and rental agreements	11,433	3,851	4,554	1,889	1,139
Purchase commitments*	51,527	51,527	-	-	-
Commitments from pending transactions	1,167	726	427	14	-
Total contractual agreements	1,070,600	446,364	570,466	47,299	6,471

* legally binding commitments to purchase goods and services, and trade payables

The Group's most important cash obligations from operating activities are the payment of interest and principal on financial liabilities, rent and lease obligations and purchase commitments. The purchase commitments are cash flows from legally binding commitments to purchase goods and services, and trade payables.

Of the financial liabilities due in 2008, half of the EUR 365m will be payable under ABS and ABCP programs and the ABS bond, the other half being reserved for bonds, debentures and private placements. The former are due in separate, short-term tranches, but are revolving and the total volume is fixed so that amounts freed up through repayments of lease receivables can be reused. The largest single item of other financial liabilities is a bond of EUR 100m which is repayable on April 30, 2008.

According to our business model, cash flow from operating activities is a particularly important indicator of the performance of the GRENKELEASING AG Group, also reflecting the development of the refinancing of the leasing business. In fiscal year 2007, the increase in lease receivables almost exactly matched the refinancing of this growth, whereas in the prior year we financed EUR 11.8m out of our own funds over the balance sheet date.

As a result, the entire EBT plus depreciation and allocations to provisions were available to fund the Group. EUR 26.1m of this amount (FY 2006: EUR 24.7m) was passed on to our franchisees for refinancing purposes. Including the cash-flow positive EUR 10.3m change in other assets and liabilities (due mainly to cut-offs on the balance sheet date, especially of prepaid rent) in fiscal year 2007 compared with the cash-flow negative EUR 0.9m in the prior year, the cash flow from operating activities in the fiscal year stood at EUR 30.3m against EUR 13.8m in the prior year.

With taxes paid and net interest income, the net cash flow from operating activities in the fiscal year came to a positive EUR 15.7m compared with a negative EUR 3.2m in the prior year. This cash flow was used to invest in equipment and acquire intangible assets of EUR 4.2m (FY 2006: EUR 5.6m), fund the dividend payment of EUR 7.5m (FY 2006: EUR 6.8m) and ease bank liabilities by EUR 0.8m (EUR 4.8m had been raised in the prior year). Overall, the cash flow for the period was positive at EUR 3.3m, against a negative EUR 10.2m in the prior year.

ADDITIONAL INFORMATION

Sales and Customer Structure

We focus on the small-ticket IT leasing market. Due to the small ticket size of each individual agreement, direct sales to new customers in this market do not make economic sense. We thus use vendor programs, which means that lease agreements are primarily concluded after referral from manufacturers and resellers.

Intensive personal reseller support provided by our own staff in local sales offices or by our franchisees distinguishes us from our competitors. Our sales staff and franchisees support and train resellers in the area of lease financing in order to contribute to their success and to ensure that leasing makes up as high a share of their new business as possible.

To this end, we regularly introduce new services for resellers to support their sales activities, improve the efficiency of their processes and increase their loyalty to our company. We have also further expanded our quality management system to support customer orientation. In addition, we offer our entire range of services on the internet (www.grenkeleasing.de und www.weblease-europe.com).

Our key account management caters to IT product manufacturers. With these sales partners we again rely on excellent process quality and efficiency to strengthen customer loyalty. We manage selected corporate customers as part of our direct sales program. We review our receivable balances quarterly and offer framework financing to suitable customers. However, it is still the case that none of these lessees has total liabilities exceeding two percent of group equity. The customer structure is thus still broad based.

Structure of the Supplier Base

The GRENKELEASING AG Group offers manufacturer-independent lease financing. The structure of the supplier portfolio is thus primarily shaped by demand from German and European small and medium-sized companies for IT products of various manufacturers. It varies without the Group actively influencing it due to IT products on offer, manufacturers' product policies and customers' usage patterns. The result is that the supplier structure of the GRENKELEASING AG Group has a broad base.

Research and Development

As a financial services company, the GRENKELEASING AG Group offers lease financing for IT products. We thus do not carry out any basic research and development. The Company's core competence is, however, efficient leasing logistics through centralized, highly standardized IT processes. We utilize common leading products which have been extended by individually programmed applications. In this connection, limited IT development costs are incurred. Under the franchise model, for example, online platforms are developed for the individual franchisees to accommodate the demands of their market environment.

Employees and Stock Options Programs

The GRENKLEASING AG Group continued to grow in the past fiscal year. Accordingly, the number of employees (excluding the Board of Directors) rose from an average of 384 in 2006 to 411. The group rate of turnover in fiscal year 2007 was 11.7 percent, compared with 13.6 percent in the prior year. The rate was strongly influenced by high turnover during the start-up phase of our operations abroad; turnover in Germany was significantly lower. Fluctuation primarily occurred amongst non-management specialist staff and part-time workers, whereas turnover among middle and top managers was below one percent in Germany and abroad.

We attach great importance to our employees' professional development and thus offer extensive training and development opportunities. Fourteen young people commenced their training at GRENKELEASING AG in fiscal year 2007. In addition to traditional training in the areas of administration and financing, we also regularly support new training fields, such as currently in dialog marketing.

Additionally, 12 employees are currently completing three or three-and-a-half year commercial computer science and international business management degree programs which combine work and study at Loerrach University of Cooperative Education. We have been working with the university since 2004. Both GRENKELEASING AG and our subsidiaries in Switzerland and France provide this opportunity to young people, and we took on four new students during

the fiscal year. In 2007 we established further links and took on two students now studying commercial computer science at the Karlsruhe University of Cooperative Education and two now studying accounting and financial control at the Mannheim University of Cooperative Education.

In the past, GRENKELEASING AG offered its employees stock options as part of two stock option programs. The last opportunity to exercise options from the second program was in a defined exercise period in fiscal year 2007. A total of 4,420 options were exercised. The remaining 9,455 options which were not exercised thus expired and no longer have an effect on earnings per share.

Changes in the Executive Bodies

At its meeting on April 30, 2007, the Supervisory Board appointed Dr. Hack as Deputy Chairman of the Board of Directors, replacing Mr. Konprecht, who will devote his full attention to managing sales activities. There were no further changes to report in the bodies in fiscal year 2007.

Compensation

Remuneration of the Board of Directors

	Grenke	Konprecht	Kostrewa	Kindermann	Dr. Hack	Total 2007	Total 2006
Gross salary	327,534.24	172,023.76	128,016.00	126,144.51	266,655.48	1,020,373.99	1,033,630.46
Performance bonus	109,939.85	51,225.29	38,418.94	38,418.94	88,107.51	326,110.53	376,471.76
Comp. in kind SOP	0.00	0.00	0.00	0.00	0.00	0.00	130,097.00
Bonus	4,530.00	2,265.00	1,698.75	1,698.75	3,895.80	14,088.30	0.00
Pensions	0.00	0.00	0.00	0.00	21,000.00	21,000.00	21,000.00
Total costs	442,004.09	225,514.05	168,133.69	166,262.20	379,658.79	1,381,572.82	1,561,199.22

Total remuneration for the Board of Directors amounted to EUR 1,382k in the fiscal year (FY 2006: EUR 1,561k). Remuneration for members of the Board of Directors includes fixed and variable components. The criteria for the variable remuneration component are defined in advance annually based on the increase in EBT (earnings before taxes) and the increase in the key performance indicators of a balanced scorecard. The achievement of the EBT growth target is measured at the end of each year and the BSC criteria are measured at the end of each quarter.

The main criteria contained in the BSC correspond to the key performance indicators for the long-term development of the Group, such as number of lease agreements and new business. This approach aims to enhance the value of the Company in the long term. In fiscal year 2007 and in the prior year, the members of the Board of Directors did not receive any GRENKELEASING AG stock options – in accordance with the Stock Option Program II.

An annual pension premium of EUR 21k is paid to a company welfare fund for Dr. Hack. On March 12, 2007, the Chairman of the Supervisory Board of GRENKELEASING AG concluded a phantom stock agreement with, and for the benefit of, Dr. Hack. Under this agreement, Dr. Hack receives for fiscal year 2007 and each of the two subsequent fiscal years a claim to payment equal to the increase in value of 30,000 shares in GRENKELEASING AG based on a defined basic share price.

The share price is the unweighted arithmetic mean of the Xetra closing prices on all trading days from December 1 to December 23 of the respective prior year. The basic price for 2007 was EUR 35.37 and has been set at EUR 22.18 for 2008. The maximum payment arising from this agreement is limited to EUR 600,000 for the period of three years. Under the program, Dr. Hack is obligated to invest the respective net amount paid plus a personal contribution of 25 percent of that amount in GRENKELEASING AG shares.

The plan was accounted for as a cash settlement plan and any changes in fair value are recognized in profit or loss. The options cannot be exercised in 2007 as the mean share price in December 2007 was less than the basic price of EUR 35.37. As of December 31, 2007, the phantom stock granted to date was therefore worth EUR 0k.

The Company has taken out directors' and officers' liability insurance for its executive bodies and top managers under which the insured party must pay a fixed deductible of EUR 3,000 per claim. Members of the Board of Directors are therefore also covered by the insurance. There is no possibiltiy to split the premium individually.

No further benefits have been agreed with any member of the Board of Directors in connection with the termination of their appointment. Moreover, no member of the Board of Directors received benefits or promises from third parties relating to his position as a member of the Board of Directors in the past fiscal year.

Name	Function	Basic salary 2007	Audit commitee	Personnel commitee	Variable Remuneration	Total (fixed and variable) 2007	Total (fixed and variable) 2006
Prof. Dr. Lipp	Chairman	9,000.00	600.00	900.00	7,311.75	17,811.75	15,093.75
Münch	Member of the Supervisory Board	6,000.00	600.00	-	3,524.50	10,124.50	9,487.50
Dr. Nass	Member of the Supervisory Board	6,000.00	-	-	3,000.00	9,000.00	8,625.00
Staudt	Member of the Supervisory Board	6,000.00	-	600.00	4,124.50	10,724.50	9,487.50
Dr. Sträter	Member of the Supervisory Board	6,000.00	-	-	3,000.00	9,000.00	8,625.00
Witt	Deputy Chairman	6,000.00	900.00	600.00	4,612.25	12,112.25	10,781.25
Hauss	Member of the Supervisory Board	-	-	-	-	-	878.91
Total		39,000.00	2,100.00	2,100.00	25,573.00	68,773.00	62,978.91

Supervisory Board Compensation

In fiscal year 2007, the members of the Supervisory Board received a total of EUR 68.8k (FY 2006: EUR 63k) remuneration for their work. The remuneration contains EUR 3,973.00 not relating to the period. The remuneration for each individual member can be found in the table above.

The members of the Supervisory Board receive fixed remuneration of EUR 6,000 for each full year of their membership, the chairman receives EUR 9,000, as well as EUR 600 for membership in each committee and EUR 900 for each committee chaired. On top of this, the members of the Supervisory Board receive a variable component if a dividend in excess of EUR 0.20 per share is paid to shareholders.

In this case, the fixed remuneration is increased by one quarter of the percentage by which the dividend per share exceeds the amount of EUR 0.20, but in doing so the variable remuneration component does not exceed 50 percent of the fixed remuneration. If membership of the Supervisory Board is not for a full fiscal year, the fixed remuneration, and thus the basis for variable remuneration, as well as the remuneration for members or chairpersons of committees is reduced accordingly. As well as her position on the Supervisory Board, Dr. Sträter also supported the Company's public relations activities and received EUR 500 remuneration for doing so.

In addition, GRENKELEASING AG's directors' and officers' liability insurance, which was described in the preceding chapter "Remuneration of the Board of Directors" also covers members of the Supervisory Board. The Company also reimburses the members of the Supervisory Board for their cash expenses and the VAT insofar as they are entitled to invoice the tax separately and actually do so.

Shares Held and Share Transactions by the Executive Bodies

The directors' holdings as of December 31, 2007 are detailed in the table below. The members of the Board of Directors currently have no options on shares in GRENKELEASING AG. Members of the Supervisory Board were not granted stock options and there is no plan to do so.

	Shares as of Dec. 31, 2007 (No.)		Shares as of Dec. 31, 2007 (No.)
Board of Directors		Supervisory Board
Wolfgang Grenke	4,871,619	Prof. Dr. Ernst-Moritz Lipp	21,000
Thomas Konprecht	330,730	Dieter Münch	75
Mark Kindermann	52,053	Erwin Staudt	1,000
Michael Kostrewa	47,500
Total	5,301,902	Total	22,075

The members of the executive bodies carried out the following directors' dealings in GRENKELEASING AG shares in fiscal year 2007.

Executive obliged to report	Function	Type of dealing	No. of shares	Date of transaction	Price per share	Transaction volume
Prof. Dr. Ernst Moritz Lipp	Chairman of the Supervisory Board	Purchase	5,000	Sep. 18, 2007	29.08 EUR	145,375.00 EUR
Erwin Staudt	Member	Purchase	1,000	May 9, 2007	35.12 EUR	35,120.00 EUR
Prof. Dr. Ernst Moritz Lipp	Chairman of the Supervisory Board	Purchase	5,000	Feb. 8, 2007	33.15 EUR	165,750.00 EUR

Disclosures Pursuant to Secs. 289 (4) and 315 (4) HGB

GRENKELEASING AG shares are admitted to trading on the Frankfurt Stock Exchange in the Prime Standard, the segment of the regulated market with additional post-admission obligations. The Company's subscribed capital totals EUR 17,491,421.86 and is divided into 13,684,099 no-par value bearer shares with a theoretical nominal value of EUR 1.28. All shares carry the same rights – there are no restrictions on voting rights, preferred shares or special control rights. The Board of Directors is not aware of any other restrictions agreed between shareholders relating to voting rights or the transfer of shares.

The Chairman of the Board of Directors of GRENKELEASING AG, Wolfgang Grenke, held 4,871,619 shares in the Company as of December 31, 2007, which represents 35.60 percent of the capital stock. 40.15 percent of the capital stock, which represents 5,494,165 shares, are held by Mr. and Mrs. Grenke and their dependent son.

The articles of incorporation do not provide for any regulations which deviate from the statutory regulations on the appointment of members of the Board of Directors by the Supervisory Board. These stipulate that members of the Board of Directors are appointed for a maximum of five years. Re-appointment is permitted. The Board of Directors of GRENKELEASING AG has at least two members. The Supervisory Board determines the number of members of the Board of Directors. It decides on their appointment, the revocation of their appointment and on the conclusion, amendment and termination of contracts of employment to be made with them. The Supervisory Board can nominate a chairman of the Board of Directors and a deputy chairman of the Board of Directors as well as deputy members of the Board of Directors.

In accordance with legal requirements, amendments to the articles of incorporation must be adopted by the Annual General Meeting. Except as otherwise required by legal regulations, resolutions are approved by the Annual General Meeting by a simple majority of votes cast and, if legislation requires a majority of capital in addition to a majority of votes, by a simple majority of the capital stock represented. The Supervisory Board is authorized to decide on amendments to the articles of incorporation which only relate to their wording. In addition, the Supervisory Board is authorized to adapt the wording of Art. 4 of the articles or incorporation governing the amount and division of the capital stock, according to the utilization of the approved capital or the end of the authorization period.

In accordance with the resolution adopted on May 9, 2006 by the Annual General Meeting, the Board of Directors is authorized, with the approval of the Supervisory Board, to increase the Company's capital stock once or several times by April 30, 2010 by up to a nominal amount of EUR 8,500,000 by issuing new no-par bearer shares in return for cash and/or non-cash contributions. The shareholders are to be granted a subscription right.

However, in the case of cash capital increases the Board of Directors is authorized, with the approval of the Supervisory Board, to partially or completely exclude the shareholders' right to subscribe for up to ten percent of the capital stock of the Company if the issue price of the new shares is not significantly lower than the market price. In addition, the shareholders' right to subscribe in the event of non-cash capital increases due to the purchase of entities, parts of entities or equity investments can be partially or completely excluded.

By resolution adopted by the Annual General Meeting on May 9, 2006, the capital stock of the Company has been conditionally increased by up to 3,000,000 new no-par bearer shares or up to EUR 3,834,690 (conditional capital III). The conditional capital serves to cover options or convertible bonds with a total nominal value of up to EUR 150,000,000 and a maximum term of ten years which the Board of Directors can issue, with the approval of the Supervisory Board, on one or more occasions until May 8, 2011. Existing shareholders' subscription rights may be excluded. Since authorization was granted, no options or convertible bonds have been issued.

There are no compensation agreements with members of the Board of Directors or employees for the event of a takeover bid. No further disclosures are made pursuant to GAS 15a.27 ("change of control" clause) as they could be of a considerable disadvantage to the parent company.

Corporate Governance

Companies listed in Germany that have their registered office in Germany have a duty under the German Transparency and Disclosure Act ["Transparenz- und Publizitätsgesetz": TransPuG] to disclose the compliance of their corporate governance with the recommendations of the German Corporate Governance Code and to explain any departures.

Good corporate governance, which manifests itself in value-based, transparent company management and control, is an integral part of GRENKELEASING AG – i.e. of the Board of Directors, Supervisory Board and executive employees. The Company agrees very strongly with the principles of the German Corporate Governance Code and sees their implementation as an important contribution to building trust with all current and future stakeholders, with customers, shareholders, lenders, employees, business partners and the general public.

In the past few years, corporate governance has also enjoyed increased weight in the assessment and valuation of listed companies. It thus contributes significantly to the increase in the value of the Company and to securing and extending access to equity markets.

Thus by tradition, GRENKELEASING AG fully complies with all recommendations of the Corporate Governance Code. This was attested by the Board of Directors and the Supervisory Board of the Company on April 30, 2007 in their declaration of compliance with the version of the Code dated June 12, 2006.

The Company's current declaration of compliance is reproduced in the "Corporate Governance" chapter of the 2007 Annual Report and on the homepage (www.grenke.de) in German and English. The German Corporate Governance Code can also be viewed there.

RISK MANAGEMENT REPORT

The risk management system at GRENKELEASING AG has the function of systematically identifying, assessing, documenting and disclosing risks to the parent company and subsidiaries. It is designed to enable employees and management to address risks responsibly and make the most of the opportunities that present themselves.

The risk management system introduced in 2003 is run via a risk management tool on the GRENKELEASING AG Group intranet and was enhanced in fiscal year 2007. The function of the risk management system and the result of measures taken are reviewed by the internal audit department. The internal audit department reports directly to the Board of Directors.

Risk Policy/Strategy

Our risk policy aims to measure and actively manage risks which arise from operating activities. We are able to measure the credit risk of our business very exactly so that we can factor in adequate risk premiums and thus achieve a positive risk/return trade-off. We also use derivatives to hedge interest rate risk. Our risk strategy aims to widely diversify our receivables, which is already an integral part of our business model. Due to our focus on small-ticket leasing we do not have, for example, any risk concentrations in our lease portfolio or new business. This applies to both customers and industries. We are not dependent on banks or manufacturers either. Our international growth strategy also leads to an even wider diversification of our receivables.

A key element of our risk management system is extensive quality management, which also makes a considerable contribution to the quality of our service and both customer and business partner satisfaction. Consistently and continuously improving the extensive quality management system we have introduced is part of our corporate philosophy. Above all, this includes our scoring process to evaluate credit risk arising from lease agreements, the evaluation of our reseller relationships based on counterparty risks, the documentation of our business processes and the development of IT programs to meet our specific needs in administering contractual arrangements with our lessees and franchise partners. In addition, the correctness of financing (avoidance of double financing, actual acquisition of lease assets) is reviewed and documented by external advisors every six months.

Credit Risk

Since 1994, we have assessed the creditworthiness of our lessees using a scoring system. The quality of this system has been proven by the level of loss experienced since its implementation. This applies to our established domestic business as well as to new markets abroad which we have been penetrating systematically. A review is performed every quarter based on the actual loss figures using automated database reports which contain both publicly available data and internally generated historical data. The scoring system is being enhanced on an ongoing basis by specialist staff.

Reseller Risk

By diversifying our reseller relationships, we take into account the risk of the differing average credit risk of their customer portfolios. We evaluate our reseller relationships on a quarterly basis based on the credit risk of the agreements arranged by them. There has been no change in the fact that no reseller generates more than four percent of new business.

Cash Flow Risk

By cash flow risks, we mean the risk of non-payment of lease installments by lessees or interest and redemption payments by the franchisee. In the case of lessees, such non-payments always arise directly from a deterioration in the creditworthiness of the lessees after conclusion of the contract. In the case of franchisees, non-payment by their customers can indirectly result in the franchisees being unable to make their interest and redemption payments.

These risks could be hedged using credit derivatives or traditional credit insurance strategies. Such instruments have not been used to date due to GRENKELEASING AG's many years of experience and proven performance in this area of risk management. This also generally applies to the financing of franchisees, as receivables from their customers are usually assigned as security within the scope of franchisee financing.

Process Risk

TÜV Management Service GmbH issued our Company with DIN EN ISO 9001:1994 certification in 1998. Our quality management system was tested and certified in 2007 by Technical Control Association officers from TÜV Management Service GmbH in accordance with the new standard DIN EN ISO 9001:2000. In addition to the German branches, the subsidiaries in Austria, France, Switzerland and Spain as well as Grenke Investitionen Verwaltungs KGaA, which is in charge of asset sales, have also been certified.

The Board of Directors regularly assesses the effectiveness of the management system and any corrections are made on a timely basis. The current audit report confirms that GRENKELEASING AG and its subsidiaries have an exemplary management system, operated to a high standard. According to the report, the requirements of ISO 9001:2000 are met in full.

Any original lease contracts which have not been scanned in are kept in fireproof cabinets/safes. Thus, even in the event of damage to property (caused by fire, etc.), sufficient precautions have been taken. Contract data is stored and updated in our IT system, mainly using specially developed programs. Original contract data is stored both in branch offices as well as in the central contract management division in Baden-Baden, Germany. Automatic backup programs and automatic power interruption facilities safeguard data maintenance. IT systems play an important role in the processing and management of our leasing business, and, as such, IT organization and processes are subject to regular internal review.

Contractual Risk

Contractual risk relates to risks to net assets and earnings as a result of open residual values. Contractual risk is limited by generally concluding full payout leases and never entering into maintenance or warranty risks.

Sales Risk

Ongoing marketing measures serve to mitigate sales risk. These include:

• ` Gathering information
• ` Product development
• ` Procedural improvements
• ` Developing sales channels

During the history of our Company, which now spans almost thirty years, we have gathered extensive experience in developing and managing our sales channels, which has not only enabled us to achieve lasting high growth. We now view this experience and the company reputation we have built up as an important market entry barrier for potential competitors.

Country Risk

Any risks that could arise from the different legal systems in each country are identified prior to market entry with the help of local legal and tax advisors and are taken into consideration in the lease contracts. As far as is necessary, the business model is adjusted accordingly.

Financial Market Risk

Fluctuations in market prices on the financial markets can have a significant effect on cash flow and net profit. Changes in interest rate markets and in certain currencies affect the GRENKELEASING AG Group. We actively manage these risks as part of our constant risk management and monitoring of interest rate and currency positions. GREN-KELEASING only uses derivative financial instruments to manage the risk positions of underlying contracts.

As well as assessing risk-prone, market-sensitive positions such as a floating rate note or a receivable in pound sterling, sensitivity and elasticity also play a key role in how we handle financial market risk. We aim to limit the sensitivity of net profit to the volatility of market prices. This means aiming for the lowest possible dependency of net profit on the development of the interest rate and currency markets while maintaining a good balance between the cost and benefit of hedge relationships. The following parameters are used for risk analysis:

• ` A concurrent, parallel increase or decrease in the value of the euro compared with all foreign currencies by ten percent
• ` A parallel shift in term structures of interest rates by 100 bps points (1 percentage point)

The potential economic effects identified in the analyses are estimates. They are based on an artificial market condition and in particular on the assumption that all other conditions will remain the same. This means that the shift in the term structure of interest rates is viewed independently of any related effects on other interest rate-induced market developments. The actual effects on the Group's income statement can significantly differ from this as a result of how the market really develops.

Interest Rate Risk

The interest rate risk for GRENKELEASING primarily results from floating-rate debentures, ABCP programs and the ABS bond. We use derivatives to hedge interest rate risk. Further information on these risks is presented in the "Detailed Risk Review" chapter in the notes to the consolidated financial statements.

Sensitivity to financial performance is key to the identification of an open risk position, which leads to a corresponding hedge using derivative instruments. This means that overall we endeavor to achieve net interest income which demonstrates minimal sensitivity to interest rates. According to estimates from the sensitivity analysis, a parallel shift in the term structure of interest rates by plus 100 bps points for the past fiscal year would lead to a EUR 776k reduction in earnings before tax. This is equivalent to approximately one percent of net interest income.

A corresponding downwards shift in the term structure of interest rates would lead to a EUR 1,543k increase in earnings before tax. The asymmetrical sensitivities result from the use of interest rate caps for ABCP financing. In these cases, a cap is set for interest expense which limits the risk of rising interest rates. But this does not exclude the possibility of benefiting from lower interest rates or the opportunities presented by falling interest rates.

Currency Risk

Currency risks currently exist in financing for group companies or franchisees outside the euro area. These risks are not hedged until the amount outstanding reaches EUR 1,000k. This amount was exceeded in Poland, the UK, Norway and the Czech Republic. The exchange rate for financing provided by GRENKELEASING AG in Polish zloty, pound sterling, Norwegian kroner and Czech koruna to the Czech subsidiary and franchise partners in the UK and Poland is thus known and fixed.

The financing for the subsidiaries in Denmark and Sweden and for the franchise partners in Hungary and Romania has not yet reached a significant volume for the Group, such that no currency hedging has been carried out in this respect to date. The derivatives used here are disclosed under financial assets or financial liabilities at their fair value as of the balance sheet date. Switzerland is not mentioned in this context, as lease refinancing is solely provided by Swiss banks in local currency.

Remeasurement due to the translation from a foreign currency of the net profit of group companies in non-euro countries has not been necessary due to the relative insignificance of the companies concerned.

Overall, risks arise from currency fluctuations relating to financial assets and receivables in foreign currency, from pending transactions in foreign currency and from the translation of group companies' financial statements. The use of derivatives (only forward exchange contracts are used for currency risk) offsets the market sensitivity of hedged items (i.e. cash flows from financial assets and receivables). Ideally, the instruments achieve an almost full offset. For the foreseeable future, hedge accounting will not be used for currency positions.

For our foreign currency sensitivity analysis we assume that the euro will gain or lose value against all currencies relevant to the GRENKELEASING Group. As of December 31, 2007, if the euro had appreciated accordingly group earnings before taxes would have increased by EUR 464k. According to estimates and assumptions made in the sensitivity analysis, a ten percent decrease in value would have led to a EUR 454k decrease in earnings before taxes. Considering that approximately EUR 50m of assets are affected by foreign currency, this sensitivity of less than one percent of the assets at risk is the result of our successful foreign currency risk management.

In terms of nominal value, the pound sterling is the most significant currency, accounting for 90 percent of the sensitivity effects. However, these results largely stem from the evaluation of pending transactions during the sensitivity analysis. There were no cash flow risks in this context.

Refinancing Risks

We refinance ourselves independently of banks and also have direct access to the capital markets. We also ensure that our liabilities are well diversified and work together with several partner banks.

Our refinancing instruments range from traditional bank financing to revolving loan facilities and asset-backed commercial paper (ABCP) programs. This financing is fixed and agreed so that there are no risks concerning availability in this area. In addition, we have access to the capital markets independently of banks thanks to our ABS bond and the debt issuance program. Using these instruments we can make use of the most favorable financing channels offered at any time on the capital markets. Overall we have sufficient scope in the next few years to refinance strong growth in new business.

During fiscal year 2007, a considerable shortage of refinancing funds and a visible widening of the interest rate spread was observed on international financial markets as a result of the subprime crisis on the US real estate market. It is not yet clear when this crisis will be completely over. The GRENKELEASING AG Group's refinancing was not markedly affected by this, however, as we had raised a substantial amount of refinancing funds before the crisis began and were thus not dependent on the market in the second half of 2007. This applies all the more as, during the third quarter of 2007, we tested the market with two smaller placements, which were placed up quickly and at attractive conditions. For the duration of this unusual state of the market, we will continue our opportunistic strategy, positioning ourselves on the market with small tranches.

Risk Summary

The risk management system is appropriate and suitable for recognizing significant risks at an early stage. Sufficient precautions have been taken to offset counterparty risk, credit risk, and similar risks arising from our leasing business. The corresponding write-downs, valuation adjustments, and provisions disclosed in the annual financial statements were computed at an appropriate level using conservative benchmarks. With respect to the future development of the GRENKELEASING AG and its subsidiaries, there are no particular business-related risks beyond the normal range.

EVENTS OF PARTICULAR SIGNIFICANCE AFTER THE CLOSE OF FISCAL YEAR 2007

There were no significant events to report after the close of fiscal year 2007.

REPORT ON FORECASTS AND THE OUTLOOK FOR THE GROUP

Economic Environment

Expectations for global economic growth were dampened at the turn of 2007/08. The global slump in prices of structured credit products caused by the mortgage crisis in the US has developed into a global crisis for the whole banking industry. The majority of observers no longer rule out the possibility of the banking crisis having a knock-on effect on the rest of the economy. Investment financing and other financing could become more expensive and no longer be provided in the volumes required and consumer spending could suffer due to resulting effects on the labor market and general uncertainty.

These predictions primarily relate to the US. As well as the ensuing fear of a considerable slump in growth in the US, concerns are also mounting that other economies could be affected. Growth forecasts for China, which benefits considerably from the strong US demand for imports, have recently been adjusted downward, and in Japan signs of an impending recession are rising. As well as the risk to growth which has been triggered by the banking crisis, the danger of inflation is increasing globally, primarily fueled by the price of oil, which has reached an all-time high.

Lower growth rates than in 2007 are expected for the current year in Europe too. However, observers believe that the impact will be considerably less serious as the economic upturn in the euro area, and in particular in Germany, is driven by strong domestic factors. Thus if export growth slows overall, investment activities by companies and thus the labor market are expected to remain solid, and consumer spending is even expected to increase slightly due to a drop in unemployment. Following real growth of 2.5 percent in 2007, the German government and economic research institutes in Germany forecast a growth rate of 1.7 percent for 2008.

Opportunities and Risks

The following report summarizes the opportunities and risks forecast for the Group. The fundamental statements concerning domestic business also apply to the segments organized according to foreign markets. Compared with domestic business, there are only two additional risks for our business abroad: First, currency risks can arise in markets outside of the euro area. In line with our risk policy strategy, we limit such risks using derivative instruments as soon as they reach a minimum volume, meaning that altogether the currency risks are low.

Second, new business growth in smaller foreign markets can be influenced more strongly by employee turnover than in Germany, where both total business volume and the number of employees are higher. This is a typical risk for a small business segment. We combat it by offering intensive employee support and training. In addition, the Group aims to reach a substantial size in all foreign markets to successively reduce the relative importance of individual employee turnover as business grows.

As a leasing provider, the whole Group is subject to interest rate risk. This can have an effect on various areas: Refinancing lease receivables is only subject to interest rate risks to a limited extent as the refinancing – if subject to a floating rate – is hedged using derivatives.

In addition, however, our business model is also sensitive to interest rates, meaning that the growth and profitability of new business can be influenced by interest rate changes. Risk awareness in the capital markets has significantly increased again due to the US subprime crisis, and the extremely low interest rate spreads of the past have widened considerably. We anticipate that when the uncertainty prevalent on the markets has passed, the levels experienced in 2004 and 2005 will return. This would be around the level at the end of fiscal year 2007 and thus be higher than recent levels, i.e. during the period from 2006 to early 2007. We assume that we will be able to pass this increase on to the market and that our interest margin will not suffer long term compared with fiscal year 2006.

However, in the short term this presents the largest risk for the development of business in 2008. It is not yet clear how long the uncertainty on the capital markets resulting from the subprime crisis will continue and how volatile the markets will be in the near future. This means that from a current perspective we cannot completely rule out that the Group's refinancing costs may suffer short term. In addition, several experts have warned that the crisis could spill over to the real economy. This would lead to increasing default rates in our receivables portfolio. However, such a development is not apparent. One further issue is that, as we stated at the beginning of this management report, the details of the taxation of leasing companies has not yet been fully clarified following the passing of the business tax reform in Germany, which leads to limited risks in terms of our tax burden for 2008.

Currently, it is also being debated whether leasing companies should be subject to banking supervision. This involves no risk for the GRENKELEASING AG Group. Given our currently high equity base, we do not expect additional capital requirements. Nor do we expect the generation of internal business data to involve additional cost, as we have already set up comprehensive reporting structures for the entire Group.

Expenses could be incurred for the additional documentation required by the German Federal Financial Supervisory Authority ["Bundesanstalt für Finanzdienstleistungsaufsicht": BaFin]. This would, however, be contrasted by trade tax relief as leasing companies would then also fall under the "bank privilege", meaning that refinancing would be trade tax-free. Overall, it would probably be advantageous for our competitive position if leasing companies were included in banking supervision as this would disproportionately affect smaller leasing companies with a smaller equity base, limited management reporting and lower profitability.

Anticipated Development of Business

Fiscal Year 2008

We are entering 2008 with confidence and aim to succeed again in our mid-term goal of exceeding ten percent growth in new business within the GRENKE Group including franchise partners. As in 2007, growth will chiefly be generated by our foreign operations while we aim at further investments into promising leasing business in our German domestic market.

For the net profit we anticipate a further stable and positive development. The volume of new business generated in the past few years should start to visibly translate into profit. The potential growth rate versus 2007, however, depends heavily on a number of external factors, which can not yet be fully evaluated. Among these are – as discussed in the previous chapter - prolonged and increased capital market insecurity as a result of the subprime crisis with related negative effects on refinancing costs; the crisis spilling over into the real economy resulting in increasing loss rates; and unfavorable decisions concerning the taxation of forfaitings. Depending on how these factors develop, we expect net profit for the period of between EUR 30.6m and EUR 33m.

Subsequent Years

We have set the Company on course for growth. Our aim is sustained new business growth of more than ten percent per year in the GRENKE Group including franchise partners. We plan to achieve this using an optimized combination of established companies with longstanding business in their markets and a large market share, and a portfolio of young, fast-growing companies in new countries.

We will achieve the highest growth rates in new business in markets where the name "GRENKELEASING" is already established but market penetration is not yet complete. This means very young markets such as Italy where our absolute volumes are still relatively low (we initiated the cell division stage there in 2007). But it also means more mature markets such as France, where we are currently expanding (we opened our eighth branch there in 2007).

Mature companies such as France are also the pillars of earnings growth within the Group. Profitability is also secured by established markets such as Germany, where growth perspectives in our traditional leasing business are, however, limited due to the large market share we have already captured.

Essentially we are heading for a high CM2 in new business, meaning that Group companies' new business growth will also be reflected in comparable growth in net profit over the term of the lease agreements. This can, however, be affected by other factors short term. These include in particular the proportion of companies at the beginning of their lifecycle – and thus in the investment phase – compared with the proportion of established, high-yield companies. We optimize the combination of companies in varying development phases in line with our growth target for new business and our target of 16 percent for return on equity.

Baden-Baden, Germany, January 23, 2008

Executive Board

CONSOLIDATED INCOME STATEMENT FOR FISCAL YEAR 2007

EURk	Note	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006
Income from interest on lease receivables	3.1	96,091	89,299
Expenses from interest on refinancing liabilities	3.2	33,702	27,603
Net interest income from leasing business	3	62,389	61,696
Settlement of claims	4	-17,139	-15,148
Net interest income after settlement of claims from leasing business		45,250	46,548
Income from insurance business		18,499	17,090
Expenses from insurance business		1,766	1,862
Profit from insurance business		16,733	15,228
Profit from new business	5	20,418	18,875
Income from disposals		14,471	12,627
Expenses from disposals		12,579	9,442
Profit from disposals	6	1,892	3,185
Other operating income	7	1,170	879
Personnel expenses	8	21,839	20,468
Operating expenses		5,782	4,744
Administrative expenses		2,790	2,631
Consulting and audit fees	9	2,674	2,349
Selling expenses (excluding commissions)		3,261	3,183
Amortization/ depreciation	11	2,233	1,821
Other operating expenses		799	892
Other taxes		861	561
Profit/ loss from ordinary operations		45,224	48,066
Expenses/ income from the fair value measurement		-16	44
Other interest income		839	1,048
Other interest expenses		1,232	1,341
Earnings before taxes		44,815	47,817
Income taxes	12	23,877	4,661
Deferred taxes	12	-11,187	12,646
Net profit for the period		32,125	30,510
Earnings per share (basic)	13	2.35	2.23
Earnings per share (diluted)	13	2.35	2.23
Average shares outstanding (basic)	13	13,682,454	13,652,642
Average shares outstanding (diluted)	13	13,682,454	13,666,537

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2007

EURk	Note	Dec. 31, 2007	Dec. 31, 2006
Assets
Current assets
Cash on hand and balances with banks		53,395	46,421
Financial assets	14	2,721	1,804
Lease receivables	15	387,454	364,529
Trade receivables	16	2,122	2,454
Lease assets for sale		11,878	12,333
Tax receivables	17	6,111	13,146
Other current assets	18	64,874	34,949
Total current assets		528,555	475,636
Non-current assets
Lease receivables	15	612,604	580,684
Property, plant and equipment	19	32,830	28,093
Intangible assets	20	3,180	2,885
Deferred tax assets	22	14,572	16,799
Other non-current assets	21	69,668	75,874
Total non-current assets		732,854	704,335
Total assets		1,261,409	1,179,971

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2007

EURk	Note	Dec. 31, 2007	Dec. 31, 2006
Liabilities and Equity
Liabilities
Current liabilities
Liabilities from the refinancing of lease receivables	24	340,666	222,273
Trade payables		7,410	11,696
Tax liabilities	25	3,781	1,195
Provisions	26	1,838	1,316
Current portion of non-current bank liabilities	24	5,705	1,498
Financial instruments with negative fair market value	30	1,261	1,206
Other current liabilities		11,038	6,536
Deferred lease payments		52,219	42,371
Total current liabilities		423,918	288,091
Non-current liabilities
Liabilities from the refinancing of lease receivables	24	558,108	621,878
Non-current bank liabilities, less the current portion	24	8,209	9,617
Deferred tax liabilities	22	43,585	57,079
Other non-current liabilities	27	1,422	1,626
Total non-current liabilities		611,324	690,200
Equity	28
Capital stock		17,491	17,486
Capital reserve		60,166	60,052
Revenue reserves		2,417	1,919
Currency translation		-608	-511
Hedging reserve		1,200	1,310
Reserve for actuarial gains / losses		-62	-36
Profit carryforward		145,563	121,460
Total equity		226,167	201,680
Total liabilities and equity		1,261,409	1,179,971

CONSOLIDATED CASH FLOW STATEMENT FOR FISCAL YEAR 2007

	EURk	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006
	Earnings before taxes	44,815	47,817
	Non-cash items contained in net profit for the period and reconciliation to cash flow from operating activities
+	Amortization/ depreciation	2,233	1,821
- / +	Profit/ loss from the disposals of equipment and intangible assets	20	20
- / +	Investment income	393	293
- / +	Non-cash changes in equity	-356	1,324
+ / -	Increase/ decrease in other provisions	522	-3
- +	Additions of lease receivables Payments by lessees	-435,729 394,387	-426,592 361,939
+	Disposals/ reclassifications of lease receivables at residual carrying values	83,068	73,622
+ / -	Changes from other set-offs	-71	-71
-	Interest income from lease receivables	-96,091	-89,299
-	Increase in other receivables from lessees	-1,405	-4,789
+ / -	Currency translation differences	996	804
=	Change in lease receivables	-54,845	-84,386
+ - -	Additions of liabilities from the refinancing of lease receivables Payment of annuities to refinancers Disposal of liabilities from the refinancing of lease receivables	623,200 -223,699 -377,858	710,932 -204,616 -460,579
+	Interest expense from lease liabilities	33,702	27,603
+ / -	Currency translation differences	-722	-786
=	Change in liabilities from the refinancing of lease receivables	54,623	72,554
-	Issue of loans	-26,502	-24,692
	Changes in other assets/liabilities
-/ +	Increase/decrease in other assets	-571	4,846
+ / -	Increase/decrease in deferred lease payments	9,849	-13,946
+ / -	Increase/decrease in other liabilities	67	8,187
=	Cash flow from operating activities	30,248	13,835

Continued on next page

EURk Jan. 1 to Dec. 31, 2007 Jan. 1 to Dec. 31, 2006 - / + Taxes paid/ received -14,256 -16,762 - Interest paid -1,232 -1,341 + Interest received 839 1,048 = Net cash flow from operating activities 15,599 -3,220 - Purchase of equipment and intangible assets -4,139 -5,618 + Proceeds from sale of equipment and intangible assets 88 1 = Cash flow from investing activities -4,051 -5,617 + / - Raising/ repayment of bank liabilities -794 4,786 - Dividend payment -7,524 -6,822 + Payments from Stock option program 119 613 = Cash flow from financing activities -8,199 -1,423 Cash funds at the beginning of period 46,421 55,677 - Cash on hand and balances with banks -1,011 -6 = Cash and cash equivalents at beginning of period 45,410 55,671 + / - Change due to currency translation 32 -1 = Cash funds after currency translation 45,442 55,670 Cash funds at the end of period Cash on hand and balances with banks 53,395 46,421 - Bank liabilities from overdrafts -4,604 -1,011 = Cash and cash equivalents at the end of period 48,791 45,410 Change in cash and cash equivalents during the period (Sum of cash flows) 3,349 -10,260 Net cash flow from operating activities 15,599 -3,220 + Cash flow from investing activities -4,051 -5,617 + Cash flow from financing activities -8,199 -1,423 = Total cash flow 3,349 -10,260

CONSOLIDATED CASH FLOW STATEMENT FOR FISCAL YEAR 2007: CONTINUED

STATEMENTS OF CHANGES IN CONSOLIDATED EQUITY FOR FISCAL YEAR 2007

			Revenue reserves
EURk	Subscribed Capital	Capital reserve	Legal reserve	Reserve in accordance with the articles of incorporation	Hedg ing reserve	Reserve for actuarial Gains and losses	Currency translation	Profit carry forward	Equity, Group
Equity as of Jan. 1, 2006	17,440	59,485	657	48	-192	-8	-274	98,986	176,142
Issue of shares	46	567							613
Dividend in 2006 for 2005								-6,822	-6,822
Distribution to revenue reserves			1,214					-1,214	0
Fair value measurement of hedging instruments					1,716				1,716
Deferred taxes					-214	8			-206
Change in pension reserve						-36			-36
Net profit for 2006								30,510	30,510
Currency translation							-237		-237
Equity as of Dec. 1, 2006	17,486	60,052	1,871	48	1,310	-36	-511	121,460	201,680
Equity as of
Jan. 1, 2007	17,486	60,052	1,871	48	1,310	-36	-511	121,460	201,680
Issue of shares Dividend in 2007 for 2006	5	114						-7,524	119 -7,524
Distribution to revenue reserves			498					-498	0
Fair value measurement of hedging instruments					-125				-125
Deferred taxes					15	8			23
Change in pension reserve						-34			-34
Net profit for 2006								32,125	32,125
Currency translation							-97		-97
Equity as of Dec. 1, 2007	17,491	60,166	2,369	48	1,200	-62	-608	145,563	226,167

STATEMENT OF RECOGNIZED PROFITS AND LOSSES FOR FISCAL YEAR 2007

EURk	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006
Change in the fair value of financial instruments used for hedging purposes recognized in equity	-125	1,716
Adjustment item for the currency translation of foreign subsidiaries	-97	-237
Accounting gains and losses from defined benefit pension committments and similar obligations	-34	-36
Deferred taxes on changes in value recognized directly in equity	23	-206
Changes in value recognized directly in equity	-233	1,237
Profit after taxes	32,125	30,510
Total net profit for the period and changes in value recognized in equity	31,892	31,747

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR FISCAL YEAR 2007

1. COMMERCIAL REGISTER AND PURPOSE OF THE COMPANY

GRENKELEASING AG (hereinafter also referred to as "GRENKELEASING" or the "Company") is a stock corporation with its registered office at Neuer Markt 2, Baden-Baden, Germany. The Company is entered in the commercial register at the local court of Mannheim, under HRB 201836.

The purpose of the Company is to lease all types of movable assets, to manage lease contracts for third parties, to broker property insurance for leased assets, to purchase and manage receivables from and for third parties (factoring), and to conduct all other related transactions.

The leasing business of the GRENKELEASING AG Group focuses on small-ticket leasing of IT products, such as PCs, notebooks, servers, monitors, and other peripheral devices, software, telecommunication and copier equipment, and other IT products. Almost all contracts provide for full cost recovery (full payout leases). This means that the payments made by the lessee during the basic lease period, including the guaranteed residual values, exceed the acquisition and contract cost.

The consolidated financial statements are due to be approved and released for publication in the supervisory board meeting on January 28, 2008.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation

GRENKELEASING AG, as a listed parent company which is traded on an organized market within the meaning of Sec. 2 (5) WpHG ["Wertpapierhandelsgesetz": German Securities Trading Act] (its stock has been listed in the Prime Standard since January 1, 2003 and was allocated to the SDAX index by Deutsche Börse on February 11, 2003), has, as in the prior year, prepared its consolidated financial statements in accordance with Sec. 315 a HGB ["Handelsgesetzbuch": German Commercial Code] on the basis of the International Financial Reporting Standards (IFRSs) published by the International Accounting Standards Board (IASB), as adopted in the EU. All International Financial Reporting Standards (IFRSs) (formerly International Accounting Standards (IAS)) mandatorily applicable for fiscal year 2007 as well as all interpretations by the International Financial Reporting Interpretations Committee (IFRIC) (formerly the Standing Interpretations Committee (SIC)) were observed.

The consolidated financial statements for the fiscal year ended December 31, 2007 are prepared for GRENKELEAS-ING AG and the companies it controls. Control is normally evidenced when the Group holds, either directly or indirectly, 50 percent (or more) of the voting rights or the subscribed capital of an entity and/or has the power to govern the financial and operating policies of an entity so as to obtain benefit from its activities.

The financial statements of the companies included in GRENKELEASING AG's consolidated financial statements have all been prepared using uniform accounting policies. The financial statements in accordance with local commercial law have been prepared as of the balance sheet date of the consolidated financial statements and audited by independent auditors, where required under national law. The reconciliation of the financial statements of all subsidiaries to IFRSs was audited in the audit of the consolidated financial statements.

The consolidated financial statements have been prepared in euros (EUR). Unless stated otherwise, all figures are rounded and stated in thousands of euros (EUR k).

2.2 New Mandatory Accounting Standards

In recent years, the IASB has published various amendments of IFRSs and new IFRSs, and International Financial Reporting Interpretations Committee interpretations (IFRICs). The provisions which have been mandatory since January 1, 2007 and are relevant or potentially relevant for GRENKELEASING as well as their impact on the consolidated financial statements are outlined below. Modifications of IFRSs which are not explicitly mentioned are not relevant for the Company's financial statements and do not have any effect on recognition and measurement.

• ` On August 18, 2005, the IASB published IFRS 7, "Financial Instruments: Disclosures". This standard supersedes IAS 30 and adopts all provisions regarding disclosures in the notes contained in IAS 32. In this connection, the capital disclosure requirements in IAS 1 were amended or extended. The standard has radically changed the disclosure requirements for financial instruments and results in new or amended disclosures which are contained throughout the financial statements. The new disclosures on capital management are presented in the Note 28.
• ` On September 9, 2006, the EU adopted IFRIC 8, "Scope of IFRS 2", and IFRIC 9, "Reassessment of Embedded Derivatives". IFRIC 8 stipulates that the share-based payments governed by IFRS 2 also include arrangements under which the consideration (if any) is inappropriate. IFRIC 9 addresses when embedded derivatives have to be assessed.
• ` IFRIC 10, "Interim Financial Reporting and Impairment", published on July 20, 2006, was adopted by the EU on June 1, 2007. IFRIC 10 provides that impairment losses recognized on goodwill and certain financial instruments that are not permitted to be written up pursuant to IAS 39 may not be reversed in subsequent periods.

The application of the new IFRICs did not have any impact on recognition and measurement.

2.3 Voluntary Adoption of New Accounting Standards

Apart from the IFRSs whose application is mandatory for fiscal years 2006 and 2007, the IASB has also published other IFRSs and IFRICs, some of which have already received EU endorsement but which will only become mandatory at a later date. Below, only those standards and interpretations which have already been endorsed by the EU and which could be relevant for GRENKELEASING AG are described. Voluntary early application of these standards is explicitly permitted and encouraged. However, GRENKELEASING AG does not make use of this option.

On June 1, 2007, IFRIC 11, "IFRS 2 Group and Treasury Share Transactions", published on November 2, 2006, was adopted by the EU. The interpretation states that share-based payment transactions in which an entity receives services or goods as consideration for its own equity instruments shall be accounted for in accordance with IFRS 2, regardless of how the equity instruments were acquired. Adoption of IFRIC 11 is mandatory for fiscal years beginning on or after March 1, 2007.

IFRS 8, "Operating Segments", was published on November 30, 2006. IFRS 8 supersedes IAS 14, "Segment Reporting". IFRS 8 was endorsed by the EU on November 22, 2007. Application is mandatory for fiscal years beginning on or after January 1, 2009.

Other than additional or modified disclosures, no significant effects are currently expected for GRENKELEASING AG's consolidated financial statements as a result of the application of the above standards and interpretations.

2.4 Consolidation Policies

The consolidated financial statements contain all assets and liabilities and all expenses and income of GRENKELEASING AG and of the subsidiaries it controls after eliminating all material intragroup transactions.

Subsidiaries are included in the consolidated group for as long as they are under the control of the parent. The purchase method of accounting was used for acquisitions. Entities acquired or disposed of during the fiscal year are included in the consolidated financial statements from the date of acquisition or until the date of disposal. There were no acquisitions in 2006 or 2007. IFRS 3 was applied for the first time in fiscal year 2005 for past business acquisitions by GRENKELEASING AG. This saw the discontinuation of goodwill amortization in favor of an impairment test to be performed at least once a year (see Note 2.14.3).

In addition to GRENKELEASING AG, the following subsidiaries are included in the consolidated financial statements:

Germany GLG Grenke-Leasing GmbH Baden-Baden, Germany 100% 100% Grenke Investitionen Verwaltungs Kommanditgesellschaft auf Aktien (84.4 percent directly, 15.6 percent indirectly via GLG Grenke-Leasing GmbH) Baden-Baden, Germany 100% 100% WEBLEASE NETBUSINESS AG Baden-Baden, Germany 100% 100% Abroad GRENKELEASING s.r.o. Prague, Czech Republic 100% 100% GRENKE ALQUILER S.A. Barcelona, Spain 100% 100% Grenkefinance N.V. Vianen, Netherlands 100% 100% GRENKELEASING AG Zurich, Switzerland 100% 100%
GRENKELEASING AG Vienna, Austria 100% 100%
GRENKELEASING ApS Herlev, Denmark 100% 100%
GRENKE LIMITED Dublin, Ireland 100% 100%
GRENKE FINANCE Plc. Dublin, Ireland 100% 100%
GRENKE LOCATION SAS Schiltigheim, France 100% 100%
GRENKE Locazione S.r.l. Milan, Italy 100% 100%
GRENKE LEASING S.r.l. Milan, Italy 100% 100%
GRENKELEASING AB Stockholm, Sweden 100% 100%
GRENKE LEASE Sprl,* Brussels, Belgium 100% 100%

The balance sheet date of all subsidiaries is December 31, 2007.

* GRENKELEASING AG holds a direct interest of EUR 1,499k in GRENKE LEASE Sprl in Brussels, Belgium, and an indirect interest of EUR 1k through its German subsidiary, GLG Grenke-Leasing GmbH.

	Equity investment		Equity Dec. 31, 2007 (EUR)		Net profit / loss 2007 (EUR)
	Grenke Investitionen Verwaltungs Kommanditgesellschaft auf Aktien, Baden-Baden*		780,828.96		0.00
	GLG Grenke-Leasing GmbH, Baden-Baden, Germany		480,875.60		28,878.80
	WEBLEASE NETBUSINESS AG, Baden-Baden, Germany		1,291,559.88		404,117.72
	GRENKE LOCATION SAS, Schiltigheim, France		14,855,765.24		3,094,430.96
	GRENKELEASING AG, Zurich, Switzerland		5,774,633.23		1,630,407.15
	GRENKELEASING AG, Vienna, Austria		1,686,649.68		618,214.26
	GRENKELEASING s.r.o., Prague, Czech Republic **		479,427.25		-7,792.41
	GRENKE ALQUILER S.A., Barcelona, Spain **		1,728,790.80		637,291.75
	GRENKE Locazione S.r.l., Milan, Italy **		179,762.90		-468,484.14
	Grenkefinance N.V., Vianen, Netherlands **		636,996.40		226,626.32
	GRENKE LEASING S.r.l., Milan, Italy **		1,741,193.03		-188,843.45
	GRENKELEASING ApS, Herlev, Denmark ** / ***		461,061.79		-328,151.42
	GRENKE LIMITED, Dublin, Ireland ** / ***		657,581.45		-178,420.50
	GRENKE FINANCE Plc., Dublin, Ireland **		12,892,149.84		7,518,459.17
	GRENKELEASING AB, Stockholm, Sweden **		658,491.26		-249,408.75
	GRENKE LEASE Sprl, Brussels, Belgium **		555,386.38		-396,221.13
*	After profit/loss transfer
**	Provisional
***	The capital of these subsidiaries changed as follows in fiscal year 2007:
	GRENKELEASING ApS	Dec. 20, 2007	Capital increase	EUR 457,493.47
	GRENKE LIMITED	Dec. 18, 2007	Capital increase	EUR 2,000,000.00

2.5 Foreign Currency Translation

2.5.1 Foreign Currency Transactions

Foreign currency transactions are translated at the closing rate on the date of the transaction. Foreign currency monetary items (e.g. cash and cash equivalents, receivables and liabilities) are subsequently translated using the closing rate, with any translation differences reported in net profit or loss. Non-monetary items carried at historical cost are not subsequently translated, the rate on initial recognition being used.

2.5.2 Foreign Entities

Each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency translations are translated into the functional currency at the spot rate on the transaction date. Monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency at the closing rate. All currency translation differences are recognized in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the dates of the initial transaction. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

The local currency is the functional currency of all foreign operations. The assets and liabilities of these subsidiaries are translated into euros at the closing rate. Income and expenses of these subsidiaries are translated at the weighted average exchange rates prevailing during the fiscal year. The exchange differences arising on translation are recognized as a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in profit or loss.

The development of the exchange rates of the currencies used in the Group in relation to the euro is illustrated below:

	Closing rate Dec. 31, 2007	Average rate 2007	Closing rate Dec. 31, 2006	Average rate 2006
CHF	1.6547	1.6427	1.6069	1.5729
CZK	26.6280	27.7660	27.4850	28.3420
DKK	7.4583	7.4506	7.4560	7.4591
GBP*	0.7334	0.6843	0.6715	0.6817
HUF*	253.7300	251.3500	251.7700	264.2600
NOK*	7.9580	8.0165	8.2380	8.0472
PLN*	3.5935	3.7837	3.8310	3.8959
SEK	9.4415	9.2501	9.0404	9.2544
RON*	3.6077	3.3353	**	**

* Currency of the franchise companies, loans are granted in foreign currency

** Franchise company did not exist in the prior year

2.6 Historical Cost Accounting

The consolidated financial statements are based on historical cost accounting. Unless otherwise stated, assets and liabilities are disclosed at nominal value less necessary allowances.

2.7 Leases

2.7.1 Determining Whether an Arrangement Contains a Lease

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

A reassessment of whether an arrangement is a lease is only required after the inception of the arrangement when any one of the following conditions is met:

• a. There is a change in the contractual terms, unless the change only renews or extends the arrangement;
• b. A renewal option is exercised or an extension is agreed to by the parties to the arrangement, unless the term of the renewal or extension had initially been included in the lease term;
• c. There is a change in the determination of whether fulfillment is dependent on a specified asset; or
• d. There is a substantial change to the asset.

2.7.2 The Group is the Lessor

2.7.2.1 Finance Leases

Under a finance lease, substantially all the risks and rewards incidental to legal ownership are transferred by the lessor to the lessee. The lease payment receivable is thus treated by the lessor as repayment of principal and finance income to reimburse and reward the lessor for its investment and services.

Assets from a finance lease are recognized in the balance sheet as receivables at an amount equal to the net investment, i.e. the present value of the residual receivables of all lease contracts existing at the end of a fiscal year. The net investment value is calculated on the basis of the net cost of the leased assets less a special lease payment made by the lessee. Initial direct costs incurred in connection with contract conclusion are offset against income over the entire term of the lease contract by proportionately reducing the unearned finance income by these initial costs. Finance income is recognized such that a constant periodic rate of return on the outstanding residual receivable is generated.

2.7.2.2 Operating Leases

Leases where the Group retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating and concluding an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as the lease income. Contingent rents are recognized as income in the period in which they are generated. Operating lease assets are disclosed in the balance sheet based on the type of asset (see Note 19).

After the original lease has expired, the contract may be extended or a follow-on contract concluded. This leads to the lease being remeasured. In cases where the criteria for an operating lease are met, the leased asset is disclosed as an asset from the start of the extension period and is carried at fair value.

2.7.3 The Group is the Lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased asset, are capitalized at the date of inception of the lease at the fair value of the leased property, or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability over the period. Finance charges are expensed immediately. If there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the capitalized leased asset is fully depreciated over the shorter of the lease term or its useful life. The lease payments under an operating lease are recognized as an expense in the income statement on a straight-line basis over the lease term.

2.8 Cash and Cash Equivalents

The cash and cash equivalents in the balance sheet comprise cash on hand and bank balances. Current negative current account balances are deducted from cash and cash equivalents for the cash flow statement.

2.9 Financial Assets and Liabilities

Financial assets as defined by IAS 39 are, depending on their characteristics, classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments or available-for-sale financial assets. Financial assets are measured at fair value at initial recognition. The carrying amounts of financial instruments other than those designated as at fair value through profit or loss include transaction costs that are directly attributable to the acquisition of the assets.

The assessment whether a contract contains an embedded derivative is made when the entity first becomes party to the contract. Embedded derivatives are separated from the host contract if the latter is not measured at fair value through in profit or loss and an analysis reveals that the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract. The financial assets are designated to the categories following initial recognition.

Reclassifications are made as of the end of a given fiscal year where permissible and appropriate. No reclassifications took place in the reporting periods. All regular way purchases and sales of financial assets use settlement date accounting. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

No financial assets or liabilities were designated as at profit or loss through fair value at initial recognition. The derivatives used in the Group other than for hedging purposes are classified as held for trading and must therefore be recognized at fair value through profit or loss.

Financial assets held for trading are initially recognized at cost plus any transaction costs incurred and are carried at fair value on subsequent measurement. The derivate financial instruments used in the Group are measured using either Bloomberg (interest rate swaps) or the measurement bases provided by the banks (forward exchange contracts). Any adjustments other than hedge accounting adjustments are recognized in profit or loss.

All other financial liabilities are classified as "loans and receivables". Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans and receivables are measured at amortized cost using the effective interest method less any impairment. Amortized cost includes all discounts and premiums paid upon acquisition and includes all fees which are an integral part of the effective interest rate and the transaction costs. Gains and losses are recognized in net profit when the loans and receivables are derecognized or impaired, as well as through the amortization process.

When hedging transactions are entered into to hedge the exposure to variability in cash flows, certain derivatives are allocated to certain host contracts that are attributable to a particular risk associated with a recognized asset or liability or a forecasted transaction (cash flow hedge). The hedging instruments in a hedge are also recognized at fair value. However, changes in value relating to the effective portion are recognized in the cash flow hedge reserve, a separate item under equity. Any ineffectiveness is recognized in profit or loss. Effectiveness is measured as of the balance sheet date using the hypothetical derivative method.

Financial liabilities are recognized initially at cost and subsequently at amortized cost. Liabilities from the refinancing of lease receivables are recognized at nominal value less the transaction costs, except for refinancing using loans, bonds or debentures with matching maturities. The deducted transaction costs and any debt discounts are amortized over the lease term using the effective interest method.

Liabilities from the refinancing of lease receivables resulting from the sale of the lease receivables to the respective refinancing party are recognized at the present value of the payments yet to be made to the refinancing party. The originally agreed rate is used as the discount rate for fixed-interest loans. Upon repayment, regular payments are split into an interest portion and a principal component. The interest portions are disclosed as expenses from interest on lease liabilities.

The Group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired. If there is an objective indication of an impairment of loans and receivables carried at amortized cost, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding expected future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate determined on initial recognition). The carrying amount of the asset is reduced using an allowance account. The impairment loss is recognized directly in profit or loss.

If the amount of the impairment loss decreases in a subsequent period and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. The amount of the reversal is limited to amortized cost at the date of the reversal. The reversal is recognized in profit or loss.

Financial assets and any related impairment losses are derecognized when the financial asset is classified as uncollectible.

2.10 Derecognition of Financial Assets and Liabilities

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when any one of the following three conditions is met:

• ` The contractual rights to receive cash flows from the financial asset expire.
• ` The Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them immediately in full to a third party under a "pass-through" arrangement pursuant to IAS 39.19.
• ` The Group has transferred the contractual rights to receive cash flows of a financial asset and has either (a) transferred substantially all the risks and rewards of ownership of the financial asset or has (b) neither transferred nor retained substantially all risks and rewards of ownership of the asset, but has transferred control of the asset.

When the Group transfers its contractual rights to receive the cash flows of an asset, but neither transfers nor retains substantially all the risks and rewards of ownership of the asset, and also retains control of the transferred asset, the Group continues to recognize the transferred asset to the extent of its continuing involvement.

Financial liabilities are derecognized if the contractual obligation underlying the liability is discharged, cancelled or expires. If an existing financial liability is exchanged with another financial liability to the same lender with substantially different terms, or if the terms of an existing liability are changed substantially, then such an exchange or change is treated as an extinguishment of the original liability and the recognition of a new liability. The difference between the two carrying amounts is recognized in profit or loss.

2.11 Trade Receivables and Other Assets

Receivables and other assets are carried at their nominal value. Adequate flat-rate specific bad debt allowances are recognized to account for the credit risk from non-performing lease receivables.

The Group generally treats a lease as a "non-performing lease receivable" as soon as the second lease payment is missed. The lease is then usually terminated. The present value of the outstanding payments is claimed as damages and an impairment loss is recognized on that amount.

2.12 Inventories

Inventories are measured at the lower of cost and net realizable value. Due to their immateriality, they are shown under other current assets.

2.13 Property, Plant and Equipment

Property, plant and equipment are recognized at cost plus directly attributable costs net of accumulated depreciation and accumulated impairment losses. Exercising the option allowed in IAS 23, borrowing costs are recognized as an expense in the period in which they occurred, and not as an asset. Property, plant and equipment are subject to straight-line depreciation over their expected economic life. When property, plant and equipment are sold or retired, their cost and accumulated depreciation are eliminated from the accounts and any gain or loss resulting from their disposal is recognized in net profit or loss.

The depreciation rates are based on the following economic lives:

Office buildings 33 years
Furniture and fixtures
` IT hardware	3 years
` Vehicle fleet	4-5 years
` Leasehold improvements	10 years
` Other (office equipment)	3-20 years

The useful life and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property, plant and equipment.

2.14 Intangible Assets

2.14.1 Licenses, Software

Licenses are carried at cost plus acquisition charges. The cost of software is capitalized and treated as an intangible asset if it is not an integral part of the related hardware. As licenses and software have limited useful lives, they are subject to straight-line amortization over their economic life, generally three years.

2.14.2 Internally Generated Intangible Assets

An intangible asset developed as part of a project is only recognized if the Group is able to prove the technical feasibility of completing the intangible asset for internal use or sale and the intention to complete the intangible asset and use or sell it. In addition, the generation of future economic benefits by the asset, the availability of resources to complete the asset, and the ability to measure the expenditure attributable to the intangible asset during its development must exist.

Internally generated intangible assets are measured at cost. The cost comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended.

The capitalized amounts are amortized over the period during which the project is expected to generate revenue or during which the software can probably be amortized. Given the technical developments expected in future years, the economic life is assumed to be three years. Before an internally generated asset is used, it is tested for impairment once a year

2.14.3 Goodwill

Goodwill resulting from acquisitions is defined as the positive difference between the purchase price of an investment and the fair value of the assets and liabilities at the time of the acquisition. Goodwill was amortized straight-line over its economic life until December 31, 2004.

Following the implementation of IFRS 3, all goodwill was frozen at the value recognized as of December 31, 2004 and amortization ceased at this time. This fixed value is now considered to be the new historical cost. Instead of straight-line amortization, all goodwill must now be tested for impairment at least once a year pursuant to IAS 36 to prove its adequate valuation ("impairment-only approach"). This regular impairment test is conducted in the third quarter of each year on the basis of the six-month figures. If there are indications that goodwill might be impaired, more frequent tests must be conducted in addition to the mandatory annual impairment test.

2.15 Impairment of Non-Financial Assets

Assets within the meaning of IAS 36.1 are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized as soon as the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the higher of an asset's net selling price and its value in use. The net selling price is the amount obtainable from the sale of an asset in an arm's length transaction less the costs of disposal. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. The recoverable amount is estimated for individual assets or, if this is not possible, for the cash-generating unit to which the asset belongs.

The carrying amounts of goodwill will be reviewed to assess the probability of continuing future benefits in accordance with the rules described in Note 2.14.3. An impairment is recognized in net profit or loss if the value in use is lower than the carrying amount of the respective cash-generating unit.

If the reason for an impairment recorded in a prior period ceases to apply, an impairment loss is reversed. Exceptions to this rule exist only for impairments of goodwill which may, on no account, be reversed.

2.16 Provisions

Provisions are carried at their probable settlement amount if a present obligation (legal or constructive) exists for the Group due to an event occurring prior to the balance sheet date, it is probable that settlement of the obligation will lead to an outflow of resources embodying economic benefits, and if a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

2.17 Pensions and Other Post-Employment Benefits

In accordance with Swiss law, the Group has set up a defined benefit pension plan in Switzerland which requires contributions to be made to separately administered funds. The obligation under the defined benefit plans is calculated using the projected unit credit method. Actuarial gains and losses are recognized under equity in accordance with IAS 19.93A.

The carrying amount of the asset or liability under a defined benefit plan is the aggregate of the present value of the defined benefit obligation and the fair value of plan assets out of which the obligations are to be settled directly.

Due to their immateriality, pensions are shown under other non-current liabilities. Contributions to defined contribution plans are recognized as an expense when an employee has rendered service. They include contributions to statutory pension schemes and direct insurance premiums.

2.18 Tax

Current Tax Assets and Liabilities

Current tax assets and liabilities for current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. They are calculated based on the tax rates and tax laws applicable as of the balance sheet date.

Deferred Tax Liabilities and Assets

Deferred tax liabilities are calculated using the liability method in accordance with IAS 12. The deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of an asset or a liability for financial reporting purposes and its tax base.

Deferred tax assets for previously non-utilized loss carryforwards are recognized if it is probable that taxable profit will be available to utilize these carryforwards. Deferred tax assets and liabilities are recognized on the basis of tax rates anticipated for the period in which the temporary differences will reverse. For this purpose, tax rates that have been enacted or substantively enacted by the balance sheet date are used. Deferred tax relating to items which are recognized directly in equity is recognized in equity and not in the income statement.

The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the entity expects, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are not discounted and are classified as non-current assets or liabilities in the consolidated balance sheet.

Value Added Tax

Revenue, expenses and assets are recognized net of VAT, with the following exceptions:

• ` Where the VAT incurred on a purchase of assets or services is not recoverable from the tax authorities, in which case the VAT is recognized as part of the cost of the asset or as part of the expense item.
• ` When receivables and liabilities are stated with VAT.

The net VAT recoverable from, or payable to, the tax authorities is stated under other receivables or liabilities in the consolidated balance sheet.

2.19 Government Grants

Government grants relate to investment grants applied for pursuant to Sec. 2 InvZulG ["Investmentzulagengesetz 1999": German Investment Grant Act 1999]. The allowance represents a grant for an asset; the carrying amount of the corresponding lease receivable is netted with this amount. This leads to increased income from interest on lease receivables spread over the term of the lease.

Since the grant is conditional on retention of the subsidized asset at the business, repayment obligations lead to an increase in the carrying amount and an adjustment of interest income. Since the provisions of the German Investment Grant Act were tightened in 2005, no grants have been applied for since 2006.

2.20 Revenue Recognition

Income From Leasing

Reference is made to the information in Note 2.7.

Income From Insurance Business

Income from insurance business comprises premiums for insurance policies which the lessees must conclude via GREN-KELEASING if they do not insure the leased assets themselves. The insurance premiums are collected annually; these amounts are deferred and released to income pro rata temporis.

Sale of Lease Assets

Sales are recognized upon transfer of benefits and burdens.

Interest Income

Interest income is recognized when interest accrues under the effective interest method.

2.21 Use of Assumptions and Estimates

In preparing the consolidated financial statements, assumptions and estimates have been made which have had an effect on the recognition and carrying amounts of assets, liabilities, income, expenses, and contingent liabilities. Assumptions and estimates generally relate to the uniform determination of useful lives of assets within the Group, the measurement of provisions, the recoverability of receivables from terminated contracts, the recognition of realizable residual values for leased assets and the probability of future tax benefits. The actual figures may in some cases differ from the assumptions and estimates. Any changes will be recognized in profit or loss as and when better information is available.

The main estimating uncertainties and the associated disclosure requirements are in the following areas:

• ` Assumptions made in impairment tests for measuring goodwill
• ` Measurement of non-performing lease receivables on the basis of the recoverability rate
• ` Use of estimated residual values at the end of the lease term to determine the present value of lease receivables
• ` Recognition of lease assets for sale at estimated residual values

The cash flows used to measure goodwill under the discounted cash flow method are based on current business plans and internal plans for the next five years. This involved making assumptions as to future revenues and costs. Assumptions as to future investments in the Company's operations were made on the basis of past figures, and past income patterns were projected into the future. If significant assumptions differ from actual figures, adjustments may have to be made in the future. Average costs of capital of 10.1 percent were used to discount the cash flows.

Non-performing lease receivables are carried at nominal value less appropriate bad debt allowances. The amounts of bad debt allowances are determined using percentages and processing categories. Percentages are calculated using statistical methods. They are reviewed once a year for validity. Processing statuses are grouped together in processing categories set up with a view to risk.

The following table lists the processing categories:

Category	Description
0	Current contract not in arrears
1	Current contract in arrears
2	Terminated contract with serviced installment agreement
3	Terminated contract (recently terminated or court order for payment applied for)
4	Legal action (pending or after objection to court payment order)
5	Order of attachment issued
6	Statement in lieu of oath (applied for or issued) and insolvency proceedings instituted but not completed
7	Derecognized
8	Being settled (not terminated)
9	Discharged (completely paid)

A decrease in value is assumed for categories 2 to 7 as the contracts have been terminated due to defaults in payment. The allowance rates range between 5 percent and 100 percent.

Estimated residual values are used to determine the present value of lease receivables. Estimated residual values comprise anticipated sales proceeds and any revenues generated in a renewal period. Residual values are calculated upon conclusion of the corresponding lease contracts on the basis of the anticipated values. Proceeds are a best estimate based on statistical analyses. If the post-transaction recoverable amount is lower than expected (from sale and subsequent lease), the lease receivables are written down. However, an increase in recoverable amount is not recognized.

Lease assets for sale are measured on the basis of the average sales proceeds per age group realized in the past fiscal year in relation to the original acquisition cost.

Non-guaranteed residual values are used to calculate lease receivables in accordance with the definition in IAS 17. They are determined on the basis of past experience and statistical methods. Based on experience, residual values for fiscal years until 2006 range between 11 and 15 percent of historical cost, depending on the term of the lease contract. In fiscal year 2007, this classification was split further into several groups according to the contract term. For additions from 2007 onward, the residual values range between 7.7 and 28.4 percent of historical cost.

Lease assets for sale are measured at historical residual values, taking into account their actual salability. As of the balance sheet date, the residual values used amounted to between 6.3 and 22.6 percent of the original acquisition cost. If a sale is considered unlikely due to the condition of the asset, the asset is written off and recognized as an expense.

3 Net Interest Income From Leasing Business

3.1 Income From Interest on Lease Receivables

Income from interest on lease receivables amounts to EUR 96,091k (FY 2006: EUR 89,299k). This includes EUR 42k (FY 2006: EUR 71k) from the recognition of investment grants (see Note 2.19) and EUR 3,192k from interest on loans to franchisees (FY 2006: EUR 1,407k).

3.2 Expenses From Interest on Refinancing Liabilities

Interest expense from refinancing liabilities amounts to EUR 33,702k (FY 2006: EUR 27,603k). This item also includes the interest income of EUR 1,162k (FY 2006: EUR 1,449k) generated by the loans issued under the ABCP programs (asset-backed commercial papers) and the ABS bond (asset-backed securities) (see Note 21).

4 Settlement of Claims

Flat-rate specific bad debt allowances are calculated based on historical rates for the collectability of a receivable in conjunction with its categorization (percentage-of-receivables approach).

EURk	2007	2006
Write-offs and net provision to specific bad debt allowances	15,838	14,175
Income from settlement of claims	17,719	20,782
Expenses from derecognition of performing IFRS receivables	19,020	21,755
Total	17,139	15,148

5 Profit from New Business

Revenues from new business are comprised as follows:

EURk	2007	2006
Recognition of new lease receivables	435,729	426,592
Share of revenues from prior leases	2,704	2,234
Revenues from processing fees	1,301	1,259
Revenues from special lease payments	668	742
Total	440,402	430,827

Expenses from new business are comprised as follows:

EURk	2007	2006
Cost of newly acquired leased assets	413,114	405,036
Commissions paid to dealers	6,870	6,916
Total	419,984	411,952
EURk	2007	2006
Profit from new business	20,418	18,875

6 Profit From Disposals

EURk	2007	2006
Revenues from subsequent leases	14,471	12,627
Depreciation of leased assets in the subsequent lease period	-13,279	-10,533
Accounting gains from the disposal of the lease receivables	700	1,091
Total	1,892	3,185

Revenues from subsequent leases relate to lease income recognized after the end of the basic lease term. Accounting gains from the disposal of lease receivables result from the revenues of terminated contracts less the disposal of the lease receivables at their carrying amount.

7 Other Operating Income

Other operating income breaks down as follows:

EURk	2007	2006
Franchise fees received	496	305
Court costs allocated to lessees	128	137
VAT refund	88	0
Accounting gains on the sale of equipment	33	6
Income from currency translation	0	162
Other items	425	269
Total	1,170	879

8 Personnel Expenses

EURk	2007	2006
Salaries	18,147	16,894
Social security and other benefit costs	3,692	3,574
Total	21,839	20,468

The average number of staff during the fiscal year totaled 411 (FY 2006: 384). Part-time staff were converted into fulltime equivalents.

Almost all company pensions in the Group are defined contribution schemes. Under defined contribution plans, the entity pays contributions to public or private pension insurance schemes on the basis of statutory or contractual requirements, or voluntarily. The entity does not have any other benefit obligations beyond payment of contributions. The current contribution payments are recognized as an expense for the respective year. In 2007, they came to EUR 978k (FY 2006: EUR 957k) and mainly comprised contributions to the statutory pension insurance scheme in Germany.

9 Consulting and Audit Fees

The consulting and audit fees of EUR 2,674k (FY 2006: EUR 2,349k) include fees of the auditor of GRENKELEASING AG, Baden-Baden, Germany, totaling EUR 385k (FY 2006: EUR 374k). The auditor's fees in fiscal year 2007 break down as follows:

EURk	2007	2006
Audit services	188	170
Other audit-related services	113	166
Other services	84	38
Total	385	374

EUR 51k of the total fees (FY 2006: EUR 34k) was not related to the period.

10 Expenses From Rent and Lease Contracts

Expenses of EUR 3,810k (FY 2006: EUR 3,529k) were incurred from rent and lease contracts in the fiscal year. They are primarily recognized under operating expenses and mainly relate to the rental of offices for branches and car leases.

11 Depreciation of Property, Plant and Equipment and Amortization of Intangible Assets

EURk	2007	2006
Equipment	1,267	1,140
Office buildings	440	301
Software licenses	526	380
Goodwill	0	0
Total	2,233	1,821

12 Income Taxes

EURk	2007	2006
Current taxes	23,877	4,661
Deferred taxes	-11,187	12,646
Total	12,690	17,307

Reconciliation between the average effective tax rate and the applicable tax rate

Reconciliation of the expected applicable tax rate of GRENKELEASING AG to the effective tax rate related to EBT (100 percent) is as follows:

Applicable tax rate	2007	2006
Trade tax	16.92%	16.95%
Corporate income tax (25 percent on income after trade tax)	20.77%	20.76%
Solidarity surcharge (5.5 percent of corporate income tax)	1.14%	1.14%
Average applicable tax rate GRENKELEASING AG	38.83%	38.85%
Tax increases due to non-deductible expenses	0.15%	0.20%
Changes due to foreign taxes	-7.15%	-3.30%
Balance of tax reductions and increases due to changes in tax rates*	-7.38%	-0.10%
Expense from the write-down of deferred tax on loss carryforwards	1.45%	0.00%
Write-down of deferred taxes from prior years	0.00%	0.54%
Backpayments of tax from prior years**	2.43%	0.00%
Average effective tax rate for the Group	28.33%	36.19%

* The main change in tax rates used to calculate deferred taxes was the following: GRENKELEASING AG; Germany: 30.18 percent (FY 2006: 38.5 percent)

** Backpayments of tax for prior years in 2007 amounted to EUR 1,080k.

13 Earnings per Share

The calculation of both diluted and basic earnings is based on the net profit for the period. The average number of shares in fiscal year 2007 was calculated as the number of ordinary shares and the proportionate number of ordinary shares that may be issued in exchange for warrants. The employee stock option programs (see Note 34) did not have a dilutive effect in fiscal year 2007. In the prior year, 13,895 stock options were exercisable and were therefore dilutive.

No.	2007	2006
Shares outstanding at beginning of period	13,679,679	13,643,646
Average number of new shares issued under the stock option program	2,775	8,996
Average number of shares outstanding at end of period (basic)	13,682,454	13,652,642
Stock option program	0	13,895
Average number of shares outstanding at end of period (diluted)	13,682,454	13,666,537
Number of potential shares	0	0
Number of diluted shares at end of period (including potentially dilutive shares)	13,682,454	13,666,537

The new shares issued under the stock option program do not take full effect in the first year because they are not considered until after the issue date. All shares which could have already been issued due to fixed terms or restrictions had a dilutive effect.

The last exercise period in the fiscal year – from May 9 to June 5, 2007 – was the last opportunity to exercise options from the second employee stock option program. A total of 4,420 options were exercised. The 9,455 options which were not exercised have thus expired and no longer have an effect on earnings per share.

In the prior year, the following options were exercised: between May 10, 2006 and June 7, 2006: 848, between July 28, 2006 and August 23, 2006: 33,437 options, between October 27, 2006 and November 23, 2006: 1,748 options.

14 Financial Assets

EURk	31.12.2007	31.12.2006
Other securities	0	340
Hedge derivatives	1,688	1,464
Non-hedge derivatives	1,033	0
Total	2,721	1,804

In 2006 hedge derivatives were presented together as interest rate swaps at a value of EUR 1,464k. All contracted interest rate swaps are disclosed as hedge derivatives. The interest rate swaps are discussed in more detail in Note 29.3. Non-hedge derivatives relate exclusively to forward exchange contracts in foreign currencies with a positive fair value as of the balance sheet date. In the prior year, other securities were mainly shares and corporate bonds. The share portfolio was liquidated in December 2007.

15 Lease Receivables

EURk	31.12.2007	31.12.2006
Outstanding minimum lease payments	939,803	883,338
+ Non-guaranteed residual values	145,490	138,590
Gross investment	1,085,293	1,021,928
- Unrealized (outstanding) finance income	155,129	145,102
Net investment	930,164	876,826
- Present value of non-guaranteed residual values	108,845	103,496
Present value of minimum lease payments	821,319	773,330

EURk	Less than 1 year	1 to 5 years	More than 5 years
Gross total investment	395,202	684,133	5,958
Present value of outstanding minimum lease payments	280,413	537,617	3,289

The reconciliation of gross investment only contains contracts still in effect on the balance sheet date. The following adjustments have to be made to reconcile net investment to the carrying amount of lease receivables disclosed in the balance sheet:

EURk	31.12.2007	31.12.2006
Changes in performing lease receivables
Balance at beginning of period	876,755	797,159
+ Change in the period	53,440	79,596
Lease receivables (current + non-current) from current contracts at period-end	930,195	876,755
Changes in non-performing lease receivables
Gross receivables at beginning of period	134,248	136,097
- Accumulated valuation allowances at beginning of period	-65,790	-72,428
Non-performing lease receivables at beginning of period	68,458	63,669
+ Change in gross receivables during the period	17,103	20,529
- Disposals of gross receivables during the period	11,916	22,378
+ Disposal of accumulated valuation allowances during the period	10,700	20,327
- Addition of accumulated valuation allowances during the period	14,482	13,689
Non-performing lease receivables at period-end	69,863	68,458
Lease receivables (carrying amounts of current and non-current receivables)
at beginning of period	945,213	860,828
Lease receivables (carrying amounts of current and non-current receivables)
at period-end	1,000,058	945,213

EURk	Present value of minimum lease payments	Present value of residual values	Other receivables from lessees	Carrying amount
Current lease receivables	280,428	37,162	69,864	387,454
Non-current lease receivables	540,921	71,683	0	612,604
Total	821,349	108,845	69,864	1,000,058

Receivables from non-performing contracts are included in other current lease receivables.

The following table lists non-performing receivables with the number of days overdue.

				Overdue on the balance sheet date in the following time bands
Lease receivables EUR m	Net carrying amount	Thereof overdue on the balance sheet date	Receivables subject to bad debt allow ances on the balance sheet date	< 90 days	Between 91 and 180 days	Between 181 and 360 days	Between 1 and 5 years	> 5 years
As of Dec. 31, 2006
Not impaired	5.3	-	-	3.6	0.5	0.6	0.5	0.1
Impaired	63.2	129.0	65.8	6.3	5.7	9.5	83.7	23.8
Total	68.5	129.0	65.8	9.9	6.2	10.1	84.2	23.9
As of Dec. 31, 2007
Not impaired	7.1	-	-	5.2	0.5	0.5	0.9	0
Impaired	62.7	132.3	69.6	5.7	5.1	10.1	78.3	33.1
Total	69.8	132.3	69.6	10.9	5.6	10.6	79.2	33.1

There were no indications that performing lease receivables were impaired as of the balance sheet date.

The maximum credit risk, without taking into account security, credit assessment systems and other tools, is the carrying amount of the receivables.

There were no indications as of December 31, 2007 that financial assets (in particular lease receivables) which are neither impaired nor overdue will be defaulted upon. Please refer to Note 2.20 for additional information on bad debt allowances. Thanks to effective risk management and a very diversified contract and lessee portfolio, the lease receivables have a particularly diversified risk structure with regard to credit risk.

The following table shows the changes in write-downs on current and non-current receivables.

EUR m	31.12.2007	31.12.2006
Write-downs at the beginning of the fiscal year	65.8	72.4
Allocation to specific bad debt allowance	14.5	13.7
Utilization of specific bad debt allowance	5.7	13.4
Reversal of specific bad debt allowance	5.0	6.9
Currency translation differences*	0	0
Write-downs at year-end	69.6	65.8

* Due to rounding, the currency translation difference in this table is stated as zero. The actual currency translation difference is EUR 20k (FY 2006: EUR 20k).

16 Trade Receivables

Trade receivables of EUR 2,122k (FY 2006: EUR 2,454k) mainly relate to receivables from resellers and third parties from the sale of lease assets. EUR 307k (FY 2006: EUR 247k) of these receivables are overdue and EUR 242k (FY 2006: EUR 191k) of this amount is impaired.

17 Tax Refund Claims

EURk	31.12.2007	31.12.2006
Advance tax payments France	0	3,450
Corporate income tax refund claim	4,644	6,917
Trade tax refund claim	1,408	2,634
Other items	59	145
Total	6,111	13,146

The corporate income tax and trade tax refund claims are the result of prepayments being too high. With regard to France, please also see Note 33.

18 Other Current Assets

EURk	31.12.2007	31.12.2006
Receivables from franchisees (refinancing)	34,530	20,739
VAT refund claim	21,811	10,850
Current portion of subordinated loan ABS bond	2,548	851
Refund from the tax audit in France	2,140	0
Other receivables from franchisees	948	469
Prepaid expenses	474	424
Direct debits at end of month	421	564
Other items	1,932	1.052
Total	64,874	34,949

Please see Note 21 for details of the receivables from franchisees and the subordinated loan. None of the receivables is overdue or impaired.

19 Property, Plant and Equipment at Cost

Overview for fiscal year 2006

		Other equip		Lease assets
EURk	Land and buildings	ment, furniture and fixtures	Assets under construction	from operating leases	Total
Cost Jan. 1, 2006	10,771	7,891	279	9,925	28,866
Currency translation differences	0	7	0	0	7
Additions	0	1,213	3,875	11,356	16,444
Disposals	0	283	0	10,533	10,816
Reclassifications	0	0	0	0	0
Cost Dec. 31, 2006	10,771	8,828	4,154	10,748	34,501
Accumulated depreciation
Jan. 1, 2006	1,062	4,148	0	0	5,210
Currency translation differences	0	8	0	0	8
Additions	301	1,140	0	10,533	11,974
Disposals	0	251	0	10,533	10,784
Reclassifications	0	0	0	0	0
Accumulated depreciation
Dec. 31, 2006	1,363	5,045	0	0	6,408
Net carrying amounts Dec. 31, 2006	9,408	3,783	4,154	10,748	28,093
Net carrying amounts Dec. 31, 2005	9,709	3,743	279	9,925	23,656

	Land and	Other equip ment, furniture	Assets under	Lease assets from operating
EURk	buildings	and fixtures	construction	leases	Total
Cost Jan. 1, 2007	10,771	8,828	4,154	10,748	34,501
Currency translation differences	0	8	0	0	8
Additions	812	1,666	850	16,445	19,773
Disposals	0	639	0	13,279	13,918
Reclassifications	5,004	0	-5,004	0	0
Cost Dec. 31, 2007	16,587	9,863	0	13,914	40,364
Accumulated depreciation Jan. 1, 2007	1,363	5,045	0	0	6,408
Currency translation differences	0	4	0	0	4
Additions	440	1,267	0	13,279	14,986
Disposals	0	585	0	13,279	13,864
Reclassifications	0	0	0	0	0
Accumulated depreciation Dec. 31, 2007	1,803	5,731	0	0	7,534
Net carrying amounts Dec. 31, 2007	14,784	4,132	0	13,914	32,830

Overview for fiscal year 2007

The operating leases are mainly lease contracts whose basic lease term has expired and which may be terminated at any time. Depreciation on lease assets from operating leases is shown in profit from disposals (see Note 6).

20 Intangible Assets at Cost

Overview for fiscal year 2006

EURk	Development costs	Goodwill	Software licenses	Total
Cost Jan. 1, 2006	408	1,913	934	3,255
Currency translation differences	0	178	-1	177
Additions	251	0	279	530
Disposals	0	0	33	33
Reclassifications	0	0	0	0
Cost Dec. 31, 2006	659	2,091	1,179	3,929
Accumulated depreciation
Jan. 1, 2006	35	0	652	687
Currency translation differences	0	0	0	0
Additions	181	0	199	380
Disposals	0	0	23	23
Reclassifications	0	0	0	0
Accumulated depreciation Dec. 31, 2006	216	0	828	1,044
Net carrying amounts Dec. 31, 2006	443	2,091	351	2,885
Net carrying amounts Dec. 31, 2005	373	1,913	282	2,568

Overview for fiscal year 2007

EURk	Development costs	Goodwill	Software licenses	Total
Cost Jan. 1, 2007	659	2,091	1,179	3,929
Currency translation differences	0	66	-1	65
Additions	183	0	626	809
Disposals	105	0	25	130
Reclassifications	0	0	0	0
Cost Dec. 31, 2007	737	2,157	1,779	4,673
Accumulated depreciation
Jan. 1, 2007	216	0	828	1,044
Currency translation differences	0	0	0	0
Additions	251	0	275	526
Disposals	65	0	12	77
Reclassifications	0	0	0	0
Accumulated depreciation
Dec. 31, 12.2007	402	0	1,091	1,493
Net carrying amounts Dec. 31, 2007	335	2,157	688	3,180

Development costs mainly relate to internally developed factoring software and webshop programming.

Goodwill Impairment

A scheduled impairment test was conducted as of June 30, 2007 in accordance with IAS 36 on the goodwill acquired in business combinations.

The recoverable amount of each of the cash-generating units was determined based on a value-in-use calculation using cash flow projections derived from five-year financial plans approved by senior management. A fair value less costs to sell is not currently available. The after-tax discount rate applied to the cash flow projections ranged from 9.52 to 10.63 percent, and cash flows beyond the five-year period were extrapolated using a 0 percent growth rate

The cash-generating units used as a basis for testing the impairment of goodwill are usually legal entities. The key parameters for determining their value are the future expectations with regard to the development of new business and profitability.

EUR 379k of goodwill is from WEBLEASE NETBUSINESS AG, CZK 33,914k (EUR 1,274k) from GRENKELEASING s.r.o., Prague, and EUR 504k is from the Group's Italian operations (GRENKE Locazione S.r.l. und GRENKE LEASING S.r.l., both in Milan). No impairment was identified.

21 Other Non-Current Assets

EURk	31.12.2007	31.12.2006
ABCP loans	26,542	42,563
Loans to franchisees (refinancing)	37,777	25,065
Subordinated loan ABS bond	2,195	4,774
Reserve accounts ABS bond	2,500	2,500
Other items	654	972
Total	69,668	75,874

In addition to the liquidity reserve of 2 percent of the refinancing volume drawn on under the three ABCP programs, the ABCP loans and the ABS bond include loans to the SPEs which need to be granted as collateral for the refinancing volume under the respective agreements. These loans depend on the refinancing volume and on the origin of the receivables refinanced through the SPEs. The interest income generated in this connection is netted with the interest expense from refinancing liabilities.

The loans to franchisees (see Notes 18 and 32) are loans granted mainly to refinance the lease agreements concluded by the franchisees. By way of security for the loan receivables, the franchisees have assigned both title to the leased assets and the claim to lease receivables. The loans are therefore equivalent to a purchase of receivables. As such, interest income generated from such loans of EUR 3,192 is recognized as income from interest on lease receivables. Loans granted in foreign currencies are translated using the closing rate.

In connection with the issue of the ABS bond, GRENKE FINANCE Plc. Dublin, Ireland, granted a subordinated loan of EUR 5,625k, which bears interest at a floating rate. The nominal amount of the loan is fixed until August 15, 2007 and will then be gradually reduced to 2.25 percent of the outstanding nominal amount of the tranches issued. An amount of EUR 2,548k was classified as current due to the expected pattern of repayment. In addition, Grenke Finance Plc. was required to set up interest-bearing reserve accounts totaling EUR 2,500k. These assets are not considered to be impaired.

22 Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities break down as follows:

EURk	31.12.2007	31.12.2006
Deferred tax assets
Tax loss carryforwards	9,559	12,727
Remeasurement of lease liabilities	5,013	4,072
Total	14,572	16,799
Deferred tax liabilities
Remeasurement of lease receivables	42,966	56,366
Other remeasurements	619	713
Total	43,585	57,079

A total of EUR 648k of deferred taxes on loss carryforward relates to the subsidiaries in Belgium and Sweden. At these companies, deferred tax assets on loss carryforwards exceed deferred tax liabilities for temporary differences by a total of EUR 449k. However, based on the budgets of each subsidiary, we believe that sufficient taxable profit will be generated to enable these tax loss carryforwards to be utilized. This was likewise demonstrated in the other countries in which GRENKELEASING operates. In Denmark, the deferred tax assets on tax loss carryforwards were adjusted by EUR 298k to match the deferred tax liabilities.

Deferred tax liabilities of EUR 15k were reversed directly in equity in the fiscal year (FY 2006: EUR 214k recognized), with no effect on income. These liabilities resulted from the cash flow hedge reserve recognized directly in equity. Deferred tax assets of EUR 8k (FY 2006: EUR 8k) were also taken into account in connection with the recognition of actuarial losses in equity.

The Bundesrat (German upper house of parliament) passed the Law on the Business Tax Reform on July 6, 2007. It was published in the Bundesgesetzblatt [Federal Law Gazette] on August 17, 2007 and will take effect as of January 1, 2008. In the future, the nominal tax rate of GRENKELEASING AG, Baden-Baden, in Germany will thus be 30.18 percent. Due to various off-balance sheet additions, especially of interest for trade tax purposes, the effective tax rate will be higher, depending on profits and the amount of any add-backs.

The anticipated effect of the tax reform on deferred taxes was reflected in the consolidated financial statements. Due to non-recurring effects, especially relating to the adjustment of the tax rate, net income of EUR 1,576k was recognized in profit and loss.

23 Additional Information on Financial Instruments

						Carrying amount in accordance
			Carrying amount in accordance with IAS 39			with IAS 17
Dec. 31, 2006 EURk	Measurement category	Carrying amount Dec. 31, 2006	Fair value directly under equity	Fair value through profit or loss	Amortized cost
Assets
Cash and cash equivalents	L&R	46,421			46,421
Financial assets	AtFVtPL / n.a	1,804	1,464	339
Lease receivables	L&R	945,213			68,458	876,755
Trade receivables	L&R	2,454			2,454
Other assets	L&R, n.a	110,823			98,619
Aggregated categories	L&R				215,952
	AtFVtPL / n.a		1,464	339
Liabilities Liabilities from the refinancing
of lease receivables	oL	844,151			844,151
Trade payables	oL	11,696			11,696
Bank liabilities	oL	11,115			11,115
Financial instruments with a negative fair value	AtFVtPL / n.a	1,206		1,206
Deferred lease payments	oL, n.a	8,162			8,162
Aggregated categories
	oL				875,124
	AtFVtPL / n.a			1,206

Net gains and losses Dec. 31, 2006 (EURk)	From interest	From dividends	Currency translation differences	Write-downs	From disposal	Net gains and losses
Loans and receivables	1.036	12	206	5,102	-21,102	-14,746
At fair value through profit or loss			-731			-731
Other liabilities	-1.341		162			-1,179

			Carrying amount in accordance with IAS 39			Carrying amount in accordance with IAS 17
Dec. 31, 2007 EURk	Measurement category	Carrying amount Dec. 31, 2007	Fair value directly under equity	Fair value through profit or loss	Amortized cost	Dec. 31, 2006 EURk
Assets
Cash and cash equivalents	L&R	53,395			53,395
Financial assets	AtFVtPL	2,721	1,688	1,033
Lease receivables	L&R	1,000,058			69,863	930,195
Trade receivables	L&R	2,122			2,122
Other assets	L&R, n.a	134,542			111,270
Aggregated categories
	L&R				236,614
	AtFVtPL / n.a		1,688	1,033
Liabilities
Liabilities from the refinancing of lease receivables	oL	898,774			898,774
Trade payables	oL	7,410			7,410
Bank liabilities	oL	13,914			13,914
Financial instruments with a negative fair value	AtFVtPL	1,261		1,261
Deferred lease payments	oL, n.a	12,460			12,460
Aggregated categories
	oL				932,558
	AtFVtPL / n.a			1,261

Net gains and losses Dec. 31, 2007 (EURk)	From interest	From dividends	Currency translation differences	Write-downs	From disposal	Net gains and losses
Loans and receivables	828	11	-462	-6,012	-11,655	-17.290
At fair value through profit or loss			356		814	1.170
Other liabilities	-1,232		132			-1,100

The net gains from lease receivables comprise interest income, profit from new business and profit from disposals and stand at EUR 118,152k (FY 2006: EUR 111,360k).

* Abbreviations:

AtFVtPL At fair value through profit and loss

L&R Loans and receivables

n.a Not applicable

OL Other liabilities

24 Current and Non-Current Financial Liabilities

GRENKLEASING's financial liabilities comprise liabilities from the refinancing of lease receivables, bank liabilities, and other financial liabilities.

EURk	31.12.2007	31.12.2006
Financial liabilities
Current financial liabilities
Liabilities from the refinancing of lease receivables	340,666	222,273
– Liabilities from ABS/ABCP	151,698	158,480
– Bonds, debentures and private placements	165,000	40,000
– Sales of receivables agreements	23,968	23,793
Bank liabilities	5,705	1,498
Other current financial liabilities	2,233	3,630
Total current financial liabilities	348,604	227,401
Non-current financial liabilities
Liabilities from the refinancing of lease receivables	558,108	621,878
– Liabilities from ABS/ABCP	220,066	244,641
– Bonds, debentures and private placements	318,000	358,000
– Sales of receivables agreements	20,042	19,237
Bank liabilities	8,209	9,617
Total non-current financial liabilities	566,317	631,495
Total financial liabilities	914,921	858,896

Total	Between 1 and 5 years	More than 5 years	Secured amount
558,108	557,109	999	240,108
621,878	620,490	1,388	304,334
8,209	2,389	5,820	10,800
9,617	4,454	5,163	10,800

The volume of non-current financial liabilities payable in one to five years and more was as follows as of December 31, 2007.

The bank liabilities include the non-current portion of a loan totaling CHF 6,616k (originally CHF 11,724k) which was translated at the exchange rate on the balance sheet date. It runs from December 23, 2002 to June 30, 2016 (the original term until December 30, 2017 was reduced) and bears interest at 2.95 percent p.a. The loan is secured by a land charge of EUR 8,000k on the office building for Commerzbank Aktiengesellschaft, Baden-Baden, entered in the Oos land register under no. 6080.

A ten-year loan of EUR 5,500k bearing interest at 3.1 percent was raised to finance the new building. Interest is payable quarterly in arrears. The first repayment on the loan is due on September 30, 2008; thereafter repayments are due semi-annually. 96 percent of the loan amount was paid out. A further land charge of EUR 2,800k was registered as security on October 11, 2006.

Current and non-current lease receivables totaling EUR 510,251k (FY 2006: EUR 509,563k) have been assigned to the refinancing institutions to secure the liabilities from the refinancing of lease receivables. Each individual item of security is assigned until the outstanding receivable on the lease has been settled. Then the collateral is reassigned. The items of security for assigned receivables are marked so that they can be clearly distinguished from non-assigned receivables.

The GRENKELEASING AG Group has three ABCP programs with a total volume of EUR 575,000k. The ABCP program Rheingold No. 9 Limited organized by Deutsche Bank AG has a volume of EUR 175,000k. The WestLB Compass Variety Funding Limited ABCP program has a volume of EUR 250,000k. Kebnekaise Funding Limited, SEB AB's ABCP program, has a volume of EUR 150,000k. The programs' average interest rate in 2007 was 4.18 percent (FY 2006: 3.35 percent). The programs with Deutsche Bank AG and SEB have an indefinite term. The program with WestLB runs until May 3, 2010. At the end of fiscal year 2007, 45 percent (FY 2006: 34 percent) of the refinancing facilities provided under the ABCP programs had been utilized.

On August 4, 2006, GRENKELEASING AG bought back liabilities under the ABCP programs with a nominal value of EUR 230,881k (Rheingold EUR 46,772k, WestLB EUR 101,460k, SEB AB EUR 82,649k). The liabilities were financed by issuing an ABS bond of EUR 250,000k with a six-year term via an SPE.

The SPEs conclude various interest rate hedges (caps and swaps) to hedge the variable cash flows from the placement of commercial papers under the ABCP programs. Any costs incurred in this context are recharged to GRENKELEAS-ING. In return, the Company participates in the interest rate hedge as the benefit paid to the ABCP program resulting from the related hedge is passed on to GRENKELEASING via the excess spread. The costs incurred by GRENKELEASING are classified as transaction costs under IAS 39 and amortized over the term of the underlying refinancing packages.

24.1 ABS Bond and ABCP Programs

ABS-Bond

To provide liquidity and ensure growth at attractive conditions, the first ABS bond amounting to EUR 250,000k with a term of six years was placed through the SPE GOALS (GRENKE Ongoing Assets Lease Securitization) on August 4, 2006. The interest rate is variable at the three-month EURIBOR plus a spread ranging between 0.08 and 1.75 percent depending on the tranche.

With this type of refinancing, several tranches of bonds with different ratings (risk classes) are issued by the SPE. The size of the best rated tranche is a reflection of the quality of the leasing portfolio and internal risk management and directly impacts the costs of this type of financing. 85 percent (EUR 212,500k) of the bond was given the highest rating by Standard & Poor's (AAA) and Moody's (Aaa).

The wholly-owned subsidiary of GRENKELEASING AG, GRENKE FINANCE Plc., Dublin, Ireland, subscribed to the last tranche (nominal value EUR 5,000k) of the ABS bond. As a result, funds of only EUR 245,000k flowed to the Group. The carrying amount of the total liability stood at EUR 103,528k on the balance sheet date (FY 2006: EUR 207,562k).

ABCP Programs

The three ABCP programs with Deutsche Bank AG, WestLB and SEB AB provide for the purchase of GRENKELEASING receivables from German, Austrian and French lessees. There is therefore no currency risk. The present value of the programs stood at EUR 268,236k on the balance sheet date (FY 2006: EUR 195,559k).

As the amount of financing provided is always identical to the balance of sold receivables (less discounts, etc.), the hedging strategy must be based on the sold receivables portfolio.

Unlike the sales of receivables described in Note 24.2, however, the interest rates on the assets and liabilities side do not match because the purchase of the receivables is financed via the ABCP programs in the commercial paper market. The reference rate for all programs is one-month EURIBOR, i.e. interest is variable. To hedge their exposure to rising interest rates, the ABCP programs enter into interest rate caps or swaps. The respective SPEs are the counterparties for the interest rate caps and swaps, which is why GRENKELEASING cannot account for them.

GRENKELEASING does not derecognize the future lease receivables sold as part of the ABCP programs and the ABS bond. Although from a legal perspective, all rights to the receipt of cash flows are transferred to the relevant SPEs, the Company retains all economic risks and rewards. This ensures that the rating and thus the interest on the refinancing liability remain constant. In the case of the ABS bond, there are no repurchases; from an economic perspective, however, the losses of receivables remain with the wholly-owned subsidiary GRENKE FINANCE Plc. and thus in the Group, due to the settlement mechanisms. Hence the sale of the future lease receivables is treated in all cases as a loan and is accounted for as such.

GRENKELEASING does not include any of the SPEs used under the ABCP programs or ABS bond in its consolidated financial statements.

24.2 Sales of Receivables Agreements

Such agreements are currently in place with Stadtsparkasse Baden-Baden, Commerzbank AG, and with UBS AG in Switzerland. In all cases, they are concluded to refinance lease contracts with matching tenors. For this purpose, individual lease contracts with similar tenors are grouped together and lease receivables are purchased for the same tenor. This ensures that at any time in the future the interest charge for GRENKELEASING is fixed and known for the entire tenor of the contract. There is therefore no interest risk. For this reason, derivatives are not used for this type of financing. There was no requirement to derecognize any items. The present value of the obligations is EUR 44,010k (FY 2006: EUR 43,030k).

24.3 Bonds, Debentures and Private Placements

Unless mentioned otherwise, the reference interest rate for the floating-rate bonds, debentures and private placements is three-month EURIBOR.

The relevant terms are as follows:

Debt-issuance-program

		Term	Coupon	Discount	Nominal value Dec. 31, 2007	Nominal value Dec. 31, 2006
Description	from	to		EURk	EURk	EURk
Euro bond	Apr. 27, 2004	Apr. 27, 2009	4.75%	11	1,000	1,000
Euro bond	Jun. 10, 2004	Jun. 10, 2009	5.00%	215	20,000	20,000
Euro bond	Mar. 22, 2005	Mar. 22, 2010	Euribor + 0.60%	486	100,000	100,000
Euro bond	Oct. 30, 2006	Apr. 30, 2008	Euribor + 0.25%	155	100,000	100,000
Euro bond	Jun. 6, 2007	Apr. 20, 2009	Euribor + 0.20%	23	25,000	-
Euro bond	Apr. 20, 2006	Apr. 20, 2009	4.00%	360	100,000	100,000

The principal repayment on the zero bond with a nominal amount of EUR 20,000k was made on schedule on June 13, 2006. The bond of EUR 100,000k issued on March 22, 2005 entailed an unconditional and irrevocable guarantee for the proper and punctual payment of principal, interest and other amounts due on the debenture for GRENKELEASING AG.

The bond of EUR 170,000k placed in fiscal year 2003 under the DIP was repaid on schedule in 2006. This debut bond was superseded by the debenture of EUR 100,000k issued on October 30, 2006. The outstanding EUR 70,000k difference was financed by selling receivables under the existing ABCP programs.

Promissory note loan (PNL)

		Term	Coupon	Discount	Nominal value Dec. 31, 2007	Nominal value Dec. 31, 2006
Description	from	to		EURk	EURk	EURk
Euro PNL	Dec. 6, 2005	Dec. 5, 2010	3.77%	-	20,000	20,000
Euro PNL	Dec. 22, 2005	Dec. 22, 2010	Euribor + 0.61%	62	17,000	17,000
Euro PNL	Aug. 16, 2007	Aug. 16, 2010	Euribor + 0.48%	-	10,000	-
Euro PNL	Sept. 13, 2007	Dec. 6, 2010	5.092%	-	15,000	-
Euro PNL	Oct. 25, 2007	Oct. 25, 2010	5.09%	-	10,000	-

GRENKELEASING AG became party to the agreement on the promissory note loan of EUR 20,000k raised on December 6, 2005 and has a joint and several liability.

GRENKELEASING AG has assumed the unconditional and irrevocable guarantee for the proper and timely payment of interest and principal and any other amounts payable for the debenture.

All debentures are bullet debt securities and are subject to constant rating. If the Standard & Poor's rating were to be downgraded, the interest rate on the EUR 20,000k fixed-interest debenture would be adjusted (raised) by between 0.5 and 1.5 percentage points. As a downgrading is not expected, no hedge has been concluded to date. The discounts are released over the term of the debt securities using the effective interest method.

24.4 Revolving Credit Facility

On September 18, 2006, GRENKE FINANCE Plc, Dublin, Ireland, concluded three revolving credit facilities with three German banks at a total volume of EUR 90,000k. Over the one-year term of the agreement, minimum amounts of EUR 5,000k can be drawn on at any time for a period of one month. As of December 31, 2007, a total volume of EUR 65,000k (FY 2006: EUR 40,000k) was drawn on these credit lines, bearing interest at an average of 5.20 percent (FY 2006: 4.11 percent). The loans are repayable within one month and will therefore be repaid in January 2008.

25 Tax Liabilities

EURk	31.12.2007	31.12.2006
Corporate income tax	1,984	1,195
Trade tax	1,797	0
Total	3,781	1,195

26 Provisions

Provisions for other costs take all recognizable risks from uncertain liabilities into account. They contain provisions for personnel expenses and consulting fees

01.01.2007	Currency translation differences	Allocation	Utilization	Reversals	31.12.2007
EURk	EURk	EURk	EURk	EURk	EURk
1,316	-1	1,819	1,278	18	1,838

All provisions are current.

27 Other Non-Current Liabilities

The following schedule of liabilities illustrates how other non-current liabilities break down by residual maturities:

EURk	Total	Between 1 and 5 years	More than 5 years	Secured amount
Other non-current liabilities	1,405	1,379	26	0
(FY 2006)	1,626	1,545	81	0

The other non-current liabilities include pensions of EUR 89k (FY 2006: EUR 62k).

A provision for pensions has been recorded under non-current liabilities due to a change in legislation in Switzerland obliging companies to make additional contributions to their compulsory funded retirement benefit plans (endowment insurance) as from January 1, 2005.

As of January 1, 2007, the present value of the obligation (DBO) under the defined benefit pension plans for Switzerland amounted to EUR 269k (CHF 431k). Less the fair value of the plan assets of EUR 207k (CHF 333k), the net obligation stood at EUR 62k (CHF 98k). The obligation is calculated using the corridor method and, according to the external report, is based on the following actuarial assumptions:

	31.12.2007	31.12.2006
Discount rate	3.50%	3.50%
Estimated future salary increases	3.50%	3.00%
Estimated future pension increases*	0.00%	0.00%
Expected return on plan assets	2.00%	2.00%

*Assuming a zero pension rise as no pensions are currently paid to employees.

	31.12.2007	31.12.2006
Mortality	EVK 2000	EVK 2000
Probability of invalidity	EVK 2000	EVK 2000
Probability of exit	BVG 2005	BVG 2005

On the basis of the actuarial report, the following income and expenses were recognized in fiscal year 2007:

`	Service cost	EUR 27k (CHF 45k)
`	Interest expense	EUR 10k (CHF 17k)
`	Income from interest on plan assets	EUR 5k (CHF 8k)

As of December 31, 2007, the provision for pensions disclosed under non-current liabilities amounted to EUR 89k (CHF 147k). This amount comprises the present value of the obligation (DBO) of EUR 373k (CHF 618k), the fair value of the plan assets of EUR 285k (CHF 471k) and an actuarial loss of EUR 34k (CHF 56k). The actuarial loss was recognized in equity in a separate line under capital reserves in accordance with the revised IAS 19.

EURk (CHFk)	2007	2006	2005	2004
Present value of the obligation (DBO)	373 (618)	268 (431)	221 (343)	196 (302)
Present value of plan assets	285 (471)	207 (333)	193 (300)	204 (315)
Net obligation	89 (147)	61 (98)	28 (43)	-8 (-13)

Experience adjustments totalled EUR 45k (CHF 74k) to the obligations and EUR 21k (CHF 34k) to assets. Employer contributions in the next period are estimated at EUR 39k (CHF 64k).

EURk	2007	2006
Change in defined benefit obligations:
Defined benefit obligation at beginning of period	269	221
Interest cost	10	8
Current service cost	27	19
Employer contributions	25	15
Benefits paid	37	3
Actuarial gains and losses recognized in equity	-13	-17
Currency translation differences from foreign plans	-8	-8
Defined benefit obligation at end of period	373	269

EURk	2007	2006
Change in plan assets
Fair value of plan assets at beginning of period	207	193
Expected return	5	4
Employer contributions	61	39
Benefits paid	38	4
Actuarial losses recognized in equity	-21	-19
Currency translation differences from foreign plans	-6	-6
Fair value of plan assets as of Dec. 31, 2007	285	207

28 Equity

For details of changes in equity, please see the statement of changes in equity and the statement of recognized income and expense for the period.

The Group's capital management activities are primarily aimed at maintaining its credit rating in order to support its operations and safeguard liquidity. The Group monitors capital using the equity ratio, the ratio of equity to total assets. In accordance with group guidelines, we aim for an equity ratio higher than 16 percent.

The fully paid-in subscribed capital of GRENKELEASING AG amounts to EUR 17,491k (FY 2006: EUR 17,486k). It is divided into 13,684,099 (FY 2006: 13,679,679) no-par bearer shares. The change on the prior year is attributable to the exercise of stock options in 2007 under the second stock option program (see Note 34). A total of 4,420 options were exercised and exchanged for shares.

On May 9, 2006, the Annual General Meeting adopted a resolution authorizing the Board of Directors, with the approval of the Supervisory Board, to increase the Company's capital stock by April 30, 2010 by up to a nominal amount of EUR 8,500k by issuing new no-par bearer shares in return for cash and/or non-cash contributions. The approved capital increase may be split into tranches. The shareholders will be granted a subscription right. However, under certain conditions, the Board of Directors is authorized to wholly or partly exclude the right of shareholders to subscribe to capital increases in return for cash contributions, with the approval of the Supervisory Board.

The articles of incorporation were amended accordingly. In this connection, the approved capital of EUR 5,963k, which expired on February 28, 2005, was canceled.

Conditional Capital

As a result of the resolution passed by the Annual General Meeting on April 16, 2002, the conditional increase in capital of up to EUR 959k ("conditional capital I"), approved on February 28, 2000, was reduced by EUR 180k. The sole purpose of the conditional capital increase was to enable options to be granted under the employee stock option program for the IPO in 2000. Since both tranches of the employee stock option plan expired in 2006, conditional capital I no longer has a purpose. On January 23, 2006, the Supervisory Board resolved to cancel conditional capital I. The articles of incorporation were amended accordingly. The change in the articles of incorporation was entered in the commercial register on April 21, 2006.

The Annual General Meeting also approved a further conditional increase ("conditional capital II") of EUR 948k which was entered in the commercial register on June 7, 2002. Conditional capital II was reduced by EUR 199k to EUR 749k by the exercise of 155,201 stock options from 2004 to 2006. Following the final exercise of 4,420 stock options, conditional capital II was reduced by EUR 5k to EUR 743k.

By virtue of the authorization granted in Art. 11 (2) of the articles of incorporation, the Supervisory Board resolved the following:

As a result of plan participants' final declaration to purchase a total of 4,420 Company shares (preemptive shares) under the terms of the stock option program (GRENKELEASING employee stock option program) issued based on a resolution adopted by the Annual General Meeting on April 16, 2002, Art. 4 (1) and Art. 2 of the articles of incorporation of GRENKELEASING AG are revised as follows:

• "(1) The Company's capital stock amounts to EUR 17,491,421.86 (in words: seventeen million four hundred and ninety-one thousand four hundred and twenty-one euros and eighty-six cents).
• (2) It is divided into 13,684,099 no-par value shares which are made out to the bearer."

The amendment of the articles of incorporation was notarized on July 9, 2007 and submitted to the commercial register.

Conditional capital II, which was designed to meet subscription rights under the stock option programs, has become obsolete because the subscription rights have expired. The articles of incorporation were amended accordingly as resolved by the Supervisory Board on September 3, 2007.

At the Annual General Meeting of GRENKELEASING AG on May 9, 2006, it was decided to conditionally increase capital by a nominal amount of up to EUR 3,834,690 by issuing up to 3,000,000 new no-par value bearer shares ("conditional capital III"). The creation of conditional capital also entitles the Board of Directors, with the consent of the Supervisory Board, to issue on one or more occasions until May 8, 2011 options or convertible bonds with a total nominal value of up to EUR 150,000,000 and a maximum term of ten years. Existing shareholders' subscription rights may be excluded. In addition, the Annual General Meeting authorized the Board of Directors, with the consent of the Supervisory Board, to issue until May 8, 2011 participation certificates on one or more occasions up to a maximum of EUR 150,000,000. The shareholders may not subscribe in this case. To date, no warrants or convertible bonds have been issued from conditional capital III.

Authorization to Acquire Treasury Shares Pursuant to Sec. 71 (1) No. 8 AktG

By resolution of the Annual General Meeting on May 9, 2006, the Company has been authorized to acquire treasury shares of up to a total of 10 percent of the capital stock existing at the time of the resolution. The authorization may be exercised in whole or in part, on one or more occasions, by the Company itself or by third parties assigned by the Company. The authorization took effect at the close of the Annual General Meeting and was effective until November 8, 2007. By resolution adopted at the Annual General Meeting on May 8, 2007, this authorization was extended until November 7, 2008. The Board of Directors is authorized to sell treasury shares in return for contributions in kind or to third parties in return for cash. The shares may be redeemed without a resolution of approval by the Annual General Meeting. No treasury shares have been purchased to date.

Participation Certificate Capital

By resolution of the Annual General Meeting on May 9, 2006, the Board of Directors was authorized, with the consent of the Supervisory Board, to issue participation certificates of up to EUR 1,500k with an indefinite term. The authorization expires on May 8, 2011. The shareholders may not subscribe. The participation certificates do not grant shareholder status, they merely confer creditor rights on a contractual basis. A conversion or option right in respect of shares in the Company is expressly precluded. No participation rights have been issued to date.

Appropriation of retained earnings

The Annual General Meeting on May 8, 2007 adopted the resolution on the appropriation of GRENKELEASING AG's retained earnings for fiscal year 2006 of EUR 51,069,498.00. The Annual General Meeting approved the proposal of the Board of Directors and the Supervisory Board, resolving to appropriate the retained earnings for 2006 as follows:

Retained earnings 2006	EUR	51,069,498.00
Dividend
of EUR 0.55 per no-par value share for
a total of 13,679,679 no-par value shares	EUR	7,523,823.45
Allocation to revenue reserves	EUR	0.00
Profit carryforward (to new account)	EUR	43,545,674.55

The dividend was paid to the shareholders of GRENKELEASING AG on May 9, 2007.

In fiscal year 2006, a dividend of EUR 6,821,823.00 was distributed to shareholders; this is equivalent to EUR 0.50 per share for a total of 13,643,646 no-par shares. The Board of Directors has proposed a dividend of EUR 0.60 per share for fiscal year 2007.

Reserves

The capital reserves of EUR 60,166k (FY 2006: EUR 60,052k) mainly result from the IPO of GRENKELEASING AG in April 2000. The Company opted to offset these costs against the capital reserves in 2000. The reversal resulted in an effect of EUR 211k in 2003, including the effect of deferred taxes of EUR 81k. The change in the capital reserves in 2006 and 2007 is due to stock options being exercised under the second stock option program.

There were the following differences between the exercise price and the accounting par value in fiscal year 2007: Exercise period after Annual General Meeting 2007: EUR 25.72 per option/share

This resulted in an amount of EUR 114k which was transferred to the capital reserves in 2007 (see Note 34). In addition to GRENKELEASING AG's revenue reserves, revenue reserves also comprise the revenue reserves and profits of the consolidated subsidiaries.

A hedge reserve was recognized in equity in fiscal year 2003, when cash flow hedges were recognized for the first time. Changes in the fair value of derivatives designated as hedging instruments in cash flow hedges are recognized in equity. The change in fair value during the fiscal year was -EUR 125k (FY 2006: EUR 1,716k) plus deferred taxes of EUR 15k (FY 2006: -EUR 214k).

As a result of the recognition of pension provisions in accordance with IAS 19, an amount of EUR 34k (FY 2006: - EUR 36k) was recognized in equity to account for actuarial gains and losses. As a corresponding liability is not recognized in Switzerland, the deferred taxes attributable to actuarial gains and losses EUR 8k; (FY 2006: EUR 8k) were also recognized under equity.

29 Derivative Financial Instruments

29.1 Financial Risk Strategy

Business Model

As a small-ticket IT leasing company, GRENKELEASING leases mobile IT assets to B2B customers.

To date, the contractual terms for the lease portfolio, i.e. all lease contracts, have been fixed for the duration of each individual contract, fixing both the periodical payments and the interest rate used to calculate the payments when the contract is concluded. Neither of the parties can subsequently amend these terms.

GRENKELEASING only dissolves or agrees to dissolve contracts prematurely (repurchase, exchange option, termination, etc.) if the lessee bears the potential loss (i.e. due to lost interest). Please refer to the risk report and the report on the financial position and net assets for quantitative disclosures regarding credit risk, liquidity risk and market risks.

Hedging Policy

Derivatives are used when, and only when, underlying contracts need to be hedged. Underlying contracts are the contractual obligations entered into by GRENKELEASING AG in order for it to achieve its objectives.

Treasury is not a separate profit center. The use of derivatives is limited to hedging the profits of GRENKELEASING AG to the extent stipulated in the Company's articles of incorporation.

Items are hedged in terms of volume or amount, with various instruments being used. The choice of instrument is always a management decision based on the risk profile, i.e. the potential income associated with the risk in question. For example, besides benefiting from falling interest rates, interest rate caps also entail a risk of rising finance costs until the strike is reached, whereas swaps fix a specified interest rate for the term of the swap.

29.2 Currency Risk Management

GRENKELEASING is exposed to currency risks because of its European activities and the growing significance of its foreign markets. Derivatives are used to mitigate or eliminate these risks.

Derivative Financial Instruments to Hedge Currencies

Forward exchange contracts are used to hedge the cash flows from the refinancing of the franchise companies in Poland, the UK, Norway and the Czech subsidiary. The Company finances the lease receivables generated by the franchisees and the subsidiary in the foreign currencies (pound sterling, Polish zloty, Norwegian crowns, and Czech koruna) and receives payments in those currencies over the term of the underlying lease contracts. Hedge accounting was not applied. As of the balance sheet date, there were forward exchange contracts with positive and negative fair values, leading to disclosure as assets (see Note 14) and liabilities (see Note 29.3).

As of the balance sheet date, there were forward exchange contracts with a nominal volume of EUR 46,639k. They break down by currency as follows:

	Nominal volume		Due in	Hedged average rate
		2008	2009	2010	Thereafter
	EURk	EURk	EURk	EURk	EURk
CZK	3,519	1,849	1,211	406	53	27.3331
GBP	23,631	13,267	6,492	2,411	1,461	0.7076
NOK	4,892	2,045	1,667	808	372	8.2204
PLN	14,597	7,713	4,706	1,851	327	3.9103

The refinancing for other non-euro countries was not hedged as the current volume is insignificant.

29.3 Interest Rate Risk Management

The interest rate risk for GRENKELEASING's operations stems mainly from the sensitivity of its financial liabilities to changes in market interest rates. GRENKELEASING endeavors to limit the impact of such risks on interest expense and net interest income by employing appropriate derivatives.

Derivative Financial Instruments to Hedge Interest Rates

Issuing bonds and contracting interest rate swaps are elements of a financing strategy under which GRENKELEASING AG separates refinancing from interest rate hedging in order to obtain maximum flexibility for its refinancing activities. The resulting risks (variable cash flows) are hedged by appropriate interest rate derivatives. Interest rate swaps are used as hedging instruments and designated as hedges in accordance with IAS 39 (see Note 28). As all interest rate derivatives used in hedge accounting have been proven to be 100 percent effective, the changes in fair value in relation to their clean value (excluding accrued interest) were recognized fully in equity.

Both interest rate caps and interest rate swaps are used to limit the interest rate risk under the ABCP programs. However, the contracting parties are the SPEs. Therefore GRENKELEASING does not account for the derivatives and does not apply hedge accounting.

Notes on the Prior-Year Figures:

The first payer swap with a volume of EUR 100,000k expired on September 22, 2006. The second interest rate swap had an initial volume of EUR 133,000k. Its term started on September 22, 2006 and will expire on September 22, 2010. The volume of the interest rate swap will amortize over its term. The interest rate was fixed at 3.2925 percent. The other terms for this swap are based on those of the floating rate debenture issued on March 22, 2005. The interest rate swap was used as a cash flow hedge of the above debenture.

In addition, two further payer swaps with an initial variable nominal volume of EUR 50,000k each were concluded to hedge the bond of EUR 100,000k issued on October 12, 2006, fixing the interest rate at 3.808 percent and 3.809 percent plus a credit spread for the term until October 30, 2010.

In addition, an interest rate swap with an initial nominal volume of EUR 40,000k and a fixed interest rate of 3.950 percent was entered into on December 18, 2006. The parameters of the interest rate swap, which has a term from April 16, 2007 to January 15, 2010 and a variable nominal volume, are aligned with the cash flows from the ABS bond issued in August 2006.

Fiscal Year 2007

On May 16, 2007, an interest rate swap with an initial variable nominal value of EUR 20,000k was concluded, fixing the interest rate at 4.35 percent until June 23, 2008. In addition, a new interest rate swap was concluded with an initial volume of EUR 40,000k. It expires on April 30, 2008, as do the underlying cash flows. The interest rate was fixed at 4.4475 percent.

The following three-month period has been hedged by means of another interest rate swap with a nominal volume of EUR 15,000k and a fixed interest rate of 4.735 percent. In this case, the cash flows from the ABS bond were designated as the underlying hedged item for this hedging instrument.

The hedging relationship for one of the existing swaps was terminated as of June 30, 2007 as the lower level of new business means that the variable cash flows planned for the future will not materialize to the extent originally planned. Due to this termination, the changes in fair value which had previously been recognized under equity were recognized in profit or loss (EUR 773k). The corresponding income is disclosed under interest expense from refinancing. The interest rate swap was sold on July 18, 2007, generating further income of EUR 41k. As of December 31, 2007, there are interest rate swaps with a volume of EUR 323,120k designated as hedging instruments in cash flow hedges.

The table below shows the development of the nominal volume as of the balance sheet date for the coming years. The average interest rate is the arithmetic mean of all swaps as of December 31, 2007. As we only contract payer swaps from the perspective of GRENKELEASING, this is the agreed fixed interest rate from interest rate swaps.

Nominal volume as of December 31					Average interest rate
	2006	2007	2008	2009	Thereafter	2007
	EURk	EURk	EURk	EURk	EURk
Contracted prior to 2007	214,399	128,120	41,993	71,965	0	3.6835%
Contracted in 2007	0	195,000	30,000	0	0	4.4389%
Total	214,399	323,120	71,993	71,965	0	4.2500%

29.4 Hedge Effectiveness

Accounting in accordance with IFRSs requires documentation and a risk analysis when derivative financial instruments are used. The relationship between the hedged item and the hedging instrument determines the effectiveness of a hedge. As it uses derivatives for interest rate hedging, GRENKELEASING applies hedge accounting in accordance with IAS 39. Hedge effectiveness, as required by IFRSs, is in line with GRENKELEASING's intention of using derivatives only to hedge risks from designated hedged items and to never enter into derivatives for speculative reasons.

A hedging relationship only exists in substance for currency hedging. Although the hedging instruments are specifically designated, hedge accounting pursuant to IAS 39 is not applied. The tests of effectiveness for each financial derivative accounted for in a hedge in accordance with IAS 39 were performed as of the end of the quarter using the hypothetical derivative method. The documentation of each hedging relationship describes the hedged item, hedged risk, strategy, hedging instrument, estimate of effectiveness, and names the counterparty.

29.4.1 Forward Exchange Contracts

The hedged item for all forward exchange hedges is determined by the payments resulting from the financing of the leasing business in the respective currency area. These foreign currency cash flows are the basis for the forward contracts. The hedge can be classified as highly effective because only the actual cash flows, and never a higher amount, are hedged. Ideally, the dates of the financing and the foreign exchange hedge coincide to ensure the best possible hedge of the exposure to variable cash flows.

29.4.2 Interest Rate Swaps

The parameters of the host contract, i.e. those of the financing (liability), are considered first and foremost when contracting interest rate swaps. For this reason, the interest rate terms of the swaps on the variable side are identical to those of the hedged item.

Furthermore, the volume contracted in the swaps is never greater than the volume of the hedged financing. The active integration of existing and future planned refinancing transactions allows a forward-looking risk management. Quarterly tests of effectiveness will be conducted as part of this ongoing analysis, in which the effectiveness of the hedges is tested using a method allowed under IFRSs. To date, the hedging relationships between interest rate swaps and existing and planned financing have proven to be highly effective. Under the hypothetical derivative method, effectiveness was 100 percent.

30 Fair Value of Financial Instruments

30.1 Fair Value of Derivative Financial Instruments

The interest rate swaps have a total fair value of EUR 1,594k on the balance sheet date (FY 2006: EUR 1,464k).

30.2 Fair Value of Primary Financial Instruments

Fair value is the amount for which financial instruments would be exchanged, sold, bought or settled on the balance sheet date between knowledgeable, willing contracting parties in an arm's length transaction. The fair value of lease receivables is estimated by using, instead of the internal rate, an interest rate which would be charged if the full amount were refinanced. A market rate of interest on December 31, 2007 was used for liabilities from the refinancing of lease receivables.

Financial instruments whose fair value differs from their carrying amount are listed below:

EURk	Fair value 2007	Carrying amount 2007	Fair value 2006	Carrying amount 2006
Lease receivables	1,085,824	1,000,058	1,029,217	945,213
Liabilities from the refinancing of lease receivables	898,545	898,774	845,043	844,151

30.3 Financial Instruments With a Negative Fair Value

EURk	31.12.2007	31.12.2006
Interest rate swaps	94	0
Other derivative financial instruments with a negative fair value	1,167	1,206
Total	1,261	1,206

The Company discloses negative fair values in connection with forward exchange contracts in the current fiscal year.

As of December 31, 2007, all forward exchange contracts on the Polish zloty, Norwegian kroner and Czech koruna had a negative fair value of EUR 1,167k (FY 2006: negative fair value of EUR 1,206k). The forward exchange contracts have an aggregate volume of EUR 46,639k (FY 2006: EUR 34,046k) and residual maturities of between one and 55 months.

31 SEGMENT REPORTING

The GRENKELEASING AG Group's risks and rates of return on equity vary depending on the geographical regions in which it operates. In accordance with IAS 14, certain items of information in the financial statements have therefore been disclosed by region (primary segments) and by division (secondary segments).

Regional segmentation makes a distinction as to whether lessees are based in Germany, France, Switzerland, or in another country. The "other countries" segment comprises Austria, Italy, the Czech Republic, Spain, the Netherlands, Denmark, Sweden, Belgium, and Ireland.

For segmentation by divisions, a distinction is made according to the method of acquisition, i.e. which lease contracts were acquired through conventional channels via specialist dealers, or via the subsidiary WEBLEASE NETBUSI-NESS AG, i.e. via e-commerce shops, and directly on the internet. The gains and losses from the contracts settled using internally developed internet software are allocated to the Internet segment.

The segment information was calculated as follows:

• ` Segment revenue comprises revenue from capitalizing lease receivables, sales proceeds from leased assets, insurance revenue, and interest income.
• ` Segment result is calculated before taxes (EBT).
• ` Amortization and depreciation relates to property, plant and equipment and intangible assets and the portion of goodwill amortization from the acquisition of consolidated subsidiaries directly attributable to the segment.
• ` Capital expenditure relates to additions of property, plant and equipment and intangible assets, including the portion of goodwill attributable to the segment.
• ` Operating segment assets and liabilities are operating assets and debt capital excluding interest-bearing claims and liabilities and without taxes.

Segment revenue breaks down as follows:

EURk	2007	2006
Income from interest on lease receivables	96,092	89,299
Profit from new business	20,418	18,875
Insurance income	18,499	17,090
Income from disposals	14,471	12,627
Total	149,480	137,891

SEGMENT REPORTING FOR FISCAL YEAR 2007 REGIONS (PRIMARY REPORTING FORMAT)

EURk	Germany France Switzerland				Other Countries	Total Segments
	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006
Revenues	92,676	92,992	32,100	25,935	7,133	6,789	17,571	12,175	149,480	137,891
Segment result	24,620	28,392	14,456	13,675	3,127	3,571	2,612	2,179	44,815	47,817
Earnings before taxes									44,815	47,817
Income taxes									12,690	17,307
Net profit for the period									32,125	30,510
Amortization / depreciation	1,787	1,399	204	162	53	50	189	210	2,233	1,821
Significant non-cash expenses	12,094	11,266	2,802	2,813	512	328	1,731	741	17,139	15,148
Capital expenditure	3,564	5,093	262	297	51	21	261	207	4,138	5,618
Segment assets	735,010	775,606	254,094	196,383	37,279	35,104	214,342	142,933	1,240,725	1,150,026
Unallocated items									20,684	29,945
Total assets									1,261,409	1,179,971
Segment liabilities	585,796	629,037	185,411	142,155	20,461	21,413	196,208	127,411	987,876	920,016
Unallocated items									47,366	58,275
Total liabilities									1,035,242	978,291

DIVISIONS (SECONDARY REPORTING FORMAT)

EURk	Internet		Conventional lease business		Total Segments
	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006	Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006		Jan. 1 to Dec. 31, 2007	Jan. 1 to Dec. 31, 2006
Revenues	83,843	77,315	65,637	60,576		149,480	137,891
Segment result	31,134	25,251	13,681	22,566		44,815	47,817
Captal expenditure	2,321	3,150	1,817	2,468		4,138	5,618
Segment assets	699,351	652,191	541,374	497,835		1,240,725	1,150,026

32 FRANCHISE SYSTEM

GRENKELEASING AG aims to expand into other markets with its business model that has been tried and tested in many European countries; for this, it employs a franchise system.

The following companies already operate as franchisees:

• ` Grenke Leasing Ltd., Guildford, UK
• ` GRENKELEASING Sp.z o.o, Poznan, Poland
• ` GRENKE-AUTOLEASING GmbH, Bremen, Germany
• ` Grenke Leasing AS, Oslo, Norway
• ` GRENKEFACTORING, Baden-Baden, Germany
• ` Grenkeleasing Magyarország Kft., Budapest, Hungary
• ` Kazenmaier FleetService GmbH, Karlsruhe, Germany

Two new franchise companies signed agreements in fiscal year 2007:

• ` GRENKELEASING SRL, Bucharest, Romania (contract signed on April 10, 2007)
• ` GRENKE RENT, S.A., Madrid, Spain (contract signed on June 11, 2007)

GRENKELEASING AG provides its know-how, infrastructure and funds for refinancing lease contracts under a franchise agreement. However, it does not own shares in the above franchisees, nor does it have any control over the franchisees' business policies.

33 CONTINGENT LIABILITIES AND OTHER FINANCIAL OBLIGATIONS

No contingent liabilities existed as of the balance sheet date which must be stated in the balance sheet or in the notes. The Company has other financial obligations related to rent, building maintenance, and lease contracts. The resulting financial obligations are presented below:

EURk	31.12.2007	31.12.2006
Rent, maintenance and lease obligations
- due in the following year	3,851	3,193
- due in two to five years	6,443	6,464
- due in more than five years	1,139	1,068
Total	11,433	10,725

There are extension options of between one and five years on leases for rented premises.

Under three agreements on the sale of receivables of Grenke Investitionen Verwaltungs Kommanditgesellschaft auf Aktien to secure all receivables of the holding company (Grenke Investitionen Verwaltungs KGaA) from the operating company, the operating company (GRENKELEASING AG) assigns to the holding company the following from lease contracts with end lessees (sublease contract) for leased assets which are the subject of a purchase agreement between the operating company and the holding company:

All receivables, claims and rights arising from these sublease contracts, including any claims from extended leases following expiry of the original lease term, any claims for compensation payments, residual values, and payment of a purchase price from the sale of the respective lease asset. Claims from credit and property insurance from the sublease contract are also assigned, as are any claims from repurchase obligations on the part of suppliers of lease assets or of third parties. The buyer of the receivables acquires the equitable lien on the lease assets underlying the receivable purchase agreement.

Our Irish subsidiary, GRENKE FINANCE Plc., Dublin, Ireland, realized income from intragroup factoring in 2007. In our view, this is an active service as defined by Sec. 8 (1) No. 5 AStG ["Aussensteuergesetz": German Foreign Investment Tax Act] and is not subject to imputed dividend taxation under Sec. 10 (1) AStG at company level.

In our opinion, this interpretation of law should also be valid for income tax law. The application of the imputed dividend taxation provisions as unreasonable anti-abuse regulations constitutes an unlawful discrimination against equity investments in foreign companies and may not, therefore, be applied in taxing GRENKELEASING AG.

The view previously held by the tax authorities would result in imputed dividend taxation of EUR 584k for 2007, and thus increase tax expenditure. EUR 1,230k would be due for prior years. Furthermore, our view is also supported by the European Court of Justice's judgment on the Cadbury Schweppes case (case no. C-196/04) dated September 12, 2006. Imputed dividend taxation is only compatible with EU law if it is aimed exclusively at contrived forms that are used to evade national taxes normally payable. Such taxation may not be applied if it is proven on the basis of verifiable indications that, regardless of the existence of tax motives, the foreign company is actually situated in the member state and carries on real economic activities there.

Objections are pending to six assessment notices on the separate and uniform determination of tax bases for 2000 for GLG Grenke-Leasing GmbH & Co. Baden-Baden KG, GLG Grenke-Leasing GmbH & Co. Düsseldorf KG, GLG Grenke-Leasing GmbH & Co. Hamburg KG, GLG Grenke-Leasing GmbH & Co. München KG, GLG Grenke-Leasing GmbH & Co. Nürnberg KG, and GLG Grenke-Leasing GmbH & Co. Stuttgart KG.

The assets of the above companies were merged into GRENKELEASING AG as of February 28, 2000. The amended tax assessment notices from the tax authorities differ from our application for amendment of the tax assessment notices for 2000 following the incorporation of the tax audit findings for the years 1996 to 1999. If the tax authorities' view proves correct, tax expense would increase by EUR 92k.

Tax Audit in France

The tax authorities in France have completed their audit of the French group company GRENKE LOCATION SAS for the fiscal years 2000 to 2002. There were differences of opinion between ourselves and the tax authorities on the allocation of the intragroup two-tier financing.

An expert third party issued a tax opinion on this matter stating that GRENKE LOCATION SAS stood a good chance that the matter accounted for by us had been presented clearly and transparently. The French tax authorities issued GRENKE LOCATION SAS with a tax assessment notice that did not take this opinion into consideration. The company has lodged an appeal against this notice and initiated proceedings before the tax court.

Payment of EUR 3,458k was made in 2004 subject to reservations and without acknowledging the assessment notice to avoid the negative publicity that would follow an entry in the commercial register. This amount was recognized as a receivable from the tax authorities as, on the basis of the tax opinion, we believed that our view would be confirmed.

The follow-up audit for 2003 and 2004 was performed in the first half of 2006. During this audit, the points addressed in the prior audit were reviewed. A mutually acceptable solution was reached in a mutual agreement procedure with the central audit office in Paris (interlocuteur départemental). The original findings were for the most part overturned. The withholding tax including interest of EUR 1,589 paid and recognized as a receivable from the tax authorities must be paid. Further expenses are the interest on the VAT for 2004 of EUR 107,913 and for 2003 of EUR 124,905.

The mutual solution is also applicable to the current proceedings relating to the audit findings for 2000 to 2002. In accordance with the final assessment notices, all of the withholding tax including interest (EUR 820,846k) and EUR 1,953k of the corporate income tax from the EUR 3,458k paid in 2004 and recognized as a receivable from the tax authorities was refunded. We will receive EUR 95,946k of interest on the refund of withholding tax. Interest on the refunded corporate income tax will be paid separately. As a result, corporate income tax for 2000 of EUR 145,011 and for 2001 of EUR 316,637 and default interest on VAT of EUR 231,693 are payable. The proceedings before the tax court were withdrawn by letter dated November 8, 2007.

The follow-up audit for 2005 and 2006 took place in November 2007. The arrangement reached in the mutual agreement procedure is also binding for this tax audit. No final notices have been issued yet.

Tax Audit in Germany

The tax audit for fiscal years 2000 to 2004 that commenced in September 2006 is still ongoing.

34 EMPLOYEE STOCK OPTION PROGRAMS

The first employee stock option program (IPO stock option program) was launched in connection with the flotation of the GRENKELEASING AG stock. A second stock option program was launched in 2002. These employee stock option programs were designed to allow members of the Board of Directors and the other employees of the Company and its affiliates to directly participate in the future growth in corporate value.

Subscription rights for all of the employee stock option programs are as follows:

• ` Members of the Board of Directors of GRENKELEASING AG maximum of 203,880 subscription rights
• ` Other employees of GRENKELEASING AG maximum of 969,490 subscription rights
• ` Other employees of companies affiliated

to GRENKELEASING AG maximum of 318,630 subscription rights

The subscription rights were issued in various tranches in subsequent years. Subscription rights could be issued in the five years after entry of the conditional capital in the commercial register.

The share price had to exceed a specified target price for the subscription rights under the employee stock option programs to be exercised, and the subscription rights could be exercised no earlier than two years after being issued. The exercise price was linked to the issue price and could fall if the target price was exceeded.

All of the employee stock option programs provided for the possibility of a cash settlement if the options were exercised. The Board of Directors would have had to adopt a resolution for this for a particular year.

As all of the stock option programs were launched before November 7, 2002 and their conditions had not been subsequently amended, the options did not need to be measured in accordance with IFRS 2, i.e. recognizing any changes in fair value in profit or loss. Hence, exercises of options were recognized directly in equity.

Stock Option Program II

The stock options issued under the second employee stock option program are as follows:

	Members of the Board of		Employees of affiliated
No.	Directors	Employees	companies	Total
Maximum number of subscription rights	103,880	441,490	196,630	742,000
Issued under the 1st SOP (2002)	24,200	108,984	65,740	198,924
Returned by leaving employees	-	8,386	20,812	29,198
Exercised by employees	23,100	96,398	40,773	160,271
Not exercised/expired subscription rights	1,100	4,200	4,155	9,455
Subscription rights still available	0	0	0	0

On the basis of the share's performance in fiscal year 2004, the performance target of the second employee stock option program (EUR 28.51) was met in the reference period in July/August 2004 so that the options issued under the second employee stock option program were able to be exercised.

The exercise price was determined separately for each exercise period in the relevant reference period. The reference price was EUR 38.00 for 2006 and EUR 43.70 for 2007.

The original conditional capital II of EUR 948,446.66 divided by 742,000 subscription rights yields a nominal value per option of EUR 1.27823.

Due to the exercise of a total of 36,033 options in 2006, the capital stock increased by EUR 46k and the capital reserve by EUR 567k.

In fiscal year 2007, a total of 4,420 subscription rights were exercised, leading to a EUR 5k increase in the capital stock and a EUR 114k increase in the capital reserves.

Measurement period	Exercise period	Mean price	Exercise price	Number of options exercised
Date	Date	EUR	EUR	No.
Mar. 30 to Apr. 26, 2005	May 4 to May 31, 2005	34.03	20.93	33,614
Jun. 24 to Jul. 21, 2005	Jul. 27 to Aug. 25, 2006	36.21	19.84	5,942
Sept. 22 to Oct. 20, 2005	Oct. 28 to Nov. 24, 2005	42.64	16.62	2,152
Mar. 31 to May 2, 2006	May 10 to Jun. 7, 2006	58.14	11.65	848
Jun. 23 to Jul. 20, 2006	Jul. 28 to Aug. 23, 2006	49.24	16.10	33,437
Sept. 22 to Oct.19, 2006	Oct. 27 to Nov. 23, 2006	43.57	18.94	1,748
Mar. 29 to Apr. 27, 2007	May 9 to Jun. 5, 2007	33.14	27.00	4,420

The following table presents all the relevant disclosures for 2005, 2006 and 2007:

As stock options issued under the employee stock option programs can no longer be exercised, as of December 31, 2007 there were no dilutive (FY 2006: 13,895 ) or potentially dilutive (FY 2006: 0) stock options.

35 RELATED PARTY DISCLOSURES

GRENKELEASING AG renders various services for related entities in its ordinary course of business. Conversely, the various group companies also render services within the GRENKELEASING AG Group as part of their business purpose. These extensive deliveries of goods and services are transacted at market conditions.

In addition, various agreements are in place between the Group and the franchise companies under which the group companies provide their know-how, infrastructure and funds for refinancing lease contracts. In addition to the franchise charge totaling EUR 490k (FY 2006: EUR 305k), the Group generated income from interest on loans of EUR 3,192k (FY 2006: EUR 1,407k). As of the balance sheet date, apart from the loans (see Notes 28 and 21), there were receivables from franchisees totaling EUR 948k (FY 2006: EUR 414k).

In accordance with the articles of incorporation, the Supervisory Board of GRENKELEASING AG has six members. The members of the Supervisory Board in fiscal year 2007 were:

Prof. Dr. Ernst-Moritz Lipp, Chairman, Professor of international finance and general manager of ODEWALD & COMPAGNIE Gesellschaft für Beteiligungen mbH, Baden-Baden, Germany

Mr. Gerhard E. Witt, Deputy Chairman, Public auditor and tax advisor, Baden-Baden, Germany

Mr. Dieter Münch, retired bank officer, member of foundation board, Weinheim, Germany

Dr. Oliver Nass, commercial general manager of ESG France, Paris, France

Mr. Erwin Staudt, economics graduate, president of the soccer club VfB Stuttgart 1893 e.V., Leonberg, Germany

Dr. Brigitte Sträter, attorney-at-law, owner and manager of the PR agency CENA, Düsseldorf, Germany

The Supervisory Board's remuneration (including payments for supplementary services) totaled EUR 73k (FY 2006: EUR 66k).

The shares held by the Supervisory Board members are listed below:

		Shares as of Dec. 31,
No.	2007	2006
Dieter Münch	75	75
Prof. Dr. Ernst-Moritz Lipp	21,000	11,000
Erwin Staudt	1,000	0
Total	22,075	11,075

In accordance with Sec. 113 (1) Sentence 2 No. 1 AktG, supervisory board remuneration is defined in Art. 10 of GRENKELEASING AG's articles of incorporation. This provision does not permit the participation of the members of the Supervisory Board in any of the employee stock option programs.

Mr. Gerhard E. Witt and Mr. Dieter Münch have also been supervisory board members of Grenke Investitionen Verwaltungs KGaA, Baden-Baden, Germany, a GRENKELEASING Group company, since February 20, 2003. Mr. Dieter Münch is also a member of the supervisory board of Weisenburger Bau + Grund AG, Halle, Saale, Germany. Mr. Erwin Staudt is a member of the supervisory boards of PROFI Engineering Systems AG, Darmstadt, Germany, USU AG, Möglingen, Germany, and Hahn Verwaltungs-GmbH, Fellbach, Germany. Prof. Dr. Ernst-Moritz Lipp is also a member of the advisory boards of TFL International GmbH, Weil am Rhein, Germany, Burkart Verwaltungen GmbH, Singen, Germany, BOA Holding GmbH, Karlsruhe, Stutensee, Oyster Holding GmbH, Karlsruhe and of SG technologies GmbH as well as SG Holding GmbH, Büschfeld.

Dr. Brigitte Sträter, Prof. Dr. Ernst-Moritz Lipp and Dr. Oliver Nass are not members of any other supervisory boards or comparable oversight bodies within the meaning of Sec. 125 (1) Sentence 3 AktG.

Mr. Witt and Prof. Dr. Lipp have been appointed until the end of the Annual General Meeting which decides on their exoneration for fiscal year 2007. The remaining members of the Supervisory Board have been appointed until the end of the Annual General Meeting which decides on their exoneration for fiscal year 2009.

Remuneration of the Supervisory Board breaks down as follows:

		Total		Remuneration AG	Remuneration KGaA		Payments for supplementary services
EURk	2007	Prior year	2007	Prior year	2007	Prior year	2007	Prior year
Total	82	75	72	65	9	9	1	1

In addition to her work for the Supervisory Board, Dr. Sträter also assisted the Company in public relations.

The Board of Directors of GRENKELEASING AG is comprised as follows:

Mr. Wolfgang Grenke, businessman, Baden-Baden, Germany (Chairman) Special responsibility: strategy, corporate development, internal audit

Dr. Uwe Hack, business administration graduate, Metzingen, Germany (Deputy Chairman) Special responsibility: investor relations, treasury, controlling

Mr. Mark Kindermann, business graduate, Bühl, Germany Special responsibility: accounting, quality management, human resources, legal, administration

Mr. Thomas Konprecht, programming graduate, certified leasing and financial consultant (VWA), Düsseldorf, Germany Special responsibility: marketing, sales, management services

Mr. Michael Kostrewa, businessman and industrial IT graduate, Gaggenau, Germany Special responsibility: information technology, e-business

Mr. Wolfgang Grenke holds sole power of representation. The other members of the Board of Directors represent GREN-KELEASING AG jointly with another member of the Board of Directors or with an authorized signatory.

The remuneration of the Board of Directors is as follows:

EURk	Total remuneration	Compensation in kind from SOP	Fixed portion	Variable portion
Total	1,360	0	1,020	340
Prior year total	1,540	130	1,034	376

An annual pension premium of EUR 21k (FY 2006: EUR 21k) is paid to a welfare fund for Dr. Hack.

On March 12, 2007, the Chairman of the Supervisory Board of GRENKELEASING AG concluded a phantom stock agreement with, and for the benefit of, Dr. Hack. Under this agreement, Dr. Hack receives for the current fiscal year and each of the two subsequent fiscal years a claim to payment equal to the increase in value of 30,000 shares in GRENKELEASING AG based on a defined basic share price for each fiscal year. The share price is the unweighted arithmetic mean of the Xetra closing prices on all trading days from December 1 to December 23 of the respective prior year.

The basic share price for 2007 was EUR 35.37. The maximum payment arising from this agreement is limited to EUR 600,000 for the period of three years. Under the program, Dr. Hack is obligated to invest the respective net amount paid plus a personal contribution of 25 percent of that amount in GRENKELEASING AG shares. The plan was accounted for as a cash settlement plan and any changes in fair value were recognized in profit or loss.

The options cannot be exercised in 2007 as the mean share price in December 2007 was less than the basic price of EUR 35.37. The basic price for 2008 is EUR 22.18. In the fiscal year and in the prior year, the members of the Board of Directors did not receive any GRENKELEASING AG stock options – in accordance with the Stock Option Program II. The members of the Board of Directors did not exercise any stock options in fiscal year 2007. Their shares and exercisable options are shown below:

	Shares as of Dec. 31,		Stock options as of Dec. 31,
No.	2007	2006	2007	2006
Wolfgang Grenke	4,871,619	4,871,619	0	0
Thomas Konprecht	330,730	330,730	0	0
Mark Kindermann	52,053	52,053	0	0
Michael Kostrewa	47,500	47,500	0	1,100
Total	5,301,902	5,301,902	0	1,100

Mr. Wolfgang Grenke is also general manager of GLG Grenke-Leasing GmbH, Baden-Baden, Germany, and GRENKE Locazione S.r.l., Milan, Italy. He is chairman of the supervisory board of WEBLEASE NETBUSINESS AG, Baden-Baden, Germany, and of GRENKELEASING AG, Vienna, Austria. He is also a member of the advisory board of Deutsche Bank AG, Freiburg region, Germany.

Mr. Mark Kindermann is also a director of GRENKE LIMITED, Dublin, Ireland and a member of the supervisory boards of WEBLEASE NETBUSINESS AG, Baden-Baden, Germany, GRENKELEASING AG, Vienna, Austria, GRENKELEASING AB, Stockholm, Sweden, and Grenkefinance N.V., Vianen, Netherlands.

Mr. Thomas Konprecht is also the chairman of the board of directors of GRENKE ALQUILER S.A., Barcelona, Spain, a member of the supervisory board of GRENKELEASING AG, Vienna, Austria, and a general manager of GLG Grenke-Leasing GmbH, Baden-Baden, Germany.

Mr. Michael Kostrewa is also a director of GRENKE LIMITED, Dublin, Ireland, and a member of the supervisory boards of GRENKELEASING AB, Stockholm, Sweden, and WEBLEASE NETBUSINESS AG, Baden-Baden, Germany.

36 SUBSEQUENT EVENTS

Of the revolving credit facilities totaling EUR 65,000k, mentioned under Note 24.4, EUR 55,000k was repaid on time and the remaining EUR 10,000k was extended by an additional month.

37 DECLARATION PURSUANT TO SEC. 161 AKTG

The Board of Directors and Supervisory Board of GRENKELEASING AG have issued the declaration for 2007 pursuant to Sec. 161 AktG and made this available to shareholders.

38 DECLARATION PURSUANT TO SEC. 264 (2) SENTENCE 3 HGB

We confirm that, to the best of our knowledge, the consolidated financial statements give a true and fair view of the net assets, financial position and results of operations of the Group and the group management report gives a true and fair view of business performance including financial performance and the situation of the Group, and describes the main opportunities and risks relating to the Group's anticipated development in accordance with the applicable financial reporting framework.

Baden-Baden, Germany, January 23, 2008

Executive Board

AUDIT OPINION

We have audited the consolidated financial statements prepared by GRENKELEASING AG, Baden-Baden, Germany, comprising the balance sheet, the income statement, the statement of changes in equity, the statement of recognized income and expense, the cash flow statement and the notes to the consolidated financial statements, together with the group management report for the fiscal year from January 1 to December 31, 2007. The preparation of the consolidated financial statements and group management report in accordance with IFRSs [International Financial Reporting Standards] as adopted by the EU, and the additional requirements of German commercial law pursuant to Sec. 315a (1) HGB ["Handelsgesetzbuch": German Commercial Code] is the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit.

We conducted our audit of the consolidated financial statements in accordance with Sec. 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (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 the applicable financial reporting framework 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 expectations as to 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 are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities 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, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU, the additional requirements of German commercial law pursuant to Sec. 315a (1) HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.

Eschborn/Frankfurt am Main, Germany, January 23, 2008

Ernst & Young AG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft

Eckl Kirch Wirtschaftsprüferin Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]

SUPERVISORY BOARD REPORT

During the fiscal year, the Supervisory Board performed its tasks in accordance with the law and the articles of incorporation of GRENKELEASING AG. It worked with the Board of Directors on an ongoing basis, providing it with regular advice, and monitored the management of the Company's business. The strategic focus of the Group was pursued in close cooperation between the Board of Directors and the Supervisory Board. Based on reports from the Board of Directors and minutes from its meetings, the Supervisory Board was provided with detailed and comprehensive information on the financial situation, strategic development, status of business planning, current events and the personnel situation. The Supervisory Board was directly involved in all fundamental decisions relating to the Company.

It also received regular information on the Group's risk situation and on its risk management and its further development. Additional agenda items at the meetings of the Supervisory Board included the approval of the financial statements and the consolidated financial statements as of December 31, 2006, the presentation of new methods for sales management, the situation and development of foreign sales, the acquisition and performance of the franchisees Grenke Leasing Ltd., Guildford, UK, and GRENKELEASING Sp.z.o.o., Poznan, Poland, as well as the German Corporate Governance Code, as amended, and the declaration of compliance with the version dated June 12, 2006.

Where required by law and the articles of incorporation, the Supervisory Board voted on the reports and proposals for resolutions made by the Board of Directors following careful examination and consultation.

In accordance with the articles of incorporation, the Supervisory Board of GRENKELEASING AG has six members. The members of the Supervisory Board in fiscal year 2007 were:

Prof. Dr. Ernst-Moritz Lipp, Chairman

Mr. Gerhard E. Witt, Deputy Chairman

Mr. Dieter Münch

Dr. Oliver Nass

Mr. Erwin Staudt

Dr. Brigitte Sträter

All members of the Supervisory Board have voluntarily agreed to observe the corporate governance principles effective in the fiscal year.

In accordance with its rules of procedure and for the efficient discharge of its duties, the Supervisory Board has established two committees, the audit committee and the personnel committee (presidium committee). At the meetings of the Supervisory Board plenary session, the chairmen of the committees reported extensively on the work of the committees.

The audit committee has three members with specialist accounting knowledge. It deals primarily with external and internal accounting issues, the Company's risk management, auditor independence, the audit priorities, and the fee arrangements with the auditor. The audit committee also prepares the Supervisory Board's resolution on the approval of the financial statements and the consolidated financial statements. The audit committee met three times during fiscal year 2007.

The personnel committee has three members. It deals with the Supervisory Board's personnel decisions and is responsible for concluding, amending and terminating the contracts of employment with the members of the Board of Directors. The personnel committee met twice during fiscal year 2007. It discussed the appointment of Dr. Uwe Hack as Deputy Chairman of the Board of Directors and recommended his appointment to the Supervisory Board. At its meeting on April 30, 2007, the Supervisory Board appointed Dr. Hack as Deputy Chairman of the Board of Directors, replacing Mr. Konprecht.

The Supervisory Board met a total of four times in fiscal year 2007. All members of the Supervisory Board attended almost every meeting. Between its regular meetings, the Board of Directors provided the Supervisory Board with detailed information about significant events. As the Chairman of the Supervisory Board, I was personally in regular contact with the Chairman of the Board of Directors and the Deputy Chairman of the Board of Directors in addition to regular appointments and was kept informed of the major transactions and the current course of business.

The financial statements of GRENKELEASING AG as of December 31, 2007 prepared by the Board of Directors, the management report for the Company for fiscal year 2007, the consolidated financial statements as of December 31, 2007 and the group management report for fiscal year 2007 were submitted to the Supervisory Board for review at its meeting on January 28, 2008. The proposal on the appropriation of profits of GRENKELEASING AG made by the Board of Directors was submitted to the Supervisory Board.

The financial statements were audited by the audit firm elected for the fiscal year by the Annual General Meeting on May 8, 2007, Ernst & Young AG, Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft, Eschborn/Frankfurt am Main. The accounting policies used in preparing the separate financial statements of GRENKELEASING AG were in keeping with the provisions of German commercial law. The audit of these financial statements for the year ended December 31, 2007 was conducted pursuant to Sec. 317 HGB ["Handelsgesetzbuch": German Commercial Code] and in compliance with the generally accepted standards for the audit of financial statements set forth by the Institute of Public Auditors in Germany (IDW).

The consolidated financial statements and the group management report for the fiscal year from January 1 to December 31, 2007 were prepared in accordance with Sec. 315a (1) HGB and based on International Financial Reporting Standards (IFRSs) as adopted by the EU.

The audit of the consolidated financial statements was conducted pursuant to Sec. 317 HGB in compliance with the generally accepted standards for the audit of financial statements set forth by the Institute of Public Auditors in Germany (IDW AuS 200). An unqualified audit opinion was rendered on both the financial statements of GRENKELEAS-ING AG and the consolidated financial statements of the GRENKELEASING AG Group.

The aforementioned documents and proposal for the appropriation of profits made by the Board of Directors were distributed to us in due time by the latter. The Supervisory Board reviewed the financial statements presented to it by the Board of Directors and the auditor and discussed the results in its meeting on January 28, 2008.

The responsible auditor attended the audit committee's meeting to discuss the financial statements and explained the significant findings from the audit. The audit committee satisfied itself of the auditor's independence. The Supervisory Board reviewed the financial statements presented to it by the Board of Directors and the auditor and discussed the results in its meeting on January 28, 2008. The auditor attended the meeting and reported on the main audit findings.

Having duly conducted its own examination, the Supervisory Board raised no objections to the findings from the audit of the financial statements conducted by the auditor and thus approved and adopted the financial statements of GRENKELEASING AG and the consolidated financial statements of GRENKELEASING AG on January 28, 2008. The Supervisory Board concurs with the proposal for the appropriation of profits made by the Board of Directors.

At the meeting on January 28, 2008, the Supervisory Board also addressed the mandatory disclosures pursuant to Secs. 289 (4) and 315 (4) HGB and the report regarding these disclosures. Reference is made to the relevant explanations in the management report of GRENKELEASING AG and in the group management report. We reviewed these disclosures and explanations, which the Supervisory Board believes to be complete, and adopted them.

In the past fiscal year, the GRENKELEASING AG stock was unable to escape the crisis on the financial markets, despite the fact that our business performed as planned. In fact, the foundations of our business improved both in terms of quality and quantity. In terms of its structure, the leasing business is a growth industry in the European economy. Based on costs per contract and the cost-income ratio, GRENKELEASING has significant cost advantages on a European scale compared with institutional competitors such as banks. Foreign operations are expanding strongly, some of them at high, double-digit rates. The new business divisions Factoring and Auto Fleet Leasing have also developed positively. We therefore share the disappointment of our shareholders over the performance of our stock.

Despite the difficult refinancing conditions, the Company's refinancing is not at risk and has not become significantly more expensive. Due to our low-risk business model with a wide spread of minor individual risks and a highly professional risk management system which has a long-standing track record, we do not see any reason to change our assessment for the future.

The Supervisory Board would like to thank the members of the Board of Directors and all company employees. The Group's continued success would not have been possible without their personal commitment in the past year.

Baden-Baden, Germany, January 28, 2008

Prof. Dr. Ernst-Moritz Lipp

DATES 2008

01.02.2008	Publication of Annual Accounts for 2007 DVFA Analyst Conference / Balance Press Conference in Frankfurt am Main
28.04.2008	Publication of Financial Statements of Q1 2008
06.05.2008	Annual General Meeting in Baden-Baden
28.07.2008	Publication of Financial Statements of Q2 2008
27.10.2008	Publication of Financial Statements of Q3 2008 DVFA Analyst Conference in Frankfurt am Main

CONTACT

Renate Hauss Corporate Communications

GRENKELEASING AG Neuer Markt 2 76532 Baden-Baden

Tel.: +49 (0) 7221 – 5 00 72 04 Fax.: +49 (0) 7221 – 5 00 71 12

www.grenke.de www.weblease-europe.com www.asset-broker.de

E-Mail: investor@grenke.de

You may find the detailed glossary to this report on: www.grenke.de

The report is published in German and as an English translation. In the event of any conflict or inconsistency between the English and the German versions, the German original shall prevail.

GRENKELEASING AG Neuer Markt 2 D - 76532 Baden-Baden

Tel.: +49 (0) 7221 5007-204 Fax: +49 (0) 7221 5007-112

www.grenke.de www.weblease-europe.com www.asset-broker.com

E-Mail: investor@grenkeleasing.com