Haemato AG — Audit Report / Information 2008

Dec 2, 2009

Real Estate Fascination

Overview of our Business Results

Business Development from 2006 – 2008 (WINDSOR AG, acc. to German Commercial Code; k€)

	k€	k€	k€
Balance Sheet Total	5,141	56,434	62,037
Equity	17,109	23,750	25,849
Sales Revenues	22,492	41,386	13,029
EBIT	6,326	5,590	2,440
Net Income of Year	5,004	5,055	2,099
Balance Sheet Profit	5,675	12,264	14,332

Business development from 2006 to 2008

(WINDSOR Group consolidated business results acc. to IFRS; k€)

	k€	k€	k€
Total Assets	68,890	48,461	47,470
Equity	19,100	29,841	29,364
Sales Revenues	28,487	43,072	13,793
EBIT	13,103	2,976	3,899
Net Income of Year	8,069	3,252	4,010
Balance Sheet Profit	8,898	13,276	17,226

Assets 2006 – 2008 (group results acc. to IFRS; k€)

	31 Dec 2006 k€	31 Dec 2007 k€	31 Dec 2008 k€
Assets
Short-term assets	46,245	29,879	25,354
Long-term assets	22,645	18,582	22,116
Total assets	68,890	48,461	74,470
Liabilities
Current liabilities	9,943	6,885	2,022
Non-current liabilities	39,846	11,735	16,084
Equity	19,101	29,841	29,364
Total liabilities	68,890	48,461	47,470

Significant Facts of WINDSOR AG in 2008

Maximum of balance sheet profit and secondbest IFRS result

No devaluation to real estate assets necessary

"A-" rating awarded by Creditreform AG

Going public of CR Capital Real Estate AG

Contents

Cover

Overview of our Business Results Significant Facts of WINDSOR AG in 2008

	Page
Letter to our Shareholders	2
Report of the Supervisory Board	4
Group Management Report of the Fiscal Year 2008	9
1. Economic Environment 2. Business Segments of WINDSOR AG 3. Business Development 4. The WINDSOR Share 5. Significant Business Transactions after 31 December 2008 until 31 March 2009 6. Dividend 7. Report on the Chances and Risks including	10 29 31 37 38 38
Reporting on the Financial Tools acc. to § 315 par 2 No. 2 CC (HGB) 8. Outlook	38 44
Conclusions	48
Consolidated Financial Statements Consolidated Income Statement for the Period from	51
1 January to 31 December 2008 (IFRS-based accounting) Consolidated Balance Sheet as of 31 December 2008 (IFRS-based accounting) Consolidated Statement of Changes in Shareholder's Equity	52 54 56
Consolidated Statement of Cash Flows for the Period from 1 January to 31 December 2008 Notes for the Fiscal Year	58
from 1 January to 31 December 2008 Development of the Group's Capital Investment Auditors' Certificate	60 80 82
Miscellaneous Information WINDSOR Share / WINDSOR Participation Certificate	84

Imprint/Contact

Dear Shareholders

WINDSOR AG has finished the previous fiscal year, once again, successfully in spite of internal turbulences and a most difficult market environment. Our corporate strategic target, i.e. ensuring further internal growth of the company, has been achieved despite all obstacles. This fact is also reflected by the corporate parameters of our Group: The income of the year rose by € 4 million on the previous year. The equity ratio of 62% corresponded to that of the year 2007 and is rated as above average especially in terms of sectoral comparison. Creditrefom AG, one of the most distinguished independent rating agencies in Europe, has recognized the company's large equity base as well as its high degree of liquidity as a guarantee of stability and financial flexibility of our company and has rated it "-A". Only few companies in our business line are in a position to boast such a top result, and we are proud of it. We consider our cooperation in CR Capital Real Estate AG's going public a great success which fact has constituted an essential value driver for us in the previous fiscal year. Since spring 2009, CR Capital Real Estate AG has been recognized as a pre-REIT. We use our repeated success, as WINDSOR AG, in the participation business as an occasion to contemplate on accelerating further the development in this business segment.

In the wake of the global financial crisis, the German real estate market has increasingly experienced its negative repercussions since late last year, and has since then been volatile. Nevertheless, this market continues to offer good chances also for companies like WINDSOR AG that feature financial flexibility and sufficient substance. As a result of the population influx into Berlin, an increase in the number of households and a permanent shortage housing space offered in 2008, rental prices have risen. Based on our existing properties, we were able to profit from the rental price rise. In this context, we have benefited from the fact that the proportion of vacant space was lower than 3% and, thus, far below average in Berlin. The purchase prices of commercial properties and apartment buildings have further slumped, and we plan to purchase new properties at favourable prices in 2009. At present we focus our attention especially on the city of Leipzig. At a big auction on 26 June 2009 e.g. we scored a great success: We purchased the property "Kleine Fleischergasse 8" at a very low price. This building is situated in the heart of the historical Leipzig City, not far away from "Altes Rathaus" (Old Townhall), "Thomaskirche" and "Maedlerpassage".

Looking back at the year 2008, however, Windsor AG had also to overcome problems; i.e. we have permanently faced actions in rescission due to which valuable financial resources are squandered. In particular, however, we were faced with the challenges of the insecure and shaky financial and real estate market.

Report of the Supervisory Board

1. Supervision of Management and Cooperation with the Management Board

During the period under review, the Supervisory Board has fulfilled its supervision and advisory tasks pursuant to law and the company's articles of association. We have supervised and simultaneously given advice to the Management Board concerning the management of business operations. With regards to decisions of material significance as well as all business transactions requiring our approval, the Supervisory Board was directly involved. There were no reasons to complain about the activities of the Management Board. Owing to the financial crisis since the second half-year of 2008 and the aggravated economic environment as well as the increasingly critical market factors, the Supervisory Board has especially closely cooperated with the Management Board.

Dr. Michael Feldhahn Supervisory Board Chairman

In accordance with § 90 par 1 and par 2 of the Stock Corporation Act (AktG), the Management Board reported to us at regular intervals orally, by telephone or in writing, especially about the economic situation of the company, major business transactions, corporate planning including business policy issues, risk management, cost and profit development as well as the liquidity and further investment activities. Thanks to this, we were able to satisfy ourselves of the proper regularity of the Management's operations. The creation of subject-related commissions within the Supervisory Board was considered unnecessary. We voted after the profoundly examining and discussing the reports and proposed resolutions of the Management Board, if our consent was needed due to legal and bye-law requirements.

2. Meetings, discussions and Resolutions

In the year under report, all in all, 14 Supervisory Board meetings have taken place, i.e. 7 meetings within each half-year, respectively. At all meetings, the Supervisory Board members constituted a quorum. During our meetings, we profoundly dealt with the strategic orientation of the company, pertinent planning and significant operative measures.

The most essential item on the agenda of almost every meeting, especially in view of the economic crisis, constituted the liquidity and general financial situation of the company, e.g. raising of external funds or the financial strengthening of affiliated and investment companies, in particular, the increase in capital of CR Capital Real Estate AG. We also discussed the future chances of REITs as well as other business models.

At its meetings, the Supervisory Board also dealt with the legal actions against various resolutions of general meetings and agreed upon this issue with the Management Board and all legal advisers.

In November 2008, we decided to recall Mr. Helmreich. For personal reasons, he had resigned from his post as chief financial officer of WINDSOR AG. We have accepted Mr. Helmreich's request to prematurely withdraw from his executive function and thank him for his work, especially his commitment to setting up the CR Capital Real Estate AG participation company.

3. Annual Financial Statements

The annual account of WINDSOR AG presented by the Management Board and the consolidated financial statements of the WINDSOR group for the fiscal year ending on 31 December 2008 as well as the management commentary and the group management report have all been audited based on the auditors' account and given an unqualified audit certificate by the auditors Deloitte & Touche GmbH, Wirtschaftsprüfungsgesellschaft, Berlin, as authorized by the general meeting.

The annual account, the consolidated financial statements, the Director's report, the proposal for the utilisation of the balance sheet profit and the auditor's accounts were sent to each member of the Supervisory Board in due time prior to the accounts review meeting taking place on 18 June 2009.

We have affirmatively taken note of the audit result and, after our own review of the annual account, the consolidated financial statements, the management commentary, consolidated management report, the business report and the proposal for the application of the balance sheet profit, we do not have any objections to them. We have agreed to the Management Board's proposal concerning the application of the balance sheet profit, i.e. to carry the profit over onto new account. We approve of the Management Board's annual account and the consolidated financial statements as of 31 December 2008 that are here with established.

Anton Pfeffer Supervisory Board member

Prof. Dr. Dr. Sabine Meck, Supervisory Board member

Group Management Report

Photograph on the left: New headquarters of WINDSOR AG in Berlin-Grunewald

1. Economic Environment

1.1 The Cyclical Development in Germany

For two years now, negative headlines and prognoses have dominated the news in the mass media of the financial and real estate markets. One could even claim that a new era of global economy has started as a consequence of the subprime crisis: before and after subprime. Since late 2008, negative headlines have appeared endlessly in the mass media, once again, and much seemed to suggest that, owing to the repercussions of the global economic crisis, the recession had reached Germany, too, as anticipated by experts. The mood among the German population has mainly been marked by anxiety and loss of confidence ever since.

In late 2008, all European states experienced a drastic slump of their national economies. The gross domestic product of the European Union, by and large, e.g. grew by merely 0.9%, with the positive growth in the first half of the year. According to data published by the Federal Statistical Office, Germany generally achieved an actual economic growth of 1.3%. Due to this, the growth of the gross domestic product has almost been halved within one year; in 2007 the growth of the German economy had still totalled 2.5%. Consequently, the economic growth in Germany was the result of the first half-year, because the situation had dramatically deteriorated at the end of the year. In the fourth quarter of 2008, the German economy dwindled drastically to such a degree unparalleled in the past 20 years of its history.

Not even the export, as the driving force of the German economy, could prevent the crash, although exports had increased by a total of 2.8% in 2008. In this context, the sales volume of € 1000 billion was nearly missed. This drastic reduction since the end of 2008 was essentially caused by the recession in other countries that are important German trade partners such as the USA and Great Britain. In early 2009 Germany, as the multiple-time export world champion, got even under more pressure. In January, exports plunged by 20% on the previous month, but showed a further surplus of € 8.5 billion. Since March 2009, the German economy seems to see the light at the end of the tunnel, because the decline in exports could be reduced. Hopes are increasing that the bottom of the recession in this essential economic segment might have been reached already.

Common era before and after subprime

Export world champion Germany under pressure

In 2008, the consumer behaviour of German citizens was not yet affected by the economic problems. The reason was that the employment ratio in 2008 was at a relatively high level with more than 40 million people employed. At the beginning of 2009, consumption was additionally stimulated by state promotion measures.

1.2 The German Real Estate Market in 2008

The German real estate market was also marked by the crisis in the second quarter 2008. The pessimistic attitudes and prognoses of market competitors were increasingly aggravated by the anxiety as to the implications of a possible recession in Germany. As a result, real estate prices plummeted steadily on most real estate markets in many German cities during the second half of the year 2008.

In the commercial properties segment, the situation has clearly worsened since 2008. The investment volume in the European commercial real estate markets dropped to € 11.5 billion in the first quarter 2009. Thus, the sales volume diminished well below that of the fourth quarter in 2008, where a transaction volume of € 20.6 billion was accomplished (CBRE). According to the real estate consulting company, in the first quarter of 2009 the sales volume in Germany dropped by 56% on the previous quarter and, thus, totalled 23% of the level of the corresponding period in the previous year. Above all, the restrictive extension of credits as well as the weak general economic environment considerably impede the dynamics investment.

Collapse of

commercial properties prices

Unchanged consumer behaviour in 2008 According to the Atisreal Office Market Report (2009), the office space turnover at the nine most important German office sites Berlin, Düsseldorf, Essen, Frankfurt/ Main, Hamburg, Köln (Cologne), Leipzig, Munich and Stuttgart amounted to approx. 3.5 million m² in 2008. As stated, this corresponds to a reduction of 5.2% on 2007 and is still a satisfactory result in view of the worsening financial crisis in the year 2008. Anyway, record sales results were recorded in some cases during the first half-year of 2008. Only in the second half of the year, more collapses in the real estate markets were reported.

While the number of building permits plunged to a new historical low of 174,600 residential units in 2008, most experts of the real estate segment anticipate an actual demand for new buildings of 270,000 to 350,000 flats per year in the period until the year 2025. This means about 7,700 flats (4.2%) fewer than in the previous year's period were permitted, and the lowest level was recorded since the reunification.

In 2008, the refurbishment of old buildings turned out to be excessively expensive and not very profitable because of the comparatively low rent level. The lacking offer of new residential buildings and rehabilitations was reflected, above all, in the rentals. It was stated in a study of "F+B Forschung und Beratung für Wohnen, Immobilien und Umwelt" that in 2008 the price level in some German cities like Munich or Hamburg exceeded the German average by 29% or 26%.

In 2008, residential portfolio properties with approx. 150,000 dwelling units and a volume of approx. € 6.1 billion were traded. This means a decline by ca. 44% of residential property units, and regarding the transaction volume even approx. 57% due to the lower prices (Cushman & Wakefield). We believe that the housing market had come nearly to a standstill in the second half of the year 2008 until spring 2009.

Office space sales are still satisfactory.

Record low of flat permits

Almost complete stagnation in the housing market

1.3 Our Property Sites of Berlin, Potsdam and Leipzig

1.3.1 The Berlin Metropolis

Economic Development

According to a new study of the Mercer consulting company, Berlin belonged to the twenty most favoured cities in the world in spring 2008. On a global scale, Leipzig also took the still respectable position 89. In terms of infrastructure evaluation, Berlin ranked among the 30 best metropolises in terms of infrastructure, provision of services and utilities. Judging by these latest results, Germany's metropolis has not lost its attractiveness, although the mood here is increasingly gloomy, too, in view of the global economic crisis.

The reason of the bad mood is that Berlin was harder hit by the global crisis and the globally lacking demand last year. Because Berlin's economy, in spite of the generally dampened economic expectations, has been as optimistic as seldom before, an actual economic growth of 1.6% could be achieved in the whole year 2008 owing to the strong economic growth in the first half of the year, which was even above the federal average value of 1.3%. There was good news also till January 2009 as to the labour market: the number of unemployed dropped by 5.4% on the previous year and the number of unemployed in Berlin was pitted against 32,000 recorded vacancies in late January 2009 (Berliner Morgenpost). However, during the first quarter of 2009, the increase of employment was steadily slowing down, and the number of persons working short hours increased. Since there is still a great demand for skilled workers and specialists in Berlin, no higher number of dismissals is to be expected, and the labour market could settle down at a stable level. Prognoses are difficult to make because nobody can exactly define the way in which the economy will develop in the near future. The current early indicators, however, show that the economic situation of Berlin could clearly get worse in 2009. As the European industrial states are very closely interlinked because of the globalisation, Berlin's economy cannot evade this maelstrom, either.

Berlin's economic growth above federal average

For the year 2009, an increase in the overall economic performance cannot be anticipated, experts rather assume that the gross domestic product will possibly slump by 2%. The more negative mood is also indicated by the Economic Report 2009 of the chambers of industry and commerce of Berlin and Brandenburg. However, as a positive fact, it must be stressed that in 2008 Berlin's expenditures were below the federal average and that the Berlin budget of 2008 closed with a positive surplus result of nearly € 1 billion.

Now as before, the area of Greater Berlin and Brandenburg belongs to the most promising German growth regions with a high development potential. With its more than 4 million inhabitants and a gross domestic product exceeding € 120 billion, the Berlin conurbation is considered one of the most dynamic regions in Germany which, last but not least, is due to the steady influx of inhabitants.

1.3.2 Berlin's Real Estate Market

Berlin's Housing Market

The above-mentioned increases in the number of inhabitants are clearly reflected in the residential properties market. In 2008, rent escalations resulted from the population immigration, an increasing number of households as well as the further limited offer of living space. During the year under report, residential permits for just some 6,300 flats were issued, although approx. 20,000 flats per year ought to be created according to the estimations of the Pestel Institute. About 3,800 flats were built in 2008. In the prime market segment of Berlin, the supply-driven rents rose by 5.8% on an average in the year 2008, with the highest rent escalations seen in Charlottenburg-Wilmersdorf with about 9 % and in Berlin-Mitte 8.2%. The average rent escalations in Berlin thus totalled ca. 2% in 2008. The average rent of new leasing offers amounted to about € 6.35/m² in the year 2008. In this context, Berlin-Mitte is becoming ever more attractive and important. Today the average rental in Berlin is equal to approx. € 4.83/m².

Berlin-Brandenburg a hopeful growth region

Rental escalations in Berlin

WINDSOR AG has further profited from this rent increase based on its portfolio properties, because our vacancy ratio was lower than 3%. In contrast, Berlin's housing vacancy ratio was about 5.6%.

WINDSOR AG profits from rent increase.

Overview of housing vacancy in the Berlin districts (Sources: Senate administration of urban development; Berlin Statistical Office, GWS and WINDSOR AG)

The trend of turnover volume in the various Berlin sub markets in the sphere of real estate proceeded very differently. As far as undeveloped properties are concerned, the number of transactions increased, whereas the monetary transaction volume decreased. The market of freehold flats declined slightly unlike portfolio transactions with a considerable decline. As early as in 2008, the turnover concerning apartment houses dwindled heavily, and there was hardly any turnover as to such properties in the Berlin metropolis.

The purchase prices of apartment houses dropped up to 20% also in Berlin since the second quarter of 2008 in the respective districts. At the balance sheet date this management report, it could not yet been anticipated when the rock bottom of this trend would be hit.

WINDSOR AG keeps a close eye on the Berlin residential properties market and stayed reserved in 2008 and the first quarter of 2009. However, we assume that since the second halfyear of 2009 the falling price level must be made use of to purchase more properties again; provided that the market situation turns out to be favourable enough and marginal conditions will improve, WINDSOR AG would take into account to re-enter the refurbishment business section.

The Berlin Office Market

According to Atisreal, the Berlin office market remained largely stable and reached a solid result in 2008. Despite missing previous year's result by about 6%, it was nearly 7% over the average of the past ten years. There were no more package sales in 2008. The interest in office spaces mainly focussed on the inner city. In general, office rents have remained quite stable in Berlin, with a top rental rate of € 22/m² at Potsdamer Platz and in the area around Gendarmenmarkt (Atisreal).

1.3.3 The Leipzig Location

In spite of the crisis, experts assume that Leipzig offers further good conditions for real estate investments. This fact has not been changed even by the "turbulent" year 2008 as mentioned in the current real estate market report for the year 2008. They state, however, that the boom Leipzig experienced thanks to package sales to institutional investors during the previous years 2006 and 2007 has come to an end for the time being and the stable level of 2005/2006 has been reached again. € 1.1 billion worth of properties were sold in 2008. The Leipzig inhabitants themselves contributed quite a lot by building their houses at the suburbs in the steadily expanding settlements. This goes to show that properties in attractive locations are considered a safe means of protection against inflation now as before. Also, the number of people buying undeveloped properties has also been stable, with the average number of properties priced at € 134/m² being situated in the city and those priced at € 95/m² in the suburbs. The most important market segment in Leipzig, however, are the properties in a style dating back to the period of promoterism, but here, too, apartment buildings in favoured urban quarters are gradually running out.

Keeping an eye on residential properties

Stable Berlin office market

Leipzig: A lucrative place for investments

The market of private homes is characterised by a constant number of purchases of flats in refurbished old buildings, whereas the number of sales of private flats in new buildings are of minor importance now as before. The average purchase price of flats in refurbished old buildings slightly increased also in 2007 and 2008 (Monitoring Report on Leipzig 2008). The average sales price is equal to about € 1,500/m², with most of these flats located in historically protected buildings, predominantly in the favoured central city quarters. In some cases, e.g. prices up to € 3,000 may be achieved in the Musikerviertel (musicians quarter) (Real Estate Exhibition – Leipzig 2009).

Whilst net cold rents of newly-built flats and flats built after 1949 (of average housing value) remained at a relatively stable level, the rents of old flats (built prior to 1949) were slightly on the upgrade. For instance, the maximum rents of excellent flats (cold) in prime locations in Leipzig amount to € 8 per square metre of living space monthly. Rents ranging between 4-6 €/m² have to be paid for old building flats in Leipzig (Monitoring Report on Leipzig 2008).

It is expected that the volume of newly constructed buildings will remain unchanged, whereas investments in the housing stock will increase until 2010. Experts assume a higher demand for smaller flats. Simultaneously, an increasing demand for prime flats offers in the districts near to the City is anticipated. For instance, the number of building permits rose slightly again in the year 2008, where existing flats account for over 50% (Leipzig Monitoring Report 2008).

The number of inhabitants in Leipzig has risen for some years now because of a population influx, on one hand, but also owing to communal incorporations, on the other, and it continues to develop more favourably than in other eastern German cities. The number of inhabitants increased to 510,512 till the end of 2007, i.e. 3,934 persons or 0.8% more on the year 2006. This positive trend also continued in 2008 and resulted in a population number of 511,676 (state: 30 June 2008). The whole housing market in Leipzig has lately experienced a minor rise and, thus, stabilizing tendencies after many years. At the same time, the number of private households also remarkably increased during the past few years. The percentage of increase was clearly higher than that of the population number thanks to the long-term trend towards smaller households (Leipzig Monitoring Report 2008).

Flats in refurbished old building are coveted.

Leipzig is a classical buyer and tenant market.

Leipzig constitutes a classical buyer and tenant market and especially attracts singles and young families because of the ambience of a big city offering a favourable price level.

Although the level of housing vacancy is clearly lower as compared to the highest level in the year 2000, it is still high. According to experts, the trend of the Leipzig housing market will see a decrease of the excessive supply of flats in the coming years (Leipzig Monitoring Report 2008).

The number of employees with jobs subject to social insurance contribution has risen again in the period from 2005 to 2008. As compared to 2005, the year with the highest unemployment rate during the last 10 years, the number of unemployed in Leipzig has markedly declined. After 21.3% in 2005, it plummeted to about 16% till the end of 2008 and indicates the continuation of this positive development. The decline in the number of unemployed as well as further growing number of population will cause the demand for flats to rise and, thus, also prices of residential properties in Leipzig (Leipzig Monitoring Report 2008).

Leipzig has established itself as an east German economic metropolis and also offers future potential. The WINDSOR group, therefore, considers the market and perspectives for the further development in Leipzig, especially the housing property market, further interesting and plans to boost its activities there. Taking our purchase profile into account, the purchase department of the WINDSOR group is constantly searching for suitable properties.

Decreasing unemployment rate

1.3.4 The Potsdam Location

WINDSOR AG will further step up the expansion of its business activities in the Potsdam real estate market also in the future. We believe further that this is the proper location to select, which fact will be substantiated by us by means of further acquisitions. Despite the crisis, the economic sentiment indicator has still been positive in many areas in Potsdam in 2008 and early 2009.

In the media, it is described as "Brandenburg's gem", and, based on numerous relevant parameters, Potsdam ranks very high among the capitals of the German lands. In 2008, e.g. most children were born in Brandenburg's capital, i.e. Potsdam features the greatest natural growth of population among all other capitals. According to prognoses, the population number could increase from 150,000 to approx. 168,000 until the year 2015, and the households correspondingly from 80,000 to 107,000. The population's average age in Potsdam is relatively low: in 2008, it was just over 40 years.

A further asset of this booming city is the low rate of unemployment as compared to all East Germany being 8.4% in November 2008 (by comparison: the average unemployment rate in the FGR was 8.7% of all unemployed salaried civilians). The driving force of the still positive economic development, in spite of the crisis, is tourism among other branches: Meanwhile, Potsdam takes a leading position regarding the number of clinical in-house bed occupancy on the overall scale in the FRG. Likewise, the branches of biotechnology, IT and communications are still booming. The Potsdam Chamber of Handicrafts also reported in spring 2009 that the mood of satisfaction among its member is widespread.

This is the reason why it is not surprising that Potsdam is in great demand as a residential place. This fact is reflected, for instance, by the prices of cold rent which, according to the statistics of Maklerverband IVD (Brokers' Association IVD), have increased by up to 11%. On the overall federal scale, this was the fastest rise of rental rates.

Potsdam: the proper site selection

In spite of crisis Booming tendency Experts assume that the demand in Potsdam will further increase due to its growth of population. According to estimates of the broker company Engels & Völkers, Potsdam will now as before rank high in investors' attractiveness thanks to its promising yield and investment opportunities, despite the crisis and temporarily stagnating turnover.

In conclusion, it can be stated that, from investors' viewpoint, it will be difficult to obtain interesting offers in Potsdam. The same applies to private persons looking for inexpensive dwellings.

Favoured by investors

Existing/Reference Properties

Type of utilization: Offices / flats Space (m²): 789 Year of construction: 1912

Type of utilization: Flats / shops Space (m²): 403 Year of construction: ca. 1740

Type of utilization: Offices / flats Space (m²): 2,195

Type of utilization: Offices Space (m²): 2,844 Year of construction: 1922-1924

Type of utilization: Offices / flats Space (m²): 1,666 Year of construction: 1871-1873

Page 22: Leipzig, Daumierstraße

Page 23: Potsdam, Mittelstraße

Property at top, left Leipzig, Kaethe-Kollwitz-Straße Year of construction: 1998

Property at top, centre Berlin Tegel, Borsig tower

Property at bottom, left Potsdam, Puschkinallee

Property at top, right	Berlin-Reinickendorf,
	Seeschloß Hermsdorf
Type of utilization:	Flats
Space (m²):	1,304
Year of construction:	1880

Type of utilization: Flats Space (m²): 3,338 Year of construction: 1910

Property at centre, right Berlin-Prenzlauer Berg Dunckerstraße

Property at bottom, right Berlin-Prenzlauer Berg

Type of utilization: Flats / shops Space (m²): 2,208 Year of construction: 1900

Schliemannstraße

Type of utilization: Offices / flats Space (m²): 5,300 Year of construction: 1606

Page 26: Leipzig, Kleine Fleischergasse

Page 27: Impressions of Kleine Fleischergasse

Page 28: Leipzig, Idastraße Type of utilization: Offices / flats Space (m²): 695

2 Business Segments of WINDSOR AG

The financial environment and the market conditions changed by the severe economic crisis and required also adjustments to the strategic orientation of our company and the weighting of the business fields. For these purposes, we mainly focussed on the following targets:

Greater stability by strengthening the equity of our group as well as by achieving very good yields while taking as little risk as possible.

One of our main pillars in the business segments was, now as before in 1008, real estate investment comprising the following areas:

• The brokerage business has been carried on by us at a limited level also in 2008 according to our principle: Buy in critical times and sell in boom times. Because of the market situation with furthermore higher purchase prices and with prices starting to fall only in the second half of the year 2008, there were fewer operations in this business segment.
• The business comprising existing properties or asset management. These include the purchase of properties to be held for a long term and the management of these properties. The asset management or property management of own real estate is aimed at generating value increases as well as optimise current revenues. This includes active rent management comprising the optimisation of rent revenues, reduction of vacancies as well as yield-oriented management of operating costs. In the year 2008, the WINDSOR group has had properties in its portfolio valued at k€ 18,890 at its locations in Berlin, Potsdam and Leipzig. In the year 2008, the WINDSOR Group purchased two more properties: one in Potsdam in the attractive Mittelstraße in the Dutch quarter, and one in Leipzig-Gohlis at Daumier street.
• Development and refurbishment business. This business segment includes the purchase, basic refurbishment, development and subsequent sale of the property. Properties are also refurbished by subcontracting third-party orders. There were no new activities in this business segment. No further properties to be refurbished were bought, because the refurbishment business is not very lucrative, and the profit margins are small. However, WINDSOR AG is searching for new properties, now as before, that will promise good yields.

The essential value driver of our activities was in 2008, too, the participation business. During the year under report, WINDSOR AG was essentially involved in placing CR Capital Real Estate AG in the over-the-counter (OTC) market of the Frankfurt stock exchange. CR Capital Real Estate AG buys and lets prime properties at exclusive locations in the Berlin conurbation, such as in Berlin-Grunewald. CR Capital Real Estate AG will receive the pre-REIT status in the first quarter on 2009. For the year 2010, it is planned to obtain the REIT status. The majority of shares in this company could be placed at the stock exchange by late 2008.

The shares sold in 2007 to WINDSOR Real Estate AG were returned in the year 2008.

One further business segment constitutes the issuance of private equity or mezzanine capital. The "Gesundheitszentrum" (health centre) project in Berlin-Kreuzberg was successfully completed, and the invested capital paid back plus interest. We are further interested in supporting new private equity projects on a reasonable scale as soon as market conditions have stabilized again. At present we also examine the conditions for extending mezzanine capital.

Value driver: participation business

Business Segments of the WINDSOR Group

Business trend from 2006 to 2008 (WINDSOR AG data acc. to HGB (k€))

	2006	2007	2008
Balance sheet total	65,141	56,434	62,037
Equity	17,109	23,750	25,849
Revenues	22,492	41,386	13,029
EBIT	6,326	5,590	2,440
Net income of the year	5,004	5,055	2,099
Balance sheet profit	5,675	12,264	14,332

Business trend from 2006 to 2008 (WINDSOR group data acc. to IFRS (k€))

	2006	2007	2008
Balance sheet total	68,890	48,461	47,470
Equity	19,100	29,841	29,364
Revenues	28,487	43,072	13,793
EBIT	13,103	2,976	3,899
Net income of the year	8,069	3,252	4,010
Balance sheet profit	8,898	13,276	17,226

IFRS data	31 Dec2006	31 Dec2007	31 Dec2008
Assets
Short-term assets	46,245	29,879	25,354
Long-term assets	22,645	18,582	22,116
Total assets	68,890	48,461	47,470
Liabilities
Non-current liabilities	9,943	6,885	2,022
Current liabilities	39,846	11,735	16,084
Equity	19,101	29,841	29,364
Total liabilities	68,890	48,461	47,470

Assets and Liabilities 2006-2008 (consolidated account acc. to IFRS, k€)

In spite of the difficult market environment and the financial crisis, the WINDSOR group, all in all, looks back at a good and successful fiscal year 2008 which was reflected in a positive consolidated annual net income of k€ 4,010 as compared with the previous year (k€ 3,252 in the previous year) as well as an unchanged equity ratio (consolidated) of 62%. The balance sheet total of k€ 67,470 has slightly diminished (k€ 48,461 in previous year).

Successful fiscal year despite financial and economic crisis

The positive consolidated result in 2008 is in line with the results of the previous years and results mainly from the going public of CR Capital Real Estate AG and the sale of share.

Earnings Situation

The composition of revenues according to segments is as follows: Sale of properties (k€ 1,911) as well as earnings from the sale of investments (k€ 10,346). Furthermore, earning have been received from completed construction services (k€ 26) and service agreements (k€ 1,480). Other earnings amount to k€ 7. Owing to the fact that fewer sales were effected in the real estate area during the past fiscal year, no additions took place. However, nearly no negative value corrections were necessary that could have had detrimentally affected the IFRS result.

The turnover decline results mostly from the earnings of property sales lower by k€ 26,255; the gross income (turnover earnings and portfolio changes minus material expenditure) is equal to k€ 5,932 and thus higher than in the previous year (k€ 5,423). In the previous year, the gross income was greatly dependent on the income gained from sales of shares to affiliated companies that amounted to k€ 5,377 in the year under report and k€ 4,822 in the previous year. The liquidity becoming available was used for purchasing investment shares as well as for the buyback of capital represented by participation certificates.

In the first quarter of 2009, WINDSOR AG was rated "A-" by Creditreform AG, which means an above-average result in terms of the overall economic comparison as well as the comparison between branches.

Above-average rating awarded by Creditreform AG

Assets and Liabilities

As of the balance sheet date, WINDSOR AG holds its own participation certificates with a total nominal value of € 17.2 million (172,053 profit-sharing rights x 100 EUR). Like in the year 2007, we have also bought back participation certificates in 2008. The participation certificates are traded over the counter at the Frankfurt stock exchange under ISIN DE000A0EQVT2. All in all, participation certificates equal to € 23.6 million were emitted. The value of the participation certificates outstanding amounted to €_6.407 million (€ 8.639 in the previous year). After the end of the successful fiscal year 2007, we have paid a dividend of 8% to the holders of the participation certificates, for the third time on end, on 22 August 2008 depending on the corresponding participation certificate capital.

The reduction of the participation certificate capital was carried out, on one hand, that in the context of the corporate tax reform from the year 2008 on interest expenditures can be deducted from taxable income only to a limited degree or, in case the exemption limit is exceeded, they cannot be deducted at all. On the other hand, the company endeavours to reduce the expensive participation certificate capital and to raise credits at historically low interest rates. Thirdly, there were only few properties at disposal at the real estate market that corresponded to our requirements regarding quality and possible dividends and, therefore, property trading had to be reduced in 2008.

High capital ratio

The success of the WINDSOR group is advocated by the high capital ratio of 62% (62% in the previous year) showing the material assets of the company. According to IFRS, the company's capital decreased slightly from € 29.8 million in 2007 to € 29.4 million in 2008. In the individual accounts based on the Commercial Code, the parent company could report a capital of € 25.8 million.

Essentially short-term assets as at the reporting date are, in addition to the liquid funds of k€ 11,033 (previous year: k€ 10,783), the purchase price claim regarding the sale of stakes. The loan of k€ 2,800 extended last year in the private equity segment was paid back during the period under review.

Major long-term assets held as financial investments are properties in Berlin, Potsdam and Leipzig with book values of k€ 18,890 (previous year: k€ 18,090).

Financial Situation

WINDSOR AG's financing is mainly based on equity (€ 29.4 million) and participation certificate capital (€ 6.4 million). As of 31 December 2008, the group owned liquid funds equal to € 11.0 million. High liquidity

	€ million	€ million
Cash flow from current operations	0.1	21.3
Cash flow from investments	-2.9	6.9
Cash flow from funding activities	3.0	28.5
Total	0.2	-0.3

3.2 Report on the Basic Features of WINDSOR AG's Remuneration System for its Management Board and Supervisory Board according to § 315 par 2 No. 4 HGB (CC)

The members of the Management Board of WINDSOR AG get each a fixed remuneration at a comparable amount as well as a success-oriented bonus (fee) whose amount is approved by the Supervisory Board depending on the respective degrees of target achievement.

According to WINDSOR AG's memorandum and articles of association, the members of the Supervisory Board get indemnification according to each full year of their membership. Furthermore, the members of the Supervisory Board are compensated for all expenses and are refunded the amount of possible VAT on their indemnification and expenses.

3.3 Real Estate Investment

Owing to the complicated market environment in 2008, we had assumed a wait-and-see attitude in our real estate investment segment; in all, one residential building as well as four flats of the Seeschloss Hermsdorf were sold. Two further properties were purchased by us: one attractive commercial and residential property in Potsdam, in the historical Dutch Quarter of the city, as well as one residential building in Leipzig-Gohlis.

3.4 Extension of Private Equity and Mezzanine Capital

The "Gesundheitszentrum" project in Berlin-Kreuzberg was successfully completed in 2008, and the applied capital has been repaid, plus pertinent interest. We are further interested in supporting new private equity projects in an adequate way as soon as market conditions have steadied. For the time being, we are probing the conditions for spending mezzanine capital.

3.5 WINDSOR REIT

In 2008, WINDSOR AG held shares in two companies, one of which already owns the pre-REIT status and the other one is to get this status in 2009. In the year under report, WINDSOR AG essentially participated in placing the CR Capital Real Estate AG's shares in over-the-counter-market at the Frankfurt stock exchange.

Participation in successfully going public

3.6 Dependent Companies Report

Thanks to the no longer existing dependency relations, no more affiliated companies report needed to be drawn up.

4 The WINDSOR Share

As seen from the stock exchange perspective, the year 2008 can be referred to as a year of extremes: The turmoil in the financial and capital markets led to a deep-rooted trust crisis that was reflected in the markets trends of all investment products. Indices like Dow Jones, DAX, ATX but also real estate indices such as GPR 2500 Global, EPRA/NAREIT Europe Index closed the year 2008 with historically heavy stock price losses. By the end of 2008, the Dow Jones Index dropped by 33.8% which was the biggest annual loss since 1937. The German key index DAX dropped by 40.5%, and European real estate titles suffered even bigger losses: The EPRA/NAREIT Europe Index finished the year 2008 with a mark down of 50.9%. The value of the German real estate shares went down by almost 50%; with regards to performance, the WINDSOR share value takes an average position among all German real estate shares.

The WINDSOR share could thus not evade this maelstrom. Nevertheless, following a clear low in the market in early 2009, our share is now showing a steady upward trend and, regarding its performance acc. to the Real Estate Magazine, takes position 2 among the German real estate shares.

Share price: WINDSOR AG O.N. (XETRA)

March May July Sep Nov Jan March 2009

Financial crisis a burden for Windsor share

Stabilisation of market value

5 Significant Business Transactions after 31 December 2008 until 31 March 2009

There have not been any essential transactions after 31 December 2008.

6 Dividend

The Management Board of WINDSOR AG, in agreement with the Supervisory Board, has proposed to carry forward the net income for the year and not to distribute dividend in the fiscal year 2008, because – in view of the continuous economic crisis which is the hardest in Germany since World War II – the further economic development of the company cannot be anticipated at present. WINDSOR AG is going to use the freely available liquidity for investments in the future such as the purchase of new properties and enhanced expansion in the individual business segments of our group.

7 Report on Chances and Risks including Reporting on the Financial Tools acc. to § 315 par 2 No. 2 CC (HGB)

7.1 Chances and Risks in the Business of Rehabilitation, Portfolio and Brokerage

The business transactions of the WINDSOR group are exposed to various risks. The risks regarding real estate trading consist in the calculation of prices and sales periods because of the changed market conditions. Under certain conditions, sales prices can be lower than the planned sales totals and, therefore, also as negatively affect the yield and liquidity as the exceeding the planned sales period (higher interest expenditure). If properties cannot be entirely sold, there will be risks resulting from increased administration expenses stemming from the letting activities and the missing reflux of liquid funds from the sales.

No dividend payment

Apart from the prime dwelling units, the current taxation and economic policy is decisive for a rapid disposal because its changes may imply risks, but also chances.

In conjunction with the sale of properties, the WINDSOR group has partly granted rental guaranties that are, however, only slightly above the respective actual rentals. From the viewpoint of the company, only in case of many vacancies the granting of rental guaranties represents a potential risk that, however, is countered by an active rent management. In addition, provisions were ensured for these purposes.

Because the most extensive construction measures are being performed in the areas of development and refurbishment of company-own and outside properties, these operations are most of all exposed to such risks as excessive, non-budgeted financing costs or longer construction time, in turn, resulting in higher financing cost. These risks are met in computational terms by careful planning, employing experienced project managers and corresponding risk allowances.

According to the obligation of warranty, cash totals (5% of the final account) are retained from subcontractors, or else, the required bank guarantees are available to the company. Thus, in the event of a subcontractor's insolvency, e.g. the pertinent lien can be realised.

Investment into existing properties poses just minor risks for the WINDSOR group. The typical risks of project development are therefore quite small. The potential vacancy risk regarding existing properties can be met by means of a controlled portfolio mixture as well as the location and quality of the building. External factors such as the infrastructure and the social environment of the existing properties are carefully examined and their development is followed up later on.

Active lease management Possible maintenance backlogs are identified if possible and eliminated as soon as possible after the purchase. The risks consist in the fact that shortcomings are not or could not be detected prior to the purchase. Possible market price increases of properties constitute chances as well as risks. Probably prices or capital market interest without an equivalent rental increase can result in the fact that fewer properties can be purchased, as they do no longer yield the required return. On the other hand, value increases result from price rises regarding properties already bought. The rate of 4.5% of realty transfer tax on properties valid from 1 January 2007 as well as the multiplier of the real estate tax of 810% remain unchanged.

7.2 Chances and Risks due to Lending Private Equity and Mezzanine Capital

The WINDSOR group lent private equity for financing a construction project in Berlin-Kreuzberg. The total loan was repaid plus interest in the year 2008.

In case of a further possible lending of private equity and mezzanine capital for new projects, risks may occur resulting in the total loss of the lend capital. In the future, the WINDSOR group will also offer these modern types of financing. However, the company will not undertake any obligations that might involve high financial risks. Stringent care is taken that chances outweigh risks.

7.3 Risk of Loss of Receivables

The risk of loss of receivables from buyers of residential property in the brokerage or rehabilitation business segment as well as from the sale of shares is considered very small by the company. The transactions regarding properties are performed via escrow accounts. A sale is confirmed only if the buyer can furnish proof of proper financing for the purchase of the property. In the event of share sales, a security agreement is made.

The risk of loss of individual rent receivables in the existing properties business is judged to be low due to the small number of individual rent receivables and the fact that it is partly compensated by rental deposits.

Modern types of financing

As for the refurbishment measures for third parties, there is a minimum risk involved, because the customer effects payment in line with the construction progress.

7.4 External Capital Risk / Participation Certificates Outstanding

The WINDSOR group has raised external funds for the operative realisation of its business model and will continue to do so. Because principal repayments are effected mainly by using current rental income or disposal proceeds, future delays regarding project funds reflows or refurbishments can have negative repercussions on the profitability, liquidity and financial position of the WINDSOR Group just like interest increases, rental decline, vacancies or rental arrears. In the year 2008, participation certificate capital, also used for funding property purchases, was bought back through the stock exchange.

The tax accounts risk regarding participation certificate capital occurs only due to the fact that the tax deductibility of interest expenditures is restricted by the interest limitation regulation valid from 2008 on. The validity period of the issued participation certificates outstanding is limited to 8% as a fixed interest rate until 31 December 2011.

By utilising innovative financing instruments (Cap funding on EURIBOR basis), both a favourable interest level can be used and the flexibility in case of a possible further sale of properties is ensured. Thanks to the fixed interest ceiling, the risk of the future interest trend is limited.

After historically low interest rates during the past few years and, in the meantime, higher interests in the years 2006-2008, since mid-2008 the general interest level has diminished again as a result of the economic crisis. The funding of real estate projects carried out and planned by the company is also done through loans from financial institutions. The development of the capital market on the whole as well as the project-related financing terms and conditions can either positively or negatively affect the property, financial and income position of the company.

Participation Certificates Outstanding

7.5 Risk Management System

The risk management system of the WINDSOR group is designed to detect, and record, all significant risks and their causes in good time in order to avoid financial losses, failures or disturbances.

This approach ensures that appropriate countermeasures for risk prevention can be performed. Simultaneously, the Management Board and the Supervisory Board are notified. Above all, this is an early detection system based on the supervision of liquidity and performance.

7.6 Risk Management and Control

The respectively responsible persons in the corporate departments decide, if required together with the Management Board, on the proper strategy as regards risk management. In this conjunction, controlling serves for supervising the operative successes and can thus detect plan variations in good time. system

Early detection

7.7 Regulatory and Political Risks

The WINDSOR group is generally exposed to risks resulting from changes of the statutory framework or regulations. As the corporate operations of the WINDSOR group are limited to Germany and such changes, in most cases, do not occur suddenly and surprisingly, there is normally time enough to react to the changes.

7.8 IT Risks

A loss of the stock of data or a prolonged failure of the systems used by the WINDSOR group could lead to disturbances in the business operations. Therefore, the company has protected itself against IT risks by using its own, independent network and against external attacks. All relevant data are regularly saved. Consequently, we consider this risk and possible implications insignificant.

7.9 Risks due to Actions in Rescission

WINDSOR AG has been sued by some so-called "professional plaintiffs" as regards the resolutions of the General Meetings (GM) of 25 July 2007, 1 February 2008 and 21 August 2008. All suits are generally based on the claim that the Management Board had not invited to the GM according to statutory requirements and the corporate memorandum.

Rescissions

They claim that WINDSOR AG has unlawfully linked the right of participation in the GM to the proof of the shareholder position at the time of the beginning of the 21st day prior to the GM.

The district court in Berlin has sustained the actions in rescission concerning all three General Meetings, for the time being. Therefore, WINDSOR AG has appealed in all three cases with the Superior Court of Justice. The verdicts of the Superior Court of Justice have not been rendered yet, and the relevant dates are not known up to now. The Management Board holds the view, now as before, that all of the invitations were done in the proper way. They satisfy the statutory requirement acc. to § 123 par 3 sentence 2 AktG (German Stock Corporation Act) for listed companies. Whether or not - as we see it - the provision referring to listed companies applies in this case is a legal issue that has not been resolved so far and will be decided on in the pending proceedings on appeal at the Superior Court of Justice.

Should the Superior Court of Justice, unlike the expectations of the Management Board – share the litigants' opinion, the invitations to the last three General Meetings would in fact be incorrect and the decisions taken there would be invalid. In this case, the invalid decisions would then have to be newly taken and the memorandum and articles of association be rendered more precisely as regards invitations to the General Meeting.

Berlin's Residential Property Market is Interesting for Investors despite the Crisis in Many Segments

8 Outlook: Economy and Real Estate Market 2009

At present, nobody is able to predict how long the crisis in the global economy as well as in terms of trust will last and how the development will continue. In spring 2009, the leading economic institutes revised their prognoses further downwards with regard to the European region and Germany. The OECD, for instance, expects the German economy to decrease by 5.3%, and the European Commission assumes in its economic prognosis in spring that the gross domestic product in the EU zone will decline even by 5.4%. The German economic institutions judge the future development even gloomier: they anticipate an economic slump by 6% in Germany in the future. However, as can be seen in many an expert opinion, on the other hand, inflation may mitigate owing to the gloomy perspectives. According to these estimates, the economy is assumed to recover again slightly with the gross domestic product growing by 0.5% (EU) and 0.7% (Germany) in the year 2010. Since spring 2009 the slump of export has slowed down, too, and the business climate index showed small positive trends during the first quarter. There seems thus to appear some light at the end of the tunnel. The Centre for European Economic Research (Zentrum für Europäische Wirtschaftsforschung (ZEW)) also sees several positive indicators that might indicate that the downward dynamics of the German economy have come to a standstill and that, thanks to the economic stabilisation, there is the prospect of bottoming out. However, forecasts regarding the duration and intenseness of the recession continue to diverge. Clear-cut statements as to the future development are impossible at the moment.

Opinions also differ as far as the future trend in the real estate market is concerned. Whilst in the first quarter 2009 some experts see the worst still in the fore in this industry, others speak of a gradual relief. Apart from this, it is increasingly stated that many people take refuge in tangible assets, i.e. properties, whereas financial products are less in demand.

Because no big real estate bubble has occurred in Germany in the past like in other European metropolises and, therefore, the market of residential properties was less volatile, there are some signs that the situation could improve. All the more as prime properties, especially in exquisite locations, are increasingly appreciated by investors as a protection against inflation and as real assets, because, houses and estates are generally considered a classical tangible assets protecting against inflation. However, it must be noted that the value of a property depends on various aspects, in particular the location that cause substantial value changes. The fact that financing conditions are favourable at present, advocates the purchase of properties as tangible assets. The prices of private residential buildings have fallen by almost one fifth on a German federal average since early 2005. But on the other hand, well-off investors increasingly invest into residential ownership.

According to media in the first quarter 2009, the consequences of the crisis for the Berlin residential properties market can less be felt. Because there has not be a big speculation bubble in the last few years, as was the case e.g. in London, many properties in the city continue to be relatively favourable compared to other metropolises as regards the yield to be achieved. The Berlin senator for urban development pointed out in spring 2009 that, in addition, many foreign investors in Berlin are family enterprises that often have a high equity cover. The Berlin real estate market is said to cover a wide range of corresponding properties: from old flats of the Wilhelminian era up to the flats in slab-type buildings, from urban houses in the City to the luxurious loft apartment in a former industrial area. These are reasons of a further comparatively steady development in the Berlin market.

The Berlin dwelling properties market is consequently very interesting, for investors, now as before, as PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI) stated in their new study issued in spring 2009. According to their analysis, on one hand, Berlin ranks among the ten most attractive European cities in terms of yield that can be achieved, and also among the ten cities featuring the least risk regarding real estate investment, on the other.

The regional association Berlin/Brandenburg of Ring Deutscher Makler (RDM) stated in its price index issued in spring 2009 for the first half-year of 2009 that residential properties in Berlin and Brandenburg in prime locations and high-grade amenities continue to be in great demand even in turbulent times. According to RDM, in the investment industry, e.g. as regards big packages of flats, the international financial crisis has affected the real estate market in Berlin and Brandenburg already since late 2007, and nearly no purchases have been executed in 2009. WINDSOR AG, too, could not accomplish any turnover as to package dealing.

The situation concerning commercially used properties is even more dramatic. Here, turnover greatly decreased in the first quarter of 2009 according to studies by Jones Lang LaSalle: In Germany, just € 1.75 billion were invested. This is the reason why this consultancy company anticipates in 2009 the lowest volume of transactions of approx. €10-15 billion for the past six years. In this context, the real estate industry is facing a double dilemma (Real Estate Management Institute of EBS 2009): On the one hand, there is only a limited availability of required external capital; on the other, the demand for property space is decreasing. Less office space is required e.g. the more people have lost their jobs. As compared on an international scale, however, Germany has some advantages. In London, for instance, the transaction volume regarding commercial property space diminished by approx. 40% in 2008 (HSH Nordbank und Börsen-Zeitung). According to studies, also France and Spain are harder hit.

In 2008 Berlin looked back, nevertheless, at a satisfactory development of the office and commercial property space market. Since there is increasingly lacking supply of modern office space, a relatively stable price and rental trend may be assumed (ibid.). On an international scale, Berlin will continue to be anyway an interesting location, since other European metropolises like London or Paris experience much more drastic falls in prices.

In general, the situation of the German real estate market in 2009 and 2010 can be assumed to remain extraordinarily difficult. The real estate markets in Berlin as well as Potsdam and Leipzig are predicted, by and large, to be stable. However, only those companies will survive in this difficult environment that have prudently traded and created a good equity basis in the past.

Proper Capital Endowment and Liquidity Ensure a Firm Basis for the Future

Conclusions

In view of the continuous global economic crisis, future trends are difficult to predict. Therefore, at present we cannot provide accurate quantitative prognoses on how the performance of the WINDSOR group will develop in the next few fiscal years. Nevertheless, the company is well positioned in this crisis as has been substantiated by the "A-"rating awarded by the renowned rating company Creditreform AG in March 2009. Thanks to its high liquidity and profound equity capital base as well as the permanently positive overall development of both the group and the parent company for the last few years, the WINDSOR Group has a solid basis available in order to flexibly respond to market trends.

We are going to maintain our strategy, on the whole, and just a few focal points may be altered. We plan, for example, to speed up the refurbishment and investment business. As far as our WINDSOR Real Estate AG subsidiary is concerned, we are discussing whether or not it is to be ensured the REIT status in 2010, market environment permitting. The predictions for the REIT investment type in Germany are promising, because it offers investors a comparably high degree of security and dividend. These advantages result, on the one hand, from tax exemption at corporate level as well as the legal obligation of distributing at least 90% of the profit for the year subject to commercial law. As regards private equity and mezzanine capital, we wait and see how market conditions will develop, but we do not rule out that we will get more involved there again later.

In the real estate investment segment, we will scrutinize the conditions determined by the market and endeavour to optimize, and expand, a counter-cyclical purchase and sales strategy according to the motto: purchase in critical times and sell in good economic times. Our solid equity capital base renders it possible. The focal question is: When will the optimum point of time occur in order to invest? In addition, we also plan to further expand our portfolio through our subsidiary and to purchase more properties.

Apart from this, we are looking for further locations for investments, planning at the same time to step up our activities in Leipzig. We will further search refurbishment properties and get involved again in this business segment provided that opportunities for good yields will occur.

As far as the development of our share is concerned, we are unable at the moment to provide any prognoses, because this development is essentially dependent on the situation in the financial markets. The fundamental performance figures of our company, anyway, are positive which is not reflected by its share price for the time being.

Berlin, 31 March 2009

Heiko Zybell (CEO)

Consolidated Financial Statements

Consolidated Income Statement for the Period from 1 January to 31 December 2008 (IFRS-based accounting)

			Previous year
		€ €	k€
1. Sales revenue	8,1	13,792,547.01	43,072
2. Reduction of inventory of finished and unfinished products 3. Other operating results	8,2	-1,848,868.16	-12,072
	8,3	1,105,696.39	762
4. Cost of materials
a) Expenses of properties and bought services	8,2	-1,054,750.58	-21,534
b) Disposal of participation book values	8,2	-4,957,020.83	-4,041
5. Personnel expenses		-6,011,771.41	-25,575
a) Wages and salaries b) Social security contributions		-608,330.53	-855
		-53,303.41	-62
		-661,633.94	-
6. Depreciation of intangible assets of fixed assets and tangible assets
7. Other operating expenses	8,4	-10,288.28	-13
8. Operating performance (profit from operation)	8,5	-2,466,280.84	-2,279
9. Other interest and similar income		3,899,400.77	2,976
10. Income from participations	8,6	473,913.07	1,195
11. Depreciations of securities of current assets		3,361.35	3
12. Interest and similar expenses	8,7	-183,930.56	-297
13. Financial result	8,7 -	-811,893.93	-1,514
14. Results of the ordinary business activity		-518,550.07	-613
15. Taxes on income and gains 16. Other taxes		3,380,850.70
	8,8	659,725.64	895
17. Annual surplus	8,9	-30,777.37	-6
Thereof:		4,009,798.97	3,252
Parent company stockholders Minority stockholders
		3,982,532.99	2,844
		27,265.98	408
		4,009,798.97

ASSETS	Notes				Previous year k
Liquid funds	5.1		11,033,358.67		10,783
Receivables from supplies & services Inventory	5.2		13,016,982.87
	5.3				10,263
1. Unfinished and finished products		928,304.99			2,777
2. Down payments made		0.00
	5.4		928.304.99		4,166
Other short-term assets			375,808.17		4,667
Short-term assets				25,354,454.70	29,879
Intangible assets	5.5		8,552,00
Plant & equipment	5.5		16,024,00		10 °
	5.6				17
Down payments for income-yielding properties			0.00		418
Income-yielding properties	5.6
	5.7		18,890,000.00		18,090 $\overline{2}$
Financial investments			2,666,981.40
Other long-term assets	5.8				30
Deferred tax liabilities	5.9		9,421.05 504,831.70		15
Long-term assets				22,115,810.15
				47,470,264.85	48,461

				Previous year
Liabilities				k€
Provisions	5,10	374,855.88		3,204
Liabilities to credit institutions	5,11	186,136.98		1,698
Trade liabilities	5,11	783,665.99		731
Other current liabilities	5,11	677,089.97		1,252
Current liabilities			2,021,748.82	6,885
	5,12	507,497.10		533
Provisions	5,13	6,407,000.00		8,639
Bonds (profit participation certificates)	5,14	8,878,421.40		2,062
Liabilities to credit institutions	5,15	291,650.71		501
Deferred tax
Non-current liabilities			16,084,569.21	11,735
Nominal capital	5,16	9,235,066.00		9,235
Statutory reserve	5,16	900,000.00		900
Revenue capital reserve	5,16	1,350,330.00		1,350
Other revue reserves	5,16	652,130.37		652
Provisions for own shares	5,16	31,905.17		0
Balance sheet profit	5,16	17,226,420.45		13,276
Reduced by cost price of own shares	5,16	29,395,851.99 -31,905.17		25,413 0
		29,363,946.82		25,413
Minority shares	5.16	0.00		4,428
Equity			29,363,946.82	29,841
			47,470,264.85	48,461

Consolidated Statement of Changes in Shareholder Equity

	Subscribed Capital Sheet	Capital Reserves	Statutory Reserves	Balance Profit
1. State as at 31 Dec 2006 / 1 January 2007	9,000,000.00	0.00	900,000,00	8,897,783.62
	9,000,000.00	0.00	9,000,000.00	8,897,783.62
2. Period profit	0.00	0.00	0.00	2,844,206.19
	0.00	0.00	0.00	2,844,206.19
3. Adjustment due to deconsolidation	0.00	0.00	0.00	0.00
	0.00	0.00	0.00	0.00
4. Capital increase by issuing
new shares	235,066.99	0.00	0.00	0.00
5. Capital reserve by issuing shares	235,066,00	0.00	0.00	0.00
above principal	0.0	1,175,339.00	0.00	0.00
	0.0	1.175.33	0.00	0.00
6. Profit from sale of own shares	0.00	0.00	0.00	0.00
	0.00	0.00	0.00	0.00
7. Capital invested by shareholders	0.00	175,000.00	0.00	0.00
	0.00	175,000.00	0.00	0.00
8. Own shares / reorganization / dissolution	0.00	0.00	0.00	1,533,802.
	0.0	0.00	0.00	1,533,802.82
9. State as at 31 Dec 2007 / 1 January 2008	9.235.066,00	1.350.330,00	900.000,00	13.275.792,63
	9,235,066.00	1,350,330.00	900,000.00	13,275,792.63
10. Period profit	0,00	0,00	0,00	3.982.532,99
	0.00	0.00	0.00	3,982,532.99
11. Adjustment of outside shareholders	0,00	0,00	0,00	0,00
	0.00	0.00	0.00	0.00
12. Own shares / reorganization	0,00	0,00	0,00	-31.905,17
	0.00	0.00	0.00	-31,905.17
13. State as at 31 December 2008	9.235.066,00	1.350.330,00	900.000,00	17.226.420,45
	9,235,066.00	1,350,330.00	900,000.00	17,226,420.45

Other reserves EUR	Reserves for own shares EUR	Shares of external shareholders EUR	Interim total EUR	Minus own shares EUR	Equity Total EUR
302,628,50	1,533,802,82	0,00	20,634,214,94	-1,533,802,82	19,100,412,12
0,00	0,00	407,474,14	3,251,680,33	0,00	3,251,680,33
0,00	0,00	4,019,841,56	4,019,841,56	0,00	4,019,841,56
0,00	0,00	0,00	235066,00	0,00	235,066,00
0.0	0.00	0.00	1,175,330.00	0.00	1,175,330.00
349,501.87	0.00	0.00	349,501.87	0.00	349,501.87
0.00	0.00	0.00	175,000.00	0.00	175,000.00
0.00	-1,533.80	2.82	0.00	1,533,802.82	1,533,802.82
652,130.37	0.00	4,427,315.70	29,840,634.70	0.00	29,840,634.70
0.00	0.00	27,265.98	4,009,798.97	0.00	4,009,798.97
0.00	0.00	-4,454,581.68	-4,454,581.68	0.00	- 4,454,581.68
0.00	31,905.17	0.00	0.00	-31,905.17	-31,905.17
652,130.37	31,905.17	0.00	29,395,851.99	- 31,905.17	29,363,946.82

Consolidated Cash Flow Statement for the Period from 1 January to 31 December 2008

				Previous year k€
Ongoing business operations
1. Performance of the ordinary business operations	3,380,850.70			2,363
2. Receipts from sale of own shares	0.00			1,883
3. Depreciations	194,218.84			311
4. Change of long-term provisions	-25,046.01			254
5. Changes relating to fair value accounting	-320,684.59			-443
6. Earnings from disposal of fixed assets of
shares of affiliated companies	-4,463,081.68			-2,720
7. Income from interest / shareholdings	-477,274.42			-1,199
8. Interest cost	811,893.93			1,515
9. Operating results before changes of working capital
10. Change of receivables from supplies and services	-899,123.23			1,964
and other receivables	1,431,882.59			8,779
11. Change of reserves	3,237,521.88			11,639
12. Change of obligations relating to supplies and services
and other liabilities as well as short-term provisions
	-3,076,819.57			731
13. Cash-flow from corporate operations
14. Interest/investment income received		693,461.67		23,113
15. Interest paid	593,482.80			1,262
16. Income tax paid	-961,737.99 -194,938.35			-2,673 -362
17. Cash flow from current business operations		-563,193.54		-1,773
Investments			130,268.13	21,340
1. Payments for sale of investment capital
2. Inpayments from sale of return-yielding properties		-2,882,324.09		-10,728
3. Payments from sale of shares of affiliated companies		0.00		10,762
4. Cash flow from investments		0.00		6,827
Financing activities			-2,882,324.09	6,861
1. Inpayments received from capital Increase
2. Payments for purchase of own shares		0.00		1,585
3. Decrease/increase of obligations to banks		-31,905.17		0.00
4. Decrease of participation certificate outstanding		5,304,821.60		-14,819
3. Cash flow from financing activities		-2,270,700.56		-15,239
Cash flow			3,002,215.87	-28,473
			250,159.91	-272
Liquid funds
1. 31 December 2008/31 December 2007 2. 31 December 2007/31 December 2006			250,159.91	-272
		11,033,358.67		10,783
		-10,783,198.76		-11,055
			250,159.91	-272

Notes for the Fiscal Year from 1 January to 31 December 2008

(1) General Information

The consolidated financial statements of WINDSOR AG, Berlin, for of the present year from 1 January to 31 December 2008 were compiled in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB). The new standards approved by the IASB were taken into account from their effective dates. The voluntary premature application of standards (IFRS 8) already published as of the balance sheet date, however, not mandatorily used, has completely been neglected. The IFRS 8 standard replaces the IAS 14 regulation "Segment Reporting" valid up to now for segmentrelated reporting. The IFRS 8 standard has been taken over from the EU on 21 November 2007. The standard must mandatorily be applied for fiscal years commencing after 1 January 2009. Possible consequences of applying IFRS 8 to the group account in the year of its first application are difficult to reliably assess at present.

IASB has not published new accounting standards (IFRS) to be applied for the first time in the current fiscal year. In October, changes to IAS 39 and IFRS 7 were adopted by IASB relating to the reclassification of financial instruments.

IFRIC published three interpretations that are to be used for the first time during the present fiscal year. These are the following:

• IFRIC 11 Transactions with own shares and shares of group companies
• IFRIC 12 Service concession agreements (state: 6 March 2009) - not released yet by the European Commission for application in the EU
• IFRIC 14 Value limitation of an asset from a performance- oriented plan, minimum financing regulations and their interrelation

The application of this interpretation has not lead to any changes of the accounting and evaluation procedures in the group. The accounting and evaluation were carried out based on the assumption of the continuous corporate operations.

(2) Group Companies being consolidated

The group financial statement of the current year of WINDSOR AG, Berlin, as of 31 December 2008 includes, in addition to WINDSOR AG, WINDSOR Grundbesitz AG, Berlin, WINDSOR Real Estate AG, Berlin, VOCON GmbH, Berlin, 22. Projektgesellschaft Mitte mbH, Berlin, SRE Schkeuditz Real GmbH, Berlin, and WINDSOR Fondsverwaltungsgesellschaft mbH, Berlin. The consolidations have been performed as follows:

• WINDSOR Grundbesitz AG ( from 9 May 2007, effective date of the first consolidation);
• WINDSOR Real Estate AG (from 28 September 2004, effective date of the first consolidation)
• VOCON GmbH (from 28 September 2004; effective date of the first consolidation)
• 1. Projektgesellschaft Mitte mbH, from 16 June 2005, effective date of the first consolidation)
• SRE Schkeuditz Real GmbH (from 24 June 2008, effective date of the first consolidation)
• WINDSOR Fondsverwaltungsgesellschaft mbH (from 24 June 2008, effective date of the first consolidation)

(3) Principles of Consolidation

The consolidation of capital accounts is performed based on the Purchase Method. At the time of purchase, the acquisition costs of the participation, the fair value, shares already existing prior to obtaining supervisory authority and, possibly, the minority portion of the fair value of the net assets of the subsidiary are set off against its newly evaluated equity. Assets and liabilities of the subsidiary are valued at the fair value in the process of revaluation.

WINDSOR Real Estate AG: In 2007, the subscribed and registered capital of WINDSOR Real Estate AG amounted to € 5.0 million. Pursuant to the resolution of the General Meeting on 21 December 2007, the capital stock was increased by € 10.0 million to € 15.0 million. The increase in capital was exclusively subscribed by the WINDSOR group in 2008. As at the balance sheet date, cash contributions totalling € 4.31 million were made to the increased capital registered in 2008. The 4,0 million shares sold in late 2007 were retransferred to WINDSOR AG in December 2008.

Until 31 December 2007, the WINDSOR group held 20% of the shares of WRE. Prior to this, however, the General Meeting of WRE had decided upon an increase in capital by k€ 10,000 to k€ 15,000, where only WAG and WINDSOR Grundbesitz AG were authorised. Due to the fact that the subscription rights could be exercised or converted at any time, these potential voting rights had to be considered regarding the determination of the proportion of voting power, so that WRE continued to belong to the group companies being consolidated.

Upon the retransfer, the WINDSOR group will hold 100% again. The claim resulting from the adopted purchase agreement was adjusted for the sales proceeds.

SRE Schkeuditz Real Estate GmbH: During the current fiscal year 2008, 100% of the shares of SRE Schkeuditz Real Estate GmbH were bought. Because SRE Schkeuditz Real Estate GmbH was a so-called "shelf company" that does not constitute a corporate entity according to IFRS 3, the purchase price equal to

€ 27,000.00 was allocated to the existing liquid funds of € 25,000.00, and the excessive amount was charge to expenditure.

(4) Estimations and Assumptions

The drawing up of the group statement requires estimations and assumptions that may affect the contribution of assets, liabilities and financial obligations as at the balance sheet date as well as the proceeds and expenses of the year under report. The actual amounts may deviate from these estimations and assumptions. The estimations and assumptions mainly relate to the calculation of the reserves and the evaluation of the yield-producing properties.

(5) Information about the Group Balance Sheet including the Accounting and Valuation Methods

All accounts receivable and obligations are denominated in EUR.

5.1 The liquid funds are indicated in the nominal values.

5.2 Trade accounts receivable are balanced in their nominal amount less required individual adjustment base on recognizable individual risks. The trade accounts receivable are composed as follows:

• Receivables from the sale of investment shares (k€ 12,805)

• Receivables from property letting (k€ 64)

• Receivables from the sale of occupant-owned flats (k€ 81) as well as from the sale of residential buildings (k€ 40)

• Other receivables (k€ 42).

5.3 Reserves imply i. a. finished and semi-finished goods valued based on the procurement and production costs. According to IAS 2, all costs were included in conjunction with the purchase or production of the respective reserves. Third-party capital costs were not activated.

The inventory was evaluated based on the Completed Contract Method. The Percentage-ofcompletion-Method (PoC method) has not been used.

The inventory is composed as follows:

	k€
Unfinished products (refurbishment properties	830.0
Finished products (flats / tenement houses etc.	98.3
	928.3

5.4 Other Short-Term Assets

The assets indicated at the balance sheet date are mainly tax refunding claims totalling k€ 249.5. Moreover, this item includes accruals equal to k€ 46.6. The remaining short-term assets are i. a. capitalised interest liabilities against banks as well as other assets.

5.5 The tangible assets as well as the intangible assets are assessed based on IAS 16 and IAS 38 at cost of acquisition. As far as the asset value found by means of the abovementioned principles was higher than the value assigned to them at the balance sheet date, this fact was taken into account by unplanned depreciations. The value to be assigned results from the net sales proceeds or - if it is higher - the cash value of the estimated future cash flow from the utilisation of the asset. Depreciation was not required during the current fiscal year as at 31 December 2008.

5.6 Investment Properties and Down-payments made for Investment Properties

IAS 40 specifies the accounting procedures of properties held as financial investments. Such types of financial investments are defined as follows: They serve for achieving rental income and/or are held over long periods for value increase. According to IAS 40, the evaluation method selected has to be equally applied to all investment properties.

In 2008, no down-payments for investment properties were made.

In the course of the fiscal year 2008, the WINDSOR group acquired two properties accounted for as investment-yielding properties. The follow-up evaluation of the held investment-yielding properties is done in line with the "Fair Value Model".

As at the balance sheet date, WINDSOR AG as well as WINDSOR Real Estate AG held investment properties serving to achieve rental income. As at the balance sheet date, their fair values total k€ 18,890. The pertinent development can be shown as follows:

	k€	k€	Group k€
State: 31 Dec 2007 / 1 Jan 2008	9,070	9,020	18,090
Additions incl. subsequent AK or HK			1,226
Fair Value Adjustments
State: 31 December 2008	9,240	9,650 9	18,890

The evaluation based at fair values leads to deferred taxes as of 31 December 2008 (cf. explanations of the profit and loss account). The development of the investment properties also results from the Group's investment capital as of 31 December 2008.

The rental revenues from investment properties of the WINDSOR Group amounted to k€ 1,417.6 in the fiscal year 2008. The amount of expenses recorded in the profit and loss account and directly attributable to the investment properties of WINDSOR AG equalled k€ 979.9. The directly attributable expenses also comprise interest expenses as well as nonerecurrent cost of funds raising (handling charges). Without interest expenses, the operating costs would amount to k€ 722.3.

Expert opinions were available for the valuation of investment properties held as financial investments.

The expert opinions were provided by "Winters & Hirsch Valuation Services GmbH & Co. KG". The valuation activities were carried out under the supervision of Mr. Bruno R. W. Tabert, Head of Valuation Advisory, Dipl.-Betriebswirt and Dipl.-Sachverständiger (accredited expert acc. to DIN EN ISO/IEC 17024 [DIN EN 45013] by IQ-Zert-Bonn).

Various techniques were applied. With reference to IAS 40, the following results as for the valuation of a part of the expert opinions provided:

The first step included the determination of all ground values resulting from the standard ground values and the respectively pertinent property areas.

As a second step, the corresponding income figures of the investment properties were computed. In this conjunction, the following assumptions were made: The rents are based on the sustainably achievable rents e.g. on the Berlin market. Here, fine-tuning has been performed according the rents in the individual urban districts and the respective rental indexes. As far as the operating costs are concerned, discounts of 18.5 to 27.3 percentage points at most are applied. The valuation expert has used various property interest rates (4.5% to 5.00%) valid for the respective properties and various multipliers directly corresponding with the residual utilisation time of the relevant buildings and properly determined. The total of the ground and the property yield result in the respective yield of the existing investment property.

The third step consisted in calculating the tangible asset values. For this purpose, the expert calculated the production costs by using additions and deductions. Additions were made e.g. for ancillary construction costs. Moreover, the valuation expert used deductions because of economic diminution in value reflecting the corresponding age of the buildings and the pertinent wear of the properties. The total of the ground and the property yield result in the respective yield of the existing investment property.

As a fourth step, the market values of the relevant investment properties were calculated. Taking into account market adjustments, the expert determined the respective current market values ranging accordingly between the earnings value and the tangible asset value.

As far as the remaining expert opinions are concerned, the expert has specified the following valuation hierarchy for determining the fair value based on IAS 40:

• 1. Current purchase prices of comparable properties;
• 1. If they are not available in sufficient numbers, adjusted comparable prices of other properties can be applied;
• 1. If these are not available, either, discounted future payment flows can be used.

The valuation based on the above items 1 and 2 was not performed, because there were no current comparable purchase prices available for this these properties.

The valuation has to be performed taking into account the customary practices in business operations. As a rule, the ground values have to be determined by using existing comparisonbased valuation methods. For calculating the ground values, the valuation expert applied the indirect comparison-based valuation method. However, as the properties to be valued have been developed in order to yield income, the expert could neglect the ground values determined before. The Gross Receipts Method based on the DCF (Discounted Cash Flow) method was applied.

The Gross Receipts Method is mainly used based on the DCF (Discounted Cash Flow) method if the income sustained achieved from the relevant property plays a predominant part for the property value. For calculating the receipts value, sustainably achievable annual net earnings have to be taken as a basis. The net earnings result from the gross income less the operating costs (cf. § 16 par 1 WertV).

Apart from the knowledge of the sustained achievable receipts, the market-oriented approach to the capitalisation interest rate is decisive for the valuation of the property yield or of a DCF calculation. The interest rate is calculated based on appropriate purchase prices and the corresponding net receipts for equally developed and used properties taking into account the remaining useful life of the buildings. The valuation expert has utilized various capitalization interest rates regarding the properties (5.25% and 6.25%).

The discount interest rate required for the DCF valuation is determined according to the Capital Asset Pricing Model (CAPM).

As a result, the proper application of the DCF method immediately yields the fair value of the relevant property.

5.7 Under the financial assets item, the equity instruments of listed companies are reported. The equity instruments are valued by taking the fair value into account.

5.8 Other Long-Term Assets

Long-term assets constitute deposits and accruals.

5.9 Deferred taxes were realised at a maximum amount of k€ 504.8. Active deferred taxes are realised considering temporary differences between taxation valuation and in the group balance sheet as well as tax-related carry-forward of losses, provided that prospective revenues subject to taxation have to be expected with sufficient probability.

5.10 Other provisions are created according to IAS 37 if there is probably a liability and the estimation of the amount is reliably possible.

Current liabilities mainly regard rent guarantee provisions of the WINDSOR group, transaction costs and auditing charges of the included companies, holiday provisions and other provisions.

	1 Jan 2008 k€	k€	Consumption Liquidation k€	Addition k€	31 Dec 2008 k€
Claims from affiliated companies	2,617	2,568
Income tax
Rent guarantee
Fees
Audit and balance sheet charges
Holiday entitlement of employees
AR remunerations
Others
	3,204	3,037

The overview of provisions is as follows:

As a result of the current taxation-related internal audit for the years 2001 to 2005, the fiscal authority intended not to take into account the tax loss carry over created until 2 August 2005 because of a loss of the economic identity at this time according to § 8 par 4 KSTG/§ 10a GewStG. We do not share the legal conception our fiscal authority notified us of, and the Federal Finance Court has decided otherwise in a similar case. This is the reason why we have not created provisions for taxation purposes. At present, we are in a appeal proceedings, and if necessary we would use all and any legal remedies. In March 2009 the fiscal authority took into account, due to changes of the applicable law, losses not recognized up to now. Now the maximum risk amounts to k€ 154.

5.11 Liabilities from trade receivables, the other current liabilities as well as liabilities to financial institutions have been stated in the balance sheet at their repayment amounts.

The current liabilities to financial institutions are loans having been used for refinancing properties.

The other liabilities are equal to k€ 677, thereof k€ 513 are allocated to the interest of the profit participation certificates outstanding as of the balance sheet date and held by WINDSOR AG. The remaining liabilities relate to diverse individual items.

5.12 Long-Term Provisions

The long-term provisions mainly constitute the rent guarantee provisions of the WINDSOR AG amounting to k€ 501.0.

	1 Jan 2008	Consumption Liquidation		Addition	31 Dec 2008
	k€	k€	k€	k€	k€
Rent guarantees etc.
Others

5.13 Bonds (Profit Participation Certificates of WINDSOR AG)

Under the item "Bonds" regarding liabilities, exclusively marketable capital represented by participation certificates is stated. Capital represented by participation certificates constitutes a mezzanine financing tool featuring both equity and outside capital elements. Only outside capital can be indicated when accounting along the lines of IFRS. Under ISIN DE 00A0EQVT2, one tranche equal to € 23.6 million is traded off-the-board at the Frankfurt stock exchange. All participation certificate holders get a distributed amount of 8% p.a. of the nominal value of their participation certificates prior to the profit share of the shareholders of WINDSOR AG. The claims of the participation certificate holders are collateralised by the creation of subordinated land charges. The participation certificates are made out to the holders and are subdivided into 500,000 shares each of € 100.00 respectively. The sale of participation certificates was finished in 2006. As at the balance sheet date, WINDSOR AG holds its own participation certificates totalling € 17.2 million (172,053 profit sharing rights x € 100), and thus only a corresponding balance amounting to € 6.4 million is to be stated at the liabilities side of the balance sheet.

5.14 Non-current liabilities to financial institutions constitute loans that have been used for acquiring properties.

5.15 Deferred Tax Liabilities

As far as upgrading of existing investment properties of the WINDSOR group is concerned, it was necessary to state deferred tax liabilities at the liabilities side. In conjunction with this, reference is made to item 5.6.

5.16 Equity

The company's equity amounting to € 9,235,066.00 is subdivided into 9,235,066 individual shares each at a calculated nominal value of € 1.00, respectively. In 2005, the equity was upgraded by € 6.75 by converting provisions of which € 2.0 million stemmed from contributions of shareholders (withdrawal from equity provisions) and € 4.75 million from the company's profit already paid taxes for. Based on the resolution of the General Meeting of 18 July 2005, the Management Board was authorized, with the Supervisory Board's consent, to increase the nominal capital stock again once or several times until 30 June 2010 by issuing new shares against cash or non-cash contributions, all in all, however, by € 4.5 million. With the Supervisory Board's consent, the Management Board has partly made use of this authorization. 235,066 new shares were issued in the first quarter of 2007. Thereby, the subscription (as for senior shareholders) or issuing price amounted to € 6.00 per share each. The difference between the subscription and issuing price and nominal value of € 5.00 per share was stated as capital provision.

According to the resolution of the General Meeting of 25 August 2006, the Management Board was authorized to issue, once or several times, participation certificates made out to the holders until 30 June 2010. Bearer warrants can be added to the participation certificates, or they can be connected with a conversion right of the holder for a maximum period of ten years since the issue. The option or conversion participation rights entitle to purchase WINDSOR AG's shares subject to the conditions determining the rights of options and convertible profit-sharing certificates.

The Management Board is further authorized to issue, until 31 July 2011, once or several times cum-warrant bonds and convertible bonds made out to the holders, instead of or in parallel with participation certificates for a maximum 10-year maturity term, and to grant holders/creditors of cum- warrant bonds option rights as well as holders/creditors of convertible bonds conversion rights to new shares of the company subject to the conditions valid for options and convertible bonds.

The total amount of the participation certificates, cum-warrant bonds and/or convertible bonds to be issued based on this authorization must not exceed € 50,000,000.00. Option and conversion rights may be issued for company shares with a proportional value of the registered capital of up to a nominal amount of € 3,600,000.00. Participation certificates, cumwarrant bonds and convertible bonds can also be issued by direct or indirect majority shareholding companies of WINDSOR AG; in this event, the Management Board is authorized to assume the guarantee for the repayment of the bonds and ensure the granting of option and conversion rights. The registered capital is contingently increased by up to € 3,600,000.00 by issuing up to 3,600,000 new shares made out to the holders (contingent capital I/2006). The purpose of the contingent capital increase is to grant rights to the holders of option and convertible profit-sharing certificates, cum- warrant bonds and convertible bonds that are issued by the company or direct or indirect majority shareholding companies of WINDSOR AG until 31 July 2011 in accordance with the above-mentioned authorization.

For the purpose of employee's participation in the company, the Management Board and the Supervisory Board have been authorized to issue, until 1 August 2011, up to 900,000 stock options for obtaining up to 900,000 shares with a calculated portion of the registered capital of up to € 900,000.00 subject to a stock options programme to be confirmed by the Management Board with the consent of the Supervisory Board.

The Employee Share Option Plan is intended for the following persons involved: The members of the Management Board of WINDSOR AG and the staff of the parent company as well as of the affiliated companies. Based on the Employee Stock Option Plan, up to 900,000 share options are allocated. For this purpose, up to 90% of the share options can be assigned to the members of the Management Board of WINDSOR AG and up to 10% of the share options to the other persons entitled to it (employees of the parent company and of its affiliated companies including executives). In case the contingent for the members of the Management Board of WINDSOR AG is not fully used, the remaining share options can also be distributed to the other persons entitled. The registered capital of the company has to be contingently increased by up to € 900,000 due to the issue of up to 900,000 shares of the company made out to the holders (contingent capital II/2006). The contingent capital increase will be realised only provided that the holders of share options, that are issued by WINDSOR AG in line with the authorization decision of the General Meeting of 25 October 2006 until 1 August 2011, will use their option rights and the company will not provide its own shares to satisfy the option rights. From the beginning of the fiscal year, the new shares will participate in the profit distributed.

235,066 new shares were issued in the first quarter of 2007. The difference between the subscription value or issuing price and the nominal value of € 5.00 per share was transferred to the capital reserve.

The revenue from the sale of own shares in 2006 till 2007 are stated in the other revenue reserves that have not been recorded in the group profit-and-loss account, but rather directly in the equity capital item.

The purchase of own shares in 2008 led to the necessity to reduce the existing equity capital according to IFRS. As at 31 December 2008, the stock of own shares amounted to 27,250. In this conjunction, it was mandatory to set up reserves for the own shares out of the balance sheet profit.

Reference is made to the development and structure of the statement of changes in stockholders' equity.

(6) Assets Analysis

The structure and development of the assets is indicated in the table "Assets Development".

The disclosed financial assets constitute equity capital tools of listed companies. The following companies are public limited companies that need not be disclosed in the group's balance sheet on grounds of consolidation. The following companies are shown only in the individual accounts of WINDSOR AG acc. to IFRS:

Name and Place of the Companies	Percentage Share
	100.00
	100.00
	93.93
	100.00
	100.00
	100.00

* WINDSOR Grundbesitz AG owns 910,000 shares (6.07%) in WINDSOR Real Estate AG and, thus, the WINDSOR Group owns all shares in WINDSOR Real Estate AG.

** WINDSOR Real Estate AG owns all shares in SRE Schkeuditz Real Estate GmbH.

(7) Contingent Liabilities and other Financial Obligations

There exist no contingent liabilities. The other financial obligations are within the scope of usual business operations.

The General Meeting of WINDSOR Real Estate AG on 21 December 2007 adopted the resolution to increase the registered Windsor Real Estate AG by € 10.00 million to € 15.00 million. The capital increase was exclusively applied by the WINDSOR group in 2008. As at the balance sheet date, the cash payment of the capital increase recorded in 2008 was made at a total of € 4.31 million. The unpaid capital contributions of WINDSOR AG to the registered equity capital of WINDSOR Real Estate AG, not disclosed in the consolidated balance sheet, amount to € 5.69 million as of the balance sheet date.

(8) Explanatory Notes to the Profit and Loss Account

Expenses and gains of the fiscal year are accounted for – regardless of the time of their payment – when they have been realised. Proceeds from the sale of assets and proceeds from services are realised when the major chances and risks have passed and the amount of the expected return service can reliably be estimated.

Tax deferments are applied to deviations between the valuation values of the financial statements and tax accounts as well as the IAS-based accounting. The deferments applied are equal to the anticipated tax burden of subsequent fiscal years.

8.1 Sales proceeds stem from the sale of properties (k€ 1,911) as well as proceeds from the sale of investments (k€ 10,346). Moreover, proceeds were yielded by construction services (k€ 26) and service agreements (k€ 23) as well based on leasing of properties (k€ 1,480). The total of other proceeds amounts to k€ 7.

8.2 The reduction of the stock of finished and semi-finished products as well as material expense imply expenditures that are essentially connected with the sale and modernisation of occupant-owned flats and tenement houses as well as the accounting of provided construction services. Moreover, this item includes the summary of all property expenses regarding the rented properties.

The item "Expenses for Purchased Services and Properties" shown in the group profitand-loss account is composed as follows:

	k€
Realisation of construction orders / modernisation services
Operation costs of the properties
Others
	1,055

The deducted investment book values essentially relate to CR Capital Real Estate AG.

8.3 The item "Other Operating Proceeds" mainly include additions to the accounted equity capital tools of listed companies amounting to k€ 747. Additions equal to k€ 129 were made to the existing investment properties of WINDSOR Real Estate AG. In this conjunction, reference is made to the explanations to item 5.6.

8.4 The write-downs include planned write-downs on tangible assets and intangible assets equal to k€ 10. The tangible assets and the intangible are written down on a straightline basis over several useful life periods.

8.5 The other operating expenses totalling k€ 2,466 include numerous individual items such as rent, advertising and travel expenditure, legal and consulting costs, commissions etc.

8.6 Other Interest and similar Proceeds

They mainly constitute interest receipts to be allocated to WINDSOR AG. The interest results from extended loans or liquid funds invested with German financial institutions.

8.7 Write-downs on financial Investments, Interest and similar expenditures

As at the balance sheet date, WINDSOR AG holds participation certificates of a total nominal amount of € 17.2 million (172,053 profit sharing rights x € 100.00). Write-downs on the nominal value of the participation certificates equal to k€ 38.0 have been set off. Write-downs of k€ 145.5 have been performed on existing equity capital tools of listed companies.

The interest mainly stems from expenses spent on participation certificate equity placed in 2005 or 2006. The overall expenses total k€ 811.9, thereof k€ 512.6 account for the interest paid on the outstanding participation certificates as of the balance sheet date that are not held by WINDSOR AG. The remaining interest and similar expenses stem from loans raised for refinancing properties in 2006, 2007 and 2008.

8.8 Income and Profit Tax

The deferred taxes in 2008 were calculated based on the taxation law valid in 2008. This item having lead to a positive profit contribution is composed as of 31 December 2008 as follows:

Deferred tax of WINDSOR AG	´ 786,880.14
Income and profit tax of WINDSOR AG	1,217.00
Deferred tax of SRE Schkeuditzer Real Estate GmbH	841.51
Deferred tax of 22. Projektgesellschaft Mitte mbH	1,501.53
Income and profit tax of 22. Projektgesellschaft Mitte mbH	1,523.42
Deferred tax of WINDSOR AG	64.72
Income and profit tax of
WINDSOR Fondsverwaltungsgesellschaft mbH	107.61
Deferred tax of WINDSOR Grundbesitz AG	8,603.98
Deferred tax of VOCON GmbH	-4,492.59
Income and profit tax of VOCON GmbH	-171.96
Deferred tax of WINDSOR Real Estate AG	-94,133.62
Income and profit tax of WINDSOR Real Estate AG	-42,216.10
	659,725.64

The income and profit taxes relate to the following items:

- 39,540.03
23,191.82
676,073.85
659,725.64

The deferred tax is calculated based on the temporary differences according to the "liability method" by using an expected actual tax percentage equal to 30.2%. With reference to IAS 12.81, the following tax rates result:

Tax rates
Legal effective tax rate	30,2	38,9
- Actual tax rate	-24.6	-38.0

The legal effective tax rate comprises the corporation tax and the solidarity surcharge (effective rate: 15.825%) as well as the trade tax (effective rate: 14.350%). The application of this tax rate to the prior tax performance of the fiscal year 2008 would lead to a calculated profit tax of k€ 808. In fact, a tax of revenue of k€ 660 is yielded for 2008 and, thus, a negative tax rate. This mainly results from the tax-exempt sale of an investment at WINDSOR AG.

In the year 2007, too, the tax-exempt sale of a stake mainly leads to a negative tax rate of 38%. A further reason was that all deferred taxes of 2007 had to be recalculated because of modified effective tax rates and, consequently, the deferred tax expenditure of the previous years in form of the up to now deferred tax liabilities was directly reduced.

Deferred tax applies to the following items as at 31 December:

	k€	k€
Deferred tax claims
– resulting from tax loss carried forward and
current taxation losses
– resulting from valuation increases
Deferred tax liabilities
– resulting from valuation increases
– resulting from tax loss carried forward

8.9 Other tax types include value-added tax and motor vehicle tax.

(9) Earnings/Loss per Share

The earnings/loss per share is calculated by dividing the net income for the year by the number of issued shares. According to IAS 33.19, the undiluted performance per share is determined by using the number of ordinary shares of the weighted average number of ordinary shares outstanding during the period. Dilution effects must not be taken into account.

The result is as follows:

Net income of the year	3,982,532.99	251,680.33
Adjusted for shares of external shareholders	27,265.98	-407,474.14
Adjusted net income for the year	4,009,798.97	2,844,206.19
Number of shares (weighted average) 9	9,232,935	9,184,695
Earnings/loss per share	0.43	0.31

Miscellaneous Expenses

(10) Information on the Members of the Corporate Bodies:

Management Board

Second Name	First Name	Position	Authority to Represent	Profession
		CEO	Power of sole representation	MBA
			Management Board Member Power of sole representation	Sports science graduate

* Until 31 December 2008

The total remunerations of the Management Board members amounted to k€ 343 in 2008. Provisions equal to k€ 40 were set up for bonuses to be paid in 2009.

Supervisory Board

Second Name	First Name	Position		Profession
		Chairman		Lawyer & tax adviser
			Deputy Chairman	Lawyer
				University lecturer &
				Science journalist

The total remunerations of the Supervisory Board members amounted to k€ 47 in the current year 2008.

(11) Number of Employees

Within the period under review, no staff were employed by the following companies:

On an average, WINDSOR AG employed a staff of 10 during the period under report.

(12) Statements on Financial Instruments pursuant to IAS 32

Risk Management Policy and Security Measures

As far as the risk management policy is concerned, we refer to our statements in the consolidated management report of 2008.

Risks from Outside Capital and Changes in Interest Rates

The Group acquired outside capital for the operational implementation of its business model. Since the payment of interest and repayment of principal (Kapitaldienst) is mainly based on rental income and proceeds from selling residential units, future delays in receipts from projects or refurbishments could have repercussions in the same way as rent reductions, vacancies or rent arrears.

In 2008 liabilities to banks increased by € 5.3 million to a total of € 9.1 million. The funds were applied to buying new properties. Moreover, these loans were borrowed in order to refinance properties that were previously acquired by internal funds. Because of decreasing interest rates, there are presently just minor risks of changes in the interest rates.

Various loans were rendered with different fixed interest periods. This results in the following.

	Fixed interest periods until
Loans of € 4.5 million	k€ 15 Nov 2010
Loans of € 0.4 million	31 Dec 2012
Loans of € 1.0 million	30 Sep 2013

In addition, as at 31 December 2008 a further bank loan is stated amounting to € 1.7 million secured by applying a corresponding financial tool (Cap financing based on EURIBOR) with regards to the interest rate level (maturity date: 30 September 2011). The risk of future interest rises are limited by means of firmly capped interest rates. An increase of interest rates by 100 basis points – which is unrealistic at the moment - would have just minor effects on the group's performance and equity as at 31 December 2008.

Apart from the above loans, a further loan is indicated valued at € 1.5 million as at the balance sheet date. The first fixed-interest period starts on 1 January 2009. It will end on 31 March 2009. The amount of the interest rate to be fixed is geared to the "EURIBOR-3-month rate" plus a nominal mark-up of 2.10% p.a. This agreement will be effective until 31 December 2009.

The remaining financial obligations are not subject to any risk of changes of the interest rate, because the conditions have contractually been fixed till the termination of the term.

Development of the Group's Capital Investment

:

	State as at 1 Jan 2008 €	Addition €	Deduction/ Account transfer €	State as at 31 Dec 2008 €
I. Intangible assets 1. Intangible assets	15,312.05	0.00	0.00	15,312.05
2. Goodwill	2,000.00	0,00	0,00	2,000.00
	17,312.05	0.00	0.00	17,312.05
II. Tangible assets
1. Other assets, plant and equipment
	34,561.29	7,982.28	0.00	42,543.57
III. High yield investment properties1)	34,561.29	7,982.28	0.00	42,543.57
1. High yield investment properties
2. Down payments made for high yield investment	15,981,161.91	1,226,389.30	0,00	17,207,551.21
properties	417,485.00	417,485.00	0.00	0,00
	16,398,646.91	808,904.30	0.00	17,207,551.21
IV. Financial assets	1,500.00	2,065,437.51	-1,500.00	2,065,437.51
	16,452,020.25	2,882,324.09	-1,500.00	19,332,844.34

1) Write-up of yield properties. (It concerns appreciations in addition of acquisition costs, which were marked by a negative sign.) and existing securities.

				Book Values
State as at 1 Jan 2008	Addition	Disposal	State as at 31 Dec 2008	State as at 31 Dec 2008	Previous year 31 Dec 2008
4,908.05	1,852.00	0.00	6,760.05	8,552.00	10,404.00
2,000.00	0.00	0,00	2,000.00	0.00	0.00
6,908.05	1,852.00	0.00	8,760.05	8,552.00	10,404.00
18,083.29	8,436.28	0.00	26,519.57	16,024.00	16,478.00
18,083.29	8,436.28	0.00	26,519.57	16,024.00	16,478.00
-2,108,838.09	426,389.30	0.00	-1,682,448.79	18,890,000.00	18,090,000.00
0,00	0,00	0,00	0,00	0,00	417,485,00
-2,108,838.09	426,389.30	0.00	-1,682,448.79	18,890,000.00	18,090,000.00
0.0	601,543.89	0.00	-601,543.89	2,666,981.40	1,500.00
-2,083,846.75	-164,866.31	0.00	-2,248,713.06	21,581,557.40	18,535,867.00

Auditor's Certificate

We have audited the consolidated financial statements provided by WINDSOR AG, Berlin comprising the consolidated balance sheet, consolidated income statement, consolidated statement of changes in equity accounts, consolidated cash flows analysis and the notes and the Group management report for the fiscal year from 1 January till 31 December 2008. The Group Management is responsible for preparing the Group's consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) as applied in the EU and the supplementary directives pursuant to § 315a par 1 HGB (German Commercial Code). Our task consists in providing an opinion based on our audit of the Group's consolidated financial statements and of the Group management report.

We have conducted our audit of the consolidated financial statements in conformance with § 317 HGB (German Commercial Code) taking the generally accepted German standards for orderly auditing annual accounts into consideration specified by the Institut der Wirtschaftsprüfer (IDW) (German Institute of Auditors). These standards require that we plan and conduct the audit in such a way that misstatements materially affecting the presentation of the financial and income statement and the Group management report, are recognized with reasonable reliability. For audit purposes, the knowledge of the business activities and the economic and legal environment of the Group as well as possibly anticipated misstatements are taken into account. The effectiveness of the accounting-related internal control system as well as evidence supporting the disclosures in the consolidated statements and in the Group management report have mainly been evaluated by random sampling. The audit includes the assessment of the annual financial statements of the companies included, the determination of companies consolidated, the accounting and consolidation principles applied and the principal assessment of the Management Board as well as the acknowledgement of the overall presentation of the Group's consolidated financial statements and the Group management report. We believe that our audit represents a sufficiently reliable basis for our opinion.

Our audit has not led to any objections.

In our opinion based on the findings that were gained by the audit, the Group's consolidated financial statements of WINDSOR AG, Berlin, conform to the IFRS principles to be applied in the EU, as well as the supplementary regulations under the commercial law pursuant to § 315a par 1 HGB (German Commercial Code) and, in compliance with the principles of orderly accounting, give a true and fair view and accurately present the assets, income and the financial position of the Group. The Group management report is in conformity with the consolidated financial statements. It generally provides a true understanding of the Group's position and properly describes the chances and risks of the future development."

Berlin, 29 May 2009

Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft

(Nienhoff) (Paul) Auditor Auditor

WINDSOR Share

Symbol	WIR.ETR
ISIN number	DE0006190705
WKN	619070
Nominal capital	€ 9.235.066
Type	No-par bearer shares
No. of shares	9.235.066
Stock ex. segment	Open Market
Admission to listing at stock ex.	Frankfurt stock exchange
Per share performance in 2008	€ 0.43

_______________________________________________________________________

WINDSOR Profit Participation Certificate

Symbol	WIR1.FSE
ISIN number	DE000A0EQVT2
WKN	A0EQVT
Type/certification	Bearer instruments, global certificate
Application purpose	Exclusively property investment
Security	Registration of junior land registry charges
Basic value per certificate	€ 100 (minimum investment)
Maturity	Min. term till 31 Dec 2011, thereafter terminable
Annual distribution	8% p.a. relating to nominal value of the profit participating certificate (depending on balance sheet profit of WINDSOR AG)
Date of payment	Subsequently on first bank working day following the General Meeting of WINDSOR AG
Market place	Frankfurt Stock Exchange