annual report - investors · 2015. 2. 9. · [qvkm 2iv]iza *wizl 5mujmz wn 1>/ dr wolfhard...

moving forward

Annual Reportfor Financial Year 2006

– moving forwardIVG

Assets under management

Germany 48 % Abroad 52 %

Amsterdam | 8 % Berlin | 12 %

Belgium | 4 %

Helsinki | 2 %

Iberia | 3 %

London | 11 %

Milan | 2 %

Paris | 15 %

Stockholm | 2 %

USA | 3 %

Other | 2 %

Düsseldorf | 8 %

Frankfurt | 10 %

Hamburg | 4 %

Munich | 7 %

Caverns | 7 %

Total volume: 18.3 billion

IVG Immobilien AG

Our market activities

Status: 31.12.2006

IVG Group key figures

in m 2005 2006Change

in %

Revenues 426.0 446.2 4.7

Total income 640.1 760.8 18.9

EBITDA 298.7 327.4 9.6

EBIT 242.6 253.2 4.4

Consolidated net profi t 110.1 149.2 35.5

Investments 534.9 1,095.6 104.8

Disposals 442.0 1,372.3 210.5

Total assets 3,686.9 4,396.8 19.3

Equity (carrying amounts) 921.9 1,187.6 28.8

Equity ratio at carrying amounts (adjusted for dividends) in % 24.1 26.0 7.9

Net asset value (equity at market values) 2,088.6 2,733.4 30.9

Equity ratio at market values (adjusted for dividends) in % 42.5 45.5 7.1

Net asset value per share in 18.00 23.56 30.9

Earnings per share in 0.83 1.20 44.6

Dividend per share in 0.38 0.50* 31.6

Investment: fair values 2,868 2,660 -7.3

Development: total investment volume (IVG share) 1,121 1,385 23.6

Funds: assets under management 13,844 13,115 -5.3

Storage Caverns: fair value (without tank farms) 584 1,179 101.9

Employees 821 832 1.3

* Proposed

IVG Development

market.

and to reinforce its market position.

IVG Storage Caverns

Storage caverns by type of use*

Number

Oil – long-term storage

18

Gas

20

Oil – short-term storage

2

Total number of caverns: 40

Project development by region*


Budapest | 5 %

Helsinki | 1 %

London | 15 %

Paris | 18 %

Hamburg | 1 %

Warsaw | 7 %

Munich | 4 %

Frankfurt | 39 %

Düsseldorf | 3 %

Berlin | 7 %



in %

Total income 119.1 110.2 -7.5

EBIT 44.4 4.2 -90.5


Total costs (IVG share) 1,120.8 1,385.2 23.6

Capital tie-up 393.7 443.2 12.6


in %

Total income 102.3** 44.9 -56.1

EBIT 76.9** 14.4 -81.3

Employees 51 53 3.9

Investments 157.8 36.7 -76.7

Number of caverns 40 40 0.0** Includes fi nance leasing ( 58.8 m)

1

Contents

Management 2In dialogue 2Company boards 6Report of the Supervisory Board 7

IVG – moving forward 14Strategy 15Markets 20Value management 28

Our divisions 34IVG Investment 35IVG Funds 40IVG Development 46IVG Storage Caverns 52

Corporate responsibility 56Corporate governance 57Corporate citizenship 60Employees 61

Investor relations 68

FINANCIAL REPORTGroup management report 74Consolidated fi nancial statements 116Auditors’ report 193

Other information 194Property overview 196Development projects 204Consolidated subsidiaries and equity investments 206

Glossary 214Five-year overview 216

Contact and fi nancial calendar

2

In dialogue

IVG has new senior management in 2007. What will that mean for the company’s future development?Dr Leichnitz: Overall IVG is in good shape. The com-

Dr Wolfhard Leichnitz, Chairman of the Management Board

Dr Bernd Kottmann, Deputy Chairman of the Management Board, CFO

Dr Georg Reul, Investment and Funds

Andreas Barth, Development

Dr Wolfhard Leichnitz

3

2006 was a successful year in financial terms. What are you particularly pleased with?Dr Kottmann:

-

-

-

By increasing the stake in OIK you have reinforced the institutional side of your funds business. What does this mean for the overall structure?Dr Reul:

-

The development business is also due to grow. How do you intend to make your mark on the division in the future?Barth:

-

Dr Georg Reul Andreas BarthDr Bernd Kottmann

Management

IVG – mov ing fo rward

Div is ions

Corpora te respons ib i l i t y

Investor re la t ions

Group management repor t

Conso l ida ted f inanc ia l s ta tements

Other in format ion

4

--

After much delay the G-REIT is finally on its way. What does the introduction of REITs mean for IVG?Dr Leichnitz:

-

The share price performed very well last year. What share of the earnings for 2006 can the shareholders expect?Dr Kottmann:

-

-

The market is currently highly liquid. With which products does IVG intend to benefit from this in the future?Dr Reul:

-

-

5

--

-

The European metropolitan regions are developing very differently. Which markets is IVG Development looking at particularly closely?Barth:

-

-

You want to build on the company’s strengths. What are these strengths and what does that mean for the current year? Dr Leichnitz:

we will enter markets selectively-

we are bundling our strengths

-

we are making the company even more transparent

-

Management


Div is ions





Other in format ion

6

Company boardsManagement Board

Dr Wolfhard Leichnitz,

Dr Bernd Kottmann,

Andreas Barth,

Dr Georg Reul, Bonn

Dr Eckart John von Freyend,

Dr Dirk Matthey, Bonn

Supervisory Board

Detlef Bierbaum,

Peter Rieck,

Franz-Xaver Baumgartner,

Dr Eckart John von Freyend,

Dr Gert Haller,

Matthias Graf von Krockow, Cologne

Rudolf Lutz, Bonn

Paul William Marcuse,

Friedrich Merz,

Claus Schäffauer,

7

Report of the Supervisory Board

Detlef Bierbaum, Chairman of the Supervisory Board

Dear Shareholders,

Appropriate monitoring of business conduct and good liaison with the Management Board

Management


Div is ions





Other in format ion

8

--

Supervisory Board and committees

-

Per-sonnel Committee and an Audit Committee

--

--

-

Key topics of discussion and committee resolutions

-

Acquisitions and disposals

-

-

-

Project developments-

London.

Corporate strategy and planning

9

-

-

Changes to the Articles of Association-

-

Changes in the Management Board

-

-

Board.

-

-

-

-

-

-

Statement of compliance shows the quality of corporate governance

--

-

Management


Div is ions





Other in format ion

10

-

-

-

-

-

-

-

-

Audit Committee deliberations on the annual financial statements and consolidated financial statements

-

-

-

-

-

2006 financial statements approved

-

-

-

11

-

--

-

-

--

Explanation of compulsory information in accordance with the acquisitions guide-lines implementation law amended on 8 July 2006, in accordance with Sections 289 Para. 4 and 315 Para. 4 German Commercial Code (HGB)

-

--

-

Changes to the Supervisory Board

-

-

-

Management


Div is ions





Other in format ion

internationalin market activities

selectively and

potential

14

IVG – moving forward

Strategy:

Further focussing and streamlining

of market activities

Markets:

Positive trend in economy and markets

Value management:

Differentiated management

at Group and division level

1515

STRATEGY

General environment for real estate markets is positive

Our goal: To increase the value of the company by profi table growth

Focus 2007: We are concentrating our market activities and tightening our internal structures and processes

Growth market: Real estate is becoming increasing important for the capital markets

Our path: IVG is building on its market position

Changes for 2007: Four divisions and profi t centres

moving forward Strategy

Management


Div is ions





Other in format ion

16

Organization of the divisions -

Growth in our core business

Increase in efficiency and transparency

-

Independent divisions to be closely aligned with markets

Caverns.

-

Strategy

Action strategy Key steps

Develop our market systematically: We focus on work on office buildings and storage caverns and concentrate regionally on attractive markets.

• Concentrate on the core business of office properties and storage caverns

• Sell properties outside the core business• Select locations specifically by division

Develop our abilities dynamically: We develop our businesses via autonomous divisions.

• Independent business development in four autonomous divisions• Focus on core markets, Germany is one key growth area• Expand position as project developer• Extend performance of fund business along two lines• Separate structure for the storage caverns business

Manage our business in an integrated way: We consolidate functions with synergy potential.

• Consolidation of key head office functions and the branch office network

• Central purchase and sale of properties (Transaction) for the Investment and Funds divisions

• Central asset management for the Investment and Funds divisions across all regions

• Use benefits of integration for overhead structure/administration

Grow the value of our business securely: We direct our activities towards growing the value of the company.

• Continue to develop value-oriented management and decision making criteria and anchor them in controlling/reporting

• Increase transparency by clear allocation of costs within the Group/to the divisions

• Fair value reporting

17

Investment division: Focus on office proper-ties and accelerated growth in Germany

-

--

-

-

-

Funds division: Substantial growth from new products and structural integration

-

--

--

-

-

-

Management


Div is ions





Other in format ion

18

Development division: Growth in selected markets with greater autonomy

-

-

--

Storage Caverns division: Successive expansion of the cavern business and sale of the tank parks

-

-

-

IVG Group

OPERATIONAL HEAD OFFICE DEPARTMENTS

Transaction

Asset Management

DIVISIONS

Investment Funds Development Storage Caverns

Private investors(EuroSelect)

Instit. investors(OIK)

Strategy

19

Integration of key functions increases effi-ciency and strengthens the market presence

--

Transaction -

department Asset Management -

-

Change in reporting practice creates greater transparency

--

G-REIT: International standard comes to Germany too

-

shareholders.

IVG – moving forward-

-

-

-

-

-

-

companies.

Management


Div is ions





Other in format ion

20

MARKETS

London and Paris

Central London records strong rental growth

2

2

-

London and Paris

Top office rentin /m2/mth

Prime yieldsin %

– London WE– London City– Île-de-France... Forecast

98 00 02 04 06 08

98 00 02 04 06

Source: IVG research/Agency data

125

100

75

50

25

7.0

6.5

6.0

5.5

5.0

4.5

4.0

3.5

2121

Paris: Record year on the letting and investment markets

2.

Germany

German metropolitan regions starting upward trend

Munich

2

Hamburg2

Düsseldorf

2

European metropolitan areas experiencing broad-based growth

Economic upturn and availability of capital also stimulate German markets

Business climate for offi ce property market remains favourable in 2007

moving forward Markets

Management


Div is ions





Other in format ion

22

Frankfurt

2

Berlin2

Positive developments forecast beyond 2007 for core markets

High demand from overseas investors

-

-

-

Markets

Germany


Prime yieldsin %

50

45

40

35

30

25

20

15

98 00 02 04 06 08

5.6

5.4

5.2

5.0

4.8

4.6

4.4

4.2

98 00 02 04 06

– Frankfurt– Munich– Berlin– Hamburg– Düsseldorf... Forecast


23

Other Europe

Northern Europe experiencing strong expansion phase

-

Stockholm and Hel-sinki

-

m2 2

-

--

-

-

Western Europe: Amsterdam on the way upAmsterdam

Brussels

2

Northern Europe


Prime yieldsin %

50

45

40

35

30

25

20

15

98 00 02 04 06 08

7.0

6.5

6.0

5.5

5.0

4.5

4.0

98 00 02 04 06

– Stockholm– Amsterdam– Helsinki– Brussels... Forecast


Management


Div is ions





Other in format ion

24

Southern Europe: Partly dynamic, partly cautious recovery

Madrid

2

-

Milan and Lisbon

-

-

-

Southern Europe


Prime yieldsin %

Markets

45

40

35

30

25

20

15

98 00 02 04 06 08

7.5

7.0

6.5

6.0

5.5

5.0

4.5

4.0

98 00 02 04 06

– Madrid– Milan– Lisbon... Forecast


25

-

Central and Eastern Europe: Demand and supply both dynamic

Budapest Prague and Warsaw

-

Eastern Europe


Prime yieldsin %

40

35

30

25

20

15

98 00 02 04 06 08

12

10

8

6

4

98 00 02 04 06

– Warsaw– Budapest– Prague... Forecast


Management


Div is ions





Other in format ion

26

Markets

Non-European markets

USA: Yield compression coming to an end--

-

-

--

-

Average cap ratein %

8.5

8.0

7.5

7.0

6.5

6.0

98 00 02 04 06

– US average

100

95

90

85

80

75

98 00 02 04 06 08

– US office rents... Forecast


USA

Average office rentBase in 2000 = 100

27

Prime yieldsin %

Asia-Pacific maintains dynamic growth

-

– Shanghai– Sydney– Seoul

8

7

6

5

4

3

00 01 02 03 04 05 06

125

100

75

50

00 01 02 03 04 05 06

– Tokyo– Singapore– Hong Kong


Asia

Top office rentBase in 2000 = 100

Management


Div is ions





Other in format ion

28

-

-

Net asset value up by 30.9 %

-

-

2002 2003 2004 2005 2006

NAV per share in 14.16 14.41 15.20 18.00 23.56

NAV total in bn 1.64 1.67 1.76 2.09 2.73

VALUE MANAGEMENT

Value management adapted to meet structural changes

-

divisions.

Tailored value management for all divisions

-

-

-

Positive effects begin with the specification process

2929

NAV calculation: Market value of property measured by independent appraisals

Market valuation using DCF method

Greater transparency due to creation of separate divisions

Value management in all four divisions

Projects to defi ne key management indicators

Net asset value up by 30.9 %

moving forward Value management

Market value of storage cavern business includes development reserves

Management


Div is ions





Other in format ion

30

Value of project developments: Carrying values plus future earnings contributions

Value of funds business: DCF method for OIK, EBIT multiple for EuroSelect

Balance sheet: Double counting avoided through verifi cation

SpreespeicherBerlin, Germany

Value management

31

Net asset value

in m 2006 2005

Intangible assets 5.8 5.7

Other property, plant and equipment 133.6 166.0

Investment properties 2,849.9 3,502.3

Storage caverns/tank farms 1,229.0 –

Project development (discounted contribution margins) 177.5 69.4

Funds 341.9 190.5

Financial assets 157.6 208.3

Shares in associates 44.6 30.7

Receivables and other assets 12.5 13.6

Pre-paid expenses 2.6 2.4

Non-current assets 4,955.0 4,188.9

Inventories 229.0 61.4

Receivables and other assets 152.7 127.4

Receivables from income taxes on securities 13.7 13.9

Securities 19.7 30.0

Non-current assets held for sale 17.1 126.7

Cash and cash equivalents 549.0 90.9

Pre-paid expenses 3.3 6.0

Current assets 984.5 456.3

Total assets 5,939.5 4,645.2

Hybrid capital 195.9 –

Financial liabilities 1,726.2 1,701.3

Pension provisions 10.6 9.9

Other provisions 136.7 75.6

Accounts payable/other liabilities 35.4 4.0

Deferred income 10.1 7.1

Non-current liabilities 2,114.9 1,797.9

Financial liabilities 725.8 571.7

Other provisions 36.0 30.5

Provisions for income taxes 26.0 24.2

Accounts payable/other liabilities 291.6 118.2

Deferred income 10.5 14.1

Liabilities included in disposal groups 1.3 1.0

Current liabilities 1,091.2 759.7

Total liabilities 3,206.1 2,557.6

NAV 2,733.4 2,087.6

NAV per share in 23.56 18.00

Deferred taxes 139.9 122.7

NNAV after deferred taxes 2,594.3 1,964.8

NNAV/per share in 22.36 16.94

Fair value derivatives 2.9 -19.5

Fair value liabilities -6.4 -30.1

NNNAV 2,590.8 1,915.2

NNNAV per share in 22.33 16.51

Management


Div is ions





Other in format ion

confi dence and provide security

clearproperty focus

34

IVG Investment:

Successful transactions completed,

concentration on offi ce properties continues

IVG Funds:

Greater performance

in both OIK and EuroSelect lines

IVG Development:

Reorganization going well,

new branches established

IVG Storage Caverns:

New leases signed, capacities to be extended

Our divisions

3535

IVG INVESTMENT

Overview


in %

Income (of which net rental income)

237.4(190.4)

219.0(173.1)

-7.8(-9.1)

Total income (of which gains on property disposals)

314.6(49.3)

480.6(226.4)

52.8(359.2)

EBIT 131.3 290.4 121.2


Investments 227.7 788.7 246.4

Property disposals 227.5 1,110.7 388.2

Financial year 2006 – Increased investment in Germany

2

Goal: Growth and further improvements in profi tability

Focus on offi ce properties

Successful disposals and attractive acquisitions

Investment focus on Germany

moving forward IVG Investment

Management


Div is ions





Other in format ion

36

Leverage size when purchasing, manage professionally over the holding period, and deploy good networks on disposal

-

-

IVG Investment

Leases by expiry datein %

2007

7.9

2008

9.8

2010

13.1

2011

32.5

Forindefinite

period

14.3

2009

22.4

Fair values by region


Belgium | 17 %

Helsinki | 10 %

London | 12 %

Milan | 2 %

Paris | 17 %

Munich | 14 %

Hamburg | 9 %

Frankfurt | 4 %

Düsseldorf | 4 %

Berlin | 9 %

Iberia | 2 %Total volume: 2.7 billion

Change in fair value of investment portfolio

-

Sales prices above estimated value + 50 m

9.8 %aboveestimated valueTrading gains + 34 m

Gains on purchase + 37 m

Like-for-like development - 10 m

Total capital appreciation + 111 m

Status: 31.12.2006

37

Like-for-like development of net rents

in m Germany Abroad Total

Positive change 1.7 3.7 5.4

Negative change -1.5 -5.8 -7.3

Changesin balance in %

0.20.6

-2.1-2.8

-1.9-1.7

Concentration on offi ce properties in selected European growth centres

Balanced risk-return profi le

Details on the valuation of the property portfolio

Discount rate Capitalization rate

in % in %

Berlin 5.75-12.00 5.75-12.00

Düsseldorf 5.75-8.25 5.75-8.25

Frankfurt 7.00-10.00 7.00-10.00

Hamburg 4.75-10.00 4.75-10.00

Munich 5.75-9.50 5.75-9.50

Brussels 5.55-9.94 6.15-10.75

Helsinki 6.25-13.75 5.00-12.00

London 6.28-8.99 4.75-6.25

Milan 7.75-8.25 5.75-6.38

Paris 6.0-8.0 4.75-7.00

Lisbon 8.75-9.39 6.75-8.50

Acquisitions for 1.9 billion with a focus on Germany

Channel Hamburg,Germany

Management


Div is ions





Other in format ion

38

2

2 in

ing vacancies.

Investment purchases

Country Property/portfolioLettable

areaInvest-ments

’000 m2 m

Germany Allegro, various 215.7 505.1

Germany, UK, France

Paneuropa portfolio, various

64.2 373.7

Germany Nautilus, various 65.6 188.5

Germany Berlin portfolio 29.5 103.3

Germany SALA portfolio, various 406.6 114.5

Germany St.-Martin-Str. 76, Munich 57.4 112.9

Germany Channel portfolio, Hamburg 47.4 97.9

London 55 Moorgate, London 6.0 75.0

Germany Nymphenburger Str. 3, Munich

15.0 65.7

Germany Other 132.5 203.5

Europe Other 23.3 78.8

1,063.2 1,918.9

Disposals for 961 million and a gain of 226 million

Germany.

IVG Investment

Nymphenburger Strasse 3 Munich, Germany

39

-

2 -

-

Investment disposals


areaSales

proceeds

’000 m2 m

Germany Rebound portfolio, various 262.0 315.3

Germany G-Log portfolio, various 256.7 95.2

Germany Triangle portfolio, various 73.0 85.0

Sweden Vattenfall buildings, Stockholm

81.3 78.6

UK Soho Square, London 5.6 77.0

Germany Capital Residential portfolio, Berlin 42.6 45.7


Europe (excl. Germany)

Other 64.5 236.7

829.6 961.4

197,000 m2 let, effective occupancy of 91.1 % at year end

2 -

-

Ten top tenants

Company Net rate

in %

1. Régie des Bâtiments service extérieur Br (Brussels) 10.0

2. MALESHERBES ANJOU HSBC (Paris) 3.6

3. OMX Technologies (London) 2.6

4. AXA Insurance Plc. (London) 2.3

5. PricewaterhouseCoopers sarl (Luxembourg) 2.3

6. BNP Paribas UK Holdings Ltd. (London) 2.2

7. EPCOS AG OFW KL (Munich) 2.1

8. Shell Deutschland Oil GmbH (Hamburg) 1.8

9. UNIVERSAL Holding GmbH (Berlin) 1.4

10. BT Worldwide Ltd BT ignite (Brussels) 1.3

Outlook-

Management


Div is ions





Other in format ion

40

IVG FUNDS

Overview


in %

Income 93.8 105.7 12.7

Total income 106.3 121.8 14.6

EBIT 43.9 44.6 1.6

Number of private investor funds under management 79 70 -11.4

Equity raised for private investor funds 170 252 48.2

Number of institutional funds under management 29 30 3.4

Volume of institutional funds under management 9,672 9,927 2.6

Investments 17.4 203.2 1,067.8


Positive overall development for the year

-

Goal: To take advantage of the healthy climate and grow

-

-

Funds volume by region


Amsterdam | 12 %

London | 11 %

Paris | 15 %

Iberia | 4 %

Belgium | 3 %

Milan | 3 %

Stockholm | 3 %

USA | 4 %

Other | 1 %

Berlin | 14 %

Düsseldorf | 10 %

Frankfurt | 9 %

Hamburg | 4 %

Munich | 7 %

Total volume: 13.1 billion Status: 31.12.2006

4141

Build on market position

OIK as a platform for institutional funds

Expand the range of structured products

EuroSelect

EuroSelect property funds in distribution

moving forward IVG Funds

Equity placedin m

2003 2004 2005 2006

21

88

170

252

Management


Div is ions





Other in format ion

42

First IVG fund of funds for private investors launched

--

IVG Funds

Equity placed by fund managers 2006

Equity Funds volume

m m

WEM Capital, Munich 405.0 783.8

KG Allg. Leasing (ALCAS), Grünwald 339.1 863.7

Jamestown Management, Cologne 328.8 955.0

IVG Immobilien, Bonn 327.1 * 700.8

CFB Commerz Fonds, Düsseldorf 295.6 860.7

HL Hannover Leasing, Munich 249.0 523.1

Sachsenfonds, Munich 226.7 570.2

MPC Münchmeyer Petersen, Hamburg 208.1 342.8

DBM Fonds (ABN AMRO), Cologne 200.0 200.0

US-Treuhand, Darmstadt 191.9 501.7

* 252.1 million plus 75 million from institutional Italy fund Petrarca Source: Marktanalyse der Beteiligungsmodelle 2007, Stefan Loipfinger

43

Structured products: Foundation fund launched in Italy

Success factors:Development strength and focus

Outlook: EuroSelect

60 London WallLondon, UK

Management


Div is ions





Other in format ion

44

OIK

-

-

-

-

-

Products for institutional investors

-

IVG Funds

Assets under managementin bn

2002

7.4

2003 2004 2005 2006

8.28.8

9.7 9.9

45

Via Cavour 185 Rome, Italy

Direct mandates

Outlook: Pursue targeted diversifi cation

Management


Div is ions





Other in format ion

46

IVG DEVELOPMENT

Overview


in %

Income 51.1 75.9 48.5

Total revenue 119.1 110.2 -7.5

EBIT 44.4 4.2 -90.5

Project volume 1,120.8 1,385.2 23.6

Committed capital 393.7 443.2 12.6

Investments 70 67 -4.7


2006 – Year of restructuring

Project development business becomes an independent division

14 CornhillLondon, UK

47

Growth by concentrating on mid-sized projects

Greater effi ciency thanks to high-performance local profi t centres

47

Emphasis on offi ce projects in selected cities

Increasing contributions to Group earnings expected in future

moving forward IVG Development

Project development by region


Budapest | 5 %

Helsinki | 1 %

London | 15 %

Paris | 18 %

Hamburg | 1 %

Warsaw | 7 %

Munich | 4 %

Frankfurt | 39 %

Düsseldorf | 3 %

Berlin | 7 %


Management


Div is ions





Other in format ion

Status: 31.12.2006

48

IVG Development

Average target return of 12.5 % at project level

Invoiced projects 2006

Project UseLettable

areaOccupancy/marketing

rate Realization IVG share Status Exit

in m2 in % Year in %

Brussels Madou Plaza Offi ce 39,835 100 2006 100 completed sold

Budapest Infopark C building Offi ce 13,376 100 2005 100 completed sold

Munich City Limit Retail 16,343 100 2006 100 completed sold

Frankfurt NIKE Headquarters Offi ce 8,090 100 2006 50 completed sold

Berlin DHL Wustermark Offi ce and logistics 10,258 100 2006 100 completed sold

Düsseldorf LogistikzentrumIndustriereifenkontor

Offi ce and logistics 27,090 100 2006 100 completed sold

Paris FDV I BC Ilot 9, 10 + 11 Residential n/a 100 2006 30 completed sold

Paris FDV I M1 H ~ Avenue de France

Offi ce12,612 100 2006 30 completed sold

Lettable area 100 % in m2 127,604Total investment volume 100 % in million 416Total investment volume IVG share in million 276Corresponds to % 66

49

employed.

Business in 2006: Eight projects success-fully completed and/or sold

2 and is

AIRRAILFrankfurt, Germany

Successful continuation of ongoing projects

2.

Management


Div is ions





Other in format ion

50

IVG Development

Projects under development

Project UseLettable

area

Occupancy/marketing

ratePlanned

realizationIVG

share Status Exit


Berlin SalzuferOffice and site development 19,341 83

2007/2011 50 completed partial sale

Budapest Infopark D building Office 18,115 3 2007 100 under constr. marketing

Budapest RiverPark/Közraktar ut 30/32 Office 9,470 0 2008 100 under constr. marketing

Düsseldorf Artquadrat Museumsmeile Bonn Office 9,700 0 2008 100 planning marketing

Düsseldorf CompassOfficeand logistics 13,781 100 2007 100 under constr. sold

Frankfurt AIRRAIL Office, retail and hotel 141,713 52 2009 81 under constr. marketing

Helsinki Vuorikatu Office 7,384 88 2006 100 completed marketing

London Caxton Hall Office 5,277 31 2007 100 under constr. marketing

London 14 Cornhill Office 15,472 0 2008 100 under constr. marketing

Munich Squareparc - Parkstadt Schwabing Office 23,148 55 2008 33 under constr. partial sale

Paris FDV I Neuilly sur Seine Office 12,853 100 2007 30 under constr. marketing

Paris FDV I Oise Logistics Parc Officeand logistics 141,428 100 2007 30

part-completed sold

Paris FDV I Les Chartreux Bureaux Office 7,893 100 2008 30 under constr. marketing

Paris FDV I Les Chartreux Logements Residential n/a 82 2007 30 under constr. partial sale

Paris FDV II Colombes Champs Philippe Office 26,215 0 2008 21 under constr. marketing

Paris FDV II BC South Phase Office 63,408 100 2009 21 under constr. sold

Paris FDV II Suresnes Office 74,770 53 2010 21 under constr. partial sale

Paris FDV II Courbevoie Office 15,769 0 2011 21 planning marketing

Paris FDV II Ris-Orangis Retail 73,000 100 2008 21 planning sold

Warsaw Galeria Astoria Retail 11,000 85 2008 100 under constr. marketing

Warsaw Curtis Plaza II (Horizon Plaza) Office 35,209 0 2008 100 under constr. marketing

Lettable area 100 % in m2 741,595 Status: 31.12.2006Total investment volume 100 % in million 2,441Total investment volume IVG share in million 1,385Corresponds to % 57Capital tie-up in million 443Average monetary occupancy rate for projects under construction in % 53

51

2

2

2

IVG/AXA joint venture in Paris

2

Outlook 2007

2

2

Caxton HallLondon, UK

Management


Div is ions





Other in format ion

52

IVG STORAGE CAVERNS

Overview*


in %

Revenues(of which from letting)

43.5(35.6)

44.4(38.1)

2.1(6.9)

Total income ** 102.3 44.9 -56.1

EBIT ** 76.9 14.4 -81.3

Employees 51 53 3.9

Investments 157.8 36.7 -76.7

Number of caverns 40 40 0.0

* Excl. tank parks ** Incl. finance lease ( 58.8 m)

Storage cavern business continues to bene-fit from international energy markets in 2006

-

caverns.

Independent division with aspirations for growth

-

--

-

Energy storage is a growth market

Permits for capacity expansion in strategically good position

5353

Benefi t from international energy markets

Capacities can be more than doubled

Contribution to perennialization of total earnings

Business in 2006: Agreements signed for the construction of fi ve new caverns

Expansion of storage cavern business and sale of tank parks planned

accordingly.

Storage caverns by type of use

Number

Oil – long-term storage

18

Gas

20

Oil – short-term storage

2

moving forward IVG Storage Caverns

Management


Div is ions





Other in format ion

Total number of caverns: 40 Status: 31.12.2006

moving forward

clear organizational

structures

intelligent ways

company.

56

Corporate governance:

IVG complies with the recommendations

of the German Corporate Governance Code

Corporate citizenship:

Social commitment is institutionalized

in the Foundation

Employees:

The Group promotes qualifi cations and

individual responsibility

Corporateresponsibility

57

CORPORATE GOVERNANCE

Corporate governance is a central pillar of our corporate philosophy

In 2006 IVG complies almost entirely with the recommendations of the German Corporate Governance Code

-

-

---

-

--

We attach great importance to transparency and provide our target groups with compre-hensive and timely information

-

-

Management


Div is ions





Other in format ion

58

-

-

-

-

-

Fixed standards of conduct provide orientation for management and employees and ensure confidential behaviour

-

-

-

Corporate governance principles introduced

-

Corporate governance

5959

Statement of compliance in accordance with Sec. 161 Stock Corporation Act (Aktiengesetz)

Management remuneration is closely linked to company performance

Management


Div is ions





Other in format ion

60

CORPORATE CITIZENSHIP

IVG as a “good corporate citizen”

IVG Foundation established

Corporate citizenshipEmployees

61

EMPLOYEES

We rely on the qualifications and motivation of our employees

-

-

-

-

Slight increase in employee numbers

-

Employee structure by segment

Trainees34 (+7)

Portfolio management166 (-4)

Storage Caverns159 (+2)

Project development50 (-20)

Funds311 (+15)

Corporate functions112 (+11)

Total number of employees: 832 (+11)

13 %

38 %

4 %

20 %

19 %

6 %

Status: 31.12.2006

Management


Div is ions





Other in format ion

62

Age structure shows a balanced mix New Group structure gives staff and managers greater autonomy

-

--

-

Preparing for the future begins with solid vocational and professional training

-

Employees

Employee structure by age

up to 29

30-3950-59

60 and older

40-49

13 %

28 %

29 %

25 %

5 %

Status: 31.12.2006

63

An individual trainee concept enables beginners to make an optimal start to their career

coming years.

Regular exchanges with students and universities

Management


Div is ions





Other in format ion

64

-

--

We target our professional training precisely and foster a holistic approach

--

-

-

-

We enable our employees to participate in the company’s success

-

--

The IVG value programme

Employees

65

The IVG employee loan

Performance share plan provides our managers with an additional performance incentive

Management


Div is ions





Other in format ion

innovativeservice concepts

new knowledge

new ideas

68

Another successful year in the markets for IVG shares

The second half-year saw particularly strong share price performance

Investor relations

69

-

-

-

Long-term return well above market performance

same period.

Share price performanceIndex: 1 January 2006 = 100

180

160

140

120

100

80

Jan 06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06 Jan 07

– IVG share– EPRA– MDAX

Management


Div is ions





Other in format ion

70

Shareholder structure

Sal. Oppenheim20 %

Free fl oat80 %

Dividend increased

Shareholder structure: Free fl oat up in 2007 to 80 %

% and 5.1

5.1

Signifi cant increase in market capitalization due to strong trading interest

Share included in STOXX 600

Research coverage extended

Total performance 2006in %

IVG

86

EPRA

49

DAX

22

MDAX

29

Stoxx 50

10

Status: January 2007

7171

Investor relations further intensifi edKey data

SIN/ISIN 620570/DE0006205701

Code IVG

Stock exchanges Frankfurt, Düsseldorf, Munich, Berlin/Bremen

Market segment Prime Standard/Amtlicher Handel

Index membership(selection)

MDAX, Stoxx 600, MSCI Small Cap Index, EPRA/NAREIT Index, E&G EPIX, E&G DIMAX, GPR 15

Designated sponsors Dresdner Kleinwort Wasserstein, Sal. Oppenheim jr. & Cie. KGaA

Market capitalization * 3.8 billion

Free fl oat marketcapitalization * 2.8 billion

Number of shares * 116 million

Share price * 32.54

First listed 01.10.1986

Last capital increase 2000

* 31.12.2006

Share data

in 2004 2005 2006Change

in %

Price at year end 11.95 17.71 32.54 83.7

Year high 12.40 17.95 33.29 85.5

Year low 8.76 12.25 18.25 50.0

Average daily trading volume (units) 157,000 252,000 438,000 73.8

Earnings per share 0.61 0.83 1.20 44.6

Cash fl ow per share 2.28 2.58 2.82 10.2

Dividend per share 0.35 0.38 0.50* 31.6

NAV per share 15.20 18.00 23.56 30.9

* Proposed

Management


Div is ions





Other in format ion

solid performance principles

profi tably

75

OVERVIEW

Group reports further earnings improvements

-

-

Sectoral and regional focus sharpened further

Investors reward performance with improved share price

-

-

Further growth targeted for 2007

-

-

Diagrams and graphs are not part of the audited Group management report.

Management


Div is ions





Other in format ion

77

IVG Group

Portfolio management Project development Real estate investment funds

Group structure 2006

Group structure 2007

IVG Group

OPERATIONAL HEAD OFFICE DEPARTMENTS

Transaction

Asset Management

DIVISIONS

Investment Funds Development Storage Caverns

Private investors(EuroSelect)

Instit. investors(OIK)

SubsegmentStorage caverns OIK

Management


Div is ions





Other in format ion

80

Structured products for foreign institutional investors too

-

-

Goals and strategy

Goal is profitable growth

divisions

The core businesses are office properties and storage caverns

--

-

-

Creation of a broad capital base

-

--

-

81

Promote an entrepreneurial orientation of the divisions

-

--

-

-

Financial goals

-

Non-financial goals-

--

-

Competitive situation: Buyer’s market for lettings, seller’s market for investments

-

-

Management


Div is ions





Other in format ion

82

-

--

-

---

Legal and economic factors in Europe: Convergence of overall frameworks with differences in economic development

-

-

-

-

-

-

83

Legal structure of the Group: No major changes

-

-

-

-

--

Research and development: Competitive advantage from in-house property market research

-

-

-

-

-

Management


Div is ions





Other in format ion

84

Company management

Performance criteria: The Group measures performance by value-based indicators

--

-

-

-

-

-

--

-

--

85

Management and control

Management and control functions are organized along proven lines

-

---

-

-

Profit centre structure transfers greater responsibility to the divisional level

-

IVG is committed to the principles of corporate governance

-

---

-

Group voluntarily applies broader range of standards

-

-

--

-

-

-

Remuneration of management and supervisory boards

Management


Div is ions





Other in format ion

86

BUSINESS AND OPERAT-ING ENVIRONMENT

Economic development and the property industry

Overall economic environment-

--

Economic development

--

-

-

Economic data for the whole EU (25 states)

Growth rates in % 2003 2004 2005 2006 2007* 2008*

GDP 1.3 2.4 1.7 2.9 2.4 2.4

Interest 4.2 4.2 3.4 3.8 n/a n/a

Investments 1.0 3.1 3.0 4.9 3.6 3.3

Employment 0.4 0.7 0.9 1.4 1.1 0.9

Inflation 1.9 2.1 2.2 2.1 2.3 2.0

Private consumption 1.6 2.0 1.5 2.2 1.9 2.3

Source: European Directorate General for Economic and Financial Affairs* Forecast in autumn 2006

-

-

87

Economic development in selected European states

Gross domestic product Total investments Construction Domestic demand Employment

Growth rates in % 2004 2005 2006* 2004 2005 2006* 2004 2005 2006* 2004 2005 2006* 2004 2005 2006*

Belgium 3.0 1.1 2.3 7.9 4.0 2.3 6.4 5.3 2.1 3.1 1.6 2.0 0.6 0.9 0.9

Germany 1.2 0.9 2.6 -0.4 0.8 2.1 -3.8 -3.6 1.4 0.0 0.5 1.7 -0.5 -0.6 0.6

Finland 3.5 2.9 2.6 4.9 3.3 2.8 4.9 4.3 2.5 3.1 4.4 2.4 0.4 1.3 0.2

France 2.3 1.2 1.7 3.0 3.6 3.6 3.2 2.3 2.9 3.0 1.9 2.2 0.0 0.2 0.8

UK 3.3 1.9 2.1 6.0 2.7 3.1 3.2 5.3 2.8 3.8 1.8 2.4 1.0 1.0 0.5

Italy 1.1 0.0 1.2 2.2 -0.6 2.0 0.9 0.6 1.1 1.0 0.3 1.4 0.0 -0.4 0.5

Poland 5.3 3.2 4.5 6.3 6.2 10.8 5.4 6.9 10.0 5.9 1.9 5.3 n/a n/a 0.8

Sweden 3.7 2.7 3.6 5.1 8.5 3.3 5.3 7.6 4.0 1.5 2.7 2.8 -0.5 0.3 1.0

Spain 3.2 3.5 2.6 4.9 7.2 4.7 5.5 6.0 3.4 4.8 5.0 3.7 2.6 3.1 2.5

Czech Republic 4.2 6.1 5.7 4.7 1.3 6.5 4.7 1.5 6.6 2.8 2.1 3.9 0.1 1.6 0.5

Hungary 4.9 4.2 3.8 7.7 5.6 3.6 n/a n/a 1.6 4.2 1.4 0.8 -0.7 0.0 0.1

* Estimate in late 2006 Source: European Directorate General for Economic and Financial Affairs

Demand for office space

--

lion m2

-

-

-

Price and interest rate developments

-

-

Management


Div is ions





Other in format ion

88

Changes in interest rates*

Interest rate in % 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Belgium 5.8 4.8 4.8 5.6 5.1 5.0 4.2 4.2 3.4 3.8

Germany 5.6 4.6 4.5 5.3 4.8 4.8 4.1 4.0 3.4 3.8

Spain 6.4 4.8 4.7 5.5 5.1 5.0 4.1 4.1 3.4 3.8

France 5.6 4.6 4.6 5.4 4.9 4.9 4.1 4.1 3.4 3.8

Italy 6.9 4.9 4.7 5.6 5.2 5.0 4.3 4.3 3.6 4.1

Finland 6.0 4.8 4.7 5.5 5.0 5.0 4.1 4.1 3.4 3.8

Czech Republic n/a n/a n/a 6.9 6.3 4.9 4.1 4.8 3.5 3.8

Hungary n/a n/a 9.9 8.6 8.0 7.1 6.8 8.2 6.6 7.3

Poland n/a n/a 9.5 11.8 10.7 7.4 5.8 6.9 5.2 5.3

Sweden 6.6 5.0 5.0 5.4 5.1 5.3 4.6 4.4 3.4 3.7

UK 7.1 5.6 5.0 5.3 5.0 4.9 4.6 4.9 4.5 4.4

Euro zone - - - - - 5.0 4.2 4.2 3.4 3.8

Comparison: USA 6.5 5.3 5.6 6.0 5.0 4.6 4.0 4.3 4.3 4.8

* Interest rates for ten-year government bonds Source: European Directorate General for Economic and Financial Affairs

Real estate investment markets

-

--

--

-

-

89

-

yield.

-

-

-

Property letting markets

2

-

-

-

-

Management


Div is ions





Other in format ion

90

Top rents Average rents Vacancy rates

Current*Change in

2006 Trend 2007 Current*Change in

2006 Trend 2007 Current**Change in 2006*** Trend 2007

in % in %

Berlin 20.50 0.0 up 11.50 0.0 up 9.30 -0.32 down

Brussels 22.90 10.1 up 15.40 2.7 up 9.63 -1.41 down

Budapest 20.00 8.1 up 14.00 0.0 fl at 12.83 1.20 down

Düsseldorf 21.00 2.4 up 12.25 0.0 up 11.60 -0.28 down

Frankfurt 34.00 3.0 fl at 13.00 0.0 fl at 16.60 -0.61 down

Hamburg 21.00 5.0 up 12.50 2.0 up 7.70 -0.30 down

Helsinki 25.00 0.0 up 17.00 13.3 up 7.50 -1.50 down

London 133.20 27.6 up 86.50 32.6 up 6.51 -2.20 down

Milan 43.75 4.9 up 22.50 8.2 fl at 9.99 -0.75 up

Munich 29.00 3.6 up 14.50 0.0 up 9.40 -1.11 down

Paris 60.80 7.2 up 39.20 -6.0 up 6.53 -0.23 up

Warsaw 22.00 29.4 up 15.00 15.4 up 5.37 -2.79 up

* Late 2006 in /m2/month Source: Cushman & Wakefi eld/IVG: European Real Estate Barometer** Late 2006 in %*** In % points

Net profitin m

2002

66.5

2004

74.9

2005

110.1

2006

149.2

2003

54.1*

EBITin m

2002

147.2

2004

202.6

2005

242.6

2006

253.2

2003

130.5*

* Adjusted for Polar bargain purchase revenue of 53.4 million

Office property markets in locations where IVG is active (Current stock and development projects)

91

Revenues and earnings

IVG remains on success path

-

-

Significant increase in net profit due to gains on disposals


in %

Revenues 426.0 446.2 4.7

Total operating profit 640.1 760.8 18.9

Net financial income -90.9 -59.4 -34.7

EBIT = operating earnings 242.6 253.2 4.4

EBIT in % of revenues 56.9 56.7 -0.4

Consolidated net profit 110.1 149.2 35.5

Cons. net profit in % of revenues 25.8 33.4 29.4

Undiluted earnings per share in 0.83 1.20 44.6

Changes in key items on the income statement

-

million.

Management


Div is ions





Other in format ion

92

--

-

-

-

-

Portfolio management segment: Still the central earnings driver

-

-

--

--

2

93

2

million.

Portfolio management purchases


areaInvest-

ments***

’000 m2 m

Germany Allegro, various* 215.7 505.1

Germany, UK, France

Paneuropa portfolio, various

64.2 373.7

Germany Nautilus, various* 65.6 188.5

Germany Berlin portfolio* 29.5 103.3

Germany SALA portfolio, various 406.6 114.5

Germany St.-Martin-Strasse 76, Munich*

57.4 112.9

Germany Channel portfolio, Hamburg* 47.4 97.9

London 55 Moorgate, London 6.0 75.0

Germany Nymphenburger Str. 3, Munich*

15.0 65.7

Germany Other** 132.5 203.5

Europe (excl. Germany) Other 23.3 78.8

1,063.2 1,918.9

* Transfer of beneficial ownership in 2007** Of which: 15.5 million transfer of beneficial ownership in 2007*** Without acquisition costs

-

2

--

Management


Div is ions





Other in format ion

94

Portfolio management disposals


areaSales

proceeds

’000 m2 m

Germany Rebound portfolio, various 262.0 315.3

Germany G-Log portfolio, various 256.7 95.2

Germany Triangle portfolio, various 73.0 85.0

Sweden Vattenfall buildings, Stockholm

81.3 78.6

UK Soho Square, London 5.6 77.0

Germany Capital Residential portfolio, Berlin 42.6 45.7


Europe (excl. Germany)

Other 64.5 236.7

829.6 961.4

Lettings

2

2

Ten top lettings and lease renewals by volume

Property/portfolio Tenant RentLettable

area

’000 ’000 m2

Munich MWM Epcos AG 3,320 33.5

Helsinki Vallila Properties SuomenOsuuskauppojenKeskuskunta SOK

1,620 10.7

London St. James’s Street Exane Ltd. 999 1.2

Paris Serbie IVG Leonard Fashion 800 1.6

HelsinkiSörnäistenRantatie 25

Kotimaisten Kielten Tutkimus-keskus 626 4.1

Hamburg Essener StrasseMakino Europe GmbH 530 7.3

Paris Vendôme Knight Frank 480 0.8

Milan Villa FioritaAgilent Technolo-gies Italia Spa 452 3.8

Paris Friedland Christian&Timbers 418 0.8

Berlin Bundesallee Bundesagentur für Arbeit

418 4.1

Rental income by region*


Belgium | 25 %

Helsinki | 19 %

London | 6 %

Hamburg | 5 %

Munich | 15 %

Frankfurt | 4 %

Iberia | 2 %

Paris | 9 %

Total volume: 130.1 million

* Status: 31.12.2006

Berlin | 8 %

Düsseldorf | 5 %

Milan | 2 %

95

Sub-segment storage caverns: Expansion of the caverns site creates earnings potential for the future

-

-

Funds segment: Increase of 48 %in funds raised

-

-

-

-

-

-

--

-

-

---

Management


Div is ions





Other in format ion

96

-

--

Direct mandates-

-

-

Project development segment: A successful year even during reorganization

million.

-

-

2

-

-

97

Management


Div is ions





Other in format ion

Projects under development

Project UseLettable

area

Occupancy/marketing

ratePlanned

realizationIVG

share Status Exit


Berlin SalzuferOffice and site development 19,341 83

2007/2011 50 completed partial sale

Budapest Infopark D building Office 18,115 3 2007 100 under constr. marketing

Budapest RiverPark/Közraktar ut 30/32 Office 9,470 0 2008 100 under constr. marketing

Düsseldorf Artquadrat Museumsmeile Bonn Office 9,700 0 2008 100 planning marketing

Düsseldorf CompassOfficeand logistics 13,781 100 2007 100 under constr. sold

Frankfurt AIRRAIL Office, retail and hotel 141,713 52 2009 81 under constr. marketing

Helsinki Vuorikatu Office 7,384 88 2006 100 completed marketing

London Caxton Hall Office 5,277 31 2007 100 under constr. marketing

London 14 Cornhill Office 15,472 0 2008 100 under constr. marketing

Munich Squareparc - Parkstadt Schwabing Office 23,148 55 2008 33 under constr. partial sale

Paris FDV I Neuilly sur Seine Office 12,853 100 2007 30 under constr. marketing

Paris FDV I Oise Logistics Parc Officeand logistics 141,428 100 2007 30

part-completed sold

Paris FDV I Les Chartreux Bureaux Office 7,893 100 2008 30 under constr. marketing

Paris FDV I Les Chartreux Logements Residential n/a 82 2007 30 under constr. partial sale

Paris FDV II Colombes Champs Philippe Office 26,215 0 2008 21 under constr. marketing

Paris FDV II BC South Phase Office 63,408 100 2009 21 under constr. sold

Paris FDV II Suresnes Office 74,770 53 2010 21 under constr. partial sale

Paris FDV II Courbevoie Office 15,769 0 2011 21 planning marketing

Paris FDV II Ris-Orangis Retail 73,000 100 2008 21 planning sold

Warsaw Galeria Astoria Retail 11,000 85 2008 100 under constr. marketing

Warsaw Curtis Plaza II (Horizon Plaza) Office 35,209 0 2008 100 under constr. marketing

Lettable area 100 % in m2 741,595 Status: 31.12.2006Total investment volume 100 % in million 2,441Total investment volume IVG share in million 1,385Corresponds to % 57Capital tie-up in million 443Average monetary occupancy rate for projects under construction in % 53

98

-

2.

The

---

2

2

2

-

2

Employees

Our human resources policy promotes a modern staff image

-

-

--

Staff numbers up slightly compared to same time last year

---

--

99

Financial incentive structures: Employee participation schemes remain popular

-

-

-

Performance share plan

-

Personnel development measures

FINANCIAL POSITION

Financial management

-

-

-

Balance sheet and capital structure

Key balance sheet figures


in %

Asset structure (non-current assets to current assets, in %) 434.9 307.5 -29.3

Non-current assets to total assets in % 81.3 75.5 -7.1

Current assets to total assets in % 18.7 24.5 31.0

Equity ratio in % 25.0 27.0 8.0

Total assets 3,686.9 4,396.8 19.3

Current assets 689.3 1,079.1 56.6

Non-current assets 2,997.6 3,317.7 10.7

Equity and non-current liabilities to total assets in % 97.0 99.6 2.7

Equity 921.9 1,187.6 28.8

Financial liabilities 2,300.2 2,475.8 7.6

-

Management


Div is ions





Other in format ion

100

-

-

-

-

-

-

-

-

Capital structure


in %

Bank borrowing 2,063.6 2,055.4 -0.4

Bank loan to value (bank borrowing to total assets) in % 56.0 46.7 -16.5

Commercial paper 160.0 347.3 117.1

Financial liabilities 2,300.2 2,475.8 7.6

Total loan to value (financial liabilities to total assets) in % 62.4 56.3 -9.7

Equity ratio (based on carrying amounts) in % 25.0 27.0 8.0

--

101

Management


Div is ions





Other in format ion

--

Short-term Up to 5 years Cash and cash

equivalents Total

892 393 549 1,834

-

Interest

-

Derivative financial instruments

-

--

102

Liquidity

in m 2005 2006

Consolidated net profit 110.1 149.2

Cash flows from operating activities 65.3 102.2

Cash flows from/for investment activities -184.7 22.9

Cash flows from financing activities 147.0 336.2

Net change in cash and cash equivalents from operations 27.6 461.3

Net change in cash and cash equivalents due to exchange rates 0.1 0.1

Transfers to plan assets -10.2 -2.2

Cash and cash equivalents at beginning of period 74.5 92.0

Cash and cash equivalents at end of period 92.0 551.2

-

DISCLOSURES INACCORDANCE WITH SEC.315 (2) NO. 4 AND (4) HGB

Principles of the remuneration system

-

Subscribed capital and voting rights

-

Authorized capital, contingent capital and repurchase of shares

--

103

Management


Div is ions





Other in format ion

-

--

-

--

-

Significant shareholders

-

Appointment/recall of members of the Management Board and changes to the Articles of Association

-

-

Significant agreements subject to change of control clauses

-

-

104

RISK MANAGEMENT

Overall assessment

-

Risk and opportunity management system

Description of the risk and opportunity management system

--

--

--

-

-

105

Management


Div is ions





Other in format ion

Discussion of individual risks

Risk management relating to financial instruments

--

-

Operating environment and sectoral risks

Operating environ-ment risks Sector risks

Demand side • Economy• Demographics• Interest rates• Exchange rates

• General sentiment regarding property as an asset class

• Competitive position of the German property market due to REIT legislation

Supply side • Interest rates• Exchange rates• Climate change

• Completion pipeline• Construction costs

-

-

-

-

-

--

106

-

-

-

-

-

-

---

Strategic risks

-

-

-

107

Management


Div is ions





Other in format ion

Business performance risks-

Ten top sectors*

SectorNominal

rent

in %

1. Public sector 16.0

2. Financial services 14.9

3. Retail 13.6

4. Consultancy 9.2

5. Research, development, technology 5.9

6. Hotels, restaurants 4.7

7. Logistics, automobile 4.7

8. Electronics 4.2

9. Manufacturing 4.1

10. Other 22.7 * Presentation differs from previous year, without leases for caverns and tank farms

-

Ten top tenants*

CompanyNominal

rent

in %

1. Régie des Bâtiments (Brussels) 10.0

2. MALESHERBES ANJOU HSBC (Paris) 3.6

3. OMX Technologies (London) 2.6

4. AXA Insurance Plc. (London) 2.3

5. PricewaterhouseCoopers sarl (Luxembourg) 2.3

6. BNP Paribas UK Holdings Ltd. (London) 2.2

7. EPCOS AG OFW KL (Munich) 2.1

8. Shell Deutschland Oil GmbH (Hamburg) 1.8

9. UNIVERSAL Holding GmbH (Berlin) 1.4

10. BT Worldwide Ltd BT ignite (Brussels) 1.3

* Presentation differs from previous year, without leases for caverns and tank farms

-

-

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108

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Personnel risks--

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--

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IT risks

-

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109

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Financial risks

--

Currency risks

--

-

Liquidity risks-

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110

Interest rate risks

--

Other risks

Legal risks

-

--

--

-

Environmental risks-

-

Insurance

-

Tax risks

-

111

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2007 OUTSET AND OUTLOOK

Significant events after the reporting date

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--

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--

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-

-

-

-

112

Future development of the Group

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--

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2

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113

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earnings.

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114

Economic and legal environment

Economy-

-

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Property markets-

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-

Legal changes-

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115

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Anticipated earnings

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117

CONSOLIDATED INCOME STATEMENTfor 2006

in m Notes 2006 2005

Revenues 6.1 446.2 426.0

Changes in inventories and other own work capitalized 6.2 -11.0 -2.3

Other operating profi t 6.3 325.6 216.4

Total operating profi t 760.8 640.1

Material expenses 6.4 -70.7 -62.4

Personnel expenses 6.5 -159.0 -79.4

Depreciation and amortization of intangible assets, property, plant and equipment and investment properties 6.6 -74.2 -56.1

Expenses from investment properties 6.7 -58.3 -58.1

Other operating expenses 6.8 -130.0 -120.3

Profi t/loss from associates accounted for using the equity method 6.9 -15.2 -13.8

Income from participating interests 6.10 -0.2 -7.4

Financial income 6.11 76.3 48.5

Financial expenses 6.11 -135.7 -139.4

Net profi t before tax 193.8 151.7

Income taxes 6.12 -44.6 -41.6

Consolidated net profi t 149.2 110.1

Share of net profi t attributable to Group shareholders 139.6 96.4

Share of net profi t attributable to providers of hybrid capital 10.4 0.0

Share of net profi t attributable to minority interests -0.8 13.7

in in

Undiluted earnings per share 6.13 1.20 0.83

Diluted earnings per share 6.13 1.20 0.83

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118

CONSOLIDATED BALANCE SHEETas at 31.12.2006


ASSETS

Non-current assets

Intangible assets 7.1 259.5 131.6

Investment properties 7.2 2,199.7 2,080.8

Property, plant and equipment 7.3 438.0 318.5

Financial assets 7.4 157.6 193.3

Shares in associates accounted for under the equity method 7.4 44.6 30.7

Derivative fi nancial instruments 8.3 10.8 10.3

Deferred tax assets 8.4 55.6 56.7

Receivables and other assets 7.5 149.3 173.3

Prepaid expenses 7.9 2.6 2.4

Total non-current assets 3,317.7 2,997.6

Current assets

Inventories 7.6 250.7 106.9

Receivables and other assets 7.5 206.9 183.5

Income tax receivables 13.7 13.9


Securities 7.7 19.7 30.0

Cash and cash equivalents 7.8 549.0 90.9

Prepaid expenses 7.9 3.3 6.0

1,043.6 431.2

Non-current assets held for sale 7.10 35.5 258.1

Total current assets 1,079.1 689.3

Total assets 4,396.8 3,686.9

119


EQUITY AND LIABILITIES

Equity

Subscribed capital 8.1 116.0 116.0

Capital reserve 8.1 458.9 458.9

Treasury shares 8.1 -0.6 0.0

Other reserves 8.1 4.3 6.4

Retained earnings 8.1 415.6 342.8

Equity attributable to Group shareholders 8.1 994.2 924.1

Hybrid capital 8.1 195.9 0.0

Minority interests 8.1 -2.5 -2.2

Total equity 1,187.6 921.9

Liabilities

Non-current liabilities

Financial liabilities 8.2 1,750.0 1,728.5


Deferred tax liabilities 8.4 167.0 149.6

Pension provisions 8.5 10.6 9.9

Other provisions 8.6 136.7 75.6

Liabilities 8.7 35.4 4.0

Deferred income 8.8 10.1 7.1

Total non-current liabilities 2,115.4 1,985.7

Current liabilities

Financial liabilities 8.2 725.8 571.7


Other provisions 8.6 36.0 30.5

Liabilities 8.7 291.6 118.2

Income tax liabilities 26.0 24.2

Deferred income 8.8 10.5 14.1

1,092.5 777.5

Liabilities associated with non-current assets held for sale 7.10 1.3 1.8

Total current liabilities 1,093.8 779.3

Total equity and liabilities 4,396.8 3,686.9

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120

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for 2006

in mSubscribed

capital

Additionalpaid-incapital

Ownshares

Balance at 01.01.2005 116.0 459.7 -0.2

Gains and losses recognized directly in equity:

Changes due to successive acquisition/disposal and change in the group of consolidated companies

Exchange rate differences

Shares and securities available for sale

Cash flow hedges

Net investment hedges

Total

Consolidated net profit

Consolidated total net profit

Valuation of share options (equity-settled share-based payments) -0.8

Dividends

Own shares repurchased/sold 0.2

Balance at 31.12.2005 116.0 458.9 0.0

Gains and losses recognized directly in equity:

Changes due to successive acquisition/disposal and change in the group of consolidated companies

Exchange rate differences

Shares and securities available for sale

Cash flow hedges

Net investment hedges

Total

Consolidated net profit

Consolidated total net profit

Cash received from issue of hybrid capital

Separate dividend paid on hybrid capital

Dividends

Own shares repurchased/sold -0.6

Balance at 31.12.2006 116.0 458.9 -0.6

121

Other reserves

Exchange ratedifferences

Sundryreserves

Other reserves total

Retainedearnings

Attributableto shareholders

Hybridcapital

Minorityinterests Equity

-8.9 2.5 -6.4 292.2 861.3 0.0 -2.3 859.0

-5.2 -5.2 -3.4 -8.6

8.9 8.9 8.9 8.9

0.5 0.5 0.5 0.2 0.7

5.3 5.3 5.3 -0.9 4.4

-1.9 -1.9 -1.9 -1.9

8.9 3.9 12.8 -5.2 7.6 -4.1 3.5

96.4 96.4 13.7 110.1

8.9 3.9 12.8 91.2 104.0 9.6 113.6

-0.8 -0.8

-40.6 -40.6 -9.5 -50.1

0.2 0.2

0.0 6.4 6.4 342.8 924.1 0.0 -2.2 921.9

-22.7 -22.7 0.6 -22.1

-5.5 -5.5 -5.5 -5.5

-0.7 -0.7 -0.7 -0.1 -0.8

5.4 5.4 5.4 3.6 9.0

-1.3 -1.3 -1.3 -1.3

-5.5 3.4 -2.1 -22.7 -24.8 0.0 4.1 -20.7

139.6 139.6 10.4 -0.8 149.2

-5.5 3.4 -2.1 116.9 114.8 10.4 3.3 128.5

195.9 195.9

-10.4 -10.4

-44.1 -44.1 -3.6 -47.7

-0.6 -0.6

-5.5 9.8 4.3 415.6 994.2 195.9 -2.5 1,187.6

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122

CONSOLIDATED CASH FLOW STATEMENTfor 2006

in m 2006 2005

Consolidated net income 149.2 110.1

Net depreciation and amortization on non-current assets 76.4 52.8

Proceeds from disposal of non-current assets -236.7 -170.0

Other non-cash earnings and expenses 26.7 7.0

Dividends received -0.4 -9.0

Non-distributed share of profi t/loss from associates 8.1 -2.6

Changes in inventories and receivables -94.0 73.4

Changes in liabilities and provisions 172.9 3.6

Cash fl ow from operating activities 102.2 65.3

Investments for intangible assets and property, plant and equipment -914.9 -427.8

Proceeds from disposal of intangible assets and property, plant and equipment 754.3 198.5

Investments for acquiring consolidated companies (less cash balances) -87.1 -2.4

Proceeds from disposal of consolidated companies (less cash balances) 269.4 132.1

Investments for fi nancial assets -64.6 -88.1

Proceeds from disposal of fi nancial assets 65.8 3.0

Cash fl ow from/used for investing activities 22.9 -184.7

Proceeds from issuance of hybrid capital 195.9 0.0

Purchase of own shares -0.6 0.0

Dividends paid by IVG Immobilien AG -44.1 -40.6

Dividends paid to minority interests -3.6 -9.5

Proceeds from bank loans 420.2 799.7

Repayment of bank loans -407.1 -796.7

Other cash infl ows from fi nancing activities 191.0 219.8

Other cash outfl ows from fi nancing activities -11.2 -2.6

Repayment of leasing liabilities -4.3 -23.1

Cash fl ow from fi nancing activities 336.2 147.0

Net change in cash and cash equivalents from operations 461.3 27.6

Cash and cash equivalents at beginning of year 92.0 74.5

Changes in cash and cash equivalents due to exchange rate movements 0.1 0.1

Contribution to plan assets -2.2 -10.2

Cash and cash equivalents at end of year 551.2 92.0

Less cash included in disposal group -2.2 -1.1

Cash and cash equivalents reported on the balance sheet 549.0 90.9

* Further information on the cash fl ow statement can be found in section 10.6 in the notes to the consolidated fi nancial statements.

123

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for 2006

1. Basis of preparation | 124

2. Consolidation procedures | 125

3. Group of consolidated companies | 126

4. Currency translation | 129

5. Accounting principles | 130

6. Notes to the

consolidated income statement | 137

7. Notes to the

consolidated balance sheet - Assets | 142

8. Notes to the

consolidated balance sheet - Equity and liabilities | 155

9. Leasing | 165

10. Other notes | 168

11. Corporate governance | 186

12. Supervisory Board and Management Board | 187

13. Statement by the Management Board | 192

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124

1. Basis of preparation

IVG Immobilien AG has prepared its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS), as applicable in the EU, and the supplementary provisions in accordance with Sec. 315a (1) of the German Commercial Code (HGB). All IFRS issued by the International Accounting Standards Board and in force at the time of preparation were applied, insofar as they have been adopted by the EU.

The requirements of the applied standards were satisfied in full and result in the presentation of a true and fair view of the financial position and financial performance of the IVG Group.

In 2005 and 2006 the IASB published the following new or revised standards, which are not binding for IVG until 01.01.2007 or later. The application of these standards is subject to adoption by the EU, which in some cases is currently pending.

IFRS 7 (2005) “Financial Instruments: Disclosures”IFRS 8 (2006) “Operating Segments” (not yet adopted by the EU)Amendment to IAS 1 (2005) “Capital Disclosures”

The amendments to IAS 19, 21, 39 and IFRS 4 and 6 had no effect on the consolidated financial statements. IFRS 7 will only affect the further information in the notes.

The International Financial Reporting Interpretations Committee (IFRIC) has also published the following interpretations, which are only binding from 01.01.2007 or later:

IFRIC 7: “Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies”IFRIC 8: “Scope of IFRS 2“IFRIC 9: “Reassessment of Embedded Derivatives”IFRIC 10: “Interim Financial Reporting and Impairment” (not yet adopted by the EU)IFRIC 11: “IFRS 2 – Group and Treasury Share Transactions” (not yet adopted by the EU)IFRIC 12: “Service Concession Arrangements” (not yet adopted by the EU)

The company did not exercise its right to apply these standards and interpretations earlier than necessary. IVG assumes that the application of these standards and interpretation would not have had any material effects on its financial or earnings position.

The accounting policies, notes and disclosures of the IFRS consolidated financial statements for 2006 financial year are based on the same accounting principles as the 2005 consolidated financial statements. The domestic and foreign company financial statements included in the consolidated financial statements are prepared as at the same reporting date as the IVG annual financial statements (31 December 2006) and are based on uniform accounting principles. The registered offices of IVG Immo-bilien AG, entered in the Commercial Register of the Bonn District Court (HRB 4148), are at Zanderstrasse 5-7, 53177 Bonn.

Various items in the consolidated balance sheet and consolidated income statement have been combined for greater clarity and are explained in the notes. Assets and liabilities are classified as non-current – with a term of more than one year – and current. Pension provisions and deferred taxes are generally shown as non-current.

The income statement is classified according to the total cost method. The consolidated financial statements are prepared in euro. All amounts, including those for the previous year, are in millions of euro ( m) unless stated otherwise.

Notes

125

To a limited extent, the consolidated financial statements must include assumptions and estimates that have an effect on the amount and reporting of the recognized assets and liabilities, income and expenses as well as contingent liabilities.

Assumptions and estimates are primarily used in the determination of useful lives of non-current assets, calculating discounted cash flows for impairment tests, calculating the market and present values of minimum lease payments, the recognition of provisions for legal proceedings, pensions and other benefit commitments, taxes, environmental risks and guarantees and the future utility of tax loss carryforwards. The actual figures may deviate from estimates.

2. Consolidation procedures

(a) SubsidiariesSubsidiaries are all companies (including special-purpose entities) whose financial and operational policies are controlled by the Group. The ability to exert control is generally equated with ownership of more than half of the voting rights. Potential voting rights that are currently exercisable or currently convertible are considered when assessing control. All material subsidiaries are included in the consolidated financial statements.

Subsidiaries are fully consolidated from the time when control is transferred to the parent and are deconsolidated whe

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