Annual Report 2003 · m 2003 2002 Change 2001 2000 1999 Turnover 411.5 471.2 -12.7% 319.3 321.3 423.6 ... Media, PR, media production 5.0 Transport, storage, aero, auto 4.8 ... €3.3

PASSION FOR REAL ESTATE.

Annual Report 2003

IVG

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3

IVG Group in Figures

m 2003 2002 Change 2001 2000 1999

Turnover 411.5 471.2 -12.7% 319.3 321.3 423.6

Total operating performance 545.7 637.8 -14.4% 486.6 434.7 543.6

EBITD 224.8 350.3 -35.8% 259.8 201.0 172.8

EBIT (operating earnings) 174.2 188.7 -7.7% 165.8 147.7 96.4

Net income from ordinary activities 99.9 111.1 -10.1% 90.0 91.1 80.1

EBT 87.3 96.6 -9.6% 77.4 80.3 73.2

Net income for the year 66.5 70.4 -5.5% 68.1 61.9 53.9

Investments 565.2 358.3 57.7% 432.2 306.5 1,179.9

Total assets 3,427.8 3,185.3 7.6% 3,021.9 2,585.4 2,520.7

Fixed assets (book values) 2,839.7 2,675.5 6.1% 2,441.5 2,112.6 2,070.5

Fixed assets cover % 83.1 89.4 -7.0% 96.2 91.1 90.0

Shareholders’ equity (book values) 917.0 769.5 19.7% 758.4 690.4 659.7

Equity ratio (book values) % 25.6 24.5 4.9% 24.3 27.4 25.3

Equity ratio (market values) % 39.0 41.2 -5.3% 45.2 49.6 48.8

Net asset value 1,671.4 1,642.3 1.8% 1,894.0 1,845.0 1,793.8

Net asset value per share 14.41 14.16 1.8% 16.33 15.91 15.73

Employees 717 750 -4.4% 763 709 747

Dividend per share 0.34 0.34 0.0% 0.34 0.33 0.31

* Including tax required additional depreciation 116.4 million

** Proposed

*** Excluding special dividend ( 0.20 per share)

*****

*

Overview 2003

T O P 1 0 I N D U S T R I E S

Net rent (%)

Public institutions 25.5

Wholesale and retail trade 11.1

Financial services 9.5

Electrical, micro/optoelectronics 7.3

Other services 6.9

Telecommunication 6.5

Real estate 6.0

Electricity, gas, water supply 5.9

Media, PR, media production 5.0

Transport, storage, aero, auto 4.8

T O P 1 0 T E N A N T S

Net rent (%)

Régie des Bâtiments (BRU) 7.9

EBV Erdölbevorratungsverband (HAM) 6.9

European Union (BRU) 3.9

Kesko Oyj (HEL) 3.8

Lucent Technologies Network (MUC) 3.5

COVA Central Orgaan Voraadvorming (HAM) 2.0

EPCOS (MUC) 1.7

PwC (BRU) 1.6

Statoil Deutschland (HAM) 1.6

Segafredo Zanetti (HEL) 1.5

D I V I D E N D P E R S H A R E

0.310.33 0.34 0.34 0.34

E B I T ( O P E R AT I N G E A R N I N G S )

million

188.7165.8

147.7

96.4

174.2

1999 2000 2001 2002 2003

C O N S O L I D AT E D N E T I N C O M E

million

70.468.161.9

53.9

66.5

1999 2000 2001 2002 2003

E B T

million

1999 2000 2001 2002 2003

73.280.3

96.6

77.487.3

1999 2000 2001 2002 2003

M A R K E T C A P I TA L I Z AT I O N

(year-end share price) million

1999 2000 2001 2002 2003

1,7611,507

1,247

9621,075

1999 2000 2001 2002 2003

N E T A S S E T VA L U E

million

1,642.31,894.01,845.01,793.8

1,671.4

Net asset value per share

15.714.2

16.315.914.4

R E A L E S TAT E H O L D I N G S ,

B Y R E G I O N

Total 3,294.5 million

R E A L E S TAT E H O L D I N G S ,

B Y T Y P E O F U S E

Total 3,294.5 million

R E N TA L I N C O M E ,

B Y R E G I O N

Total 205.7 million

R E N TA L I N C O M E ,


Total 205.7 million

I V G T E N A N C I E S B Y E X P I RY D AT E

% of net rental income/year

2004 2005 2006 2007 2008 ff.

18.2

10.4 10.915.6

44.9

AV E R A G E M O N T H LY R E N T S P E R m 2

1997 1998 1999 2000 2001 2002 2003

7.92

5.55

11.1911.16

9.229.20

11.09

P R O J E C T D E V E L O P M E N T,

B Y R E G I O N

IVG share of total value € 1,123 million

P R O J E C T D E V E L O P M E N T,



Office, business parks 89%

Commercial, logistics 9%

Other 2%

Office, business parks 73.8%

Commercial, logistics 20.7%

Retail 2.6%

Other 2.9%

Berlin 9.9%

Düsseldorf 6.0%

Frankfurt 3.4%

Hamburg 8.2%

Munich 12.4%

Brussels 25.3%

Budapest 1.4%

Helsinki 9.4%

London 5.1%

Milan 3.8%

Paris 9.4%

Stockholm 2.5%

Other 3.2%

Office, business parks 80.8%

Commercial, logistics 10.9%

Retail 4.4%

Other 3.9%

Berlin 9.2%

Düsseldorf 5.4%

Frankfurt 4.2%

Hamburg 16.3%

Munich 14.1%

Brussels 24.3%

Budapest 1.4%

Helsinki 2.8%

London 2.9%

Milan 4.1%

Paris 7.9%

Stockholm 3.8%

Other 3.6%

Berlin 15%

Düsseldorf 6%

Frankfurt 23%

Munich 4%

Brussels 15%

Budapest 2%

Helsinki 4%

London 12%

Milan 1%

Paris 18%

Real estate is our strength.

IVG is one of Europe’s major listed real estate companies, withproperty under management worth some €6.3 billion – including€3.3 billion in its own real estate portfolio.

We pursue a clear strategy in our core activities of portfoliomanagement, project development and investment funds:

Focus on office properties and business parks in major European cities and growth regionsUpgrading of the existing real estate portfolioDemand-driven project developmentExploitation of cyclical differences between real estate marketsDevelopment of the funds business

Combined with our value-driven corporate philosophy, this is astrategy for continued profitable growth.

IVG synergizes the property and capital markets for private and institutional investors.

Mission statement

76 Financial Information 76 Group Management Report 87 Consolidated Financial Statements 93 Notes to the IVG Consolidated Financial Statements 112 Consolidated Cash Flow Statement 114 Key figures by segment 116 Changes in shareholders‘ equity 122 Other information

58 Investor Relations 59 IVG shares 65 EPRA 70 Corporate governance

72 Employees 73 Employee numbers 73 Employee development

36 Markets 37 Economic environment 40 IVG locations in Europe 42 Rental market 44 Investment market 46 European network of excellence

06 Our Business 07 Portfolio management 16 Real estate portfolio 20 Project development 30 Investment funds

01 Mission 01 Mission statement 02 Letter to our shareholders

Letter to our shareholders

Dear Shareholders,

IVG successfully exploited the opportunities offered by Europe’s real estate markets in 2003:

Good performances in a tough economic climate.

Proposed dividend matching the previous year’s high level.

185,000 m2 in new lettings, against market trend.

Entered the attractive Helsinki property market by acquiring POLAR Real Estate Corporation.

Profitable disposals in stable investment markets.

2004 saw a pivotal change in share ownership at IVG. The 49.9% stake held by Sirius – until then IVG’s

largest shareholder – was taken over by Sal. Oppenheim Bank (25.1%), HSH Nordbank (11.16%), DZ-

Bank, WGZ-Bank and IKB Deutsche Industriebank. The Board of Management greets the new owner-

ship structure. With their strong capital base and experience in real estate, the new owners can actively

support and secure the continuation of IVG’s successful European strategy for the long term.

IVG held its course in a tough economic climate. Net asset value – a key indicator reflecting the un-

derlying value of a listed real estate company’s shares – was raised 1.8% to €14.41 per share. Group

net income, at €66.5 million, was only about 5.5% short of the previous year’s high figure. Due to the

POLAR acquisition, net rents rose from €226.1 million to €232.8 million. Lettings were also up, with a

grand total of 185,000 m2 newly let by IVG. The earnings figures allow the Board of Management and

Supervisory Board to propose a dividend matching the previous year’s high level of €0.34 per share.

IVG once again achieved positive net new lettings in 2003, bucking the market trend of falling rents.

New tenancies were €27.6 million, compared with terminations to the value of €26.6 million. The qua-

lity of our portfolio and the proximity of our branch offices around Europe to their markets and custom-

ers contributed to the strong figure for new tenancies.

2.3

Good business year

Positive net lettings

trump the market

IVG enters the

Helsinki property

market

08 Our Business 01 Mission 01 Mission Statement 02 Letter to our shareholders

36 Markets 72 Employees 58 Investor Relations 76 Financial Information

Purchases of large lots of property, as through takeovers of listed property companies, are a key part of

the IVG strategy. Transactions of this kind take a strong element of expertise and allow reasonable entry

prices. IVG acquired a qualified majority of the Helsinki-listed POLAR Real Estate Corporation in October

2003 and now holds approximately 95%. The POLAR portfolio, worth €311 million at the close of 2003,

provides the basis for entering the attractive Helsinki market. In this complex transaction, IVG was able

to draw on its own considerable experience gained from the 1999 Asticus takeover in Sweden.

Timely real estate purchases and disposals are two sides of the same coin for IVG. As part of this sys-

tematic buy-and-sell policy, IVG used the relative stability of investment markets compared with rental

markets to sell property chiefly in Brussels, Frankfurt, London, Madrid, Paris and Helsinki.

The IVG share price gained 11.7% in 2003. On a European comparison this means it is still significantly

undervalued. A clear corporate strategy, good performance data even when times are difficult and reso-

lution of the shareholding structure all evidence untapped upside potential.

In addition, calls to institute tax transparency for property investment companies present a first opportu-

nity to create an analogue to the real estate investment trusts (REITs) allowed in countries such as the

USA, France and the Netherlands. This could give a marked boost to German real estate shares.

IVG continued its strategic evolution in 2003 into an investment house specializing in indirect property

investment products. The emphasis remains on office properties in major European cities and growth

centres.

Acquisition of Wert-Konzept was completed with effect from 1 January 2003 and the company is now

integrated into the IVG Group. Wert-Konzept are long-standing and highly regarded initiators of closed-

end real estate funds. The end of 2003 saw the issue of »EuroSelect 07« – the first multinational fund

to combine Wert-Konzept and IVG expertise.

Stable investment

markets used for

disposals

IVG shares set to

go on rising

IVG: One-stop shop

for indirect property

investments

After a relatively brief run-up, IVG Immobilien KAG gained approval to engage in investment business

from Germany’s Federal Financial Supervisory Authority (BaFin) in February 2003. Through the new

company, IVG will serve the strong investor interest in open-end funds.

IVG thus provides a one-stop service offering investors the right indirect property investment to match

their varying risk/yield requirements.

IVG synergizes property and capital markets with a strategy founded on three main pillars:

IVG’s origins and expertise are in the property markets. IVG has a local presence in those markets

through its branch offices, which serve as property scouts and managers for all investment prod-

ucts.

A market-proven balance of local expertise and global management policies speeds decision-

making and action.

With a portfolio under management worth 6.3 billion, IVG can judge opportunities and risks in

property investment with the heightened awareness of experienced owners.

IVG’s success is due in no small part to the vast real estate expertise and committed work of all IVG

employees around Europe, to whom we extend special thanks and recognition. Raising the earning

power and value of IVG is a challenge which all will continue to meet with motivation and tenacity. More

than ever before, Europe offers outstanding opportunities for those prepared to work hard. We will take

these opportunities together, so stay invested!

Yours sincerely,

Eckart John von Freyend Bernd Kottmann Dirk Matthey

4.5

Real estate expertise

and synergies from a

European network

Teamwork

in Europe

01 Mission 01 Mission Statement 02 Letter to our shareholders

06 Our Business 36 Markets

76 Financial Information

72 Employees 58 Investor Relations

Dr. Bernd Kottmann (46)

Chief Operating Officer

Born 1958, holds a business degree and

a doctorate. With the IVG Group since

1997. Member of the Board of Manage-

ment of IVG Immobilien AG since July

2001. Formerly Member of the Board at

Harpen AG, Managing Director of Deut-

sche Babcock Bau GmbH and Member

of the Board at GERMANIA-EPE AG.

Dr. Dirk Matthey (55)

Chief Financial Officer

Born 1949, holds a business degree and

a doctorate. Chief Financial Officer to

IVG Immobilien AG since 1996. Previous-

ly Managing Director and Chief Financial

Officer to subsidiaries of the VIAG group,

Munich; Director and Head of Business

Administration at VEBA, Düsseldorf; and

Executive Assistant and Department

Manager in Finance and Accounting at

RWE, Essen.

Dr. Eckart John von Freyend (62)

Chief Executive Officer

Born 1942, holds an economics degree

and a doctorate. Chief Executive Officer

to IVG Immobilien AG since 1995. Pre-

vious posts included Head of Division

in the Federal Ministry of Finance and

Managing Partner at publishers Verlags-

gruppe Deutscher Wirtschaftsdienst

John von Freyend GmbH. He began his

career with the Federation of German

Industry (BDI) in 1970.

6.7

Our Business

IVG business model:Property and capital market integration

Real estate

capital market

Real estate market

Banks Institutional investors Private investors

IVG shares Open-end funds Closed-end funds

IVG corporate functions

Upgrading

Buying Restructuring property portfolios

Individual properties Developing land Selling

Property portfolios Improving building systems

Improving quality of tenancies

Branch offices

Service providers Tenants

Portfolio management

2003 was another dynamic year in portfolio management:

An 85% stake was acquired in POLAR, a Finnish listed real estate company.

134,000 m2 of lettable space – 78,000 m2 in Germany and 56,000 m2 elsewhere in Europe – was let

out in a hard business climate.

The effective occupancy rate at the end of 2003 was 91.5% – above the market average including

signed tenancies yet to enter into force, the occupancy rate was 93.9%.

Favourable European investment markets were used to make sales in Belgium, Finland, France,

Germany, Spain and the UK.

The market value of our own real estate portfolio was €3.3 billion as at 31 December 2003.

Segment turnover increased from €283.7 million in 2002 to €294.3 million in 2003. This figure includes

net rent revenues, which increased from €223.1 million to €230.2 million. This is primarily due to the

acquisition of POLAR.

Due to higher profits from property sales, segment earnings improved from €169.7 million to €196.2

million.

01 Mission 06 Our Business 07 Portfolio management

36 Markets 76 Financial Information

Rolf Moritz Webeler, Director Portfolio Management Germany Michael Lipnik, Director Portfolio Management International


8.9

Acquisitions

Our real estate acquisitions target long-term earning potential and sustained growth in value:

Acquisitions are concentrated in major European cities and growth centres whose economies and

real estate markets show good development prospects.

We primarily invest in office properties and business parks.

Investments are preferably made at locations where IVG already has an experienced management

team or can build one up in the medium term.

Acquisitions focus on properties which IVG can enhance in value by suitable upgrading measures.

Another key area comprises purchasing real estate packages, real estate companies and properties

under forced sale. Transactions of this kind offer attractive entry prices.

Growing with

real estate

David Canals_Dr. Volker Hahn_Norbert Zube_Rolf Moritz Webeler_Stefan Schraut (left to right)

M E M B E R S O F T H E P O L A R A C Q U I S I T I O N T E A M

Data (October 2003):

POLAR Real Estate Corp.

Location: Helsinki, Finland

Properties: 38

Site area: 297,000 m2

Type of use:

60% Offices

40% Shopping centres

Delevopment reserve:

56,000 m2 GFA

IVG acquired the Helsinki-listed POLAR Real Estate Corporation in autumn 2003. IVG has since in-

creased its stake, from 85% at the year-end to over 95% in March 2004.

The takeover opens up the emerging Finnish real estate market for IVG. The country is considered one

of the world’s best investment locations and has good growth prospects. Growth rates have topped the

EU average for several years. In contrast with many other EU member states, fiscal revenues exceed

government spending. Public debt is only some 40% of GDP. There are already signs that GDP is set

to rise in 2004. The positive economic and policy data combined with proximity to emerging Eastern

European markets bode well for renewed upward momentum in the Finnish real estate market.

At the time of IVG’s acquisition, POLAR commanded 38 properties with a total of 297,000 m2 of let-

table space. The real estate portfolio worth some €350 million comprises 60% office buildings and

40% shopping centres, all well situated. POLAR also owns land in Helsinki with development reserves

exceeding 56,000 m2 of gross floor area. About 80% of POLAR’s buildings are in Helsinki. POLAR’s

experienced professional team contributes local expertise and a functioning network. This is one of the

keys to entering major regional markets for IVG.

The POLAR management had already sold two shopping centres in line with the IVG strategy by the

end of 2003. This increased the share of the POLAR portfolio consisting of office properties and thus

the Helsinki share to over 80%. A third such sale is already agreed for 2004.

01 Mission 06 Our Business 07 Portfolio management 08 Acquisitions


▲

Kauppakeskus Jumbo

Location: Vantaa, Type of use: Shopping Centre

Site area: 53,800 m2, Occupancy rate: 100 %

Tenants: Retail and services

▲

Tapiontuuli KOy

Location: Espoo, Type of use: Office

Site area: 6,900 m2, Occupancy rate: 100 %

Tenants: Novo Nordisk Farma, Oy Niklashipping Ltd. u.a.

A C Q U I S I T I O N S : P O L A R , H E L S I N K I


10.11

Quality assures

customer loyalty

Thomas Rücker, Director Communication/Marketing

Marketing and customer loyalty

High occupancy rates and long-term tenancies with companies of immaculate financial standing mean

growth in value-in-use and realizable value – location and rental income being the key determinants of

the selling price of a commercial property.

One of the keys to our success in the letting business is actively looking after our tenants and proper-

ties. The combination of high-quality, functional and economic buildings with professional on-site cus-

tomer service produces satisfied customers more likely to select an IVG property for their corporate

headquarters. Our most recent customer satisfaction survey, in autumn 2003, revealed that 95% of

our tenants are satisfied and 91% would recommend us as lessors of commercial premises. This is

the result of an active customer service programme in place since 1999, combining customer recruit-

ment and service by branch offices with standardized, centrally administered quality assurance. Special

incentives are provided under the IVG Value Service offering a wide range of products and services at

outstanding value. These include office furniture and supplies, hotel accommodation, car rental, cor-

porate image and communication consultancy, event marketing, business startup and financial advice,

and much more.

In total as at 31 December 2003, IVG controlled 1.7 million m2 of lettable space in its own portfolio

and looked after 2,150 tenants under 2,800 tenancy agreements. IVG realized 35% of net rent in 2003

with its ten largest tenants. In terms of industry affiliation, IVG tenants are evenly divided between

old-economy companies, public agencies and modern, financially well placed service and technology

firms.

01 Mission 06 Our Business 07 Portfolio management 08 Acquisitions 10 Lettings


N E W L E T T I N G S I N E X C E S S O F 2 , 0 0 0 m 2, 2 0 0 3 :

Branch office Property Tenant Lettable space in m2 Type of use

Brussels Trèves Etape 3,400 offices

Düsseldorf Global Gate, Second construction phase TQ3 Travel Solutions, Chubb 10,000 offices

Insurance Company, Metro,

Nowy Styl, Weight Watchers

Frankfurt Airbizz Thiel Logistik, Tradeport 17,100 offices/

warehousing

London Soho Square Hill & Knowlton 4,000 offices

Madrid Alcampo office building Alcampo 10,300 offices

Madrid Caje de la Palma Johnson & Johnson 3,400 offices/logistics

Munich IVG Businesspark vor München Galileo Industries 2,400 offices

Munich Nordostpark Nürnberg Conti Temic, Demedis, 6,000 offices

Huss Umwelttechnik

Paris Boulevard Haussmann L‘Immobilière du CMN 10,600 offices

Paris Rue d‘Aguesseau Française des Jeux 4,500 offices

T O P 1 0 T E N A N T SNet rent, %

Régie des Bâtiments (BRU) 7.9

EBV Erdölbevorratungsverband (HAM) 6.9

European Union (BRU) 3.9

Kesko Qyj (HEL) 3.8

Lucent Technologies Network (MUC) 3.5

COVA Central Orgaan Voraadvorming (HAM) 2.0

EPCOS (MUC) 1.7

PwC (BRU) 1.6

Statoil Germany (HAM) 1.6

Segafredo Zanetti (HEL) 1.5


12.13

Boulevard Haussmann

Location: Paris

Type of use: Office

Site area:10,600 m2

Occupancy rate: 100%

Tenants: L‘Immobilière du CMN

No. 173-175, Boulevard Haussmann in Paris is an example of a successful major letting at a low point on the economic cycle. The loca-

tion is in the financial district near the Champs Elysées, an area known for its intricate assemblage of historical buildings. The classical

Boulevard Haussmann building has 10,600 m2 of lettable space and parking for 205 cars. IVG initially considered a full modernization

after the last tenants moved out in 2003. Instead, thanks to the strong market presence of IVG‘s Parisian office, the building was re-

let without standing empty for any length of time to L’Immobilière du CMN, a subsidiary of the major French bank Crédit Mutuel Nord

Europe; the new tenants are also undertaking the refurbishment.

A L C A M P O , M A D R I D

The Alcampo office building in Madrid illustrates the close connec-

tion between purchase, letting and sale at IVG. The building imme-

diately adjoins Spain’s second largest shopping centre, La Vaguada.

It serves as the headquarters of the Alcampo supermarket chain.

IVG acquired the property through a subsidiary in 2000. The tenancy

stipulated a rent adjustment to market rates as at 1 January 2003. To

secure the location, tenants Alcampo were prepared to extend the

tenancy a further five years to a total of ten and to accept a significant

increase in rent. With effect from the end of the year, IVG sold the

property together with two logistics buildings to GE Capital.

▲

Alcampo

Location: Madrid, Type of use: Office, Site area: 10,300 m2

Occupancy rate (sale): 100%

Sale: 12/2003, Tenants: Alcampo

B O U L E VA R D H A U S S M A N N , PA R I S▲

Logistics real estate represents the third main part of our portfolio alongside office properties and busi-

ness parks.

IVG lets out storage space for petroleum, petroleum products and natural gas in caverns and tank farms

– our underground real estate. The tenants are companies in the energy sector and bodies responsible

for maintaining strategic oil reserves.

The largest storage facility operated by IVG is the Etzel caverns facility near Wilhelmshaven. Of the

39 caverns at Etzel, 33 belong to the German state and 6 to IVG. A seventh IVG cavern is currently

in development. In total, the caverns offer subterranean storage for some 13 million m3 of petroleum

and approximately 500 million m3 of working gas. The stored fuels represent a significant contribution

towards securing the German and Dutch energy supply. IVG also operates tank farms in Germany and

Poland with a total capacity of 218,000 m3.

Logistics

real estate

▲

Etzel, storage caverns

Location: Wilhelmshaven, Type of use: Storage, Volume: 13 million m3 petroleum, 500 million m3 (standard) working gas

Occupancy rate: 100%, Tenants: EBV, C.O.V.A.

01 Mission 06 Our Business 07 Portfolio management 08 Acquisitions 10 Lettings

36 Markets 76 Financial Information 72 Employees 58 Investor Relations

Friedrich Foltas, Director Logistics

14.15

Sales

Property sales are a major source of income for IVG and a key part of our business. Properties are most-

ly sold following significant recent value gains as a result of:

Modernization.

Exploiting development reserves.

Improving a building’s tenancy profile (higher occupancy rate, new tenants with better financial

standing, higher net rent per unit area, increasing the term on tenancies).

A general upturn in the local property market.

An upturn in the property market cycle is a particularly good opportunity to realize gains in value. IVG

used the abating real estate market crisis of the 1990s to make purchases in Central and Western

Europe and has since resold many properties at a profit after several years of rising markets. Rather

than moving in lockstep, the markets in different cities and regions tend to peak and trough at different

times. Investing at multiple locations around Europe allows IVG to »ride the cycle« by exploiting such

asynchronies. This can be shown by correlation analysis of European prime office rents: weak or nega-

tive correlations are an opening to reduce risk by diversifying and exploiting cyclical differences, selling

in one city at the tail end of a boom and reinvesting the proceeds in another city about to embark on a

cyclic upturn.

In 2003, IVG took the opportunity to sell where demand was strong for quality real estate. Sales were

made by the IVG branch offices in Brussels, Düsseldorf, Frankfurt, Helsinki, London, Madrid, Munich

and Paris.

Using cyclical

differences between

markets lowers risk

C O R R E L AT I O N O F E U R O P E A N P R I M E O F F I C E R E N T S ( 1 9 9 2 – 2 0 0 2 )

%

Berlin BER

Brussels 72.8 BRU

Budapest -9.6 -0.5 BUD

Düsseldorf 64.7 77.9 15.1 DUS

Frankfurt 64.6 79.8 -13.5 65.6 FRA

Hamburg 85.7 82.4 -3.0 73.9 68.8 HAM

Lisbon 38.1 73.0 -4.0 66.1 80.7 46.0 LIS

London 31.0 34.0 -39.9 31.2 47.9 17.3 47.6 LON

Madrid 62.1 65.6 -29.7 55.5 76.9 53.5 67.4 83.1 MAD

Milan 47.3 55.2 -7.1 51.7 69.6 37.6 69.9 34.3 53.5 MAI

Munich 50.8 75.9 -13.0 66.5 79.7 64.5 72.5 50.8 71.9 33.3 MUN

Paris 51.4 59.2 -22.6 60.3 76.6 41.9 69.5 80.4 86.8 71.7 66.4 PAR

Stockholm 32.9 22.7 -45.2 23.6 41.0 26.5 27.5 72.9 59.0 13.9 53.5 64.6 STO

Source: Cushman & Wakefield Healey & Baker / ICG European Research Group

■ Negative correlation (-100–0%)

■ Low correlation (0–60%)

■ High correlation (60–100%)

Sweden House

Location: Brussels, Type of use: Office

Site area: 7,200 m2

Occupancy rate (sale): 94.3%

Sale: 6/2003, Tenants: ESA, Microsoft

S W E D E N H O U S E , B R U S S E L S

Sweden House in Brussels is an example of the rapid and successful sale of a

high-quality office property by IVG. The 7,200 m2 building is located in Quartier

Léopold, the EU district and Brussels’ most sought-after office location. IVG ac-

quired it in 2001 as part of a share deal. Minor conversion work was carried out

and a number of tenancies signed or extended over the ensuing months. 2003

saw a new tenant move in: the European Space Agency (ESA), which coordinates

its activities with EU institutions from the building. In the same year, IVG sold

Sweden House together with another building to Arab investors DMI. The sale

was effected by a share deal, which minimizes the high transfer costs that would

otherwise be incurred in Belgium.

Great Marlborough

Location: London, Type of use: Office



Sale: 06/2003, Tenants: Turner Broadcasting

G R E AT M A R L B O R O U G H S T R E E T, L O N D O N

▲

A sale in London exemplifies the profitable resale of a property acquired as part of

a larger package. When IVG took it over in 1999, the Swedish property group Asti-

cus AB was nearing completion of a development comprising two office buildings

with a total lettable space of 14,900 m2 on Great Marlborough Street in London’s

West End. 4,800 m2 was sold in 2000 and the remaining 10,100 m2 went to a

Greek investor in 2003.

01 Mission 06 Our Business 07 Portfolio management 08 Acquisitions 10 Lettings 14 Sales


A S E L E C T I O N O F S A L E S I N 2 0 0 3 :

Property Buyer

Sweden House, Rue de Trèves, Brussels DMI

IVG Immobilien AG headquarters, Bonn EuroSelect 07

Office building, IVG Businesspark am Flughafen, Düsseldorf Barmenia

Airbizz, Frankfurt Private investor

Two shopping centres outside Helsinki Citycon

16 Great Marlborough Street, London Lazari

Alcampo office building and two logistics buildings, Madrid GE Capital

Two office buildings, IVG Businesspark Nordost, Nuremberg EuroSelect 07 and BIG – Berliner Immobilien Gesellschaft

Avenue Hoche and Rue de Bassano, Paris DEFO Deutsche Fonds für Immobilienvermögen

▲


16.17

Table of the Real estate portfolio

Spreespeicher, Stralauer Allee 1–2, BerlinCarossa Quartier, Streitstrasse 5–19, Berlin 3

Office building, Bundesallee 204–206, BerlinHafenplatz 6/7, Köthener Str. 29, BerlinLeibniz Kolonnaden, Walter-Benjamin-Pl. 6, Leibnizstr. 53, Berlin 1, 2

Airport Center Schönefeld, Mittelstrasse 5/5a, BerlinLogistics centre, Montanstrasse 18–26, BerlinOffice building, Joachimstaler Str. 1–3, BerlinOther BerlinBerlin totalDresden totalBerlin Office total

North Gate, Bd. Roi Albert II, 6, 8 and 16, BrusselsOffice building, Square de Meuus 8, BrusselsOffice building, Diegem, Rue Bessenveld 9, BrusselsPléiade A–C, Avenue des Pléiades 11–15–19, BrusselsLouise Village, Avenue Louise 29–31/Rue Dejonker 34–36, BrusselsTervuren Plaza, Rue Gribaumont 1, BrusselsTwin House, Rue Neerveld 105, BrusselsLe Croissant, Avenue Beaulieu 24–26, BrusselsOffice building, Place St Lambert, BrusselsOffice building, Chaussée de la Hulpe 154, BrusselsOaktree, Drève de Bonne Odeur 20, BrusselsMadou Plaza, Brussels 3

Other BrusselsBrussels totalAriane I-III, Route d‘Esch 400, LuxembourgThomas, Rue Thomas Edison 2, LuxembourgLuxembourg totalBrussels Office total

Infopark Budapest, Infopark sétány 1 and 3, Budapest 1, 4

Other BudapestBudapest Office total

IVG Businesspark am Flughafen, Heltorfer Str. 1–22, DüsseldorfGotic-Haus, Westfalendamm 94–100, DortmundOffice building, Stockholmer Allee 32, DortmundFashion Plaza, Karl-Arnold-Platz 2, DüsseldorfGlobal Gate, Grafenberger Allee 293–297, Düsseldorf 3

Other DüsseldorfDüsseldorf Office total

Logistics centre, Cargo City Süd, Geb. 554, Frankfurt-FlughafenCenter am Ring, Otto-von-Guericke-Ring 13–15, WiesbadenOther FrankfurtFrankfurt totalLogistics centre Lohfelden, Otto-Hahn-Str. 26, 28, 34, 36, LohfeldenLogistics centre Waldau, Falderbaumstrasse 7–13, Kassel-Waldau Other Kassel + LiebenauKassel totalFrankfurt Office total

IVG Businesspark Hamburg Nord, Essener Str. 89–99, Hamburg Lilienthal-Center, Kugelfangtrift 4–8/Lilienthalstr. 300, HanoverOffice building, Habichtstrasse, Habichtstrasse 41, HamburgOtherHamburg totalTank storage 7

Oil storage caverns, Beim Postweg 2, Friedeburg Gas storage caverns, Beim Postweg 3, Friedeburg Cavern/tank storage total 7

Hamburg Office total

71 Lombard Street 71, London20 Soho Square, London 20 St. James’s Street, London 40/41 Conduit Street, London London Office total

Berlin

Brussels

Budapest

Düsseldorf

Frankfurt

Hamburg

London

89%100%95%95%50%

100%100%98%

100%

100%100%71%

100%100%100%100%100%100%100%100%100%

94%100%

100%

100%100%100%100%100%

100%100%

100%100%

100%100%100%

100%100%100%

100%100%100%100%

IVG share

OfficesBusiness park

OfficesOther

OfficesOffices

Comm./logisticsOffices

Business park

OfficesOfficesOfficesOfficesOther

OfficesOfficesOfficesOfficesOfficesOfficesOffices

OfficesOffices

Business park

Business parkOfficesOfficesOfficesOffices

Comm./logisticsOffices

Comm./logisticsComm./logistics

Business parkComm./logistics

Offices

LogisticsLogisticsLogistics

OfficesOfficesOfficesOffices

Type of use

1995/20021948/2002

19981998

1996/200120011948

2000/2003

1992/2003

19981996/19991998/2001

19991999

1999/2003199919991999

1989/19991999

1999/2003

19991999

2003

19991995/2002

200119982003

1997/19991993/2002

1983/20011948/2000

1948/20011948/1980/2002

1991/1995

1962/20031972/20031993/1998

2002/20031999/2003

19991999

Added/last refurbished

12.7239.7

7.512.17.6

14.044.21.8

240.4580.0192.0772.0

9.410.919.88.07.66.54.14.42.03.54.72.8

45.7129.4

9.56.4

15.9145.9

3.71.95.6

69.413.37.31.7

16.27.8

115.7

17.79.8

343.4370.9

75.891.0

42,486.642,653.443,024.3

133.954.13.0

65.9256.9

2.41.10.80.75.0

Site area

1,000 m2

35.941.519.216.512.711.87.46.6

27.8179.6

35.5215.1

56.040.419.715.012.50.09.36.04.94.63.60.0

87.6259.6

15.15.8

20.9280.5

17.27.6

24.8

37.623.66.76.4

12.63.0

89.9

11.79.1

16.036.825.722.266.9

114.8151.6

48.326.56.7

17.398.8

218.012,800.04,500.0

0.05.65.12.6

13.3

Lettable w/o parking

1,000 m2

9

9

6

LeaseholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreehold

Freehold

FreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreehold

FreeholdFreehold

FreeholdFreehold

FreeholdFreeholdFreeholdFreeholdFreehold

LeaseholdFreehold

FreeholdFreehold

FreeholdFreeholdFreehold

FreeholdFreehold 8

Freehold 8

FreeholdFreeholdFreeholdFreehold

Form ofownership

01 Mission 06 Our Business 07 Portfolio management 08 Acquisitions 10 Lettings 14 Sales 16 Real Estate Portfolio


Spreespeicher, Stralauer Allee 1–2, BerlinCarossa Quartier, Streitstrasse 5–19, Berlin 3

Office building, Bundesallee 204–206, BerlinHafenplatz 6/7, Köthener Str. 29, BerlinLeibniz Kolonnaden, Walter-Benjamin-Pl. 6, Leibnizstr. 53, Berlin 1, 2

Airport Center Schönefeld, Mittelstrasse 5/5a, BerlinLogistics centre, Montanstrasse 18–26, BerlinOffice building, Joachimstaler Str. 1–3, BerlinOther BerlinBerlin totalDresden totalBerlin Office total

North Gate, Bd. Roi Albert II, 6, 8 and 16, BrusselsOffice building, Square de Meuus 8, BrusselsOffice building, Diegem, Rue Bessenveld 9, BrusselsPléiade A–C, Avenue des Pléiades 11–15–19, BrusselsLouise Village, Avenue Louise 29–31/Rue Dejonker 34–36, BrusselsTervuren Plaza, Rue Gribaumont 1, BrusselsTwin House, Rue Neerveld 105, BrusselsLe Croissant, Avenue Beaulieu 24–26, BrusselsOffice building, Place St Lambert, BrusselsOffice building, Chaussée de la Hulpe 154, BrusselsOaktree, Drève de Bonne Odeur 20, BrusselsMadou Plaza, Brussels 3

Other BrusselsBrussels totalAriane I-III, Route d‘Esch 400, LuxembourgThomas, Rue Thomas Edison 2, LuxembourgLuxembourg totalBrussels Office total

Infopark Budapest, Infopark sétány 1 and 3, Budapest 1, 4

Other BudapestBudapest Office total

IVG Businesspark am Flughafen, Heltorfer Str. 1–22, DüsseldorfGotic-Haus, Westfalendamm 94–100, DortmundOffice building, Stockholmer Allee 32, DortmundFashion Plaza, Karl-Arnold-Platz 2, DüsseldorfGlobal Gate, Grafenberger Allee 293–297, Düsseldorf 3

Other DüsseldorfDüsseldorf Office total

Logistics centre, Cargo City Süd, Geb. 554, Frankfurt-FlughafenCenter am Ring, Otto-von-Guericke-Ring 13–15, WiesbadenOther FrankfurtFrankfurt totalLogistics centre Lohfelden, Otto-Hahn-Str. 26, 28, 34, 36, LohfeldenLogistics centre Waldau, Falderbaumstrasse 7–13, Kassel-Waldau Other Kassel + LiebenauKassel totalFrankfurt Office total

IVG Businesspark Hamburg Nord, Essener Str. 89–99, Hamburg Lilienthal-Center, Kugelfangtrift 4–8/Lilienthalstr. 300, HanoverOffice building, Habichtstrasse, Habichtstrasse 41, HamburgOtherHamburg totalTank storage 7

Oil storage caverns, Beim Postweg 2, Friedeburg Gas storage caverns, Beim Postweg 3, Friedeburg Cavern/tank storage total 7

Hamburg Office total

71 Lombard Street 71, London20 Soho Square, London 20 St. James’s Street, London 40/41 Conduit Street, London London Office total

1380

291250289147

00

1651,280

61,286

1,003491480228204

01141336972880

2,5605,442

273246519

5,961

2190

219

313413

066

1012

895

0213218431

0022

433

3269

1240

459

00000

74.9%55.2%

100.0%96.7%81.1%9.5%

100.0%99.9%

76.0%71.3%75.2%

100.0%90.9%

100.0%58.5%99.1%

72.6%100.0%

63.2%100.0%

30.0%

94.6%100.0%100.0%100.0%

92.7%

75.2%

77.2%

97.0%88.0%

100.0%93.1%76.6%

90.1%

100.0%93.3%

97.1%100.0%

68.5%

92.3%93.1%

100.0%79.7%

100.0%

94.6%

72.2%82.4%

100.0%81.5%

In-building parking

Spaces

2736,745

943

119

2071,4549,7411,729

11,470

64518

2270

6,539 12

4539753426

29,13015,62453,917

01212

53,929

2,915697

3,612

149963

00

6,8410

7,953

56496

0552

4518

364427979

508907

110

1,426

6,1377,563

161,441

00

1,457

Investment 2003

‘000

3,2911,3851,8891,1181,385

555847

1,9492,907

15,3261,885

17,211

16,5119,1723,0382,1832,044

1271,2171,617

497640187

7,35544,588

2,8121,0303,842

48,430

2,1101,3213,431

5,4243,097

9341,3331,720

14712,655

1,2501,429

02,679

592885

3,4874,9647,643

5,0341,197

869184

7,284

26,46833,752

02,1913,2891,6457,125

Income fore-cast 1 2004

‘000

3,1221,3712,8731,4841,292

699847

1,8463,051

16,5852,393

18,978

16,4699,0412,9002,0311,746

1461,3961,605

873587163

07,516

44,4733,6961,6915,387

49,860

1,4921,2822,774

5,4992,768

9021,449

247254

11,119

1,2221,170

12,3931,7991,0133,4946,3068,699

4,9921,161

830202

7,185

26,28633,471

9088

3,2861,6935,895

Rental in-come 1 2003

‘000

Occupancy at 31 Dec.

%

182.013.0

8.028.2

49.8281.0

26.8307.8

36.20.0

36.2

36.00.00.00.0

13.51.3

50.8

0.00.00.00.05.5

34.54.5

44.544.5

74.020.00.00.0

94.0

0.00.00.00.0

Development reserve

1,000 m2

1,910466

2,512547683367722

1,0543,259

11,5201,744

13,264

16,1608,8042,992

8361,003

191,2021,516

629270-85-57

6,03239,321

3,2801,2464,526

43,847

-450564114

4,7112,314

7801,188-524

-1,5706,899

765924-29

1,6601,556

8502,5754,9816,641

4,115793526158

5,592

18,16823,760

795-989

2,1751,6973,678

Cash flow 2003

‘000

-25641

2,250547682204624567

2,4737,132

7567,888

14,1276,9852,593

416537

-321869

1,260450

36-176

-235,362

32,1152,605

9923,597

35,712

-625323

-302

3,3351,700

601978

-763-1,5994,252

544677-29

1,1921,172

6641,8793,7154,907

2,521472339

823,414

13,56716,981

665-1,5041,1091,4311,701

EBIT 2003

in T

324,551

758,687

76,100834,787

44,977

199,240

28,775

82,702111,477

104,420

165,000269,420

168,093

Market value

‘000

69.4%70.1%

100.0%97.6%86.4%65.8%

100.0%98.2%

84.9%82.7%84.6%

100.0%100.0%95.7%76.1%87.9%

75.8%100.0%90.3%

100.0%32.5%

90.8%100.0%100.0%100.0%

91.8%

52.7%

62.1%

99.0%84.8%95.8%98.3%27.6%

88.9%

100.0%84.1%

91.5%100.0%93.0%

96.8%95.3%

100.0%72.2%90.7%

92.9%100.0%100.0%100.0%100.0%

98.4%

0.0%83.2%

100.0%73.4%

Jan.–Dec.

%

Effective occupancy

75.3%70.1%

100.0%98.0%91.1%37.1%

100.0%98.2%

91.8%78.4%90.9%

100.0%100.0%99.9%68.4%97.8%

68.0%100.0%93.3%

100.0%32.7%

95.4%100.0%100.0%100.0%

95.5%

77.3%

80.8%

99.0%88.3%

100.0%96.9%63.2%

90.8%

100.0%96.6%

98.2%100.0%86.5%

93.8%95.1%

100.0%70.8%

100.0%

93.4%100.0%100.0%100.0%100.0%

98.5%

58.5%91.0%

100.0%82.1%

at 31 Dec.

%

9

9

6

18.19

Table of the Real estate portfolio

Milan

Munich

Paris

Finland

Piazzale Lodi 3, MilanPalazzi Fermi & Galeno, Milan 3Via Carducci 125, Sesto San Giovanni, MilanVia Dione Cassio 13, MilanVia Cascia 5, MilanVia Gobetti 2, Cernusco sul NaviglioPalazzo dei Cigni, Milan 3Milan Office total

Nordostpark Nuremberg, Nordostpark 1–98, NurembergIVG Businesspark MEDIA WORKS MUNICH, Rosenheimer-Str., Munich IVG Businesspark vor München, Einsteinstrasse, Ottobrunn Gewerbepark Dornach, Margaretha-Ley-Ring 1–14, DornachBusinesspark Puchheim, Benzstr. 11, Siemensstr. 4, PuchheimOther Munich Munich Office total

7 Place Vendôme, Paris173–175 Bd Haussmann, ParisOffice building, 121–123 Rue d‘Aguesseau, Boulogne Billancourt21 Place de la Madeleine, ParisParis Office total

Kornetintie 6 KOy, Helsinki Kutomotie 6 KOy, Helsinki Malmin Kauppatie 8 KOy, HelsinkiMunkkiniemen liiketalo, Helsinki Niittylänpolku 16 KOy, HelsinkiPasilanraitio 5 KOy, Helsinki Satomalmi KOy, HelsinkiSörnäisten Rantatie 25 KOy, HelsinkiTeerikukonkuja 5 KOy, HelsinkiVallilan yhtiöt, Helsinki Vanha Talvitie 11 KOy, Helsinki Vilhonkatu 5 KOy, Helsinki Vuorikatu 20 KOy, HelsinkiKilon Helmi KOy, EspooKilon Timantti KOy, EspooLastupolku KOy, EspooScifin Alfa KOy, EspooSinimäentie 10 KOy, EspooTapiontuuli KOy, EspooPlaza Forte KOy, VantaaPakkalan Kartanonkoski 3 KOy, VantaaPakkalan Kartanonkoski 12 KOy, VantaaSisustaja KOy, VantaaVantaan Liikeskus (Jumbo), VantaaOtherFinland total 10

Other total

Europe (except Germany)GermanyIVG

100%93%94%94%94%

100%93%

100%100%100%100%95%

100%100%94%

100%

85%85%85%85%85%78%75%85%85%85%85%85%85%85%85%85%85%65%85%85%85%85%85%18%

IVG share

FreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreehold

FreeholdFreeholdFreeholdFreeholdFreehold

FreeholdFreeholdFreeholdFreehold

LeaseholdFreehold

LeaseholdFreeholdFreehold

LeaseholdFreeholdFreehold

LeaseholdFreehold

LeaseholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreeholdFreehold

Form ofownership

OfficesOfficesOfficesOfficesOfficesOfficesRetail

Business parkBusiness parkBusiness park

Comm./logisticsComm./logistics

OfficesOfficesOfficesOffices

OfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesOfficesRetailRetail

Type of use

2001200019991999200020012000

1948/20031966

1960/20031974/2001

1977

1999/2002199720001997

2003200320032003200320032003200320032003200320032003200320032003200320032003200320032003200320032003

Added/last refurbished

6.05.91.57.02.44.74.8

32.3

258.220.8

768.430.7 43.722.6

1,144.4

2.51.63.00.87.9

2.03.64.16.02.72.12.33.48.8

10.02.81.61.73.73.91.57.8

23.43.14.09.54.0

25.328.687.4

253.3

144.9

594.345,313.345,907.6

Site area

1,000 m2

20.815.89.49.25.45.12.7

68.4

123.411.479.829.821.92.9

269.2

11.110.69.82.6

34.1

3.37.74.76.73.07.74.86.54.1

34.86.75.86.73.84.01.25.3

12.66.96.17.83.3

15.953.874.0

297.2

147.6

865.9824.6

1,609.5

Lettable w/o parking

1,000 m2

1 Non-consolidated/provisional2 Stated amounts are IVG share of euro total3 Space (partly) in development

4 Near completion5 Includes tenancies signed up to 31 Dec. 2003

01 Mission 06 Our Business 07 Portfolio management 08 Acquisitions 10 Lettings 14 Sales 16 Real Estate Portfolio


Effective occupancy

Piazzale Lodi 3, MilanPalazzi Fermi & Galeno, Milan 3Via Carducci 125, Sesto San Giovanni, MilanVia Dione Cassio 13, MilanVia Cascia 5, MilanVia Gobetti 2, Cernusco sul NaviglioPalazzo dei Cigni, Milan 3Milan Office total

Nordostpark Nuremberg, Nordostpark 1–98, NurembergIVG Businesspark MEDIA WORKS MUNICH, Rosenheimer-Str., Munich IVG Businesspark vor München, Einsteinstrasse, Ottobrunn Gewerbepark Dornach, Margaretha-Ley-Ring 1–14, DornachBusinesspark Puchheim, Benzstr. 11, Siemensstr. 4, PuchheimOther Munich Munich Office total

7 Place Vendôme, Paris173–175 Bd Haussmann, ParisOffice building, 121–123 Rue d‘Aguesseau, Boulogne Billancourt21 Place de la Madeleine, ParisParis Office total

Kornetintie 6 KOy, Helsinki Kutomotie 6 KOy, Helsinki Malmin Kauppatie 8 KOy, HelsinkiMunkkiniemen liiketalo, Helsinki Niittylänpolku 16 KOy, HelsinkiPasilanraitio 5 KOy, Helsinki Satomalmi KOy, HelsinkiSörnäisten Rantatie 25 KOy, HelsinkiTeerikukonkuja 5 KOy, HelsinkiVallilan yhtiöt, Helsinki Vanha Talvitie 11 KOy, Helsinki Vilhonkatu 5 KOy, Helsinki Vuorikatu 20 KOy, HelsinkiKilon Helmi KOy, EspooKilon Timantti KOy, EspooLastupolku KOy, EspooScifin Alfa KOy, EspooSinimäentie 10 KOy, EspooTapiontuuli KOy, EspooPlaza Forte KOy, VantaaPakkalan Kartanonkoski 3 KOy, VantaaPakkalan Kartanonkoski 12 KOy, VantaaSisustaja KOy, VantaaVantaan Liikeskus (Jumbo), VantaaOtherFinland total 10

Other total

Europe (except Germany)GermanyIVG

*7) *7) *7)

In-building parking

Spaces

2,167367

6,2363884

28,894

600

9950

1,055

1292,992

3,502

66,54736,859

103,406

Investment 2003

‘000

2,6801,992

874900574710506

8,236

10,980355

7,9962,3582,131

15823,987

6,6252,5002,2251,964

13,314

503712670

1,218323

1,049427

1,055372

4,653490

1,232915642403136921967

1,2631,2361,309

6162,5263,0896,657

33,384

15,397

129,31795,248

224,565

Income fore-cast 1 2004

‘000

2,6801,9531,138

884563706506

8,430

14,259541

8,5673,4672,084

13929,057

6,3865,3082,8601,708

16,262

8311311119753

14951

17356

77310218114810911623

153194210178210101420515

1,2485,667

15,475

104,363101,324205,687

Rental in-come 1 2003

‘000

99.042.0

204.419.012.00.0

376.4

9.0

10.028.48.6

56.0

0.0

92,2873,5965,7

Development reserve

1,000 m2

2,3231,958

966750564611507

7,679

11,624-28

4,9793,1211,9923,769

25,457

6,0383,2272,5951,227

13,087

568785

163449026

13739

70875

161146919716

13016118614916879

411421556

4,282

12,016

84,70376,021

160,724

Cash flow 2003

‘000

1,9441,656

806626477512429

6,450

8,755-99

3,6952,6861,6513,760

20,448

5,6752,2702,144

90110,990

406974

130405915

12034

59236

122141788014

11713715997

13964

379421432

3,589

9,968

68,10854,476

122,584

EBIT 2003

‘000

125,900

408,630

308,300

310,568

188,533

1,981,1581,313,3183,294,476

Market value

‘000

100.0%100.0%90.6%

100.0%100.0%100.0%100.0%98.6%

92.2%100.0%96.5%

100.0%100.0%

95.4%

100.0%78.0%90.7%97.9%89.9%

100.0%97.6%

100.0%98.3%

100.0%93.4%62.6%

100.0%100.0%100.0%93.9%93.6%

100.0%97.4%

100.0%100.0%100.0%87.4%

100.0%100.0%100.0%95.4%

100.0%100.0%

97.1%

89.9%93.3%91.5%

Jan.–Dec.

%

Effective occupancy

100.0%100.0%88.4%

100.0%100.0%100.0%100.0%97.7%

93.8%79.6%95.7%

100.0%100.0%

95.4%

100.0%100.0%39.1%

100.0%88.9%

100.0%97.6%

100.0%98.3%

100.0%93.4%62.6%

100.0%100.0%100.0%93.9%93.6%

100.0%97.4%

100.0%100.0%100.0%87.4%

100.0%100.0%100.0%95.4%

100.0%100.0%

97.1%

93.4%94.4%93.9%

150178845340

150

655

1,446963183430

03

3,025

00

603191

11

26623160

91

4013

618

1511386

1,6001,5203,793

1,199

11,8986,098

17,996

100.0%100.0%

86.2%100.0%100.0%100.0%100.0%

98.1%

92.3%80.9%95.2%

100.0%100.0%

94.3%

99.8%100.0%

45.9%100.0%84.4%

100.0%100.0%100.0%100.0%100.0%100.0%

86.9%100.0%100.0%100.0%

89.1%92.6%

100.0%100.0%100.0%100.0%100.0%

82.5%100.0%

82.8%100.0%100.0%100.0%100.0%

96.1%

91.5%88.6%90.3%

4 Near completion5 Includes tenancies signed up to 31 Dec. 2003

6 Geometrical volume in 1,000 m3; gas cavern storage capacity:

500 million scm working gas7 IVG share only

8 Partly held under trust for German government9 1,000 m3

10 Finland portfolio (net rental income, cash flow and operating earnings) stated at

2/12 of total (POLAR first consolidated 1 Nov. 2003)

Occupancy at 31 Dec.

%

at 31 Dec.

%

20.21

Project development

IVG development projects were snapped up by tenants and buyers all over Europe in 2003, rewarding

IVG’s strategy of producing top-quality developments in line with market needs:

IVG worked with top-notch partners on development projects worth €2.1 billion in 2003; IVG ac-

counted for €1.1 billion of this total while keeping its capital commitment below €400 million.

Lettings in 2003 totalled 51,000 m2, comprising 41,000 m2 in Germany and 10,000 m2 elsewhere in

Europe.

IVG project development activities in 2003 generated turnover of €87.0 million (2002: €160.6 million)

and operating earnings of €5.3 million (2002: €49.1 million). Turnover and earnings were down because

the 2002 figures had included the sale of Gresham Street, IVG’s biggest ever development project.

Accounts were not settled on any major projects in 2003. Factoring out Gresham Street, turnover and

operating earnings increased compared with 2002.

Development projects elsewhere in Europe are undertaken by IVG branch offices or experienced local

partners.

In Germany, IVG consolidated and reinforced its project development capabilities during the year under

review. Wert-Konzept Projektentwicklung and Tercon combined to form a single unit under the Tercon

name. As a result, various technical and commercial functions have been expanded and geared to pull

together.

IVG total value:

1.1 billion

Dr. Josef Zimmermann, Director Project Development Germany Jorgen Svedin, Director Project Development International

IVG generates attractive returns with project development while systematically minimizing risk. Clear

risk control principles are applied to this end:

The IVG share of development projects must not exceed around one third by value of the IVG real

estate portfolio.

The strict investment criteria applied to portfolio properties apply equally to development projects.

Project appraisal draws on IVG’s own pan-European research and the wealth of experience furnished

by branch office property experts.

IVG works with top-calibre contractors to minimize quality, cost and timing risk.

Margins between 10% and 20% must be attainable depending on the project’s location, type of use

and degree of advancement.

A global project controlling function monitors ongoing projects and performs risk assessment on a

continuous basis.

Selected development projects current in 2003

IVG is developing several projects in Berlin through Tercon, its project development subsidiary:

Wert-Konzept developed Classicon, a combined commercial-residential building on Leipziger Platz, as

general project contractor for IVG. The eleven-storey building is part of an assemblage which restores

Leipziger Platz to its earlier octagonal form. IVG sold the project to an open-end real estate fund soon

after construction began. It is now used by Stinnes AG.

Berlin

76 Financial Information 36 Markets 06 Our Business 07 Portfolio management 20 Project development

01 Mission

Classicon

Location: Berlin, Leipziger Platz 9

Type of use: Office



Tenants: Stinnes

Completed: 08/2003

Sale: 08/2003 to CGI Commerzbank Grundinvest

▲


Nordbahnhof

Location: Berlin

Type of use: 4 office buildings


Occupancy rate: 96%

Tenants: Deutsche Bahn

Completion: 2005

Sale: 2003 to DB Real Estate

22.23

Also on Leipziger Platz, Hannover Leasing engaged Tercon as general project contractor for Kanada-

Haus. About 6,500 m2 of the 19,000 m2 building will be used by the Canadian embassy. Tercon is also

commissioned with marketing the remainder.

In a joint venture with Rendata, Tercon is general project contractor for Stettiner Carrée – a develop-

ment at Berlin’s Nordbahnhof rail station comprising four office buildings with a project value of €160

million. The ensemble is let to Deutsche Bahn – which is using it to bring together much of its corporate

headquarters – and has been sold to a company in the Deutsche Bank group.

Tercon has further Berlin projects in the planning or building stage at Salzufer, on Unter den Linden, in

Hackescher Markt and on the banks of the Spree in Kreuzberg.

Tercon Management Board_Horst Lieder_Dr. Dierk Ernst_Reinhard Müller (left to right)

▲

Nordbahnhof

Location: Berlin

Type of use: 4 office buildings


Occupancy rate: 96%

Tenants: Deutsche Bahn

Completion: 2005

Sale: 2003 to DB Real Estate

Brussels is IVGs largest location. Besides management of the portfolio, activities in 2003 focused on

two projects:

The complete overhaul and extension of Madou Plaza, which will largely be finished in 2004.

Refurbishment of the 10,000 m2 Tervueren Plaza office building, which began mid-2003 and was

completed in January 2004.

Brussels

M A D O U P L A Z A , B R U S S E L S

Madou Plaza is a major IVG project comprising wholesale mod-

ernization and expansion of an existing building. The originally

32-storey office tower was completed in 1964 and came into

IVG’s hands when IVG took over Asticus in 1999. The property

is handily sited on the Brussels inner ring road, at the edge of

Quartier Léopold where the main EU institutions are found.

The new, rejuvenated Madou Plaza will be finished by the end

of 2004. The expanded tower is receiving an attractive glass

frontage, new utilities and a variable-floorplan interior layout. A

7,000 m2 extension featuring a generous atrium houses offices

and a conference centre. The 33-storey building will be the tall-

est structure in the European capital. Letting prospective: EU.

01 Mission 06 Our Business 07 Portfolio management 20 Project development

36 Markets


▲

Dr. Jean Pierre Staelens, Cetim S.A., Brussels_IVG Project Manager

Madou Plaza

Location: Brussels, Type of use: Office

Site area: 40,000 m2, Completion: end of 2004


24.25

IVG has been in Budapest since the late 1990s and has completed a number of projects in the city cen-

tre. Some 100,000 m2 of office space is currently being built in Infopark Budapest. Half of it is already

completed.

Budapest

Infopark Budapest is a key IVG project in one of the new EU member states. IVG began developing the accessibly situated site near

the Technical University and the Danube in 1998. Three buildings are complete and mostly let; construction of a further office build-

ing with 13,400 m2 of lettable space commenced at the end of 2003. Infopark is designed to house branch offices of international

firms alongside local businesses. In addition to the office buildings, it also has a service centre with communication and catering

facilities. Major tenants in the first three buildings include Hewlett-Packard and Hungary’s market-leading telecoms and Internet

service providers Matáv and Axelero. Matáv has bought the building it uses. Onward development and completion of the Infopark

depends on demand and is looked after by the IVG branch office with the aid of locally experienced project developers.

Infopark Budapest

Location: Budapest, Type of use: Office

Site area: 42,100 m2 (IVG 17,200 m2), Occupancy rate: 77%

Tenants: Hewlett-Packard, Axelero

Development reserve: 36,200 m2

▲

I N F O PA R K , B U D A P E S T

▲

Global Gate

Location: Düsseldorf, Type of use: Office

Site area: 33,600 m2 in three construction phases (phase 1: 10,000 m2 sold / phase 2: 12,600 m2 / phase 3 in preparation: 11,000 m2)

Occupancy rate: 63% (phase 2 only)

G L O B A L G AT E , D Ü S S E L D O R F

Global Gate – an IVG office development in Düsseldorf – shows that there are openings in the German office market even at difficult

times. It is located on Grafenberger Allee, between the city centre and leafy suburbs. A number of German household names have

taken up residence in the area, including including Deutsche Bank, Thyssen-Krupp, SMS and Metro with its corporate headquarters.

The first construction phase of Global Gate, completed by IVG in 2002, is let to a subsidiary of Deutsche Telekom and was sold to

an open-end real estate fund.

Almost all of the second phase was let in 2003 despite the difficult market situation. Tenants include international companies such

as the Finnish office chair manufacturers Nowy Styl, TUI subsidiary TQ 3 Travel Solutions, Metro, Weight Watchers and Chubb

Insurance. With these lettings, the complex has attained its eponymous status as Düsseldorf’s global business gateway.

The third phase will offer the tried and tested combination of high quality and commercial amenity.



26.27

Preparations continue for construction of Airrail, a major development fully integrated with Frankfurt

Airport. Considerable progress has been made on planning work for the complex, which features 680

five-star hotel rooms and more than 70,000 m2 of office space. Le Meridien plans to create one of the

world’s most prestigious airport hotels with high-end interior appointment specially designed for Airrail.

As a result, 32% of the total space at Airrail is already let before construction even begins.

IVG has achieved promising further progress with its London activities following its highly successful

Gresham Street and Great Marlborough Street projects. IVG modernized 20 Soho Square and let some

4,000 m2 of the 5,600 m2 office building to Hill and Knowlton, an advertising agency. Preparations com-

menced for refurbishment of the former headquarters of Lloyds TSB Bank in Lombard Street.

IVG acquired a promising development project together with its majority stake in Finland’s POLAR. The

Jumbo shopping centre near the airport – the second largest in Finland, with a floor area of 53,800 m2

– is gaining another 28,400 m2 of retail space.

The 16,900 m2 Centro Marelli is finished and is now being let. A total of 4,100 m2 was let in 2003, some

of it to Xerox.

London

Frankfurt

Helsinki

Milan

Airrail

Location: Frankfurt

Type of use: Office,

retail, hotel


Occupancy rate: 32%

Tenants: Le Meridien

Completion: 2007

▲

Colgate

Location: Paris, Type of use: Office

Site area: 9,100 m2, Occupancy rate: 100%

Tenants: Colgate

Sales: 12/2003 to KanAm

▲

Perisud

Location: Paris, Type of use: Office


Tenants: Sanofi-Synthélabo

Sales: 05/2003 to CGICommerzbank Grundinvest

▲

A joint venture between AXA and IVG is developing real estate projects worth some €800 million by 2008. With up-to-date products

on attractive terms, the joint venture has already fully let three large office buildings and sold two of them to German open-end real

estate funds: the Périsud building in Montrouge, Paris, has been completed and is now used by Sanofi-Synthélabo; an office building

in Bois-Colombes is let to Colgate. A further Bois-Colombes office complex, with 40,800 m2 of lettable space, is under construction

and has already been let to Aviva, a UK insurance group. The joint venture has also sold numerous owner-occupied apartments in

Issy-les-Moulineaux and Bois-Colombes.

Paris


36 Markets

76 Financial Information 72 Employees 58 Investor Relations

In a joint venture with insurers and real estate specialists AXA, IVG has been involved in developing

various projects in Paris since 2001. The focus in 2003 was on letting, sales, and advancing construction

on ongoing projects:

A X A / I V G P R O J E C T D E V E L O P M E N T, PA R I S

Berlin

Berlin

Berlin

Brussels

Brussels

Budapest

Düsseldorf

Düsseldorf

Düsseldorf

Frankfurt

Helsinki

London

Milan

Munich

Munich

Paris

Paris

Paris

Paris

Paris

Paris

Paris

Paris

Paris

* Percentage let/sold

28.29

Carossa Quartier phase 2

Nordbahnhof Berlin

Salzufer

Madou Plaza

Tervuren Plaza

Infopark building C

Global Gate phase 2

Global Gate phase 3

Museumsmeile Parkhaus

AIRRAIL

Jumbo 2

Lombard Street

Centro Marelli

City Limit Fürth

Ottobrunn Geb. 3 Modernization

AXA – Bois Colombes Ilot 1

AXA – Bois Colombes Ilot 2, 3, 4

AXA – Bois Colombes Ilot 6, 7, 8

AXA – M1 H Avenue de France

AXA – Neuilly sur Seine

AXA – Oise Logistics Parc

AXA – PERISUD

AXA – PS Cluny

AXA – PS Soufflot

Total lettable space 100% in m2

Total value 100% ( m)

IVG share of total value ( m)

IVG share of total value (%)

Committed capital ( m)

Average economic occupancy rate (%)

Portfolio

Sold

For sale

Portfolio

Portfolio

Portfolio

Portfolio

Portfolio

Let

For sale

For sale

For sale

Sold

For sale

Portfolio

Sold

For sale

Sold

For sale

For sale

For sale

Sold

For sale

For sale

Under const.

Under const.

Under const.

Under const.

Under const.

Under const.

Completed

In planning

Completed

In planning

In planning

In planning

Completed

Completed

Under const.

Completed

Under const.

Under const.

In planning

In planning

Part complete

Completed

Under const.

Under const.

100%

50%

50%

100%

100%

100%

100%

100%

100%

47%

60%

100%

45%

94%

100%

30%

30%

30%

30%

30%

30%

30%

13%

13%

2006

2005

2005

2004

2004

2005

2003

2006

2003

2007

2006

2008

2004

2004

2004

2003

2005

2004

2006

2006

2005

2003

2005

2005

P R O J E C T D E V E L O P M E N T S

Location Project Type of use Lettable Occup. Realiza- IVG Progress Status

space m2 rate* tion share

P R O J E C T D E V E L O P M E N T B Y R E G I O N


14%

96%

31%

2%

0%

0%

78%

0%

100%

32%

59%

0%

28%

75%

77%

100%

100%

96%

0%

0%

0%

100%

100%

58%

8,941

61,347

48,556

40,000

9,560

13,376

12,602

10,917

114,823

28,425

16,512

16,871

20,768

13,555

9,090

40,840

14,755

12,612

12,500

140,816

33,749

3,764

5,701

690,080

2,091

1,123

54

< 400

42

Berlin 15%

Düsseldorf 6%

Frankfurt 23%

Munich 4%

Brussels 15%

Budapest 2%

Helsinki 4%

London 12%

Milan 1%

Paris 18%

Office and retail

Office

Office, site dvlpmt.

Office

Office

Office

Office

Office

Parking

Office, retail and hotel

Retail

Office and retail

Office

Retail

Office

Office

Office

Residential

Office

Office

Logistic

Office

Residential

Residential

Project development services

IVG’s project development activities are not restricted to buildings in its own portfolio. The Group also

offers project development as a service to other companies. IVG subsidiary Tercon undertakes projects

as general project contractor and provides services ranging from project management and obtaining

planning permission to project financial control.

▲

St. Martin-Strasse

Location: Munich

Type of use: Office


Tenants: Siemens

Tercon has been general project contractor for the new Siemens office park on

St. Martin-Strasse – near Munich East Station – since 2001. The new park will

ultimately accommodate 5,500 workers. Five office buildings with a total of

80,000 m2 and 450 parking spaces were handed over to Siemens in 2003. Plan-

ning work has begun on two further office buildings with 25,000 m2.

01 Mission 06 Our Business 07 Portfolio management 20 Project development 29 Services


City Name Type of Use m2 (GFA) Service

Berlin Kanada Haus Embassy, offices, 19,000 Construction as general project

residential contractor; partial marketing

Darmstadt TZ Darmstadt Office building 80,000 General planning

(buildings for T-Online and T-Systems)

Darmstadt TZ Darmstadt (development Telekom office park 284,000 Management of planning

plan and planning permission) application

Munich St. Martin-Strasse Siemens office building 105,000 Construction as general project

contractor; marketing

Munich Hannover-Leasing headquarters Office building 9,500 Project management

S E L E C T E D S E RV I C E R E F E R E N C E S , T E R C O N 2 0 0 3 :

Service

references,

Tercon 2003

S T. M A RT I N - S T R A S S E , M U N I C H


30.31

Investment funds

Our funds complement IVG shares as a vehicle allowing private and institutional investors to tap into

our active presence and deep experience in European property markets.

German institutional investors are looking to buy into property abroad and – rather than buying outright

as they would do at home – prefer to invest indirectly through institutional real estate funds. With

property-based tax-saving strategies on the decline, private investors are increasingly turning to yield-

oriented investments. Difficult property markets make an experienced guide with local presence a key

success factor.

IVG is well placed to serve institutional and private investors. Access to attractive investment products,

experience in active portfolio management and a network of branch offices in major European cities and

growth centres give a competitive edge. IVG projects a sharply defined market presence by its clear

focus on office and commercial property in Europe.

IVG actively exploited the strategic opportunities in 2003 to consolidate and expand funds activities for

institutional and private investors. In total, IVG manages a real estate portfolio worth €3 billion for third

parties.

Growing funds

business leverages

IVGs expertise

Dr. Georg Reul, Director Funds Fund team_Jan Dührkoop_Dr. Rüdiger von Stengel_Philipp Henkels (left to right)

Open-end real estate funds

As of 2003, IVG is stepping up its involvement in the open-end real estate fund business. In spring,

IVG Immobilien KAG gained approval to carry on investment business from BaFin, Germany’s Federal

Financial Supervisory Authority. IVG Immobilien Kapitalanlagegesellschaft mbH, to cite its full name,

is a specialized financial institution coming under Sec. 1 of the German Banking Act (KWG) and BaFin

supervision. Its activities consist of issuing and managing real estate funds as defined in the German

Investment Funds Act (KAGG) (which was superseded by the German Investment Act (InvG) on 1 Janu-

ary 2004). Known as open-end real estate funds, these are especially popular among investors due to

their transparency and security.

For the time being, IVG is concentrating on real estate funds for institutional investors such as insurance

companies and pension funds. Over €13 billion is currently invested in institutional real estate funds

in Germany. The flow of money into institutional real estate funds is expected to continue growing,

primarily due to the growth market in company pensions, investment strategies with greater emphasis

on real estate and a shift in investment patterns from direct to indirect vehicles.

Its risk spread and stability makes real estate an attractive buy for institutional investors. But profession-

ally looking after property takes a lot of management effort and expert knowledge.

01 Mission 06 Our Business 07 Portfolio management 20 Project development 30 Investment funds 31 Open-end real estate funds


Source: BVI (March 2003), IVG Immobilien AG

Open-end real estate funds

Money market funds

Other security funds

Bond funds

Equity funds 1997 1998 1999 2000 2001 2002 2003

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

- 10,000

- 20,000

F U N D S I N V E S T E D

m

New IVG

investment company


32.33

To make up for knowledge shortfalls above all regarding foreign markets, institutional investors prefer a

professional, experienced operator with direct access to the rental and investment markets.

In December, IVG Immobilien KAG issued two real estate funds: IVG Europa Invest Nr. 1 and IVG

Europa Invest Nr. 2. The plans are for further investors to join these funds. In view of their systematic

pan-European investment policy resembling the buy-and-sell strategy successfully practised by IVG, we

anticipate that the funds will generate sustained, above-average returns.

Institutional

investors cautious

in their investment

decisions

A D VA N TA G E S O F I N V E S T I N G I N R E A L E S TAT E

Percentage of respondents

Broad diversification

Steady income

Independent of stock and bond markets

Protection from inflation

Strong potential for value growth

97.4

63.2

60.5

47.1

44.7

D I S A D VA N TA G E S O F I N V E S T I N G D I R E C T LY I N R E A L E S TAT E

Percentage of respondents

High administrative expense

Not readily fungible

Demands high level of expert knowledge

Low yields

High cluster risk

Source: Prognos AG – survey covering 50% of market value in investments

81.6

73.5

50.0

28.9

13.2

I V G I M M O B I L I E N D E L P H I S T U D Y: I N V E S T M E N T B E H AV I O U R O F I N S T I T U T I O N A L I N V E S T O R S

Closed-end real estate funds

Private investors have long favoured closed-end funds as a means of investing in property. A key advan-

tage is that investors are fully informed, before committing themselves, as to the properties that make

up the fund assets and the fund’s prognosticated performance over the next 10 to 15 years. This pro-

vides a sound basis on which to decide when it comes to certain kinds of mostly long-term investment

– bringing forecasting risk down to a low level unattainable for other indirect property investments.

As a result, closed-end real estate funds have kept a strong place among property investments, proving

wrong all predictions to the contrary. Some €4.5 billion in equity flowed into closed-end funds in 2003.

The total value of real estate assets held in closed-end funds exceeds €150 billion, well above the €85

billion assets of all open-end real estate funds.

IVG plans to place greater focus on closed-end real estate funds. We consider ourselves well placed to

expand this business in view of our Europe-wide branch office network and considerable experience in

the structuring, value-sustaining management and timely sale of real estate investments. Investment

products structured in this way will be promoted in future through an IVG-owned marketing manage-

ment company. To this end, IVG has increased its stake in Wert-Konzept, a funds marketing company

of long standing, from 40% to 100%. After strengthening the workforce and structure of its marketing

arm, Wert-Konzept increased marketed equity in 2003 by 140% compared with the previous year, to

€46 million. The target for 2004 is further growth to €100 million.

Marketing in 2003 centred around two closed-end funds: »Ertragsfonds 5« and »EuroSelect 07«. The

first of these was issued in 2002 and all units were sold in 2003. The fund assets are two office build-

ings in Frankfurt am Main and Bonn. The two properties are let under long-term tenancies to Dresdner

Bank and Deutsche Telekom.

■ Total investment: €99.25 million

■ Equity sold: €46.65 million, plus €2.3 million premium (€31 million in 2003)

■ Prospectus dividend: 7%

■ Tax loss for investors in Year 1: 13%

Ertragsfonds 5

IVG takes 100% of shares

in investment fund

promoters Wert-Konzept

01 Mission 06 Our Business 07 Portfolio management 20 Project development 30 Investment funds 31 Open-end real estate funds 33 Closed-end real estate funds


34.35

IVG and Wert-Konzept presented the »Euro-

Select 07« fund in November 2003. The fund

combines first-class office properties in

Germany and the UK.

EMI House, London

Lettable space 8,000 m2

Purchase price €51.0 million

Annual rent €3.6 million

IVG Headquarters

Zanderstr. 5-7, Bonn

(94% of the property management company)


Purchase price €21.5 million (for 94%)

Annual rent €1.5 million (for 94%)

Nordostpark Building 12-14,

Nuremberg


Purchase price €12.7 million

Annual rent €0.9 million

Total value: €98.5 million

Equity, excluding premiums, approx.

€50 million

Initial dividend 6.3% (tax free)

» E U R O S E L E C T 0 7 «

The planning of »EuroSelect 07« is an early example of how the expertise of various

IVG business operations is drawn upon in issuing closed-end funds. All IVG divisions

successfully contributed their experience, from the search for a suitable property by

the London Branch Office to choices regarding legal and tax issues, financing and

ultimately marketing.

The »EuroSelect 07« investment company has acquired the London headquarters

of EMI. The property is in the London Borough of Hammersmith, between the City

(about 5 km away) and Heathrow Airport (12 km).

The other two properties are the headquarters of IVG Immobilien AG in Bonn and an

office building in the IVG business park at Nuremberg. The buildings are let on long-

term tenancies lasting to 2020.

Under the double taxation treaty, income from the London property is only taxed in

the UK. In Germany, this income is tax-exempt (though it counts towards total income

when determining the tax rate applicable to income from other sources). The UK

grants each taxpayer a tax-free allowance equivalent to €6,500 a year. As a result,

dividends payed out by the funds are virtually tax-free for German participants invest-

ing up to €115,000.

IVG provides investors in this fund with exit opportunities unusual for a closed-end

fund – for example redemption of units in the event of hardship and a right to sell to

IVG in respect of the two German properties.

IVG will remain able to offer attractive European properties with tax benefits for pri-

vate investors.

Zanderstrasse

Location: Bonn

Type of use: Office

Site area: 9,300 m2


Tenants: IVG Immobilien AG

▲

01 Mission 06 Our Business 07 Portfolio management 20 Project development 30 Investment funds 31 Open-end real estate funds 33 Closed-end real estate funds


EMI House

Location: London, Type of use: Office


Tenants: EMI

▲

Wert-Konzept_Bernd Wrobel_Dr. Klaus-Dieter Schmidt_Rainer Gieseke_Torsten Deutsch (v.l.n.r.)

Volume € million 98.5

Equity capital € million 50.0

Borrowed capital (net) € million 48.5

Initial dividend in % 6.3

Minimum investment € (plus 5% premium) 10,000

* from 2003; rising to approx. 8% by 2022

D ATA

London, EMI House, m2 office space 8,000

43 Brook Green Hammersmith parking spaces 45

Bonn, IVG headquarters, m2 office space 9,300

Zanderstrasse 5&7 parking spaces 109

Nuremberg, m2 office space 8,500

Nordostpark 12–14 parking spaces –

P R O P E RT I E S »EuroSelect 07«

Data

*

S E L L I N G O P T I O N S

Investors have option to sell in event of hardship at any time

▲

▲

Years 1–580% of par

Up to year 1090% of par

Investors have right to sell units backonce after 10 years, at the then prevailing market

price with the applicable discount.

The investment fund company has optionsto sell the German investment properties

(Bonn and Nuremberg) to IVG:

Initial purchase of units ▲

2004 2009 2014 2015 2017

Source: IVG

36.37

Markets

Rather than following identical trends, the various European real estate markets each have different potential and growth rates.

Selling opportunities in one major city coincide with buying opportunities in another.

Only a real estate company with local expertise is in a position to exploit these market opportunities to full effect.

Economic environment

The European economy was generally feeble in 2003. Most European countries reported only slight

economic growth. The main cause besides structural problems was weak domestic demand. House-

holds and businesses held back with spending due to the shaky outlook and governments were forced

to save by high levels of public debt.

A look at Europe’s countries and regions reveals a varied picture. Countries in Central Eastern Europe

have relatively high growth rates. Though not spared the effects of the weak global and Western Euro-

pean economy, these were through the worst of the recession and are now attractive investment loca-

tions in view of their impending EU accession. This region is expected to continue delivering Europe’s

top growth rates in the coming years. Among existing EU members, the UK and Spain turned the corner

and already saw their growth rates pick up in 2003.

Inflation in EU member states ranges between 1.2% and 2.9%. Combined with low interest rates this

makes for a good climate for business investment.

Varied economic

picture across Europe

Markets

01 Mission 06 Our Business 36 Markets 37 Economic environment



E U R O P E A N E C O N O M I C D ATA

in %

GDP growth Inflation Interest rates 3

2002 2003 2002 2003 2002 2003

Germany 0.2 -0.1 1.3 1.3 4.78 4.07

Finland 2.2 1.5 2.0 1.2 4.98 4.13

Sweden 1.9 1.4 2.0 2.0 5.30 4.64

Hungary 3.5 2.9 5.2 5.2 7.09 n.s.

Italy 0.4 0.3 2.6 2.8 5.03 4.25

Portugal 0.4 -0.8 3.7 2.3 5.01 4.18

Spain 2.0 2.3 3.6 2.9 4.96 4.12

Belgium 0.7 0.8 1.6 1.8 4.99 4.18

France 1.2 0.1 1.9 2.5 4.86 4.13

UK 1.7 2.0 1.3 1.3 4.91 4.58

EU (15 countries) 1.0 0.7 2.1 2.0 4.92 4.23

Euro zone (12 countries) 0.9 0.4 2.3 2.1 4.92 4.16

Source: Eurostat1 Provisional (except Germany)2 Nov. 2002–Nov. 20033 Yield on 10-year government bonds

1 2

European real estate market

Most European office property markets were dragged down with the economy in 2003: Top and aver-

age rents fell while vacancy rates increased. The causes were shrinking demand and growth in the

supply of new space. Projects initiated at the height of the millennium boom were now coming onto

the market. Large amounts of space were also available for subletting.

Space turnover varied from city to city across Europe. While demand in London, Milan, Berlin and Bar-

celona dropped between 10% and 23%, Brussels saw demand growth of 96%, Prague 47% and Ma-

drid 21% – after a weak preceding year – no less than 40%. Turnover remained at previous year’s levels

in the main German office locations except Berlin, and in Frankfurt was even up 21%. However, many

companies were taking advantage of the current market situation to let new units on better terms.

A total of 7.06 million m2 of office space was let in the 19 main cities in 2003. The 2002 figure had been

6.65 million. The weighted average relative growth rate in 16 key Western European office markets

was 5%. The three major cities of Central Eastern Europe saw growth of 14%, albeit from a far lower

starting point.

For property market research, IVG draws on the expertise of its own branch offices and of local specialist estate

agents, supplemented by a centrally managed cooperation with international real estate consultants Cushman &

Wakefield Healey & Baker (CWHB). This double-checking of market information is necessary because there are

no central clearing points for the real estate market.

Rental markets

hard, investment

markets stable

38.39

M A R K E T D ATA

Location Population1 Total space2 (m2 million)1 Space turnover (m2)1 Top monthly rent (/m2)1 Average monthly rent (/m2)1 Vacancy rate (%)1 Prime yield (%)1 Average yield (%)1

Change Change Change Change Change Change Change

2003 2003 2002 % 2003 2002 % 2003 2002 % 2003 2002 % 2003 2002 % 2003 2002 % 2003 2002 %

Berlin 3,299,900 16.6 16.4 1.2 350,000 395,000 -11.4 21.50 26.00 -17.3 12.75 14.50 -12.1 9.2 7.3 1.9 6.00 5.50 0.50 7.00 6.50 0.50

Brussels 949,000 11.8 11.4 3.5 723,236 427,627 69.1 22.90 20.80 10.1 17.00 15.80 7.6 9.4 8.6 0.8 6.25 6.75 -0.50 6.60 6.80 -0.20

Budapest 2,018,000 1.4 1.3 7.7 139,616 131,369 6.3 19.00 18.00 5.5 14.00 14.00 – 20.5 20.9 -0.4 8.50 8.75 -0.25 9.00 9.00 –

Düsseldorf 565,500 5.7 5.6 1.8 230,000 282,000 -18.4 21.00 23.00 -8.7 12.25 13.00 -5.8 12.3 7.2 5.1 6.00 5.50 0.50 6.50 6.25 0.25

Frankfurt 664,000 10.9 10.5 3.8 526,500 435,000 21.0 35.00 42.00 -16.7 13.50 16.00 -15.6 12.4 4.8 7.6 5.50 5.00 0.50 6.50 6.00 0.50

Hamburg 1,689,000 12.8 12.6 1.6 280,000 325,000 -13.8 20.00 22.50 -11.1 12.50 13.00 -3.8 7.8 4.7 3.1 5.50 5.25 0.25 6.75 6.25 0.50

Helsinki 555,000 7.4 7.3 1.4 350,000 200,000 23.50 24.00 -2.1 14.50 15.00 0.6 6.9 5.5 1.4 6.50 6.50 – 7.25 7.25 –

London 6,678,000 21.6 20.4 5.9 461,632 597,733 -22.8 82.75 92.90 -10.9 54.08 69.75 -22.5 11.7 8.1 3.6 6.00 6.25 -0.25 7.50 7.25 0.25

Madrid 3,101,000 9.4 8.9 5.6 531,000 440,000 20.7 27.00 30.50 -11.5 15.90 18.70 -15.0 9.4 7.3 2.1 6.00 6.00 – 6.25 6.60 -0.35

Milan 1,487,000 8.8 8.6 2.3 162,680 193,830 -16.1 39.60 41.70 -5.0 21.34 21.34 – 10.3 8.0 2.3 5.75 5.75 – 6.50 6.50 –

Munich 1,257,000 16.6 16.0 3.8 460,000 490,000 -6.1 28.00 28.00 – 14.00 15.00 -6.7 8.1 4.8 3.3 5.25 4.75 0.50 6.75 6.00 0.75

Paris 9,200,000 44.8 44.0 1.8 1,580,948 1,450,860 9.0 52.25 58.30 -10.4 28.00 25.00 12.0 6.9 6.1 0.8 6.00 6.25 -0.25 6.75 6.75 –

1) Source: CWHB 2) Source: IVG Research 3) Source: Catella

3)3) 3)

76 Financial Information 36 Markets 37 Economic environment

06 Our Business 01 Mission

St. James‘s Street

Location: London

Type of use: Office

Site area: 5,100 m2

Occupancy rate: 91%

Tenants: BNP, Inter Gen

▲

Location Population1 Total space2 (m2 million)1 Space turnover (m2)1 Top monthly rent (/m2)1 Average monthly rent (/m2)1 Vacancy rate (%)1 Prime yield (%)1 Average yield (%)1

Change Change Change Change Change Change Change

2003 2003 2002 % 2003 2002 % 2003 2002 % 2003 2002 % 2003 2002 % 2003 2002 % 2003 2002 %

Berlin 3,299,900 16.6 16.4 1.2 350,000 395,000 -11.4 21.50 26.00 -17.3 12.75 14.50 -12.1 9.2 7.3 1.9 6.00 5.50 0.50 7.00 6.50 0.50

Brussels 949,000 11.8 11.4 3.5 723,236 427,627 69.1 22.90 20.80 10.1 17.00 15.80 7.6 9.4 8.6 0.8 6.25 6.75 -0.50 6.60 6.80 -0.20

Budapest 2,018,000 1.4 1.3 7.7 139,616 131,369 6.3 19.00 18.00 5.5 14.00 14.00 – 20.5 20.9 -0.4 8.50 8.75 -0.25 9.00 9.00 –

Düsseldorf 565,500 5.7 5.6 1.8 230,000 282,000 -18.4 21.00 23.00 -8.7 12.25 13.00 -5.8 12.3 7.2 5.1 6.00 5.50 0.50 6.50 6.25 0.25

Frankfurt 664,000 10.9 10.5 3.8 526,500 435,000 21.0 35.00 42.00 -16.7 13.50 16.00 -15.6 12.4 4.8 7.6 5.50 5.00 0.50 6.50 6.00 0.50

Hamburg 1,689,000 12.8 12.6 1.6 280,000 325,000 -13.8 20.00 22.50 -11.1 12.50 13.00 -3.8 7.8 4.7 3.1 5.50 5.25 0.25 6.75 6.25 0.50

Helsinki 555,000 7.4 7.3 1.4 350,000 200,000 23.50 24.00 -2.1 14.50 15.00 0.6 6.9 5.5 1.4 6.50 6.50 – 7.25 7.25 –

London 6,678,000 21.6 20.4 5.9 461,632 597,733 -22.8 82.75 92.90 -10.9 54.08 69.75 -22.5 11.7 8.1 3.6 6.00 6.25 -0.25 7.50 7.25 0.25

Madrid 3,101,000 9.4 8.9 5.6 531,000 440,000 20.7 27.00 30.50 -11.5 15.90 18.70 -15.0 9.4 7.3 2.1 6.00 6.00 – 6.25 6.60 -0.35

Milan 1,487,000 8.8 8.6 2.3 162,680 193,830 -16.1 39.60 41.70 -5.0 21.34 21.34 – 10.3 8.0 2.3 5.75 5.75 – 6.50 6.50 –

Munich 1,257,000 16.6 16.0 3.8 460,000 490,000 -6.1 28.00 28.00 – 14.00 15.00 -6.7 8.1 4.8 3.3 5.25 4.75 0.50 6.75 6.00 0.75

Paris 9,200,000 44.8 44.0 1.8 1,580,948 1,450,860 9.0 52.25 58.30 -10.4 28.00 25.00 12.0 6.9 6.1 0.8 6.00 6.25 -0.25 6.75 6.75 –

1) Source: CWHB 2) Source: IVG Research 3) Source: Catella

▲

Leibniz Kolonnaden

Location: Berlin

Type of use: Office, Site area: 12,700 m2

Occupancy rate: 91%

Tenants: Lawyers, insurers, etc.


2)

IVG locations in Europe

40.41

2.5

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Office markets, fourth quarter 2003(compared with previous year)

Prime rent (/m2)

Average rent (/m2)

Leased space 2003 (1,000 m2)

Vacancy rate

Yield in prime locations

Tendency prediction average rent

76 Financial Information 36 Markets 37 Economic environment 40 IVG locations in Europe


IVG locations in Europe


2.5

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42.43

Top rents down,

vacancy rates up

Rental market

Western Europe rental market

City centre oversupply caused another slight decrease in top rents in most office markets – by a weigh-

ted average of 11% in 16 key Western European cities, as against 9% in Central Eastern Europe. There

were exceptions in both West and East: In the West, Brussels saw rents climb 10.1% fuelled by strong

demand in the EU quarter, Quartier Léopold; rents in Budapest rose 5.5%.

A trend taking hold in many regions is a shift in the emphasis of demand away from city centres and

towards accessibly situated peripheral locations. This was especially plain in Paris. The main causal

factor is heightened cost awareness among tenants, who take advantage of lower rents and the wide

range of large modern units on offer in the banlieue. As a result, average office rents in Europe’s major

cities held up better than top rents: office rents fell in only 7 of 19 monitored cities, stayed level in 10

and rose in Brussels and Paris.

IVG Businesspark

vor München

Location: Munich

Type of use: Office


Occupancy rate: 96%

Tenants: BOSCH, MTU,

EADS, Astrium, Galileo

Industries

▲

With large quantities of new buildings still coming onto the market and many tenants still cutting back

on space, vacancy rates rose at all key Western European locations, with the strongest increase in

Lisbon, Frankfurt and Amsterdam. The latter’s 18% vacancy rate for office space was higher than any

other major European city.

Supply was further swelled by office users trying to part-sublet their premises. Endeavours of this kind

were most evident in the financial centres London and Frankfurt, each of which saw over 500,000 m2

or more than 5% of all downtown office space available for subletting. Few such offers were taken up,

however, as tenants usually prefer to deal with the actual owner of a property. This gives greater room

for manoeuvre and is less risky, avoiding dependence on a primary tenant.

Overall, most European property markets appear to have reached firmer ground in 2003, with top rents

falling less steeply and vacancy rates increasing far less sharply than the preceding year; the third quar-

ter even saw average rents recover by 1.6%. With the economy livening up again, 2004 is seeing the

start of a new upturn. Yet with supply so strong, vacant space will fill up but most cities will not support

major rent increases in prime locations during 2004. These are not expected until vacancy rates are sig-

nificantly lower. The conditions will then indeed be right for rents to rise again, at least for commercial

units combining high quality with good location and up-to-date amenities.

Central and Eastern Europe rental market

The real estate market cycles of Central and Eastern Europe are so far largely independent of those

of Western Europe. While the West boomed in the late 1990s, cities such as Budapest, Prague and

Warsaw saw rents take a dive and vacancy rates on the increase – the effect of a construction boom in

the preceding years. This was compounded by subdued macroeconomic growth towards the end of the

period. Today, with the exception of Warsaw, the office market crisis has been overcome. Accession

to the European Union is stimulating economic activity and demand for real estate. As was the case in

Western and Southern European countries after joining the EU, rents and demand are likely to rise in

the coming years.

Vacancy rates moved contrary to Western Europe. They had been extremely high in earlier years, at-

taining between 12.5% and 21%. But vacancies in Budapest, Prague and Warsaw began to fall during

2003 – clear evidence of gaining demand.

Rents and demand on

the increase

01 Mission 06 Our Business

36 Markets 37 Economic environment 40 IVG locations in Europe 42 Rental Market 42 Western Europe 43 Central and Eastern Europe

76 Financial Information 72 Employees 58 Investor Relations

44.45

Investment markets

Demand on the European market for property investments stayed lively in 2003. According to Jones

Lang LaSalle, €80.6 billion was invested – 8% down on the 2002 record. Selling prices for commercial

property kept relatively stable as a result. Prime rental yields in key Western European real estate mar-

kets averaged 6.0% (2002: 6.1%) at the end of 2003. End-2003 prime yields in Central Europe stood at

8.8% (2002: 9.2%).

Investment activity was buoyed by very low interest rates, with equity yields keeping their edge on

other low-risk investments. Businesses financing activities with debt capital could take advantage of

the good terms. Mortgage rates often undercut rental yields, affording buyers positive cash flows from

the outset.

The most important investor groups Europe-wide were German open-end real estate funds – with cash

inflows still a high €13.7 billion in 2003 – together with private investors and institutional investors such

as pension funds. Investors from the USA also showed renewed interest in European property.

Healthy demand for

property investments

▲

Place Vendôme

Location: Paris, Type of use: Office , Site area: 11,000 m2,

Occupancy rate: 100%, Tenants: Cartier, BNP Paribas

Western Europe investment market

Average yields held steady in 2003 on almost all key markets outside Germany; prime yields fell in

London and Paris (both from 6.25% to 6.0%) and various other cities. The preferred investment target

was the UK, with a 50% market share according to Jones Lang LaSalle. Second place was taken by

Scandinavia with 12%, primarily because of the number of foreign investors active in Sweden. France

came third, with marked emphasis on Paris. The city was the investment location favoured by German

open-end funds.

There was a marked decline in buying interest in German property. According to a survey by Jones Lang

LaSalle, the transaction volume in the five key locations of Berlin, Düsseldorf, Frankfurt, Hamburg and

Munich fell by 37% in 2003 to about €5 billion.

2004 will probably see many institutional investors increasing the real estate share in their portfolio. The

general economic recovery heightens the attractiveness of property as a low-risk, high-yield asset class

with potential for value growth.

Central and Eastern Europe investment market

Central and Eastern Europe is becoming increasingly well established as an investment location. With

EU accession in the background, contributing factors include increasing political and economic stability

and good growth prospects. 2003 was the fourth consecutive year of investment growth. For now,

though, the markets remain far smaller, less predictable and more liable to fluctuate than those of

established Western European major cities. Investors are consequently only prepared to buy in at signi-

ficantly higher yields. The latest weighted average yield figure for prime location office properties in Bu-

dapest, Prague and Warsaw was 9.0%, compared with 6.0% in Western Europe. Prices are noticeably

rising in Central and Eastern Europe, however, and yields are correspondingly reduced. Rising prices

and falling yields reflect international investors’ growing confidence in the maturing markets of Central

Eastern Europe.

Good investment

opportunities in Central

and Eastern Europe

76 Financial Information 36 Markets 37 Economic environment 40 IVG locations in Europe 42 Rental market 44 Investment market 44 Western Europe 45 Central and Eastern Europe


London – still Europe‘s

leading investment target


Lombard Street

Location: London

Type of use: Office

Site area: 16,500 m2,

Total refurbishment of the former headquarters of

Lloyds TSB Bank

Completion: 2008

▲

46.47

European network of excellence

London

Paris

Milan

Stockholm

Düsseldorf

Munich

Brussels

Frankfur t

Hamburg

Berlin

Budapest

Helsinki

Bonn

■ IVG locations

IVG headquarters


Luc Delfosse, IVG Branch Manager, Brussels

Suite à l’élargissement de l’Union européenne, le marché du bureau connaît aujourd’hui

une grande expansion à Bruxelles. La demande se concentre sur le quartier Léopold où

siègent les principales institutions de l’UE, ainsi que sur le Centre, situé immédiatement

à l’ouest de celui-ci. Dans ces deux quartiers toutefois, les réserves en espaces et en

surfaces sont pratiquement épuisées. Bruxelles est un site de plus en plus prisé par les

investisseurs. Les loyers les plus élevés, dont le niveau était jusqu’à présent relativement

bas, se rapprochent aujourd’hui de ceux d’autres grandes villes européennes.

»Expansion of the European Union is giving the Brussels office market a strong push. Demand is concentrated in Quartier Léopold, which is home to the main EU institutions, and in the city centre immediately to the west. Re-serves are virtually exhausted in both parts of the city, both in terms of space within existing buildings and land for development. Brussels is increasingly sought-after as an investment location. Top rents, relatively low in the past,are approaching the levels of other major cities in Europe.«

»

«

Brussels – Europe‘s rising market

01 Mission 06 Our Business 76 Financial Information 72 Employees 58 Investor Relations

North Gate

Location: Brussels

Type of use: Office



Tenants: Régie des Bâtiments

▲

Number of properties 25

Total site area 1,000 m2 280.5

Total rental income € billion 49.9

Total market value € million 834.8

R E A L E S TAT E P O RT F O L I O

R E A L E S TAT E D E V E L O P M E N T P R O J E C T S

Number of projects 2


Total value € million 185.5

IVG share of total value % 100

OFFICE RENTS

/m2

■ Top monthly rent

■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e

13.6 13.614.5

15.817.0

18.118.6 19.1

20.8

22.9

17.5

25.0

European network of excellence

48.49

«Place de la Madeleine

Location: Paris

Type of use: Office

Site area: 2,600 m2


Tenants: Hediard, Bati conseil, etc.

▲

Frederic Heitz, IVG Project Development International_Tommy Karlsson, IVG Branch Manager, Paris

La région parisienne est le plus grand marché européen de

l’immobilier d’entreprise, et l’un des plus porteurs en termes

d’avenir. Doté d’un potentiel de croissance énorme, c’est un site

très attractif pour les implantations de projets. Les immeubles

de standing bien situés sont souvent loués ou vendus bien avant

leur achèvement. Un redressement de l’économie et du marché

de l’immobilier se dessine actuellement dans la capitale.

»The region surrounding the Paris is Europe’s largest and one of its most promising officemarkets with a lot of growth potential, making it a highly attractive location for projectdevelopment. High-quality, well-situated properties can in some cases be let and sold long before completion. The French capital shows signs that its economy and property market will soon recover.«

»

«











OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e

Paris – attractive locus for development

27.931.8 31.8

25.0 28.030.0

44.5

63.5 63.558.3 52.3 58.3

Vallila Companies

Location: Helsinki

Type of use: Office



Tenants: TeliaSonera,

Segafredo Zanetti, etc.

▲



Total rental income € billion 5.7*


*2/12 of total (POLAR first consolidated 1 Nov. 2003)







OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e

15.8 15.9 16.0

24.023.5

25.0

Helsinki – strong growth prospects

76 Financial Information 06 Our Business 01 Mission

Risto Varpula, POLAR Real Estate CEO and IVG Branch Manager, Helsinki

Kansainväliset sijoittajat ovat löytämässä Suomen lupaavat markkinat.

Ajankohta sijoitustoiminnan aloittamiseen on erittäin suotuisa. Kiin-

teistöalan suhdanteet ovat ohittaneet aallonpohjan ja edessä on vakaa

nousukausi. Sijoitusten alkutuotot ylittävät vielä Euroopan keskiarvon.

Suomen markkinoiden erityispiirteiden vuoksi on ulkomaisten sijoitta-

jien kuitenkin syytä toimia tällä alueella vain mikäli he tuntevat olosuh-

teet hyvin tai mikäli heillä on tukenaan suomalainen alan osaaminen.

»International investors have now discovered the up-and-coming Finnish market. It is a good time to get in there: the real estate cycle has obviously passed its lowest point and a robust upturn is now imminent. Initial yields so far are still above the European average. Certain peculiarities of the Finnish market mean foreign investors would be wise to go in only if they have good market knowledge themselves or can draw on local expertise.«

»

«



«

17.5

18.918.1

26.1

28.327.0

50.51

Property: Soho Square

Location: London

Type of use: Office

Site area: 5,600 m2

Miete 2003: 8,000

Completed: 12/2003

Occupancy rate: 59%

Tenants: Hill & Knowlton

▲











OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e

David Gibson, IVG Branch Manager, London

In spite of the recent problems on the London rental market, prime London

locations still bring in the highest rents in Europe. The most sought-after pro-

perties are in the West End, followed by the City. Tenants and investors are

now turning to other markets as well: for example Soho, which is a trendy

location for media and communications firms, and Hammersmith, handily

situated between the city centre and Heathrow. London retains its status as

the highest-liquidity and most professionally operating European market.

»

«

London – market leads Europe in professionalism

75.0 78.0 80.0

69.8

54.1 54.1

93.7

122.7

110.0

92.9

82.8 84.6

Berlin – long-run potential


Spreespeicher

Location: Berlin

Type of use: Office


Occupancy rate: 75%

Tenants: Universal,

adidas-Salomon, Vitra, etc.

▲Number of properties 21










OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e

Frank Strothe, IVG Branch Manager, Berlin_Dr. Harald Braun, Berlin-Konzept

Als einzige Stadt in Deutschland konnte Berlin den Umsatz auf

dem Investmentmarkt im Jahr 2003 halten. Auffällig ist der hohe

Anteil an großen Transaktionen: Geschäfte mit einem Volumen

von über 50 Mio. € machten fast die Hälfte des Gesamtumsatzes

aus. Berlin bleibt aufgrund seiner Hauptstadtfunktion ein

interessanter Markt für zukünftige Projektentwicklungen.(Frank Strothe)

»

«

14.8 15.514.5 14.5

12.8 13.0

24.5

28.130.7

26.0

21.5 22.0

London – market leads Europe in professionalism



»Berlin was the only German city to keep up investment market turnover in 2003. One thing that stands out is the large share of high-value transactions: deals worth over €50 million made up almost half of total turnover. Because of its role as a capital city, Berlin remains an attractive market for future project develop-ments.«

52.53

IVG Businesspark

am Flughafen

Location: Düsseldorf

Type of use: Office


Occupancy rate: 99%

Tenants: Nokia, Compass,

Allianz-Immobilien, etc.

▲











OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e

Roland Gottschling, IVG Branch Manager, Düsseldorf

Im Jahr 2003 stieg der Büroleerstand in Düsseldorf an; Umsätze und

Spitzenmieten gingen zurück. Doch gibt es nach wie vor Bereiche mit

einem lebhaften Marktgeschehen. Dazu zählen moderne und zugleich

preisgünstige Bürohäuser in gut erschlossenen Stadtlagen, nahe dem

Flughafen und der Grafenberger Allee, für die sich Mieter mit Kosten- und

Qualitätsbewusstsein entschieden. Erfreulich ist, dass die Leerstandsrate

zum Jahresende 2003 nicht mehr anstieg.

»

«

Düsseldorf – demand set to rally

12.8 13.0 13.3 13.0 12.3 13.0

23.0 23.0 23.0 23.021.0

23.0

»Düsseldorf saw an increase in the vacancy rate as regards office units in 2003; turnover and top rents were down. There are still some lively sectors of the market, such as modern but attractively priced office buildings in accessible city locations, near the airport and Grafenberger Allee; these attract tenants with an eye to cost and quality. It is plea-sing to note that the vacancy rate had stopped rising by the end of 2003.«

Lother Ruck, IVG Branch Manager, Munich

München hat nach wie vor einen geringeren Leerstand als andere

deutsche Büro-Metropolen. Bevorzugte Standorte sind vor allem nördliche,

östliche und südliche Stadtbereiche und Vororte mit ihrer Nähe zum

Flughafen, zur Messe und zu wichtigen Hightech-Unternehmen. Letztere

sind auch heute die wichtigste Mietergruppe. Ihr Flächenbedarf dürfte bei

anziehender Konjunktur wieder deutlich wachsen.

»

«


Munich – new perspectives

15.5 16.1 16.2 15.0 14.0 14.0

28.630.7 30.2

28.0 28.0 28.0

IVG Businesspark

MEDIA WORKS MUNICH

Location: München

Type of use: Office


Occupancy rate: 80%

Tenants: Epcos

▲











OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e



»Munich still has a lower vacancy rate than other major German office markets. The preferred locations are northerly, easterly and southern urban and suburban districts close to the airport, the exhibition centre and the operating locations of major high-tech firms. The latter are also the most important group of tenants at the moment. They should be nee-ding significantly more space as the economy picks up.«

54.55

Airbizz

Location: Frankfurt

Type of use: Office


Completed: 12/2003

Sale: 12/2003


Tenants: Fraport AG, Thiel Logistik

▲











OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e

Friedhelm Hübers, IVG Branch Manager, Frankfurt

Der Miet- und Investmentmarkt wird sich Ende 2004 stabilisieren.

Deutlich festzustellen ist jedoch ein gestiegenes Kostenbewusstsein der

Nachfrager. In der Innenstadt war der Mietrückgang der letzten Jahre noch

gravierender als an dezentralen Locationen wie Niederrad, Rödelheim und

Heddernheim. Als dynamischer Immobilienstandort erwies sich erneut der

Frankfurter Flughafen, insbesondere die Cargo City Süd.

»

«

16.0 18.0 16.013.5 13.0

40.946.0

53.7

42.0

35.0 33.0

Frankfurt – highest rents in Germany

»The rental and investment market will stabilize by the end of 2004, though potential tenants are visibly more cost-conscious. The decline in rents over the last few years was even sharper in the city centre than in out-of-town locations like Niederrad, Rödelheim and Heddernheim. Frankfurt Airport again proved a dynamic real estate location, especially Cargo City South.«

Hamburg – crisis-proof sectoral mix


12.8 13.1 14.0 13.0 12.5 12.5

24.525.6

28.1

22.520.0 20.5

Gabriele Müller, IVG Branch Manager, Hamburg

Hamburgs Büromarkt ist gekennzeichnet durch eine breite und daher

relativ krisenfeste Branchenmischung. Im nächsten Aufschwung dürfte

Hamburg stark von seiner vielfältigen Wirtschaftsstruktur profitieren. Dies

bringt nicht nur Impulse für die City, sondern auch für den Norden der

Stadt mit seiner guten Flughafenanbindung.

»

«

IVG Businesspark

Hamburg Nord, Essener Strasse

Location: Hamburg

Type of use: Office



Tenants: Hermes Versand,

Lilly Forschung, Yxlon International

X-Ray

▲Number of properties 5*




* Including caverns and tank storage



Number of projects –

Total site area 1,000 m2 –

Total value € million –

IVG share of total value % –

OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e



»Hamburg’s office market has a broad sectoral mix, which makes it fairly crisis-proof. Hamburg stands to benefit from its diverse economy in the next upswing. This will bring stimulus not only for the city centre, but also for the north of town with its easy accessibility to the airport.«

56.57

Via Carducci

Location: Milan

Type of use: Office

Site area: 9,400 m2

Occupancy rate: 88%

Tenants: IVENSYS

▲











OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e

Sergio Villa, IVG Branch Manager, Milan

Milano è la capitale economica d’Italia ed è il più importante mercato immobilia-

re per quanto riguarda gli uffici. Sono richiesti soprattutto locali moderni di alto

livello qualitativo che però sono piuttosto rari in città. Per questo motivo spesso

il centro viene abbandonato a favore delle località dell’hinterland con ottimi

collegamenti con la metropoli, come ad esempio Sesto San Giovanni. La grande

crescita regionale e l’ottimo clima investivo fanno prevedere una ripresa a media

scadenza degli aumenti delle locazioni e del valore degli immobili.

»

«

Milan – consolidating after the boom

»Milan is Italy’s economic capital and its most important office market. Demand is strongest for high-quality modern units, which are very rare in the city centre. Accordingly, potential tenants often look away from the cen-tre to accessibly situated suburbs like Sesto San Giovanni. Strong regional growth and a good investment climate mean that rents and property values may well grow again in the medium term.«

11.316.2

21.3 21.3 21.3 20.023.7

32.3

43.0 41.741.3

43.4












OFFICE RENTS

/m2


■ Average rent

4Q99 4Q00 4Q01 4Q02 4Q03 4Q04e

Kay-Uwe Blandow, IVG Branch Manager, Budapest

Magyarország fo ˝ városa Európa egyik legélénkebben fejlo ˝ do ˝ ingatlanpiaca, ahol

emelkednek a bérleti díjak és csökken az üresen álló helyiségek száma. A befekteto ˝ k

egyre nagyobb bizalommal vannak a város iránt; a bevásárlóközpontok mellett az

irodaházak a favorizált befektetések. Nemcsak belvárosi helyeket választanak, hanem

olyanokat is, ahonnan könnyen elérheto ˝ a repülo ˝ tér és egyéb más fontos helyi intéz-

mény, mit például a Mo ˝ szaki Egyetem. A kedvezo ˝ perspektívák alapján – az EU-hoz

történo ˝ csatlakozás miatt is – a budapesti ingatlanok árai az elkövetkezo ˝ években

várhatóan jelento ˝ sen emelkednek.

»

«

Andrássy út

Location: Budapest

Type of use: Office

Site area: 2,000 m2

Occupancy rate: 73%

Tenants: SIL Interior, etc.

▲

»The Hungarian capital has one of Europe’s most rapidly emerging property markets with sharply rising rents and shrink-ing vacancy rates. Investors are showing more and more confidence in the place; office buildings are the favourite investment target next to shopping centres. Choice locations include both the city and sites that are well connected to the airport and important local institutions like the Technical University. The good outlook – especially with Hungary joining the EU – means Budapest property prices should shoot up over the next few years.«

18.9

16.9

15.214.0 14.0 14.0

18.9

16.9 16.4

18.019.0

18.5

Budapest – new stimulus from joining EU



58.59

Investor Relations

Proactive investor and creditor relations are integral to our value-driven corporate philosophy.

They secure transparency and trust.

IVG shares

February 2004 saw a pivotal change in share ownership at IVG. The 49.9% stake held by Sirius – until

then IVG’s largest shareholder – was taken over by Sal. Oppenheim Bank (25.1%), HSH Nordbank

(11.16%), DZ-Bank, WGZ-Bank and IKB Deutsche Industriebank. IVG greets the new ownership struc-

ture: With their strong capital base and experience in real estate, the new shareholders can actively

support and secure IVG’s successful European strategy for the long term.

The stock markets recovered in 2003 after three weak years in succession. The main international share

indices gained overall, in some cases by a pronounced margin: The Dow Jones rose by 21.6%, the

Nikkei by 23.6% and the EuroStoxx 50 by 11.6%. The DAX, which had been among the world’s weak-

est indices in 2002, showed the strongest growth in Europe with an increase of 34.1%.

European property shares again proved an attractive investment in 2003: The EPRA Total Return Index,

comprising Europe’s 70 main listed real estate companies, turned in growth of 19.7%, once again out-

performing the Euro Stoxx 50 (11.6%). This was the third consecutive year in which the EPRA index did

better than the market as a whole.

New ownership

structure

Investor Relations

Stock market recovery

Dr. Wilhelm Breuer, Director Investor Relations

01 Mission 06 Our Business 36 Markets 76 Financial Information 72 Employees 58 Investor Relations 59 IVG shares

European real estate

shares performing well

Norbert Zube, Director Finance

60.61

The IVG share price also showed its upside potential in 2003 and gained 11.7% on a dividend-adjusted

basis over the year, though it did not quite keep pace with the EPRA index. Reasons included uncer-

tainty about IVG’s ownership, a weak property market in Germany, and the introduction or expected

emergence of REIT vehicles in France and other European countries adding vigour to those markets.

After two weak years, the stock market performance of IVG shares fails to satisfy despite the positive

showing in 2003. The share price does not yet suitably reflect IVG’s underlying performance. IVG’s net

asset value, with reflects the inherent value of its shares, was €14.41 per share before deferred taxes

and transaction costs at the end of 2003. We expect that our share price will better follow the funda-

mental data now that the ownership structure has been resolved.

IVG shares set to

go on rising

Factors operating in favour of IVG shares:

Major listed European real estate company

Dynamic portfolio management: market value €3.3 billion, net rents €233 billion

Quality project development with top-calibre partners, with the IVG share of projects totalling €1.1 billion

Reputable real estate investment funds for institutional and private clients, with a €3 billion portfolio under management for

third parties

Value-driven corporate philosophy

Clear strategic direction:

Rigorous and successful transformation from a national conglomerate to a sharply focused listed European real estate

company

Sectoral focus on office properties and business parks, unlocking synergies in terms of expertise

Regional focus on major European cities, targeting cyclical differences, stable cash flows and risk minimization

Knockdown purchases of property lots and property companies

Portfolio value growth by modernization, utilization of development reserves and improvement of tenancy structures

Rigorous policy of selling when markets mature or good offers received

Project development with attractive opportunity/risk profile

Development, management and sale of reputable fund products

Ongoing evolution into an investment house for indirect real estate investment products: a one-stop shop providing institu-

tional and private clients with property investments to match their needs

Efficient structure:

IVG branch offices providing critical mass and local expertise

Balance of local expertise and central management policies

Quick decisions and action

Synergies from a European network

Teamwork across Europe

Good performance figures and dividends, even at difficult times

High stock market liquidity

Broad research coverage and inclusion in relevant indices

Active investor and creditor relations for maximum transparency and trust

T H E I V G E Q U I T Y S T O RY

150

100

50

0

- 50

01 Mission 06 Our Business 36 Markets 76 Financial Information

IVG’s market capitalization stood at €1.1 billion at the end of 2003, making it the largest German listed

real estate company. Some 130,000 IVG shares were traded on each dealing day in 2003, a significant

increase in stock market turnover compared with the previous year (75,000).

IVG holds 29th place in the 50-share MDAX index in terms of free-float market capitalization and 35th

place measured in turnover. IVG shares currently make up 1.3% of the index.

In addition to the national MDAX, IVG is also included in all relevant international sectoral indices:

EPRA index

EPRA/NAREIT Index

GPR 250

Salomon Smith Barney World Property Index

Increasingly, these are used as a basis for index certificates and as benchmarks by real estate equity

funds and other institutional investors.

The Board of Management and the Supervisory Board will be proposing a dividend of €0.34 per share

at the 2004 Annual General Meeting. This represents a total distribution of €39.4 million.

The attractiveness of IVG shares as an investment is shown by medium to long-term share price trends.

Since the end of 1997 – when IVG began systematically focusing on commercial property and the Eu-

ropean markets – the dividend-adjusted share price has increased by over 50%; the MDAX has risen

22% and the DAX is 7% down.

High stock market

liquidity

IVG included in

relevant share indices

72 Employees 58 Investor Relations 59 IVG shares

Source: Bloomberg, January 2004■ IVG ■ DAX ■ EPRA Total Return Index

Stable dividends

IVG share price

medium-term

attractive

January 1998 January 1999 January 2000 January 2001 January 2002 January 2003 January 2004

I V G ‘ S S H A R E P R I C E

%

62.63

IVG’s share options scheme creates performance incentives that are tied to gains in the value of the

enterprise. The Annual General Meeting of 23 May 2002 approved a new share options scheme.

The options scheme is open to the Board of Management, general managers of affiliated companies,

and other key managerial employees.

The share options are valid for five years ending on 29 June 2008. They cannot be exercised before

expiry of a two-year blocking period on 30 June 2005.

Active investor and creditor relations are integral to our value-driven corporate philosophy. They secure

transparency and trust.

As in previous years, IVG held large numbers of analysts’ conferences, roadshows and one-on-ones

both in Germany and elsewhere during 2003. The staging of the third annual conference of the Real

Estate Shares Initiative was very well received, attracting over 200 visitors.

IVG has long had a strong commitment to equity and capital market communication issues, with mem-

berships including:

The German Investor Relations Association (DIRK)

Deutsches Aktieninstitut (DAI)

German Society of Investment Analysts and Asset Managers (DVFA)

The DVFA Efficient Communication Commission

The Real Estate Companies Subcommittee of the DVFA Methodology Commission.

Share options

Active investor and

creditor relations

Active involvement in the European Public Real Estate Association (EPRA) is an important part of our

investor relations activities. EPRA brings together all forces of relevance to European property shares,

including the leading European listed real estate companies, financial analysts, investors, banks and

auditors. IVG is active on the EPRA Management Board and in the Best Practices Committee, which

drafts uniform reporting and valuation standards for European real estate shares.

The EPRA Best Annual Report award was first presented in 2002, when IVG took first place out of over

60 European listed real estate companies. IVG was once again among the winners in 2003, taking third

prize.

The general conditions for real estate shares have improved markedly across Europe in recent years,

particularly when it comes to tax regimes. Now France has followed the Belgian, Dutch and American

example with the introduction of real estate investment trusts (REITs). These are not taxed as a cor-

porate entity in their own right, allowing them to distribute their operating profits almost in full. Only

shareholders pay tax on the high dividends after these have been paid out. German listed real estate

companies are at a comparative disadvantage because both the companies themselves and their inves-

tors are taxed.

IFD – a joint initiative of Deutsche Börse, the Bundesbank, the German Finance Ministry and financial in-

stitutions promoting Germany as a financial centre – has now paved the way for the creation of German

REITs by putting forward detailed plans for a tax-transparent property investment vehicle. This would

give a marked boost to German real estate shares. IVG will take an active part in the debate.

01 Mission 06 Our Business 36 Markets 76 Financial Information 72 Employees 58 Investor Relations 59 IVG shares

IVG again in top three

for EPRA Award

Advancing the REIT

cause

European Public

Real Estate Associa-

tion (EPRA)

64.65

No. of shares at year end million

Market cap. (based on year-end price) million

Year‘s highest price

Year‘s lowest price

Year‘s closing price

DVFA/SG earnings

DVFA/SG cash earnings

Dividend per share

Total dividend distribution million

Dividend yields (year-end share price) %

Price/earnings (P/E) ratio (year-end share price)

MDAX P/E

DAX P/E

I V G S H A R E D ATA

per share

2001

116

1,247

15.80

9.40

10.75

0.55

1.06

0.34

39.44

3.16

19.5

17.5

30.0

2000

116

1,507

15.35

12.55

12.99

0.73

1.40

0.33

38.28

2.54

17.8

18.7

20.4

1999

114

1,761

18.86

12.94

15.45

0.62

1.17

0.31

35.34

2.01

24.9

22.4

30.2

1998

93

1,300

15.08

7.35

13.97

0.52

1.24

0.29

26.95

2.08

26.9

16.7

20.9

1997

93

731

10.65

7.68

7.87

0.45

1.21

0.27

25.36

3.43

17.5

17.3

17.2

1996

93

750

9.47

6.98

9.00

0.32

0.77

0.26

20.91

2.89

28.1

14.9

15.6

1995

78

622

9.52

7.23

7.97

0.39

0.94

0.24

18.61

3.01

20.4

18.4

16.0

2003

116

1,075

9.50

5.75

9.27

0.52

1.14

0.34

39.44

3.67

17.8

29.1

22.4

2002

116

962

12.99

8.00

8.30

0.58

1.31

0.34

39.44

4.09

15.4

12.9

16.4

R E C O N C I L I AT I O N O F D V FA / S G E A R N I N G S T O N E T I N C O M E

, 000

Consolidated net income for the year

Adjustments for consolidation

Adjustments to assets

Adjustments to depreciation periods or methods (claw-back effect)

Other adjustments

Adjustments to liabilities

Special tax-allowable reserves

Other adjustments

DVFA/SG consolidated earnings for the entire Group

Minorities‘ share of earnings/losses

Share of parent company shareholders in DVFA/SG consolidated earnings

Number of shares outstanding (thousand)

DVFA/SG earnings per share (€)

2002

70,432

0

-2,356

-13,347

0

12,771

67,500

566

66,934

116,000

0.58

2003

66,476

0

0

3,162

0

-2,435

67,203

7,139

60,064

116,000

0.52

Reuters IVG F

Bloomberg IVG GR

WKN 620 570

ISIN Code DE 0006205701

S T O C K S Y M B O L S

***

*

* Excluding special dividend (€0.20 per share)

** Proposed

01 Mission 06 Our Business 36 Markets 76 Financial Information 72 Employees 58 Investor Relations 59 IVG shares 65 EPRA a) Net Asset Value

EPRA

The European Public Real Estate Association (EPRA) is the European industry association of publicly

quoted real estate companies. Its members also include financial analysts, investors, banks, and audit-

ing firms. To ensure the highest possible level of transparency for investors, IVG acts upon EPRA’s Best

Practices Recommendations for accounting and reporting. For details of the Best Practices Recommen-

dations, please see www.epra.com.

IVG supports EPRA’s efforts to promote European harmonization of reporting standards in the publicly

quoted real estate sector. Most of the required information at IVG is already an integral part of the an-

nual financial statements. Additional information required by EPRA is brought together on the pages

that follow, primarily relating to these topics:

a) Net asset value

b) EPRA income presentation

c) Financial risk management/other disclosures

d) Like-for-like rental growth

a) Net asset value (NAV)

IVG net asset value

Net asset value (NAV) is the company’s total assets at market prices minus total liabilities. It is a meas-

ure of net worth. NAV per share was up 1.8% at the end of 2003, to €14.41 per share. The increase

results from IVG’s acquisition of POLAR Real Estate Corporation on attractive terms and the renewed

strength of the European property markets.

The annual revaluation of the IVG property portfolio against the backdrop of a difficult market showed

a rise in market value of 1.5% or €37.5 million compared with the previous year. This figure demon-

strates the benefits of IVG’s European strategy. A decrease in the market value of German property

due to the ongoing harsh macroeconomic and property market climate was countered by a gain across

the remainder of the European portfolio. London showed the strongest increase on revaluation at 2.5%,

followed by Milan with 2.2% and Stockholm with 2.0%.

Basis of computation

Save as otherwise stated below, all NAV figures draw on data from the consolidated financial state-

ments. Portfolio properties are accounted for at market values estimated in the great majority of cases

by neutral appraisers instead of at the book values stated in the financial statements.

66.67

N E T A S S E T VA L U E

m

Market values of real estate portfolio

Project development

Current assets (own stakes excluded)

Financial assets

Other assets

Total assets

Liabilities

Other liabilities

Provisions

Deferred income

Total borrowing

Net asset value

NAV per share ()

EPRA net asset value (going concern):

Deferred taxes (going concern)

Transaction costs

NAV (going concern) ()

NAV per share (going concern) ()

2002

3,171.6

59.0

495.7

260.4

11.9

3,998.6

2,106.4

35.0

162.3

52.6

2,356.3

1,642.3

14.16

58.8

47.6

1,535.9

13.24

Fair valuation of portfolio properties

The real estate portfolio was valued as at 31 December 2003 almost entirely by the following independ-

ent experts:

Germany: Jones Lang LaSalle

Belgium/Luxembourg: de Crombrugghe & Partners s.a.

Italy: REAG

United Kingdom: FPD Savills

Spain/Portugal: CB Richard Ellis

Hungary: CWHB Hungary

Sweden: DTZ Sweden

France: Alban Cooper

Switzerland: Colliers AMI (Suisse) SA

Finland: Kiinteistötaito Peltola & Pulkkanen Oy

2003

3,294.5

60.3

542.5

216.2

21.3

4,134.8

2,139.8

0

191.6

132.0

2,463.4

1,671.4

14.41

62.5

48.7

1,560.2

13.45

01 Mission 06 Our Business 36 Markets 76 Financial Information 72 Employees 58 Investor Relations 59 IVG shares 65 EPRA 65 a) Net Asset Value

In compliance with International Financial Reporting Standards (IFRS), IVG has all properties appraised

at fair value. Neutral appraisers value the great majority of the portfolio by the discounted cash flow

(DCF) method. The valuations generally comply with IFRS, including in particular IAS 40, which covers

accounting for investment properties. The valuations are performed on the basis of the International

Valuation Standards (IVS) and the RICS Appraisal and Valuation Manual (Red Book) published by the

Royal Institution of Chartered Surveyors.

Fair valuation by the DCF method

The DCF method is a net present value calculation that entails discounting a property’s future net op-

erating income to a valuation date. The net operating income figures are the balance of receipts and

payments for each year of a ten-year detailed budget period. Receipts are mostly net rental income.

Payments comprise running costs met by the owner and not passed on to tenants. The net operating

incomes are discounted to the valuation date at a free market discount rate estimated for each property,

giving a net present value for each period’s net operating income.

A residual value is then estimated for the property as at the end of the ten-year detailed budget period.

This reflects the price most likely to be recovered at the end of the period. It is obtained by capitalizing

the net operating income for the eleventh year as a perpetuity at what is referred to as the capitaliza-

tion rate. The net present value of this figure as at date of valuation is then found by applying the same

discount rate as is used for net operating income. The sum of discounted net operating income and

discounted residual value is the fair value of the property under appraisal.

Development projects

Development projects are recognized at their discounted contribution margin plus their carrying

amounts under financial assets and current assets. The discount rate used is 15%.

Financial assets, current assets and other assets

Financial assets and current assets are shown net of amounts already included in the market value of

real estate assets.

Deferred taxes on hidden reserves

The EPRA going-concern value incorporates deferred taxes discounted over 25 years at an 8% discount

rate. The tax loss carried forward in Finland with around € 240 million wasn’t considered. It is assumed

that book gains on sales of German properties can be transferred to newly acquired properties under

Sec. 6b of the German Income Tax Act.

Liabilities

Liabilities for non-consolidated properties are included in addition to Group liabilities.

68.69

b) EPRA income presentation

E P R A I N C O M E S TAT E M E N T

m

Earnings

Group rental income

Gain on sales of real estate

Unrealized gain on revaluation of property investment

Total revenues from property investments

Earnings from development activities

Earnings from funds business

Management fees

Earnings from other operating activities

Total revenues

Expenses

Loss on sale of investment property

Unrealized loss on revaluation of property investment

Property operating expenses

Personnel expenses

Other operating expenses

Total expenses

Net operating income according

Net financing costs

Net income before tax

Income tax

Deferred income tax on revaluation result

Net income (including unrealized gains and deferred income taxes)

Net income (excluding unrealized gains and deferred income taxes)

Net income per share (including unrealized gains and deferred income taxes) ()

Net income per share (excluding unrealized gains and deferred income taxes) ()

2003

232.8

60.4

87.1

380.3

117.4

14.1

61.5

68.9

642.2

0

92.6

136.6

56.9

134.7

420.8

221.4

-89.8

131.6

-20.8

2.4

113.2

116.3

0.98

1.00

2002

226.1

43.0

7.8

276.9

113.8

1.1

56.6

71.0

519.4

0

141.8

89.8

52.1

131.7

415.4

104.0

-95.9

8.1

-26.2

41.6

23.5

115.9

0.20

1.00

Notes

1

2

3

4

5

6

7

8

9

10

11

12

1. Gross rental income – Net rents excluding running costs that can be apportioned among tenants

2. Gains on sales of real estate – Capital gains on sales of properties as stated in the annual financial statements

3. Unrealized gains on revaluation of property investments – Gains in market value of properties on revaluation, adjusted for investments and

divestments, and including the »lucky buy« POLAR acquisition.

4. Earnings from development activities – Total operating performance of the Project Development segment as stated in the annual financial

statements

5. Earnings from investment fund activities – Total operating performance of the investment fund segment

6. Management fees – Includes ancillary letting costs recouped from tenants and management fees from the management of logistics assets

7. Earnings from other operating activities – Includes operating income from participating interests, corporate functions, non-core business

8. Loss on sale of investment property – Book losses on sales of properties as stated in the annual financial statements

9. Unrealized loss on revaluation of property investments – Loss in market value of properties on revaluation, adjusted for investments and

divestments

10. Property operating expenses – Material expenses and maintenance/upkeep

11. Other operating expenses – Other operating expenses (excluding maintenance/upkeep), and other taxes as stated in the annual financial

statements

12. Deferred income taxes on revaluation result for property investments – Deferred income taxes on revaluation gains and deferred income tax

assets on revaluation losses.

01 Mission

EPRA net income after revaluation increased from €23.5 million in 2002 to €113.2 million in 2003, prima-

rily due to lower unrealized losses on revaluation of property investments: net revaluation losses were

€5.5 million including the POLAR »lucky buy«. Net revaluation losses in 2002 had been €134.0 million.

EPRA net income differs from HGB (German Commercial Code) net income in that rather than depreciat-

ing buildings over estimated useful lives, the property portfolio is revalued on a yearly basis, where pos-

sible by outside appraisers, and reported with any deferred taxes arising on revaluation. Based on EPRA

net income per share after revaluation, IVG has an attractive price/earnings (p/e) ratio of nine.

c) Financial risk management and other disclosures

Derivatives

We make systematic use of derivative financial instruments to reduce risk due to exchange rate and

interest rate changes in the course of IVG’s Europe-wide activities. For this purpose, the Group Treasury

exclusively uses marketable instruments with adequate market liquidity. To ensure the lowest possible

risk of counterparty default, contracts involving derivative financial instruments are entered into solely

with major European banks of immaculate credit standing. The use of derivative instruments is subject

to uniform internal guidelines and strict controls. Regular valuations are performed and there is monthly

reporting. In accordance with internal Group directives, derivative financial instruments are used exclu-

sively to hedge risks in connection with specific underlying transactions. Together with the correspond-

ing hedged item they essentially form a valuation unit.

Currencies

Foreign currency exposures from investment in non-euro countries are broadly neutralized by refinanc-

ing in the same currency. Currency risks are thus countered at Group level by systematic currency

management.

Interest rate exposures, loan maturities and average cost of debt

Interest rate exposures and loan maturities are geared to the investment portfolio, reflecting the typical

duration of most investments in real estate. Portfolio management under our buy-and-sell strategy and

the resulting short-term, intra-year cash flows mean that a relatively small sum relative to the total is

deliberately financed on a variable short-term basis. At existing repayment terms, the earnings effect

of a 1% change in interest rates would be approximately €1.7 million. The weighted average cost of

debt is less than 5%.

d) Like-for-like rental growth

On a like-for-like basis adjusted for investments and divestments, rents stayed roughly level at

€169.5 million compared with €169.9 million the previous year.

06 Our Business 36 Markets 76 Financial Information 72 Employees 58 Investor Relations 59 IVG shares 65 EPRA 65 a) Net Asset Value 68 b) EPRA income presentation 69 c) Financial risk management and other disclosures 69 d) Like-for-like rental growth

70.71

Corporate governance

Corporate governance refers to the entire system by which a company is managed and monitored, its

corporate principles and guidelines, and the system of internal and external controls and supervision to

which the company’s operations are subjected. Good, transparent corporate governance ensures that

our company will be managed and monitored in a responsible manner geared to value creation. This

fosters the confidence of investors, employees, business associates and the general public in IVG’s

management and supervision.

Declaration of compliance with the recommendations of the German Corporate Governance Code in

the version dated 21 May 2003 by the Board of Management and Supervisory Board of IVG Immobilien

AG pursuant to Sec. 161 of the German Stock Corporation Act (Aktiengesetz – AktG)

IVG welcomes the principles drawn up by the Government Commission on the German Corporate Gov-

ernance Code (the ‘Cromme Commission’). Most of these principles have already formed an integral

part of our value-oriented corporate policies for some years. In September 2002, IVG also became a

founder member of a corporate governance organization for the German real estate industry, ‘Initiative

Corporate Governance der deutschen Immobilienwirtschaft e.V.’. Under the chairmanship of IVG Im-

mobilien AG’s Chief Executive Officer Dr. Eckart John von Freyend, this organization drew up corporate

governance principles specifically for real estate companies which go beyond those recommended in

the Cromme Commission’s Code and which add real estate-specific requirements to that Code. IVG

follows the recommendations and suggestions from the Corporate Governance Code of the German

Real Estate Industry. This Code can be downloaded from http://www.immo-initiative.de.

IVG undertook numerous measures geared towards compliance with the German Corporate Govern-

ance Code during 2002 and pursued these measures in 2003 as a result of the modifications to the

Cromme Commission’s Code. These measures included reworking the Terms of Reference for the

Board of Management and the Supervisory Board. IVG complies with the recommendations of the

Code with the following specific exceptions:

4.2.4 Compensation of the members of the Board of Management shall be reported in the Notes to the

Consolidated Financial Statements, subdivided according to fixed, performance-related and long-term

incentive components. The figures should be individualized.

01 Mission 06 Our Business 36 Markets 76 Financial Information 72 Employees 58 Investor Relations 59 IVG shares 65 EPRA 70 Corporate governance

IVG certainly intends to report the compensation paid to members of the Board of Management in the

Notes to the Consolidated Financial Statements, subdivided according to fixed, performance-related

and long-term incentive components. However, the figures are not yet individualized. We shall await

further developments in the publication of top executives’ pay on an individual basis.

5.4.5 (...) Compensation of the members of the Supervisory Board shall be reported in the Notes to the

Consolidated Financial Statements on an individualized basis and broken down into modules. (...)

Article 16 of the Memorandum and Articles of Association subdivides the compensation of the mem-

bers of the Supervisory Board into fixed and performance-related components. However, the figures re-

ported in the Notes to the Consolidated Financial Statements are not yet individualized. We shall await

further developments in the publication of compensation of Supervisory Boards on an individual basis.

5.3.2 The Supervisory Board shall set up an Audit Committee which, in particular, handles issues of ac-

counting and risk management, the necessary independence required of the auditor, the issuing of the

audit mandate to the auditor, the determination of auditing focal points and the fee agreement.

It does not make sense to establish a separate Audit Committee since IVG’s Supervisory Board has

six members, meaning that all of the issues involved can be discussed and decided upon by the full

Supervisory Board with maximum efficiency.

7.1.1 (...) The Consolidated Financial Statements and interim reports shall be prepared under observ-

ance of internationally recognized accounting principles. (...)

IVG currently conducts its financial reporting according to German accounting laws and regulations,

and intends by 2005 at the latest, in accordance with statutory transitional rules, to switch to report-

ing in accordance with International Accounting Standards (IAS). To ensure maximum transparency for

investors, IVG already complies on a voluntary basis with the European Public Real Estate Association

(EPRA) Best Practices Recommendations on accounting, valuation and disclosure. In September 2002,

the company received the EPRA award for the best annual report by a listed public European real es-

tate company. EPRA’s membership takes in Europe’s leading public real estate companies, financial

analysts, investors, banks and auditors.

Board of Management and Supervisory Board

IVG Immobilien AG

72.73

Employees

Motivated employees are an indispensable success factor.

With their commitment, skills, qualifications and passion for

real estate, IVG employees secure the positive performance

of our business and lay the foundations for further growth.

Employees in the Bonn headquarters and at branch offices

and IVG companies around Germany and the rest of Europe

contribute equally to the Group’s success.

Employee numbers

The number of employees as at 31 December 2003 was 717, a decrease of 4.4% on the previous year.

This is due to non-core operations (126 employees in 2002) being partially excluded from the consoli-

dated financial statements.

The acquisitions of the Wert-Konzept companies and POLAR added to the workforce in the strategic

core businesses of portfolio management, project development and funds.

Group personnel expenses increased by 9.2% to €56.9 million. This item includes expenditure for

severance pay and provisions for employee development and pension obligations.

Employee development and training

IVG is firmly committed to advancing the professional expertise and training of its workforce. A ma-

nagement trainee programme was launched in 2003. The objective is timely identification and recruit-

ment of ambitious management talent with an aptitude for the real estate business. Four graduates

with real estate training and appropriate placement experience joined a variety of business units for a

one-year programme in which they were soon taking on responsibility for projects and other tasks. A

new group of management trainees are to be taken on in 2004.


Management trainee

programme launched

E M P L O Y E E S B Y Q U A L I F I C AT I O N

%

E M P L O Y E E S B Y S E G M E N T S

Trainees 17 (+7)

Corporate Functions 133 (-3)

Funds 40 (+35)

Project development 150 (+25)

Portfolio management 377 (+29)

( ) = Change relative to 2002

Basic education

with additional skill 13%

University graduate 28%

Basic education 59%

72 Employees 73 Employee numbers 73 Employee development

58 Investor Relations

74.75

The placements programme serves even earlier identification of management talent. Students are

given a chance to combine their theoretical knowledge with initial practical experience in a structured

series of placements. This can culminate in company support with a practice-based undergraduate

dissertation. IVG remains committed to the »agenda4« initiative, which initiates and promotes property-

related courses of further study.

IVG employees have access to personal development and further training. We support attendance of

targeted further training courses at the European Business School Real Estate Academy in Oestrich-

Winkel and, in a pilot scheme, a part-time real estate studies course at Mannheim University of Co-

operative Education. Other programmes help improve language skills and acquire finance qualifications

such as Certified Credit Analyst, Chartered Financial Analyst, etc.

In March 2004, IVG and the EBS Real Estate Academy launched the IVG Graduate School – a personal

training programme for managers and specialists from Germany and other European countries. Over

a set of ten modules, employees are taught about new academic findings relevant to real estate and

introduced to practice-oriented application examples by experienced real estate experts.

Employees with a vested share in Group success identify more closely with the firm and have a perfor-

mance incentive. Employees can purchase IVG Immobilien AG shares on preferential terms under the

IVG VALUE programme. The company grants an interest-free loan to cover 90% of the total purchase

price. Participating employees have full shareholder status for the two-year programme term, with full

dividend entitlement and all the opportunities and risks of movements in the share price.

Employee share

ownership

Trainees_Stephan Stollenwerk_Philipp Diederichs_Christian Beck_Jan Hendrik Goldbeck (left to right)

Targeted placements

Building specialist

skills

IVG Group employees were again given the opportunity in 2003 to invest part of their net earnings in

the form of a loan under the German Employee Savings Act (Vermögensbildungsgesetz). A portion of

personnel expenses thus remains in the firm as employee equity.

IVG tops up the employee loans with a tax-free supplement, repayable along with the employee-contri-

buted portion with 4.5% interest on expiry of the six-year term. Including the tax-free supplement, emp-

loyees stand to receive attractive overall returns. Depending on their personal income situation, certain

employees can additionally claim a government savings bonus. More than 50% of IVG employees took

part in the loan scheme in 2003, with employee equity totalling €1.76 million at the end of the year.

The need for additional individual pensions again featured large in public debate during 2003. IVG has

implemented the statutory provisions in force since 2001 and has developed an attractive private pensi-

on package for employees. Since 2002, IVG employees have been able to take advantage of a deferred

compensation option under which the equivalent of up to 4% of the state pension insurance contribu-

tion assessment ceiling (€2,448.00 in 2003) is paid into a pension plan. The deferred compensation is

tax-free for employees and neither they nor the employer need pay social insurance levies on it to 2008

inclusive. Many employees have taken up this pension option. A smaller number have signed up for

state-supplemented »Riester« pension arrangements, for which IVG has also made provision by setting

up an attractive group policy with a German life assurance company.

IVG Immobilien AG signed a collective agreement covering semiretirement in 2001. This extends the

company’s employee development and human resources planning options. It allows older employees

the possibility of an early transition from working life into retirement. IVG has opted for a »block« arran-

gement, where semiretirement is divided into a full-time working phase and a non-working phase.

A total of 40 semiretirement agreements had been signed by December 2003. At the end of 2003 there

were already 10 employees in the non-working phase plus 27 in and 3 about to enter the working phase

of semiretirement.

IVG has put in place a share options scheme giving management a share in the company’s perfor-

mance. Further information on the share options scheme is given on page 62 and in the Notes.


Employee equity: A

high-yield investment

Attractive pension

plans

Semiretirement

Share options


Group Management Report

Net income near last year’s high

POLAR takeover opens attractive Helsinki property market

European real estate markets neutral

Proposed dividend as 2002

76.77

IVG Immobilien AG Group Management Report for the 2003 financial year

Economic environment

The European economy was again generally weak in 2003. Most European countries saw only slight

economic growth. The main cause besides structural problems was flimsy domestic demand. House-

holds, businesses and governments struggling with budget deficits held back on spending.

Europe’s countries and regions paint a varied picture. Countries in Central Eastern Europe show rela-

tively fast growth. These were through the worst of the recession and are now attractive investment

locations with EU membership close at hand. The region is set to keep up Europe’s top growth rates

in the coming years. Among card-carrying EU members, the UK and Spain turned the corner and saw

their growth rates pick up.

Inflation in EU member states ranged from 1.2% to 2.9%. Combined with the sharp fall in interest rates

across all EU countries during 2003, this raises businesses’ propensity to invest.

The economy

€ m

2003 2002

Group total operating performance 545.7 637.8

Group turnover 411.5 471.2

EBITD 224.8 350.3

EBIT (operating earnings) 174.2 188.7

Consolidated net income for the year 66.5 70.4

Investments 565.2 358.3

Shareholders’ equity 917.0 769.5

Total assets 3,427.8 3,185.3

G R O U P P E R F O R M A N C E

76 Group Management Report 77 Economic environment 77 The economy 78 Real estate markets 79 Business performance 79 Segments 81 Financing 82 Consolidated value added statement

83 IVG Immobilien AG: Annual Financial Statements 84 Dependent parties report 84 Risk management system 85 Events after the close of the financial year 86 Outlook

87 Consolidated Financial Statements 88 Consolidated Balance Sheet 90 Consolidated Fixed Asset Schedule 92 Consolidated Income Statement 93 Notes to the IVG Consolidated Financial Statements 112 Consolidated Cash Flow Statement 114 Key figures by segment 116 Changes in shareholders’ equity 117 Summary of major shareholdings

122 Other information 123 Report of the Auditors of the Consolidated Financial Statement 124 Report of the Supervisory Board 127 Supervisory Board/ Board of Management 131 Financial calender

Most European office markets were split in 2003: Rents in many places fell and vacancy rates increased.

Their investment markets, in contrast, remained stable as institutional investors had money to spend.

Total demand for office space in the 19 main cities increased, but many firms took advantage of the

market and moved head office to smaller units at reduced rents. The 19 main cities had seen a total of

6.65 million m² of office space re-let in 2002; the 2003 figure was 7.06 million. The weighted average

relative growth rate across 16 key Western European office markets was 5%. The three major cities of

Central Eastern Europe saw growth of 14%, though from a far lower starting point. Far from presenting

a consistent pattern across Europe, growth in space turnover varied strongly from city to city: While

demand in London, Milan, Berlin and Barcelona dropped by between 10% and 23%, Brussels saw

demand grow 69%, Prague 47%, and Madrid 20% after a weak preceding year.

City centre oversupply caused a drop in top rents on most office markets – by a weighted average of

9% in 16 key West-European cities, compared with 11% in Central Eastern Europe. There were posi-

tive exceptions in both West and East: In the West, Brussels in particular saw monthly rents driven

up 10% by strong demand in the EU quarter, Quartier Léopold, reaching an absolute high of €22.90

per m². In the East, Budapest stood out with an increase of 5.5%. Top monthly rents there at the end

of 2003 were €19.00/m².

Real estate markets

78.79

K E Y E C O N O M I C D ATA

in %

GDP growth Inflation Interest rates 3

2002 2003 2002 2003 2002 2003

Germany 0.2 -0.1 1.3 1.3 4.78 4.07

Finland 2.2 1.5 2.0 1.2 4.98 4.13

Sweden 1.9 1.4 2.0 2.0 5.30 4.64

Hungary 3.5 2.9 5.2 5.2 7.09 n.s.

Italy 0.4 0.3 2.6 2.8 5.03 4.25

Portugal 0.4 -0.8 3.7 2.3 5.01 4.18

Spain 2.0 2.3 3.6 2.9 4.96 4.12

Belgium 0.7 0.8 1.6 1.8 4.99 4.18

France 1.2 0.1 1.9 2.5 4.86 4.13

UK 1.7 2.0 1.3 1.3 4.91 4.58

Source: Eurostat, 1 Provisional (except Germany), 2 Numbers Nov. 2002–Nov. 2003, 3 Yield on 10-year government bonds

1 2

Average vacancy rates in the 19 main European property markets swelled from 8.2% to 10.0%. The

reasons were again large quantities of new buildings coming onto the market and many companies

cutting back on space

Vacancy rates rose at all key Western European locations, with the strongest increase in Lisbon,

Frankfurt, Düsseldorf and Amsterdam. The latter’s 18% vacancy rate was higher than any other major

European city. In contrast, vacancy rates in Central Eastern Europe had already begun to shrink, falling

in Budapest, Prague and Warsaw to 20.5%, 13.6% and 14.7% respectively.

Business performance

Group net income, at 66.5 million, was just short of the previous year’s high despite the tough eco-

nomic climate. The dip in turnover from €471.2 million to €411.5 million mostly reflects the 2002 sale

of Gresham Street – IVG’s biggest ever development project – which made for extra-high sales and

earnings figures that year. Factoring out Gresham Street, turnover increased in 2003. Due partly to the

POLAR takeover, net rents rose from €226.1 million to €232.8 million. Letting activity was on the up:

IVG trumped a hard market with a total of 185,000 m2 of new lettings in portfolio properties and project

developments during 2003.

IVG forged ahead with its successful buy-and-sell strategy and realized €64.8 million in book gains from

property sales in 2003.

Including acquired liabilities, IVG invested €565.2 million over the 2003 financial year. Most of this

came from the takeover of the POLAR group and ongoing development of IVG’s business parks. IVG’s

pan-European activities are partly financed in foreign currency. This resulted in a gain of €22.2 million

before taxes.

The earnings figures allow the Board of Management and Supervisory Board to propose a dividend at

the previous year’s high level of €0.34 per share.

The highlight of the year was the takeover of Helsinki-listed POLAR Real Estate Corporation. This

secured IVG’s entry into one of Europe’s upcoming real estate markets. IVG has since upped its stake

to 95% of all shares in POLAR.

Portfolio management

segment

76 Group Management Report 77 Economic environment 77 The economy 78 Real estate markets 79 Business performance 79 Segments

87 Consolidated Financial Statements 122 Other information

IVG again successfully played off cyclical differences between property markets across Europe, reaping

attractive gains on disposals under its active buy-and-sell strategy:

An office building on Great Marlborough Street, London

Properties on Rue de Trèves and Rue du Luxembourg, Brussels

Two office buildings in the Eighth Arrondissement of Paris, on Avenue Hoche and Rue de Bassano

Two logistics buildings and an office building in Madrid

The IVG headquarters in Bonn, under sale and leaseback with the EuroSelect 07 investment fund

The Airbizz office and logistics building at Frankfurt Airport

Two shopping centres in Helsinki.

Segment turnover gained from €283.7 million in 2002 to €294.3 million in 2003. This includes net

rent revenues, which jumped from €223.1 million to €230.2 million, primarily due to the takeover of

POLAR Real Estate Corporation. Due to higher profits from property sales, segment earnings rallied

from €169.7 million to €196.2 million. Tenancies were signed for 134,000 m2 of lettable space, despite

patchy demand in many European property markets. The effective occupancy rate at the end of the

year was 91.5%.

The project development year was dominated by the successful joint venture with AXA, refurbishment

of the Madou Tower in Brussels, and settlement of accounts for the Glockengiesserwall project in Ham-

burg. Joint projects with AXA in Paris made especially good progress. Besides major lettings to pres-

tigious international firms, the joint venture sold the Périsud project (with 33,500 m2 of lettable space)

to the property funds arm of Commerzbank. In Brussels, IVG pressed on with the complete overhaul of

Madou tower, the city’s tallest building.

After the successful sale of the Leipziger Platz and Dorotheenstrasse projects, IVG has begun a new

development in Berlin’s Mitte district. In a joint venture, IVG subsidiary Tercon is developing over

60,000 m2 of office space for tenants Deutsche Bahn. The project is worth some €160 million. The

office complex was sold to the Deutsche Bank Group before construction began. It is expected that

the Am Salzufer development in Berlin’s Charlottenburg will be successfully marketed once the current

weak market has been overcome.

IVG project development activities in 2003 generated turnover of €87.0 million (2002: €160.6 million)

and operating earnings of €5.3 million (2002: €49.1 million). Turnover and earnings were down because

the 2002 figures had included the sale of Gresham Street. Accounts were not settled on any major

projects in 2003. Development projects do not feature in the turnover and earnings until completed,

sold and handed over to the investor. Factoring out Gresham Street, turnover and earnings increased

compared with 2002. Development project lettings in the 2003 financial year totalled 51,000 m2.

Project development

segment

80.81

After increasing its stake in the Wert-Konzept group to 100%, IVG combined the project development

activities of Tercon and Wert-Konzept under the Tercon name. As a result, the 2003 financial statements

include Wert-Konzept as a consolidated subsidiary for the first time.

In the second quarter of 2003, the public authorities abandoned the project of privatizing Berlin’s air-

ports. The consortium led by IVG and Hochtief came to an acceptable final arrangement with the au-

thorities, the terms of which are confidential. IVG regrets that the opportunity of an economically viable

solution for the privatization was not taken after eight years of intensive work.

To minimize interest rate risk, IVG has entered into interest rate swaps with a nominal value of €20 mil-

lion and a 10-year term on the basis of existing loan agreements. IVG has thus secured the current low

level of interest rates for the long term and further reduced its risk exposure to interest rate changes.

The average interest rate on borrowed capital was 4.9% at the end of the year.

A loan was taken out, initially for nine months, to finance the POLAR takeover. This acquisition loan will

be rolled over into a long-term financing arrangement in the course of 2004.

€71 million has been borrowed on a long-term basis to 2012 in connection with a forfaiting transaction

in receivables from letting IVG-owned storage caverns. The tenants’ first-rate financial standing is car-

ried over to the loan, a fact which is reflected in the credit terms.

IVG provides funding to Group companies through a central treasury function. This central funding net-

work makes for optimum pooling of liquidity and so lowers the cost of capital throughout the Group. It

also guarantees the solvency of each of the companies involved and monitors interest, currency and

liquidity risks in the Group as a whole. Integrating the international subsidiaries into IVG’s electronic

cash pool further boosts efficiency.

Financing

The full cash flow statement appears in the Notes.

m

2003 2002

Cash provided by operating activities 44.0 238.4

Cash provided by/used for investing activities 38.8 -42.0

Cash used for financing activities -165.9 -85.3

Net change in cash and cash equivalents -83.1 111.1

Cash and cash equivalents generated by consolidation changes 5.7 0.1

Cash and cash equivalents at the start of the period 131.4 20.2

Cash and cash equivalents at the end of the period 54.0 131.4

C O N S O L I D AT E D C A S H F L O W S TAT E M E N T

76 Group Management Report 77 Economic environment 77 The economy 78 Real estate markets 79 Business performance 79 Segments 81 Financing

122 Other information 87 Consolidated Financial Statements

Preparation of consolidated financial statements and the requisite accounting valuations involve esti-

mates and assumptions that affect reported amounts and related disclosures. All estimates and as-

sumptions are made to the best of our knowledge and belief so as to give a true and fair view of our net

assets, financial position and results of our operations. Such estimates and assumptions significantly

affect certain accounting policies, as detailed in the following.

Property, plant and equipment is reported at historical acquisition cost less depreciation. The market

value of the great majority of our properties is estimated annually by independent appraisers. Financial

assets are reported at the lesser of acquisition cost or fair value.

Under German commercial law, fixed assets may be written down to fair value to recognize impairment

losses of a temporary nature. We restrict use of this option to instances where the impairment is inca-

pable of reversal for a reasonably long time (three years or longer).

Measuring write-downs for doubtful debts also entails estimates and assumptions for specific debts;

these estimates and assumptions are made to the best of our knowledge and belief.

Estimates are made in the measurement of provisions for risks arising from legal disputes and of an-

ticipated losses due to project development and other risks contingent on future events. We carefully

weigh the opportunities and risks in each such case and recognize a provision for the risk where we

consider a loss to be likely.

Consolidated value

added statement m

2003 2002

Source

Turnover 411.5 471.2

Other income 143.6 171.5

Group performance 555.1 642.7

Material expenses -116.9 -72.8

Depreciation -50.4 -161.6

Other expenses -144.1 -153.1

Total expenses and depreciation -311.4 -387.5

Value added 243.7 255.2

Distribution

Shareholders 46.5 38.8

Employees 56.9 52.1

State 33.4 40.7

Creditors 87.0 92.1

Group 19.9 31.5

Value added 243.7 255.2

C O N S O L I D AT E D VA L U E A D D E D S TAT E M E N T

82.83

Premises underlying

the consolidated

financial statements

IVG Immobilien AG:

Annual Financial

Statements for 2003

Receivables from affiliated companies and liabilities to affiliated companies increased due to invest-

ments in and divestments of subsidiaries. Other assets include bank credit balances.

We will propose a dividend of 0.34 per share at the Annual General Meeting on 27 May 2004.

The financial statements of IVG Immobilien AG, as issued with their clean auditors’ certificate by PwC

Deutsche Revision Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft of Düsseldorf, are published in

the Federal Bulletin (Bundesanzeiger) and deposited at Bonn Local Court under the registration number

HRB 4148.

m

31.12.2003 31.12.2002

Assets

Property, plant, equipment and intangible assets 3.2 0.5

Financial assets 1,802.3 1,916.3

Total fixed assets 1,805.5 1,916.8

Receivables from affiliated companies 620.7 446.9

Other assets/prepaid expenses 169.7 207.1

Total current assets 790.4 654.0

Total assets 2,595.9 2,570.8

Liabilities

Shareholders’ equity 696.2 695.8

Provisions 61.1 48.7

Liabilities to affiliated companies 673.5 539.7

Other liabilities 1,165.1 1,286.6

Total liabilities and shareholders’ equity 2,595.9 2,570.8

I V G I M M O B I L I E N A G : B A L A N C E S H E E T

m

2003 2002

Net income from participating interests (including amortization of financial assets) 103.6 126.1

Net interest payable -51.0 -41.2

Other income and expenses -3.6 -34.2

Net income from ordinary activities 49.0 50.7

Taxation -9.2 -7.8

Net income for the year 39.8 42.9

Withdrawal from reserve for own shares 0.1 0.9

Transfers to reserves -0.5 -4.3

Net income available for distribution 39.4 39.4

I V G I M M O B I L I E N A G 2 0 0 3 : I N C O M E S TAT E M E N T


83 IVG Immobilien AG: Annual Financial Statements


The Board of Management has issued a separate report on relations with affiliated companies, in ac-

cordance with Sec. 312 of the German Stock Corporation Act (AktG). This report includes the following

statement: »In the circumstances known to us at the time legal transactions were undertaken, our

company was appropriately remunerated for such transactions in all instances. We did not take or omit

to take any measures at the behest of or in the interests of WCM Beteiligungs- und Grundbesitz AG, of

Frankfurt am Main, or SIRIUS Beteiligungsgesellschaft mbH, of Wackerow.«

IVG’s risk management system is integral to all business processes, Group-wide directives and IT sys-

tems. Integration of risk analysis into the planning and control process and into reporting to the Board of

Management and Supervisory Board ensures continuous review of the risk situation. The operation of

our risk management is monitored by our internal auditing function and scrutinized during independent

auditing of the annual financial statements.

IVG counters market risk with comprehensive central and local research. It works together with interna-

tionally recognized research institutes to this end. Quarterly studies investigate the economic, industry

and market situation.

IVG faces a wide range of tax, competition and environmental rules and regulations in its market en-

vironment. By obtaining legal and technical advice and by monitoring the competition, IVG is fully in-

formed about any potential risks and ensures a fast response capability to negative developments in its

environment. Other legal risks – particularly litigation risks – are managed by a central legal department

in cooperation with top-calibre law firms throughout Europe.

Operating risks can arise in our portfolio management, project development and investment funds

activities.

Risks specific to portfolio management include vacancy risk, tenant credit risk and risk of a decline in

market rents. IVG monitors these with early warning indicators, including rent forecasts, vacancy rates,

tenancy terms to renewal and get-out clauses, regional market developments and reports on buying

and selling activities. This information is reported to the Board of Management on a continuous basis

using various analytical methods. Legacy risks were once again reviewed in 2003. The appraisal was

unchanged.

Dependent parties

report

Risk management

system

84.85

Major risks in project development are cost and schedule overruns during construction, and worsening

of the market situation. IVG secures its capability of responding to potential such risks with a tightly run

monthly reporting and control system covering all key management indicators.

Risks in the investment funds business primarily result from placement commitments given by IVG and

– depending on how each fund is set up – obligations under repurchase guarantees. Ongoing monitor-

ing of placement progress and the operating performance of investment properties makes certain that

adverse trends are spotted early and action is quickly taken.

IVG is exposed to the normal interest rate and foreign exchange rate risks in its operating business

and counters them, among other things with derivative financial instruments. The instruments used to

hedge financial risks are described in the Notes.

There are currently no apparent risks from past or future developments that could threaten the contin-

ued existence of IVG. All identified risks are adequately covered by balance-sheet provisions.

February 2004 saw a pivotal change in share ownership at IVG. The 49.9% stake held by Sirius – until

then IVG’s largest shareholder – was taken over by Sal. Oppenheim Bank (25.1%), HSH Nordbank

(11.16%), DZ-Bank, WGZ-Bank and IKB Deutsche Industriebank.

On 3 March 2004, IVG Immobilien AG acquired through a subsidiary a further 18.8 million shares in

POLAR Kiinteistöt Oyj, Helsinki, increasing its total shareholding to 95.5%.

Events of special im-

portance after the close

of the financial year


83 IVG Immobilien AG: Annual Financial Statements 84 Dependent parties report 84 Risk management system 85 Events after the close of the financial year


The world economy will be carried along in 2004 by forecast growth of over 5% in the USA and some

7% in Asia. The Euro zone stands to benefit only to a very limited extent, with forecast growth at 1.8%

(Deutsche Bank, Outlook, 30 January 2004). This is not enough to create new jobs in any quantity. A

similar outlook is given by the forecast change in service sector employment, which is an indicator of

future demand for office space.

We expect interest rates will stay level in 2004.

Overall, most European property markets appear to have reached firmer ground in 2003, with top rents

falling less steeply and vacancy rates increasing far less sharply than the preceding year; the third

quarter of 2003 even saw average rents recover by 1.6%. With the economy livening up again, 2004

is seeing the start of a new upturn. Yet with supply in many places so strong, vacant space may fill up

but most cities will only support minor rent increases in prime locations during 2004. We anticipate

that the property markets in Brussels, London, Paris and Budapest will initially continue to rally. With

some delay, an economic recovery with a positive effect on the property market should then follow in

Germany at the end of 2004.

Qualitative upgrading of our portfolio, rigorous pursuit of our active buy-and-sell strategy, realization of

proceeds from project development and expansion of our investment funds business will, we expect,

make 2004 another positive year for our business.

Bonn, 16 March 2004


Outlook

86.87

Consolidated Financial Statements

76 Group Management Report 122 Other information 87 Consolidated Financial Statements

C O N S O L I D AT E D B A L A N C E S H E E T A S AT 3 1 D E C E M B E R 2 0 0 3

31.12.2003 31.12.2002

ASSETS Notes € ‘000 € ‘000 € ‘000

A. Fixed assets

I. Intangible assets 1.

1. Patents, trademarks, licences and similar rights 10,516 6,192

2. Goodwill 15,596 5,601

3. Advance payments made 233 60

26,345 11,853

II. Property, plant and equipment 1.

1. Real estate (land, leasehold rights and buildings,

including buildings on land held by third parties) 2,407,671 2,173,595

2. Technical equipment, plant and machinery 52,000 46,266

3. Other fixtures and fittings, tools and equipment 6,846 6,436

4. Advance payments made and construction in progress 128,487 148,143

2,595,004 2,374,440

III. Financial assets 2.

1. Shares in affiliated companies 30,678 47,848

2. Long-term loans to affiliated companies 550 1,311

3.Shares in associated companies 23,294 24,572

4. Participating interests 33,323 38,082

5. Long-term loans to companies linked

via participating interests 66,055 68,961

6. Other long-term loans 64,477 108,395

218,377 289,169

2,839,726 2,675,462

B. Current assets

I. Inventories 3.

1. Raw materials and supplies 235 3,163

2. Work in progress 139,266 32,508

3. Finished goods and goods for resale 7,960 0

4. Advance payments made 78 55

147,539 35,726

II. Receivables and other assets 4.

1. Trade recevaibles 102,101 69,158

2. Receivables from affiliated companies 32,499 64,947

3. Receivables from companies linked via participating interests 100,249 47,604

4. Other assets 143,777 146,873

378,626 328,582

III. Securities available for sale 5.

1. Own shares 5.1 329 438

2. Own securities 5.2 101 0

430 438

IV. Liquid assets 6. 53,975 131,426

580,570 496,172

C. Prepaid expenses 7. 7,486 13,638

Total assets 3,427,782 3,185,272

Trust assets 199,459 199,302

88.89

31.12.2003 31.12.2002

LIABILITIES AND SHAREHOLDERS’ EQUITY Notes € ‘000 € ‘000 € ‘000

A. Shareholders’ equity 8.

I. Subscribed capital 8.1 116,000 116,000

II. Additional paid-in capital 8.2 458,897 458,897

III. Revenue reserves 8.3

1. Reserve required by law 2,556 2,556

2. Reserve for own shares 329 438

3. Other revenue reserves 222,257 144,233

225,142 147,227

IV. Negative consolidation difference 8.4 32,015 0

V. Consolidated net income available for distribution 8.5 39,440 39,440

VI. Minority interests 8.6 45,555 7,909

917,049 769,473

B. Special tax-allowable reserve 9. 0 31,465

C. Provisions 10.

1. Provisions for pensions and similar obligations 14,647 12,842

2. Provisions for taxes 69,642 53,482

3. Other provisions 117,606 95,941

201,895 162,265

D. Liabilities 11.

1. Bonds 8,450 0

2. Bank loans 1,881,553 1,906,083

3. Advance payments received for orders 73,070 15,290

4. Trade acccounts payable 33,406 23,959

5. Liabilities to affiliated companies 20,664 16,194

6. Liabilities to companies linked

via participating interests 7,287 12,909

7. Other liabilities 101,270 131,991

2,125,700 2,106,426

E. Deferred income 12. 183,138 115,643

Total liabilities and shareholders’ equity 3,427,782 3,185,272

Trust liabilities 199,459 199,302

76 Group Management Report 122 Other information 87 Consolidated Financial Statements 88 Consolidated Balance Sheet

C O N S O L I D AT E D F I X E D A S S E T S C H E D U L E O F I V G I M M O B I L I E N A G

€ ‘000 COST OF ACQUISITION AND CONSTRUCTION DEPRECIATION, WRITE-UPS AND WRITE-DOWNS BOOK VALUE

Consolidation Re- Reclassi- Currency Consolidation Write- Re- Reclassi- Currency

01.01.03 changes Additions valuations fications influences Disposals 31.12.03 01.01.03 changes Additions ups valuations fications influences Disposals 31.12.03 31.12.03 31.12.02

I. Intangible assets

1 . Patents, licences, trademarks

and similar rights 16,916 6,749 348 60 96 23,977 10,724 1,362 1,390 -12 3 13,461 10,516 6,192

2 . Goodwill 19,063 -94 8,423 5,326 217 32,501 13,462 -38 3,698 217 16,905 15,596 5,601

3 . Advance payments 60 9,799 600 -60 1,447 8,952 9,403 159 843 8,719 233 60

(Total intangible assets) 36,039 16,454 9,371 5,326 1,760 65,430 24,186 10,727 5,247 -12 1,063 39,085 26,345 11,853

II. Property, plant and equipment

1 . Real estate (land, leasehold rights

and buildings, including buildings

on land held by third parties) 2,834,923 340,956 60,605 -86,884 107,971 -17,213 273,043 2,967,315 661,328 54,562 35,268 -142,726 -728 -1,189 46,871 559,644 2,407,671 2,173,595

2 . Technical equipment,

plant and machinery 117,270 8,526 2,938 1,185 -1,634 1,025 127,260 71,004 677 4,771 3 -179 1,016 75,260 52,000 46,266

3 . Other fixtures and fittings,

tools and equipment 25,965 -1,151 2,694 1,847 -72 4,860 24,423 19,529 -1,834 2,375 725 -54 3,164 17,577 6,846 6,436

4 . Advance payments made

and construction in progress 149,321 -1,998 52,006 -66,176 -371 4,295 128,487 1,178 1,178 128,487 148,143

(Total property, plant and equipment) 3,127,479 346,333 118,243 -86,884 44,827 -19,290 283,223 3,247,485 753,039 53,405 42,414 -142,726 -1,422 52,229 652,481 2,595,004 2,374,440

Running total 3,163,518 362,787 127,614 -86,884 50,153 -19,290 284,983 3,312,915 777,225 64,132 47,661 -142,726 -1,434 53,292 691,566 2,621,349 2,386,293

III. Financial assets

1 . Shares in affiliated companies 49,060 33,381 30,986 -1,011 1 79,947 32,470 1,212 8,954 538 8,912 1,792 30,678 47,848

2 . Long-term loans to affiliated companies 2,714 1,830 61 4,055 550 1,403 132 1,535 550 1,311

3 . Shares in associated companies 24,572 -2,868 6,916 -5,326 23,294 23,294 24,572

4 . Participating interests 44,731 12,217 33,407 1,011 -2 47,805 43,559 6,649 1,780 1,179 4,000 3,372 10,236 33,323 38,082

5 . Long-term loans to companies

linked via participating interests 69,089 1,384 10,845 15,155 66,163 128 5 25 108 66,055 68,961

6 . Other long-term loans 108,485 7,756 25,183 -44,827 31,209 65,388 90 823 2 911 64,477 108,395

(Total financial assets) 298,651 53,700 107,398 -50,153 -1 178,171 231,424 9,482 10,739 2,672 27 4,000 13,819 13,047 218,377 289,169

(Total fixed assets) 3,462,169 416,487 235,012 -86,884 -19,291 463,154 3,544,339 786,707 74,871 50,333 27 -138,726 -1,434 67,111 704,613 2,839,726 2,675,462

90.91

C O N S O L I D AT E D F I X E D A S S E T S C H E D U L E O F I V G I M M O B I L I E N A G

€ ‘000 COST OF ACQUISITION AND CONSTRUCTION DEPRECIATION, WRITE-UPS AND WRITE-DOWNS BOOK VALUE

Consolidation Re- Reclassi- Currency Consolidation Write- Re- Reclassi- Currency

01.01.03 changes Additions valuations fications influences Disposals 31.12.03 01.01.03 changes Additions ups valuations fications influences Disposals 31.12.03 31.12.03 31.12.02

I. Intangible assets

1 . Patents, licences, trademarks

and similar rights 16,916 6,749 348 60 96 23,977 10,724 1,362 1,390 -12 3 13,461 10,516 6,192

2 . Goodwill 19,063 -94 8,423 5,326 217 32,501 13,462 -38 3,698 217 16,905 15,596 5,601

3 . Advance payments 60 9,799 600 -60 1,447 8,952 9,403 159 843 8,719 233 60

(Total intangible assets) 36,039 16,454 9,371 5,326 1,760 65,430 24,186 10,727 5,247 -12 1,063 39,085 26,345 11,853

II. Property, plant and equipment

1 . Real estate (land, leasehold rights

and buildings, including buildings

on land held by third parties) 2,834,923 340,956 60,605 -86,884 107,971 -17,213 273,043 2,967,315 661,328 54,562 35,268 -142,726 -728 -1,189 46,871 559,644 2,407,671 2,173,595

2 . Technical equipment,

plant and machinery 117,270 8,526 2,938 1,185 -1,634 1,025 127,260 71,004 677 4,771 3 -179 1,016 75,260 52,000 46,266

3 . Other fixtures and fittings,

tools and equipment 25,965 -1,151 2,694 1,847 -72 4,860 24,423 19,529 -1,834 2,375 725 -54 3,164 17,577 6,846 6,436

4 . Advance payments made

and construction in progress 149,321 -1,998 52,006 -66,176 -371 4,295 128,487 1,178 1,178 128,487 148,143

(Total property, plant and equipment) 3,127,479 346,333 118,243 -86,884 44,827 -19,290 283,223 3,247,485 753,039 53,405 42,414 -142,726 -1,422 52,229 652,481 2,595,004 2,374,440

Running total 3,163,518 362,787 127,614 -86,884 50,153 -19,290 284,983 3,312,915 777,225 64,132 47,661 -142,726 -1,434 53,292 691,566 2,621,349 2,386,293

III. Financial assets

1 . Shares in affiliated companies 49,060 33,381 30,986 -1,011 1 79,947 32,470 1,212 8,954 538 8,912 1,792 30,678 47,848

2 . Long-term loans to affiliated companies 2,714 1,830 61 4,055 550 1,403 132 1,535 550 1,311

3 . Shares in associated companies 24,572 -2,868 6,916 -5,326 23,294 23,294 24,572

4 . Participating interests 44,731 12,217 33,407 1,011 -2 47,805 43,559 6,649 1,780 1,179 4,000 3,372 10,236 33,323 38,082

5 . Long-term loans to companies

linked via participating interests 69,089 1,384 10,845 15,155 66,163 128 5 25 108 66,055 68,961

6 . Other long-term loans 108,485 7,756 25,183 -44,827 31,209 65,388 90 823 2 911 64,477 108,395

(Total financial assets) 298,651 53,700 107,398 -50,153 -1 178,171 231,424 9,482 10,739 2,672 27 4,000 13,819 13,047 218,377 289,169

(Total fixed assets) 3,462,169 416,487 235,012 -86,884 -19,291 463,154 3,544,339 786,707 74,871 50,333 27 -138,726 -1,434 67,111 704,613 2,839,726 2,675,462

76 Group Management Report 122 Other information 87 Consolidated Financial Statements 88 Consolidated Balance Sheet 90 Consolidated Fixed Asset Schedule

C O N S O L I D AT E D I N C O M E S TAT E M E N T

2003 2002

Notes € ‘000 € ‘000 € ‘000

1. Turnover 1. 411,496 471,238

2. Net change in inventories of finished goods,

work in progress and work not yet billed 2. 6,044 -60,894

3. Other own work capitalized 857 1,599

4. Other operating income 3. 127,266 225,878

545,663 637,821

5. Material expenses 4.

a) Cost of raw materials, supplies and

acquired merchandise -3,682 -6,004

b) Cost of acquired services -113,237 -66,777

-116,919 -72,781

6. Personnel expenses 5.

a) Wages and salaries -46,472 -43,238

b) Social security levies, and costs of retirement pensions

and other welfare benefits -10,421 -8,882

-56,893 -52,120

7. Depreciation and write-downs on intangible assets

and property, plant and equipment 6. -47,661 -157,810

8. Other operating expenses 7. -144,123 -153,051

9. Income from participating interests 8. 9,416 4,915

10. Income from long-term loans 9. 4,247 14,223

11. Other interest and similar income 9. 31,439 21,420

12. Write-downs on financial assets and securities available for sale 9. -2,672 -3,844

13. Interest and similar expenses 9. -122,640 -127,717

14. Net income from ordinary activities 99,857 111,056

15. Income taxes 10. -20,784 -26,158

16. Other taxes 10. -12,594 -14,466

17. Consolidated net income for the year 66,479 70,432

18. Minority interests -7,139 -566

19. Withdrawals from the reserve for own shares 109 903

20. Transfer to other revenue reserves -20,009 -31,329

21. Consolidated net income available for distribution 39,440 39,440

92.93

Notes to the IVG Consolidated Financial Statements for the 2003 financial year

I. General principles applied to the consolidated financial statements

As in previous financial years, the consolidated financial statements of the IVG Group are prepared in

accordance with the German Commercial Code (Handelsgesetzbuch – HGB), Stock Corporations Act

(Aktiengesetz – AktG), and Principles of Orderly Accounting (Grundsätze ordnungsmässiger Buchführung

– GoB), collectively also known as »German GAAP«.

The financial statements of all companies included in the consolidated financial statements are prepared

using uniform accounting and valuation principles.

The financial statements and the lists of participating interests of IVG Immobilien AG and the IVG Group are

deposited at Bonn Local Court (Amtsgericht), registered as HRB no. 4148, and are published in the Federal

Bulletin (Bundesanzeiger). German partnerships coming under Sec. 264a of the Commercial Code in which

IVG Immobilien AG is a limited partner and which are included in the consolidated financial statements are

generally exempt under Sec. 264b Para. 4 from the preparation, auditing and publication requirements ap-

plicable to limited companies.

The consolidated financial statements include the parent company, IVG Immobilien AG, together with all

material subsidiaries. These are the companies that fall, directly or indirectly, under IVG’s uniform control. As

a general rule, associated companies are accounted for by the equity method if IVG holds between a 20%

and 50% share and exerts a significant influence over them. Other participating interests are reported at the

lower of acquisition cost or fair value.

100 subsidiaries that are non-operating or conduct only a small volume of business are not consolidated ei-

ther because they are not material to presentation of a true and fair view of the Group’s net assets, financial

position and the results of its operations, as provided by Sec. 296 (2) of the Commercial Code, or because

the shares in them are held solely for resale, as provided by Sec. 296 (1) 3.

In total, 103 domestic and 150 foreign-domiciled companies were consolidated in the 2003 financial year,

66 more than in the 2002 consolidated financial statements. Five associated companies are accounted for

by the equity method. One company accounted for by the equity method in 2002 is now fully consolidated

following the purchase of the remaining voting shares.

Scope of

consolidation

Total Total

Domestic Foreign 31.12.2003 31.12.2002

Number of fully consolidated companies 103 150 253 187

Number of participating interests accounted for by the equity method 4 1 5 6

Number of other affiliated companies 42 58 100 42

Number of other participating interests 62 19 81 43

Total number of companies 211 228 439 278

76 Group Management Report 87 Consolidated Financial Statements 88 Consolidated Balance Sheet 90 Consolidated Fixed Asset Schedule 92 Consolidated Income Statement 93 Notes to the IVG Consolidated Financial Statements

122 Other information

In autumn 2003, IVG acquired over 85% of POLAR Kiinteistöt Oyj. POLAR, which is based in Hel-

sinki and listed on the Helsinki stock exchange, has a real estate portfolio consisting of approximately

260,000 m2 of lettable space (60% offices, 40% shopping centres) plus development reserves with a

gross floor area of 55,000 m2. A further 10% stake was purchased in early March 2004.

POLAR’s consolidated financial statements for 2003, prepared in accordance with Finnish law, report

turnover of €48.5 million (2002: €61.9 million) and net income of €37.5 million (2002: €28.9 million).

The asking price for the 85% stake was €116.6 million. 2003 earnings per share were €0.21.

The net asset position of IVG and the results of its operations are materially affected by consolidation

changes in the 2003 financial year, primarily due to the first-time inclusion of the POLAR group as from

1 November 2003, of the Wert-Konzept group and of XXTRA KG.

The changes are presented in the table below.

m

Position Total consolidation Group total

changes for 2003 %

Assets 324.5 2,839.7 11.4

Inventories 54.0 147.5 36.6

Trade receivables 6.5 102.1 6.3

Other assets 18.4 143.8 12.8

Liquid funds 11.3 54.0 20.9

Provisions 21.2 201.9 10.5

Liabilities 234.6 2,125.7 11.0

Turnover 25.2 411.5 6.1

Other operating income 12.9 127.3 10.1

Personnel expenses -6.6 -56.9 11.7

Material expenses -15.2 -116.9 13.0

Other operating expenses -14.5 -144.1 10.1

Write-downs on financial assets -0.8 -2.7 31.6

Comparability of the

2003 and 2002

consolidated financial

statements

Affiliated companies first consolidated up to 31 December 2000 were incorporated in the consolidated

financial statements by the book-value method, based on the difference between acquisition cost and

the Group’s interest in the equity of the subsidiaries when they were acquired or first consolidated.

Companies first consolidated on or after 1 January 2001 are incorporated into the consolidated financial

statements by the fair value purchase method as at the date of acquisition in accordance with GAS 4.

The same consolidation principles apply to shares in equity-accounted associated companies. No retro-

spective adjustment through reserves has been made in respect of comparative figures for earlier years.

Previously unrecognized gains and losses recognized on application of the fair purchase value method

are recorded in equity. Any positive consolidation difference is recognized as goodwill and amortized,

normally over an estimated useful life of 15 years. Any negative consolidation difference is recognized

separately in shareholders’ equity and released to income over the remaining estimated useful life of

the acquired non-monetary assets.

Consolidation methods

94.95

For companies historically consolidated by the book-value method, the difference between acquisition

cost and the Group’s interest in the equity of the subsidiary is allocated to the subsidiary’s assets; any

unallocated amount is reported as goodwill and amortized, normally over an estimated useful life of 15

years. Negative consolidation differences are charged, according to type, to real estate, provisions, or

shareholders’ equity.

Intra-Group lending and all other receivables, liabilities, turnover, expenses and income arising within

the Group are eliminated.

Deferred taxes arising from temporary differences between carrying amounts recognized in single-

entity financial statements and amounts attributed for tax purposes are grouped with deferred taxes

arising on consolidation and reported under provisions for taxes. Deferred taxes are measured at the tax

rates ruling or expected to rule in the country concerned at the balance sheet date. In all other respects,

the tax regulations in force or enacted on the balance sheet date are deemed to apply.

Other transactions between consolidated Group companies are eliminated in IVG’s consolidated finan-

cial statements, in accordance with Sec. 304 of the Commercial Code. All intra-Group trading of goods

and services is conducted at arm’s length.

Non-euro balance sheets of foreign subsidiaries are translated using the exchange rate ruling at the

balance sheet date; non-euro income statements of foreign subsidiaries are translated at the average

rate for the financial year. That is, assets, provisions and liabilities are valued using the middle rate of

exchange ruling at the balance sheet date. All income and expense items are translated at the average

rate for the year. Shareholders’ equity items are translated at the rates of exchange that applied at the

time of their initial measurement. Differences between such values and the values found by applying

the exchange rate at the balance sheet date are credited or debited to revenue reserves, with no effect

on income.

The exchange rates used for translation purposes are as follows:

Currency translation

Exchange rate Average exchange Exchange rate

on 31.12.2003 rate for 2003 on 2002

Currency Country in € in € in €

1 GBP United Kingdom 1.4188 1.4455 1.5373

100 SEK Sweden 11.0132 11.0966 10.9256

100 HUF Hungary 0.3810 0.3946 0.4232

100 PLN Poland 21.2680 22.7500 24.8694

C U R R E N C Y T R A N S L AT I O N S

Currency translation differences are credited or debited to revenue reserves without going through the

income statement.



Financial statements are prepared in accordance with the IVG Group’s accounting and valuation poli-

cies for each Group company included in the consolidated financial statements. Financial statements

prepared to other countries’ requirements are adapted where the requirements materially differ from

Group accounting and valuation policies.

The income statement is presented using the type-of-expenditure format.

Intangible assets are valued at acquisition cost less amortization. The maximum estimated useful life

of building and exploitation rights – reported under patents, trademarks, licences and similar rights – is

10 years. Salt rights have an unlimited useful life.

Property, plant and equipment is valued at the cost of acquisition or construction and, if depleting,

reported net of depreciation. Costs of producing self-constructed assets also include apportioned over-

heads.

Earlier write-downs allowed solely for tax purposes and temporary depreciation differences credited

to special tax-allowable reserves were reversed as from 1 January 2003 following partial repeal of

Sec. 308 of the German Commercial Code. The carrying amounts of the affected assets are now stated

in accordance with Commercial Code valuation rules. The resulting €56.7 million revaluation difference

was credited to reserves without going through the income statement. This matched a €51.9 million

increase in fixed assets, a €21.0 million increase in provisions for deferred taxes, and a €25.8 million

decrease in special tax-allowable reserves.

As a general rule, buildings throughout the Group are depreciated on a straight-line basis, assuming a

normal useful life of either 50 or 66.67 years.

Movable assets are normally depreciated over the shortest useful life permissible for tax purposes,

using either the straight-line method or else the declining-balance method subsequently switching to

straight-line; first-half-year additions are depreciated for a full year and second-half additions by half the

first-year depreciation allowance. Low-value assets are written off in the year of acquisition. They are

recorded as additions in the fixed assets movement schedule and normally recorded as disposals after

their assumed useful life of four years has elapsed.

Shares in affiliated companies and other participating interests are recorded on the balance sheet at the

lower of acquisition cost or fair value.

Shareholdings accounted for by the equity method are included in the consolidated financial statements

using the book-value method stipulated in Sec. 312 (1) 1 of the Commercial Code. As a general rule,

associated companies apply IVG’s accounting and valuation principles.

Accounting and

valuation policies

96.97

Loans to employees – including interest-free and low-interest loans – are reported at nominal value.

Long-term loans to affiliated companies or to companies linked via participating interests are reported

less any impairment losses.

Inventories are valued at the lower of their cost of acquisition or construction required for tax purposes

or current market value. Raw materials and supplies are normally valued at average acquisition cost less

any write-downs. Finished goods, work in progress and work not yet billed are valued at cost of con-

struction. In addition to unit material and production costs, cost of construction is normally also taken

to include apportioned material and production overheads and depreciation charges. The lower of cost

or net realizable value measurement principle is applied.

Specific allowances are recognized to account for identifiable risks in respect of receivables and other

assets. General bad-debt risk is adequately allowed for by means of a lump-sum write-down on receiva-

bles.

Own shares are reported at the lower of acquisition cost or fair value.

Provisions for pensions and similar obligations are reported at actuarial present value using a discount

rate of 6%, as stipulated by Sec. 6a of the German Income Tax Act (Einkommensteuergesetz). The

provisions are calculated using Prof. K. Heubeck’s 1998 actuarial tables.

Semiretirement pension obligations are reported at actuarial present value (applying a 5.5% discount

rate) in analogy to Sec. 6a of the German Income Tax Act; employees not having signed a semiretire-

ment pension agreement are included in accordance with the estimated probability of semiretirement

being taken. The payroll backlog is reported at nominal value.

Provisions for taxes comprise deferred taxes as provided by Sec. 274 and net deferred taxes from

single-entity financial statements as provided by Sec. 306 of the Commercial Code.

All tax liabilities or assets arising during the financial year are fully accounted for in the consolidated

financial statements, based on the tax regulations applying to individual Group companies.

Other provisions account for all identifiable risks and uncertain obligations to the full extent necessary,

in line with prudent business judgement.

Liabilities are reported at the amount due.

Turnover is reported once supplies of goods and/or services have been completed and risk has passed

to the customer. Turnover in project development is not reported on the income statement until con-

tractual performance is complete or a distinct part of the work already performed for, or delivered to,

the customer can be billed.



II. Notes to the Consolidated Balance Sheet and Income Statement for the 2003 financial year

Consolidated Balance Sheet

Movements in individual fixed asset categories (disclosed in the Consolidated Fixed Asset Schedule)

are accounted for on the basis of historical cost of acquisition or construction.

Acquisition and production costs reported for intangible assets and property, plant and equipment are

historical costs, in some cases originating from the deutschmark-denominated opening balance of

1948.

Intangible assets consist of goodwill and patents, trade marks, licences and similar rights.

Property, plant and equipment consists of real estate; technical equipment, plant and machinery; other

fixtures and fittings, tools and equipment; and advance payments made and construction in progress.

The decrease in shares in affiliated companies compared with the previous year is a result of previously

unconsolidated companies being reported as consolidated companies for the first time.

The changes in shares in associated companies are substantially due to reclassification of Wert-Konzept

Berlin Holding GmbH & Co. Beteiligungs KG, Berlin, as a fully consolidated company.

Shares in equity-accounted associated companies totalled €23.3 million at the balance sheet date and

included €9.3 million in amortized goodwill.

Other participating interests decreased due to repayment of the capital in BBPI Berlin Brandenburg

International Partner GmbH & Co. KG, Berlin.

The long-term loans to companies linked via participating interests chiefly relate to a loan granted to

TARDIS Verwaltungsgesellschaft mbH & Co. KG, Munich, in connection with the previous year’s sale-

and-leaseback transaction pertaining to MEDIA WORKS MUNICH.

Other long-term loans include a deposit lodged by IVG Logistik GmbH to finance property, plant and

equipment (€9.9 million), housing loans provided to employees, and a payment moratorium granted

to the purchaser in the sale of the Talis group (€6.2 million). In connection with the stake in FDV, loans

totalling €26.6 million were granted in 2003 to FDV Venture’s subsidiary. The sale-and-leaseback deal

with Tardis Verwaltungsgesellschaft mbH & Co. KG gave rise to a debt of €10.7 million.

1. Intangible assets

and property, plant and

equipment

2. Financial assets

98.99

m

31.12.2003 31.12.2002

Trade receivables 102.1 69.2

(of which: amount not due for more than 1 year) (7.1) (4.3)

Receivables from affiliated companies 32.5 64.9


Receivables from companies linked via participating interests 100.2 47.6


Other assets 143.8 146.9


378.6 328.6

R E C E I VA B L E S

The raw materials and supplies item (€0.2 million) relates to operations such as tank farms. Most of the

Group’s work in progress (€139.3 million) is in project development. The increase is due to the merging

of Tercon Bau GmbH (€73.7 million) and to first-time inclusion of XXTRA (€23.9 million) and IVG

Hungaria Kft. (€14.4 million). Finished goods (€8.0 million) primarily consist of land up for sale in Klein-

machnow.

3. Inventories

4. Receivables and

other assets

Trade receivables primarily increased due to enlargement of the consolidated Group.

Most of the receivables from affiliated companies result from Group financial transactions.

The receivables from companies linked via participating interests are mainly short-term loans by IVG

Immobilien AG to the investment fund company Wert-Konzept Beteiligungs- und Verwaltungs GmbH

Euroselect Sieben KG (€48.9 million) and to Leibniz-Kolonnaden mbH & Co. KG (€25.5 million) for the

purposes of funding capital investment.

Other assets include indirect interests in Wohnen am Märchenviertel KG K.u.K. Grundverwaltungs

GmbH & Co. (€39.5 million).

This item also includes shares in affiliated unconsolidated companies (€89.9 million).



5.1 Own shares

IVG Immobilien AG once again issued shares to employees to promote employee savings in 2003. The

IVG VALUE programme continues to be as well received as ever, with 61,600 no-par-value shares is-

sued to employees in 2003. To this end, 50,800 no-par-value shares were purchased in several blocks

during 2003. 41,751 no-par-value shares (2002: 52,551), constituting 0.036% of capital stock, remained

in the Group’s ownership on 31 December 2003.

5.2 Other securities

These include units in two real estate funds (€0.1 million).

These are mostly liquid funds of IVG Immobilien AG and of companies not yet included in the cash

clearing system.

This item consists of payments made that will not be recognized as expense until later financial years.

It also contains deferred discounts on long-term bank loans (€0.7 million).

8.1 Subscribed capital

The capital stock of IVG Immobilien AG is €116,000,000.00, divided into 116 million no-par-value

shares.

Categories of authorized capital in existence at the balance sheet date:

Class I authorized capital for issue by 30 May 2005

as new no-par-value shares payable in cash €24 milion by AGM resolution of 31 May 2000

Class II authorized capital for issue by 26 May 2004

as new shares payable in cash €9 million by AGM resolution of 27 May 1999

Class III authorized capital for issue by 30 May 2005 as new registered

no-par-value shares payable in cash or in non-cash assets €24 million by AGM resolution of 31 May 2000

IVG Immobilien AG also has by resolution of 23 May 2002 €30 million in conditional capital (to expire

on 22 May 2007) for the event of a convertible bond or warrant-linked bond issue and by resolution of

27 May 1999 and 23 May 2002 a total of €5,848,856 in conditional capital for rights issues under share

options schemes.

SIRIUS Beteiligungsgesellschaft mbH and WCM Beteiligungs- und Grundbesitz-AG have made all

disclosures required by the German Securities Trading Act (Wertpapierhandelsgesetz). A dependent

parties report in respect of WCM has been prepared in accordance with Sec. 312 of the German Stock

Corporations Act.

8.2 Additional paid-in capital

Additional paid-in capital remains unchanged at €458.9 million.

5. Securities

available for sale

6. Liquid assets

7. Prepaid expenses

8. Shareholders’ equity

100.101

8.3 Revenue reserves

€0.4 million was credited to other revenue reserves from IVG Immobilien AG’s net income for the year;

the reserve for own shares was reduced by €0.1 million to reflect the decrease in holdings of such

shares over the year to 31 December 2003.

The repeal of Sec. 308 (3) of the Commercial Code resulted in a €56.7 million increase in revenue re-

serves as from 1 January 2003 (see page 96/97). A further €19.5 million was transferred from consoli-

dated net income to other revenue reserves.

8.4 Negative consolidation difference

First-time inclusion of companies acquired in the lucky buy of the POLAR group gave rise to a negative

consolidation difference of 36.4 million which is being released to income over the remaining esti-

mated useful life of the acquired non-monetary assets. Amounts released to income for asset disposals

in 2003 added €4.4 million to other operating income.

8.5 Consolidated net income

IVG Immobilien AG’s consolidated net income available for distribution was €39.4 million in 2003. The

Board of Management and Supervisory Board will propose to the Annual General Meeting on 27 May

2004 that a dividend of €0.34 (2001: €0.34) per no-par-value share be distributed out of this sum.

8.6 Minority interests

Minority interests in the equity of consolidated subsidiaries total €45.6 million and mostly consist of

stakes in POLAR Kiinteistöt Oyj, Helsinki, Stodiek Europa Immobilien AG, Bonn, and K.u.K. Zweite

Grundverwaltungs-GmbH & Co. Spreespeicher KG, Berlin. The share of net income accruing to minority

shareholders is a positive €7.1 million.

Provisions for all pension commitments are measured in accordance with actuarial principles.

Provisions for taxes have primarily been recognized for the current year, earlier years, and deferred

taxes (€54.1 million).

Other provisions cover matters such as personnel expenses, outstanding suppliers’ invoices, omitted

maintenance work, anticipated losses on pending transactions, restructuring and potential litigation

costs.

€6.5 million is also included for land rehabilitation and other environmental measures.

Additional provisions of €10.2 million (2002: €12.3 million) are made for previously unrecognized losses

recognized on consolidation; €2.1 million of these provisions was reversed or used in the 2003 financial

year.

9. Provisions



m

Up to Up to More than

Total as at 1 year to 5 years to 5 years to Total as at

31.12.03 maturity maturity maturity 31.12.02

Bonds 8.5 8.5 0.0

Bank loans 1,881.5 415.2 883.1 583.2 1,906.1

Advance payments received for orders 73.1 69.5 3.0 0.6 15.3

Trade accounts payable 33.4 29.8 3.2 0.4 23.9

Liabilities to affiliated companies 20.7 20.7 16.2

Liabilities to companies linked via participating interests 7.3 7.3 12.9

Other liabilities 101.2 97.1 3.4 0.7 132.0

(of which: tax liabilities) (20.7) (20.7) (37.9)

(of which: for social security) (0.8) (0.8) (0.7)

2,125.7 648.1 892.7 584.9 2,106.4

L I A B I L I T I E S

The nonconvertible bonds of POLAR Kiinteistöt Oyj, Helsinki, are interest-bearing (12 months Helibor

+2%; 2003: 4,772%; 2004: 4,307%). The bonds mature on 31 December 2004.

The bank loans are secured by mortgages on real estate of €594.8 million, pledged shares of €84.9

million and a pledged fixed-term deposit of €18.4 million.

This item is mostly earnings charged to future periods under a sale-and-leaseback transaction covering

the majority of MWM Businesspark, forfaited rents for storage caverns secured by title in IVG-owned

storage cavern sites, and advance rent payments.

10. Liabilities

11. Deferred income

12. Contingent

liabilities m

31.12.03 31.12.02

Guarantees 291.2 355.6

Other contingent liabilities 185.5 242.5

476.7 598.1

C O N T I N G E N T L I A B I L I T I E S

The guarantees consist of obligations IVG Immobilien AG has entered into with third parties on behalf of

affiliated companies. The other contingent liabilities include IVG’s share of joint-and-several debt obliga-

tions to leasing companies which IVG subsidiary undertakings use to finance some of their investment;

rent guarantees unlikely to be called up; letters of comfort; and longer-term contingent liabilities, dis-

counted at 5.5%, comprising option-writer’s liabilities arising out of redemption rights for fund investors.

102.103

13. Other financial

obligations m

31.12.03 31.12.02

Obligations from rental and leasing agreements

Due 2004 (31.12.02: 2003) 26.9 35.7

Due 2005 – 2008 (31.12.02: 2004 – 2007) 30.5 53.4

Due after 2008 (31.12.02: due after 2007) 32.8 14.0

90.2 103.1

Undertaking to contribute capital 18.5 16.5

Loan obligation 0.0 25.9

108.7 145.5

O T H E R F I N A N C I A L O B L I G AT I O N S

Lease payments on longer-term obligations are discounted at 5.5%.

Besides the above, there is another financial obligation of €61.0 million (discounted at 5.5%; 11 years)

resulting from a letter of comfort issued by IVG Immobilien AG for the MWM tenancy.

The international focus of its operating business exposes IVG to interest rate and currency risk. These

risks are hedged using derivative financial instruments. Risk of default and market risk were negligible

both in the year under review and the financial year preceding it.

The derivative financial instruments current as at the balance sheet date were as follows:

14. Derivative financial

instruments

m

31.12.03 31.12.02

Interest-rate swaps 629.4 432.5

Foreign exchange interest swaps 117.1 164.2

746.5 596.7

N O M I N A L A M O U N T

The nominal volume of the hedging contracts in the table is not netted out. It is the total of all buy and

sell amounts underlying the contracts.



Consolidated Income Statement

Turnover includes net rental income, prepayments of ancillary costs by tenants, and revenue from sales

of development projects. In accordance with the German Commercial Code, book gains on the sale of

portfolio properties are recognized not as turnover but as other operating income.

Turnover is deemed to have been realized when performance has been rendered and the risk passed

on. Turnover in project development is not reported in the income statement until contractual perform-

ance is complete or a distinct part of the work has been handed over to the customer.

A breakdown by divisions and regions is presented in the segment information.

The changes in these inventories (€6.0 million) result from various domestic project developments.

1. Turnover

2. Net increase in inven-

tories of finished goods,

work in progress and

work not yet billed

3. Other operating

income m

2003 2002

Disposals of property, plant and equipment 64.8 191.6

(includes €4.3 million – nil in 2002 – from the release of

negative consolidation difference into income)

Foreign exchange gains 25.3 0.1

Release of provisions 12.1 13.7

Recovered personnel expenses 3.6 0.0

Transfers from special tax-allowable reserves 0.0 7.1

Other 21.5 13.4

127.3 225.9

O T H E R O P E R AT I N G I N C O M E

Intra-Group book gains were neutralized in 2002 by applying special depreciation allowances (€112.4

million) and transfers to special tax-allowable reserves (€14.0 million) as provided by Sec. 273 of the

Commercial Code and Sec. 6b of the German Income Tax Act (EStG). Amortized accumulated inter-

company profits were eliminated in 2003 as part of the adjustments made following the partial repeal

of Sec. 308 of the Commercial Code.

Material expenses (€116.9 million) are chiefly raw materials and supplies, production inputs for the com-

pletion of orders, and purchased services. They break down on a segmental basis to €34.8 million for

portfolio management, €81.8 million for project development and €0.3 million for non-core operations.

4. Material expenses

104.105

5. Personnel expenses

m

2003 2002

Wages and salaries 46.5 43.2

Social insurance levies, and costs of retirement pensions and other benefits 10.4 8.9

(of which: for retirement pensions) (3.3) (3.1)

56.9 52.1

P E R S O N N E L E X P E N S E S

Personnel expenses primarily increased due to enlargement of the consolidated Group (see p. 93).

The wages and salaries item includes employer’s matching contributions to the employee-loan asset

participation model for employee wealth creation. The total cost in the 2003 financial year was €40,000

(2002: €42,000).

The costs of retirement pensions and other welfare benefits include the pension entitlements of em-

ployees whose contracts are with IVG Immobilien AG arising from a special contributory agreement

with the state pension agency Versorgungsanstalt des Bundes und der Länder (VBL). The contribu-

tion rate applicable in 2003 was 7.86% of the wages and salaries covered by this supplementary plan

(€16.57 million); 6.45% is payable by the employer and 1.41% by the compulsorily insured employees.

The employer must also pay an adjustment levy comprising 1.60% of wages and salaries covered by

the supplementary plan. According to VBL information, 645 former employees will be entitled to or are

already receiving supplementary pensions.

6. Depreciation and

write-downs on intan-

gible assets, property,

plant and equipment

m

2003 2002

Scheduled depreciation 45.4 43.1

Write-downs 2.3 1.2

Special depreciation allowances permitted by tax law 0.0 113.5

47.7 157.8

D E P R E C I AT I O N

The write-downs include impairment losses recognized for goodwill.



7. Other operating

expenses

m

2003 2002

Lease rentals payable 20.1 13.6

Maintenance and upkeep 19.7 17.0

Auditing, consultancy and legal fees 18.2 13.3

Cost of external services 8.2 7.7

Ground rents or lease payments 7.4 3.9

Communication and marketing 6.3 5.3

Data processing 4.0 4.2

Transfer to special tax-allowable reserves 0.0 17.6

Other expenses* 60.2 70.5

144.1 153.1

O T H E R O P E R AT I N G E X P E N S E S

Other operating expenses consist of these items:

* This sub-item includes allocations to provisions, write-downs on assets, foreign exchange losses,

losses on disposals of fixed assets, financial service charges, property levies, etc.

8. Income from

participating interests m

2003 2002

Income from non-consolidated affiliated companies 5.5 1.5

Income from associated companies 0.3 -5.7

Income from other participating interests 3.6 9.1

9.4 4.9

I N C O M E F R O M PA RT I C I PAT I N G I N T E R E S T S

Income from non-consolidated affiliated companies includes income from project developments.

106.107

10. Taxation

m

2003 2002

Income taxes 20.8 26.1

Other taxes 12.6 14.5

33.4 40.6

TA X AT I O N

The provision for deferred taxes was reversed in the amount of €0.8 million to account for changes in

accounting treatment in respect of subsidiary financial statements prepared for incorporation into the

consolidated accounts; €0.3 million of deferred taxes was attributable to consolidation.

Provisions for deferred taxes recognized in earlier years were reversed in the amount of €11.4 million.

9. Financial earnings

m

2003 2002

Income from long-term loans 4.2 14.2

(of which: from affiliated companies) (0.0) (0.2)

Other interest and similar income 31.4 21.4

(of which: from affiliated companies) (2.3) (2.1)

Write-downs on financial assets and securities available for sale -2.7 -3.8

Interest and similar expenses -122.6 -127.7

(of which: to affiliated companies) (-1.3) (-3.2)

-89.7 -95.9

F I N A N C I A L E A R N I N G S

76 Group Management Report 87 Consolidated Financial Statements 88 Consolidated Balance Sheet 90 Consolidated fixed asset schedule 92 Consolidated Income Statement 93 Notes to the IVG Consolidated Financial Statements


V. Other information

The members of the Supervisory Board and the Board of Management are listed on pages 127 to 128.

The remuneration paid to members of the Board of Management of IVG Immobilien AG in the 2002

financial year was €2,102,000, comprising €936,000 in salaries and €1,166,000 in performance-linked

bonuses. Remuneration paid at IVG Immobilien AG to retired members of the Board of Management,

general managers and their surviving dependants was €560,000.

A provision of €5,345,000 has been made for pension obligations to former members of the Board of

Management, general managers and their surviving dependants.

Total remuneration paid to members of the Supervisory Board at IVG Immobilien AG amounted to

€141,800 in the 2003 financial year.

No advances or loans had been granted to members of the Board of Management or the Supervisory

Board as at 31 December 2003.

Total remuneration of

the Supervisory Board

and Board of

Management, and

loans granted

108.109

Key data on share options schemes to date and the options issued under them are shown in the table

below.

2003 scheme 2002 scheme 2001 scheme 2000 scheme 1999 scheme

Issue date 30.06.2003 26.07.2002 14.06.2001 16.06.2000 10.06.1999

Valid for 5 years 5 years 7 years 7 years 7 years

Blocking period 2 years 2 years 3 years 3 years 3 years

Base price (€) €7.63 €10.28 €14.127 €14.696 €15.02

Participants in year of issue 49 52 35 30 27

Number of options issued 749,250 766,350 410,497 377,298 403,256

of which: to members of the Board of Management 274,050 274,050 147,707 138,075 162,748

Performance threshold, absolute

(percentage share price gain per year) 5% 5% 7.4% 6.5% 5%

Performance threshold, relative – – outperform outperform outperform

EPIX EPIX EPIX

Value of options at date of issue €1.42 €1.47 €3.33 €3.59 €2.63

IVG IMMOBILIEN AG SHARE OPTION SCHEMES AS APPROVED BY THE ANNUAL GENERAL MEETING

2003 scheme 2002 scheme 2001 scheme 2000 scheme 1999 scheme

as at 1 January 1999 –

Issued in 1999 403,256

Exercised in 1999

Expired in 1999

Number as at 31 December 1999 403,256

Issued in 2000 377,298

Exercised in 2000

Expired in 2000 18,083

Number as at 31 December 2000 377,298 385,173

Issued in 2001 410,497

Exercised in 2001

Expired in 2001 48,327 49,729

Number as at 31 December 2001 410,497 328,971 335,444

Issued in 2002 766,350

Exercised in 2002

Expired in 2002 1,726

Number as at 31 December 2002 766,350 410,497 327,245 335,444

Issued in 2003 749,250

Exercised in 2003

Expired in 2003 20,100 7,575 6,904 9,042

Number as at 31 December 2003 749,250 746,250 402,922 320,341 326,402

IVG IMMOBILIEN AG SHARE OPTION SCHEMES



Corporate governance refers to the entire system by which a company is managed and monitored, its

corporate principles and guidelines, and the system of internal and external controls and supervision to

which the company’s operations are subjected. Good, transparent corporate governance ensures that

our company will be managed and monitored in a responsible manner geared towards value creation.

This fosters the confidence of investors, employees, business associates and the general public in

IVG’s management and supervision.

The Board of Management and the Supervisory Board of IVG Immobilien AG jointly issued, in accord-

ance with Sec. 161 of the German Stock Corporations Act, a new declaration of conformity with the

recommendations of the German Corporate Governance Code. The declaration is published on the IVG

website, www.ivg.de, where shareholders can access it at any time.

The Board of Management of IVG Immobilien AG is responsible for the preparation, completeness and

integrity of the consolidated financial statements, the Group Management Report and other information

provided in the annual report.

The consolidated financial statements of the IVG Group were prepared in accordance with the German

Commercial Code (Handelsgesetzbuch – HGB), Stock Corporations Act (Aktiengesetz – AktG), and

Principles of Orderly Accounting (Grundsätze ordnungsmässiger Buchführung – GoB), collectively also

known as »German GAAP«.

The Group Management Report contains an analysis of the Group’s net asset position, financial posi-

tion and the results of its operations, and further disclosures required by the German Commercial Code

(Sec. 315).

An effective internal management and control system ensures the completeness and reliability of data

for consolidated financial statements and internal reporting. This includes Group-wide financial report-

ing directives, a risk management system as required by the German Control and Transparency Act

(Gesetz zur Kontrolle und Transparenz im Unternehmensbereich – KonTraG), an integrated approach to

financial control as part of value-oriented management, plus internal audits. The Board of Management

is thus able to identify material risks at an early stage and to take timely action as needed.

Acting by resolution of the IVG Immobilien AG Annual General Meeting of 27 May 2003, the Super-

visory Board appointed PwC Deutsche Revision Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft,

Düsseldorf, to audit the annual financial statements of IVG Immobilien AG for the 2003 financial year.

PwC have audited, confirmed and issued a clean auditors’ certificate in respect of the consolidated fi-

nancial statements prepared by the Board of Management in accordance with German requirements.

The consolidated financial statements, Group Management Report, audit report and risk management

system were discussed in detail with the chief auditor by the full Supervisory Board at its meeting to

approve the financial statements.

Corporate governance

Board of Management

declaration

110.111

Related parties are the Supervisory Board, the Board of Management, managerial employees, close rel-

atives of the foregoing three groups, Sirius GmbH of Wackerow and its subsidiaries, WCM AG of Frank-

furt and its subsidiaries, unconsolidated subsidiaries of IVG and equity-accounted IVG companies.

A dependent parties report has been prepared in respect of the relationship with Sirius GmbH and

WCM AG (see Group Management Report). There were no business dealings with either company or

any of their subsidiaries.

Information on related party dealings with members of the Supervisory Board and Board of Manage-

ment is provided in the section on total remuneration, above. There were no business dealings with

close relatives of members of the Supervisory Board or Board of Management.

Business dealings with managerial employees and their close relatives were not materially significant.

All business dealings with unconsolidated subsidiaries and equity-accounted entities (inclusion in global

cash management, general project contracts, etc.) were conducted at arm’s length. They comprised

€10.2 million in services rendered (income) and €12.1 million in services received (expense).

Bonn, 16 March 2004


Related party dealings



Consolidated Cash Flow Statement

The cash flow statement is based on information from the accounting records and from the balance

sheet and income statement derived from them in accordance with the German Commercial Code

(HGB). It is presented in vertical format and reports cash flows classified by operating, investing and

financing activities; comparative figures from the previous period are included. On the grounds of mate-

riality, purchases of and proceeds from disposals of intangible assets are not reported separately from

purchases of and proceeds from disposals of property, plant and equipment.

Cash used for or provided by operating activities is quantified indirectly; that is, based on consolidated

net income for the year. The figures for cash used for or provided by investing and financing activities

are quantified by the direct method. All consolidated enterprises are included in the cash flow state-

ment using the same consolidation method by which they are included in the consolidated financial

statements. For enterprises accounted for using the equity method, the cash flow statement includes

only (a) cash flows between such enterprises and the Group and (b) cash flows from the acquisition or

disposal of investments in such enterprises.

All cash flows are disclosed without netting. Cash and cash equivalents consist of liquid funds (cash

in hand and short-term deposits at banks). €18.4 million of cash and cash equivalents is pledged as

security.

Effects of consolidation changes are eliminated; their effect on cash and cash equivalents is shown

separately.

Interest received was €33.6 million (2002: €25.6 million). Interest paid was €118.3 million (2002:

€114.5 million).

€ m

Acquisitions of Disposals of

consolidated consolidated

companies companies

Cash and cash equivalents 4.2 0.0

Other assets 603.4 23.6

Debts 534.2 20.5

EFFECT ON CASH AND CASH EQUIVALENTS

112.113

C O N S O L I D AT E D C A S H F L O W S TAT E M E N T

€ m

2003 2002

Net income for the period. before extraordinary items 66.5 70.4

+/– Depreciation and write-ups/write-downs on fixed assets 50.3 161.5

+/– Other non-cash items -34.7 22.2

– Profits from the disposal of fixed assets -62.9 -180.7

+/– Increase/decrease in provisions -3.4 -12.3

Changes in current assets and liabilities

+/– Inventories (decrease/increase) 34.1 60.4

+/– Receivables and other assets (decrease/increase) 93.9 8.8

+/– Trade accounts payable/other liabilities (increase/decrease) -99.8 108.1

Cash provided by operating activities 44.0 238.4

Proceeds from the disposal of property, plant and equipment/intangible fixed assets 236.9 283.3

Cash used for investments in property, plant and equipment/intangible fixed assets -119.2 -217.0

Proceeds from the disposal of financial assets 150.2 38.6

Cash used for investments in financial assets -107.5 -128.1

Proceeds from the disposal of consolidated companies 3.1 0.6

Cash used for investments in consolidated companies -124.7 -19.4

Cash provided by/used for investing activities 38.8 -42.0

Payments made to IVG shareholders and other equity partners -39.4 -39.4

Proceeds from new borrowing 160.8 104.9

Proceeds from other financial operations 71.0 0.0

Payments to service existing loans -358.3 -150.8

Cash used for financing activities -165.9 -85.3

Net change in cash and cash equivalents -83.1 111.1

Cash and cash equivalents generated by consolidation changes 5.7 0.1

Cash and cash equivalents at the start of the period 131.4 20.2

Cash and cash equivalents at the end of the period 54.0 131.4

76 Group Management Report 87 Consolidated Financial Statements 88 Consolidated Balance Sheet 90 Consolidated Fixed Asset Schedule 92 Consolidated Income Statement 93 Notes to the IVG Consolidated Financial Statements 112 Consolidated Cash Flow Statement


Key figures by segment

The activities of the IVG Group are Portfolio Management, Project Development and Investment Funds.

Other segment information is reported under Non-Core Operations and Corporate Functions/Consoli-

dation.

The Portfolio Management segment contains the mainstream real estate portfolio management busi-

ness. In addition to office properties and business parks, this also includes the logistics properties seg-

ment (storage caverns and tank farms).

The Project Development segment comprises property developments for IVG and third parties.

The Investment Funds segment is reported separately for the first time in 2003. IVG will expand this

segment over the coming years. Comparative figures for the other segments have been adjusted to

account for it.

The Non-Core Operations segment mainly incorporates the remaining operations of the former Rail

business sector.

The figures reported under Corporate Functions/Consolidation cover Group level activities (such as

Legal, Tax, Finance, Corporate Development) plus consolidation effects.

€ m

Intersegmental External Total operating Operating Assets Depreciation Income from asso- Income from other

turnover turnover performance earnings (at book value) Liabilities and write-downs ciated companies participating interests Investment Employees

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

Office properties/

business parks 0.9 1.6 246.1 236.8 339.4 427.6 180.4 152.8 2,752.9 2,448.8 1,078.0 936.6 39.0 147.0 0.0 -0.3 0.0 4.2 474.2 189.6 377 348

Logistics real estate 0.0 0.0 48.2 46.9 48.4 47.2 15.8 16.9 60.8 62.4 72.0 7.9 4.2 4.7 0.0 0.0 0.0 0.0 6.2 3.0

Portfolio Manage-

ment total 0.9 1.6 294.3 283.7 387.8 474.8 196.2 169.7 2,813.7 2,511.2 1,150.0 944.5 43.2 151.7 0.0 -0.3 0.0 4.2 480.4 192.6 377 348

Project Development 1.3 2.6 87.0 160.6 117.4 113.9 5.3 49.1 373.5 310.0 126.6 93.4 3.9 4.5 -2.2 -1.7 6.4 6.4 46.6 79.4 150 125

Investment Funds 0.3 0.0 11.9 0.0 14.1 0.0 1.0 0.5 14.0 9.4 4.1 0.0 0.4 0.0 0.7 0.6 0.0 0.0 2.5 1.2 40 5

Non-core business 0.0 0.0 17.4 25.4 21.0 59.1 -7.4 23.9 27.4 34.2 10.4 14.1 0.7 2.8 1.8 -4.6 0.0 0.0 0.9 12.4 40 126

Corporate functions/

consolidation -2.5 -4.2 0.9 1.5 5.4 -10.0 -20.9 -54.5 112.2 122.8 1,129.3 1,262.7 2.2 2.6 0.0 0.3 2.7 0.0 34.8 72.7 110 146

Group 0.0 0.0 411.5 471.2 545.7 637.8 174.2 188.7 3,340.8 2,987.6 2,420.4 2,314.7 50.4 161.6 0.3 -5.7 9.1 10.6 565.2 358.3 717 750

S E G M E N T S

114.115

€ m

Other

UK France Benelux Germany Finland countries Group

External turnover 9.6 19.8 57.6 280.4 7.6* 36.5 411.5

Assets (at book value) 134.9 252.4 719.5 1,501.1 345.3 387.6 3,340.8

Investment 1.5 1.1 45.7 173.5 333.0 10.5 565.3

Operating earnings 25.1 23.1 35.8 54.3 12.5 23.4 174.2

G E O G R A P H I C A L S E G M E N T S Regions

The operating earnings item is net income from ordinary activities excluding net interest, minus other

taxes. The assets item is total assets less loans to affiliated companies, receivables from affiliated

companies, and liquid funds. The liabilities item includes, without liabilities to affiliated companies,

provisions for pensions, other provisions, and deferred income. The investment item also includes

investments in financial assets.

The average number of employees in 2003 was 717. The IVG Group had 33 trainees as at 31 December

2003 (31 December 2002: 33).

The segmental breakdown into regions reflects the geographical location of IVG’s real estate holdings.

€ m

Intersegmental External Total operating Operating Assets Depreciation Income from asso- Income from other

turnover turnover performance earnings (at book value) Liabilities and write-downs ciated companies participating interests Investment Employees

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

Office properties/

business parks 0.9 1.6 246.1 236.8 339.4 427.6 180.4 152.8 2,752.9 2,448.8 1,078.0 936.6 39.0 147.0 0.0 -0.3 0.0 4.2 474.2 189.6 377 348

Logistics real estate 0.0 0.0 48.2 46.9 48.4 47.2 15.8 16.9 60.8 62.4 72.0 7.9 4.2 4.7 0.0 0.0 0.0 0.0 6.2 3.0

Portfolio Manage-

ment total 0.9 1.6 294.3 283.7 387.8 474.8 196.2 169.7 2,813.7 2,511.2 1,150.0 944.5 43.2 151.7 0.0 -0.3 0.0 4.2 480.4 192.6 377 348

Project Development 1.3 2.6 87.0 160.6 117.4 113.9 5.3 49.1 373.5 310.0 126.6 93.4 3.9 4.5 -2.2 -1.7 6.4 6.4 46.6 79.4 150 125

Investment Funds 0.3 0.0 11.9 0.0 14.1 0.0 1.0 0.5 14.0 9.4 4.1 0.0 0.4 0.0 0.7 0.6 0.0 0.0 2.5 1.2 40 5

Non-core business 0.0 0.0 17.4 25.4 21.0 59.1 -7.4 23.9 27.4 34.2 10.4 14.1 0.7 2.8 1.8 -4.6 0.0 0.0 0.9 12.4 40 126

Corporate functions/

consolidation -2.5 -4.2 0.9 1.5 5.4 -10.0 -20.9 -54.5 112.2 122.8 1,129.3 1,262.7 2.2 2.6 0.0 0.3 2.7 0.0 34.8 72.7 110 146

Group 0.0 0.0 411.5 471.2 545.7 637.8 174.2 188.7 3,340.8 2,987.6 2,420.4 2,314.7 50.4 161.6 0.3 -5.7 9.1 10.6 565.2 358.3 717 750

S E G M E N T S

76 Group Management Report 87 Consolidated Financial Statements 88 Consolidated Balance Sheet 90 Consolidated Fixed Asset Schedule 92 Consolidated Income Statement 93 Notes to the IVG Consolidated Financial Statements 112 Consolidated Cash Flow Statement 114 Key figures by segment


* 1.11. – 31.12.2003

Changes in shareholders’ equity

Changes in the capital of the IVG Group are shown below in the Statement of Changes in Shareholders’

Equity.

€ m

Currency

Reserve for Use of translation Other

own shares net income differences changes

31.12.2003 Changes during the financial year 31.12.2002

Subscribed capital 116.0 116.0

Additional paid-in capital 458.9 458.9

Revenue reserves 225.1 -0.1 0.5 -6.4 83.9 147.2

Negative consolidation

difference 32.0 32.0 0.0

Consolidated net income

available for distribution* 39.4 39.4

Minority interests 39.1 30.6 8.5

Minority share in net income 6.5 7.1 -0.6

Total minority capital 45.6 37.7 7.9

Total shareholders’ equity 917.0 -0.1 0.5 -6.4 153.6 769.4

S TAT E M E N T O F C H A N G E S I N S H A R E H O L D E R S ’ E Q U I T Y

Reserve for own shares:

Issues of shares to Group employees under the IVG VALUE programme have reduced the number of own

shares held and with it the reserve for own shares.

Use of net income:

€0.5 million of IVG Immobilien AG net income was credited to other revenue reserves.

Currency translation differences:

Currency translation differences arise, among other things, on the translation of the shareholders’ equity

of foreign subsidiaries at historical exchange rates.

Other changes in revenue reserves:

These mostly represent adjustments following the repeal of Sec. 308(3) of the German Commercial Code

(HGB) plus consolidated net income from subsidiaries credited to revenue reserves to bring IVG Group net

income available for distribution into line with IVG AG net income available for distribution.

* All net income available for distribution was distributed in 2002.

116.117

76 Group Management Report 87 Consolidated Financial Statements 88 Consolidated Balance Sheet 90 Consolidated Fixed Asset Schedule 92 Consolidated Income Statement 93 Notes to the IVG Consolidated Financial Statements 112 Consolidated Cash Flow Statement 114 Key figures by segment 116 Changes in shareholders’ equity 117 Summary of majors shareholdings


Share-

Company Proportion Voting holders’ Net

of capital rights equity income

held in % in % Country in €,000 in €,000

I. Affiliated companies (consolidated as per German Commercial Code Sec. 271(2))

Kouvolan valtakatu 28 Koy, Kuovola 100.00 100.00 Fi 1,032 -4 3

POLAR Kiinteistöt Oyj, Helsinki 85.07 85.07 Fi 185,724 46,091 3

IVG Beteiligungs GmbH, Bonn 100.00 100.00 D -40 -140

Ferenda Oy, Helsinki 100.00 100.00 Fi 3 0 3

Oululn Myllykiinteistöt Oy, Oulu 100.00 100.00 Fi 862 -23 3

Suomen Osakaskiinteistöt Oy, Helsinki 100.00 100.00 Fi 16,140 -447 3

POLAR-Rakennus Oy, Helsinki 100.00 100.00 Fi -2,938 -80 3

Helsingin Vuorikatu 20 Koy, Helsinki 100.00 100.00 Fi 1,078 -40 3

Hollolan Ostospaikka Koy, Hollola 100,00 100.00 Fi 5,049 -299 3

Jamsän Forum Koy, Jämsä 54.30 54.30 Fi 1,834 -1 3

Järvenpään Helsinginportti Koy, Jarvenpää 100.00 100.00 Fi 188 -55 3

Kalustaja Koy, Vantaa 100.00 100.00 Fi -2,080 -1 3

Kilometri Koy, Espoo 100.00 100.00 Fi 119 -6 3

Kilon Helmi Koy, Espoo 100.00 100.00 Fi 5,461 -141 3

Kilon Timantti Koy, Espoo 100.00 100.00 Fi 5,141 -154 3

Kivikukkaro Koy, Turku 100.00 100.00 Fi 15,127 -361 3

Kornetintie 6 Koy, Helsinki 100.00 100.00 Fi -351 -220 3

Kuopion Satama 4 Koy, Kuopio 100.00 100.00 Fi 1,570 -105 3

Kutomotie 6 Koy, Helsinki 100.00 100.00 Fi 3,377 -220 3

Lappeenrannan Lentäjäntie 17-19 Koy, Lappeentranta 100.00 100.00 Fi 1,164 -192 3

Larvalankatu 13 Koy, Kokkola 100.00 100.00 Fi 3,593 -266 3

Lastupolku Koy, Espoo 100.00 100.00 Fi 1,048 -61 3

Malmin Kauppatie 8 Koy, Helsinki 100.00 100.00 Fi 5,309 -196 3

Nittylänpolku 16 Koy, Helsinki 100.00 100.00 Fi 2,831 -74 3

Nova Koy, Turku 100.00 100.00 Fi -240 -23 3

Pakkalan Kartannkoski 12 Koy (Leija), Vantaa 100.00 100.00 Fi -196 -322 3

Pakkalan Kartannkoski 3 Koy, Vantaa 100.00 100.00 Fi 12,029 -390 3

Pasilanraitio 5 Koy, Helsinki 91.60 91.60 Fi 9,447 114 3

Plaza Forte Koy, Vantaa 100.00 100.00 Fi 13,522 -261 3

Pitkänsillankatu 1-3 Koy, Kokkola 100.00 100.00 Fi 1,411 -190 3

Satomalmi Koy, Helsinki 87.90 87.90 Fi 3,545 -12 3

Scifin Alfa Koy, Espoo 100.00 100.00 Fi 7,275 -155 3

Seinäjoen Kino Koy, Seinäjoki 89.90 89.90 Fi 3,457 -54 3

Sinimäentie 10 Koy, Espoo 76.90 76.90 Fi 1,082 -53 3

Sisustaja Koy, Vantaa 100.00 100.00 Fi 10,337 -45 3

Solartalo 2001 Koy, Helsinki 100.00 100.00 Fi 4,516 -169 3





Sörnäisten Rantatie 25 Koy, Helsinki 100.00 100.00 Fi 8,482 -281 3

Tapiontuuli Koy, Espoo 100.00 100.00 Fi 3,823 -201 3

Teerikukonkuja 5 Koy, Espoo 100.00 100.00 Fi 2,442 -114 3

Turun Kalevantie 25 Koy, Turku 100.00 100.00 Fi 968 -91 3

Vallilan Solar 1 Koy, Helsinki 100.00 100.00 Fi 1,599 0 3




Vanha Talvitie 11 Koy, Helsinki 100.00 100.00 Fi 1,367 -182 3

Vantaanportin Liiketilat Oy, Vantaa 60.00 60.00 Fi 5,614 18 3

Vilhonkatu 5 Koy, Helsinki 100.00 100.00 Fi -2,196 -138 3

Ässätalo Koy, Helsinki 100.00 100.00 Fi 1,599 0 3

F-Medi Koy 22.30 22.30 Fi 4,053 -71 3

S U M M A RY O F M A J O R S H A R E H O L D I N G S A S AT 3 1 . 1 2 . 2 0 0 3 5

118.119

Vantaanportin Liikekskus Koy 21.40 21.40 Fi 30,432 204 3

IVG Immobilien AG , Bonn D 696,192 39,820

TERCON Immobilien Projektentwicklungsgesellschaft mbH, Munich 80.00 80.00 D 10,458 4,636

IVG Management GmbH Bonn 100.00 100.00 D 59,869 4,657

MMD Bauträgergesellschaft mbH, Bonn 100.00 100.00 D 961 -208

Tercon Bau, formerly JOBAU Immobilienmanagement GmbH, Jena

(formerly JENOPTIK Bauentwicklung GmbH, Jena ) 100.00 100.00 D -4,144 -5,323

BURG Grundstücksverwaltung GmbH & Co. Ristamos KG, Berlin 94.59 94.59 D -4,676 2,098 4

IVG Immobilien GmbH & Co. Bonn XIV – Objekt Heltorfer Strasse – KG, Bonn 100.00 100.00 D 3,730 3,377 4

IVG Immobilienentwicklungsgesellschaft mbH & Co. 100.00 100.00 D 1,481 185 4

– Objekt Hamburg Glinde – KG, Hamburg

IVG Management GmbH & Co. Liebenau VIII – Objekt Bornlitz – KG 100.00 100.00 D 774 151 4

Liebenau II – Objekt Dörverden – KG, Liebenau 100.00 100.00 D 102 7 4

Liebenau III – Objekt Liebenau – KG, Liebenau 100.00 100.00 D 1,188 -10 4

IVG Management GmbH & Co. Liebenau IX – Objekt Clausthal – KG 100.00 100.00 D 138 25 4

Bonn XIII – Objekt Düsseldorf Karl-Arnold-Platz KG, Bonn 100.00 100.00 D 51 1,160 4

Liebenau IV – Objekt Dragahn-KG, Liebenau 100.00 100.00 D -191 -40 4

Liebenau V – Objekt Bremen-Blumenthal-KG, Liebenau 100.00 100.00 D -126 -26 4

Bonn II – Objekt Bad Godesberg-KG, Bonn 100.00 100.00 D 390 82 4

Liebenau VI – Objekt Leese-KG, Liebenau 100.00 100.00 D 80 -6 4

München II – Objekt Unterpfaffenhofen-KG 100.00 100.00 D 157 37 4

München XII – Objekt Rosenheim-KG 100.00 100.00 D 1,239 29 4

München III – Objekt Ottobrunn-KG 100.00 100.00 D 15,505 2,210 4

München IV – Objekt Dornach-KG 100.00 100.00 D 3,000 2,645 4

IVG Immobilienentwicklungsgesellschaft mbH & Co.

– Objekt Hamburg Raboisen 6 – KG, Hamburg 100.00 100.00 D 48 428 4

IVG-Immobilien-GmbH & Co. München VI – Objekt Puchheim-KG, Munich 100.00 100.00 D 10,456 1,611 4

München VIII – Obj. Rosenh./Anz.Str.-KG 100.00 100.00 D 1,000 5,550 4

IVG Nordostpark I GmbH & Co. KG, Munich 100.00 100.00 D 2,940 -57 4

IVG Nordostpark II GmbH & Co. KG, Munich 100.00 100.00 D 5,000 116 4

IVG Nordostpark III GmbH & Co. KG, Munich 100.00 100.00 D 3,535 -142 4

IVG Nordostpark IV GmbH & Co. KG, Munich 100.00 100.00 D 3,150 -62 4

IVG Businesspark Media Works Munich I GmbH & Co. KG, Munich 100.00 100.00 D 4,819 -167 4

München X – Objekt Nürnberg-KG, Munich 100.00 100.00 D 26,523 8,937 4

IVG Businesspark Media Works Munich II GmbH & Co. KG 100.00 100.00 D 14,653 -347 4

IVG Businesspark vor München I GmbH & Co. KG 100.00 100.00 D 16,591 -585 4

IVG Businesspark vor München II GmbH & Co. KG 100.00 100.00 D 24,222 -778 4

IVG Businesspark vor München III GmbH & Co. KG 100.00 100.00 D 6,688 -281 4

IVG Businesspark vor München IV GmbH & Co. KG 100.00 100.00 D 8,394 1,026 4

IVG Businesspark vor München V GmbH & Co. KG 100.00 100.00 D 14,361 444 4

IVG Management GmbH & Co. Liebenau X – Objekt Hessisch-Lichtenau-KG 100.00 100.00 D -530 -20 4

IVG Management GmbH & Co. Liebenau XI – Objekt Lippoldsberg-KG 100.00 100.00 D 43 95 4

IVG Immobilienverwaltung Bonn GmbH & Co. – Objekt Langen KG, Bonn 100.00 100.00 D 373 -2,447 4

Frankfurt Flughafen KG, Bonn 100.00 100.00 D 51 504 4

Bremerhaven KG 100.00 100.00 D 1,607 -709 4

IVG Management GmbH & Co. Liebenau XII – Objekt Fienerode-KG, Liebenau 100.00 100.00 D 1,608 18 4

Bonn XII – Objekt Dortmund Westfalendamm-KG, Bonn 100.00 100.00 D 34,345 771 4

Bonn VII – Objekt Dortmund, Stockholmer Allee-KG, Bonn 100.00 100.00 D 337 742 4

Bonn VI – Objekt Düsseldorf – Grafenberg-KG, Bonn 100.00 100.00 D 5,362 -1,717 4

Bonn IV – Objekt Düsseldorf, Hohenzollernwerk-KG, Bonn 100.00 100.00 D -91 -133 4

Bonn V – Objekt Homburg/Saar-KG, Bonn 100.00 100.00 D 26 -37 4

Kassel VII – Objekt Hannover-KG 100.00 100.00 D 3,611 -110 4

Hamburg I – Objekt Essener Str.-KG 100.00 100.00 D 4,729 1,299 4

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S U M M A RY O F M A J O R S H A R E H O L D I N G S A S AT 3 1 . 1 2 . 2 0 0 3 5 ( C O N T I N U AT I O N )



Hamburg II – Objekt Tarpen-KG 100.00 100.00 D -294 -361 4

Hamburg V – Objekt Habichtstr.-KG 100.00 100.00 D 6,740 42 4

Berlin VIII - Objekt Neue Spreespeicher Cuvryhof KG, Schönefeld

(formerly Hamburg III -Objekt Lübeck- KG), Bonn 100.00 100.00 D 696 2,820 4

IVG Immobilienentwicklungsgesellschaft mbH & Co

– Objekt Hamburg Ferdinandstraße 18 KG, Hamburg 100.00 100.00 D -535 -118 4

IVG Schönefeld Mittelstraße GmbH & Co KG 100.00 100.00 D 7,000 77 4

IVG Schönefeld Entwicklungs GmbH & Co. KG 100.00 100.00 D 473 -24 4

IVG Businesspark Micropolis Ost Verwaltungs GmbH & Co. KG 100.00 100.00 D 7,980 -1 4

IVG Businesspark Micropolis Ost Grundstücks GmbH & Co. KG 100.00 100.00 D 2,048 -32 4

IVG Management GmbH & Co. Berlin IX – Objekt Wohnpark Lückstraße-KG 100.00 100.00 D 8,400 134 4

IVG Management GmbH & Co. Bonn XV – Objekt Zanderstr. 1 und 3 KG, Bonn 100.00 100.00 D 144 -6 4

IVG Management GmbH & Co. Berlin X – Objekt Wohnpark Roonstraße-KG, Berlin 100.00 100.00 D 12,375 227 4

Kassel VIII – Objekt Fuldabr.-Ostr.-KG 100.00 100.00 D 1,433 468 4

Kassel IX – Objekt Waldau-KG 100.00 100.00 D 3,032 668 4

Kassel XI – Obj. Lohfeld./Forstbachweg-KG 100.00 100.00 D 2,022 380 4

Kassel X – Objekt Lohfeld./Otto-H.Str.-KG 100.00 100.00 D 5,430 1,097 4

Dresden I – Objekt Klotzsche West-KG 100.00 100.00 D 6,966 -1,158 4

Dresden II – Objekt Klotzsche Ost-KG 100.00 100.00 D 1,159 95 4

Kassel XII – Obj.Fuldabr./-Crumb.Str.-KG 100.00 100.00 D 3,107 506 4

Kassel XIII – Objekt Falderbaumstr.-KG 100.00 100.00 D 791 8 4

Berlin II – Objekt Streitstraße-KG 100.00 100.00 D 2,676 -4,464 4

Bonn X – Objekt Wiesbaden-KG, Bonn 100.00 100.00 D 35 714 4

Berlin IV – Objekt Montanstr.-KG 100.00 100.00 D 1,130 619 4

Berlin V – Objekt Freiheit-KG 100.00 100.00 D 294 358 4

Berlin VI – Objekt Hallerstr.-KG 100.00 100.00 D 11 -8 4

Berlin VII – Objekt Haller./Morsestr.-KG 100.00 100.00 D 13,415 -304 4

IVG Immobilien Kapitalanlagegesellschaft mbH, Bonn 100.00 100.00 D 4,368 -624 4

IVG Immobilienentwicklungsgesellschaft mbH & Co. – Glockengießerwall 19 KG, Hamburg 100.00 100.00 D 50 1,558 4

XXTRA Liegenschaften GmbH & Co. KG, Nuremberg 94.70 94.70 D 8,978 484 4

Párizs 2000 Investitions und Immobilien – Vertriebs GmbH, Budapest 100.00 100.00 HU 2,961 -112 3

IVG Promotion SARL, Paris 100.00 100.00 F -281 -291 3

IVG Logistik GmbH, Bonn 100.00 100.00 D 100,196

IVG Objekt Museumsmeile Bonn GmbH, Bonn (formerly IVG Flugtanklager Service GmbH) 100.00 100.00 D 132 -132

IVG InfoTec GmbH & Co KG, Bonn 100.00 100.00 D 3,072 90 4

IVG Schienenfahrzeuge GmbH & Co Güterwagen KG, Bonn 100.00 100.00 D 2,555 205 4

IVG Schienenfahrzeuge GmbH & Co Kesselwagen KG, Bonn 100.00 100.00 D 1,022 119 4

IVG Tanklager Silesia, Radzionków, Polen 100.00 100.00 Pl 1,954 -2,049

Stodiek Europa Immobilien AG, Bonn 94.43 94.43 D 90,582 6,307

Property Security Belgium SA, Brussels 100.00 100.00 B 13,504 770

Stodiek Immobilien- und Verwaltungs GmbH, Bonn 100.00 100.00 D 26 -

Stodiek Wohnpark Kaarst GmbH & Co KG, Bonn 100.00 100.00 D -389 38 4

Stodiek Ariane I S.A., Luxembourg 100.00 100.00 Lux 3,790 168 3

Stodiek Ariane II S.A., Luxembourg 100.00 100.00 Lux 3,501 148 3

Stodiek Ariane III S.A., Luxembourg 100.00 100.00 Lux 2,764 79 3

Stodiek ESPANA S.A., Madrid, Spain 100.00 100.00 E 10,663 545 3

Stodiek Immobilien GmbH & Co. – Objekt München I-KG, Bonn 100.00 100.00 D 51 443 4

Stodiek Italia S.r.l., Mailand 100.00 100.00 I 8,596 356 3

Stodiek Lisboa – Promocao e Construcao de Imóveis, S.A., Lisboa 100.00 100.00 P 537 302 3

Stodiek France SAS, Paris 100.00 100.00 F -626 -425 3

Stodiek Immobiliare S.r.l., Milan 100.00 100.00 I 15,119 2,283 3

SCI 121/123 Rue D‘ Aguesseau, Paris 100.00 100.00 F 1,126 1,910 3

Stodiek Inmobiliaria, S.A., Madrid 100.00 100.00 E 9,226 4,534 3

Stodiek Portugal – Sociedade Imobiliaria, S.A., Lisbon 100.00 100.00 P 2,577 105 3

Tamperen Koskenranta 12.76 15.00 Fi 0 0 3

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120.121

IVG European Real Estate S.A., Brussels 100.00 100.00 B 67,731 -189 3

IVG European Properties AB, Göteborg 100.00 100.00 S 10,991 -1,945 3

Asticus AB, Göteborg (S) 100.00 100.00 S 136,676 -375 3

Ada SA, Brussels 100.00 100.00 B 7,690 -2,442 3

Asticus Belgium II SA, Brussels 100.00 100.00 B 524,509 14,698 3

Asticus Belgium SA, Brussels 100.00 100.00 B 395,590 -15 3

Asticus Europe GIE, Brussels 100.00 100.00 B 0 0 3

Beaulieu SPV SA, Brussels 100.00 100.00 B -760 -807 3

Beeda SA, Brussels 100.00 100.00 B 5,683 -45 3

Bolet SA, Brussels 100.00 100.00 B 3,101 -58 3

Bonne Odeur SA, Brussels 100.00 100.00 B 34,191 -33 3

Bosquet Immobilière SA, Brussels 100.00 100.00 B 45,260 988 3

Ceda SA, Brussels 100.00 100.00 B 5,697 -45 3

Demot SPV SA, Brussels 100.00 100.00 B 88 -3 3

Ekster SA, Brussels 100.00 100.00 B 54,836 4,686 3

Gertrud SA, Brussels 100.00 100.00 B 21,010 568 3

Groenhoek SA, Brussels 100.00 100.00 B 25,118 308 3

Hibou SA, Brussels 100.00 100.00 B 55,642 630 3

Immobilière Groenveld SA, Brussels 100.00 100.00 B 13,384 565 3

IVG Brusssels SA, Brussels 100.00 100.00 B 112,619 1,050 3

Kobben SA, Brussels 100.00 100.00 B 36,206 1,640 3

Kolla SA, Brussels 100.00 100.00 B 24,358 825 3

Korpen SA, Brussels 100.00 100.00 B 221,520 959 3

Madou Plaza SA, Brussels 100.00 100.00 B 27,595 -1,707 3

Praten SA, Brussels 100.00 100.00 B 2,767 3,518 3

Slot SA, Brussels 100.00 100.00 B 16,075 721 3

Spannen SA i.L., Brussels 100.00 100.00 B 59,464 -37 3

Spoor SA, Brussels 100.00 100.00 B 11,365 525 3

Storken SA i.L., Brussels 100.00 100.00 B 3

Svanen SA, Brussels 100.00 100.00 B -6,438 -298 3

Valen SA, Brussels 100.00 100.00 B 140,120 95 3

Varla SA, Brussels 100.00 100.00 B 1,725 32 3

Zesmeer SA, Brussels 100.00 100.00 B 39,090 -1,919 3

Cabrera SA, Luxembourg 100.00 100.00 Lux -8,672 -408 3

Edison SA, Luxembourg 100.00 100.00 Lux -1,464 -86 3

Morella SA, Luxembourg 100.00 100.00 Lux -7,328 -308 3

Sanara SA, Luxembourg 100.00 100.00 Lux 3,810 315 3

Serenade SA, Luxembourg 100.00 100.00 Lux 0 0 3

Sierra SA, Luxembourg 100.00 100.00 Lux -2,799 65 3

Thomas SA, Luxembourg 100.00 100.00 Lux 1,415 353 3

Aranäs International NV, Amsterdam 100.00 100.00 NL 23,104 -127,955 3

Auletta BV, Amsterdam 100.00 100.00 NL 0 0 3

Bygg Bouw BV, Amsterdam 100.00 100.00 NL 0 0 3

Daler BV, Amsterdam 100.00 100.00 NL 0 0 3

Sophia Antipolis BV, Amsterdam 100.00 100.00 NL 0 0 3

Stockned Holding BV, Amsterdam 100.00 100.00 NL 60,144 67,182 3

Swedium BV, Amsterdam 100.00 100.00 NL 0 0 3

Zevenazur BV, Amsterdam 100.00 100.00 NL 0 0 3

Zevenhaven BV, Amsterdam 100.00 100.00 NL 0 0 3

Zevenshop BV, Amsterdam 100.00 100.00 NL 0 0 3

Zevenspant BV, Amsterdam 100.00 100.00 NL 0 0 3

IVG Immobilière SAS, Paris (formerly Asticus International SAS) 100.00 100.00 F 115,734 29,732 3

C:ie Foncière Chaveaux Lagarde, Paris 100.00 100.00 F 11 -4 3

C:ie Foncière De Bassano, Paris 100.00 100.00 F -2,781 -5,169 3

C:ie Foncière Etoile, Paris 100.00 100.00 F 15 -2,447 3

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C:ie Foncière Malesherbes 14, Paris 100.00 100.00 F 11 -4 3

C:ie Foncière Malesherbes 16, Paris 100.00 100.00 F 35 20 3

C:ie Foncière Vendôme, Paris 100.00 100.00 F 5,241 560 3

IVG Asticus (GMS) Ltd, London 100.00 100.00 UK 23,974 24,553 3

Asticus (Marlborough) Ltd, London 100.00 100.00 UK 283 0 3

Asticus (Mayfair) Ltd, London 100.00 100.00 UK 25,851 0 3

IVG Asticus Real Estate Limited, London 100.00 100.00 UK 54,355 -3,323 3

Brooksave Ltd, London 100.00 100.00 UK 0 0 3

IVG Asticus (Lombard) Limited 100.00 100.00 UK -875 -1,132 3

Asticus International AB, Göteborg 100.00 100.00 S 89,836 707 3

IVG Real Estate Stockholm AB, Göteborg 100.00 100.00 S 530 1,011 3

Bürohaus Schönefeld GRISO Verwaltungsgesellschaft mbH & Co. KG, Munich 100.00 100.00 D -3,823 3 4

Infopark RT (Hungary) 100.00 100.00 HU 15,123 86 3

IVG Hungária Ingatlanfejlesztesi KFT Budapest 100.00 100.00 HU 1,390 -3,070 3

Infopark B Épitési Terület Kft, Budapest 100.00 100.00 HU 5,453 -1,721 3

Infopark I Épitési Terület Kft, Budapest 100.00 100.00 HU 436 390 3

IHC Immobilien AG, Luxembourg 100.00 100.00 Lux 698 -470 3

Société Immobilière de la place de la Madeleine S.A.S, Paris 100.00 100.00 F 8,541 -117 3

Société Immobilière 173–175 Boulevard Haussmann S.A.S, Paris 100.00 100.00 F 42,151 -203 3

IVG Real Estate Belgium, Brussels 100.00 100.00 B 74,912 -3,679 3

Batipromo S.A., Brussels 100.00 100.00 B 84,150 4,996 3

Bonn Kft. , Budapest (Hungary) 100.00 100.00 HU 1,370 -318 3

K.u.K. Zweite Grundverwaltungs-GmbH & Co. Spree- Speicher KG, Berlin 88.46 88.46 D 10,778 -7,598 4

IVG Media Works Munich Vermietgesellschaft mbH (vorm.UN Ulrich Nack GmbH, Bonn) 100.00 100.00 D 219 182

Wert-Konzept-Berlin Holding GmbH & Co. Beteiligungs KG, Berlin 100.00 100.00 D 2,700 781 4

IVG Italia S.r.l., Milan 100.00 100.00 I 11,078 777 3

FORSET Verwaltungsgesellschaft mbH & Co. Vermietungs KG, Munich 100.00 100.00 D 26 2,960 4

REM Gesellschaft für Stadtbildpflege und Denkmalschutz mbH, Berlin 100.00 100.00 D 137 0

Berlin Konzept Immobilien Verwaltungs GmbH, Berlin 100.00 100.00 D 21 0

Wert-Konzept ImmobilienFonds GmbH, Cologna 100.00 100.00 D 2,483 20

Architekturbüro Reinhard Müller GmbH, Berlin 100.00 100.00 D 157 0

Wert-Konzept Immobilienfonds Verwaltungsgesellschaft mbH, Berlin 100.00 100.00 D 18 -7

BOTAGRUND Verwaltungs GmbH, Berlin 100.00 100.00 D 1,163 147

FvH Grundstücksverwaltungs-GmbH & Co. Hardenbergstraße 26 KG, Berlin 98.13 98.13 D 5,680 746 4

IVG Service GmbH & Co. Berlin – Objekt Potsdam-KG, Bonn 100.00 100.00 D 5,000 43 4

IVG Service GmbH & Co. Berlin – Objekt Teltow-KG, Bonn 100.00 100.00 D 5,000 295 4

IVG Service GmbH & Co. Berlin – Objekt Großziethen-KG, Bonn 100.00 100.00 D 4,000 215 4

Johs. Uckermann GmbH & Co. Grundstücksentwicklung KG 92.50 92.50 D 2,278 531 4

II. Associated companies (valued by the equity method, German Commercial Code Sec. 311/312)

CI Projektmanagement GmbH, Cologne 50.00 50.00 D 515 328

FDV Venture S.A., Luxembourg 30.00 30.00 Lux 24,878 -6,026 1

Fernleitungs-Betriebsgesellschaft mbH, Bonn 49.00 49.00 D 29 3

HANNOVER HL Leasing GmbH & Co KG, Munich 25.00 25.00 D 2

Hannover HL Leasing Verwaltungs-GmbH, Munich 25.00 25.00 D 2

1 Net income as at 31.12.2002 2 Results not disclosed, as per Sec. 286 (3) 2 of the German Commercial Code 3 As disclosed in the financial statements prepared for consolidation purposes 4 Sec. 264b HGB5 The complete summary of major shareholdings will be deposited at the German Commercial Registry

Share-





122.123

Other information

76 Group Management Report 87 Consolidated Financial Statements 122 Other information 123 Report of the Auditors of the Consolidated Financial Statement

Report of the Auditors of the Consolidated Financial Statements

»We have audited the consolidated financial statements presented by IVG Immobilien AG, Bonn (compris-

ing the consolidated balance sheet, consolidated income statement, notes to the consolidated financial

statements, consolidated cash flow statement, segment information and statement of changes in share-

holders’ equity) and the group management report for the business year from 1 January to 31 December

2003. The preparation of the consolidated financial statements and the group management report in ac-

cordance with German commercial law are the responsibility of the company’s Board of Management.

Our responsibility is to express an opinion on the consolidated financial statements and the group manage-

ment report based on our audit.

We conducted our audit of the consolidated annual financial statements in accordance with Sec. 317 of

the German Commercial Code (HGB) and German generally accepted standards for the audit of financial

statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan

and perform the audit such that misstatements materially affecting the presentation of the net assets,

financial position and results of operations in the consolidated financial statements in accordance with

German principles of proper accounting and in the group management report are detected with reason-

able assurance. Knowledge of the business activities and the economic and legal environment of the

company and evaluations of possible misstatements are taken into account in the determination of audit

procedures. The effectiveness of the accounting-related internal control system and the evidence support-

ing the disclosures in the consolidated financial statements and the group management report are exam-

ined primarily on a test basis within the framework of the audit. The audit includes assessing the annual

financial statements of the companies included in consolidation, the determination of the companies to be

included in consolidation, the accounting and consolidation principles used and significant estimates made

by the company’s Board of Management, as well as evaluating the overall presentation of the consolidated

financial statements and the group management report. We believe that our audit provides a reasonable

basis for our opinion.

Our audit has not led to any reservations.

In our opinion, the consolidated financial statements give a true and fair view of the net assets, financial

position and results of operations of the group in accordance with German principles of proper accounting.

On the whole the group management report provides a suitable understanding of the group’s position and

suitably presents the risks of future development.«

Düsseldorf, 16 March 2004

PwC Deutsche Revision Aktiengesellschaft

Wirtschaftsprüfungsgesellschaft

Brebeck ppa. Leifels

(German Chatered Accountant) (German Chatered Accountant)

Report of the Supervisory Board

Dear Reader,

On this and the following pages, the Supervisory Board reports on its activities in the 2003 financial year,

describing its constant communication with the Board of Management and the focal points of Supervisory

Board meetings including its scrutiny of the annual and consolidated financial statements.

The Supervisory Board performed its duties over the 2003 financial year as stipulated by law and by the

IVG Articles of Association. It monitored the Board of Management in managing the company and fol-

lowed the running of the company’s affairs. The Supervisory Board was directly involved in all fundamental

decisions.

The Board of Management has provided the Supervisory Board with full, regular, timely, written reporting

on all matters relating to the company’s business, covering in particular corporate, personnel and financial

planning, the Group’s situation including appraisal of the risk position and risk management, and progress

on investment projects. The Board of Management explained all significant current transactions with refer-

ence to reports at Supervisory Board meetings.

The Chairman of the Supervisory Board was also kept informed of significant transactions by the Board of

Management outside of Supervisory Board meetings.

In accordance with the Industrial Constitution Act (Betriebsverfassungsgesetz) of 1952, the Supervi-

sory Board is composed of four shareholder representatives and two employee representatives. The

Supervisory Board’s Personnel Committee is empowered to take decisions affecting the contracts of the

members of the Board of Management of IVG Immobilien AG, and regarding all other personnel matters

referred to the Supervisory Board by statutory requirement. No other committees have been formed.

Six Supervisory Board meetings were held in the 2003 financial year, with one member unable to attend

at four meetings. An occasion for the Personnel Committee to meet did not arise.

At each of its meetings, the Supervisory Board discussed the turnover, earnings and financial position

together with personnel changes within the Group and the various segments.

At its 13 November 2003 meeting, the Supervisory Board covered the amended German Corporate Gov-

ernance Code and the guidelines of the German Real Estate Industry Corporate Governance Initiative. The

Supervisory Board and the Board of Management broadly agree with the recommendations and sugges-

tions and have adapted the Terms of Reference of both the Supervisory Board and Board of Management

accordingly. The Declaration of Conformity with the Code is published on the IVG website, www.ivg.de.

The Supervisory Board plans to consider the Code’s recommendation regarding regular examination of the

efficiency of its activities during the course of 2004.

Supervisory Board and

committee meetings

Main topics

discussed by the

Supervisory Board

124.125

76 Group Management Report 87 Consolidated Financial Statements 122 Other information 123 Report of the Auditors of the Consolidated Financial Statement 124 Report of the Supervisory Board

At its November meeting, the Supervisory Board dealt in detail with the medium-term plans for the years

2004 to 2006, the investment, finance and human resources plans derived from them, and the long-term

corporate strategy.

New additions and acquisitions in the portfolio were discussed at several meetings. The acquisition of ap-

proximately 85% of shares in POLAR Kiinteistöt Oyj (Helsinki, Finland) was successfully completed.

The Supervisory Board also approved developments in Munich, Berlin and Budapest. The Board of Man-

agement provided information at Supervisory Board meetings on the progress and abandonment of nego-

tiations to privatize Berlin’s airports system and the building of the new Berlin-Brandenburg International

airport (BBI).

Opportunities to sell and realize value gains were taken in various regional markets. The Supervisory Board

approved the sale of properties or business interests in Barcelona, Brussels, Dornach, Frankfurt, Lisbon,

Madrid, Stockholm and Wroclaw.

The Supervisory Board held in-depth discussions at its meeting on 28 March 2003 regarding the compa-

ny’s authorization to purchase its own shares. The proposed resolution was adopted with a large majority

at the 17th Annual General Meeting on 27 May 2003.

The Supervisory Board adopted further resolutions relating to the 2003 share options plan based on the

resolution of the Annual General Meeting of 23 May 2002 and on the appointment of executive officers

and holders of Prokura, or registered power of attorney under German commercial law.

The annual financial statements of IVG Immobilien AG and the consolidated financial statements for the

year ended 31 December 2003 as submitted by the Board of Management have been duly audited, to-

gether with the Company Management Report and the Group Management Report for the 2003 financial

year, by PwC Deutsche Revision Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft, of Düsseldorf, who

have awarded a clean auditors’ certificate in each case. The chief auditor was present at our meeting to

discuss the company’s and the consolidated financial statements on 26 March 2004. He gave an extensive

account of the conduct and findings of the audit, and was available to provide additional information.

The Supervisory Board has scrutinized the two sets of financial statements, the Management Report and

the proposed appropriation of net income. It concurs with the findings of the audit and, following the con-

clusive findings of its own examination, it has no objections to any of these documents and reports.

The report on relations with affiliated companies prepared by the Board of Management for the year 2003

in compliance with Sec. 312 of the German Stock Corporations Act (AktG) was supplied to the Supervisory

Board along with the auditor’s appraisal of it. The Supervisory Board has itself examined the Board of

Management’s report, and has approved it together with the auditor’s findings. The auditor’s certificate for

the Board of Management’s dependent company report reads as follows:

Annual financial

statements

»Having examined and appraised this report as by duty bound, we hereby confirm that the facts stated in

the report are correctand the Company did not render unduly high remuneration in any of the legal trans-

actions documented in the report.«

In its conclusive findings from its own examination, the Supervisory Board has no objections to make to

the Board of Management’s declaration on relations with affiliated companies covering the financial year

2003.

At its meeting on 26 March 2004, the Supervisory Board issued its approval of the financial statements

prepared by the Board of Management, which are therefore deemed final. It also concurred with the Board

of Management’s proposed appropriation of net income, and finalized the motions to be put to the Annual

General Meeting.

On the shareholders’ side, Franz-Josef Seipelt resigned his seat on the Supervisory Board with effect from

31 January 2003. He was succeeded as shareholder representative by Dr Michael Albertz, appointed by

court order effective 1 February 2003. The Supervisory Board would like to express its gratitude to the

retiring member for his constructive and authoritative input.

The Supervisory Board wishes also to thank the Board of Management, the Group’s employees and their

employee representatives for their work in the 2003 financial year.

Bonn, 26 March 2004

On behalf of the Supervisory Board

Roland Flach

Chairman

Composition of the

Supervisory Board

126.127

76 Group Management Report 87 Consolidated Financial Statements 122 Other information 123 Report of the Auditors of the Consolidated Financial Statement 124 Report of the Supervisory Board 127 Supervisory Board/ Board of Management

Roland Flach

Chairman

Chief Executive Officer of WCM Beteiligungs-

und Grundbesitz-AG

Kronberg im Taunus

Notification of seats on other supervisory boards as

per Sec. 285 (10) of the German Commercial Code:

Gladbacher Aktienbaugesellschaft AG*

GEHAG GmbH*

Gemeinnützige Eisenbahn-Wohnungsbau-Gesell-

schaft mbH Wuppertal* (Chairman)

KHS Maschinen- und Anlagenbau AG* (Chairman)

KHS Inc.* (Chairman)

Klöckner-Werke AG* (Chairman)

MAAG Holding AG (Vice President of the

Advisory Board)

MATERNUS-Kliniken AG

NB Beteiligungs AG* (Chairman)

RSE Grundbesitz und Beteiligungs-AG*

RSE Projektmanagement AG* (Chairman)

YMOS AG* (Chairman)

* WCM Group companies

Karl-Ernst Schweikert

Stellv. Vorsitzender

Deputy Chairman

Member of the Board of Management of WCM

Beteiligungs- und Grundbesitz-AG under

Sec. 105 (2) of the German Stock Corporations

Act, Männedorf (Switzerland)



BHE Beteiligungs-AG*

Bremische Gesellschaft für Stadterneuerung,

Stadtentwicklung und Wohnungsbau mbH*

(Chairman)


(Chairman)

Gemeinnützige Eisenbahn-Wohnungsbau-

Gesellschaft mbH Wuppertal*

KHS Maschinen- und Anlagenbau AG*

Kieler Wohnungsbaugesellschaft mbH*

Klöckner-Werke AG*

MAAG Holding AG


NB Beteiligungs AG*

RSE Grundbesitz und Beteiligungs-AG*

WCM Beteiligungs- und Grundbesitz-AG

(in abeyance from 4.6.2003 under Sec. 105 (2)

of the German Stock Corporations Act)

Dr. Michael Albertz (from 1 February 2003)

Deputy Chairman of the Executive Board, Corpus

Immobiliengruppe GmbH & Co. KG

Cologne



DGAG Deutsche Grundbesitz AG

Rainer Antons

Mechanical engineering master craftsman

IVG Logistik GmbH, Etzel Office

Friedeburg



None

Wilhelm Friedrich Corneli

Salaried corporate lawyer

IVG Immobilien AG

Bonn



None

Dr. Manfred Lennings

Industrial consultant

Essen



Bauunternehmung E. Heitkamp GmbH

Deilmann-Haniel GmbH

Deutsche Post AG

ENRO AG

Gildemeister AG (Chairman)

Heitkamp-Deilmann-Haniel GmbH (Chairman)

Supervisory Board/Board of Management

Supervisory Board

128.129

Dr. Eckart John von Freyend

Chief Executive Officer

Bad Honnef



BONN-INNOVA GmbH & Co. Venture Beteili-

gungs KG

Gerling Konzern Lebensversicherungs AG

HANNOVER HL Leasing GmbH & Co. KG

IABG Industrieanlagen-Betriebsgesellschaft mbH

(Chairman)

Infopark Fejlesztési Rt.*

IVG Immobilien Kapitalanlagegesellschaft mbH*

POLAR Kiinteistöt Oyj, Helsinki* (Chairman)

SIBRA Beteiligungs AG* (Chairman)

Stodiek Europa Immobilien AG* (Chairman)

TERCON Immobilien Projektentwicklungs

GmbH* (Chairman)

UTH United Technologies Holding GmbH

VNR Verlag für die Deutsche Wirtschaft AG

* IVG Group companies

Dr. Bernd Kottmann

Portfolio Management

Pech, Wachtberg



Bonn Kft.*

Infopark Fejlesztési Rt.*

IT Immobilien Beteiligungsgesellschaft mbH*

Parisz Kft.*

POLAR Kiinteistöt Oyj, Helsinki*


GmbH*


Dr. Dirk Matthey

Chief Financial Officer

Bad Godesberg, Bonn



HANNOVER HL Leasing GmbH & Co. KG

POLAR Kiinteistöt Oyj, Helsinki*

SIBRA Beteiligungs AG*

Stodiek Europa Immobilien AG*


GmbH*


Franz-Josef Seipelt

Member of the Board of Management of WCM

Beteiligungs- und Grundbesitz-AG

Frankfurt (until 31 January 2003)


per Sec. 285 (10) of the German Commercial Code

(until 31 January 2003):

Allboden Allgemeine Grundstücks-AG*

Bartelt Inc., Sarasota, USA


(Chairman)

KHS Maschinen- und Anlagenbau AG*

Klöckner KHS Inc., Waukesha, USA*


MPI International Inc., Rochester Hill, USA*

YMOS AG*

* WCM Group companies

Board of Management

Dr. Klaus AscheChief Executive, LIBRA Unternehmensberatung GmbH, Hamburg

Dr. Ralf BethkeChairman of the Board of Executive Directors, K + S Aktiengesellschaft, Kassel

Dr. Hans-Georg BrodachSenior Vice President ABB Europe Ltd., Brussels

Dr. Gerold BezzenbergerLawyer and notary, Berlin

Udo Cahn von SeelenFormer Chairman of the Board of Management, Energie-Aktiengesellschaft Mitteldeutschland, Kassel

Karl-Hans CapranoManaging Director, Technoform Caprano + Brunnhofer GmbH & Co. KG, Fuldabrück

Dr. Karl-Joachim DreyerSpokesman of the Board of Management, Hamburger Sparkasse, Hamburg

Wolfgang EggerChairman of the Board of Management, Patrizia Immobilien AG, Augsburg

Dr. Dierk ErnstManaging Partner, TERCON Immobilien Projektentwicklungs GmbH, Munich

Dipl.-Volkswirt Wolfgang FinkChairman of the Management Board, Allianz Immobilien GmbH, Stuttgart

Dr. Roland FleckNonelected councillor and Deputy Mayor for Economic Affairs, Nuremberg

Dr. Christoph FranzFormer CEO and Chairman of the Management Board, DB Reise & Touristik Aktiengesellschaft, Frankfurt

Werner GegenbauerPresident, Berlin Chamber of Industry and Commerce, Berlin

Dr. Joachim GrünewaldRetired Parliamentary State Secretary, Olpe

Dr. Gert HallerRetired State Secretary, Chairman of the Management Board, Wüstenrot + Württembergische AG, Stuttgart

Dr. Volker HassemerMember of the Berlin Landtag, former Managing Director, Partner für Berlin – Gesellschaft für Hauptstadtmarketing mbH, Berlin

Dr. Karl KauermannChairman of the Board of Management, Berliner Volksbank eG, Berlin

Peter KobielaMember of the Board of Managing Directors, Landesbank Hessen-Thüringen, Frankfurt am Main

Thies J. KorsmeierFormer Member of the Board of Management, Deutsche Shell AG, HamburgChairman of the Board, Verband Schmierstoff-Industrie e.V., Hamburg

Dr. Heinrich KraftChairman of the Advisory Board, ECEProjektmanagement GmbH, Hamburg

Jorma LaakkonenFormer Senior Executive, Nordea Bank,Espoo (Finland)

Dr. Thomas KurzeChairman of the Advisory Board of VBV Vermögens-Beratungs- und Verwaltungsgesellschaft mbH, Berlin

Jan-Henrik KulpFormer CFO, UPM-Kymmene Group, Helsinki

Klaus LaminetManaging Partner, INVESTA Projektentwicklungs- und Verwaltungs-GmbH, Munich

Georg LewandowskiLord Mayor of the City of Kassel, Kassel

Dr. Walter LohmeierChief Executive Manager, Kassel Chamber of Industry and Commerce, Kassel

Dr. Johannes LudewigExecutive Director, GEB – Gemeinschaft der Europäischen Bahnen; retired State Secretary, Brussels

Advisory Committee

76 Group Management Report 87 Consolidated Financial Statements 122 Other information 123 Report of the Auditors of the Consolidated Financial Statement 124 Report of the Supervisory Board 127 Supervisory Board/ Board of Management

130

Dr. Klaus LukasChairman of the Executive Board, Kasseler Sparkasse, Kassel

Paul MarcuseChief Executive Officer, AXA Real Estate Investment Managers Limited, London

Dr. Werner MartinLawyer, Berlin

Dr. Lutz MellingerFormer Member of the Corporates and Real Estate Group Divisional Executive, Deutsche Bank AG, Frankfurt am Main

Prof Peter NiehausFormer spokesman of the Management Board, Siemens Real Estate, Munich

Dr. Gerhard NiessleinChairman of the Managing board, DeTeImmobilienDeutsche Telekom Immobilien und Service GmbH, Frankfurt am Main

Dr. Claus NoltingFormer Member of the Board of Managing Directors, Bayerische Hypo- und Vereinsbank AG, Munich

Lars G. ÖbergChairman of the Board, AB Rännilen, Stockholm

Dr. Andreas OdefeyManaging Partner, BPE Capital Partners GmbH, Hamburg

Dr. Jens OdewaldChairman of the Administrative Board, Odewald & Compagnie GmbH, Berlin

Dr. Karl OhlLawyer, Kronberg im Taunus

Paul Orchard-LisleFormer Chairman and CEO, Healey & Baker Investment Advisors, Cushman & Wakefield, London

Dr. Klaus RauscherChairman of the Management Board, Vattenfall Europe AG, Berlin

Dr. Klaus RiebschlägerLawyer, Berlin

Dr. Jochen ScharpeMember of the Executive Management, Siemens Real Estate GmbH & Co. OHG, Munich

Dipl.-Kfm. Fried ScharpenackFormer Member of the Board of Management, IVG Immobilien AG, Essen

Dr. Udo SchlitzbergerChief Executive of the Council of the Administrative District of Kassel, Kassel

Alfred SchmidtRetired Minister of State, Kassel

Dr. Manfred SchmidtChairman of the Supervisory Board, Philips GmbH, Hamburg

Prof Dr Karl-Werner SchulteHead of Department, ebs European Business School, Oestrich-Winkel

Erich K. SchulthessChairman of the Board of Management, Schulthess Holding AG, Zurich

Klaus-Werner SebbelManaging Partner, Inventis GmbH & Co. KG, Munich

Thilo von Trott zu SolzChief Executive, Wirtschaftsförderung Region Kassel GmbH, Kassel

Dr. Henning VoscherauNotary, Retired Mayor and President of the Senate of the Free Hansa City of Hamburg, Hamburg

Dr. Theo WaigelLawyer and Former Federal Minister of Finance, Munich

Claus WisserMember of the Supervisory Board, AVECO Holding AG, Frankfurt am Main

Eckhard ZiegertFormer Member of the Board of Management, Esso AG, Hamburg

Organizational Structure

Financial calendar

31 March 2004 Analysts’ conference

13 May 2004 Interim report, 1 January–31 March 2004

27 May 2004 Annual general meeting fiscal year 2003

11 August 2004 Interim report, 1 January–30 June 2004

16 November 2004 Interim report, 1 January–31 September 2004

16 November 2004 Analysts’ conference fiscal year 2004

31 May 2005 Annual general meeting fiscal year 2004

Berlin

Brussels

Budapest

Düsseldorf

Frankfurt

Hamburg

Helsinki

London

Milan

Munich

Paris

Stockholm

Portfolio Management

Project Development

Portfolio

Customer Relationship

Management

Branch Offices

Finance

Investor Relations

Group Controlling

Accounting/Taxes

Legal/Insurance

Fund Management

Project Development

Affiliates and Associates

Corporate Development/IT

Communication/Marketing

Organization/Internal Audit

Personnel

Dr. Eckart John von FreyendChief Excecutive Officer

Dr. Bernd KottmannChief Operating Officer

Dr. Dirk MattheyChief Financial Officer

Imprint

Published by

IVG Immobilien AG

Zanderstrasse 5/7

53177 Bonn

Germany

Concept and Design

Kirchhoff Consult AG, Hamburg

Printing

Mediahaus Biering GmbH, Munich

Photographers

Gerd Rettinghaus, Düsseldorf (Properties)

Gaby Gerster, Frankfurt (People)

Horst Kløver, Berlin (Titel)

This annual report is also available in German.

PASSION FOR REAL ESTATE.

IVG Immobilien AG

Zanderstrasse 5/7

53177 Bonn

Germany

Investor Relations

Phone: +49 (0)228 / 844-137

Fax: +49 (0)228 / 844-372

Email: [email protected]

Public Relations

Phone: +49 (0)228 / 844-300

Fax: +49 (0)228 / 844-338

Email: [email protected]

Internet: www.ivg.de IVG

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Documents

Annual Report 2003 · m 2003 2002 Change 2001 2000 1999 Turnover 411.5 471.2 -12.7% 319.3 321.3 423.6 ... Media, PR, media production 5.0 Transport, storage, aero, auto 4.8 ... €3.3