TIDMSGL 
 
RNS Number : 2225Q 
Summit Germany Limited 
07 April 2009 
 

SUMMIT GERMANY LIMITED 
 
 
Final Results for the Year Ended 31 December 2008 
 
Summit Germany Limited ("Summit" or the "Group"), the AIM quoted commercial real 
estate company invested in assets in Germany, has today announced results for 
the year ended 31 December 2008. 
 
 
RESULTS SUMMARY 
 
 
+----------------------------------------------------------------+--------+------------+--------------+ 
|                                                                |        | For the year              | 
|                                                                |        | ended                     | 
+----------------------------------------------------------------+--------+---------------------------+ 
|                                                                |        | 31         | 31           | 
|                                                                |        | December   | December     | 
|                                                                |        | 2008       | 2007         | 
+----------------------------------------------------------------+--------+------------+--------------+ 
| Net profit from operations (before tax and revaluation)        | EUR      | 11.8m      | 7.4m         | 
+----------------------------------------------------------------+--------+------------+--------------+ 
| Net (loss)/profit attributable to equity shareholders          | EUR      | (89.9)m    | 6.7m         | 
+----------------------------------------------------------------+--------+------------+--------------+ 
| Net asset value per Ordinary Share                             | EUR      | 0.645      | 1.153        | 
+----------------------------------------------------------------+--------+------------+--------------+ 
| Net asset value change                                         |        | (44.0)%    | 6.6%         | 
+----------------------------------------------------------------+--------+------------+--------------+ 
| Earnings per Ordinary Share                                    | EUR      | (0.327)    | 0.031        | 
+----------------------------------------------------------------+--------+------------+--------------+ 
| First interim dividend per Ordinary Share                      | EUR      | 0.023      | 0.024        | 
+----------------------------------------------------------------+--------+------------+--------------+ 
| Second interim dividend per Ordinary Share                     | EUR      | 0.01       | 0.0265       | 
+----------------------------------------------------------------+--------+------------+--------------+ 
 
 
 
FINANCIAL OVERVIEW 
 
 
  *  Adjusted net asset value per share of EUR0.645 (2007: EUR1.153). 
  *  Profit from operations before tax and revaluations of EUR11.8m. 
  *  Including the downward revaluation of properties of EUR105m, the loss for the year 
  was EUR89.9 million. 
  *  Subsequent to the balance sheet date, the bank notified the Group that a EUR96 
  million non-recourse loan is in breach of its LTV covenant. Discussions are 
  being held with the bank to remedy the breach. 
  *  The Group continues to produce a solid cash flow and there is no exposure to a 
  breach of interest cover covenant. 
  *  Shareholders should note an announcement outlining a recommended offer for 
  Summit, which was released on 7 April 2009. 
 
Property Overview 
 
 
  *  Property assets had a combined aggregate value of EUR849m, a decrease of 11% 
  (2007: EUR953m). 
  *  Net blended yield of the portfolio was 7.6% as at 31 December 2008, rising to 
  8.3% on full occupancy. 
  *  Portfolio consisted of 112 properties as at 31 December 2008, diversified across 
  the office, logistic and retail sectors throughout Germany. 
  *  Substantial letting activity during the period. A total of 78 lease agreements 
  signed during the period, 51 of which were new leases of previously vacant 
  areas. 
 
 
Date: 7 April 2009 
For further enquiries contact: 
 
 
Summit Germany Fairfax I.S. PLCCity Profile 
John Lamb, Chairman    Jeremy Porter       William Attwell 
07802 440 714 020 7598 5368      020 7448 3244 
 
 
 
 
 
 
                                  Final Results for the Year Ended 31 December 
2008 
 
 
Chairman's Statement 
 
 
I am pleased to present the Annual Report and Consolidated Financial Statements 
for Summit Germany Limited (the "Company") and its subsidiaries (collectively 
the "Group") for the year ended 31 December 2008. 
 
 
The continued global financial crisis has been having a detrimental impact on 
property values all across the globe, including German properties. Our property 
portfolio valuation decreased in 2008 by EUR105 million, representing an 11% 
decrease in value since 31 December 2007. In addition, due to the sharp decrease 
of interest rates, the fair value of the Group's financial instruments decreased 
by EUR35 million. As a result of the foregoing factors, the net asset value 
("NAV") per share has decreased by 44% from EUR1.153 as at 31 December 2007 to 
EUR0.645 at 31 December 2008. 
 
 
It is difficult at this stage to foresee the depth and length of the ongoing 
global financial crisis or its eventual effects on the Group. However, we are 
continuing our efforts to improve our properties and increase income wherever 
possible. 
 
 
Results for the Year 
 
 
Despite the tough year and the resulting decrease in valuations, our properties 
continue to perform well and the profit from operations before tax and 
revaluations for the year ended 31 December 2008 amounted to EUR11.8 million, 
compared to EUR7.4 million for the year ended 31 December 2007. Including the 
downward revaluation of properties by EUR105 million, the loss for the year was 
EUR89.9 million (2007: net profit of EUR6.7 million). 
 
 
Dividend 
 
 
The 2007 second interim dividend of 2.65 cents per Ordinary Share was paid on 30 
April 2008. 
 
On 22 September 2008, the Board declared a first interim dividend relating to 
the year ended 31 December 2008 of 2.3 cents per Ordinary Share. This dividend 
was paid on 31 October 2008 to Shareholders on the share register on 3 October 
2008. 
 
 
On 7 April 2009, the Company announced a second interim dividend for the year 
ended 31 December 2008 of 1 cent per share. The dividend will be paid on 
24 April 2009 to Shareholders on the share register on 17 April 2009. We believe 
that despite the uncertain times it is in the best interests of the Company to 
make a distribution to Shareholders. However, the second interim dividend 
declared is substantially lower than the dividends distributed in previous 
years, given the current circumstances. 
 
 
Property Portfolio 
 
 
The Group's portfolio consisted of 112 properties as at 31 December 2008, with 
an aggregate valuation of EUR849 million. 
 
 
The entire portfolio produces annual rental income of approximately EUR64.5 
million, reflecting an average net yield of 7.6% rising to 8.3% on full 
occupancy (2007: 6.8% rising to 7.4% on full occupancy). The majority of the 
leases are linked to the German Consumer Prices Index or include a fixed uplift 
of 1.5% to 3% per annum and have an average term of approximately 6.5 years. 
As part of the process of disposal of non-strategic investments, in May 2008, 
the Company's subsidiary, Deutsche Real Estate AG ("Deutsche RE"), sold its 
share in a property located in Cologne. The property was held through a joint 
venture in which Deutsche RE has a 40% share. The property had a net rentable 
area of 14,800 sqm and the bank borrowings in the joint venture amounted to EUR15 
million. Deutsche RE's share in the net cash flow from the sale amounted to 
approximately EUR2 million. 
 
 
In December 2008, the tenant in a property located in Augsburg, held by Deutsche 
RE, exercised his purchasing option and acquired the property for a purchase 
price of EUR6.6 million. 
 
 
Bank Borrowings 
 
 
As at 31 December 2008, the Group had bank borrowings of EUR735 million, fixed 
through the use of interest rate swaps, at a total average cost of 5.44% per 
annum on a blended basis. The Group's finance is long term and is committed for 
an additional period of 4.5 to 5.8 years. The Group has interest rate hedges in 
place in order to mitigate its exposure to interest rate risk. 
 
 
The Group's credit facility agreements contain several financial covenants that 
must be complied with. One of these is the Loan to Value covenant ("LTV") ratio, 
which ranges between 85% and 87.5% in relation to the Group's facilities.  The 
LTV ratio has been severely affected by the decrease in property valuations 
during the year. Upon the formal notification of a breach, the lender will 
require the borrower to reduce the loan outstanding or make other arrangements 
to cure the breach, unless the lender agrees to waive the breach. In the event 
that a resolution to the breach is not achieved, an event of default occurs and 
the lender is entitled to repayment of its loan. With the exception of the cross 
guarantee more fully described in note 7 to the financial statements, the lender 
only has access to the assets secured on the particular loan facility and not to 
the other assets of the parent company or the Group. 
 
 
Subsequent to the balance sheet date, a notice of an LTV breach in respect of a 
EUR96 million credit facility was received by certain subsidiaries of the Company 
in respect of valuations at 31 December 2008. 
 
 
Since the Group is at the higher end of its LTV covenant ratio requirements for 
most of its credit facilities, any further decrease in property values will 
result in the Group becoming exposed to a greater risk of LTV covenant breaches. 
For further details please see note 7. 
 
 
The quality of tenants in the Group's property portfolio remains high and 
continues to generate strong positive cash flows that enable the Group to 
service the ongoing interest and amortisation obligations. 
 
 
The Directors and the Asset Manager constantly review the Group's position in 
light of the market indicators. Discussions are ongoing with the lenders to cure 
the existing breach and to achieve suitable arrangements with the lenders to 
minimise the likelihood of further breaches. The Directors believe that the 
ongoing ability of the Group to service its debts from the positive cash flows 
that are being generated, mean that the Group is well positioned to agree a 
satisfactory resolution of these issues with the lenders. 
 
 
After careful consideration of all of the above factors, the Board has concluded 
that it is appropriate to prepare the consolidated financial statements on the 
going concern basis. 
 
 
Directorship 
 
 
In June 2008, Dr. Johannes Beermann resigned from the Board of Directors, 
following his nomination as secretary of state in the cabinet of the German 
State Saxony. We would like to thank Dr. Beermann for his contribution to the 
Board since the Company's inception. 
 
 
Recommended Offer 
 
 
Shareholders should note an announcement outlining a recommended offer for the 
Company, which was released on 7 April 2009. 
 
 
Outlook 
 
 
We believe that those who survive the global financial crisis will become 
stronger and more dominant in their respective markets. We are doing our best to 
weather the storm successfully, whilst keeping our property portfolio intact, 
safe and operational, with a focus on improving the properties and the income 
derived from those properties. 
 
 
Decreasing valuations, however, are threatening our ability to retain our 
properties because of potential breaches of LTV covenants. We intend to confront 
this risk through a number of measures. We have strong positive cash flows, and 
the Group's experienced management team is focused on extracting further value 
from the portfolio through the renewal of leases, letting of vacant areas and 
cost savings. The Board is also considering the need to restructure the balance 
sheet. In addition, the Group continues to discuss with its lenders a revision 
of the current arrangements. 
 
 
In the current climate, we believe that the Company's cash balances and 
management capabilities are essential tools required in order to succeed, 
although they cannot guarantee success. 
 
 
John Lamb 
Chairman 
7 April 2009 
 
 
 
 
 
 
 
 
 
 
 
Asset Manager's Report 
 
 
 
 
Investment Objective and Policy 
 
 
The Company's investment objective is to achieve income and capital growth from 
a diversified portfolio of commercial real estate properties located throughout 
Germany. The Company's investment policy is mainly to hold good quality 
properties let on long leases to strong tenants with an upside potential to be 
achieved through active asset management. 
 
 
German Economic Overview 
 
 
Since September 2008, the international financial crisis has taken a firm hold 
on Germany. According to initial calculations of the Federal Statistical Office, 
the 2008 GDP growth rate is 1.3% (2007: 2.5%, 2006: 3%). Net exports in 2008 
recorded a decline of 0.3% and thus slowed down economic development. In 
addition, private consumer spending stagnated. 
 
 
The German government reacted to the economic weakness with rescue funds for the 
banking sector and the economy of approximately EUR100 billion. These measures 
however, are only due to commence in the second half of 2009. Key to this rescue 
package is the enhancement of national, state and community spending by an 
additional EUR17 billion to EUR18 billion in 2009 and 2010, respectively. 
Additionally, there will be a bailout by means of guarantees for companies up to 
EUR100 billion, modelled on the rescue package for banks. In spite of governmental 
measures, economic research institutes expect economic development to decrease 
further in 2009. However, their forecasts and estimations vary from a 1.2% to 2% 
decrease in economic performance for 2009. At the beginning of December 2008, 
the European Central Bank ("ECB") again reacted to the worsening economic 
situation with a strong reduction in interest rates by 75 basis points to 2.5%. 
In mid-January 2009, the ECB reduced the base rate further to 2%. The average 
German Consumer Prices Index for 2008, however, increased by 2.6% in comparison 
with 2007. This represents the highest annual inflation rate in 14 years (1994: 
+2.8%) and is primarily a result of the high inflation rates in the first half 
of 2008. 
 
 
At first, the weakening of the economy had no effect on the employment market. 
However, in December, for the first time since 2005, the number of unemployed 
rose by 114,000 to 3.1 million. Economists anticipate unemployment to increase 
further; an increase to approximately 4 million is considered possible. 
 
 
German Real Estate Market 
 
 
The turmoil in the credit markets had an immediate effect on the real estate 
investment market, resulting in some transactions failing and/or prices being 
renegotiated downwards. This has caused a marked reduction in the volume of 
transactions with activity below the levels of recent years. Generally, there is 
greater volatility in the evidence generated by comparable transactions and in 
these circumstances there is a greater degree of uncertainty than that which 
exists in a more active and stronger market. The position has also become more 
difficult given the absence of funding for property transactions. 
 
 
The financial and economic crisis seems to have also reached the office letting 
market when, in the fourth quarter of 2008, new lettings and owner-occupier 
take-up in the five most important office markets in Germany decreased by 64,000 
sqm, or 9% in comparison with the third quarter. As a result of the difficult 
economic prospects for 2009, decrease in scope of activity in most of the top 
five office markets can be expected this year. 
 
 
Reduction in vacancies is continuing at a similar pace as in the third quarter 
of 2008. Vacancies reduced from 9.4% (at the beginning of October 2008) to 9.3% 
(at the beginning of January 2009). In most of the locations, the prime rent 
stayed on a stable level. 
 
 
Forecasts for 2009 are relatively pessimistic. A strong impact of the crisis in 
the financial markets on the real economy is anticipated. Hence, companies will 
act cost-consciously and will delay potential plans to relocate. Against this 
background, it is expected that, in particular, the significance of lease term 
extensions will increase. 
 
 
Rents for logistics warehouses with good, average or basic fit-out remained 
largely stable in the fourth quarter. 
 
 
Performance 
 
 
In 2008 the Group generated net profit, excluding the downward revaluation of 
properties and before minority interests, of EUR15 million compared to EUR13 million 
for the year ended 31 December 2007. The increase occurred although 2008 tax 
expenses accounted for EUR2 million compared to EUR4.7 million of tax benefits in 
2007. Operating expenses also increased mainly as a result of the consolidation 
of Deutsche RE from August 2007. 
 
 
The NAV as at 31 December 2008 was 64.5 cents, a decrease of 44% in the year. 
 
 
Valuations 
 
 
The total decrease in the Group's portfolio valuation for 2008 was EUR105 million 
to EUR849 million, representing a decrease of 11%. Net rental income is expected 
to increase to EUR64.5 million per annum. 
 
 
The net blended yield of the portfolio was 7.6% at the year end (8.3% on full 
occupancy). The Group's property portfolio consisted of 112 properties 
diversified across office, logistic and retail sectors. The portfolio as a whole 
has a weighted average lease length of approximately 6.5 years. 
 
 
Management Activities 
 
 
After aggregating the portfolio in the last few years, we have shifted our focus 
in order to maximise the performance of the existing portfolio. The major 
activities included: 
  *  Substantial letting activity with 78 lease agreements signed since the beginning 
  of 2008, 51 of which are new leases of previously vacant areas; 
  *  Stabilising properties with high vacancy rates through new lettings, extension 
  of leases, restructuring the tenant base and improving cost efficiencies; 
  *  Improving property management procedures and cutting operational and G&A costs 
  in Deutsche RE; 
  *  Rehabilitation of some tenant relationships in Deutsche RE including the removal 
  of problematic tenants; 
  *  Collection of old debts; 
  *  Settlements with service providers and partners; 
  *  Disposal of non strategic holdings; and 
  *  Adopting a new property management software and bringing our accounting function 
  in-house. 
 
The positive effects of these activities are already being partly seen in the 
year under review. 
 
 
Letting Activity and Occupancies 
 
 
The table below describes the letting activity and the evolution of vacant 
spaces in 2008. The Group has signed 78 leases for 85,000 sqm, generating annual 
income of EUR5.7 million with an average lease length of 7 years. Expired leases 
totaled 42,000 sqm, representing annual income of EUR3.4 million. 
 
 
The Group let its vacant space in Rostock by signing a lease agreement for 2,670 
sqm with a governmental health insurance company. The ten year lease will 
contribute an average net rental income of EUR0.5 million per annum. 
The required investment was approximately EUR1.2 million. 
 
 
Furthermore, the Group let an additional 9,000 sqm in its Osram Hofe property in 
Berlin. The new lease agreement with the Berlin State hospital is for an 
additional 6.5 years and approximately EUR1.1 million per annum, of which EUR0.9 
million is net rental income and EUR0.2 million is derived from a saving of void 
costs. The required investment in preparing the property for the tenant's use 
was marginal. Together with additional lettings in this property, its total 
vacancy has been reduced from 30,000 sqm to 17,000 sqm, representing a 28% 
vacancy rate compared to a 50% vacancy rate when the Company acquired this 
property as part of the Deutsche RE portfolio. The result is a 65% increase of 
the original net operating income attributed to this property. 
 
 
During the year, one of the tenants, occupying two of the Group's properties, 
went into receivership. The Group signed a new triple net lease agreement for 
one of the properties for a term of eight years, which equals the rental income 
from this property prior to the insolvency of the original tenant. 
 
 
Rental Income 
 
 
Annual income as at 1 January 2008 amounted to EUR64.6 million. This income was 
increased by EUR3.7 million (5.8% increase) due to the letting of vacant areas and 
indexation of some leases. After adjusting for expired leases and the disposal 
of a property (see below), the current annual income amounted to EUR64.5 million 
as at 31 December 2008. 
 
 
Sale of Properties 
 
 
The Company's policy is to sell properties which have achieved their improvement 
potential. Due to the current situation in the market, we do not anticipate that 
any properties will be sold in the near future. 
 
 
In December 2008, the tenant in a property held by Deutsche RE, exercised his 
purchasing option at a price of EUR6.6 million. There was no profit due to the 
Company and the proceeds were used to repay the property's debt. The transaction 
was completed in the first quarter of 2009. 
 
 
Cash Position 
 
 
The table below describes the Group's net cash position: 
 
+--------+--------+---------+---------+ 
|        |        |         |Million  | 
+--------+--------+---------+---------+ 
| Total cash as at 31       |  EUR100.7 | 
| December 2008             |         | 
+---------------------------+---------+ 
| Net working capital       |   EUR23.0 | 
| assets                    |         | 
+---------------------------+---------+ 
| Net working capital       | EUR(37.9) | 
| liabilities               |         | 
+---------------------------+---------+ 
| Blocked in capex and      |  EUR(3.1) | 
| reserve accounts          |         | 
+---------------------------+---------+ 
| Debt repayment and        |  EUR(8.4) | 
| interest payment          |         | 
| scheduled in the first    |         | 
| quarter of 2009           |         | 
+---------------------------+---------+ 
| Net cash        |         |   EUR74.3 | 
| amounts         |         |         | 
+-----------------+---------+---------+ 
| Cash at subsidiaries      |   EUR28.9 | 
| level                     |         | 
+---------------------------+---------+ 
|        |        |         |         | 
+--------+--------+---------+---------+ 
| Cash at parent company    |   EUR45.4 | 
| level                     |         | 
+--------+--------+---------+---------+ 
 
 
Financing and Covenants 
 
 
As at 31 December 2008, the Group's bank debt amounted to EUR735 million. Our 
financing is fixed for long terms, with loans maturing between 2013 and 2014 and 
bearing interest fixed through the use of interest rate swaps, at a total 
average cost of 5.44%. 
 
 
Financing covenants can include interest and debt service coverage ratios as 
well as LTV covenants. The Group's steady cash flow meets the interest cover 
ratio and debt service cover ratio covenants. The Group's financing is non 
recourse to the parent Company. 
 
 
Some of Deutsche RE's debt, which relates to joint ventures with third 
parties, has recourse to Deutsche RE. The related direct debt to Deutsche RE is 
EUR287 million but the maximum exposure of such recourse debt is EUR16 million. 
 
 
Five major credit facilities (Facilities A to E) are with one lender and three 
smaller credit facilities (Facilities F to H) are with a different lender. 
 
 
Facility A amounts to approximately EUR175 million fixed until mid 2013 with an 
average fixed interest rate of 5.1%. The LTV as at the year end was 84.9%, 
against a requirement of less than 85%. 
 
 
Facility B amounts to approximately EUR78 million fixed until mid 2013 with an 
average fixed interest rate of 5.1%. The LTV as at the year end was 78.4%, 
against a requirement of less than 87%. There is a cross default between 
Facilities A and B. 
 
 
Facility C amounts to approximately EUR103 million fixed until early 2014 with an 
average fixed interest rate of 5.2%. The LTV at the year end was 83.6%, against 
a requirement of less than 85%. 
 
 
Facility D amounts to approximately EUR231 million fixed until October 2014 with 
an average fixed interest rate of 5.8%. The LTV as at the year end was 87.3%, 
against a requirement of less than 87.5%. 
 
 
Facility E amounts to approximately EUR96 million fixed until October 2014 with an 
average fixed interest rate of 5.7%. The facility is in breach of the LTV 
covenant following notification received from the bank. The LTV covenant was 
91.7%, against a requirement of less than 85%. The Company is in discussion with 
the lender regarding the breach. 
 
 
Facilities F and G amount to approximately EUR20.4 million fixed until 2011-2012 
with an average fixed interest rate of 5.8%. There are no LTV covenants for 
these shorter facilities and the cash flow is positive. 
 
 
Facility H amounts to approximately EUR26 million fixed until the end of 2010. 
There is no LTV covenant for this facility but the property has high vacancy and 
the current cash flow is negative. 
 
Outlook 
 
 
The global financial crisis has been adversely affecting real estate prices 
across the globe as well as in Germany. Given the slowdown of economies, 
increasing unemployment, decreasing consumption and lack of funding, property 
valuations are expected to continue to deteriorate. A further decrease in values 
of the Group's leveraged properties would impact the Group's NAV and the Group 
would be subject to increased pressure from its lenders. 
 
 
As managers of the portfolio, we continue to do our best on a daily basis to 
maximise the cash flows it generates and to extract more value from our 
properties. 
 
 
Zohar Levy 
Summit Management Company SA. 
7 April 2009 
 
 
 
 
 
 
 
 
 
 
The financial information set out in this announcement does not constitute the 
Group's statutory financial statements for the year ended 31 December 2008. 
 
 
Consolidated Income Statement 
 
 
 
 
 
 
+--------------------------------------------+-------+------+------------+-----------+ 
|                                                    |      |Year ended  |   Year    | 
|                                                    |      |    31      | ended 31  | 
|                                                    |      |  December  | December  | 
|                                                    |      |    2008    |   2007    | 
+----------------------------------------------------+------+            +           + 
| EUR '000                                             |Note  |            |           | 
+----------------------------------------------------+------+------------+-----------+ 
|                                                    |      |  Audited   |  Audited  | 
+----------------------------------------------------+------+------------+-----------+ 
|                                                    |      |            |           | 
+----------------------------------------------------+------+------------+-----------+ 
| Rental income                                      |      |    66,400  |   39,512  | 
+----------------------------------------------------+------+------------+-----------+ 
| Operating expenses                                 | 14   |    (6,926) |   (2,180) | 
+----------------------------------------------------+------+------------+-----------+ 
| Gross profit                                       |      |    59,474  |   37,332  | 
+----------------------------------------------------+------+------------+-----------+ 
|                                                    |      |            |           | 
+----------------------------------------------------+------+------------+-----------+ 
| General and administrative expenses                | 15   |   (11,822) |   (7,808) | 
+----------------------------------------------------+------+------------+-----------+ 
| Goodwill impairment                                |      |    (4,004) |         - | 
+----------------------------------------------------+------+------------+-----------+ 
| Fair value adjustments on investment       |              |  (104,871) |   (6,215) | 
| properties                                 |              |            |           | 
+--------------------------------------------+--------------+------------+-----------+ 
| Financial expenses                                 | 16   |   (41,750) |  (25,035) | 
+----------------------------------------------------+------+------------+-----------+ 
| Financial income                                   | 16   |     9,930  |    2,905  | 
+----------------------------------------------------+------+------------+-----------+ 
| Other expenses                                     |      |       (75) |         - | 
+----------------------------------------------------+------+------------+-----------+ 
| (Loss)/profit before taxes on income               |      |   (93,118) |    1,179  | 
+----------------------------------------------------+------+------------+-----------+ 
|                                                    |      |            |           | 
+----------------------------------------------------+------+------------+-----------+ 
| Income tax (charge) / credit                       | 17   |    (2,063) |    4,663  | 
+----------------------------------------------------+------+------------+-----------+ 
|                                                    |      |            |           | 
+----------------------------------------------------+------+------------+-----------+ 
| Net (loss)/profit                                  |      |   (95,181) |    5,842  | 
+----------------------------------------------------+------+------------+-----------+ 
|                                                    |      |            |           | 
+----------------------------------------------------+------+------------+-----------+ 
|                                                    |      |            |           | 
+----------------------------------------------------+------+------------+-----------+ 
| Attributable to:                                   |      |            |           | 
+----------------------------------------------------+------+------------+-----------+ 
| Equity Shareholders                                |      |   (89,873) |    6,746  | 
+----------------------------------------------------+------+------------+-----------+ 
| Minority interests                                 |      |    (5,308) |     (904) | 
+----------------------------------------------------+------+------------+-----------+ 
|                                                    |      |   (95,181) |    5,842  | 
+----------------------------------------------------+------+------------+-----------+ 
|                                                    |      |            |           | 
+----------------------------------------------------+------+------------+-----------+ 
| (Losses)/earnings per share - basic and diluted    |      |    (0.327) |    0.0309 | 
| (Euros)                                            |      |            |           | 
+--------------------------------------------+-------+------+------------+-----------+ 
 
 
 
  Consolidated Balance Sheet 
 
 
+---------------------------------------------+------+------------+------------+ 
| EUR '000                                      |Note  |    31      |    31      | 
|                                             |      |  December  |  December  | 
|                                             |      |    2008    |    2007    | 
+---------------------------------------------+------+------------+------------+ 
|                                             |      |  Audited   |  Audited   | 
+---------------------------------------------+------+------------+------------+ 
| NON-CURRENT ASSETS:                         |      |            |            | 
+---------------------------------------------+------+------------+------------+ 
|                                             |      |            |            | 
+---------------------------------------------+------+------------+------------+ 
| Property, plant and equipment               |      |       390  |       254  | 
+---------------------------------------------+------+------------+------------+ 
| Investment properties                       |  5   |   848,894  |   953,440  | 
+---------------------------------------------+------+------------+------------+ 
| Intangible assets                           |  6   |     2,128  |     6,021  | 
+---------------------------------------------+------+------------+------------+ 
| Long-term financial assets                  |  7   |    11,284  |    26,365  | 
+---------------------------------------------+------+------------+------------+ 
| Deferred tax assets                         | 17   |     9,013  |    12,174  | 
+---------------------------------------------+------+------------+------------+ 
|                                             |      |   871,709  |   998,254  | 
+---------------------------------------------+------+------------+------------+ 
| CURRENT ASSETS:                             |      |            |            | 
+---------------------------------------------+------+------------+------------+ 
|                                             |      |            |            | 
+---------------------------------------------+------+------------+------------+ 
| Trade receivables                           |  8   |     3,579  |     3,771  | 
+---------------------------------------------+------+------------+------------+ 
| Prepaid expenses and other current assets   |  9   |    19,271  |     3,103  | 
+---------------------------------------------+------+------------+------------+ 
| Receivables from related parties and        |  12  |       113  |        52  | 
| shareholders                                |      |            |            | 
+---------------------------------------------+------+------------+------------+ 
| Cash and cash equivalents                   | 10   |   100,710  |   137,509  | 
+---------------------------------------------+------+------------+------------+ 
|                                             |      |   123,673  |   144,435  | 
+---------------------------------------------+------+------------+------------+ 
| Total assets                                |      |   995,382  | 1,142,689  | 
+---------------------------------------------+------+------------+------------+ 
 
 
 
 
 
 
 
 
 
 
  Consolidated Balance Sheet 
 
 
 
 
+---------------------------------------------+------+------------+-----------+ 
| EUR '000                                      |Note  |    31      |    31     | 
|                                             |      |  December  | December  | 
|                                             |      |    2008    |   2007    | 
+---------------------------------------------+------+------------+-----------+ 
|                                             |      |  Audited   |  Audited  | 
+---------------------------------------------+------+------------+-----------+ 
| NON-CURRENT LIABILITIES:                    |      |            |           | 
+---------------------------------------------+------+------------+-----------+ 
| Interest-bearing loans and borrowings       |  7   |   627,454  |  742,758  | 
+---------------------------------------------+------+------------+-----------+ 
| Other long-term financial liabilities       |  7   |    33,158  |    1,602  | 
+---------------------------------------------+------+------------+-----------+ 
| Deferred tax liabilities                    | 17   |     8,079  |   12,171  | 
+---------------------------------------------+------+------------+-----------+ 
|                                             |      |   668,691  |  756,531  | 
+---------------------------------------------+------+------------+-----------+ 
| CURRENT LIABILITIES:                        |      |            |           | 
+---------------------------------------------+------+------------+-----------+ 
| Interest-bearing loans and borrowings       |  7   |   107,571  |    6,316  | 
+---------------------------------------------+------+------------+-----------+ 
| Payables to related parties and             |  12  |     1,096  |    6,437  | 
| shareholders                                |      |            |           | 
+---------------------------------------------+------+------------+-----------+ 
| Tax liabilities                             |      |    14,218  |   17,163  | 
+---------------------------------------------+------+------------+-----------+ 
| Trade and other payables                    | 13   |    22,563  |   28,315  | 
+---------------------------------------------+------+------------+-----------+ 
|                                             |      |   145,448  |   58,231  | 
+---------------------------------------------+------+------------+-----------+ 
| Total liabilities                           |      |   814,139  |  814,762  | 
+---------------------------------------------+------+------------+-----------+ 
| Net Assets                                  |      |   181,243  |  327,927  | 
+---------------------------------------------+------+------------+-----------+ 
|                                             |      |            |           | 
+---------------------------------------------+------+------------+-----------+ 
| Represented by:                             |      |            |           | 
+---------------------------------------------+------+------------+-----------+ 
| Equity attributable to equity holders of the       |            |           | 
| Parent                                             |            |           | 
+----------------------------------------------------+------------+-----------+ 
| Share capital                               |  11  |          - |         - | 
+---------------------------------------------+------+------------+-----------+ 
| Share premium                               |  11  |          - |   217,547 | 
+---------------------------------------------+------+------------+-----------+ 
| Distributable reserve                       |      |   292,007  |   74,460  | 
+---------------------------------------------+------+------------+-----------+ 
| Net unrealised Gain (loss) reserve          |      |   (31,455) |    4,702  | 
+---------------------------------------------+------+------------+-----------+ 
| (Deficit)/Retained earnings                 |      |   (83,074) |   20,412  | 
+---------------------------------------------+------+------------+-----------+ 
| Net Assets attributable to Ordinary Shareholders   |   177,478  |  317,121  | 
+----------------------------------------------------+------------+-----------+ 
| Minority interests                          |      |     3,765  |   10,806  | 
+---------------------------------------------+------+------------+-----------+ 
|                                             |      |            |           | 
+---------------------------------------------+------+------------+-----------+ 
| Total equity                                |      |   181,243  |  327,927  | 
+---------------------------------------------+------+------------+-----------+ 
|                                             |      |            |           | 
+---------------------------------------------+------+------------+-----------+ 
| Net Asset Value per Ordinary Share          |      |      64.54 |    115.32 | 
|                                             |      |     cents  |    cents  | 
+---------------------------------------------+------+------------+-----------+ 
 
 
 
 
 
  Consolidated Statement of Changes in Equity 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
|                          |                Attributable to equity holders of the Parent                 |           |           | 
+--------------------------+-----------------------------------------------------------------------------+-----------+-----------+ 
| EUR '000                   |  Share   |  Share    |Distributable  |    Net      |(Deficit)/  |  Total    | Minority  |  Total    | 
|                          | capital  |  premium  |    reserve    | unrealised  |  Retained  |           |interests  |  equity   | 
|                          |          |           |               |gain/(loss)  |  earnings  |           |           |           | 
|                          |          |           |               |  reserve    |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
|                          |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Balance as at 1 January  |     *) - |   217,547 |        74,460 |       4,702 |     20,412 |   317,121 |    10,806 |   327,927 | 
| 2008                     |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
|                          |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Net loss on              |        - |         - |             - |       (970) |          - |     (970) |     (238) |   (1,208) | 
| available-for-sale       |          |           |               |             |            |           |           |           | 
| financial assets         |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Net loss on cash flow    |        - |         - |             - |    (35,187) |          - |  (35,187) |   (2,645) |  (37,832) | 
| hedges                   |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Net income and expense   |     *) - |         - |             - |    (36,157) |          - |  (36,157) |   (2,883) |  (39,040) | 
| for the year recognised  |          |           |               |             |            |           |           |           | 
| directly in equity       |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Net loss                 |        - |         - |             - |           - |   (89,873) |  (89,873) |   (5,308) |  (95,181) | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Total income and expense |     *) - |         - |             - |    (36,157) |   (89,873) | (126,030) |   (8,191) | (134,221) | 
| for the year             |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
|                          |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Distribution of second   |        - |         - |             - |           - |    (7,288) |   (7,288) |         - |   (7,288) | 
| interim dividend 2007    |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Transfer to              |          | (217,547) |       217,547 |           - |          - |         - |         - |         - | 
| distributable reserve    |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Minority interest        |        - |         - |             - |           - |          - |         - |     1,150 |     1,150 | 
| arising on acquisition   |          |           |               |             |            |           |           |           | 
| of subsidiary            |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Distribution of first    |          |           |               |             |    (6,325) |   (6,325) |         - |   (6,325) | 
| interim dividend 2008    |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
|                          |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Balance as at 31         |     *) - |         - |      292,007  |    (31,455) |   (83,074) |  177,478  |    3,765  |  181,243  | 
| December 2008            |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
|                          |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Balance as at 1 January  |     *) - |    72,480 |        74,460 |         293 |     20,486 |   167,719 |       110 |   167,829 | 
| 2007                     |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
|                          |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Net gains on cash flow   |        - |         - |             - |      4,409  |          - |    4,409  |      (91) |    4,318  | 
| hedges                   |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Net income and expense   |     *) - |         - |             - |       4,409 |          - |     4,409 |      (91) |     4,318 | 
| for the year recognised  |          |           |               |             |            |           |           |           | 
| directly in equity       |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Net profit/(loss)        |        - |         - |             - |           - |     6,746  |    6,746  |     (904) |    5,842  | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Total income and expense |     *) - |         - |             - |      4,409  |     6,746  |   11,155  |     (995) |   10,160  | 
| for the year             |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
|                          |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Issuance of shares, net  |     *) - |   145,067 |             - |           - |          - |   145,067 |         - |   145,067 | 
| of expenses              |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Minority interest        |        - |         - |             - |           - |          - |         - |    11,691 |    11,691 | 
| arising on acquisition   |          |           |               |             |            |           |           |           | 
| of subsidiary            |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Dividend paid            |        - |         - |             - |           - |    (6,820) |   (6,820) |         - |   (6,820) | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
|                          |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
| Balance as at 31         |     *) - |  217,547  |       74,460  |      4,702  |    20,412  |  317,121  |   10,806  |  327,927  | 
| December 2007            |          |           |               |             |            |           |           |           | 
+--------------------------+----------+-----------+---------------+-------------+------------+-----------+-----------+-----------+ 
 *) No par value. 
 
 
  Consolidated Cash Flow Statement 
+--------------------------------------------+----+------------+------------+ 
|                                            |    |Year ended  |Year ended  | 
|                                            |    |    31      |    31      | 
|                                            |    |  December  |  December  | 
|                                            |    |    2008    |    2007    | 
+--------------------------------------------+----+            +            + 
| EUR '000                                     |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
|                                            |    |  Audited   |  Audited   | 
+--------------------------------------------+----+------------+------------+ 
| Cash flows from operating activities:      |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Net (loss)/profit                          |    |   (95,181) |      5,842 | 
+--------------------------------------------+----+------------+------------+ 
| Adjustments to reconcile net (loss)/profit to net cash provided by        | 
| operating activities:                                                     | 
+---------------------------------------------------------------------------+ 
| Deferred taxes                             |    |      1,784 |    (4,798) | 
+--------------------------------------------+----+------------+------------+ 
| Financial expenses on interest-bearing     |    |      1,197 |        404 | 
| loan and borrowings                        |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Fair value adjustment on investment        |    |    103,519 |      5,101 | 
| properties                                 |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Gain from purchase of a loan               |    |    (5,404) |          - | 
+--------------------------------------------+----+------------+------------+ 
| Depreciation of property, plant and        |    |         78 |         88 | 
| equipment                                  |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Amortisation and impairment of intangible  |    |      4,026 |        346 | 
| assets                                     |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
|                                            |    |    105,200 |      1,141 | 
+--------------------------------------------+----+------------+------------+ 
| Changes in operating assets and            |    |            |            | 
| liabilities:                               |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Decrease in trade receivables              |    |        192 |        653 | 
+--------------------------------------------+----+------------+------------+ 
| Increase in trade and other payables       |    |      5,008 |    (1,902) | 
+--------------------------------------------+----+------------+------------+ 
| Decrease in income tax liabilities         |    |    (2,945) |          - | 
+--------------------------------------------+----+------------+------------+ 
| (Decrease)/increase in payables to related |    |      (820) |      1,853 | 
| parties and shareholders                   |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| (Increase)/decrease in prepaid expenses    |    |    (2,156) |      1,010 | 
| and other current assets                   |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Increase/(decrease) in other non current   |    |         62 |      (102) | 
| liabilities                                |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Interest income                            |    |    (4,526) |    (2,905) | 
+--------------------------------------------+----+------------+------------+ 
| Interest expenses                          |    |     40,553 |     24,631 | 
+--------------------------------------------+----+------------+------------+ 
|                                            |    |     35,368 |     23,238 | 
+--------------------------------------------+----+------------+------------+ 
| Net cash flows provided by operating       |    |     45,387 |     30,221 | 
| activities                                 |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
|                                            |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Cash flows from investing activities:      |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Additions to property, plant and equipment |    |      (214) |          - | 
+--------------------------------------------+----+------------+------------+ 
| Additions to financial instruments         |    |       (57) |          - | 
+--------------------------------------------+----+------------+------------+ 
| Additions to intangible assets             |    |      (133) |          - | 
+--------------------------------------------+----+------------+------------+ 
| Acquisition of subsidiaries, net of cash        |          - |  (132,275) | 
| acquired                                        |            |            | 
+-------------------------------------------------+------------+------------+ 
| Payment in respect of acquisition of       |    |    (8,568) |          - | 
| subsidiaries                               |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Change in deposits                         |    |    (7,100) |         44 | 
+--------------------------------------------+----+------------+------------+ 
| Additions to investment properties         |    |    (5,660) |   (39,897) | 
+--------------------------------------------+----+------------+------------+ 
| Interest received                          |    |      4,265 |      2,905 | 
+--------------------------------------------+----+------------+------------+ 
| Proceeds from sale of financial            |    |      2,000 |          - | 
| instruments                                |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Net cash flows used in investing           |    |   (15,467) |  (169,223) | 
| activities                                 |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
|                                            |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Cash flows from financing activities:      |    |            |            | 
+--------------------------------------------+----+------------+------------+ 
| Proceeds from issue of shares              |    |          - |    145,067 | 
+--------------------------------------------+----+------------+------------+ 
| Prepayment of long term loan               |    |    (6,167) |          - | 
+--------------------------------------------+----+------------+------------+ 
| Proceeds from bank loans                   |    |          - |    283,335 | 
+--------------------------------------------+----+------------+------------+ 
| Repayment of borrowings                    |    |    (3,671) |  (207,441) | 
+--------------------------------------------+----+------------+------------+ 
| Interest paid                              |    |   (43,268) |   (20,508) | 
+--------------------------------------------+----+------------+------------+ 
| Dividends paid to equity holders of the Company |   (13,613) |    (6,820) | 
+-------------------------------------------------+------------+------------+ 
| Net cash flows (used in)/provided by financing  |   (66,719) |    193,633 | 
| activities                                      |            |            | 
+-------------------------------------------------+------------+------------+ 
| (Decrease)/increase in cash and cash            |   (36,799) |     54,631 | 
| equivalents                                     |            |            | 
+-------------------------------------------------+------------+------------+ 
| Cash and cash equivalents at beginning of       |    137,509 |     82,878 | 
| period                                          |            |            | 
+-------------------------------------------------+------------+------------+ 
| Cash and cash equivalents at end of period |    |    100,710 |    137,509 | 
+--------------------------------------------+----+------------+------------+ 
   Notes to the Financial Statements 
 
 
NOTE 1:- GENERAL 
Summit Germany Limited ("the Company") is a German property fund specialist 
whose shares are traded on AIM, a market of the London Stock Exchange plc. The 
Company was incorporated and registered in Guernsey on April 19, 2006. 
The principal activity of the Company and its subsidiaries (the "Group") is 
investment in real estate assets in Germany. This remains unchanged from last 
year. 
 
 
The Company owns and operates commercial assets in Germany including office 
buildings, logistic centres and retail buildings, which are leased to numerous 
commercial and industrial tenants. The Group invests primarily in such 
properties that provide substantial occupancy rates and income flows. The Group 
does not acquire properties for speculative purposes. 
 
 
Going Concern 
The Group's credit facility agreements contain several financial covenants that 
must be complied with. One of these is the Loan to Value covenant ("LTV") ratio, 
which ranges between 85% and 87.5% in relation to the Group's facilities.  The 
LTV ratio has been severely affected by the decrease in property valuations 
during the year. Upon the formal notification of a breach, the lender will 
require the borrower to reduce the loan outstanding or make other arrangements 
to cure the breach, unless the lender agrees to waive the breach. In the event 
that a resolution to the breach is not achieved, an event of default occurs and 
the lender is entitled to repayment of its loan. With the exception of the cross 
guarantee more fully described in note 7 to the financial statements, the lender 
only has access to the assets secured on the particular loan facility and not to 
the other assets of the parent company or the Group. 
 
 
Subsequent to the balance sheet date, a notice of an LTV breach in respect of a 
EUR96 million credit facility was received by certain subsidiaries of the Company 
in respect of valuations at 31 December 2008. 
 
 
Since the Group is at the higher end of its LTV covenant ratio requirements 
for most of its credit facilities, any further decrease in property values will 
result in the Group becoming exposed to a greater risk of LTV covenant breaches. 
For further details please see note 7. 
 
 
The quality of tenants in the Group's property portfolio remains high and 
continues to generate strong positive cash flows that enable the Group to 
service the ongoing interest and amortisation obligations. 
 
 
The Directors and the Asset Manager constantly review the Group's position in 
light of the market indicators. Discussions are ongoing with the lenders to cure 
the existing breach and to achieve suitable arrangements with the lenders to 
minimise the likelihood of further breaches. The Directors believe that the 
ongoing ability of the Group to service its debts from the positive cash flows 
that are being generated, mean that the Group is well positioned to agree a 
satisfactory resolution of these issues with the lenders. 
 
 
After careful consideration of all of the above factors, the Board has concluded 
that it is appropriate to prepare the consolidated financial statements on the 
going concern basis. 
 
 
 
NOTE 2.1:- BASIS OF PREPARATION 
The consolidated financial statements have been prepared on a historical cost 
basis, except for investment properties and derivative financial instruments and 
available-for-sale financial assets that have been measured at fair value. The 
carrying values of recognised assets and liabilities that are hedged items in 
cash flow hedges and are otherwise carried at cost, are adjusted to record 
changes in the fair values attributable to the risks that are being hedged. The 
consolidated financial statements are presented in Euros and all values are 
rounded to the nearest thousand, except when otherwise indicated. 
 
 
Statement of compliance: 
The consolidated financial statements of the Company have been prepared in 
accordance with International Financial Reporting Standards as adopted by the 
European Union ("IFRS"), applicable legal and regulatory requirements of 
Guernsey and reflect the following policies, which have been adopted and applied 
consistently. 
 
 
Basis of consolidation: 
The consolidated financial statements comprise the financial statements of the 
Company and its subsidiaries as at 31 December 2008. The financial statements of 
the subsidiaries are prepared for the same reporting year as the Company using 
consistent accounting policies (see appendix The Company's holdings as of 31 
December 2008). 
 
 
All intra-group balances, transactions, income and expenses and profits and 
losses resulting from intra-group transactions, are eliminated in full. 
 
 
Subsidiaries are fully consolidated from the date of acquisition, being the date 
on which the Group obtains control, and continue to be consolidated until the 
date that such control ceases. 
 
 
Minority interests represent the portion of profit or loss and net assets not 
held by the Group and are presented separately in the Consolidated Income 
Statement and within equity in the Consolidated Balance Sheet, separately from 
the Company's equity. 
 
 
 
 
NOTE 2.2:- CHANGES IN ACCOUNTING POLICY AND DISCLOSURES: 
The accounting policies adopted are consistent with those of the previous 
financial year. 
 
 
 
 
NOTE 2.3:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
 
 
Business combinations and goodwill: 
Business combinations are accounted for using the purchase method pursuant to 
IFRS 3. The cost of an acquisition is measured as the fair value of the assets 
given, equity instruments issued and liabilities incurred or assumed at the date 
of exchange, plus costs directly attributable to the acquisition. Identifiable 
assets acquired and liabilities and contingent liabilities assumed in a business 
combination are measured initially at fair values at the date of acquisition, 
irrespective of the extent of any minority interest. 
 
 
Goodwill is initially measured at cost being the excess of the cost of the 
business combination over the Group's share in the net fair value of the 
acquiree's identifiable assets, liabilities and contingent liabilities. If the 
cost of acquisition is less than the fair value of the net assets of the 
subsidiary acquired, the difference is recognised directly in the income 
statement. 
 
 
After initial recognition, goodwill is measured at cost less any accumulated 
impairment losses. For the purpose of impairment testing, goodwill acquired in a 
business combination is, from the acquisition date, allocated to each of the 
Group's cash generating units that are expected to benefit from the synergies of 
the combination, irrespective of whether other assets or liabilities of the 
acquiree are assigned to those units. 
 
 
Foreign currency translation: 
The Group's consolidated financial statements are presented in Euros, which is 
the Group's functional currency. That is the currency of the primary economic 
environment in which the Group operates. Each entity in the Group determines its 
own functional currency and items included in the financial statements of each 
entity are measured using that functional currency. Transactions in foreign 
currencies are initially recorded at the functional currency rate prevailing at 
the date of the transaction. 
 
 
Monetary assets and liabilities denominated in foreign currencies are 
retranslated at the functional currency spot rate of exchange ruling at the 
balance sheet date. All differences are taken to the income statement. 
Non-monetary items that are measured in terms of historical cost in a foreign 
currency are translated using the exchange rates as at the dates of the initial 
transactions. Non-monetary items measured at fair value in a foreign currency 
are translated using the exchange rates at the date when the fair value is 
determined. 
 
 
Revenue recognition: 
Revenue is recognised to the extent that it is probable that the economic 
benefits will flow to the Company and the revenue can be reliably measured. 
Revenue is measured at the fair value of the consideration received, excluding 
discounts, rebates, and sales taxes or duty. The following specific recognition 
criteria must also be met before revenue is recognised: 
 
 
Interest income: 
Revenue is recognised as interest accrues (using the effective interest method). 
Interest income is included in financial income in the income statement. 
 
 
Rental income: 
Rental income arising from operating leases on investment properties is 
accounted for on a straight line basis over the lease terms. 
 
 
Acquisitions of subsidiaries that are not business combinations: 
On the day of acquisition of subsidiaries and operations, the Company assesses 
whether business is acquired in accordance with IFRS 3. A business generally 
consists of inputs, processes applied to those inputs, and resulting outputs 
that are, or will be, used to generate revenues. If goodwill is present, the 
transferred set of activities and assets shall be presumed to be a business. 
When no business is acquired, according to IFRS 3, the consideration is 
allocated between the identifiable assets and liabilities acquired on the basis 
of relative fair values, without allocating to goodwill or deferred taxes 
 
 
Taxes: 
The Income Tax Authority in Guernsey has granted the Company exemption from 
Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 
1989 so that the Company is exempt from Guernsey taxation on income arising 
outside of Guernsey and on bank interest receivable in Guernsey. The Company is 
therefore only liable to a fixed fee of GBP600 per annum. The Directors intend 
to conduct the Company's affairs such that it continues to remain eligible for 
exemption from Guernsey tax. 
The property subsidiaries are subject to income taxes in their country of 
domicile in respect of their income. The ordinary corporate income tax rate in 
Germany as of 31 December 2008 was 15.825%. 
 
 
Deferred income tax: 
Deferred income tax is provided, using the liability method, on all temporary 
differences at the balance sheet date between the tax basis of assets and 
liabilities and their carrying amounts for financial reporting purposes, except 
 
 
  *  where the deferred income tax liability arises from the initial recognition of 
  goodwill or of an asset or liability in a transaction that is not a business 
  combination and, at the time of the transaction, affects neither the accounting 
  profit nor taxable profit or loss; and 
  *  in respect of taxable temporary differences associated with investments in 
  subsidiaries, associates and interests in joint ventures, where the timing of 
  the reversal of the temporary differences can be controlled and it is probable 
  that the temporary differences will not reverse in the foreseeable future. 
 
 
 
Deferred income tax assets are recognised for all deductible temporary 
differences and carry-forward of unused tax losses, to the extent that it is 
probable that taxable profit will be available against which the deductible 
temporary differences, and the carry-forward of unused tax losses can be 
utilised, except: 
 
 
  *  where the deferred income tax asset relating to the deductible temporary 
  difference arises from the initial recognition of an asset or liability in a 
  transaction that is not a business combination and, at the time of the 
  transaction, affects neither the accounting profit nor taxable profit or loss; 
  and 
  *  in respect of deductible temporary differences associated with investments in 
  subsidiaries, associates and interests in joint ventures, deferred income tax 
  assets are recognised only to the extent that it is probable that the temporary 
  differences will reverse in the foreseeable future and taxable profit will be 
  available against which the temporary differences can be utilised. 
 
 
 
The carrying amount of deferred income tax assets is reviewed at each balance 
sheet date and reduced to the extent that it is no longer probable that 
sufficient taxable profit will be available to allow all or part of the deferred 
income tax asset to be utilised. 
 
 
Deferred income tax assets and liabilities are measured at the tax rates that 
are expected to apply in the year when the asset is realised or the liability is 
settled, based on tax rates (and tax laws) that have been enacted or 
substantively enacted at the balance sheet date. 
 
 
Deferred income tax relating to items recognised directly in equity is 
recognised in equity and not in the income statement. 
 
 
Deferred income tax assets and deferred income tax liabilities are offset, if a 
legally enforceable right exists to set off current tax assets against current 
income tax liabilities and the deferred income taxes relate to the same taxable 
entity and the same taxation authority. 
 
 
Based on the Company's expectations, future sales of investment properties will 
be implemented through a sale of the shares of the company owning the assets, 
rather than a direct sale of the assets. Therefore, for the purpose of 
calculating deferred taxes, the tax rate applicable to the sale of shares was 
used. In the event that the assets are sold directly, the tax rate could be 
materially higher. 
 
 
Financial assets 
Initial recognition: 
Financial assets within the scope of IAS 39 are classified as financial assets 
at fair value through profit or loss, loans and receivables, available-for-sale 
financial assets, or as derivatives designated as hedging instruments in an 
effective hedge, as appropriate. The Company determines the classification of 
its financial assets at initial recognition. 
 
 
Financial assets are recognised initially at fair value plus, in the case of 
investments not at fair value through profit or loss, directly attributable 
transaction costs. 
 
 
Purchases or sales of financial assets that require delivery of assets within a 
time frame established by regulation or convention in the marketplace (regular 
way purchases) are recognised on the trade date, i.e., the date that the Company 
commits to purchase or sell the asset. 
 
 
The Company's financial assets include cash and short-term deposits, trade and 
other receivables, unquoted financial instruments and derivative financial 
instruments. 
 
 
Subsequent measurement: 
The subsequent measurement of financial assets depends on their classification 
as follows: 
 
 
Loans and receivables: 
Loans and receivables are non?derivative financial assets with fixed or 
determinable payments that are not quoted in an active market. Such financial 
assets are carried at amortised cost using the effective interest rate method. 
Gains and losses are recognised in the consolidated income statement when the 
loans and receivables are derecognised or impaired, as well as through the 
amortisation process. 
 
 
Available-for-sale financial assets: 
Available-for-sale financial assets are non-derivative financial assets that are 
designated as available-for-sale or are not classified in any of the three 
preceding categories. After initial measurement, available-for-sale financial 
assets are measured at fair value with unrealised gains or losses recognised 
directly in equity until the investment is derecognised, at which time the 
cumulative gain or loss recorded in equity is recognised in the income 
statement, or determined to be impaired, at which time the cumulative loss 
recorded in equity is recognised in the income statement. 
 
 
Financial liabilities 
Initial recognition: 
Financial liabilities within the scope of IAS 39 are classified as financial 
liabilities at fair value through profit or loss, loans and borrowings, or as 
derivatives designated as hedging instruments in an effective hedge, as 
appropriate. The Group determines the classification of its financial 
liabilities at initial recognition. 
 
 
Financial liabilities are recognised initially at fair value and in the case of 
loans and borrowings, directly attributable transaction costs. 
 
 
The Company's financial liabilities include trade and other payables, bank 
overdrafts, loans and borrowings and derivative financial instruments. 
 
 
Subsequent measurement: 
The measurement of financial liabilities depends on their classification as 
follows: 
 
 
Loans and borrowings: 
After initial recognition, interest bearing loans and borrowings are 
subsequently measured at amortised cost using the effective interest rate 
method. 
 
 
Gains and losses are recognised in the income statement when the liabilities are 
derecognised as well as through the amortisation process. 
 
 
Offsetting of financial instruments: 
Financial assets and financial liabilities are offset and the net amount 
reported in the consolidated balance sheet if, and only if, there is a currently 
enforceable legal right to offset the recognised amounts and there is an 
intention to settle on a net basis, or to realise the assets and settle the 
liabilities simultaneously. 
 
 
Fair value of financial instruments: 
The fair value of financial instruments that are actively traded in organised 
financial markets is determined by reference to quoted market bid prices at the 
close of business on the balance sheet date. For financial instruments where 
there is no active market, fair value is determined using valuation techniques. 
Such techniques may include using recent arm's length market transactions; 
reference to the current fair value of another instrument that is substantially 
the same; discounted cash flow analysis or other valuation models. 
 
 
Amortised cost of financial instruments: 
Amortised cost is computed using the effective interest method less any 
allowance for impairment and principal repayment or reduction. The calculation 
takes into account any premium or discount on acquisition and includes 
transaction costs and fees that are an integral part of the effective interest 
rate. 
 
 
Impairment of financial assets: 
The Company assesses at each balance sheet date whether there is any objective 
evidence that a financial asset or a group of financial assets is impaired. A 
financial asset or a group of financial assets is deemed to be impaired if, and 
only if, there is objective evidence of impairment as a result of one or more 
events that has occurred after the initial recognition of the asset (an incurred 
'loss event') and that loss event has an impact on the estimated future cash 
flows of the financial asset or the group of financial assets that can be 
reliably estimated. Evidence of impairment may include indications that the 
debtors or a group of debtors is experiencing significant financial difficulty, 
default or delinquency in interest or principal payments, the probability that 
they will enter bankruptcy or other financial reorganisation and where 
observable data indicate that there is a measurable decrease in the estimated 
future cash flows, such as changes in arrears or economic conditions that 
correlate with defaults. 
 
 
Loans and receivables: 
For loans and receivables carried at amortised cost, the Company first assesses 
individually whether objective evidence of impairment exists individually for 
financial assets that are individually significant, or collectively for 
financial assets that are not individually significant. If the Company 
determines that no objective evidence of impairment exists for an individually 
assessed financial asset, whether significant or not, it includes the asset in a 
group of financial assets with similar credit risk characteristics and 
collectively assesses them for impairment. Assets that are individually assessed 
for impairment and for which an impairment loss is, or continues to be, 
recognised are not included in a collective assessment of impairment. 
 
 
If there is objective evidence that an impairment loss has been incurred, the 
amount of the loss is measured as the difference between the asset's carrying 
amount and the present value of estimated future cash flows (excluding future 
expected credit losses that have not yet been incurred). The carrying amount of 
the asset is reduced through the use of an allowance account and the amount of 
the loss is recognised in the income statement. Interest income continues to be 
accrued on the reduced carrying amount based on the original effective interest 
rate of the asset. Loans together with the associated allowance are written off 
when there is no realistic prospect of future recovery and all collateral has 
been realised or has been transferred to the Company. If, in a subsequent year, 
the amount of the estimated impairment loss increases or decreases because of an 
event occurring after the impairment was recognised, the previously recognised 
impairment loss is increased or reduced by adjusting the allowance account. If a 
future write-off is later recovered, the recovery is recognised in the income 
statement. 
 
 
The present value of the estimated future cash flows is discounted at the 
financial asset's original effective interest rate. If a loan has a variable 
interest rate, the discount rate for measuring any impairment loss is the 
current effective interest rate. 
 
 
Available-for-sale financial investments: 
For available-for-sale financial investments, the Group assesses at each balance 
sheet date whether there is objective evidence that an investment or a group of 
investments is impaired. 
 
 
In the case of equity investments classified as available-for-sale, objective 
evidence would include a significant or prolonged decline in the fair value of 
the investment below its cost. Where there is evidence of impairment, the 
cumulative loss - measured as the difference between the acquisition cost and 
the current fair value, less any impairment loss on that investment previously 
recognised in the income statement - is removed from equity and recognised in 
the income statement. Impairment losses on equity investments are not reversed 
through the income statement; increases in their fair value after impairment are 
recognised directly in equity. 
 
 
Derivative financial instruments and hedge accounting 
Initial recognition and subsequent measurement: 
The Company uses derivative financial instruments such as interest rate swaps to 
hedge its risks associated with interest rate. Such derivative financial 
instruments are initially recognised at fair value on the date on which a 
derivative contract is entered into and are subsequently remeasured at fair 
value. Derivatives are carried as assets when the fair value is positive and as 
liabilities when the fair value is negative. 
 
 
Any gains or losses arising from changes in fair value on derivatives during the 
year that are qualified for hedge accounting are taken directly to the equity 
statement. 
 
 
The fair value of interest rate swap contracts is determined by reference to 
market values for similar instruments. 
 
 
At the inception of a hedge relationship, the Company formally designates and 
documents the hedge relationship to which the Company wishes to apply hedge 
accounting and the risk management objective and strategy for undertaking the 
hedge. The documentation includes identification of the hedging instrument, the 
hedged item or transaction, the nature of the risk being hedged and how the 
entity will assess the hedging instrument's effectiveness in offsetting the 
exposure to changes in the hedged item's fair value or cash flows attributable 
to the hedged risk. Such hedges are expected to be highly effective in achieving 
offsetting changes in fair value or cash flows and are assessed on an ongoing 
basis to determine that they actually have been highly effective throughout the 
financial reporting periods for which they were designated. 
 
 
Hedges which meet the strict criteria for hedge accounting are accounted for as 
follows: 
 
 
Cash flow hedges 
The effective portion (100%) of the gain or loss on the hedging instrument is 
recognised directly in equity. If there was any ineffective portion it was 
recognised immediately in the income statement. 
Amounts taken to equity are transferred to the income statement when the hedged 
transaction affects the income statement, such as when the hedged financial 
income or financial expense is recognised or when a forecast sale occurs. 
 
 
If the forecast transaction or firm commitment is no longer expected to occur, 
amounts previously recognised in equity are transferred to the income statement. 
If the hedging instrument expires or is sold, terminated or exercised without 
replacement or rollover, or if its designation as a hedge is revoked, amounts 
previously recognised in equity remain in equity until the forecast transaction 
or firm commitment occurs. 
 
 
Property, plant and equipment 
Plant and equipment is stated at cost, net of accumulated depreciation and/or 
accumulated impairment losses, if any. 
 
 
Depreciation is calculated on a straight-line basis over the useful life of the 
asset as follows: 
 
 
  *      Fixtures and furniture - 3 to 23 years. 
 
 
 
An item of property, plant and equipment is derecognised upon disposal or when 
no future economic benefits are expected from its use or disposal. Any gain or 
loss arising on derecognition of the asset (calculated as the difference between 
the net disposal proceeds and the carrying amount of the asset) is included in 
the income statement in the year the asset is derecognised. 
 
 
The assets' residual values, useful lives and methods of depreciation are 
reviewed at each financial year end, and adjusted prospectively if appropriate. 
 
 
Leases 
The determination of whether an arrangement is, or contains a lease is based on 
the substance of the arrangement at inception date: whether fulfilment of the 
arrangement is dependent on the use of a specific asset or assets or the 
arrangement conveys a right to use the asset. 
 
 
Company as a lessor: 
Leases where the Company does not transfer substantially all the risks and 
benefits of ownership of the asset are classified as operating leases. Initial 
direct costs incurred in negotiating an operating lease are added to the 
carrying amount of the leased asset and recognised over the lease term on the 
same bases as rental income. Contingent rents are recognised as revenue in the 
period in which they are earned. 
 
 
Investment properties: 
Investment properties are measured initially at cost, including transaction 
costs. The carrying amount includes the cost of replacing part of an existing 
investment property at the time that cost is incurred if the recognition 
criteria are met and excludes the costs of day to day servicing of an investment 
property. Subsequent to initial recognition, investment properties are stated at 
fair value, which reflects market conditions at the balance sheet date. Gains or 
losses arising from changes in the fair values of investment properties are 
included in the Consolidated Income Statement in the year in which they arise. 
 
 
Investment properties are derecognised when either they have been disposed of or 
when the investment property is permanently withdrawn from use and no future 
economic benefit is expected from its disposal. The difference between the net 
disposal proceeds and the carrying amount of the asset is recognised in the 
income statement in the period of derecognition. 
 
 
Intangible assets: 
Intangible assets acquired separately are measured on initial recognition at 
cost. The cost of intangible assets acquired in a business combination is fair 
value as at the date of acquisition. Following initial recognition, intangible 
assets are carried at cost less any accumulated amortisation and any accumulated 
impairment losses. 
 
 
The useful lives of intangible assets are assessed as either finite or 
indefinite. 
 
 
Intangible assets with finite lives are amortised over the useful economic life 
and assessed for impairment whenever there is an indication that the intangible 
asset may be impaired. The amortisation period and the amortisation method for 
an intangible asset with a finite useful life are reviewed at least at each 
financial year end. Changes in the expected useful life or the expected pattern 
of consumption of future economic benefits embodied in the asset is accounted 
for by changing the amortisation period or method, as appropriate, and are 
treated as changes in accounting estimates. The amortisation expense on 
intangible assets with finite lives is recognised in the income statement in the 
expense category consistent with the function of the intangible asset. 
 
 
Impairment of assets: 
The Company assesses at each reporting date whether there is an indication that 
an asset may be impaired. If any indication exists, or when annual impairment 
testing for an asset is required, the Company estimates the asset's recoverable 
amount. 
 
 
Goodwill 
Goodwill is tested for impairment annually (as at 31 December) and when 
circumstances indicate that the carrying value may be impaired. 
 
 
Impairment is determined for goodwill by assessing the recoverable amount of 
each cash-generating unit (or group of cash-generating units) to which the 
goodwill relates. Where the recoverable amount of the cash-generating unit is 
less than their carrying amount an impairment loss is recognised. Impairment 
losses relating to goodwill cannot be reversed in future periods. 
 
 
Cash and short-term deposits: 
Cash and short-term deposits in the balance sheet comprise cash at banks and on 
hand and short-term deposits with an original maturity of three months or less. 
 
 
For the purpose of the consolidated cash flow statement, cash and cash 
equivalents consist of cash and short-term deposits as defined above, net of 
outstanding bank overdrafts. 
 
 
Trade and other receivables: 
Trade receivables, which generally have 30-90 days' terms, are recognised and 
carried at original invoice amount less an allowance for any uncollectible 
amounts. Provision is made when there is objective evidence that the Company 
will not be able to collect the debts. Each debt is considered on an individual 
basis. The risk assessment is based on the expected financial position of the 
tenant as determined by management, based on their experience of the 
relationship with that tenant. Bad debts are written off when identified. 
 
 
Provisions: 
Provisions are recognised when the Company has a present obligation (legal or 
constructive) as a result of a past event, it is probable that an outflow of 
resources embodying economic benefits will be required to settle the obligation 
and a reliable estimate can be made of the amount of the obligation. Where the 
Company expects some or all of a provision to be reimbursed, for example under 
an insurance contract, the reimbursement is recognised as a separate asset but 
only when the reimbursement is virtually certain. The expense relating to any 
provision is presented in the income statement net of any reimbursement. If the 
effect of the time value of money is material, provisions are discounted using a 
current pre-tax rate that reflects, where appropriate, the risks specific to the 
liability. Where discounting is used, the increase in the provision due to the 
passage of time is recognised as a finance cost. 
 
 
Earnings per share: 
Basic earnings per share amounts are calculated by dividing net profit for the 
period by the weighted average number of Ordinary Shares outstanding during the 
year. 
 
 
NOTE 3:- SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS 
 
 
The preparation of the Company's consolidated financial statements requires 
management to make judgments, estimates and assumptions that affect the reported 
amounts of revenues, expenses, assets and liabilities, and the disclosure of 
contingent liabilities, at the reporting date. However, uncertainty about these 
assumptions and estimates could result in outcomes that require a material 
adjustment to the carrying amount of the asset or liability affected in future 
periods. 
 
 
Judgments: 
In the process of applying the Company's accounting policies, management has 
made the following judgments which have the most significant effect on the 
amounts recognised in the consolidated financial statements: 
 
 
Operating lease commitments-Company as Lessor 
The Company has entered into commercial property leases on its investment 
property portfolio. The Company has determined, based on an evaluation of the 
terms and conditions of the arrangements, that it retains all the significant 
risks and rewards of ownership of these properties and so accounts for the 
contracts as operating leases. 
 
 
Estimates and assumptions: 
The key assumptions concerning the future and other key sources of estimation 
uncertainty at the balance sheet date, that have a significant risk of causing a 
material adjustment to the carrying amounts of assets and liabilities within the 
next financial year are discussed below. 
 
 
Revaluation of investment properties: 
The Company carries its investment properties at fair value, with changes in 
fair values being recognised in the Consolidated Income Statement. The Company 
engages independent valuation specialists to determine fair value. For the 
investment properties, the valuer used a valuation technique based on an income 
approach model as well as comparable market data. 
 
 
The determined fair value of the investment properties is most sensitive to the 
estimated yield. The key assumptions used to determine the fair value of the 
investment property, are further explained in Note 5. 
 
 
 
 
Impairment of goodwill and intangible assets: 
The Company's impairment test for goodwill is based on value in use calculations 
that use a discounted cash flow model. The cash flows are derived from the 
budget for the next five years and do not include restructuring activities that 
the Group is not yet committed to or significant future investments that will 
enhance the asset base of the cash generating unit being tested. The recoverable 
amount is most sensitive to the discount rate used for the discounted cash flow 
model as well as the expected future cash-inflows and the growth rate used for 
extrapolation purposes. 
 
 
Deferred tax assets: 
Deferred tax assets are recognised for all unused tax losses to the extent that 
it is probable that taxable profit will be available against which the losses 
can be utilised. Significant management judgment is required to determine the 
amount of deferred tax assets that can be recognised, based upon the likely 
timing and the level of future taxable profits together with future tax planning 
strategies. 
 
 
Fair value of financial instruments: 
Where the fair value of financial assets and financial liabilities recorded in 
the balance sheet cannot be derived from active markets, they are determined 
using valuation techniques including the discounted cash flows model. The inputs 
to these models are taken from observable markets where possible, but where this 
is not feasible, a degree of judgment is required in establishing fair values. 
The judgments include considerations of inputs such as liquidity risk, credit 
risk and volatility. Changes in assumptions about these factors could affect the 
reported fair value of financial instruments. 
 
 
NOTE 4:- STANDARDS ISSUED BUT NOT YET EFFECTIVE 
 
 
The IASB and IFRIC have issued the following standards and interpretations with 
an effective date after the date of these financial statements: 
 
 
IFRS 3R Business Combinations and IAS 27R Consolidated and Separate Financial 
Statements 
The revised standards were issued in January 2008 and become effective for 
financial years beginning on or after 1 July 2009. IFRS 3R introduces a number 
of changes in the accounting for business combinations occurring after this date 
that will impact the amount of goodwill recognised, the reported results in the 
period that an acquisition occurs, and future reported results. IAS 27R requires 
that a change in the ownership interest of a subsidiary (without loss of 
control) is accounted for as an equity transaction. Therefore, such transactions 
will no longer give rise to goodwill, nor will it give rise to a gain or loss. 
Furthermore, the amended standard changes the accounting for losses incurred by 
the subsidiary as well as the loss of control of a subsidiary. Other 
consequential amendments were made to IAS 7 Statement of Cash Flows, IAS 12 
Income Taxes, IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 28 
Investment in Associates and IAS 31 Interests in Joint Ventures. The changes by 
IFRS 3R and IAS 27R will affect future acquisitions or loss of control and 
transactions with minority interests. The standards may be early applied. 
However, the Group does not intend to take advantage of this possibility. 
 
 
 
 
 
 
IAS 1 Revised Presentation of Financial Statements 
The revised Standard was issued in September 2007 and becomes effective for 
financial years beginning on or after 1 January 2009. The Standard separates 
owner and non-owner changes in equity. The statement of changes in equity will 
include only details of transactions with owners, with non-owner changes in 
equity presented as a single line. In addition, the Standard introduces the 
statement of comprehensive income: 
it presents all items of recognised income and expense, either in one single 
statement, or in two linked statements. The Group is still evaluating whether it 
will have one or two statements. 
 
 
IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial 
Statements - Puttable Financial Instruments and Obligations Arising on 
Liquidation 
These amendments to IAS 32 and IAS 1 were issued in February 2008 and become 
effective for financial years beginning on or after 1 January 2009. The 
revisions provide a limited scope exception for puttable instruments to be 
classified as equity if they fulfil a number of specified features. The 
amendments to the standards will have no impact on the financial position or 
performance of the Group, as the Group has not issued such instruments. 
 
 
IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged 
Items 
These amendments to IAS 39 were issued in August 2008 and become effective for 
financial years beginning on or after 1 July 2009. The amendment addresses the 
designation of a one-sided risk in a hedged item, and the designation of 
inflation as a hedged risk or portion in particular situations. It clarifies 
that an entity is permitted to designate a portion of the fair value changes or 
cash flow variability of a financial instrument as hedged item. The Group has 
concluded that the amendment will have no impact on the financial position or 
performance of the Group, as the Group has not entered into any such hedges. 
 
 
The following standards and interpretations have also been issued or amended 
which have an effective date after the date of these financial statements. In 
the opinion of management, these standards will have no material impact on the 
Group. 
 
 
IFRS2 - Share based payment 
 
 
IFRS 8 - Operating segments 
 
 
IAS 23 - Borrowing cost capitalization 
 
 
IFRIC 12 - Service Concession Arrangement 
 
 
IFRIC 13 - Customer Loyalty Programs 
 
 
IFRIC 14 - IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding 
Requirements and their interaction 
 
 
IFRIC 15 - Agreements for the Construction of Real Estate 
 
 
IFRIC 16 - Hedges of a Net investment in a Foreign Operation 
 
 
IFRIC 17 - Distributions of Non-Cash Assets to Owners 
 
 
IFRIC 18 - Investments in a foreign operation 
 
 
 
 
Improvements to IFRSs 
The Group has not yet adopted the following amendments and anticipates that 
these changes will have no material effect on the financial statements. 
 
 
  *  IFRS 7 Financial Instruments: Disclosures: 
 
Removal of the reference to 'total interest income' as a component of finance 
costs. 
 
 
  *  IAS 8 Accounting Policies, Change in Accounting Estimates and Errors: 
 
Clarification that only implementation guidance that is an integral part of an 
IFRS is mandatory when selecting accounting policies. 
 
 
  *  IAS 10 Events after the Reporting Period: 
 
Clarification that dividends declared after the end of the reporting period are 
not obligations. 
 
 
  *  IAS 16 Property, Plant and Equipment: 
 
Items of property, plant and equipment held for rental that are routinely sold 
in the ordinary course of business after rental, are transferred to inventory 
when rental ceases and they are held for sale. 
 
 
  *  IAS 18 Revenue: 
 
Replacement of the term 'direct costs' with 'transaction costs' as defined in 
IAS 39. 
 
 
  *  IAS 19 Employee Benefits: 
 
Revised the definition of 'past service costs', 'return on plan assets' and 
'short term' and 'other long-term' employee benefits. Amendments to plans that 
result in a reduction in benefits related to future services are accounted for 
as curtailment. Deleted the reference to the recognition of contingent 
liabilities to ensure consistency with IAS 37. 
 
 
  *  IAS 27 Consolidated and Separate Financial Statements: 
 
When a parent entity accounts for a subsidiary at fair value in accordance with 
IAS 39 in its separate financial statements, this treatment continues when the 
subsidiary is subsequently classified as held for sale. 
 
 
  *  IAS 34 Interim Financial Reporting: 
 
Earnings per share is disclosed in interim financial reports if an entity is 
within the scope of IAS 33. 
 
 
  *  IAS 39 Financial Instruments: Recognition and Measurement: 
 
Changes in circumstances relating to derivatives are not reclassifications and 
therefore may be either removed from, or included in, the 'fair value through 
profit or loss' classification after initial recognition. Removed the reference 
in IAS 39 to a 'segment' when determining whether an instrument qualifies as a 
hedge. Require the use of the revised effective interest rate when remeasuring a 
debt instrument on the cessation of fair value hedge accounting. 
 
 
  *  IAS 40 Investment Property: 
 
Revision of the scope, such that property under construction or development for 
future use as an investment property is classified as investment property. If 
fair value cannot be reliably determined, the investment under construction will 
be measured at cost until such time as fair value can be determined or 
construction is complete. Also, revised of the conditions for a voluntary change 
in accounting policy to be consistent with IAS 8 and clarified that the carrying 
amount of investment property held under lease is the valuation obtained 
increased by any recognised liability. 
 
 
NOTE 5:- INVESTMENT PROPERTIES 
 
 
+--------------------------------------------------+------------+------------+ 
| EUR '000                                           |    2008    |    2007    | 
+--------------------------------------------------+------------+------------+ 
|                                                  |            |            | 
+--------------------------------------------------+------------+------------+ 
| As at 1 January                                  |    953,440 |    358,618 | 
+--------------------------------------------------+------------+------------+ 
|                                                  |            |            | 
+--------------------------------------------------+------------+------------+ 
| Addition from acquisition of subsidiaries        |          - |    560,026 | 
+--------------------------------------------------+------------+------------+ 
| Addition in the year                             |      5,660 |     39,897 | 
+--------------------------------------------------+------------+------------+ 
| Disposal in the year (1)                         |    (6,687) |          - | 
+--------------------------------------------------+------------+------------+ 
| Fair value adjustments                           |  (103,519) |    (5,101) | 
+--------------------------------------------------+------------+------------+ 
|                                                  |            |            | 
+--------------------------------------------------+------------+------------+ 
| As at 31 December                                |    848,894 |    953,440 | 
+--------------------------------------------------+------------+------------+ 
 
 
 
 
(1) In December 2008, the tenant in a property located in Augsburg, held by a 
subsidiary of the Company (Deutsch Real Estate AG - "DRE") exercised his 
purchasing option and acquired the property for a purchase price of EUR6.6 million 
(the asset's fair value as of the sale date). The proceeds from the sale were 
used to repay the property's debt. The transaction was completed in the first 
quarter of 2009. 
 
 
The investment properties are stated at fair value, which has been determined 
based on valuations performed by independent valuers and partly updated 
internally. Properties with a value of EUR459 million were valued by independent 
appraisers and Properties with a value of EUR389.9 million were valued by 
independent appraisers as at July 2008 and October 2008 and their values were 
updated internally at the year- end date. The fair value represents the amount 
at which the assets could be exchanged between a willing buyer and willing 
seller in an arm's length transaction at the date of valuation, after proper 
marketing wherein the parties had each acted knowledgeably, prudently and 
without compulsion, issued by the International Valuation Standards Committee. 
The valuations are based on the income approach. In the case of completed and 
operating buildings, this approach involves a direct capitalisation of the net 
income and, in respect of buildings under renovation, a discounted cash flow 
analysis. 
 
 
The main input used was the yield based on market indicators.  The yields range 
is 5.9% to 10.6% (2007: 5.3% to 8.2%). 
A change in the yields by plus/minus 0.1% would have resulted in an approximate 
reduction of EUR11 million or an increase of EUR11.3 million in fair values. 
 
 
The fair value adjustments of the investment properties result in a temporary 
difference between the carrying value of the properties and their tax basis. 
Since it is the intention of management in case of disposal of some properties, 
to sell the companies holding these properties rather than the properties 
themselves, deferred taxes on the above differences have not been recorded in 
respect to those properties. 
 
NOTE 6:- GOODWILL AND OTHER INTANGIBLE 
ASSETS 
 
 
+------------------------------+-----------+----------+-----------+-----------+ 
| EUR '000                       |           |    IT    | Goodwill  |  Total    | 
|                              |           |Software  |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
|                              |           |          |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
| Cost:                        |           |          |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
| At 1 January 2007            |           |        - |         - |         - | 
+------------------------------+-----------+----------+-----------+-----------+ 
| Additions                    |           |        - |    6,004  |    6,004  | 
+------------------------------+-----------+----------+-----------+-----------+ 
| Acquisition of a subsidiary  |           |   1,724  |      311  |    2,035  | 
+------------------------------+-----------+----------+-----------+-----------+ 
| At 31 December 2007          |           |   1,724  |    6,315  |    8,039  | 
+------------------------------+-----------+----------+-----------+-----------+ 
|                              |           |          |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
| Additions                    |           |     133  |         - |         - | 
+------------------------------+-----------+----------+-----------+-----------+ 
| At 31 December 2008          |           |   1,857  |    6,315  |    8,039  | 
+------------------------------+-----------+----------+-----------+-----------+ 
|                              |           |          |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
| Amortisation and impairment: |           |          |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
| At 1 January 2007            |           |        - |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
| Acquisition of a subsidiary  |           |   1,672  |         - |    1,672  | 
+------------------------------+-----------+----------+-----------+-----------+ 
| Amortisation                 |           |      35  |      311  |      346  | 
+------------------------------+-----------+----------+-----------+-----------+ 
| At 31 December 2007          |           |   1,707  |      311  |    2,018  | 
+------------------------------+-----------+----------+-----------+-----------+ 
|                              |           |          |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
| Amortisation and impairment  |           |      22  |    4,004  |    4,026  | 
+------------------------------+-----------+----------+-----------+-----------+ 
| At 31 December 2008          |           |   1,729  |    4,315  |    6,044  | 
+------------------------------+-----------+----------+-----------+-----------+ 
|                              |           |          |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
| Net book value:              |           |          |           |           | 
+------------------------------+-----------+----------+-----------+-----------+ 
| At 31 December 2008          |           |      128 |     2,000 |     2,128 | 
+------------------------------+-----------+----------+-----------+-----------+ 
| At 31 December 2007          |           |       17 |     6,004 |     6,021 | 
+------------------------------+-----------+----------+-----------+-----------+ 
 
(1) The Company has performed an internal annual goodwill impairment test as 
at 31 December 2008. The goodwill subject to the impairment testing arose from a 
business combination which occurred in August 2007, when the Company acquired 
its subsidiary, Deutsch Real Estate AG ("DRE"). The impairment test included an 
assessment of the value in use of DRE as a cash generating unit, which equated 
to DRE's net assets market value as at 31 December 2008. This is the same 
testing methodology as was used for DRE's recoverable amount assessment on the 
business combination date. With respect to the said assessment findings, the 
Company has recognised an impairment loss relating to goodwill in the amount of 
EUR4 million. 
 
 
  In 2007, the Company acquired 80.33% of the voting shares of DRE for a 
consideration of EUR49,205,000. DRE is a public company traded on the Frankfurt 
Stock Exchange which owns a commercial real estate in Germany. The carrying 
value and the fair value of the identifiable assets and liabilities of DRE at 
the date of acquisition were as follows: 
+----------------------------------------------+---+-------------+----------+------------+ 
| EUR'000                                        |   | Fair value  |          |  Previous  | 
|                                              |   | recognised  |          |  carrying  | 
|                                              |   |     on      |          |   value    | 
|                                              |   |acquisition  |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
|                                              |   |             |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Investment property                          |   | 289,949     |          | 268,191    | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Cash and cash equivalents                    |   | 15,883      |          | 15,883     | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Receivables                                  |   | 8,619       |          | 8,619      | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Other current assets                         |   | 4,988       |          | 4,988      | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Financial assets                             |   | 2,050       |          | 1,925      | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Available-for-sale investments               |   | 14,466      |          | 14,466     | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Other non-current assets                     |   | 653         |          | 653        | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Deferred tax asset                           |   | 6,958       |          | 5,928      | 
+----------------------------------------------+---+-------------+----------+------------+ 
|                                              |   |             |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Total Assets                                 |   | 343,566     |          | 320,653    | 
+----------------------------------------------+---+-------------+----------+------------+ 
|                                              |   |             |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
|                                              |   |             |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Current liabilities                          |   | 36,238      |          | 33,277     | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Long-term loans                              |   | 242,351     |          | 242,351    | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Other long-term liabilities                  |   | 1,807       |          | 1,807      | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Deferred tax liability                       |   | 9,391       |          | 5,928      | 
+----------------------------------------------+---+-------------+----------+------------+ 
|                                              |   |             |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Total Liabilities                            |   | 289,787     |          | 283,363    | 
+----------------------------------------------+---+-------------+----------+------------+ 
|                                              |   |             |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Net assets                                   |   | 53,779      |          | 37,290     | 
+----------------------------------------------+---+-------------+----------+------------+ 
|                                              |   |             |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Net assets - Acquired (80.33%)               |   | 43,201      |          | 29,955     | 
+----------------------------------------------+---+-------------+----------+------------+ 
|                                              |   |             |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Goodwill arising on acquisition              |   | 6,004       |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
|                                              |   |             |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
| Total consideration (*)                      |   | 49,205      |          |            | 
+----------------------------------------------+---+-------------+----------+------------+ 
 
 (*)  The total consideration includes transaction costs amounting to 
EUR6,635,000. 
 
Purchase Price Components: 
 
 
+--------------------------------------------+------+------------+ 
| EUR '000                                     |      |            | 
+--------------------------------------------+------+------------+ 
|                                            |      |            | 
+--------------------------------------------+------+------------+ 
|            Net purchase price paid         |      |     33,406 | 
+--------------------------------------------+------+------------+ 
|            Transaction costs               |      |      6,444 | 
+--------------------------------------------+------+------------+ 
|            Future payments commitment      |      |      5,911 | 
+--------------------------------------------+------+------------+ 
|            Purchase of Deutsche RE shares  |      |      3,253 | 
|            from the public                 |      |            | 
+--------------------------------------------+------+------------+ 
|            Transaction costs (public       |      |        191 | 
|            shares)                         |      |            | 
+--------------------------------------------+------+------------+ 
|                                            |      |     49,205 | 
+--------------------------------------------+------+------------+ 
 
 
NOTE 7:-    OTHER FINANCIAL ASSETS AND FINANCIAL LIABILITIES 
 
 
+---------------------------------------------+----+------------+------------+ 
| EUR '000                                      |    |    31      |    31      | 
|                                             |    |  December  |  December  | 
|                                             |    |    2008    |    2007    | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Derivatives in effective hedges (1)         |    |          - |    11,051  | 
+---------------------------------------------+----+------------+------------+ 
| Deposits in escrow (2)                      |    |       454  |       431  | 
+---------------------------------------------+----+------------+------------+ 
| Available-for-sale investment - unquoted    |    |    10,493  |    14,466  | 
| equity shares (3)                           |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Long-term loan receivables (4)              |    |       333  |       323  | 
+---------------------------------------------+----+------------+------------+ 
| Other                                       |    |         4  |        94  | 
+---------------------------------------------+----+------------+------------+ 
| Total non-current financial assets          |    |    11,284  |    26,365  | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Total non-current financial liabilities -   |    |    31,377  |       960  | 
| Derivatives in effective hedges (1)         |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Other                                       |    |     1,781  |       642  | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |    33,158  |     1,602  | 
+---------------------------------------------+----+------------+------------+ 
 
 
 (1)    Derivatives in effective hedges: 
The Company uses an interest rate swap to hedge its risks associated with 
interest rate fluctuation. The swap transactions were designed to fully cover 
the interest rate risk arise from the Group's interest-bearing loans and 
borrowing. Those loans and borrowings bear interest at floating rates. Therefore 
the transactions are based on the Interest-bearing loans and borrowing notional 
schedules and the cash flows are expected in accordance with each interest 
payment date. It is the Company's policy not to trade in derivative financial 
instruments. Such financial derivatives are stated at fair value. 
 
 
(2)    Deposits in escrow: 
The Company made several deposits with a notary, in connection with certain 
acquisitions, until certain conditions subsequently are fulfilled. The deposits 
do not bear interest. 
 
 
(3)    Available-for-sale investment - unquoted equity shares: 
Mainly includes subsidiary's unquoted Ordinary shares in certain companies. 
These companies were not accounted for using the equity method because of lack 
of significant influence. The fair value of the unquoted shares as of 31 
December 2008 has been based on the market value of the affiliated and 
associated investments that invest in real estate. For a related sale during the 
reported period, see Note 20b. 
 
 
(4)These third party amounts have a fixed term until 30 June 2010. The 
receivables plus interest accrued are due for repayment on the agreed date. 
 
 
  Interest-bearing loans and borrowings: 
 
 
+------------------+----+-----------+---+-----------+----+-----------+------------+ 
| EUR '000           |    |Effective  |   | Maturity  |    |    31     |    31      | 
|                  |    | interest  |   |           |    | December  |  December  | 
|                  |    |   rate    |   |           |    |   2008    |    2007    | 
+------------------+----+-----------+---+-----------+----+-----------+------------+ 
|                  |    |    %      |   |           |    |           |            | 
+------------------+----+-----------+---+-----------+----+-----------+------------+ 
| Current:         |    |           |   |           |    |           |            | 
+------------------+----+-----------+---+-----------+----+-----------+------------+ 
| Bank overdrafts  |    |  * 3-5.7  |   |    On     | ** |  107,571  |     6,316  | 
| and current      |    |           |   |  demand   |    |           |            | 
| loans            |    |           |   |           |    |           |            | 
+------------------+----+-----------+---+-----------+----+-----------+------------+ 
| Non-current:     |    |           |   |           |    |           |            | 
+------------------+----+-----------+---+-----------+----+-----------+------------+ 
| Secured bank     |    |  * 3-5.7  |   |2013-2014  |    |  627,454  |   742,758  | 
| loans            |    |           |   |           |    |           |            | 
+------------------+----+-----------+---+-----------+----+-----------+------------+ 
 
 
*) Includes the effects of related interest rate swap as discussed hereunder. 
**) Includes reclassified long-term loans of EUR94.08 million (net of cost of 
raising loans), as a result of the breach in the LTV covenant, as discussed 
below. 
 
 
The Company's Subsidiaries have signed credit facility agreements with various 
credit institutions, mainly for a seven-year period. Based on the agreements, 
the loans bear a floating interest rate of Euribor plus a margin per annum 
(1%-1.25%) and are fixed by entering into an interest rate swap agreement. The 
loans are repaid in quarterly instalments while the amortisation varies from 0% 
to 1% per annum. 
 
 
As part of the loan agreements, lenders were generally provided with the 
following securities: 
 
 
a.    A charge over the Subsidiaries' total assets and all the rights to 
revenues and profits that will be received from the long-term lease agreement 
with the third party lessee. 
 
 
b.    A pledge over the Subsidiaries' shares, secured by a first charge over the 
properties. 
 
 
c.    Execution of a hedging transaction by the Subsidiaries, for the purpose of 
establishing fixed rate interest for the period of the loans. 
 
 
The credit facility agreements include several financial covenants that must be 
complied with. One of these is the Loan to Value covenant ("LTV") ratio, which 
ranges between 85% and 87.5% in relation to the Group's facilities.  The LTV 
ratio has been severely impacted by the decrease in valuations. A breach of any 
LTV covenant, which only arises when a formal notice is issued rather than when 
the LTV ratio is exceeded, may require the Group to reduce the loan outstanding 
or make other arrangements to cure the breach. 
 
 
In the event that a resolution to the breach is not achieved, an event of 
default occurs and the lender is entitled to repayment of its loan, although the 
lender usually has access only to the assets secured on the particular loan and 
not to other assets of the Group. 
 
 
Subsequent to the balance sheet date, a notice of LTV breach in respect of a EUR96 
million credit facility was received by certain subsidiaries of the Company in 
respect of valuations at 31 December 2008 subsequently received. Active 
discussions are being held with the relevant lender to remedy the breach. As a 
result, a long-term loan balance net of cost of raising loan of EUR 94 million is 
presented as a current liability. 
 
 
Since the Group is at the higher end of its LTV covenant ratio requirements in 
most of its credit facilities, a further increase in yields will result in the 
Group becoming exposed to a greater risk of LTV covenant breaches. 
 
 
The Group's steady cash flow meets the interest cover ratio and debt service 
cover ratio covenants. The Group's financing is non recourse to the parent 
Company. Some of Deutsche RE's debt, which relates to joint ventures with third 
parties, has recourse to Deutsche RE. The related total debt to Deutsche RE is 
EUR287 million but the maximum exposure of such recourse debt is EUR16 million. 
 
 
Five major credit facilities (Facilities A to E) are with one lender and three 
smaller credit facilities (Facilities F to H) are with a different lender. 
 
 
Facility A amounts to approximately EUR175 million fixed until mid 2013 with an 
average fixed interest rate of 5.1%. The LTV as at the year end was 84.9%, 
against a requirement of less than 85%. 
 
 
Facility B amounts to approximately EUR78 million fixed until mid 2013 with an 
average fixed interest rate of 5.1%. The LTV as at the year end was 78.4%, 
against a requirement of less than 87%. There is a cross default between 
Facilities A and B. 
 
 
Facility C amounts to approximately EUR103 million fixed until the early 2014 with 
an average fixed interest rate of 5.2%. The LTV at the year end was 83.6%, 
against a requirement of less than 85%. 
 
 
Facility D amounts to approximately EUR231 million fixed until October 2014 with 
an average fixed interest rate of 5.8%. The LTV as at the year end was 87.3%, 
against a requirement of less than 87.5%. 
 
 
Facility E amounts to approximately EUR96 million fixed until October 2014 with an 
average fixed interest rate of 5.7%. The facility is in breach of the LTV 
covenant following notification received from the bank. The LTV covenant was 
91.7%, against a requirement of less than 85%. The Company is in discussion with 
the lender regarding the breach. 
 
 
Facilities F and G amount to approximately EUR20.4 million fixed until 2011-2012 
with an average fixed interest rate of 5.8%. There are no LTV covenants for 
these shorter facilities and the cash flow is positive. 
 
 
Facility H amounts to approximately EUR26 million fixed until the end of 2010. 
There is no LTV covenant for this facility but the property has high vacancy and 
the current cash flow is negative. 
 
 
The Directors and the Asset Manager constantly review the Group's position in 
light of the market indicators and will seek to achieve suitable arrangements 
with the lenders to cure the breach notified to the Group. 
 
 
The total net cost of raising loans was EUR5.10 million. The net cost of raising 
loans is presented net of interest-bearing loans and borrowings. The costs of 
raising loans are amortised during the period of the loans (7 years). For the 
reporting period, the amortisation amounted to EUR1.20 million. 
 
 Fair values: 
 
Set out below is a comparison by class of the carrying 
amounts and fair value of the Group's financial instruments that are not 
measured at fair value in the financial statements. 
 
 
 
 
+--------------------------+--+-----------+-----------+--+--+-----------+-----------+ 
| EUR '000                   |  |    Carrying amount    |  |  |      Fair value       | 
+--------------------------+--+-----------------------+--+--+-----------------------+ 
|                          |  |    31     |    31     |  |  |    31     |    31     | 
|                          |  | December  | December  |  |  | December  | December  | 
|                          |  |   2008    |   2007    |  |  |   2008    |   2007    | 
+--------------------------+--+-----------+-----------+--+--+-----------+-----------+ 
|                          |  |           |           |  |  |           |           | 
+--------------------------+--+-----------+-----------+--+--+-----------+-----------+ 
| Financial assets and     |  |           |           |  |  |           |           | 
| liabilities              |  |           |           |  |  |           |           | 
+--------------------------+--+-----------+-----------+--+--+-----------+-----------+ 
| Long-term loans with     |  | (735,025) | (749,074) |  |  | (721,492) | (749,074) | 
| variable interest *)     |  |           |           |  |  |           |           | 
+--------------------------+--+-----------+-----------+--+--+-----------+-----------+ 
 
 
*)     Including current maturities at the amount of EUR107.57 million (2007: 
EUR3.76 million). 
 
 
The fair value of the financial assets and liabilities are included at the 
amount at which the instrument could be exchanged in a current transaction 
between willing parties, other than in a forced or liquidation sale. 
 
 
The following methods and assumptions were used to estimate the fair values: 
 
 
-      The carrying amount of cash and cash equivalents, trade receivables, 
other accounts receivable, investment in marketable securities, 
available-for-sale financial investments, derivatives in effective hedges, 
trade payables and other accounts payable approximate their fair value. 
 
 
-    The fair value of the balance of long term loans with floating interest 
type Euribor + X% margin is evaluated by reference to the movement in the X% 
margin between the market condition and the loan terms. 
 
Cash flow hedge 
The Company contracted a hedging instrument under the form of "interest rate 
swap" at a fixed rate of 3% to 5.7%. 
 
 
The interest rate swap agreements had been contracted in order to protect the 
Company from an increase in the interest rate. This interest rate swaps meets 
the criteria of hedging instrument under IAS 39 and is therefore reported at 
fair value through equity. 
 
 
The calculation of fair value for derivative financial instruments depends on 
the type of instruments: Derivative interest rate contracts - The fair value of 
derivative interest rate contracts (e.g., interest rate swap agreements) are 
estimated by discounting expected future cash flows using current market 
interest rates and yield curve over the remaining term of the instrument. 
 
 
 
 
  NOTE 8:- TRADE RECEIVABLES 
 
 
+---------------------------------------------+----+------------+------------+ 
| EUR '000                                      |    |    31      |    31      | 
|                                             |    |  December  |  December  | 
|                                             |    |    2008    |    2007    | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Trade receivables                           |    |     4,891  |     4,842  | 
+---------------------------------------------+----+------------+------------+ 
| Provision for doubtful accounts             |    |    (1,312) |    (1,071) | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |     3,579  |     3,771  | 
+---------------------------------------------+----+------------+------------+ 
 
 
Trade receivables are non-interest bearing and are generally 30-90 day terms. 
 
 
As at 31 December 2008, trade receivables at a nominal value of EUR1.31 million 
(2007: EUR1.07 million) were impaired and fully provided for. Movements in the 
provision for impairment of receivables were as follows: 
 
 
+--------------------------------------------------+------------+--------------+ 
| EUR '000                                           |            |Individually  | 
|                                                  |            |  impaired    | 
+--------------------------------------------------+------------+--------------+ 
|                                                  |            |              | 
+--------------------------------------------------+------------+--------------+ 
| At 1 January 2007                                |            |          10  | 
+--------------------------------------------------+------------+--------------+ 
| Acquisition of subsidiary                        |            |         560  | 
+--------------------------------------------------+------------+--------------+ 
| Charge for the year                              |            |         501  | 
+--------------------------------------------------+------------+--------------+ 
| At 31 December 2007                              |            |       1,071  | 
+--------------------------------------------------+------------+--------------+ 
|                                                  |            |              | 
+--------------------------------------------------+------------+--------------+ 
| Charge for the year                              |            |         875  | 
+--------------------------------------------------+------------+--------------+ 
| Utilised                                         |            |        (634) | 
+--------------------------------------------------+------------+--------------+ 
| At 31 December 2008                              |            |       1,312  | 
+--------------------------------------------------+------------+--------------+ 
 
 
 
 
As at 31 December, the ageing analysis of trade receivables was as follows: 
 
 
+------+--+--------+----------+---------+---------+----------+----------+---------+ 
|      |  |        |          |            Past due but not impaired              | 
+------+--+--------+----------+---------------------------------------------------+ 
| EUR    |  | Total  | Neither  |  < 30   |30 - 60  | 60 - 90  |90 - 120  |  >120   | 
| '000 |  |        |past due  |  days   |  days   |  days    |  days    |  days   | 
|      |  |        |   nor    |         |         |          |          |         | 
|      |  |        |impaired  |         |         |          |          |         | 
+------+--+--------+----------+---------+---------+----------+----------+---------+ 
|      |  |        |          |         |         |          |          |         | 
+------+--+--------+----------+---------+---------+----------+----------+---------+ 
| 2008 |  |  3,579 |      790 |   1,181 |     133 |       54 |       36 |   1,385 | 
+------+--+--------+----------+---------+---------+----------+----------+---------+ 
| 2007 |  |  3,771 |      831 |   1,706 |     137 |      329 |      172 |     596 | 
+------+--+--------+----------+---------+---------+----------+----------+---------+ 
 
 
Management believes the risk inherent in the "neither past due nor impaired" 
balance is not high given the history and the strong tenant base of the 
Company. 
 
 NOTE 9:-    PREPAID EXPENSES AND OTHER CURRENT ASSETS 
 
 
 
 
 
+---------------------------------------------+----+------------+------------+ 
| EUR '000                                      |    |    31      |    31      | 
|                                             |    |  December  |  December  | 
|                                             |    |    2008    |    2007    | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Prepaid expenses                            |    |      3,494 |      2,507 | 
+---------------------------------------------+----+------------+------------+ 
| Service charge                              |    |      1,728 |        596 | 
+---------------------------------------------+----+------------+------------+ 
| Receivables due on disposal (1)             |    |      6,632 |          - | 
+---------------------------------------------+----+------------+------------+ 
| Deposit for loan repayment (1)              |    |      7,417 |          - | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |     19,271 |      3,103 | 
+---------------------------------------------+----+------------+------------+ 
 
 
(1)    Due to the disposal of an investment property in December 2008. For 
further information, see 
 Note 5(1). 
 
 
NOTE 10:-    CASH AND CASH EQUIVALENTS 
 
 
+---------------------------------------------+----+------------+------------+ 
| EUR '000                                      |    |    31      |    31      | 
|                                             |    |  December  |  December  | 
|                                             |    |    2008    |    2007    | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Cash at banks and on hand                   |    |     22,132 |     21,646 | 
+---------------------------------------------+----+------------+------------+ 
| Short-term deposits                         |    |     78,578 |    115,863 | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |    100,710 |    137,509 | 
+---------------------------------------------+----+------------+------------+ 
 
 
Cash at banks earn interest at floating rates based on daily bank deposit rates. 
Short-term deposits are made for varying periods of between one day and three 
months, depending on the immediate cash requirements of the Company and earn 
interest at the respective short-term deposit rates. 
 
 
 
NOTE 11:-    SHARE CAPITAL 
 
 a. The authorised share capital of the Company is represented by an 
unlimited number of Ordinary Shares with no par value. 
The issued share capital of the Company is represented by 275,000,000 Ordinary 
Shares with no par value. 
 
 
b.    Dividend policy: 
The Directors expect to pay interim and final dividends in respect of each 
financial year at an aggregate rate of approximately 85% of the Group's 
consolidated profits after tax, excluding property revaluations or disposal 
profits or losses, accrued carried interest entitlements and any exceptional 
items. 
 
 
There can be no guarantee as to the amount of any dividend payable by the 
Company. The Group may reinvest the proceeds from any disposals of assets if the 
Board considers that appropriate and suitable opportunities exist. 
 
 
c.  Distributable reserve: 
At the Annual General Meeting of the Company, held on 24 June, 2008, a 
resolution was passed to redesignate all of the share premium account of the 
Company as a distributable reserve to be used for all purposes permitted by The 
Companies (Guernsey) Law, 1994, including the purchase of the Company's own 
shares and the payment of dividends. 
 
 
From 1 July 2008, Guernsey Company Law has been revised and a new solvency test 
has been introduced to determine whether a company is in a position to 
distribute funds to shareholders. 
 
 
Dividends payable on Ordinary Shares: 
 
 
+--------------------------------------------------+--------------+------------+ 
|                                                  |  Number of   |   Total    | 
|                                                  |  Ordinary    |            | 
|                                                  |    Shares    |            | 
+--------------------------------------------------+--------------+------------+ 
|                                                  |              |  EUR '000    | 
+--------------------------------------------------+--------------+------------+ 
| First interim dividend 2007                      |              |            | 
+--------------------------------------------------+--------------+------------+ 
| Paid 17 October 2007                             |155,000,000   |  3,720     | 
+--------------------------------------------------+--------------+------------+ 
|                                                  |              |            | 
+--------------------------------------------------+--------------+------------+ 
| Second interim dividend 2007                     |              |            | 
+--------------------------------------------------+--------------+------------+ 
| Paid 30 April 2008 (1)                           |275,000,000   |   7,288    | 
+--------------------------------------------------+--------------+------------+ 
|                                                  |              |            | 
+--------------------------------------------------+--------------+------------+ 
| First interim dividend 2008                      |              |            | 
+--------------------------------------------------+--------------+------------+ 
| Paid 30 October 2008 (2)                         |275,000,000   |  6,325     | 
+--------------------------------------------------+--------------+------------+ 
|                                                  |              |            | 
+--------------------------------------------------+--------------+------------+ 
| Second interim dividend 2008                     |              |            | 
+--------------------------------------------------+--------------+------------+ 
| Payable 24 April 2009 (3)                        |275,000,000   |   2,750    | 
+--------------------------------------------------+--------------+------------+ 
| (not accrued for in these financial statements)                 |            | 
+--------------------------------------------------+--------------+------------+ 
 
(1)    On 31 March 2008, the Board of Directors of the Company declared a second 
interim dividend of 2.65 cents per Ordinary Share, in respect of the year ended 
31 December 2007. 
 
 
(2)On 22 September 2008, the Company declared a first interim dividend of 2.30 
cents per Ordinary Share, in respect of the year ended 31 December 2008. 
 
 
 (3)On 7 April 2009, the Company declared a second interim dividend of 1 cent 
per Ordinary Share, in respect of the year ended 31 December 2008. 
 
 
e. Net unrealised gain/(loss) reserve: 
The reserve records fair value changes on available-for-sale financial assets 
net of deferred taxes. Also recorded as a separate component is the effective 
portion of the gain or loss on hedging instruments in cash flow hedges net of 
deferred taxes. 
 
 
NOTE 12:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES 
 
 
+----------------------------+----------------+----+------------+----------+ 
| EUR '000                     |                |    |    31      |    31    | 
|                            |                |    |  December  |December  | 
|                            |                |    |    2008    |  2007    | 
+----------------------------+----------------+----+------------+----------+ 
|                            |                |    |            |          | 
+----------------------------+----------------+----+------------+----------+ 
| Assets management company  |                |    |      (845) |  (1,547) | 
+----------------------------+----------------+----+------------+----------+ 
| Other related parties -    |                |    |      (251) |  (4,890) | 
| liabilities                |                |    |            |          | 
+----------------------------+----------------+----+------------+----------+ 
| Other related parties -    |                |    |       113  |      52  | 
| assets                     |                |    |            |          | 
+----------------------------+----------------+----+------------+----------+ 
 
 
Assets Manager and significant shareholder: 
As at 31 December 2008, Summit Real Estate Holdings Ltd. held 18.18% of the 
Company's issued share capital through a wholly owned Dutch subsidiary 
(Unifinter administratiekantoor B.V.), which is under the control of Zohar Levy, 
a Director of the Company. Summit Management Company S.A., a company controlled 
by Zohar Levy, was appointed as an Asset Manager on 19 May 2006. 
 
 
Subsequent to the balance sheet date, in January 2009, Summit Real Estate 
Holdings Ltd., through its wholly owned Dutch subsidiary (Unifinter 
administratiekantoor B.V.), purchased an additional 32,465,278 Ordinary Shares 
in the Company, which increased its holding rights to 29.98% of the Company's 
issued share capital. As a result of this purchase, Summit Real Estate Holdings 
Ltd. became a significant influential entity over the Company. 
 
 
Terms and conditions of the agreements with the Asset Manager 
The management agreement sets out the responsibilities of the Asset Manager 
including identifying and executing investment opportunities in accordance with 
the Group's investment strategy and providing other property advisory and 
portfolio management services. Under this agreement, the Asset Manager receives 
an annual basic management fee of 0.5% of the aggregate value of the assets 
under management. To meet set up costs, the Asset Manager received an advance of 
EUR300,000 deductible from the basic fee over the first three years of the term. 
 
 
The agreement is for an initial term of 10 years that will continue thereafter 
for successive 3-year periods, unless terminated by a 12-month advance notice 
prior to the end of the initial term or any extension thereafter. In any case of 
termination prior to the end of the initial term, the asset manager will be 
compensated by an amount equivalent to the management fees expected to be paid 
by the end of the initial term assuming the agreement was not terminated. 
 
 
The articles of association of Summit Finance Limited, the Company's direct 
subsidiary, contain the provisions which relate to the Asset Manager's carried 
interest entitlement. The Asset Manager holds special B shares in Summit Finance 
Limited which will give it the right to receive a dividend if the Company 
distributes a cash return on shareholders' equity of at least 8% in any 
financial year ("the Hurdle"). The Asset Manager will be entitled to receive 25% 
of the cash return in that year in excess of the Hurdle. To date the hurdle has 
not been met. 
 
 
If the Company has not achieved a cash return on shareholders' equity of at 
least 8% in any previous year ("a Shortfall"), the carried interest will not be 
paid until the Shortfall has been made up. 
 
 
The entitlement will be paid by way of dividend on the special shares. To the 
extent that Summit Finance Limited has insufficient distributable profits, the 
balance shall be paid out of the Summit Finance Limited's distributable profits 
as a first call on them in future years. The Asset Manager may elect to either 
receive the amount that Summit Finance Limited cannot distribute by way of an 
interest free loan until the dividend is paid or can elect to receive the 
dividend plus interest. If an exit event occurs (these are a change of control 
of the Company, the Company selling all or substantially all of its properties, 
any of the principal subsidiaries being wound-up, the Group being in material 
breach of the Portfolio Management Agreement), the Asset Manager can require the 
Company or Summit Finance Limited to buy its shares for a price equal to the 
value of the basic management fees that would have been paid to the Asset 
Manager plus the carried interest had the Portfolio Management Agreement not 
been terminated on the basis that the portfolio remained the same during the 
term of the portfolio Management Agreement. The carried interest entitlement 
shall be valued at either the sum that would have been paid had the whole 
portfolio been sold at the latest valuation point or had it been retained and 
its rent increased by 1.5% per annum for the remainder of the term of the 
Portfolio Management Agreement. 
 
 
The special B shares do not confer any voting rights save in certain 
circumstances to protect the special rights attached to them and/or to protect 
the entitlement where Summit Finance Limited is wound up. 
 
 
Compensation of key management personnel of the Company: 
 
 
+-------------------------+--------------------+----+------------+----------+ 
|                         |                    |    |  for the year ended   | 
+-------------------------+--------------------+----+-----------------------+ 
| Transactions            |      EUR '000        |    |    31      |    31    | 
|                         |                    |    |  December  |December  | 
|                         |                    |    |    2008    |  2007    | 
+-------------------------+--------------------+----+------------+----------+ 
| Directors fees          |                    |    |       176  |     198  | 
+-------------------------+--------------------+----+------------+----------+ 
| Management fee          |                    |    |     4,817  |   3,610  | 
+-------------------------+--------------------+----+------------+----------+ 
 
 
 
 
NOTE 13:- TRADE AND OTHER PAYABLES 
 
 
+---------------------------------------------+----+------------+----------+ 
| EUR '000                                      |    |    31      |    31    | 
|                                             |    |  December  |December  | 
|                                             |    |    2008    |  2007    | 
+---------------------------------------------+----+------------+----------+ 
|                                             |    |            |          | 
+---------------------------------------------+----+------------+----------+ 
| Accrued expenses                            |    |      4,506 |    6,558 | 
+---------------------------------------------+----+------------+----------+ 
| Accrued interest                            |    |      5,185 |    7,900 | 
+---------------------------------------------+----+------------+----------+ 
| Service charge prepayments                  |    |      1,047 |      397 | 
+---------------------------------------------+----+------------+----------+ 
| Acquisition costs to be paid                |    |      2,767 |    6,741 | 
+---------------------------------------------+----+------------+----------+ 
| VAT                                         |    |      1,216 |    1,148 | 
+---------------------------------------------+----+------------+----------+ 
| Accruals for maintenance                    |    |      2,814 |    1,733 | 
+---------------------------------------------+----+------------+----------+ 
| Other trade payables                        |    |      5,028 |    5,571 | 
+---------------------------------------------+----+------------+----------+ 
|                                             |    |     22,563 |   28,315 | 
+---------------------------------------------+----+------------+----------+ 
 
 
 
 
NOTE 14:- OPERATING EXPENSES 
 
 
+---------------------------------------------+-----+-----------+-----------+ 
|                                             |     |  for the year ended   | 
+---------------------------------------------+-----+-----------------------+ 
| EUR '000                                      |     |    31     |    31     | 
|                                             |     | December  | December  | 
|                                             |     |   2008    |   2007    | 
+---------------------------------------------+-----+-----------+-----------+ 
|                                             |     |           |           | 
+---------------------------------------------+-----+-----------+-----------+ 
| Operational expenses                        |     |   12,940  |    5,868  | 
+---------------------------------------------+-----+-----------+-----------+ 
| Land tax payment                            |     |    2,372  |    1,357  | 
+---------------------------------------------+-----+-----------+-----------+ 
| Staff costs                                 |     |      385  |      283  | 
+---------------------------------------------+-----+-----------+-----------+ 
| Reimbursements of service charges(a)        |     |   (8,772) |   (5,328) | 
+---------------------------------------------+-----+-----------+-----------+ 
|                                             |     |    6,926  |    2,180  | 
+---------------------------------------------+-----+-----------+-----------+ 
 
(a) According to the lease agreements certain operational costs are reimbursed 
by the tenant. The reimbursements reflect the amounts that were recovered or to 
be recovered by the tenants in respect of the reported period. 
 
 
  NOTE 15:- GENERAL AND ADMINISTRATIVE EXPENSES 
 
 
+---------------------------------------------+------+----------+------------+ 
|                                             |      |  for the year ended   | 
+---------------------------------------------+------+-----------------------+ 
| EUR '000                                      |      |    31    |    31      | 
|                                             |      |December  |  December  | 
|                                             |      |  2008    |    2007    | 
+---------------------------------------------+------+----------+------------+ 
|                                             |      |          |            | 
+---------------------------------------------+------+----------+------------+ 
| Management fees                             |      |   4,817  |     3,610  | 
+---------------------------------------------+------+----------+------------+ 
| Directors' fees                             |      |     176  |       198  | 
+---------------------------------------------+------+----------+------------+ 
| Professional fees                           |      |    3,237 |      1,837 | 
+---------------------------------------------+------+----------+------------+ 
| Salaries                                    |      |    1,634 |      1,018 | 
+---------------------------------------------+------+----------+------------+ 
| Administration fees                         |      |      110 |        109 | 
+---------------------------------------------+------+----------+------------+ 
| Other fees                                  |      |    1,310 |        748 | 
+---------------------------------------------+------+----------+------------+ 
| Office expenses                             |      |      538 |        288 | 
+---------------------------------------------+------+----------+------------+ 
|                                             |      |   11,822 |      7,808 | 
+---------------------------------------------+------+----------+------------+ 
 
 
 
 
NOTE 16:- FINANCIAL EXPENSES AND FINANCIAL INCOME 
 
 
+---------------------------------------------+------+----------+------------+ 
|                                             |  for the year   | 
|                                             |      ended      | 
+---------------------------------------------+-----------------+ 
| EUR '000                                      |      |    31    |    31      | 
|                                             |      |December  |  December  | 
|                                             |      |  2008    |    2007    | 
+---------------------------------------------+------+----------+------------+ 
|                                             |      |          |            | 
+---------------------------------------------+------+----------+------------+ 
| Financial expenses                          |      |          |            | 
+---------------------------------------------+------+----------+------------+ 
| Interest on bank borrowings                 |      |  40,553  |    24,631  | 
+---------------------------------------------+------+----------+------------+ 
| Amortisation of cost of raising loan        |      |   1,197  |        404 | 
| finance                                     |      |          |            | 
+---------------------------------------------+------+----------+------------+ 
|                                             |      |  41,750  |    25,035  | 
+---------------------------------------------+------+----------+------------+ 
|                                             |      |          |            | 
+---------------------------------------------+------+----------+------------+ 
| Financial income                            |      |          |            | 
+---------------------------------------------+------+----------+------------+ 
| Interest income on short-term deposits      |      |   4,526  |     2,905  | 
+---------------------------------------------+------+----------+------------+ 
| Gain from pre-payment of a loan             |      |   5,404  |          - | 
+---------------------------------------------+------+----------+------------+ 
|                                             |      |   9,930  |     2,905  | 
+---------------------------------------------+------+----------+------------+ 
 
 
NOTE 17:- TAXATION 
Consolidated Income Statement 
 
 
+--------------------------------------------+------+----------+------------+ 
|                                            |      |  for the year ended   | 
+--------------------------------------------+------+-----------------------+ 
| EUR '000                                     |      |    31    |    31      | 
|                                            |      |December  |  December  | 
|                                            |      |  2008    |    2007    | 
+--------------------------------------------+------+----------+------------+ 
|                                            |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Current income tax:                        |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Current income tax charge                  |      |     279  |       135  | 
+--------------------------------------------+------+----------+------------+ 
|                                            |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Deferred income tax:                       |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Origination and reversal of temporary differences |   1,784  |    (4,798) | 
+---------------------------------------------------+----------+------------+ 
|                                            |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Income tax expense reported in the income         |   2,063  |    (4,663) | 
| statement                                         |          |            | 
+--------------------------------------------+------+----------+------------+ 
 
 
  Consolidated statement of changes in equity (see Note 11). 
 
 
Deferred income tax related to items charged or credited directly to equity 
during the year: 
 
 
+--------------------------------------------+------+----------+------------+ 
|                                            |      |  for the year ended   | 
+--------------------------------------------+------+-----------------------+ 
| EUR '000                                     |      |    31    |    31      | 
|                                            |      |December  |  December  | 
|                                            |      |  2008    |    2007    | 
+--------------------------------------------+------+----------+------------+ 
|                                            |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Net loss on revaluation of cash flow       |      |  (3,397) |      (784) | 
| hedges                                     |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Unrealised gain on available-for-sale      |      |     682  |          - | 
| financial assets                           |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
|                                            |      |  (2,715) |      (784) | 
+--------------------------------------------+------+----------+------------+ 
 
 
A reconciliation between the tax benefit in the statement of income and the 
profit before taxes multiplied by the current tax rate can be explained as 
follows: 
+--------------------------------------------+------+----------+------------+ 
|                                            |      |  for the year ended   | 
+--------------------------------------------+------+-----------------------+ 
| EUR '000                                     |      |    31    |    31      | 
|                                            |      |December  |  December  | 
|                                            |      |  2008    |    2007    | 
+--------------------------------------------+------+----------+------------+ 
|                                            |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Profit before taxes on income              |      | (93,118) |     1,179  | 
+--------------------------------------------+------+----------+------------+ 
|                                            |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Tax at the statutory tax rate in Germany   |      | (14,736) |       187  | 
| (15.825%)                                  |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Increase/(decrease) in respect of:         |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Losses for which deferred taxes were not   |      |   5,327  |       291  | 
| recorded                                   |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Effect of lower tax rate                   |      |  (2,678) |      (889) | 
+--------------------------------------------+------+----------+------------+ 
| Deferred taxes due to revaluation of       |      |  12,728  |     3,716  | 
| investment properties                      |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Non-deductible expense                     |      |   1,354  |        79  | 
+--------------------------------------------+------+----------+------------+ 
| Difference between tax and reporting GAAP  |      |  (1,645) |      (859) | 
+--------------------------------------------+------+----------+------------+ 
| Deferred tax assets reversed               |      |   1,623  |          - | 
+--------------------------------------------+------+----------+------------+ 
| Adjustments in respect to current income   |      |     116  |            | 
| tax of previous years                      |      |          |            | 
+--------------------------------------------+------+----------+------------+ 
| Other                                      |      |     (26) |       244  | 
+--------------------------------------------+------+----------+------------+ 
| Income tax expense/(benefit)               |      |    2,063 |    (4,663) | 
+--------------------------------------------+------+----------+------------+ 
 
 
   Deferred income tax: 
 
 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
|                           |  | Consolidated balance  |  |  Consolidated income  | 
|                           |  |        sheet          |  |      statement        | 
+---------------------------+--+-----------------------+--+-----------------------+ 
| EUR '000                    |  |    31     |    31     |  |    31     |    31     | 
|                           |  | December  | December  |  | December  | December  | 
|                           |  |   2008    |   2007    |  |   2008    |   2007    | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
|                           |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Deferred tax liability:   |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Revaluations of           |  |   (6,481) |   (9,738) |  |   (3,257) |   (3,202) | 
| investment properties to  |  |           |           |  |           |           | 
| fair value *)             |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Revaluation of financial  |  |     (805) |   (1,598) |  |         - |         - | 
| instruments               |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Other                     |  |     (793) |     (844) |  |      (51) |         - | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
|                           |  |   (8,079) |  (12,171) |  |   (3,308) |   (3,202) | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
|                           |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Deferred tax assets:      |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Revaluations of           |  |    1,599  |    2,817  |  |    1,218  |         - | 
| investment properties to  |  |           |           |  |           |           | 
| fair value                |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Revaluation of financial  |  |    2,185  |      254  |  |           |           | 
| instruments               |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Losses available for      |  |    3,807  |    7,037  |  |    3,230  |   (1,361) | 
| offset against future     |  |           |           |  |           |           | 
| taxable income            |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Provisions                |  |      263  |      809  |  |      546  |         - | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Other                     |  |    1,159  |    1,257  |  |       98  |     (235) | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
|                           |  |    9,013  |   12,174  |  |     5,092 |   (1,596) | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
|                           |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Deferred tax              |  |           |           |  |    1,784  |   (4,798) | 
| expense/(income)          |  |           |           |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
| Deferred net tax asset    |  |       934 |        3  |  |           |           | 
+---------------------------+--+-----------+-----------+--+-----------+-----------+ 
 
 
The Company has tax losses which arose in Germany of EUR63.2 million (2007: EUR 44.5 
million), among them tax losses in the amount of EUR24 million that are available 
indefinitely for offset against predicted future taxable profits in respect of 
the companies in which the losses arose. The Company has created deferred taxes 
assets in respect of these losses in the amount of EUR3.8 million. 
 
 
The Company is exempt from Guernsey taxation under the Income Tax (Exempt 
Bodies) (Guernsey) Ordinance, 1989. The exempt status results in no Guernsey 
taxation on income it receives, including interest and dividends received, or 
capital gains from the disposal of investments. A fixed annual fee of GBP600 is 
payable to the States of Guernsey in respect of this exemption. With effect from 
1 January 2008, Guernsey has restructured its tax regime, and the standard rate 
of income tax for Companies has moved to 0%.  The subsidiaries are subject to 
income taxes in their country of domicile in respect of their income. The 
ordinary corporate income tax rate in Germany as of 31 December 2007 is 15.825%. 
 
 
Based on the Company's expectations, future sales of investment properties will 
be implemented through a sale of the shares of the Company owning the assets, 
rather than a direct sale of the assets. Therefore, for the purpose of 
calculating deferred taxes the tax rate applicable to the sale of shares was 
used. This policy was implemented regarding all of the Company's holdings in 
investment properties, except for its holding through "Deutsche Real Estate AG" 
(a subsidiary purchased in August 2007), for which the Company does not expect 
future sales of its investment properties through a sale of the subsidiary's 
shares, as the legal structure was not designated for it. 
 
 
NOTE 18:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 
 
 
The Company's principal financial liabilities, other than derivatives, comprise 
mainly bank loans, and trade payables. The main purpose of these financial 
liabilities is to raise finance for the Company's operations. The Company has 
various financial assets such as trade receivables and cash and short-term 
deposit. 
 
 
The Company also enters into derivative transactions, primarily interest rate 
swaps. The purpose is to manage the interest rate risk arising from the 
Company's operations and its sources of finance. 
 
 
It is, and has been throughout 2008 and 2007 the Company's policy that no 
trading in derivatives shall be undertaken. 
 
 
The main risks arising from the Company's financial instruments are summarised 
below. 
 
 
Market risk: 
Market risk is the risk that the fair value of future cash flows of financial 
instruments will fluctuate because of changes in market prices. Market prices 
comprise two types of risks that are relevant to the Company:  interest rate 
risk, and other price risk. 
 
 
Interest rate risk: 
The Company's exposure to the risk of changes in market interest rates relates 
primarily to the Company's long-term debt obligations with floating interest 
rates. 
 
 
The Company's policy is to fix the interest rate of its bank loans by entering 
into variable interest rate loan agreements and by entering into interest rate 
swaps, in which the Company agrees to exchange, at specified intervals, the 
difference between fixed and variable rate interest amounts calculated by 
reference to an agreed-upon notional principal amount. At 31 December 2008, 
after taking into account the effect of interest rate swaps, the vast majority 
of the Company's borrowings are at a fixed rate of interest (2007: 100%). 
However, fixing the interest rates of bank loan agreements exposes the Company 
to market risk on changes in fair value of the swap. Currently management can 
not perform a sensitivity test to asses this risk. 
 
 
The Company's available funds are held in bank temporary deposits. A sensitivity 
test shows an increase/decrease of 15 basis points in the interest rate will 
impact the interest income on short-term deposits by EUR0.15 million 
income/expense, which has an immaterial effect on the Company. 
 
 
Other price risk: 
The Company's unlisted equity securities are susceptible to market price risk 
arising from uncertainties about future values of the investment securities. The 
Company manages the equity price risk through diversification and placing limits 
on individual and total equity instruments. Reports on the equity portfolio are 
submitted to the Company's senior management on a regular basis. The Company's 
Board of Directors reviews and approves all equity investment decisions. 
 
 
  Credit risk 
Credit risk is the risk that a counterparty will not meet its obligations under 
a financial instrument or customer contract, leading to a financial loss. The 
Company is exposed to credit risk from its operating activities (primarily for 
trade receivables). 
 
 
The Company performs ongoing credit evaluations of its lessees and purchasers 
and the financial statements include specific allowances for doubtful accounts 
which, in management's estimate, adequately reflect the underlying loss of debts 
whose collection is doubtful. 
 
 
Liquidity risk 
The Company monitors its risk to a shortage of funds using a recurring liquidity 
planning tool. 
 
 
The table below summarises the maturity profile of the Company's financial 
liabilities at 31 December 2008 based on contractual undiscounted payments. 
 
 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| EUR '000 Year ended 31      |  Up to   |  1-2    |  2-3    |  3-4    |  More    |  Total   | 
| December 2008             |  1 year  |  years  |  years  |  years  |  than 4  |          | 
|                           |          |         |         |         |  years   |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
|                           |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Interest bearing loans    |  142,894 |  45,078 |  62,835 |  58,144 |  587,212 |  896,163 | 
| and borrowings            |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Derivatives in effective  |    5,002 |   1,578 |   2,200 |   2,036 |   20,560 |   31,376 | 
| hedges                    |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Other liabilities         |  14,218  |       - |       - |       - |        - |  14,218  | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Trade and other payables  |  22,563  |       - |       - |       - |        - |  22,563  | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Payables to related       |   1,096  |       - |       - |       - |        - |   1,096  | 
| parties and shareholders  |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
|                           | 145,533  | 46,656  | 65,035  | 60,180  | 607,772  | 925,176  | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
|                           |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
|                           |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| EUR '000 Year ended 31      |  Up to   |  1-2    |  2-3    |  3-4    |  More    |  Total   | 
| December 2007             |  1 year  |  years  |  years  |  years  |  than 4  |          | 
|                           |          |         |         |         |  years   |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
|                           |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Interest bearing loans    |    6,276 |  53,989 |  75,285 |  52,747 |  758,678 |  946,976 | 
| and borrowings            |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Derivatives in effective  |       40 |      47 |      47 |      46 |      780 |      960 | 
| hedges                    |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Other liabilities         |  17,163  |       - |       - |       - |        - |  17,163  | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Trade and other payables  |  28,315  |       - |       - |       - |        - |  28,315  | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
| Payables to related       |   6,437  |       - |       - |       - |        - |   6,437  | 
| parties and shareholders  |          |         |         |         |          |          | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
|                           |  58,231  | 54,036  | 75,332  | 52,793  | 759,458  | 999,851  | 
+---------------------------+----------+---------+---------+---------+----------+----------+ 
 
 
Risks of property ownership 
Investments in property may be difficult, slow or impossible to realise. The 
Ordinary Shares will be subject to the general risks incidental to the ownership 
of real or heritable property, including changes in the supply of or demand 
for competing investment properties in an area, changes in interest rates and 
the availability of mortgage funds, changes in property tax rates, changes in 
landlord/tenant or planning laws, credit risks of tenants and borrowers and 
environmental factors. The marketability and value of any properties owned by 
the Group will, therefore, depend on many factors beyond the control of the 
Group and there is no assurance that there will be either a ready market for 
any properties held by the Group or that such properties will be sold at a 
profit or will yield a positive cash flow. 
 
 
Property investment risk 
The performance of the Group could be adversely affected by a downturn in the 
property market in terms of capital value or weakening of rental markets. In the 
event of default by a tenant, the Group may suffer a rental shortfall and incur 
additional costs including legal expenses and costs of maintaining, insuring and 
re-letting the property. Any future property market recession could materially 
adversely affect the value of the properties. 
 
 
Returns from an investment in property depend largely upon the amount of rental 
income generated from the property and the property value and management of the 
property, as well as changes in its market value. 
 
 
Rental income and the market value of properties are generally affected by 
overall conditions in the local economy, such as growth in GDP, employment 
trends, inflation and changes in interest rates. Changes in GDP may also 
impact employment levels, which in turn may impact demand for premises, 
especially for office space for commercial enterprises. Furthermore, movements 
in interest rates may also affect the cost of financing for real estate 
companies. 
 
 
Both rental income and property values may also be affected by other factors 
relevant to the real estate market, such as competition from other property 
owners, the perceptions of prospective tenants on the attractiveness, 
convenience and safety of properties, the inability to collect rents because of 
bankruptcy or insolvency of tenants or otherwise, the periodic need to renovate, 
repair or re-lease space and the cost thereof, the cost of maintenance and 
insurance, and increased operating costs. In addition, the owner must meet 
certain significant expenditures, including operating expenses, even if the 
property is vacant. 
 
 
Investments in property are relatively illiquid and more difficult to realise 
than investments in equities or bonds. 
 
Capital management 
The primary objective of the Company's capital management is to ensure that it 
maintains a strong credit rating and healthy capital ratios in order to support 
its business and maximise shareholder value. 
 
 
The Company manages its capital structure and makes adjustments to it, in light 
of changes in economic conditions. To maintain or adjust the capital structure, 
the Company may adjust the dividend payment to shareholders, return capital to 
shareholders or issue new shares. 
 
 
No changes were made in the objectives, policies or processes during the years 
end 31 December 2008 and 31 December 2007. 
  The gearing ratios at 31 December were as follows: 
 
 
+---------------------------------------------+----+------------+------------+ 
| EUR '000                                      |    |    31      |    31      | 
|                                             |    |  December  |  December  | 
|                                             |    |    2008    |    2007    | 
+---------------------------------------------+----+------------+------------+ 
| Non current interest bearing loans and      |    |   627,454  |   742,758  | 
| borrowings                                  |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Current liabilities                         |    |   107,571  |    58,231  | 
+---------------------------------------------+----+------------+------------+ 
| Less cash and short term deposits           |    |  (100,710) |  (137,509) | 
+---------------------------------------------+----+------------+------------+ 
| Net debt                                    |    |   634,315  |   663,480  | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Equity                                      |    |   181,243  |   327,927  | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Total capital                               |    |   815,558  |   991,407  | 
+---------------------------------------------+----+------------+------------+ 
|                                             |    |            |            | 
+---------------------------------------------+----+------------+------------+ 
| Gearing ratio                               |    |      77.8% |      66.9% | 
+---------------------------------------------+----+------------+------------+ 
 
 
NOTE 19:- COMMITMENTS AND CONTINGENCIES 
 
 
Operating Lease Commitments - Group as Lessor 
 
 
The Group has entered into commercial property leases on its investment property 
portfolio. These non-cancellable leases have remaining average terms of between 
1 and 17 years (the average non-cancellable lease length is 6.5 years). The 
majority of the leases include a clause to enable upward revision of the rental 
charge on an annual basis according to the CPI or the prevailing market 
conditions. 
 
 
Future minimum rentals receivable under non-cancellable operating leases as at 
31 December 2008 were as follows: 
+---------------------------------------------+----+------------+----------+ 
| EUR '000                                      |    |            |    31    | 
|                                             |    |            |December  | 
|                                             |    |            |  2008    | 
+---------------------------------------------+----+------------+----------+ 
| Within one year                             |    |            |  60,705  | 
+---------------------------------------------+----+------------+----------+ 
| After one year but not more than five years                   | 192,230  | 
+---------------------------------------------------------------+----------+ 
| More than five years but not more than ten years              | 110,570  | 
+---------------------------------------------------------------+----------+ 
| More than ten years but not more than seventeen years         |  21,491  | 
+---------------------------------------------------------------+----------+ 
|                                             |    |            | 384,996  | 
+---------------------------------------------+----+------------+----------+ 
 
 
 
 
NOTE 20:- SIGNIFICANT EVENTS DURING THE REPORTED PERIOD 
 
 
a. On 30 January 2008, the Company announced that one of its tenants, a German 
printing company that occupied two properties located in Cologne and 
Neu Munster, Germany, went into receivership. 
 
 
The Company had pre-existing bank guarantees and deposits in place. Most rental 
income for these properties has been fully paid or received through partial 
relation of the lessor lien. Never the less the bank guarantees 
were realised after the balance sheet date to cover any damages suffered by the 
company from the breach of the lease agreements. 
 
 
In July 2008, the Company reached an agreement with the bank, pursuant to which 
a subsidiary of the Company acquired the lessor bank debt of EUR11.6 million for a 
total amount of EUR6.6 million. The profit resulting from this said acquisition is 
approximately EUR5 million and is included in financial income (see note 16). 
 
 
Furthermore, on 5 September 2008, the Company had announced the signing of a new 
triple-net lease agreement for one of the properties above. The Company expects 
the income from this agreement will be similar to that from the original one. 
 
 
b. In May 2008, one of the Company's subsidiaries (Deutsch Real Estate AG 
("DRE") sold its share in a property located in Cologne for a total amount of EUR2 
million. The property was held through a joint venture in which Deutsche RE's 
share was 40%. The investment in this joint venture was accounted for as an 
available-for-sale financial investment. 
 
 
c. For an investment property sale during the year, see Note 5(1). 
 
 
d. For dividends distribution during the year, see Note 11(d). 
 
 
NOTE 21:- EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE 
 
 
a. Subsequent to the balance sheet date, in January 2009, Summit Real Estate 
Holdings Ltd., through its wholly owned Dutch subsidiary (Unifinter 
administratiekantoor B.V.), purchased an additional 32,465,278 Ordinary Shares 
in the Company, which increased its holding rights to 29.98% of the Company's 
issued share capital. 
 
 
b. Subsequent to the balance sheet date a notice of LTV breach in respect of a 
Company's EUR96 million credit facility was received by certain subsidiaries of 
the Company in respect of valuations at 31 December 2008 subsequently received. 
Currently discussions are being held with lenders to remedy the breach. 
 
 
c. For dividend declared subsequent to the balance sheet date, see Note 11d. 
 
 
d. Recommended offer: 
Shareholders should note an announcement outlining a recommended offer for the 
Company, which was released on 7 April 2009. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 FR UNRVRKSRSRAR 
 

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