Germania Property Fund Info

•Because of buying below actual open market value and without having to pay additional fees for the property- business, the ZBI Germany One Fund can temporarily withstand a rental void up to c. 47 %.

•Even by selling, for example after ten years, with a loss of 20 % (which means sales returns 20 % below the historically low prices of today), still the 8% per annum would have been payed back already and the complete deposit could be paid back because of the generated amortization.

Management
•Peter Groner main associate of the ZBI Zentral Boden Immobilien Gruppe.•
For more than 20 years he has developed expertise for Store groups.•
Own holdings of more than 1.200 flats, c. 15 self-service stores, 3 commercial and residential buildings.
•Concession: According to the article of association § 5 section 7 the property must be brought into the fund for the pure cost of sales which are defined in the article, without charging a trading profit (Unique).
Concession: according to § 22 Right of the „First Look“ for the fund.

• Purchase of profitable commercial and residential property below open market value. After optimizing the property it is supposed to be sold for open market value as soon as there is a rise in demand.

•No charging of trading profit (Unique).

•„Blind-Pool“ - does it mean the property to be bought is not completely known at the time of subscription ?
Indeed – without Blind-Pool no bargains. But within the articles of association the criterias of investment are fixed and they are constructed to guarantee a rate above average. It is the only way to provide the liquidity for bargains.

•New: The investors decide right from the beginning which property will be bought. The management has only the right to suggest.

The fund is in accordance with the german Fondserlass (fund enactment) BFM (Ministry of Finance) from 20.10.03

•Purchase for maximum 10,5-times of the actual annual net rent provides c. 8 % p.a. return on rent referring to the total investment including all incidential expenses, without optimizing the rent by letting vacancies.

•Exception: if the return on rent is at least 15% below the testified open market return, the notarial purchase price may be up to 12-times of the actual annual net rent.

•Exception: For dwelling houses a maximum of 15% of vacancies can be added with the value of the average net rent to the years purchase.

•Distributions: Limited Partners will receive 100% of distributions until the Limited Partners have received their invested capital plus a preferred return of 8% per annum; thereafter distributions will be shared 50 : 50 between the Limited Partners and the General Partner with retroactive effect since the beginning of the association.

Positive expectations of the management and a high interest in lasting success, because there is no placement commisson for the management (only the reimbursement of the cost of sales are part of the articles of association.

No risks of development

•Cost of issue only c. 4,5 % of the total investment.

•Project related costs c. 3,8 % of the total investment (the same as with direct purchase) for extensive analysis of the project, costs for raising finance and guarantee , costs for the first lettings and analysis and choice of suggested property (less than 5 % are suitable to the criterias of investment given in the articles of association).

•Incidential expenses for: Notary , tax for the acquisition of land, land register office, expert and sales agent c. 7,2 % of the total investment.

• Minimum deposit: 100.000 Euro; The deposit must be divisable through 5.000 Euro. Payable pursuant to capital calls of the management.

•Last subscription: will be fixed at the meeting of the associates.

•„First Look“: Peter Groner has to show all property that suits the investment criterias to the fund, to prevent him from becoming a competitor to the fund.

•Partner liable to unlimited extend: Peter Groner is the General Partner (Partner liable to unlimited extend) with the background of his group of companies, where he holds the majority. He also stands as personal guarantor to the bank.

•No joint and several liabilty for borrowed capital between the several property companies and the holding. No liability of the investors for borrowed capital.

•Application of funds control through a law firm with accountants and tax consultants (GbR), with personal liabilty to unlimited extend.

• Intended holding period: Commercial property 3-5 years,
residential property 5-7years

•Selling of the property only with agreement of the members of the association.

•Selling of the interest: ZBI Funds buy deposits up to
10 % of the equity capital at 100 % face value respectivley maximum for the balanced book value. At any time it is possible to sell the interest to a third party.

•8 % preferred return per annum

at the first day of the month, three months after paying in.

Following an example to show that high return isn´t necessarily tied to a high risk:

How much profit out of the rentals is realistic?

Open market value*

(sale without time pressure nor financial pressure: Open market value* for a dwelling house, year in which constructed 1996
1.700.000 € for 1350 sq./m
= c. 1.260 € sq./m)
Open market value*:      1.700.000 € + incidential expenses:
c. 9,5 %:                              161.500 €

= Total:                        1.861.500 €

Rent 5,25 € per sq./m per month
= per annum: 85.050 €
This satisfies a profit out of rental of: 4,57 % p.a.
* According to german Baugesetzbuch.

ZBI-Buying below open market value

(sale with time pressure or financial pressure: 820.000 € for 1350 sq./m
= c. 607 € per sq./m
ZBI notarial purchase price:        820.000 €

+ incidential expenses

+ fund fees c.                                180.000 €

= Total:                                 1.000.000 €
Rent 5,25 € per sq./m per month
= per annum : 85.050 € This satisfies a profit out of rental of:
8,5 % p.a.

Purchase price including carrying charges and fund fees. € 1 Mio.

= running distributions to the investors

= Surplus without gain on disposal 37.500 € = 15 %

Construction year 1996

5.780 sq./m living area

156 parking spaces in an underground car park.

Purchase price for the fund
only : 631,49 € per sq./m living area including parking spaces

	Bought from the meeting of associates 26.05.03 for ZBI Professional I Fonds Leipzig, Reudnitzer Straße and Emilienhof Construction costs for the builder More than 1.450 € sq./m
Erste ZBI Gewerbeimmobilien AG & Co. KG Marktredwitz, Wunsiedle Price per sq./m: 1.283 Euro/ Years purchase 11,4-times	Property - Year of construction 2002 - Total usable floor space c. 1.595 sq./m - Self-service market with Schlecker, butcher, bakery and pet shop - Let: 100 % - Main tenant: Norma - Actual annual net rent c. 179.712 Euro - Parking spaces c. 90

Erste ZBI Wohnimmobilien AG & Co. KG
Leipzig, Hans-Driesch-Str.

Property: Price per sq,/m: 839 Euro

- Years purchase: 9,58-times (AANR)

- Year of construction c. 1995

-Commercial and residential house with

-Underground car park

- Total usable floor space c. 1.091 sq./m

- 12 units comm. and res.

- Let: 92 % (1 unit vacancy)

- Actual annual net rent c. 90.000 Euro

- Prospected annual net rent c. 96.800 Euro

- Purchase price c. 838 Euro per sq./m

All dwellings are with balcony

Erste ZBI Wohnimmobilien AG & Co. KG
Leipzig, Ludwig-Beck-Str. 8

Property:
- Year of construction c. 1900

- High-class redevelopment 1993-95

- 17 furnitered dwellings (1 and 2 rooms)

- Total usable floor space c. 746 sq./m

- Let 82 %

- Actual annual net rent c. 41.500 Euro

- Prospected annual net rent c. 65.000 Euro

- Very high-class furnitered dwellings with balconies

Price per sq./m: 957 € -Years purchase: 11-times of the

Property: Price per sq./m: 675 Euro

- Years purchase: 11-times (AANR)

- Year of construction c. 1954

and 1991 (New building Felixstr.2 a)

- Size c. 15.356 sq./m

- 3 blocks of flats

altogether 230 dwelling units

- Total usable floor space c. 12.601sq./m

- Let: 99 % (2 units vacancies)

- Actual annual net rent c. 780.260 Euro

- Prospected annual net rent c. 787.410 Euro

- Purchase price 674,55 per sq./m

• The investors will join a Limited Partnership. They are only liable for their subscription capital.

– There will be no obligation to pay up further capital -

•The Limited Partners will have distribution priority to the General Partner.

•The investors will decide at the associates meeting how to deal with the liquidity after the withdrawals of the preferred return of 8% per annum and 1% per annum for the General Partner.

•The Limited Partners will have distribution priority until they received 100% of their capital plus the preferred return of 8% per annum.

ZBI Germany One Fund is drafted as asset managing AG & Co. KG, with income out of business (Gewerbebetrieb)


• Common legal consequences	When an Irish or British investor joints a partnership as a joint venturerer, taxation of permanent establishments applies. This means, that, when an Irish or British investor joins a German business partnership (limited partnership) as a Limited Partner or atypical dormant partner for example, the profits made by this company are firstly liable for German business tax, then the investor´s share of the profits is liable to German income tax.

•Business Tax The share of the business profit that is allocated to own property investments can be deducted according to § 9 Nr. 1 GewStG from the taxable business profit. As taxation in Germany is ruled by German law, all the known criteria will be examined in this context.	•Income Tax The income tax, which an Irish / British investor has to pay in Germany, is measured according to the Grundtabelle, but it consists of at least 25% according to § 50 Abs. 3 EstG. It has been doubted whether this rule is legal according to EU law. There is a suit of law pending with the European Court of Justice aiming to have this rule declared contrary to EU law. Even though there are in my opinion considerable doubts concerning the legality of this rule, its future can not be foretold. Therefore § 50 Abs. 3 EstG, as described above, remains relevant until further notice. The business tax paid by the business partnership can be deducted *from the income tax payable by foreign investors according to § 35 Abs. 1 Satz 1 EstG (see Littman, EstG, § 50 Rdz 40).*	•Taxation of income from rents Concerning commercial income from rents Art XII (4) Double Taxation Treaty (DTT) GB and Art IX (4) DTT IR state that Art XII DTT GB and IX DTT IR with their special ruling concerning commercial income from rents have precedence over Art III DTT GB and Art III DTT IR detailing all other sorts of business profits. This is also true when investments are made in property located within the territory of the Federal Republic of Germany, as the Federal Republic of Germany enjoy the right to tax profits from the leasing of such objects according to Art XII (1) DTT GB resp. Art IX (1) DTT IR.
•Taxation of Capital Gains The taxation of capital gains of business partnerships takes place in the state where the permanent establishment is situated. •Specific features according to the DDT Great Britain The DDT Great Britain follows the above mentioned specifications. Art XVIII (1) a) of the treaty states that income tax paid in the Federal Republic of Germany can be allowed as credit against the tax which the United Kingdom levies on these business profits. If and to what extend the United Kingdom taxes business profits made in the Federal Republic anew, is ruled by British law and has to be decided by a colleague in the relevant country. •Specific features according to the DDT Ireland The above mentioned features of the DTT Great Britain apply correspondingly.	•Specific features concerning investors from the Channel Islands or the Isle of Man The above mentioned specifications are also valid for investors from this area. If and to what extend investors have to pay tax on business profits made in Germany in their home country is ruled by local law and has to be decided by a colleague in the relevant country. There is no German legal foundation for the crediting of taxes paid in the Federeal Republic, nor does the treaty say anything concerning this matter.