IMMOEAST Annual Report 2006/07

The Development
of Business in
2006/07
Content
1. The Economic Environment 69
2. The Market Environment 70
3. Corporate Profile 71
4. Accounting and Valuation Policies 71
5. Results for the 2006/07 Financial Year 71
5.1. Earnings Position 71
5.2. Financial Position 81
5.3. Asset Position 82
6. Segment Reports 86
6.1. Segment CEE 86
6.2. Segment SEE 93
6.3. Segment CIS 97
1. The Economic Environment
The global economy was characterised by strong growth in 2006, which reinforced the positive
trend set in past years. Development in Asia was generally stable, while the USA experienced a
moderate slowdown and Western Europe reported an upturn. The momentum in Central and Eastern
Europe has now outpaced the western economies for a number of years, with strong investment
activity and rising disposable income driving growth by providing support for consumer spending.
Forecasts call for a continuation of this sound performance during the coming years, even through
individual countries such as Hungary or the Czech Republic may slowly approach the pace of development
in the west. Russia, Ukraine, Bulgaria and Romania are expected to maintain a level of
growth that exceeds the comparable figures for Western Europe. A comparison of the gross domestic
product per capita confirms the enormous pent-up demand in these countries: the average for all
OECD countries equalled USD 31,206, compared with USD 33,488 in the Euro zone and USD 44,187
in the USA. In contrast, Poland reported per capita GDP of USD 8,882, Russia USD 9,800, Bulgaria
USD 8,200 and Romania USD 7,700.
Interest rates
The low interest rate policy pursued up to 2004 – the key rate set by the US Federal Reserve was
1.6% at that time – has since been replaced by a gradual increase in interest rate levels, with the
three-month rate climbing to 5.25% by the end of 2006. Although a noticeable decline is not expected
during 2007, the actual results will depend on economic developments. The European Central
Bank gradually raised the prime rate from 2.5% in December 2005 to 3.5% in late 2006 and 4.0%
at the end of June 2007. In this operating environment the use of hedging instruments, the develop-
Report by the Executive Board 69
Highlights 2006/07
Business Model and Strategy
Portfolio Structure
Corporate Governance and Outlook
Property Portfolio
Development of Business
Consolidated Financial Statements
Service and Glossary
Economic upturn in Europe,
slight weakness in USA
Increase in interest rates