SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 11-K

þ		ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

CRESCENT REAL ESTATE EQUITIES, LTD. 401(k) PLAN

(Full title of plan)

CRESCENT REAL ESTATE EQUITIES COMPANY

777 Main Street, Suite 2100
Fort Worth, Texas 76102
(Name of issuer and address of principal executive offices)

 

 

CRESCENT REAL ESTATE EQUITIES, LTD. 401(k) PLAN

FINANCIAL STATEMENTS

Years Ended December 31, 2006 and 2005

Table of Contents

Report of Independent Registered Public Accounting Firm			1
Financial Statements:
Statements of Net Assets Available for Benefits			2
Statements of Changes in Net Assets Available for Benefits			3
Notes to Financial Statements			4
Supplemental Schedule:
Form 5500, Schedule H, Line 4i — Schedule of Assets (Held at End of Year)			12

NOTE:		All other schedules required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted since they are either not applicable or the information required therein has been included in the financial statements or notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustees of the
Crescent Real Estate Equities, Ltd. 401(k) Plan

We have audited the accompanying statements of net assets available for benefits of the Crescent Real Estate Equities, Ltd. 401(k) Plan as of December 31, 2006 and 2005, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Crescent Real Estate Equities, Ltd. 401(k) Plan as of December 31, 2006 and 2005, and the changes in its net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of Form 5500, Schedule H, Line 4i – Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/ Whitley Penn LLP

Fort Worth, Texas
June 22, 2007

CRESCENT REAL ESTATE EQUITIES, LTD. 401(k) PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

		December 31,
		2006				2005
Assets
Investments, at fair value:
Shares of registered investment companies:
Mutual funds		$	15,372,778			$	12,840,898
Pooled separate accounts			12,829,803				9,515,079
Common collective trusts			3,248,242				2,817,533
Participant loans			696,507				582,809
Common stock, Crescent Real Estate Equities Company			4,495,105				4,129,883
			36,642,435				29,886,202
Participant contributions receivable			—				87,371
Company contributions receivable			40,188				590,490
Total Assets			36,682,623				30,564,063
Liabilities
Excess contributions payable			11,296				42,409
Net assets reflecting all investments at fair value			36,671,327				30,521,654
Adjustment from fair value to contract value for fully benefit-responsive investment contracts			51,558				44,725
Net assets available for benefits		$	36,722,885			$	30,566,379

CRESCENT REAL ESTATE EQUITIES, LTD. 401(k) PLAN

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

		Year Ended December 31,
		2006				2005
Additions to net assets:
Investment income:
Net realized and unrealized gains on investments		$	2,171,332			$	1,964,288
Interest and dividends			1,259,882				909,958
Total investment income			3,431,214				2,874,246
Contributions:
Participants			3,455,052				2,887,140
Company			2,103,135				1,854,625
Rollovers			331,307				573,173
Total contributions			5,889,494				5,314,938
Total additions to net assets			9,320,708				8,189,184
Deductions from net assets:
Benefits paid to participants			3,068,220				1,704,010
Fund management expenses			95,982				98,944
Total deductions from net assets			3,164,202				1,802,954
Net increase in net assets available for benefits			6,156,506				6,386,230
Net assets available for benefits at beginning of year			30,566,379				24,180,149
Net assets available for benefits at end of year		$	36,722,885			$	30,566,379

CRESCENT REAL ESTATE EQUITIES, LTD. 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

December 31, 2006 and 2005

1. Description of the Plan

Years of		Percentage
Service		Matched
Less than 2			25	%
2			50	%
3			75	%
4			100	%

CRESCENT REAL ESTATE EQUITIES, LTD. 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)

1. Description of the Plan — continued

Participant Accounts

Each participant account is credited with the participant’s contributions and allocations of (a) the Company’s contributions and (b) Plan earnings. Allocations are based on participant contributions or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

Forfeited Accounts

Forfeiture balances are held in a forfeiture account for twelve months, after which forfeiture balances attributed to the Company’s matching contributions can be applied to pay expenses under the Plan. Forfeitures not used to pay expenses shall be applied to reduce future Company contributions. Forfeitures during the years ended December 31, 2006 and 2005, were $34,675 and $43,073, respectively. Forfeitures used to pay plan expenses for the years ended December 31, 2006 and 2005, were $264 and $4,596, respectively. Company forfeitures used to reduce Company contributions for the years ended December 31, 2006 and 2005, were $38,064 and $18,746, respectively.

Vesting

The participant’s voluntary contributions to the Plan plus actual earnings or losses thereon are fully vested at all times. The participant’s share of the Company’s matching contributions and earnings or losses thereon vest in accordance with the following schedule:

Number of
Completed Years of			Vesting
Service			Percentage
1				20	%
2				40	%
3				60	%
4				80	%
5				100	%

Company contributions become fully vested in the event of retirement at age 65, disability, or death of a participant.

Investment Options

Upon enrollment in the Plan, a participant may direct employer and employee contributions of any percentage in a variety of investment options, which vary in degree of risk. Participants may change their investment options daily. A list of available investment options into which a participant may direct their employee and employer contributions is contained in the supplemental schedule to this report titled “Form 5500, Schedule H, Line 4i — Schedule of Assets (Held at Year End).”

CRESCENT REAL ESTATE EQUITIES, LTD. 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)

1. Description of the Plan — continued

Participant Loans

Participants may borrow from their fund accounts, a minimum of $1,000 and a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loans are available to all participants. Loan transactions are treated as a transfer to (from) the investment fund from (to) the participant loan fund. Loan terms range from one to five years or a reasonable period of time greater than five years for the purchase of a principal residence. The loans are secured by the balance in the participant’s account and bear interest at the prime rate listed in the Wall Street Journal plus 2%. The interest rate must be one that a bank or other professional lender would charge for making a loan in a similar circumstance. The interest rates at December 31, 2006 and 2005 were 10.25% and 9.00%, respectively. Principal and interest have a defined repayment period, which provides for payments to be made not less frequently than quarterly.

Payment of Benefits

Upon termination of service due to death, disability, retirement, or termination of employment, a participant or designated beneficiary is entitled to receive in a lump sum the value of the participant’s vested interest in his or her account as defined by the Plan. Payment shall be made as soon as practicable following the participant’s normal retirement date, disability, termination of employment or death, as the case may be.

Payment of benefits to participants with balances less than $5,000 will be made in a lump-sum distribution.

As of December 31, 2006 and 2005, there were no unpaid benefit payment requests.

2. Summary of Significant Accounting Policies

Basis of Accounting

The financial statements of the Plan are presented on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

CRESCENT REAL ESTATE EQUITIES, LTD. 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)

2. Summary of Significant Accounting Policies — continued

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Plan Administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from these estimates.

As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP), investment contracts held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. The plan invests in investment contracts through a collective trust. As required by the FSP, the Statement of net assets available for benefits reflect the fair value of the investment in the collective trust as well as the adjustment of the investment in the collective trust from fair value to contract value relating to the investment contracts. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.

Investment Valuation and Income Recognition

The Plan’s investments are stated at fair value as of the end of the Plan year. Shares of registered investment companies are valued at quoted market prices, which represent the net asset value of shares held by the Plan at year end. The Company shares are valued using quoted prices. Participant loans are valued at cost, which approximates fair value.

The net realized and unrealized gains and losses on investments includes realized gains and losses on sales of investments during the year and unrealized increases or decreases in the market value of investments held at year end. Purchases and sales of investments are reflected on a trade-date basis. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. Capital gain distributions are included in dividend income. The Plan’s investments are generally subject to market or credit risks customarily associated with debt and equity investments.

Certain funds in which the Plan invests utilize various investment strategies including the use of derivative investments. Derivatives are used to hedge against currency and interest rate fluctuations. Derivative investments underlying the funds are stated at fair market value. The Plan’s exposure is limited to the fund(s) utilizing such derivative investments.

Contributions

Contributions from the participants and the Company are accrued in the period in which they are deducted in accordance with salary deferral agreements and become obligations of the Company, as determined by the Plans Administrator.

CRESCENT REAL ESTATE EQUITIES, LTD. 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)

2. Summary of Significant Accounting Policies — continued

Payment of Benefits

Benefits are recorded when paid.

Plan Expenses

Employees of the Company perform certain administrative functions with no compensation from the Plan. To the extent possible, Plan administrative costs are paid by any available forfeitures. Any remaining expenses will be paid by the Company (See Note 6). These administrative expenses are not reflected in the accompanying financial statements. Under the terms of the Plan, the Plan is not responsible for reimbursing the Company for any fees paid by the Company.

3. Investments

Individual investments with market values greater than 5% of net assets available for benefits at December 31, are as follows:

		2006
T. Rowe Price Mid-Cap Growth		$	5,563,964
Vanguard Wellington			4,765,798
Crescent Real Estate Equities Company			4,495,105
Principal Stable Value Fund *			3,299,800
Vanguard U.S. Growth Fund			3,296,162
Principal Small Company Blend Account			2,675,843
Principal Large Cap Stock Index			2,107,029
Principal International Stock Account			2,094,004
Principal Bond & Mortgage Account			1,972,067
Principal International Emerging Markets Account			1,894,475

		2005
T. Rowe Price Mid-Cap Growth		$	4,812,199
Crescent Real Estate Equities Company			4,129,883
Vanguard Wellington			3,698,354
Vanguard U.S. Growth Fund			3,222,985
Principal Stable Value Fund *			2,862,258
Principal Small Company Blend Account			2,210,375
Principal Bond & Mortgage Account			1,815,219
Principal Large Cap Stock Index			1,582,416
Principal International Stock Account			1,544,019

At December 31, 2006 and 2005, the percentage of the Plan’s net assets held in the Crescent Real Estate Equities Company (“Crescent”) common stock was 12.2% and 13.8% respectively. The Plan holds 227,600 allocated shares of Crescent’s common stock on December 31, 2006, which represents approximately 0.22% of the 102,754,654 Crescent common shares outstanding on that date.

CRESCENT REAL ESTATE EQUITIES, LTD. 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)

3. Investments — continued

During 2006 and 2005, the net realized and unrealized gains (losses) on investments were as follows:

		2006				2005
Mutual funds		$	330,291			$	616,015
Pooled separate accounts			1,766,189				956,098
Common collective trusts			118,688				92,363
Common stock			(43,836	)			299,812
		$	2,171,332			$	1,964,288

4. Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their entire account balance.

5. Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated October 18, 2002, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the “Code”) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan has been amended since receiving the determination letter. The Company believes that the Plan, as amended, is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt as of December 31, 2006.

6. Related Party Expenses

Some administrative expenses and accounting fees of the Plan are paid by the Company. The Company paid $37,014 and $21,476 for administrative and accounting fees on behalf of the Plan during the years ended December 31, 2006 and 2005, respectively. Under the terms of the Plan, the Plan is not responsible for reimbursing the Company for any fees paid by the Company.

CRESCENT REAL ESTATE EQUITIES, LTD. 401(K) PLAN
NOTES TO FINANCIAL STATEMENTS (continued)

7. Reconciliation of Financial Statements to Form 5500

The following is a reconciliation of the net assets available for benefits per the financial statements to the Form 5500:

		December 31,
		2006
Net assets available for benefits, per the financial statements		$	36,722,885
Less adjustment from fair value to contract value for fully benefit-responsive contracts			(51,558	)
Net assets available for benefits, per the Form 5500		$	36,671,327

8. Subsequent Event

Subsequent to year end, Crescent, the sole Parent of the Company entered into a definitive Agreement and Plan of Merger (the “Agreement”) whereby Crescent will be acquired by a third party. The impact to the Plan related to the Agreement is unknown at this time. Due to the proposed merger, beginning May 23, 2007 through the closing of the merger, plan participants will no longer be allowed to purchase Crescent common stock through the Plan.

SUPPLEMENTAL SCHEDULE

CRESCENT REAL ESTATE EQUITIES, LTD. 401(k) PLAN

FORM 5500, SCHEDULE H, LINE 4i — SCHEDULE OF ASSETS (HELD AT END OF YEAR)

December 31, 2006

EIN: 75-2526839

Plan: 001

				(c) Description				(e) Current
(a)		(b) Identity of Issuer		of Investments		(d) Cost		Value
		T. Rowe		Mutual Fund — T. Rowe Price Mid-Cap Growth		**	$	5,563,964
		Vanguard		Mutual Fund — Vanguard Wellington		**		4,765,798
		Vanguard		Mutual Fund — Vanguard U.S. Growth Fund		**		3,296,162
*		Principal		Principal Stable Value Fund		**		3,248,242
*		Principal		Pooled Separate Account — Small Company Blend Account		**		2,675,843
*		Principal		Pooled Separate Account — Large Cap Stock Index		**		2,107,029
*		Principal		Pooled Separate Account — Principal International Stock Account		**		2,094,004
*		Principal		Pooled Separate Account — Bond & Mortgage Account		**		1,972,067
*		Principal		Pooled Separate Account — International Emerging Markets Account		**		1,894,475
*		Principal		Mutual Fund — American Century Value Investment Fund		**		1,146,865
*		Principal		Pooled Separate Account — Bond Emphasis Balanced Account		**		890,522
		Putnam		Mutual Fund — Putnam Equity Income A Fund		**		599,989
*		Principal		Pooled Separate Account — Principal Lifetime 2030 Separate		**		357,123
*		Principal		Pooled Separate Account — Principal Financial Group, Inc.		**		345,179
*		Principal		Pooled Separate Account — Principal Govt. Securities Account		**		204,278
*		Principal		Pooled Separate Account — Principal Lifetime 2020 Separate		**		178,022
*		Principal		Pooled Separate Account — Principal Lifetime 2040 Separate		**		61,159
*		Principal		Pooled Separate Account — Principal Lifetime 2010 Separate		**		29,136
*		Principal		Pooled Separate Account — Principal Lifetime 2050 Separate		**		18,843
*		Principal		Pooled Separate Account — Principal Lifetime Strategic Income Separate		**		2,123
*		Crescent Real Estate
		Equities Company		Common shares (par value $.01)		**		4,495,105
*		Participant loans		Participant loans (6.00% to 11.50%)		-0-		696,507
							$	36,642,435

SIGNATURE

     Pursuant to the requirements of the Securities and Exchange Act of 1934, the trustees (or other persons who administer the Plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.