To our shareholders

Last year was full of challenges for the economy, politics and the general public. In the second half of the year, the economy began to recover from an unprecedented nosedive. Consequently, the fall in German industrial output slowed down to finish up at an overall figure of approximately 5%. However, this heavy economic burden has so far had relatively little effect on consumer behaviour in Germany, and companies have also managed to keep employment levels relatively stable.

This relative stability also benefited the Fair Value Group and we are happy to report that the occupancy rate in our portfolio increased again and was at 95.5% at the end of the year. The dramatic drop in interest rates also led to significantly lower net interest expenses than in the previous year, and amortisation payments have also contributed to this fall in interest expenses. Notable savings were also made with regard to the general administrative expenses and the property related costs were lower than we had forecasted. As a result, the adjusted consolidated net income pursuant to EPRA was € 6 million or 65 ct per share, which was considerably better than we had expected at the beginning of 2009.

However, the market valuations of properties and interest derivatives had a negative effect on the overall result at the end of the year. A positive aspect of the market valuations on December 31, 2009, was that some of the

properties were again already increasing in value, even though the proportionate valuation result for our real estate portfolio was on balance -3.4%. This was a considerably smaller fall than was the case in the previous year however (-6.4%). The market valuations of the interest derivatives also again placed a burden on the consolidated result and the consolidated equity position, although the negative effect was less than in the previous year. We consider the significantly smaller falls in the market valuations compared to the previous year to be a sign that a market bottom has been reached.

Due to the market valuations, the Group recorded a consolidated net loss in 2009 of € 2.9 million in 2009 (pursuant to IFRS), compared to € 13.3 million in the previous year. The consolidated equity was € 72.7 million on December 31, 2009, 4.7% below the previous year‘s figure.

The currently negative market values for the derivative financial instruments included in this position adds up to a proportionate amount for Fair Value of € 8.8 million. This amount will dissipate as the interest rate hedging transactions gradually expire, thus giving rise to an increase in the consolidated equity. The real estate related net assets of the Fair Value Group, pursuant to EPRA, amounted to € 81.5 million (€8.72 per share) on December 31, 2009, after adding up the derivative financial instruments.

The market valuation of the properties also had an impact on the non-consolidated financial statement of Fair Value REIT-AG on December 31, 2009, pursuant to the German Commercial Code (HGB). The extraordinary partial depreciation of directly owned properties and two participations resulted in a net loss of € 2.8 million, which was balanced by appropriations from retained earnings and from the capital reserve. There is thus no profit pursuant to HGB. As such a profit forms the basis for the distribution of dividends, there will be, as forecasted, no dividend payment made in 2010 for the past fiscal year.

From 2010 onwards, the cost cutting measures initiated last year for the general administrative expenses at the holding level will produce their full effect. Due to planned repair and letting costs, we are forecasting a somewhat lower EPRA result (45 ct per share) for the 2010 fiscal year than for the reported year, although the FFO (Funds from Operations) will remain relatively stable at 29 ct per share. It is expected that the EPRA result will increase in 2011 to 59 ct per share and the FFO to 32 ct per share.

Due to further savings in the cost structure of the participations as well as revenue inflows resulting from further portfolio adjustments, we are aiming to generate annual surpluses according to HGB that allow future payment of a dividend of 10 ct per share. The increasingly active investment market of the last few months should support this goal, as will the most recent rental successes in the portfolio, which provide evidence of the quality of our portfolio. The remaining vacancies in the Group on December 31, 2009, have now been halved and 75% of the upcoming lease renewals requiring action by 2012 have already been concluded early on.

We aim to use the solid basis provided by further stabilization in the capital markets to increase the size of the Fair Value Group by means of capital increases in kind and, subordinated, cash capital increases. We do not see an increase in size as being a goal in itself, but wish to use the size of the Group in order to further reduce operational costs per share and thereby sustainably increase the future dividend potential.

In this sense, transparent financial reporting has been an important issue since our stock market debut in autumn 2007. We are therefore very pleased about the outcome of a study published in December 2009 about the transparency of the financial reporting of fourty so called Immobilien-AGs (real estate companies) listed on the stock market, which placed the financial reporting of Fair Value REIT-AG in top position for the 2008 fiscal year with regard to meeting the information needs of investors and analysts.

The results of this study provide us with a great incentive to further improve our provision of information to you and we hope that we have made a further step in this direction with the 2009 Annual Report. We thank you for the confidence and trust you place in us and would be very happy to see you at this year’s Annual General Meeting, which will be held in Munich on May 17, 2010.