Stable development of the rental sector and, even more importantly, savings in planned rental costs and general administration expenses have helped us to exceed our earnings targets considerably. Having raised our forecast for adjusted consolidated net income from € 4.2 million to € 5.1 million in November 2010 to reflect market changes and extraordinary effects, we can now actually report net income of € 5.8 million or € 0.62 per share for the whole of 2010.

Compared to the previous year (€ 6.0 million), this “operational” consolidated net income like the occupancy rate remained almost unchanged. The slight decrease

is mainly related to the sale of four properties. 

The improved market valuation of the property portfolio played a decisive role in the reconciliation between the adjusted and unadjusted IFRS consolidated net

income in 2010. On balance, there was a valuation loss of around 2%, which was mainly the result of temporary vacancies in individual properties. Compared with the previous year (– 4%), the valuation result improved by 50%.

Overall, consolidated net income reached € 2.2 million or € 0.24 per share, representing an increase of € 5.1 million compared to a net loss of € 2.9 million in the previous year. As a result, net asset value (NAV) increased by around 3% to € 8.00 per share (previous year: € 7.78).

Due to the transfer of the four properties sold in the previous year and the sale of a participation in an associated company, the Group’s financial liabilities decreased by 9%. At the same time, equity pursuant to § 15 of the REIT Act rose to 49.6% of immovable assets. This equates to an increase of over 4 percentage points compared to the previous year (45.5%). There was positive development in the Group’s cash and cash equivalents, which increased by € 3.7 million (or 44%) to around € 12.0 million.

Retained earnings reported in the non-consolidated financial statements of Fair Value REIT-AG under the German Commercial Code, which are of crucial importance for the determination of dividends, reached € 1.0 million. We have thus achieved our dividend payout objective. The Management Board and Supervisory Board will propose to the Annual General Meeting on May 31, 2011 a dividend payment of € 0.10 representing a payout ratio of 93.5% of retained earnings pursuant to the Commercial Code.

The German economy is expected to grow by 2.0% and 2.2% in 2011 and 2012, respectively. This means that at present, Germany is the fastest growing economy in the Eurozone. Demand for office rental space is likely to increase in line with continuing economic growth, allowing for moderate rent increases. Based on positive consumer sentiment, retail market rents are expected to rise.

However, these forecasts have been based on the assumption that the natural

disaster in Japan will not have a serious negative impact on global economic

development – for example, by disrupting global supply chains, which could

adversely affect growth rates in Germany. So far, the demand for products and

services has not been disrupted.

The positive economic outlook in Germany should help to reduce existing and future vacant spaces in our property portfolio. As in previous years, we have forecast costs expected to be incurred in letting the entire existing vacancy in the property portfolio. In addition, our forecasts take into account re-letting and new lease expenses related to expiring lease agreements as well as maintenance costs. Overall, the expiring lease volume in 2011 and 2012 will amount to around 15% of Fair Value’s share of the annual rent, which is spread across about 150 lease agreements. Through successes in tenant retention and letting we aim to ensure a high level of profitability of Fair Value’s property portfolio also in the coming years.

In 2011, revenues are expected to decrease initially below the level of 2009 and 2010 due to reported property sales by subsidiaries. However, the high portfolio occupancy rate and the weighted remaining term of the leases still offer a high level of stability. Assuming that we manage to let the entire vacant space in our property portfolio and spend our entire rental cost budget, we expect adjusted consolidated net income (EPRA earnings) to reach € 4.3 million or € 0.46 per share in 2011. In 2012, we expect adjusted consolidated net income to climb to € 5.1 million or € 0.55 per share. 

Our original forecast for 2010 had envisaged an adjusted net income of € 4.2 million, based on the same assumption of letting the existing vacancies in full. This income was considerably exceeded because the actual rental costs could be kept at a much lower level compared to forecasts. 

With respect to the non-consolidated financial statements of Fair Value REIT-AG under the German Commercial Code, we are seeking to achieve retained earnings Letter to Shareholders 05 that will support a dividend payment of at least € 0.10 per share in 2011 and 2012. In order to reach this target, as yet unsecured income from portfolio adjustments will be required. However, on the back of the improved investment climate for real estate we believe this to be achievable. In this respect we will focus mainly on the sale of properties held by participations.

In the current economic and capital market environment, German commercial real estate offers comparably high return on equity on the back of low debt interest rates. German REITs represent a unique and stable form of property investment, as they are required to maintain an equity ratio of at least 45% of the property value. At the same time, German REITs offer a high payout ratio of at least 90% of annual net income under the German Commercial Code while the tax burden for shareholders is limited to a maximum of 25% plus the German solidarity surcharge. In addition, REIT shares provide a high degree of transparency and liquidity as they are traded daily on the stock exchange.

These features support our view that in the future, REITs will become increasingly important in the German capital market – as is the case in all other countries that have had this form of indirect property investment for quite some time.

This environment should create new opportunities for Fair Value to raise equity and increase investment, which will enable us to grow our earnings and dividends per share in the long-term. This expansion should take place in connection with capital increases in cash or in kind, which can only be achieved in a stable and thriving capital market environment. We wil actively take advantage of these opportunities.

We thank you for your trust and confidence and look forward to welcoming you to this year’s Annual General Meeting, which will be held on May 31, 2011 in Munich.