Dear Shareholders, Ladies and Gentlemen,

The property industry – including IVG – is currently in a difficult situation. The international financial crisis and its consequences for the real economy have resulted in a global scarcity of credit and an unexpectedly early and severe collapse in property markets.

The management viewed the financial year 2008 ambivalently. From an operational point of view, IVG has performed relatively well under adverse market conditions. At the end of the year 2008, the value of assets under management by IVG was about €22 billion. In Germany, IVG continued to build on its market-leader position in institutional funds and again stands at the top of the sales ranking for [glossary] closed-end property funds. At the end of 2008, the effective [glossary] occupancy rate of our own holdings valued at €5.4 billion was 92.5% and rental income continued to increase [glossary] like-for-like by 3.4%. In 2008 we sold project developments totalling about €425 million.

After the sale of 40 existing caverns and 30 project caverns to a “Spezialfonds” subscribed by institutional investors, IVG Caverns remains the operator of the cavern site in Etzel near Wilhelmshaven. This presents the possibility of attractive future income from the construction, rental and sale of further caverns. The current situation in the energy sector indicates that the infrastructure for gas and oil storage is gaining in long-term strategic market importance. As developer and operator of caverns, we will exploit this potential, as our site has the potential for the construction of a further 60 caverns. Lease options have already been granted out for 33 of these caverns.

Nevertheless, the consolidated financial statements for 2008 show a loss of €452 million. This results principally from the negative changes in market value of our property portfolio and the ongoing development projects of about €900 million as of 31 December 2008. This decrease in value has no effect on [glossary] cash flow but a direct effect on net profit because of fair value accounting in IFRS.

Property shares came under strong pressure around the world in 2008. This was due in no small part to commercial property being dragged into the fundamental problems which have been affecting the US residential sector and its financing. The price of the IVG share fell by 76% during the course of the year. At the end of the year the share was at €5.72 and considerably below the adjusted [glossary] net asset value (NAV adj.), which at the end of 2008 was valued at €12.70 per share.

The individual divisions are supported by Asset Management, via our local branches. This means that we can best increase the value potential of each property across its full life cycle. Above all, we want to increase occupancy and tenant loyalty. We will use renovation and development to reposition property, purchase or dispose of properties either individually or in a portfolio and include them in other investments forms, particularly funds. Our corporate management currently has three important goals:

Strengthen liquidity.

In the coming months we will be disposing of selected properties from our holdings. In the Development division, we will continue with planned sales as scheduled. Negotiations with our banks permitted us to extend all expiring loans at normal market rates in 2008. Since the beginning of February we have been carrying out negotiations with the banks for the prolongation of loans. For various bilateral credit lines totalling €1.3 billion that will expire in 2009/2010, we agreed new syndicated financing on the basis of term sheets for the same amount with maturities until the end of 2012, subject to final credit and security documentation.

Reduce corporate risk.

We will gradually reduce our development pipeline and in the future will use our project development expertise mostly for optimising the value of the properties we manage.

Use synergy potential.

We will improve the integration of all Group activities on the basis of centralised control and transparent risk management. We will structure our internal organisation so that we can offer an integrated value-added chain for managed assets.

Our growth will be more dependent than ever on the superior commitment of our employees. Professional qualifications, motivation, loyalty and prudent actions on behalf of the company are the factors that count. IVG employees have already demonstrated these qualities and have drawn closer over the past few months to achieve the common goals of IVG. For this, we extend to you our grateful thanks and recognition.

The next few months will be very difficult in the financial and property markets. However, we expect property markets to recover in the medium term once the general crisis of trust in the financial markets has passed. Liquidity, which has largely ground to a halt across the world, will then begin to flow again into property as an asset class, undoubtedly in the context of a generally sharpened and differentiated acknowledgement of risk. Prime property should do well from the reorganisation of the investment segment. In the current year we will be continuing to improve on our structures and processes in order to be ready for the market recovery.

We would like to thank our shareholders, customers, finance partners and employees for their trust in these difficult times. It is our obligation and incentive to lead the traditional company IVG towards a successful future.

Bonn, March 2009

The Management Board