Spectroscopic and holographic studies of the trans-cis and cis-trans photoinduced isomerisation of 4-fluoro-4 ' -methoxyazobenzene dissolved in pentylocyanobiphenyl (5CB) were performed. The azobenzene molecule changes its shape upon isomerisation, thus inducing a change of the local order of the liquid crystal. The kinetics of the isomerisation of the azobenzene derivative was measured spectrophotometrically in the temperature regions of the stability of both the nematic and isotropic phases of 5CB, and in the vicinity of the temperature of the nematic-isotropic phase transition. A thin cell (10 μm) was prepared, consisting of two glass plates with planar alignment of the nematic liquid crystal containing a few percent of the photoactive azobenzene derivative. The cell was employed as an element for real-time holographic processing. The experimental set-up of degenerate two wave mixing was used to write and read a hologram in the same time. An Argon laser (λ=514 nm) was applied as a source of light. The origin of the diffraction gratings (holograms) induced by light intensity pattern is described. Design and characterization (diffraction efficiency) of the optically addressed spatial light modulator are presented.