Dear customers, business associates,

shareholders, and staff,

For several reasons, 2007 will go down as a particularly significant year in the history of Hypo Group Alpe Adria. An unprecedented amount of work has been invested in designing our future and equipping the Bank for the major challenges which lie ahead. Heavy emphasis has been placed on reduction of risks, a solid foundation has been created for the future and intensive preparations have been made for the new course we shall be pursuing.

So 2007 was a year of transition – a change brought about by the willingness of the owners to pave the way for fresh injections of capital, which have strengthened the Bank’s position and for which the entire Group should be grateful. The entry of a group of international investors headed by Berlin & Co Capital S.à.r.l. and the capital increases at the end of 2006 and in the first quarter of 2007 have created a new dynamism and given Hypo Group Alpe Adria an unsuspected degree of new momentum. This has allowed us deal quickly and thoroughly with the key unresolved issues of our recent history. The owners’ decision also cleared the way for the involvement of our chosen partner, Bayerische Landesbank (BayernLB). BayernLB’s acquisition of a majority interest in our Group in October 2007 gives our customers the security provided by a long-term partner with impressive strengths despite its troubles in the present financial crisis. It means we can offer an even wider variety of products and services, and has resulted in an enhanced international focus. In Bayerische Landesbank we have acquired a partner who shares our belief in the potential of the Alps to Adriatic region and appreciates, supports and complements our longterm growth strategy for the region. Our cooperation with the leading financial player in the Bavarian market further reinforces our Alps to Adriatic approach.

This long-term partnership gives us access to a new network and provides a solid foundation for the continued and customer-focused growth of our Group, which has been one of the most successful pioneers in the countries of Central and South Eastern Europe since their liberalisation. Our joint activities have started promisingly, and we are extremely confident that a bright future lies ahead. Today, there are teams in all parts of the Group working on strategies and ideas to add substance to our partnership and – most importantly – to generate new solutions and opportunities for our customers. This will also encourage us to focus even more closely on local variety while not losing sight of our recognised strategy for our common future.

Another capital increase subscribed by BayernLB and GRAWE Group towards the end of 2007 has given us an even more robust capital structure and enhanced our ability to compete in our chosen markets. The groundwork for our future growth has been done, compliance with the requirements of international standards is ensured, and our market position has been strengthened.

Creating a secure base and striding confidently into the future – these thoughts have been our primary concern in 2007 and will continue to guide our actions in 2008.

Hypo Group Alpe Adria already has a presence in the extended Alps to Adriatic region that can not be ignored, and in 2008 we shall be concentrating all our energies on further expansion. As part of this campaign, 2007 saw the start of our leasing activities in Ukraine, which has extended the scope of our operations to a market of several million customers in and around Kiev. Our customers now have access to a close-knit network and well-oiled infrastructure supporting a wide range of international financial services. Our new departure also means growing our market shares in existing markets this year. We shall be concentrating on refining our product range even further and on offering our customers an extended portfolio of services tailored to their requirements.

Internal consolidation and risk reduction will again be key priorities in 2008. Global concerns in the closing months of 2007 about knock-on effects of the US real estate crisis and ever increasing volatility in international financial markets make these particularly relevant. We are fully aware of these risks, and while never ignoring potential opportunities, intend to proceed conservatively. Hardly a bank anywhere in the world will not be affected by these developments – and this includes Hypo Group Alpe Adria – but thanks to our timely countermeasures we remain confident of our ability to deal effectively with the prevailing trends in financial markets. This will also be a topmost priority in 2008.

Hypo Group Alpe Adria is a dynamic, entrepreneurial bank, and our strong position and leading role in the markets of the extended Alps to Adriatic region could not have been achieved without the efforts of our approximately 7,000 highly motivated employees who service more than 1.2 million customers in line with our philosophy that “banking business is people’s business”. On behalf of the Executive Board, I should like to give them hearty thanks for their commitment. However, special thanks are also due to our customers, business associates and shareholders for their trust, which gives us strength and encouragement in our day-to-day operations.

If “creating a secure base and striding confidently into the future” are our guiding principles, then thinking and acting in the interests of our customers is our principal objective. And in 2008, we will continue to do all we can to develop Hypo Group Alpe Adria in a way which benefits them.

The conditions for achieving that have never been better!

With best wishes