Among the numerous subsidiaries of Hypo Group Alpe Adria, Kärntner Holding Beteiligungs-AG (KHBAG), and Hypo Alpe Adria Immobilien (AAI-Group) are of particular significance.

Kärntner Holding Beteiligungs-AG (KHBAG)

This subsidiary is responsible for Hypo Group Alpe Adria’s tourism and golf projects, and for project development, project financing and long-term project management activities. The Hotel & Residenzen Schloss Velden complex on the Wörthersee is a demonstration of the depth of the company’s tourism expertise.

Kärntner Holding Beteiligungs-AG is responsible for all Hypo Group Alpe Adria’s tourism projects, and acts as a driving force in the sustainable development of tourism in Carinthia. It is a valuable partner in the development phase, in providing access to financing by Hypo Group Alpe Adria and as the investor, responsible for careful selection of operators for these projects. KHBAG’s tourism skills are a prerequisite and success factor in both the financing and the ongoing operation of established businesses, and play a key role in ensuring the long-term profitability of regional and internationally networked projects.

In the past year, the company successfully completed the Hotel & Residenzen Schloss Velden project, a major hotel development in Velden am Wörthersee. Schloss Velden, formerly a showcase hotel on the Wörthersee, was converted and extended into a luxury 5-star hotel and exclusive residential complex with modern spa facilities. Construction began in November 2005, and the official opening was celebrated on 28 May 2007 – only one-and-a-half years later – in time for the start of the summer season. The hotel, which operates under the luxury brand of Capella Hotels & Resorts, comprises 105 suites, 210 beds, four restaurants and bars, a ball room, two seminar rooms, a 3,500 m² spa and wellness area, and an indoor golf centre. The sale of apartments will be handled by real estate specialist Stiller & Hohla, an experienced international affiliate of Christie’s Great Estates Europe. With demand for the properties strong, KHBAG was in a position to begin work on the second phase of residential construction in the grounds of the property in September. At 31 December 2007 phase two was 75 % complete, with construction work scheduled to end in 2008.

Activities in 2007 also included tendering a project development submission for the Lamplhof project. The plan is to construct another model tourist destination of about 150 rooms on the southern shore of the Wörthersee, targeting seminar and golf tourists.

KHBAG announced the official inauguration of Congress Hotel Villach on 27 October 2007, in which it holds a 49 % interest through Congress Hotel Villach ErrichtungsgmbH. Since December 2006 KHBAG has also held an interest in HICO Hotel Investment & Consulting St. Veit/Glan GmbH, which is responsible for the construction of Blumenhotel St. Veit an der Glan.

In addition to its portfolio of hotel interests, KHBAG also holds all of Hypo Group Alpe Adria’s golf projects. These include the Klagenfurt-Seltenheim and Finkenstein courses.

Hypo Group Alpe Adria’s tourism business will continue to be the principal focus of Kärntner Holding Beteiligungs- AG’s activities in coming years.

Hypo Alpe-Adria-Immobilien AG

This subsidiary brings together Hypo Group Alpe Adria’s comprehensive real estate expertise and in 2007 was successful in improving its standing in the market. During the year, the company’s achievement internationally was the conclusion of the second largest real estate deal in Croatia’s history.

Hypo Alpe-Adria-Immobilien AG is the Hypo Group Alpe Adria subsidiary with responsibility for development, financing, project management, operational management and repositioning of real estate ventures. It manages the Group headquarters and its branch offices, together with the properties comprised in its highly successful property participation portfolio. The Group’s comprehensive real estate expertise and its understanding of the real estate markets in the Alps to Adriatic region are brought together in Hypo Alpe-Adria-Immobilien AG. This structure permits Hypo Group Alpe Adria to leverage potential synergies and also to further improve earnings.

Despite the turbulence of international property markets in 2007, Hypo Alpe-Adria-Immobilien AG continued to successfully consolidate its established market position. The commitment and expertise of its real estate professionals made a significant contribution to preserving the value and improving the yields of the properties under its management in the year under review. With the sale of HOTO Tower Zagreb to an international institutional investor, Hypo Alpe- Adria-Immobilien AG concluded the second largest property deal in Croatia’s history. Hypo Alpe-Adria-Immobilien AG also benefits from the development of new markets in individual countries through the Hypo Group Alpe Adria network covering the Alps to Adriatic region.