Dear Customers and Business Partners,
Dear Shareholders,
Dear Staff,

The year 2008 was probably the most dramatic in the history of the international financial industry ever. Large banks with global operations collapsed, had to seek refuge in the often not all too strong arms of other banks or were nationalized to avoid even worse. Nothing, and I mean nothing at all, is the way it used to be. The financial crisis is still upon us, and it is hitting the real economy with considerable force, too.

Even a financial group such as Hypo Group Alpe Adria – although it had made the most of time by repositioning itself, reorganizing internal workflows and processes and above all reducing risk positions – was not able to escape the negative impact of a crisis that spared no-one in the financial industry. And even though active portfolio adjustments in the past meant that our group was not or only little involved in the globally most severe cases of damage, we also felt the effects of the crisis. Furthermore, the difficulties of Bayerische Landesbank (BayernLB), our main shareholder, did not go unnoticed in our day-to-day business.

In this context, it came as no surprise that we had to report a loss at the end of the year. While this loss might be understandable and unavoidable in the present crisis, it nevertheless hurts and fuels our ambition to show what this bank is made of.

This is all the more true as our bank, by and large, is on the right track. It has made significant progress, both in terms of operations and customer relationships, while it has massively improved its internal setup.
Precisely because of this, 2008 was not a lost banking year for Hypo Group Alpe Adria. Notwithstanding these adverse circumstances, we have improved in many ways. For instance, our network of branch offices continued to grow denser in 2008, allowing us to serve our customers even better. We improved our market position. On the operative side, the net interest result grew in the double digits again, and we also achieved a further increase of the primary resources. This confirms that we are on the right way.

And not least, in the last days of the year we succeeded in taking a decisive step to protect our substance and our future even in the financial crisis. After our majority shareholder, BayernLB, had decided together with Hypo Alpe Adria Mitarbeiter Privatstiftung to strengthen Hypo Group Alpe Adria through an increase of stock in the course of the group-wide capital allocation, the Republic of Austria also bolstered Hypo Alpe-Adria-Bank International AG, the supreme credit institution of Hypo Group Alpe Adria, by providing approximately EUR 900 million in the form of participation capital. After a thorough audit, we were
certified as a healthy bank. The funds represent the interest-bearing investment in our Tier 1 capital to raise it to an internationally accepted level in the crisis. In return, the Republic of Austria demanded a commitment that we would not curtail our activities as a provider of loans to the economy. This we were happy to give. After the risk adjustment measures, we therefore still have an internationally accepted capitalization rate and are able to look ahead to fiscal 2009 with confidence. Without a doubt, it will be anything but an easy year. We thank the representatives of the Republic of Austria as well as all the shareholders who have supported the bank constructively.

In the wake of the financial crisis, BayernLB started a re-dimensioning process. We have full understanding for this measure and give it our constructive support. At the same time, we regard it as our duty to ensure that the excellent future prospects in our dynamic markets are not endangered by excessively short-term decisions. We are very confident that we will be able to contribute our special strengths and potentials to everybody’s benefit, even if the structure of our main shareholder changes. Hypo Group Alpe Adria is certainly prepared to make its contribution.

Austria as a place of banking has demonstrated in 2008 how quickly and pragmatically it is capable of initiating the right measures for its banks and economy. We feel thoroughly good about being a bank in Austria, a Carinthian bank for Carinthia and for many markets abroad where we have long since stopped being perceived as foreigners. We are aware that in our capacity we are expected to make a contribution to the working of the markets, to the success of the enterprises and to the growing prosperity of the people. This is something we are proud of working on – in 2009 and in the future.

I will be vacating my position as Chairman of the Executive Board on 30 April 2009. When BayernLB acquired a majority stake in Hypo Group Alpe Adria, I accepted the post of Chairman of the Executive Board while committing myself to return to my own company, Berlin & Co., after the successful implementation of necessary capital injections and internal restructuring measures. Based on a solid foundation in terms of capitalization and risks, the bank can now look towards the future with confidence. Having fulfilled my task, I am therefore able to dedicate myself to my own company once again.

Before this, however, it is my strong desire to thank our customers, business partners and shareholders for their loyalty and trust. I am convinced that as a reliable bank, Hypo Group Alpe Adria will work to the best of its ability for the benefit of its customers in 2009. I also wish to appreciate all employees for their uncompromising commitment, day in and day out, who are responsible for the excellent relationships we maintain with our customers.

Yours sincerely

Tilo Berlin

Chairman of the Executive Board

HYPO ALPE-ADRIA-BANK INTERNATIONAL AG