Dear Customers and Business Partners,

Dear Shareholders,

Dear Staff,

The first half of the 2009 financial year is behind us and we can confirm that Hypo Group Alpe Adria has been making headway as far as operations are concerned. In particular, we were able to increase net interest income significantly and – assisted by the financial result – to boost the operating income. Operating expenses rose only marginally in the first half of the year as a result of cost control measures, and this led to a significantly higher operating result before risk provisions.

We are, of course, pleased about our successes in the market. If our satisfaction remains somewhat muted, however, then this is primarily because the successes are cancelled out by the problems caused by the financial crisis as well as wide-ranging corrections needed in the credit and leasing portfolios.

I joined the Bank in June of this year and have taken on the chairmanship of the Executive Board. My first impressions have confirmed the perception I had prior to joining: namely, that Hypo Group Alpe Adria is a bank with good prospects, which can tap into a huge seam of motivation and commitment, and this gives me great confidence looking to the future. I made it clear from the very beginning that I am determined not to mince words and that my aim is to bring about openness and accountability on a lasting basis. With this in mind, I have to record that the effects of the financial crisis will be with us for a long time; and that our internal organisation has a long way to go before it is structured and working the way it should be.

Our success at operational level in the first half-year demonstrates not only that we can operate successfully in the market, but also that we are working hard to do justice to the trust placed in us. We have as a result a little more room for manoeuvre, to allow us to put right in a systematic way the problems that are hurting us every day: we have had to make a whole clutch of value adjustments, in the leasing business in particular, in individual countries of South Eastern Europe particularly hit by the economic crisis, but also in Austria. Risk provisions have risen as a result, and reflect the difficult position companies in our core regions find themselves in. Consequently, our result could not be positive, on the contrary, we have recorded a clearly negative result.

Hypo Group Alpe Adria is currently working on many fronts at the same time: on the one hand, the Group is part of a comprehensive restructuring programme led by our main shareholder, BayernLB; but we are also working on our own programme and are examining and evaluating every area of our business in order to identify potential risk; and on top of that, we are working extremely hard to streamline and optimise our internal processes wherever we can. It is clear to all, of course, that there is no way that our customers should suffer as a result of what we are doing: no matter what is going on internally, the customer remains our focus.

We are starting to record the first successes: we have been able to reduce the balance sheet total and to rationalise the number of locations. The highly successful placing of our benchmark bond in July also showed that confidence in us remains high and is furthered strengthened through the state guarantee. But it is also clear that 2009 is going to be a very difficult year. We shall surely succeed in making further headway in operational terms. We shall also succeed in taking a big step forward in terms of sinking costs further and reshaping the Bank to required dimensions. But we will not be able to move back into the black in 2009, because we continue to be confronted daily with the effects of the factors described above. The reason for my confidence in spite of this is down to several factors:

Firstly the Bank is well positioned in the right markets. Once the economic crisis has passed – and it will – our core regions have a great chance of becoming the motors for growth.

Secondly: there are very few banks with such motivated staff as Hypo Group Alpe Adria. There is fighting spirit at this Bank and the achievements of the staff here are outstanding. This is a huge factor in the Bank’s favour.

So, we know what we have to do and we are already working on it. In a few short years we will see that the hard work was worth it. The Bank will do its utmost to ensure a positive future for itself and its customers – and customers will reap many benefits from this. The foundation has been laid.

Yours sincerely