Hypo Group Alpe Adria, founded in 1896 and with around 380 locations in twelve Central and South Eastern European countries, is considered to be one of the leading financial institutions in the extended Alps to Adriatic region. The geographical reach of the Bank extends from Austria, Italy, Slovenia and Croatia, through Bosnia and Herzegovina, Serbia, Montenegro and Germany, to Bulgaria, Macedonia, Hungary and Ukraine. With around 7,500 employees in the core business areas as of 30 June 2009, Hypo Group Alpe Adria has a transnational network of financial specialists, who serve close to 1.3 million customers in total.

Even in the difficult economic environment in the first half of 2009, Hypo Group Alpe Adria has succeeded in the main in holding its strong market position in the markets it serves. After years of pursuing an active expansion strategy, the Bank is now focussing on consolidating the existing network, with increased focus on improving results through slimming down the cost structure and reducing risk positions. Thus, for example, the merger of the two Croatian banking subsidiaries, which was initiated back in 2007, was successfully completed on 1 March 2009. With this step, the Group has not only strengthened its market position in Croatia, but has created a more efficient structure allowing for better servicing of the market. The Group has also initiated a comprehensive restructuring project in the first half of 2009, which concentrates in particular on sustainable cost reduction and a refocusing on the target markets. The Bank’s strategic focus will be on securing the existing position in core markets.

As part of restructuring and modifying internal structures, there was also a change in Executive Board in the period under review: Franz Pinkl, previously Chairman of the Management Board of Österreichische Volksbanken-AG, became Chairman of the Executive Board of Hypo Group Alpe Adria with effect from 1 June 2009. Andreas Dörhöfer, who has been the Chief Risk Officer for the banking group since May 2008, was appointed Deputy Chairman. Furthermore, Anton Knett, a proven specialist both for Eastern European markets and for restructuring projects, was appointed to the Board as Chief Operating Officer. With this Executive Board team, which has extensive experience of banking in Austria and in South Eastern Europe, the Bank now has the necessary management structure to enable it to pursue its new strategic direction efficiently and in a focussed way.

The turbulence in the international financial markets as well as the clearly worsening macro-economic conditions affected the Bank’s ratings. In May, for example, the credit rating agency Moody’s downgraded its credit rating for the obligations of Hypo Alpe-Adria-Bank International AG, Hypo Group Alpe Adria’s representative on international capital markets. Long-term obligations were downgraded from A2 to Baa1, short-term obligations from Prime-1 (P-1) to Prime-2 (P-2) and subordinated liabilities from A3 to Baa2. In June the Group’s Financial Strength Rating (BFSR) was downgraded from D– to E+. Moody’s confirmed, however, that any state-guaranteed bonds issued by the Bank would be given the highest Aaa rating.

At the start of the second half of the year, Hypo Group Alpe Adria successfully placed a benchmark bond issue guaranteed by the Republic of Austria, to strengthen its liquidity position. The bond, with a volume of EUR 1 bn and a term of four years, was oversubscribed several times within a very short time of its issue. Within the framework of the issue programme totalling EUR 1.35 bn, EUR 350 m is still available to the Group.

There have been no changes in the ownership structure of Hypo Group Alpe Adria since 31 December 2008, so that it continues to be made up as follows: