ANNUAL REPORT 2010 TO BREATHE NEW LIFE INTO THE FUTURE AND INTO THE PAST, CHANGE IS ESSENTIAL. THE KEY LIES IN GOING THROUGH THE CHANGE JOINT- LY, WITH THE SELFSAME INTENSITY AND TARGET ORIENTATION. TO ACHIEVE THAT, WE ALL HAVE TO ACT IN CONCERT ... AND PULL TOGETHER. WE WILL BE ACTIVE IN PRECISELY THE REGIONS WHERE WE KNOW THE MARKET AND KNOW OUR PARTNERS; WHERE WE CAN OFFER THE PRODUCTS AND SERVICES AT WHICH WE EXCEL. IN A CERTAIN SENSE, THIS IS THE DISTILLED ESSENCE OF TRADITIONAL AND MODERN COMPONENTS WHICH THE HYPO TIROL BANK EMBODIES AS A STATE BANK. WE STAND FOR THE VALUES WHICH LIE WITHIN AND BEHIND THIS ORIENTATION. MOREOVER, THEY ARE EXEMPLIFIED IN OUR MARKET PRESENCE AND FINANCIAL DECISIONS. Mag. Wilfried Stauder MORE THAN ANYTHING ELSE, IT IS THE WAY HYPO TIROL BANK DEALS AND WORKS TOGETHER WITH ITS OWN EMPLOYEES, CUSTOMERS AND BUSINESS ASSOCIATES WHICH IS OUR FOREMOST FACTOR FOR FUTURE SUCCESS. REGARDLESS WHETHER IN THE QUALITY OF OUR COUNSEL, THE HUMANE APPROACHABILITY OF OUR ADVISORS OR OUR ACTIVITIES IN SOCIAL AND SPONSORING SECTORS, IT IS THIS UNFLAGGING DEVOTION TO PEOPLE THAT WILL PROVIDE THE GREATEST THRUST FOR- WARD IN THE MONTHS AND YEARS AHEAD. Dr. Markus Jochum Johann Peter Hörtnagl FOREWORD SUPERVISORY BOARD Dear Ladies and Gentlemen, Looking back over the last business year of , the image which arises is of a bank facing highly de- manding and di cult conditions. The complexities at Hypo Tirol Bank are refl ected in the fi gures as well. The company had to be positioned anew, strategically speaking, to empower it to act and react in more acute and aware ways to the prevailing risks. Only in this way was it possible to establish the background conditions required by a strong Tyrolean State Bank. This meant, before all else, resurrecting the original commission which a state bank is assigned to fulfi l, namely, fi nding back to its roots in order to again be a strong and reliable partner for all the inhabitants of Tyrol, and at the same time, to serve the interests of the regional businesses. This trend reversal required replacements in personnel at Managing Board level in order to securely anchor the path realignment among the uppermost executives. The strategic decision is refl ected in the newfound concentration on the core market of Tyrol, which in its greater swathe includes the north-south axis and the region of South Tyrol/Trentino. We will be active in precisely the regions where we know the market and know our partners; where we can o er the products and services at which we excel. In a certain sense, this is the distilled essence of traditional and modern components which the Hypo Tirol Bank embodies as a state bank. We stand for the values which lie within and behind this orientation. Moreover, they are exemplifi ed in our market presence and fi nancial decisions. Hypo Tirol Bank stands on the shoulders of a strong owner: the State of Tyrol is % behind its state bank and sets its sights and its focus of attention on maintaining the bank’s independence. This enables us, in turn, to fulfi l the assigned role of a universal services bank in its core market in the best ways possible; and to make our long-term contribution to strengthening the land and its economy. Mag. Wilfried Stauder Dear ladies and gentlemen, Esteemed associates and partners! Last year brought numerous changes to Hypo Tirol Bank. Above all else, a new strategic orientation with a reinforced focus on the core market of Tyrol and, as part of this, the region of South Tyrol/Trentino, called up intense e orts and fl exibility of the entire concern and all its employees. The current situation is a great challenge for Hypo Tirol Bank. For the second year in sequence, enormous risk-covering costs were required. This development was a direct result of the overall economic situation. Yet to a large degree it was also a consequence of the prior strategic orientation of intensifed expansion policy. The updated rating by the international rating agency Moody’s which was assigned to Hypo Tirol Bank in the rd quarter of also has to be seen in this light. In the course of this process, a new rating was assigned, following the prior Aa rating from . The current rating is A. Although this result amounts to a downgrading, it remains an extremely good rating in comparison with other Austrian banks. The adjustment was anticipated. It corroborates the correctness of our approach, namely, with the focus on minimising risk and concentration on business activities which protect our own equity capital. Apart from this, the public pfandbriefs of Hypo Tirol Bank were assigned the best possible grade - Aaa - at the end of the year. This rating was based on Moody’s rating of Hypo Tirol Bank as an issuing bank and its evaluation of security of the covering funds. This result is highly gratifying, of course, and is in keeping with the security demands of many investors. In spite of - perhaps even because of - the dizzying economic developments, we have done our home- work, particularly as relates to costs. As a result of those e orts, we were able to achieve remarkable results on that front. Our reduction of administrative costs is clearly the outstanding achievement in this regard: they were % lower than in . The positive rise of interest profi ts - % above the previous year - is equally pleasing. FOREWORD MANAGING BOARD That we are on the right path is also corroborated by our clients. A representative survey of more than private bank customers of Hypo Tirol Bank which was carried out last year brought highly positive reports. More than % are utterly satisfi ed with our business. This fi nds expression, among other things, in a high degree of word-of-mouth recommendations: the Net Promoter Score is %. The customers at Hypo Tirol Bank continue to manifest a high degree of loyalty. This profound client bonding is also evidenced by the fact that the percentage of customers who use Hypo Tirol Bank as their main bank has risen measurably over recent years. Our greatest hallmark lies especially in the sector of personal customer care to our clients and supplying them with the best possible counsel and supervision of their fi nancial concerns. In keeping with this orientation, we expend a great deal of time and energy in educating our employees. In the year , more than sta members participated in internal training sessions which focused both on specifi c departmental expertise and sales-specifi c themes. More than anything else, it is the way Hypo Tirol Bank deals and works together with its own employees, customers and business associates which is our foremost factor for future success. Regardless whether in the quality of our counsel, the humane approachability of our advisors or our activities in social and sponsoring sectors, it is this unfl agging devotion to people that will provide the greatest thrust forward in the months and years ahead. With a mind towards this as our ultimate lodestar, we extend a profound debt of thanks to our customers for their ongoing trust and confi dence in us; and to all our employees for their dedication and support. Dr. Markus Jochum Johann Peter Hörtnagl CONSOLIDATED FINANCIAL STATEMENT I. CORPORATE REPORT ON BUSINESS DEVELOPMENTS AND THE ECONOMIC SITUATION I. 1. HYPO TIROL BanK – our stATE BANK HYPO TIROL BANK AG sees itself in the historic context as the partner of the State of Tyrol, with its focus on the people of the region. This historic association and cooperation have grown naturally over time ever since the bank’s founding in 1901. It is refl ected not only in its business orientation, but also in its economic and social involvement. At the center are the needs of its customers and associates; the range of services and products as well as their qual- ity are dictated specifi cally by customer expectations. The immediate market nearness and the independence of the bank are two major factors contributing to the fulfi llment of these goals. I. 2. REPORT ON THE BRANCHES As a modern and innovative corporate enterprise with a sophisticated banking and fi nancial structure, Hypo Tirol Bank, with locations between Munich and Verona, is active not only in Austria, but in Italy and southern Germany as well. Further, the bank is also represented in Zurich and Vienna. Its strategic engagement as a universal services bank is clearly focused on its core market of Tyrol. But beyond that, in South Tyrol, Trentino and Verona, together with greater Vienna and Munich, customers are also served with diff erentiated off erings and products. The Hypo concern comprises 20 branches in Tyrol, 3 business offi ces and 2 advisory centres in South Tyrol/Trentino and in Veneto, plus one representational offi ce in Vienna and in Munich. Further, corporate clients are provided wide ranging advisory services at 4 locations in Tyrol and vienna, and at 3 centres in northern Italy. I I. 3. THE STATE OF THE ECONOMy In 2010 ECONOMIC RECOVERY AND NATIONAL RESCUE PACKAGES In the year 2010, economic growth revived in many of the developed countries, thanks to far reaching measures designed to aid recovery from the sub-prime crisis, a crisis then negatively amplifi ed by a general loss of public confi dence. these eff ects were felt even more gravely in developing countries. Yet due to the consumer willingness to begin spending again, these developing countries are today responsible for approximately half of the global growth. While the business cycle is now ticking quite well throughout the world, there are diff ering patterns of development from country to country, as well as within various countries.