HYPO TIROL BANK AG

DevelopmentIn the current year of reporting, the balance sheet total of EUR 11.7 billion was about 2.1% lower than thebalance sum of the previous year (previous year: EUR 12.0 billion). Ongoing developments pulling in theopposite direction were the factors which led to this change.A major factor which had the effect of reducing the balance volume was Hypo Tirol Group's own strategy ofconsolidation in the shares and securities department. In the course of the planned reduction of Hypo TirolGroup's own portfolio, this decrease can be attributed mainly to redemptions of debentures. The book valueof the securities in categories AFS, HTM and L&R was reduced by EUR 798.2 million compared to theprevious year, namely from EUR 3.1 billion to EUR 2.3 billion.On the other hand, there was a rise in receivables from customers of EUR 229.6 million to EUR 7.4 billion(previous year: EUR 7.2 billion), even if smaller in extent than the reductions in the securities sector. Themovements of currency exchange rates, particularly of swiss franc against the euro, played a major role inthis rise in volume of receivables. However, not only currency-related factors were responsible for theincrease in receivables from customers. The first signs that Hypo Tirol Group's new strategic plans towardsthe expansion of the pfandbrief and communal-brief business were also evident.Further, there was a rise in trading assets and derivatives of EUR 177.1 million to EUR 636.5 million(previous year: EUR 459.4 million) as well as in financial assets designated at fair value by EUR 230.0million to EUR 832.7 million (previous year: EUR 602.7 million). These changes did not arise from areduction in inventory of such assets, but largely from a positive cash value development.On the liability side of the ledger, the decreased balance sheet total manifests a decrease in payables tocredit institutes, to customers and a decrease of securitised liabilities.With regard to payables to credit institutes, the decrease of EUR 112.1 million to EUR 649.7 million(previous year: EUR 761.9 million) can largely be explained by the decrease in money trading business.A major factor in the decrease of payables to customers amounting to EUR 106.0 million to EUR 2.9 billion(previous year: EUR 3.0 billion) is attributable, by and large, to the reduction of savings deposits.Through new issues in the amount of EUR 141.6 million, redemptions amounting to EUR 345.4 million andthe influence of other changes, exchange rate changes in particular, which caused a rise in book valueamounting to EUR 1.3 million, the amount of securitised liabilities decreased by EUR 202.5 million, the bookvalue of securitised liabilities at the balance sheet date amounted to EUR 1.8 billion (previous year: EUR2.0 billion).Capital ResourcesCreditable equity capital, in accordance with the banking laws with regard to the concern, decreased byEUR 18.3 million compared to the previous year and, taking into consideration the deductible items,amounted to EUR 646.0 million (previous year: EUR 664.3 million) on 31 December 2010. The requiredcapital resources decreased in this period by EUR 17.0 million, the equity ratio thus amounts to 11.39% atthe balance sheet date (previous year: 11.29%), 0.10% higher than in the previous year. HYPO TIROLBANK AG thus fulfils the equity capital requirements as specified by the banking laws. The surplus of equitycapital amounts to EUR 192.4 million (previous year: EUR 193.6 million).Core capital amounts to EUR 418.7 million at the balance sheet date (previous year: EUR 414.0 million).Non-core capital, taking the deductible items into consideration in accordance with the banking laws,amounted to EUR 227.3 million (previous year: EUR 250.3 million). This amount contains non-core capitalat a nominal value of EUR 80.9 million and subordinate capital at a creditable amount of EUR 147.3 million.The core capital ratio at the balance sheet date is 7.38% (previous year: 7.04%).Profit DevelopmentA backdrop of difficult economic conditions left its stamp on business year 2010. The major factor in theloan business was to be found in the strains of the real economy, still palpable in the year of reporting. Theresult, just as in the year before, was noticeably burdened by risk provisions in the loan business. In equalmeasure, the net commission's profits and trading profits were down, due to the tense market conditions.Positive profit developments in interest profits and, in particular, in administrative expenses, led to abalance of the negative results. This ultimately resulted in profits before taxes equal to the level of theprevious year, amounting to EUR 2.1 million.The following explanatory notes make clear the major changes in the profit and loss accounting:53