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What moved us.

Interim Report as of 30 June 2008.Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft

Vorarlberg | Kleinwalsertal | Vienna | Graz | Wels | Bolzano | St. Gallen | Vaduz

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Key figures of Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft –IFRS consolidated figures:

in ’000 EUR 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Total assets 12,408,694 11,979,622 429,072 3.6Loans and advances to customers 6,395,861 5,904,795 491,066 8.3Amounts owed to customers 3,528,480 3,281,968 246,512 7.5Liabilities evidenced by certificates 1,956,003 1,921,866 34,137 1.8Capital resources pursuant to the Austrian Banking Act 795,656 786,522 9,134 1.2thereof core capital Tier 1 502,839 506,767 - 3,928 - 0.8

in ’000 EUR 1.1. -

30.06.2008

1.1. -

30.06.2007

Change

in ’000 EUR in %

Net interest income after loan loss provisions 46,215 38,816 7,399 19.1Net fee and commission income 21,128 21,731 - 603 - 2.8Net trading result - 3,815 4,685 - 8,500 > - 100.0Administrative expenses - 42,700 - 38,806 - 3,894 10.0Profit from ordinary activities 25,772 29,677 - 3,905 - 13.2

Key figures 30.06.2008 31.12.2007 Change

absolute in %

Cost-Income-Ratio (CIR) 54.88 % 46.70 % 8.18 % 17.5Solvency ratio (Total capital) pursuant to the Austrian Banking Act 11.58 % 12.37 % - 0.79 % - 6.4Return on Equity (ROE) 11.50 % 14.06 % - 2.56 % - 18.2

Staff 30.06.2008 31.12.2007 Change

absolute in %

Staffing level 713 683 30 4.4

The shareholders of Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft (Hypo Landesbank Vorarlberg) as at 30 june 2008:

Owners Shareholders

total

Voting rights

Vorarlberger Landesbank-Holding 71.1715 % 74.9997 %Austria Beteiligungsgesellschaft mbH 23.7242 % 25.0003 %

Landesbank Baden-Württemberg 15.8161 % -Landeskreditbank Baden-Württemberg Förderbank 7.9081 % -

Widely held (participation capital) 5.1043 % 0.0000 %Subscribed capital 100.0000 % 100.0000 %

Rating/Moody’s

Long-term: for liabilities with deficiency guarantee Aaafor liabilities without deficiency guarantee (as of 2 April 2007) Aa1

Short-term P-1

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Consolidated management report for second quarter of 2008

The Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft (Hypo Landesbank Vorarlbergreported ordinary business results of EUR 25.8 million for the first six months of 2008. Due to the uncertain market environment this result was 13.2% below the same period last year. Hypo Landesbank Vorarlberg expects to achieve corpo-rate profits in 2008 in the magnitude of the positive year 2006, assuming there are no drastic changes in the economic and financial markets. The international rating agency Moody’s has again confirmed our very good Aa1 rating, and our rating remains excellent even without the deficiency guarantee. The increase in refinancing costs will be limited.

The “Financial Times” newspaper annually compiles and publishes in its trade magazine “The Banker” a list of the global and national rankings of the 1,000 largest banks (based on assets and earnings). For the first time, Hypo Landesbank Vorarlberg was ranked tenth among the largest Austrian banks and improved from rank 583 to 554 in the global listing.

Notes to the income statement

Net interest income was EUR 57.1 million as of 30 June 2008, 5.0% over last year, in spite of continuing strong competition and pressure on margins in credit business due to volume growth in loans and advances to customers. Net interest income after loan loss provisions, which signifies the net performance of the interest business, increased to EUR 46.2 million (+19.1%) due to lower loan loss provisions.

In the course of the weakening stock markets, net fee and commission income was EUR 21.1 million, 2.8% lower than last year.

Net trading results fell by EUR 8.5 million to EUR - 3.8 million. This was mainly due to the valua-tion of assets held for trading and assets designated at fair value through profit or loss, caused by fluc- tuations in value due to the crisis in the financial markets.

At EUR 42.7 million, administrative expenses were 10% higher than the first six months of 2007 although they remain within budget. There are

Banking business environment in the second quarter of 2008

The first half of 2008 was marked by repercussions from the financial crisis. After five positive years, the stock market has experienced a reversal leading to a global correction of the most important stock indices and major volatility in the markets. The emerging markets did not meet expectations and suffered disproportionate losses. In view of this, the IMF (International Monetary Fund) is adhering to the revised prognosis of 3.70% for global economic growth. Bond markets did not deliver a performance worth mentioning either. May and June were especially weak months for the bond market. Starting in the middle of March, the yields on 10 year Euro-Bench-mark-Bonds climbed steadily and the corresponding bond prices fell sharply.

Worldwide, central banks are confronted with major challenges. The weakening economy in many regi-ons, coupled with accelerating inflation – helped by rapidly increasing commodity prices – have put the central banks in a waiting position. Growth risk was clearly in the foreground in the USA and the Federal Reserve Bank decided against further cuts in the lending rate. Adhering to its main goal of maintaining price stability, the European Central Bank raised the benchmark interest rate to 4.25% in the second quarter.

As a result of the real estate and financial crisis, the USA is no longer the flagship of the world econo-my. Growing worry about recession has made the international markets unsure. The lack of autonomy of many economic regions from the developments in US economy led the mood indicators to new lows.Unlike the traditional asset groups, raw materials profited in the first six months. Crude oil set one record price after another and was quoted at almost USD 145.00 at the end of June. Gold reached an all-time high in the first quarter, fluctuated strongly, then began to climb again at the end of the second quarter. The international real estate markets show-ed no further positive stimulus.

The rise of the euro against the US dollar has conti-nued in the current year and reached an all time high in April of 1.60 EUR/USD.

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31.12.06 30.06.08

12,408.7

10,047.4

11,979.6

31.12.07

several reasons for the higher costs, among them an increase of 30 employees as well as the continu-ing investment in modernisation of the headquarters in Bregenz, the Hypo Office Dornbirn and several branches.

Loan loss provisions remain at a historical low at EUR 10.8 million.

The lower contribution by net trading results amounted to operating results of EUR 24.3 million, a reduction of EUR 6.2 million compared to the same period last year. After balancing the results from investments and the results from equity consolidati-on, earnings before taxes (ordinary business results) was EUR 25.8 million as of 30 June 2008, 13.2% under the results of the first six months of 2007.

The price of the Hypo Landesbank Vorarlberg participation certificate was quoted at EUR 98.00 (EUR 83.90 in 2007) as of 30 June 2008. At the annual meeting of shareholders on 18 June 2008, the Managing Board proposed distributing, based on the share capital of EUR 22 million, to the sharehol-ders, to Vorarlberger Landesbank-Holding and to Austria Beteiligungsgesellschaft mbH (Landesbank Baden-Württemberg und Landeskreditbank Baden-Württemberg Förderbank) a total amount of EUR 8.79 million and a total of EUR 540,000 to holders of participation certificates. This equals a dividend increase of 20% compared to last year.

Balance sheet

Total assets of the group increased 3.6% to EUR 12,408.7 million as of 30 June 2008. Loans and advances to customers increased by EUR 491.1 million to EUR 6,395.9 million, taking into account that the application of the IFRS 7 standard

EUR 98,00as of 30 June 2008

60

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

70

80

90

Development of the Hypo Landesbank Vorarlberg participation certificate

is obligatory as of 1 January 2007. This standard requires that financial instruments be recognized separately by valuation category pursuant to IAS 39. For this reason, the Group reclassified loans and advances to banks and customers designated at fair value through profit or loss in the amount of EUR 603.3 million (2007: EUR 622.9 million) in “Financial assets/at fair value” for the fiscal year 2008 and for reference years. This item qualifies as and must be added to loans and advances to customers.

On the liabilities side, in the first six months of 2008 amounts owed to customers recorded the largest increase compared to end 2007 (EUR 246.5 million or 7.5%) and amounted to EUR 3,528.5 million as of 30 June 2008.

Development of total assets (in million EUR):

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Business segments in the second quarter of 2008

Corporate Customers/Public Sector

Hypo Landesbank Vorarlberg offers its customers both traditional banking products and other bank-related services such as leasing, real estate services, and insurance through its subsidiaries. The range of financing portfolio products includes equity financing, as well as competent consulting and support in connection with financial aid programmes and institutions.

In order to professionally support our corporate customers in their international activities, we have expanded our services abroad and have installed an International Services team. In future Credit Management-Corporate Customers will take care of financial engineering and the structuring of complex transactions as well as the syndication/consortium business. In response to high demand, we have set up precious metal accounts for our customers, to facilitate the buying and selling of precious metals.

In the Corporate Services segment, ordinary business results (earnings before taxes) was EUR 14.8 million. As of 30 June 2008, net interest income was EUR 23.3 million (+10.1%). Net fee and commission income increased by 9.6% to EUR 5.6 million. Contribution of the Public Segment was EUR 2.1 million in first six months of 2008.

Private Customers

As a universal bank, Hypo Landesbank Vorarlberg offers private customers a complete range of products – with focus on investment advice and residential real estate financing. A priority for our investment consulting is financial security for the future. Rising interest rates have led to increased enquiries concerning savings accounts. To raise the awareness of the importance of a monthly savings programme, of accruing investments and of pension provisions, Hypo Landesbank Vorarlberg offers customers new portfolio-funds from our in-house, highly-rated investment management. For the Hypo-Portfolio fund, the minimum investment is EUR 50 per month. It usually requires a minimum investment of EUR 50,000 to enjoy the benefits of investment management.

In autumn the newly launched Hypo-Klima-Kredit was made available for private as well as corporate customers. The goal is to promote energy saving measures in cooperation with the Energy Institute

Vorarlberg by offering attractive conditions. In additi-on to the introduction of the Hypo-Lebenswert-Kredit last year for the financial needs of older customers, Hypo Landesbank Vorarlberg launched the Komfort-Programm 60Plus in early summer 2007, thus providing a complete product package for seniors. At the same time a full range of products for younger customers was developed.

In the Private Customer sector, ordinary business results (earnings before taxes) was EUR 6.1 million as of 30 June 2008. Net interest income increased by 5.9% to EUR 9.1 million. Net fee and commission income fell 8.3% to EUR 8.5 million due to the situation in the financial markets.

Private Banking and Asset Management

We operate separate Private Banking Centres in all large branch offices in Vorarlberg as well as in Lech, Vienna, Graz and Wels. As a particular quality feature of these centres, only qualified investment managers provide services there. In addition, at the beginning of 2007 the Team Private Banking Plus for top private and institutional customers was established.

The superior quality of our investment consulting and asset management services has been confirmed through external recognition by the “Fuchsbriefe Report” and the “Elite Report”. In addition, in the

“Private Banking Survey 2008” conducted by the business magazine “Euromoney”, Hypo Landesbank Vorarlberg was ranked among the top 10 private banks in Austria.

Hypo Landesbank Vorarlberg expanded its already innovative and attractive range of products in June 2008 with the new asset management strategy Hypo Weltdepot Anleihen, with active duration controls. An in-house developed computer model can track and recognise the correct point in time – and with that the basis for the decision to extend or reset the term of the bond – to optimise yields.

Hypo Landesbank Vorarlberg “Hypo-Weltport-folio Aktien” fund of funds in first place three years in a row.

In November 2007, the annual “geld” magazine award for the best Austrian fund of funds went to the Hypo-Weltportfolio equity fund of funds for the third year in a row. The award included best 3-year and best 5-year performance as well as second place in 1-year performance.

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Financial Markets/Treasury

Due to foresighted refinancing policies the bank is in an excellent liquidity situation. While the narrowing credit spread in issues made refinancing favourable for the bank, the severely flattening interest curves in the first half of the year allowed no earnings growth from term transformation. The bank was comparatively only moderately exposed.

The sub-prime crisis in the US created great market volatility in the second half of 2007 and led to a strong increase in the credit spread which has lasted through the first half of 2008. Although the Bank has no direct US sub-prime risk, it is indirectly affected through developments in the money and capital markets. As with almost all other banks, Hypo Landesbank Vorarlberg could not evade the turbu-lence on the money and capital markets or the falling bond prices and was therefore indirectly affected by the financial market crisis. Earnings before taxes of the Financial Markets division was EUR -4.5 million in the first half of 2008. In comparison to a great many other institutions, the financial impact on the bank has been very limited. At the present time we can assume there will be no value fluctuations or permanent losses.

Leasing and Real Estate

Ordinary business results (earnings before taxes) of the division Leasing and Real Estate was EUR 2.8 million in the first half of 2008.

3.500

3.000

2.500

2.000

1.500

1.000

500

3,449

110

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

199

4

1993

1992

1991

1990

1989

2005

2006

2007

2008

Development of asset management mandates

Hypo Vorarlberg Leasing AG in Bolzano, Italy, had an 80% increase in new business volume compared to the same period last year. Priorities, in addition to the long term focus on real estate leasing, are the areas of alternative energy (especially photovoltaic) and municipal leasing. The first transactions with Northern Italian municipalities have been concluded. Hypo Vorarlberg Leasing AG in Bolzano moved to new rental offices in the Via Galileo Galilei at the end of May 2008. The new offices are better located and provide more office space. By early 2009, two new branches in Treviso and Modena (Italy) will be opened to complement and enlarge the trading area.

Hypo Südleasing GmbH new business volume amounted to EUR 108.3 million in the first half of 2008, and special attention was given to large projects in real estate and vendor leasing. In June, Hypo Südleasing GmbH celebrated its fifth annivers-ary. This year, strengthening operations in German-speaking Switzerland will be a priority.

Hypo Immobilien GmbH, based in Dornbirn, is the competence centre for real estate in the Hypo Vorarlberg group and manages the entire real estate portfolio of Hypo Landesbank Vorarlberg, consisting of buildings used for its own purposes and of proper-ties destined for utilisation. The company is divided into the business areas of real-estate brokering, facility management, building management, con-struction management and real estate assessment.

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Three large construction projects will be completed this year: the renovation and enlargement of the headquarters in Bregenz, the construction of the Hypo Office for subsidiaries in Dornbirn, and the erection of a new bank building for our subsidiary in Bendern, Liechtenstein.

Corporate Centre contributions amounted to EUR 4.5 million.

Outlook

Rising commodity prices, crisis in the USA, euro-dollar parity, poor general conditions, increasing transportation costs as well as the surfacing econo-mic problems in Germany are negatively affecting the current mood of Vorarlberg industrialists. 54 companies with 22,947 employees took part in the latest economic survey (second quarter 2008) by the Industriellenvereinigung Vorarlberg (an industrial association) and the Vorarlberg Chamber of Com-merce and revealed a very cloudy outlook. It also exposed the negative development of the business climate index, which has declined for four months in a row. The business climate index, which shows business conditions currently and in six months, has fallen more than 20 points compared to last year. Demand for credit remains stabile in Vorarlberg, and employment remains high.

WIFO, the Austrian Institute for Economic Develop-ment, is also predicting an economic downturn for Austria. The continuing stagnation in the USA, con-sequences from the high valuation of the Euro and the unfavourable credit conditions were amplified in the last months by high crude oil prices. This pushed inflation higher (2008 +3.5%) and reduced the real disposable income and consumer demand of private households. In 2009, the domestic economy will grow by only 1.4%. The weakening of economic growth will also cause a reverse in the employment market. Although the employment rate is currently growing strongly, higher unemployment is expected in 2009.

Hypo Landesbank Vorarlberg is pursuing a sustain-able growth strategy taking full consideration of the risks and costs involved. The outlook for the fiscal year 2008, especially for the first half, for the loan and investment business is cloudy. Capital markets, stock exchanges and investors are unsettled, as are consumers by the relatively high inflation accompa-nied by real wage loss and reduction in buying power. In our home market Vorarlberg, we again anticipate massive margin pressure and fierce competition.

Because of these difficult conditions and the loss of one-off special factors, at this time we expect to achieve corporate profit in 2008 in the magnitude of the positive year 2006.

This year the issuance of participation certificates in the amount of EUR 50 million is planned. The goal is to interest as many customers as possible in a (non-voting) stake in Hypo Landesbank Vorarlberg. The current participation certificates will be called in, and, following the wishes of the customer, either compensated for in cash or traded for new partici-pation certificates. On 18 June 2008, shareholders approved both the recall as well as the issue of participation certificates.

The tax affair between Germany and Liechtenstein escalated in the first quarter 2008. We expect somewhat reduced growth in our subsidiary Hypo Investment Bank (Liechtenstein) AG in the next years and anticipate regulatory adjustments in the Principality of Liechtenstein.

A priority for 2008 is “energy efficiency and energy optimising”. In addition to the assistance provided by Hypo-Klima-Kredit for energy saving investments, Hypo Landesbank Vorarlberg supports the Vorarl-berg Klimaschutzpreis (climate protection prize) as well as the passive-house campaign of the Province of Vorarlberg. Our leasing subsidiary Hypo Vorarlberg Leasing AG will open two new locations in Modena and Treviso (Italy) in 2008 or by early 2009 and further estab-lish its position as the largest leasing business in Südtirol (Trentino-Alto Adige).

The Bregenz-based centralized Portfolio and Asset Management of Vorarlber-ger Landes und Hypothekenbank Aktiengesellschaft is considered a company within the meaning of the Global Investment Performance Standards (GIPS®). The company includes all asset management mandates of private and insti-tutional customers as well as those publicly offered funds that are managed as part of the Bank’s centralized investment process. They do not include decentralized organization units and other Group units with their own market presence. The company is in compliance with GIPS®. A list of all composites and their detailed description can be requested from Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft by telephone at +43 (0)5574/414-1521 or via e-mail at gips@hypovbg.at

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Interim ReportInternational Financial Reporting Standards (IFRS) as of 30 June 2008

I. Income statement

in ’000 EUR (Notes) 1.1. -

30.06.2008

1.1. -

30.06.2007

Change

in ’000 EUR in %

Interest and similar income 275,691 226,886 48,805 21.5Interest and similar expenses - 218,632 - 172,562 - 46,070 26.7

Net interest income (1) 57,059 54,324 2,735 5.0Loan loss provisions - 10,844 - 15,508 4,664 - 30.1

Interest income after loan loss provisions 46,215 38,816 7,399 19.1Fee and commission income 23,693 24,409 - 716 - 2.9Fee and commission expenses - 2,565 - 2,678 113 - 4.2Net fee and commission income 21,128 21,731 - 603 - 2.8Net trading result - 3,815 4,685 - 8,500 > - 100.0Administrative expenses (2) - 42,700 - 38,806 - 3,894 10.0Other operating income and expenses 3,440 4,053 - 613 - 15.1

Operating profit 24,268 30,479 - 6,211 - 20.4Net results from investments 4,321 - 1,148 5,469 > - 100.0Results from equity consolidation - 2,817 346 - 3,163 > - 100.0

Profit from ordinary activities 25,772 29,677 - 3,905 - 13.2Taxes on income - 6,360 - 7,880 1,520 - 19.3

Consolidated net income after taxes 19,412 21,797 - 2,385 - 10.9Minority interests in consolidated net income - 238 - 233 - 5 2.1

Consolidated net income 19,174 21,564 - 2,390 - 11.1

II. Balance

Assets

in ’000 EUR (Notes) 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Cash and balances with central banks 40,034 131,171 - 91,137 - 69.5Loans and advances to, and placements with banks 2,007,601 1,965,971 41,630 2.1Loans and advances to customers 6,395,861 5,904,795 491,066 8.3Loan loss provisions - 130,016 - 123,473 - 6,543 5.3Trading assets and derivatives (3) 243,343 245,464 - 2,121 - 0.9Financial assets - at fair value (4) 1,157,267 1,113,666 43,601 3.9Financial assets - available for sale (5) 1,190,602 1,364,738 - 174,136 - 12.8Financial assets - held to maturity (6) 1,157,043 1,066,490 90,553 8.5Shares in companies valued at equity 20,271 24,332 - 4,061 - 16.7Investment property 23,993 23,399 594 2.5Intangible assets (7) 1,335 1,331 4 0.3Property, plant and equipment (8) 76,824 68,365 8,459 12.4Current tax assets 2,996 21,212 - 18,216 - 85.9Deferred tax assets 122,313 99,092 23,221 23.4Available-for-sale assets 50,503 51,093 - 590 - 1.2Other assets 48,724 21,976 26,748 > 100.0Total assets 12,408,694 11,979,622 429,072 3.6

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Liabilities

in ’000 EUR (Notes) 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Amounts owed to banks 300,592 89,361 211,231 > 100.0Amounts owed to customers 3,528,480 3,281,968 246,512 7.5Liabilities evidenced by certificates (9) 1,659,003 1,921,866 34,137 1.8Trading liabilities and derivatives (3) 469,484 383,175 86,309 22.5Financial liabilities - at fair value (10) 5,178,620 5,417,849 - 239,229 - 4.4Provisions 8,746 12,036 - 3,290 - 27.3Social capital 14,703 14,645 58 0.4Current tax liabilities 4,577 36,049 - 31,472 - 87.3Deferred tax liabilities 120,837 96,788 24,049 24.8Other liabilities 122,365 41,964 80,401 > 100.0Subordinated and supplementary capital 242,394 226,362 16,032 7.1Shareholders’ equity 461,893 457,559 4,334 0.9 thereof minority interests 1,318 1,454 - 136 - 9.4Total liabilities 12,408,694 11,979,622 429,072 3.6

III. Statement of changes in shareholders’ equity

in ’000 EUR Subscri-

bed

capital

Capital

reserves

Retained

earnings

Available-

for-Sale-

reserves

Reserves

from

currency

translation

Effects

from

first-time

adoption

Consoli-

dated net

profit

Minority

interests

Total

share-

holders’

equity

IFRSAs at 1st January 2007 24,180 100,342 298,372 - 316 - 570 3,615 7,775 1,299 434,697Consolildated net income 0 0 - 48 0 0 0 21,612 233 21,797Currency translation 0 0 0 6 - 410 0 - 283 0 - 687Changes in valuation 0 0 742 0 0 - 3 0 10 749Valuation of available-for-Sale portfolio

0 0 0 - 150 0 0 0 0 - 150

Total income second quarter 0 0 694 - 144 - 410 - 3 21,329 243 21,709Dividends 0 0 0 0 0 0 - 7,775 0 - 7,775As at 30th June 2007 24,180 100,342 299,066 - 460 - 980 3,612 21,329 1,542 448,631

As at 1st January 2008 24,180 100,342 327,331 - 7,746 - 947 3,615 9,330 1,454 457,559Consolidated net income 0 0 - 10 0 0 0 19,184 238 19,412Currency translation 0 0 107 - 6 779 0 220 40 1,140Changes in valuation 0 0 612 0 0 0 0 0 612Valuation of available-for-Sale portfolio

0 0 0 - 7,086 0 0 0 - 23 - 7,109

Total income second quarter 0 0 709 - 7,092 779 0 19,404 255 14,055Dividends 0 0 0 0 0 0 - 9,330 - 391 - 9,721As at 30th June 2008 24,180 100,342 328,040 - 14,838 - 168 3,615 19,404 1,318 461,893

IV. Cash flow statement

in ’000 EUR 1.1. -

30.06.2008

1.1. -

30.06.2007

Cash and balances with central banks at end of previous period 131,171 61,406Cashflows from operating activities - 128,403 509,019Cashflows from investing activities 36,313 - 487,349Cashflows from financing activities 978 - 12,920Effects of changes in exchange rate, valuation, consolidation - 25 - 4

Cash and balances with central banks at end of period 40,034 70,152

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V. Notes

Notes to the income statement

(1) Net interest income

in ’000 EUR 1.1. -

30.06.2008

1.1. -

30.06.2007

Change

in ’000 EUR in %

Interest and similar income 275,691 226,886 48,805 21.5Interes income from cash and balances with central banks 1,092 1,853 - 761 - 41.1Interest income from loans and advances to banks 33,935 28,086 5,849 20.8Interest income from loans and advances to customers 150,998 115,507 35,491 30.7Interest income from bonds - held for trading 11 0 11 100.0Interest income from bonds - at fair value 8,754 8,288 466 5.6Interest income from bonds - available for sale 30,847 26,095 4,752 18.2Interest income from bonds - held to maturity 21,169 19,407 1,762 9.1Interest income from leasing 24,738 19,882 4,856 24.4Interest income from shares 2,956 7,471 - 4,515 - 60.4Investment income from affiliated companies 73 138 - 65 - 47.1Investment income from associated companies 1,118 159 959 > 100.0

Interest and similar expenses - 218,632 - 172,562 - 46,070 26.7Interest expenses for amounts owed to bank - 7,223 - 6,472 - 751 11.6Interest expenses for amounts owed to customers - 67,559 - 48,813 - 18,746 38.4Interest expenses for liabilities evidenced by certificates - 39,427 - 43,638 4,211 - 9.6Interest expenses for liabilities - at fair value - 96,537 - 67,314 - 29,223 43.4Interest income for subordinated and supplementary capital - 7,710 - 6,299 - 1,411 22.4Other leasing expenses - 176 - 26 - 150 > 100.0

Net interest income 57,059 54,324 2,735 5.0

(2) Administrative expenses

in ’000 EUR 1.1. -

30.06.2008

1.1. -

30.06.2007

Change

in ’000 EUR in %

Staff costs - 24,589 - 22,580 - 2,009 8.9Material expenses - 15,408 - 13,541 - 1,867 13.9Amortisation of property, plant and equipment and intangible asstes - 2,703 - 2,685 - 18 0.7Administrative expenses - 42,700 - 38,806 - 3,894 10.0

Thereof staff costs

in ’000 EUR 1.1. -

30.06.2008

1.1. -

30.06.2007

Change

in ’000 EUR in %

Wages and salaries - 18,426 - 17,418 - 1,008 5.8Statutory social security contributions - 4,696 - 4,240 - 456 10.8Voluntary social benefits - 782 - 392 - 390 99.5Expenses for retirement benefits and other benefits - 567 - 478 - 89 18.6Social capital - 118 - 52 - 66 > 100.0Staff costs - 24,589 - 22,580 - 2,009 8.9

11

Notes to the balance sheet

(3) Trading assets and derivativesTrading assets and derivatives – breakdown by product

in ’000 EUR 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Debt securities of public issuers 1,208 1,723 - 515 - 29.9Investment certificates 9,048 783 8,265 > 100.0Other equity interests 481 2,254 - 1,773 - 78.7Positive market values of derivative financial instruments 122,057 134,649 - 12,592 - 9.4Deferred interest 110,549 106,055 4,494 4.2Trading assets and derivatives 243,343 245,464 - 2,121 - 0.9

Derivatives

in ’000 EUR Nominal Value Positive market values Negative market values

30.06.2008 31.12.2007 30.06.2008 31.12.2007 30.06.2008 31.12.2007

Interest rate derivatives 8,229,392 8,514,618 113,063 125,032 383,183 305,068Interest rate swaps 6,377,136 6,669,944 89,219 95,352 295,934 214,981Cross currency swaps 994,942 1,029,952 19,412 27,151 82,889 87,945Interest rate options 699,394 690,378 4,400 2,380 3,533 1,298 Others derivatives 157,920 124,344 32 149 827 844

Currency derivatives 898,122 785,400 8,994 9,617 11,485 10,801FX forward transactions 524,804 494,836 6,926 8,367 6,735 8,076FX swaps 194,374 189,720 330 366 3,012 1,841FX options 178,944 100,844 1,738 884 1,738 884

Derivatives 9,127,514 9,300,018 122,057 134,649 394,668 315,869

(4) Financial assets – designated at fair value

in ’000 EUR 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Debt securities of public issuers 50,275 48,741 1,534 3.1Debt securities of other issuers 453,174 407,255 45,919 11.3Equities 12,686 10,471 2,215 21.2Investment certificates 19,164 6,871 12,293 > 100.0Loans and advances to, and placements with, banks 34,497 35,029 - 532 - 1.5Loans and advances to customers 568,805 587,835 - 19,030 - 3.2Deferred interest 18,666 17,464 1,202 6.9

Financial assets - at fair value 1,157,267 1,113,666 43,601 3.9

(5) Financial asstes - available for sale

in ’000 EUR 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Debt securities of public issuers 10,122 10,275 - 153 - 1.5Debt securities of other issuers 1,129,979 1,298,930 - 168,951 - 13.0Equities 1,189 1,182 7 0.6Investment certificates 19,483 22,637 - 3,154 - 13.9Other equity rights 10,373 10,373 0 0.0Deferred interest 5,254 7,342 - 2,088 - 28.4Investments 10,041 9,912 129 1.3Shares in affiliated companies 4,161 4,087 74 1.8

Investments - available for sale 1,190,602 1,364,738 - 174,136 - 12.8

12

(6) Financial assets - held to maturity

in ’000 EUR 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Debt securities of public issuers 360,007 355,197 4,810 1.4Debt securities of other issuers 777,491 688,754 88,737 12.9Deferred interest 19,545 22,539 - 2,994 - 13.3Financial assets - held to maturity 1,157,043 1,066,490 90,553 8.5

(7) Intangible assets

in ’000 EUR 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Software acquired 1,104 1,101 3 0.3Other intangible assets 231 230 1 0.4Intangible assets 1,335 1,331 4 0.3

(8) Property, plant and equipment

in ’000 EUR 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Land without buildings 963 963 0 0.0Land with buildings 8,015 8,030 - 15 - 0.2Buildings 41,965 37,248 4,717 12.7Furniture and fixtures 5,020 4,588 432 9.4Leased movables 190 199 - 9 - 4.5Construction in progress 20,671 17,337 3,334 19.2Property, plant and equipment 76,824 68,365 8,459 12.4

(9) Liabilities evidenced by certificates (LAC)

in ’000 EUR 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Mortgage bonds 24,678 31,481 - 6,803 - 21.6Municipal bonds 19,239 40,157 - 20,918 - 52.1Medium-term fixed-rate notes 1,082 7,973 - 6,891 - 86.4Bonds 1,085,707 1,055,110 30,597 2.9Housing construction bonds 254,260 212,375 41,885 19.7Bonds issued by Pfandbriefstelle 560,000 560,000 0 0.0Other liabilities evidenced by certificates 545 545 0 0.0Interest accrued 10,492 14,225 - 3,733 - 26.2Liabilities evidenced by certificates 1,956,003 1,921,866 34,137 1.8

(10) Financial liabilities - designated at fair value

in ’000 EUR 30.06.2008 31.12.2007 Change

in ’000 EUR in %

Amounts owed to banks - at fair value 141,543 143,367 - 1,824 - 1.3Amounts owed to customers - at fair value 377,805 387,201 - 9,396 - 2.4Mortgage bonds - at fair value 17,550 32,807 - 15,257 - 46.5Municipal bonds - at fair value 27,858 28,631 - 773 - 2.7Medium-term fixed-rate notes - at fair value 69,410 66,962 2,448 3.7Bonds - at fair value 3,220,566 3,424,295 - 203,729 - 5.9Housing construction bonds - at fair value 112,993 96,033 16,960 17.7Bonds issued by Pfandbriefstelle - at fair value 990,118 991,291 - 1,173 - 0.1Subordinated capital - at fair value 94,471 96,545 - 2,074 - 2.1Supplementary capital - at fair value 63,926 64,104 - 178 - 0.3Interest accrued - at fair value 62,380 86,613 - 24,233 - 28.0Financial liabilities - at fair value 5,178,620 5,417,849 - 239,229 - 4.4

13

Additional IFRS disclosures

(11) Segment reporting

Breakdown by segment

in ’000 EUR Public Corporate

Customers

Private

Customers

Leasing

and Real

Estate

Financial

Markets

Corporate

Center

Total

Net interest income 2nd Q 2008 2,146 23,300 18,637 5,714 4,348 2,914 57,0592nd Q 2007 2,411 21,166 17,602 5,454 5,821 1,870 54,324

Loan loss provisions 2nd Q 2008 - 2 - 4,559 - 1,675 - 2,013 - 1,499 - 1,096 - 10,8442nd Q 2007 0 - 9,772 - 2,031 - 2,002 - 5 - 1,698 - 15,508

Net fee and commission income 2nd Q 2008 190 5,554 8,515 - 69 1,900 5,038 21,1282nd Q 2007 183 5,068 9,285 21 2,133 5,041 21,731

Net trading result 2nd Q 2008 6 1,278 973 110 - 7,781 1,599 - 3,8152nd Q 2007 1 930 899 88 1,474 1,293 4,685

Administrative expenses 2nd Q 2008 - 260 - 10,789 - 20,508 - 3,412 - 2,757 - 4,974 - 42,7002nd Q 2007 - 226 - 10,284 - 18,925 - 2,365 - 2,627 - 4,379 - 38,806

Other operating income and expenses

2nd Q 2008 1 63 159 2,428 46 743 3,4402nd Q 2007 1 67 138 1,623 21 2,203 4,053

Net results from financial investments

2nd Q 2008 0 0 0 0 1,262 3,059 4,3212nd Q 2007 0 0 0 0 - 862 - 286 - 1,148

Result from equity consolidation 2nd Q 2008 0 0 0 0 0 - 2,817 - 2,8172nd Q 2007 0 0 0 0 0 346 346

Operating profit 2nd Q 2008 2,081 14,847 6,101 2,758 - 4,481 4,466 25,7722nd Q 2007 2,370 7,175 6,968 2,819 5,955 4,390 29,677

Total assets 2nd Q 2008 652,975 3,233,017 1,459,462 1,472,271 5,251,364 339,605 12,408,6942nd Q 2007 810,288 2,734,089 1,227,194 1,273,186 5,388,286 379,845 11,812,888

Total liabilities 2nd Q 2008 137,612 964,646 2,440,624 367,880 7,351,335 1,146,597 12,408,6942nd Q 2007 129,796 756,058 2,129,046 267,617 8,202,910 327,461 11,812,888

(12) Staff

30.06.2008 31.12.2007 Change

absolute in %

Full-time salaried staff 650 621 29 4.7Part-time salaried staff 47 47 0 0.0Apprentices 12 11 1 9.1Full-time blue-collar workers 4 4 0 0.0Average number of staff in a year 713 683 30 4.4

14

(10) Overall risk management

(14) Overall risk management

The Bank’s operations involve the following risks:

� Credit risk: This includes the counterparty default risk, as well as the risk of deteriorating credit standing. Risks can also result from the use of credit risk minimization methods.� Market risks: The common characteristic of these risks is that they result from price changes in money and capital markets. Market price risks are divided into interest rate risks, stock price risks, foreign currency risks, and commodity risks.� Liquidity risk: Liquidity risks can be distinguished in maturity and retrieval risks, structural liquidity risk (roll-over financing risk), and market liquidity risk. The maturity risk describes an unplanned extension of the capital commitment period in the lending business. The retrieval risk is the risk that credit commitments are unexpectedly utilized or deposits are with drawn. As a result, a bank can no longer fully meet its payment obligations. The structural liquidity risk results from the fact that required roll-over financing can only be carried out at less favourable conditions or not at all. A market liquidity risk arises when items can only be sold immediately, having to accept a loss.� Operational risk: This includes the risk of direct or indirect losses caused by human error, process deficits, technological failure, or external influence. Operational risks also include the legal risk.� Other risks: These include above all those types of risks for which only rudimentary or no quantification methods exist. In particular, other risks encompass strategic risks, reputation,

equity, as well as performance or business risks.

The Bank controls these risks as part of its cont-rol and limitation of the central banking risk. The Managing Board is responsible for the overall risk management of Hypo Landesbank Vorarlberg. In this capacity, it approves the principles of risk control and the risk measurement procedures. Moreover, it establishes the Bank‘s willingness to take risks and defines the limits for all relevant types of risk, depending on the bank‘s risk-absorbing capacity.

The overall risk management of Hypo Landesbank Vorarlberg is based on a strict separation between Front Office and Back Office. The risk management functions of Hypo Landesbank Vorarlberg are con-centrated in the Member of the Board responsible for risk management. The risk controlling of Hypo Landesbank Vorarlberg is developed and implemen-ted by the Central Risk Controlling Department. The group measures credit risks, market risks, liquidity risks and operational risks on an overall bank level. Moreover, this group is also responsible for the implementation of the Basel II requirements. The independent assessment and approval of credit applications is carried out by the Credit Management departments for corporate and private customers.

The Bank‘s market and liquidity risks, as well as the Capital Adequacy Process are discussed in the Asset Liability Management Committee (ALM). In this committee, the Managing Board decides on procedures for market risk measurement, on the definition of interfaces between Sales and Treasury with regard to the market interest rate method, and on the level of market risk or liquidity limits. The Central Risk Controlling, Controlling, and Treasury

(13) Overview quarterly results

in ’000 EUR 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter

2007 2007 2007 2007 2008 2008

Net interest income 26,995 27,329 27,090 29,008 27,883 29,176Loan loss provisions - 8,213 - 7,295 - 5,217 - 7,343 - 3,057 - 7,787 Net fee and commission income 10,867 10,864 12,313 12,680 10,357 10,771Net trading result 1,698 2,750 189 - 4,008 - 1,939 - 1,876 Administrative expenses - 19,646 - 19,060 - 19,828 - 19,555 - 21,475 - 21,225 Other operating income and expenses 1,708 2,245 3,182 2,311 1,173 2,267Net results from financial instruments 233 - 1,144 - 535 37 1,440 2,881Result from equity consolidation 600 - 254 - 764 809 - 1,843 - 974 Profit from ordinary activities 14,242 15,435 16,430 13,939 12,539 13,233Taxes on income - 3,450 - 4,430 - 7,265 - 5,696 - 3,154 - 3,206 Consolidated net income after income taxes 10,792 11,005 9,165 8,243 9,385 10,027Minority interests in consolidated net income - 76 - 157 - 121 - 135 - 77 - 161 Consolidated net income 10,716 10,848 9,044 8,108 9,308 9,866

15

departments are also represented in the meetings of the committee.

The strategies, procedures, and approaches for the management of risks are documented in writing. The Bank keeps a risk management handbook and a credit handbook that is available to all employees. These handbooks are updated at regular intervals. Frameworks are provided for all other types of risk. The risk strategy of the Bank sets the guidelines for the single risk frameworks adopted by the Managing Board. Moreover, the Bank has laid down all relevant work processes in written instructions that are also available to all employees.

The Bank has set out the following risk policy principles:

Risk control� The entire Managing Board is responsible for

the Bank‘s risk management.� The Bank distributes its risk capital among the

organisational units by defining suitable limits.� The Bank only assumes risks that are in propor-

tion to the envisaged results.� The Bank only assumes measurable risks.� The Bank only assumes auditable risks, i.e. the

guidelines for the assumption of risks are laid down in writing to allow for examination by the internal audit department.

Risk measurement� The Bank identifies all major types of risk and

quantifies these using acknowledged methods.

In case quantification is not possible or useful, provisions are made for risk buffers.

� The Bank performs stress tests to identify severe risks.

Organisation� For each risk, the Bank defines who is respon-

sible for a risk and who monitors the risk.� Risk management is organised in a way so as

to avoid conflicts of interest on a personal level and on the level of organisational units.

� The Bank defines structured emergency plans allowing it to remain operational in a crisis situation.

New products and areas of business� New products or areas of business are only

introduced after a structured analysis of oppor-tunities and risks.

� New products must be represented in the internal risk measurement.

Limits regime� The Bank formulates as many limits as necessa-

ry and as few as possible.� The Bank does not take any risks without a limit.� Illiquid risks are limited where they emerge: in

the market sector.� Concentration risks are curbed using structure

limits or volume limits that depend on credit standing.

� The Bank monitors both compliance with and utilization of the risk capital provided.

During the first six months of the year. the market risk developed as follows:

Change VaR in ’000 EUR

Mean value of

VaR Total

Mean value of

VaR Interest

Maen value of

VaR FX

Mean value of

VaR Equities

2007 Jan 9,226,501 8,753,217 1,320,380 580,425Feb 8,894,292 8,417,387 1,429,414 609,519Mar 8,453,666 8,055,484 1,528,203 921,274Apr 8,220,504 7,757,913 1,494,328 765,350May 8,610,471 7,989,793 1,432,231 667,383Jun 8,882,120 8,336,497 1,375,282 732,753

2008 Jan 9,436,093 8,429,780 2,070,334 687,030Feb 9,480,521 8,218,230 2,496,121 932,646Mar 9,847,104 8,377,370 2,846,687 980,590Apr 10,636,602 9,116,958 2,842,295 778,399May 11,685,230 10,356,228 3,039,721 1,410,349Jun 7,440,529 7,780,681 264,269 1,596,758

16

Declaration of the statutory representatives with respect to the interim report

The undersigned members of the Managing Board, as statutory representatives, confirm that this interim report has been prepared within their responsibility to the best of their knowledge in accordance with International Financial Reporting Standards (IFRS) as applicable within the EU, including but not limited to IAS 34 („Interim Reports“) and presents a true and fair view of the Company‘s assets and liabilites, financial condition, and results of operation. This interim report was not subjected to an audit or review by an auditor.

Bregenz, 13 August 2008

Jodok SimmaCEO, Chairman Managing Board

Johannes HefelMember Managing Board

Michael GrahammerMember Managing Board

17

Branch offices/Subsidiaries

Vorarlberg: Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft

International dialing code for Austria: +43 Zentrale: 6900 Bregenz, Hypo-Passage 1, T (05574) 414-0, F 414-10 50 6900 Bregenz „GWL”, Römerstraße 2, T (05574) 414-17 00, F 414-17 50 6900 Bregenz Vorkloster, Heldendankstraße 33, T (05574) 414-18 00, F 414-18 50 6700 Bludenz Am Postplatz 2, T (05552) 633 47-0, F 633 47-30 50 6850 Dornbirn Rathausplatz 6, T (05572) 246 53-0, F 246 53-40 50 6850 Dornbirn „Messepark”, Messestraße 2, T (05572) 295 80-0, F 295 80-42 50 6863 Egg „Wälderpark”, HNr. 940, T (05512) 21 44-46 00, F 21 44-46 50 6800 Feldkirch Neustadt 23, T (05522) 736 01-20 00, F 736 01-20 50 6800 Feldkirch „LKH Feldkirch“, Carinagasse 47-49, T (05522) 787 72-0, F 787 72-24 50 6793 Gaschurn Schulstraße 6b, T (05558) 87 22-34 00, F 87 22-34 50 6840 Götzis Hauptstraße 4, T (05523) 624 51-0, F 624 51-60 50 6971 Hard Landstraße 9, T (05574) 414-16 00, F 414-16 50 6973 Höchst Hauptstraße 25, T (05578) 722 72-0, F 722 72-52 50 6845 Hohenems Bahnhofstraße 19, T (05576) 737 81-0, F 737 81-62 50 6923 Lauterach „Achpark”, Dammstraße 2, T (05574) 414-64 00, F 414-64 50 6764 Lech HNr. 138, T (05583) 25 78-0, F 25 78-38 50 6890 Lustenau Kaiser-Franz-Josef-Straße 4a, T (05577) 836 11-0, F 836 11-50 50 6993 Mittelberg Walserstraße 62, T (05517) 55 91-0, F 55 91-84 50 6830 Rankweil Ringstraße 11, T (05522) 453 30-0, F 453 30-22 50 6830 Rankweil „LKH Rankweil“, Valdunastraße 16, T (05522) 787 72-26 11, F 787 72-26 50 6991 Riezlern Walserstraße 31, T (05517) 50 01-0, F 50 01-80 50 6780 Schruns Jakob-Stemer-Weg 2, T (05556) 739 76-0, F 739 76-32 50

Kleinwalsertal: Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft 87569 Mittelberg, Walserstraße 62, T (05517) 55 91-0, F 55 91-84 50 87567 Riezlern, Walserstraße 31, T (05517) 50 01-0, F 50 01-80 50

Vienna: Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft 1010 Vienna, Singerstraße 12, T (01) 513 89 29-0, F 513 89 29-74 50

Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft, Mobiler Vertrieb 1040 Vienna, Wiedner Hauptstraße 76, T (01) 587 02 70-0, F 587 02 70-77 50

Styria: Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft 8010 Graz, Joanneumring 7, T (0316) 81 64 70-68 00, F 81 64 70-68 50

Upper Austria: Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft 4600 Wels, Kaiser-Josef-Platz 49, T (0)50 414-68 00, F -68 50

Switzerland: Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft eine Niederlassung der Vorarlberger Landes- und Hypothekenbank Aktiengesellschaft 9004 St. Gallen, Bankgasse 1, T +41/(0)71/228 85-00, F 228 85-19

Principality of Hypo Investment Bank (Liechtenstein) AktiengesellschaftLiechtenstein: 9490 Vaduz, Austrasse 59, Postfach 231, T +423/265 56-56, F 265 56-699

Italy: Hypo Vorarlberg GmbH 39100 Bolzano, Galileo-Galilei-Straße 10/B, T +39/0471/06 05 00-0, F 06 05 50 Hypo Vorarlberg Leasing AG 39100 Bolzano, Galileo-Galilei-Straße 10/B, T +39/0471/06 05 00-0, F 06 05 00-50

Hypo Vorarlberg Leasing AG 24100 Bergamo, Via Vittorio Emanuele II, T +39/035/21 07 51-0, F 21 06 09

Hypo Vorarlberg Leasing AG 22100 Como, Via Fratelli Rosselli 14, T +39/031/57 45 17-0, F 57 44 76

Vorarlberger Landes- und Hypothekenbank AktiengesellschaftHypo-Passage 1, 6900 Bregenz, AustriaT +43/(0)5574/414-0, F +43/(0)5574/414-1050info@hypovbg.at, www.hypovbg.atBLZ 58000, BIC/SWIFT HYPVAT2B, DVR 0018775, UID ATU 36738508, FN 145586y