Financial Statements

for the Year Ended December 31, 2006
(HVB Group compliant with IFRS 5)

The transfers agreed by the Management Board and Supervisory Board on September 12, 2006, which were approved by the Extraordinary Meeting of Shareholders on October 25, 2006, represent a discontinued operation as defined by IFRS 5, resulting in a different presentation in the income statement.

The results of the discontinued operations are not shown in the income statement prepared in compliance with IFRS 5 until after the net profit after tax and minorities of “HVB Group new”. The following companies and sub-groups have been defined as discontinued operations: the Bank Austria Creditanstalt Group, Joint Stock Commerical Bank HVB Bank Ukraine (HVB Bank Ukraine), Closed Joint Stock Company International Moscow Bank (IMB), AS UniCredit Bank, Riga (formerly HVB Bank AS, Riga) and the HVB AG branches in Tallinn, Estonia, and Vilnius, Lithuania.

	Notes	2006	2005	Change
Income/expenses		€ millions	€ millions	€ millions	in %
Net interest	27	3,148	3,166	(18)	(0.6)
Dividends and other income from equity investments	28	251	259	(8)	(3.1)
Net interest income		3,399	3,425	(26)	(0.8)
Net fees and commissions	29	1,753	1,723	+ 30	+ 1,7
Net trading, hedging and fair value income	30	768	376	+ 392	>+ 100.0
Net other expenses/income	31	32	(311)	+ 343
Net non-interest income		2,553	1,788	+ 765	+ 42.8
Total Revenues		5,952	5,213	+ 739	+ 14.2
Payroll costs		(2,216)	(2,212)	(4)	+ 0.2
Other administrative expenses		(1,166)	(1,260)	+ 94	– 7.5
Amortisation, depreciation and impairment losses on intangible and tangible assets		(313)	(413)	+ 100	(24.2)
Operating costs	32	(3,695)	(3,885)	+ 190	(4.9)
Operating profit		2,257	1,328	+ 929	+ 70.0
Provisions for risks and charges	33	(164)	(87)	(77)	+ 88.5
Write-down on goodwill		0	0	0	0.0
Restructuring costs	34	(60)	(438)	+ 378	(86.3)
Net write-downs of loans and provisions for guarantees and commitments	35	(933)	(979)	+ 46	(4.7)
Net income from investments	36	671	69	+ 602	>+ 100.0
Other non-operating expenses	37	(153)	0	(153)
Profit before tax	38	1,618	(107)	+ 1,725
Income tax for the period	20	125	(14)	+ 139
Net profit		1,743	(121)	+ 1,864
Minorities		(103)	(6)	(97)	>+ 100.0
Net profit of HVB Group New		1,640	(127)	+ 1,767
Net profit after tax of discontinued operations		3,457	1,158	+ 2,299	>+ 100.0
Minority interest in the net profit of discontinued operations		(677)	(389)	(288)	+ 74.0
Net profit of full HVB Group		4,420	642	+ 3,778	>+ 100.0
Change in reserves		3,798	451	+ 3,347	>+ 100.0
Consolidated profit		622	191	+ 431	>+ 100.0

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The income statement of the full HVB Group for 2006, including the discontinued operations, is marked by non-recurring effects with a positive net balance of €2,230 million, some of which relates to the integration of HVB Group into the UniCredit Group.

Of the total non-recurring effects in 2006, €362 million are attributable to the continuing operations of the new HVB Group and €1,868 million to discontinued operations.

The non-recurring effects in the new HVB Group relate to the following:

• Gains on the disposal of the Activest companies to Pioneer Global Asset Management S.p.A. totalling €543 million and the partial disposal of our holding in Münchener Rückversicherungs-Gesellschaft AG (€217 million) disclosed in net income from investments
• Valuation expenses of €130 million arising from the disposal of a portfolio of non-strategic real estate announced by the Management Board of HVB AG on December 13, 2006 included in net income from investments
• Restructuring costs of €60 million
• General provisions for losses on specific loans and advances of €55 million disclosed under net write-downs of loans and provisions for guarantees and commitments that were made possible for the first time by the preparations for Basel II causing improvements to the data records in terms of defaults by customers who are 90 days in arrears and other non-performance
• Expenses of €153 million arising from a change in the parameters used to calculate the fair value mainly of financial instruments under the categories held for trading and at fair value through profit and loss (fair-value discount) shown in the line item “Other non-operating expenses”

In the discontinued operations, the non-recurring effects comprise the following individual items:

• Gains of €669 million on the disposal of HVB Splitska banka, which belongs to the BA-CA Group, and of €1,756 million on the disposal of the Bank BPH Group disclosed in net income from investments
• Restructuring costs of the discontinued operations totalling €248 million. €225 million of this total relates to the creation of provisions at BA-CA for reorganisation and restructuring in the Retail, Corporates, Markets & Investment Banking and Global Banking Services divisions as well as Support Services and Risk Management
• Non-recurring expense of €278 million in net write-downs of loans and provisions and for guarantees and commitments relating to a change of methods used by BA-CA
• Expenses of €31 million arising from a change in the parameters used to calculate the fair value of assets (fair-value discount) shown in the income statement item “Other non-operating expenses”

In addition to restructuring costs of €546 million (€108 million of which is for discontinued operations), the previous-year total included further extraordinary expenses arising from loan-loss provisions due to additional general provisions for losses on specific loans and advances totalling €147 million (€70 million of which was for discontinued operations).

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In the full HVB Group, €3,798 million of the unappropriated profit (€4,420 million) has been transferred to reserves. The consolidated profit (which is the profit available for distribution of HVB AG) amounts to €622 million. We will propose to the Annual General Meeting of Shareholders that a dividend of €301 million be paid to the shareholders and that a further €321 million be transferred to retained earnings. The total dividend payout of €301 million is equivalent to a dividend of €0.40 per share of common stock and per share of preferred stock and an advance dividend of €0.064 per share of preferred stock.

Earnings per share

Full HVB Group	Notes	2006	2005
		€	€
Earnings per share (adjusted)1	40	2.88	1.55
Earnings per share	40	5.89	0.86

¹ 2006 figures adjusted for the defined non-recurring effects 2005 figures adjusted for restructuring costs and additional provisions for losses on loans and advances

Since no conversion rights or option rights on conditional capital existed at the closing date for 2006, there is no calculation of diluted earnings per share.

The income and expense of both the continuing and the discontinued operations are disclosed in the individual income statement items in the income statement shown below for information purposes. This provides an overview of the operating performance of the full HVB Group including the discontinued operations.

	2006	2005	Change
Income/expenses of full HVB Group	€ millions	€ millions	€ millions	in %
Net interest	5886	5,576	+ 310	+ 5,6
Dividends and other income from equity investments	479	533	(54)	(10,1)
Net interest income	6,365	6,109	+ 256	+ 4.2
Net fees and commissions	3,468	3,198	+ 270	+ 8.4
Net trading, hedging and fair value income	1,230	656	+ 574	+ 87.5
Net other expenses/income	104	(322)	+ 426
Net non-interest income	4,802	3,532	+ 1270	+ 36.0
Total revenues	11,167	9,641	+ 1,526	+ 15.8
Payroll costs	(3,895)	(3,733)	(162)	+ 4.3
Other administrative expenses	(2,132)	(2,185)	+ 53	(2.4)
Amortisation, depreciation and impairment losses on intangible and tangible assets	(573)	(690)	+ 117	(17.0)
Operating costs	(6,600)	(6,608)	+ 8	(0.1)
Operating profit	4,567	3,033	+ 1,534	+ 50.6
Provisions for risks and charges	(267)	(98)	(169)	>+ 100.0
Write-down on goodwill	0	0	0	0.0
Restructuring costs	(308)	(546)	+ 238	(43.6)
Net write-downs of loans and provisions for guarantees and commitments	(1,661)	(1,482)	(179)	+ 12.1
Net income from investments	3,170	392	+ 2,778	>+ 100.0
Other non-operating expenses	(184)	0	(184)
Profit before tax	5,317	1,299	+ 4,018	>+ 100.0
Income tax for the period	(117)	(262)	+ 145	– 55.3
Net profit	5,200	1,037	+ 4,163	>+ 100.0
Minorities	(780)	(395)	(385)	+ 97.5
Net profit of full HVB Group	4,420	642	+ 3,778	>+ 100.0
Change in reserves	3,798	451	+ 3,347	>+ 100.0
Consolidated profit	622	191	+ 431	>+ 100.0

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