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8 Letter from the Board of Management – münchener Hypothekenbank eg l Annual Report 2011 Letter from the board of management The Board of Management of the Münchener Hypothekenbank eG. From left to right: Bernhard Heinlein, Dr. Louis Hagen (Spokesman), Michael Jung Last year was mixed for the Münchener Hypothekenbank. The worsening European sovereign debt crisis, as well as heightened uncertainties surrounding the future of the currency union, led to greater demand for safer capital investments among profes- sional and private investors. German residential property, in particular, was viewed as a safe investment. Demand for private residential property financing, especially in Germany, rose no- tably as owner-occupiers also increasingly invested their capital in houses or apartments, while interest rates fell to historic lows. Our new business benefited considerably from these develop- ments as we greatly exceeded some of our targets. Our part- nership with the Volksbanken and Raiffeisenbanken was further reinforced, and our portfolio of mortgages grew further. We were, however, unable to avoid being affected by the im- pact of the European sovereign debt crisis and, in particular, the exacerbation of the financial situation in Greece. We had to take corresponding write-downs of our holdings of Greek government bonds. These write-downs burdened our 2011 busi- ness results. Following the compulsory exchange of bonds, an additional write-down will be required in 2012. Nevertheless, we were able to bear these heavy burdens with our own resourc- es during the year under review. Business strategy will be continued The core principles of our business and risk strategy, which we further developed in 2010, proved their value as a stable plat- form even during last year’s more challenging overall conditions. This is why we will continue our business and risk strategy, es- pecially in light of the selective course of growth we foresee for the Bank. In view of the current sovereign financial situation in the economically weaker European countries and beyond, we will, however, closely examine our lending business with the public sector and banks. The new regulatory requirements will be an important aspect of this review. For this reason we dear shareholders and business associates,