The ratings on Austria-based Vorarlberger Landes-und Hypothekenbank AG (Hypo Vorarlberg) are based on the deficiency guarantee (Ausfallsbürgschaft) of the bank's 71.2%-majority owner, the State of Vorarlberg (Vorarlberg). The ratings on Hypo Vorarlberg, therefore, reflect the credit quality of Vorarlberg. On April 2, 2003, the European Commission (EC) agreed with the Austrian government to phase out state guarantees by April 1, 2007, benefiting some Austrian banks, including all rated Landeshypothekenbanks. (For further details, see the article entitled "Austrian Landeshypothekenbanks Grandfathered Debt Ratings and CCRs Affirmed; Outlook Neg", published on April 3, 2003, on RatingsDirect.) Grandfathered obligations incurred until April 2, 2003, irrespective of their maturity will continue to benefit from the state guarantee. In addition, obligations incurred between April 3, 2003,
