Landeskreditbank Baden-Württemberg - L-Bank

Notes to the annual financial statements of
Landeskreditbank Baden-Württemberg – Förderbank –
for the financial year ended December 31, 2002
Securities in the trading portfolio and liquidity reserve are valued strictly according to the principle of lower
of cost or market value as at the balance sheet date. Securities treated as fixed assets are shown at net book value,
differences between book value and redemption value (premium/discounts) being marked up or down pro rata to
term.
Equity investments in non-affiliated and affiliated companies are valued at the lower of acquisition cost or
fair value, according to the rules applying to fixed assets.
Tangible assets are valued at acquisition or production cost, less scheduled depreciation. Where the value of
an item is expected to continue to decline, unscheduled depreciation has been applied as appropriate. Minor fixed
assets are fully depreciated in the year of acquisition.
Reserves for pension commitments and for obligations under the Bank’s employee pension scheme have
been calculated using the method of computation provided for in § 6a of the German Income Tax Act
(Einkommensteuergesetz [EStG]) applying the updated Heubeck mortality tables (Heubeck Sterbetafeln).
Adequate provisions have been made to cover the early retirement scheme provided for by collective agreement
and the part-time employment scheme devised for senior employees, as well as any obligations arising in
connection with long-service bonuses and other benefits.
Other reserves are set at the amount deemed necessary by the exercise of reasonable business judgment to
cover all uncertain liabilities and potential losses on pending transactions.
The Bank concludes derivative transactions primarily in order to control interest rate exposure – they are not
valued. The Bank also trades in derivatives on its own account and in order to hedge balance sheet items. Market
values are based on interest rates prevailing at December 30, 2002. Transactions for hedging purposes are valued
together with the relevant balance sheet items.
The market values of bonds, notes and derivatives held for the Bank’s own account are determined
individually as at the balance sheet date. The Bank currently holds four portfolios governed by EUR interest rate
risks and offsets valuation gains and losses within these portfolios. In accordance with the non-parity principle
(Imparitaetsprinzip), any positive balance is not appropriated, whereas a provision is made to cover a negative
balance.
Principles of the German Banking Act (Kreditwesengesetz [KWG])
Throughout 2002, the Bank adhered to Principle I (relating to capital adequacy) and Principle II (relating to
liquidity).
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