Landeskreditbank Baden-Württemberg - L-Bank

transferred to independent subsidiaries without state support. As a consequence, the advantages resulting from
state guaranties for such new activities will be treated as impermissible state aid within the meaning of Art. 87
EC Treaty. In addition, Understanding II clarifies that a violation of the state aid rules by single development
activities will have no effect on the continued existence of the state guaranties as such.
As a development bank engaged in aforementioned noncompetitive public functions, we will remain a
beneficiary of the maintenance obligation, the guaranty obligation as well as the explicit guaranty of Baden-
Württemberg. On March 10, 2004, the parliament of Baden-Württemberg slightly amended the L-Bank Act and
the L-Bank Statutes to reflect more precisely the activities permitted to us by Understanding II; the amendments
will become effective as of December 31, 2007. In our view, Understanding II does not, apart from minor
adjustments, require us to give up any activities.
Insolvency of L-Bank. Pursuant to Section 12 of the Insolvency Law (Insolvenzordnung) and Section 45 of
the Baden-Württemberg Law Implementing the Judiciary Law (Gesetz zur Ausführung des
Gerichtsverfassungsgesetzes), certain public law institutions like us are not subject to insolvency proceedings.
Therefore, as a public law institution, we can currently only be dissolved in accordance with the L-Bank Statutes
and with the L-Bank Act.
Supervision of L-Bank. Pursuant to the L-Bank Act and the L-Bank Statutes, we are subject to supervision
by the Ministry of Finance of Baden-Württemberg in consultation with the ministry of Baden-Württemberg
having jurisdiction for the particular matter concerned. We are also subject to the supervision of the Federal
Supervisory Authority for Financial Services (Bundesanstalt für Finanzdienstleistungsaufsicht) in conjunction
with the Federal Central Bank (Deutsche Bundesbank). For more information about our supervision, see the
discussion under the heading “—Regulation and Supervision of L-Bank in the Federal Republic of Germany.”
In addition, the State Accounting Office (Landesrechnungshof) of Baden-Württemberg, which is responsible
to the parliament of Baden-Württemberg (Landtag), has an unrestricted right to audit us at any time, in particular
with regard to our compliance with the Baden-Württemberg Budgeting Principles Act
(Landeshaushaltsordnung), the law setting forth the principles and guidelines relating to, among other things, the
administration of public funds.
Our supervisory board (Verwaltungsrat) establishes guidelines for, and oversees, the conduct of our
business. Pursuant to the L-Bank Act, our supervisory board is composed of eight representatives of the
government of Baden-Württemberg and seven other members, all of whom are appointed by the government of
Baden-Württemberg and vested with voting rights. In addition, the supervisory board includes three advisory
members without voting rights. The government of Baden-Württemberg appoints one of the representatives of
Baden-Württemberg in our supervisory board as chairman of the supervisory board. See “—Management.”
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