Landeskreditbank Baden-WÃ¼rttemberg - L-Bank

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(3) Of the total amount of loans outstanding approximately 93% represents loans to credit institutions and 7% represents loans to customers, either directly or by way of sub-participating in loans made by other credit institutions. In 2003, the majority of our total commitments with respect to financing of start-ups and small and mediumsized enterprises were commitments to financial institutions (L-Bank taking the credit risk of those financial institutions). Generally, loans that we extend in this area of financing have an original term of between three and 12 years; in exceptional cases the original term may be up to 20 years. We also provide equity capital to start-up businesses as well as to established small and medium-sized enterprises. We make those investments through a business unit operating under the brand name L-EA (L- EigenkapitalAgentur). However, all investments are included on our balance sheet. Specialized external management teams working on the basis of consultancy contracts advise us in the preparation of our investment decisions. Investment decisions (acquisitions and sales of equity) in this area of business are being taken by our board of management following the completion of a thorough due-diligence process. We try to ascertain the reputational, operational and legal risks of each investment, and especially we examine the business plans, business strategies and, if already available the financial statements of the target companies. If advisable we consult external legal or business advisors before taking a final decision. Investments exceeding the amount of two million Euro are to be decided on by our supervisory board. The focus of our investments is directed at venture capital, in particular at information and communications technology and biotechnology, and towards equity investments financing the expansion or ownership restructuring of established small and medium-sized enterprises. As a general rule, we only invest in minority holdings and as a co-investor — on equal terms — with other private investors. We generally do not invest in stock exchange listed companies. The maximum capital we envisage to invest through L-EA over the years amounts to approximately EUR 253 million (including amounts already invested). We do not intend to become a permanent investor in those companies; instead, we intend to exit our investments on terms we deem favorable to us by way of private or public sales. So far, we have also invested in private equity and venture capital funds as well as in companies directly. In exceptional cases we also grant mezzanine financing to companies in which we are invested. In addition to our own investments, we hold minority interests in two specialized private equity-companies, which undertake similar investments: Mittelständische Beteiligungsgesellschaft Baden-Württemberg mbH, in which we hold 26.8%, and BWK GmbH Unternehmensbeteiligungs-gesellschaft, in which we hold 10%, both located in Stuttgart. Furthermore, under our equity joint venture guaranty program, we assume the default risk of equity investments by venture capital companies and private investors in small and medium-sized businesses by way of guaranties. Those guaranties cover amounts of up to 50% of the respective individual investments. The following table sets out the amounts invested in each year indicated: Total Equity Investments (1) 2004 2003 2002 (in thousands of EUR) Direct investments in companies ........................................... 4,454 6,508 6,073 Investments in private equity funds ......................................... 1,272 3,732 4,725 Mezzanine financings .................................................... 6,766 5,700 (2) 0 Commitments (3) ........................................................ 10,500 12,600 9,319 13
(1) Holdings in companies for strategic purposes as of December 31 of the year indicated, not including Mittelständische Beteiligungsgesellschaft Baden-Württemberg mbH and BWK GmbH Unternehmensbeteiligungsgesellschaft. (2) As from 2003 onwards, as a matter of policy, we increased our engagement in mezzanine financings to complement our direct equity investment in order to further strengthen the capital structure of our companies we are invested in. (3) Outstanding commitments to further payments for equity or parts in equity funds. Infrastructure In order to enhance Baden-Württemberg’s economic and technical infrastructure, we administer several public assistance programs and provide financing for different investments in this respect. We administer programs sponsored by Baden-Württemberg, Germany and the European Union. Through those programs we provide assistance and financing primarily for investments in technology, tourism and economic infrastructure predominantly on a local community level, as well as for investments to enhance the development of rural areas and transport infrastructure. We provide the relevant financing in the form of loans, grants as well as guaranties. Through a network of subsidiaries, we maintain real estate investments focused on business parks, technology parks and industrial parks in Baden-Württemberg. In most cases, we extend loans to financial institutions, typically commercial, cooperative or savings banks, which on-lend the funds to the ultimate borrower at the interest rate and for the purpose specified by us. The intermediary bank bears the credit risk of the borrower, while we bear the credit risk of the intermediary bank. In some cases we lend directly to borrowers. In addition we increasingly extend funds to local authorities and other political subdivisions of Germany or Baden-Württemberg. The following table shows our loans and commitments in connection with infrastructure-related financing for each of the years indicated: Infrastructure-Related Financing (1) Loans and Commitments 2004 2003 2002 2001 (in millions of EUR, except for %) Loans outstanding (2) ...................................... 3,984.47 4,043.14 2,156.01 2,172.38 % of total loans outstanding ................................ 8.73 9.18 5.25 5.34 Commitments made (3) ..................................... 2,751.57 3,544.52 1,399.62 1,373.54 % of total commitments made ............................... 30.96 39.56 19.7 18.61 (1) Not including real estate investments. (2) Loans outstanding at December 31 of the year indicated. Loans outstanding do not include fiduciary loans and administrative loans. (3) Commitments represent the volume of funds committed by us for loans (including fiduciary loans and administrative loans) during the year indicated, including amounts to be disbursed in future years. Social Welfare In support of our owner, the State of Baden-Württemberg, we administer a wide range of financial assistance programs, such as for the support of facilities for handicapped or addicted people or for the construction of hospitals, distributing funds provided by German state and federal governments and the European Union. As of December 31, 2004, we administered 46 such programs, an increase of 17 programs compared to 14
Page 1 and 2: INTERNATIONAL PROSPECTUS SUPPLEMENT
Page 3 and 4: ISSUER Landeskreditbank Baden-Würt
Page 5 and 6: TABLE OF CONTENTS Use of Proceeds .
Page 7 and 8: EXCHANGE RATE INFORMATION The follo
Page 9 and 10: Maturity, Repurchase Maturity. The
Page 11 and 12: the rules of such stock exchange pe
Page 13 and 14: THE CLEARING SYSTEMS DTC DTC is a l
Page 15 and 16: Cross-market transfers between pers
Page 17 and 18: For the purposes of this provision,
Page 19 and 20: These activities by the managers or
Page 21 and 22: You should rely only on the informa
Page 23 and 24: PROSPECTUS SUMMARY The following su
Page 25 and 26: APPLICATION OF PROCEEDS As may be m
Page 27 and 28: (4) Loans to customers (i.e., non-c
Page 29 and 30: transferred to independent subsidia
Page 31: Our housing-related activities are
Page 35 and 36: Loan Portfolio Risks We maintain a
Page 37 and 38: securities portfolio. In accordance
Page 39 and 40: The following table shows our borro
Page 41 and 42: authorized limits. A daily risk and
Page 43 and 44: MANAGEMENT INFORMATION Introduction
Page 45 and 46: credit institutions increased by 10
Page 47 and 48: To control the risks of unhedged po
Page 49 and 50: RECENT DEVELOPMENTS Development of
Page 51 and 52: MANAGEMENT Board of Management Our
Page 53 and 54: Wirtsch.-Ing. Bernd Bechtold Presid
Page 55 and 56: REGULATION AND SUPERVISION OF L-BAN
Page 57 and 58: non-banking corporations if the use
Page 59 and 60: Covering Market Risk Positions Mark
Page 61 and 62: ank, and the aggregate nominal valu
Page 63 and 64: may at any time change the reserve
Page 65: The Entschädigungseinrichtung GmbH
Page 68 and 69: ECONOMY General Germany The economy
Page 70 and 71: Industrial Structure General Positi
Page 72 and 73: The following table shows the amoun
Page 74 and 75: The Euro-zone follows a mutual mone
Page 76 and 77: Revenue Equalization While the Germ
Page 78 and 79: For more detailed information regar
Page 80 and 81: Outstanding Principal Maturity Amou
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DESCRIPTION OF THE DEBT SECURITIES
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(iv) a waiver by the holders of the
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CURRENCY CONVERSION RATES The follo
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TAXATION UNITED STATES FEDERAL INCO
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number of complete years to maturit
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will equal such U.S. Holder’s ini
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using the constant yield method des
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We have included the federal income
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Capital gains resulting from the di
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SUMMARY OF CERTAIN DIFFERENCES BETW
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The credit risk of the loan and sec
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Under U.S. GAAP, repurchased debt s
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LIMITATIONS ON ACTIONS AGAINST THE
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GLOSSARY This glossary describes ce
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Administrative loans, which are loa
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Depreciation and accumulated amorti
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Landeskreditbank Baden-Württemberg
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Balance sheet as at December 31, 20
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Statement of income for the period
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Notes to the annual financial state
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Authorities of Landeskreditbank Bad
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Proposal of the Board of Management
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FINANCIAL STATEMENTS OF L-BANK AS O
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Landeskreditbank Baden - Württembe
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Directorships held by members of th
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State government deputy representat
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Independent Auditors’ opinion We
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Directorships held by members of th
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Authorities of Landeskreditbank Bad
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Proposal of the Board of Management
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Debt of L-Bank at December 31, 2004
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Debt Securities
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Landeskreditbank Baden-WÃ¼rttemberg - L-Bank

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