Landeskreditbank Baden-WÃ¼rttemberg - L-Bank

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Enforcement Powers In order to secure compliance with the German Banking Act and the regulations issued thereunder, the BaFin and the Bundesbank may require information and documents from a bank and the BaFin may examine a bank without having to give any particular reason. The BaFin may attend meetings of the bank’s supervisory board, its managing board and shareholders (and require such meetings to be convened). In practical terms, because the BaFin has access to our books and records in Germany, it is able to monitor our worldwide activities. To ensure that German banks, including us, fully comply with all applicable legislation and reporting requirements, the BaFin requires that they maintain an effective and independent internal auditing department of adequate size and quality. A bank must also establish a written plan of organization, which sets forth the responsibilities of its employees and operating procedures. The internal auditing department must examine compliance with this plan and these responsibilities and procedures. If the BaFin discovers irregularities, it has a wide range of enforcement powers. The BaFin can challenge the qualifications of the bank’s management. If the Own Funds of a bank are not adequate, or if the liquidity requirements are not met and if the bank has failed to remedy the deficiency within a period set by the BaFin, the BaFin may prohibit or restrict the distribution of profits or the extension of credit. If a bank is in danger of defaulting on its obligations to creditors, the BaFin may take emergency measures to avert default. In this connection, it may, inter alia: (1) issue instructions relating to the management of the bank, (2) prohibit or restrict the acceptance of deposits and the extension of credit, (3) prohibit or restrict the management of the bank from carrying on their functions and (4) appoint supervisors. If these measures are inadequate, the BaFin may revoke the bank’s license and, if appropriate, order that the bank be closed. To avoid the insolvency of a bank, the BaFin has the authority to prohibit payments and disposals of assets, to suspend customer services, and to prohibit the acceptance of payments other than the payment of debt owed to the bank. In addition, violations of the German Banking Act may result in criminal and administrative penalties. Powers of the European Central Bank Affecting L-Bank’s Conduct of Business The European System of Central Banks (“ESCB”) consists of the European Central Bank (“ECB”) and the national central banks of the 25 Member States of the European Union (the “National Central Banks”). The ECB and the National Central Banks of the 12 Member States of the European Union that have transferred their monetary sovereignty to the ECB and have introduced the Euro as their currency are referred to as the “Eurosystem”. The primary objective of the ESCB is to maintain price stability, to define and implement the monetary policy of the European Community, to conduct foreign exchange operations, hold and manage the official foreign reserves of the Member States and promote the smooth operation of payment systems. The ESCB is governed by the decision-making bodies of the ECB. The National Central Banks of the Member States of the European Union that are part of the Eurosystem retain the functions that are not transferred to the Eurosystem. Thus, the Bundesbank continues to act as discount window for banks for eligible securities whereby the discount rate is computed on the basis of the so-called base rate. The base rate is adjusted on January 1 and July 1 of each year by the number of percentage points by which the ECB’s interest rate for its most recent main refinancing operations has been raised or lowered since the last change in the base rate. The ECB requires credit institutions, including us, established in the 12 Member States of the European Union that are members of the Eurosystem, to hold minimum reserves on accounts maintained with their respective National Central Banks, which, in our case, are held by the Bundesbank. In its regulation on minimum reserves, the ECB, currently as of September 12, 2003, set a 0% reserve ratio on the following liability categories: “deposits with agreed maturity over two years,” “deposits redeemable with notice period over two years,” “repurchase agreements (repos)” and “debt securities issued with an agreed maturity over two years.” For all other deposits, debt securities issued and money market instruments, the ECB set a 2% reserve ratio. The ECB 43
may at any time change the reserve ratios. Liabilities to other institutions subject to the Eurosystem’s minimum reserve system and liabilities to the ECB and the National Central Banks are not included in the basis for minimum reserves. Furthermore the ECB imposes statistical reporting obligations on credit institutions resident in Member States of the Eurosystem to enable the ECB to fulfill the ESCB’s tasks. Securities Trading—Regulation by the BaFin The Securities Trading Act (Wertpapierhandelsgesetz) of 1995, as amended (the “Securities Trading Act”), prohibits insider trading with respect to securities admitted to trading or included in the over-the-counter market at a German exchange or the exchange in another Member State of the European Union or the European Economic Area. The Securities Trading Act also requires that the issuer of securities admitted to trading on a German stock exchange publish promptly any new fact relating to the issuer which is not publicly known if such fact could have a material influence on the market price of such securities due to its effects on the financial condition or the overall business performance of the issuer. The BaFin supervises securities trading and deals with irregularities in the securities market. To enable the BaFin to carry out its securities trading supervisory functions, the German banks and the other institutions that are members of a German stock exchange are subject to comprehensive reporting requirements with respect to all transactions in securities and derivatives that are listed or traded on an exchange or other organized market in Germany or another Member State of the European Union or a Member State of the European Economic Area. The reporting obligation applies to transactions for a bank’s own account as well as for the account of its customers. The Securities Trading Act also introduced so-called “Rules of Conduct” for securities services enterprises, i.e., credit institutions and financial services institutions engaged in the purchase and sale of securities or derivatives for others or the intermediation of transactions in securities or derivatives. In practice, the Rules of Conduct therefore apply principally to all German banks. The BaFin has broad powers to investigate securities services enterprises with a view to monitoring compliance with the Rules of Conduct. The Securities Trading Act provides for an annual examination by the BaFin of a bank’s compliance with its obligations under the Securities Trading Act; in addition, independent accountants are required to prepare a report annually on a bank’s compliance with the reporting requirements under the Securities Trading Act. Supervision by the State of Baden-Württemberg 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 over the particular matter concerned. The ministries are entitled to request information, undertake audits, send representatives to meetings of our supervisory board, request that such meetings be called and rescind unlawful resolutions and other actions of our supervisory board or board of management. Furthermore, those ministries may order us to perform legally required actions and, if we do not comply with such demand or order, the ministries may themselves take such action. These supervisory powers do not include the right to exercise influence over business decisions by our board of management or supervisory board. In addition, we are subject to auditing by the State Audit Office (Landesrechnungshof) of Baden- Württemberg. Financial Statements and Audits Our financial statements are prepared in accordance with the German Commercial Code, the German Banking Act (Kreditwesengesetz – KWG), general corporate law, and the Regulation on the Accounting Principles applied to Credit Institutions and Financial Services Institutions (Verordnung über die Rechnungslegung der Kreditinstitute und Finanzdienstleistungsinstitute) issued by the Federal Minister of 44
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INTERNATIONAL PROSPECTUS SUPPLEMENT
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ISSUER Landeskreditbank Baden-Würt
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TABLE OF CONTENTS Use of Proceeds .
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EXCHANGE RATE INFORMATION The follo
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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 and 32: Our housing-related activities are
Page 33 and 34: (1) Holdings in companies for strat
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: ank, and the aggregate nominal valu
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
Page 82 and 83: DESCRIPTION OF THE DEBT SECURITIES
Page 84 and 85: (iv) a waiver by the holders of the
Page 86 and 87: CURRENCY CONVERSION RATES The follo
Page 88 and 89: TAXATION UNITED STATES FEDERAL INCO
Page 90 and 91: number of complete years to maturit
Page 92 and 93: will equal such U.S. Holder’s ini
Page 94 and 95: using the constant yield method des
Page 96 and 97: We have included the federal income
Page 98 and 99: Capital gains resulting from the di
Page 100 and 101: SUMMARY OF CERTAIN DIFFERENCES BETW
Page 102 and 103: The credit risk of the loan and sec
Page 104 and 105: Under U.S. GAAP, repurchased debt s
Page 106 and 107: LIMITATIONS ON ACTIONS AGAINST THE
Page 108 and 109: GLOSSARY This glossary describes ce
Page 110 and 111: 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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