Landeskreditbank Baden-Württemberg - L-Bank

Justice. The accounting principles set forth in the above statutes and regulations are referred to herein as
“German GAAP.”
Under German law, we must be audited annually by German independent accountants (Wirtschaftsprüfer)
who are appointed annually by our supervisory board. The BaFin must be informed of and may reject such
appointment. The independent accountants are required to prepare annually a long form audit report
(Prüfungsbericht) on the financial statements prepared by our management, and submit it to our supervisory
board, our Guarantor, the BaFin and the Federal Central Bank. This comprehensive audit report is in contrast to
the much shorter audit reports typically prepared for other German companies. The contents of the report are
prescribed in a regulation issued by the BaFin. In particular, the auditor must review that the bank is in
compliance with: (1) the regulatory reporting requirements; (2) the large credit limitations; (3) the limitations on
extension of credit to related companies; (4) the requirements of the capital adequacy and liquidity principles
(described above) and (5) the regulations concerning the prudent granting of credit. The audit report must also
discuss in detail certain large or important loans and review compliance with certain provisions of the German
Banking Act, match assets and liabilities bearing interest at fixed rates according to maturity and assets and
liabilities bearing interest at floating rates according to interest periods, and explain the effect of a change in
interest rates on the unmatched portion of such assets and liabilities, respectively. The auditor’s opinion opines as
to compliance with German GAAP and all applicable legal requirements.
The audit reports of PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (“PwC”)
for the years ended December 31, 2004, 2003 and 2002, dated March 1, 2005, March 29, 2004 and April 8, 2003,
respectively, each refer to a management report that has not been included to this prospectus. The examinations
of and the audit reports upon such management reports are required under German auditing standards. Those
examinations were not made in accordance with Statement on Standards for Attestation Engagements No. 10,
“Management’s Discussion and Analysis.” PwC does not provide an opinion on this information or on the
financial statements included in this prospectus in accordance with U.S. GAAP or U.S. attestation standards.
In addition, each year an independent accountant designated by the BaFin must conduct an examination of
any bank that acts as depositary of customers’ securities under the German Depositary Act (Depotgesetz). The
examination is made in accordance with the Depositary Act and concludes with an opinion as to the proper
execution of trading orders by such bank for its customers and as to the safekeeping of securities for such
customers.
Deposit Protection and Investor Compensation
In Germany, private sector commercial banks, credit institutions organized under public law and credit
cooperative institutions each have their own system of deposit protection and investor compensation. According
to the German Act on Deposit Protection and Investor Compensation of 1998, as amended (“Deposit Protection
Act”, Einlagensicherungs- und Anlegerentschädigungsgesetz), the association of the German credit institutions
organized under public law (Bundesverband Öffentlicher Banken Deutschlands e.V., “VÖB”) established a
company under the name Entschädigungseinrichtung des VÖB GmbH (“Entschädigungseinrichtung GmbH”) to
provide deposit protection and investor compensation for customers of German credit institutions organized
under public law. We are a member of the Entschädigungseinrichtung GmbH.
A creditor of L-Bank has a direct claim against Entschädigungseinrichtung GmbH if (i) the BaFin
determines that we are unable to repay deposits (as defined in the Deposit Protection Act) or to satisfy
obligations resulting from the securities businesses for reasons that are directly connected to our financial
situation, and that no prospects exist for the repayment of the deposits or the satisfaction of the obligations and
(ii) the creditor is eligible for compensation. A direct claim against Entschädigungseinrichtung GmbH is limited
to 90% of the customer’s deposits and our obligations to the customer resulting from the securities businesses
respectively, and may not exceed in any case EUR 20,000.
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