COREALCREDIT BANK AG

PFANDBRIEFE
The following is a summary description of certain fundamental principles of the laws governing
Pfandbriefe and Pfandbrief Banks, and therefore does not address all the complexities and details
of such laws. Accordingly, the description is qualified in its entirety by reference to the applicable
laws.
Rules applicable to all Types of Pfandbriefe
Pfandbriefe are standardised debt instruments issued by a Pfandbrief Bank. The quality and
standards of Pfandbriefe are strictly governed by provisions of the Pfandbrief Act
(Pfandbriefgesetz) and are subject to the supervision of the BaFin. Pfandbriefe generally are
medium- to long-term bonds, typically with an original maturity of between two and ten years,
which are secured or "covered" at all times by a pool of specified qualifying assets (Deckung), as
described below (the "Cover Pool"). Pfandbriefe are recourse obligations of the issuing bank, and
no separate vehicle is created for their issuance generally or for the issuance of any specific series
of Pfandbriefe. Pfandbriefe may not be redeemed at the option of the holders prior to maturity.
Pfandbriefe may be issued either as Mortgage Pfandbriefe, Public Sector Pfandbriefe, Ship
Mortgage Pfandbriefe or Aircraft Pfandbriefe. The outstanding Pfandbriefe of any one of these
types must be covered by a separate Cover Pool: a Cover Pool specifically for Mortgage
Pfandbriefe, a Cover Pool specifically for Public Sector Pfandbriefe, a Cover Pool specifically for
Ship Mortgage Pfandbriefe and a Cover Pool specifically for Aircraft Pfandbriefe. An independent
trustee appointed by the BaFin has extensive duties in monitoring compliance of the Pfandbrief
Bank with the provisions of the Pfandbrief Act (Pfandbriefgesetz). In particular, the trustee monitors
the sufficiency of the cover assets and maintaines a register of the cover assets used to provide
cover for each type of Pfandbriefe (the "Cover Register"). Any issue of Pfandbriefe must first be
certified by the trustee.
The coverage of all outstanding Pfandbriefe with respect to their principal and interest must at all
times be ensured on the basis of their net present value (Barwert). The net present value of the
assets contained in the Cover Pool must exceed the total amount of liabilities arising from the
corresponding Pfandbriefe and derivatives by at least 2% (excess cover (Sichernde
Überdeckung)).
Such 2 per cent. excess cover must consist of highly liquid assets. Qualifying assets for such
excess cover are: (i) certain debt instruments (e.g. notes) the debtor of which is the German
Federal Government, a special fund (Sondervermögen) of the German Federal Government, a
Federal State, the European Communities, another EU or EEA member state, the European
Investment Bank, the World Bank, the Council of Europe Development Bank or the European
Bank for Reconstruction and Development, or, if they fulfil certain rating criteria, Switzerland, the
United States of America, Canada or Japan, (ii) notes guaranteed by one of the debtors set out
under (i) above, and (iii) balances with the European Central Bank, any central bank of a EU
member state or any other suitable credit institution located in one of the countries listed under
(i) above if certain rating criteria are fulfilled.
In addition, a daily comparison of the claims under the registered cover assets which become due
and the liabilities becoming due under the outstanding Pfandbriefe and derivative transactions
which are part of the cover pools, must be carried out for the following 180 days in order to ensure
liquidity. The amount of all daily differences accrued up to this date must be calculated for each
day. The highest negative amount calculated for the following 180 days must at all times be
covered by the total amount of certain eligible cover assets. The aggregate principal amount of the
cover assets contained in a cover pool must furthermore at all times be greater than or equal to
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