COREALCREDIT BANK AG

Generally, the Issuer's profitability is tied to its access to low cost funds. Due to the nature of the
Issuer's business, it does not have access to a large base of customer deposits as an inexpensive
source of funds. Its source of funds predominantly derives from the issue of Pfandbriefe. Other
funding sources are bearer securities in the form of senior unsecured notes, subordinated notes,
Securitisation and Syndication.
Particularly in view of the current financial market crisis and the tight market situation the Issuer's
costs of funds may prove to be more expensive in the future than was the case historically and
more expensive than currently contemplated in the Issuer's plans.
This circumstance may also affect the issuance of Pfandbriefe as it cannot be excluded that also
the refinancing costs for the issuance of Pfandbriefe increase, in particular if the value of the
assets in the cover pool deteriorates. Under extreme market conditions the sale of securities,
including Pfandbriefe, may become temporarily impossible. Furthermore, a decrease in
creditworthiness of the Issuer or an increase in the risk positions of its financing portfolios may
have the same effect for unsecured securities and money market instruments.
In the light of the continuing financial market crisis and the still constrained money market and
capital market, the Issuer submitted an application for a framework guarantee of bonds
(Schuldverschreibungen) to the German Financial Market Stabilisation Fund (Sonderfonds
Finanzmarktstabilisierung – SoFFin) in order to further strengthen its liquidity situation. This
framework guarantee has been granted in the amount of EUR 500 million, subject to particular
conditions to be met by the Issuer's sole shareholder. By the end of the first quarter 2011, all
SoFFin-guarateed bond issues have been redeemed prior to original maturity.
Operational Risks
Operational risk describes the risk of losses arising from insufficient or erroneous internal
processes, employees, and systems, as well as external events. It is caused by human errors,
systems failures and insufficient controls and processes. Legal risks are also part of the
operational risk; legal risks, in particular, arise from uncertainty as to the outcome of legal actions
or uncertainty in the applicability or interpretation of contracts, laws or regulations.
Counterparty Risks vis-à-vis Financial Institutions
The Issuer defines counterparty risk in relation to financial institutions as the potential losses in
value or foregone profit, which may occur through unexpected default or deterioration of the credit
quality of trading counterparties with whom the bank has entered into securities transactions,
money market, interest rate or currency derivatives, as well as securities repurchase transactions.
Regulatory Risk
The Issuer's business is subject to detailed, comprehensive laws and regulations as well as
supervision. Changes in existing laws and regulations may effect the way in which the Issuer
conducts its business and the products the Issuer may offer. Changes in regulations relating to
financial services, securities products and transactions may materially adversely affect its
businesses by restructuring the Issuer's activities, imposing increased costs or otherwise.
Real Estate Business, Business and Strategic Risk
As a credit institution, the Issuer is exposed to the creditworthiness of its customers and
counterparties. If the value of the collateral securing the loan portfolio declines, the Issuer will be
exposed to higher credit risk and increased risk of non-recovery in the event that any of its loans
fail to perform. The Issuer cannot assure that its level of risk provisioning will be adequate or that it
will not have to make significant additional provisions for possible bad and doubtful debts in future
periods.
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