apoBank: apoBank's Pfandbrief activities

For apoBank the mortgage Pfandbrief issues are an additional funding source. It enables the bank to benefit from refinancing advantages in the capital market and provide another investment oppurtunity to investors with a more safety-oriented focus at the same time.

The German Financial Supvervisory Authority (BaFin) granted apoBank the license for the Pfandbrief business already on 19 December 2007. After that, the assignation of the preliminary Pfandbrief rating by the rating agency Standard & Poor's (S&P) at the best rating score AAA followed in April 2008. Still in June 2008 the inaugural mortgage Pfandbrief issue with a volume within the benchmark range (EUR 500 m) was concluded.

apoBank intends to be a recurrent issuer of mortgage Pfandbriefe in registered and bearer form. The bank aims to be able to react flexible on the actual market environment, while also considering its own refinancing needs. As apoBank does not aim for building up a benchmark mortgage Pfandbrief-curve, it has the opportunity to broaden the maturity profile, including positive effects on the matching requirements, by smaller issues.

Basis for the mortgage Pfandbrief is the continuously growing loan portfolio of mortgage loans of apoBank's retail clients with a good credit rating. The very high quality of the cover pool was confirmed by S&P's AAA rating. It reflects the good quality and high granularity of the cover pool. In addition S&P recognizes the high lending standards with inclusion of the risk measurement system apoRate, which is regulatory reviewed and approved.

The legal basis for the Pfandbrief issue is the new German Covered Bond Act (PfandBG), which became effective on 19 July 2005. PfandBG's target was to ensure the high quality of the German Pfandbrief by corresponding legal regulations and controls in a changing market environment. This was achieved by complementing the covering mechanism of the German Mortgage Banks Act with additional requirements at the Regulatory Authority, the operating Pfandbrief business and the eligible assets. The success of the implementation appears in an international comparism of the credit spreads of different types of covered bonds. As measured by this performance, Pfandbriefe covered by the German PfandBG have a in part much better performance.