Obbligazione Banque de Luxembourg fiduciary for HSH Nordbank AG 7.25% ( XS0221141400 ) in USD

Banque de Luxembourg fiduciary for HSH Nordbank AG

100 USD ▲

Germania

XS0221141400 ( in USD )

7.25% per anno ( pagato 4 volte l'anno)

perpetue

Prospetto opuscolo dell'obbligazione Banque de Luxembourg fiduciary for HSH Nordbank AG XS0221141400 en USD 7.25%, scadenza perpetue

1 000 USD

500 000 000 USD

D75507WG0

N/A

30/06/2025 ( In 66 giorni )

Banque de Luxembourg fungeva da fiduciario per HSH Nordbank AG, gestendo alcuni aspetti amministrativi e patrimoniali della banca tedesca.

The Obbligazione issued by Banque de Luxembourg fiduciary for HSH Nordbank AG ( Germany ) , in USD, with the ISIN code XS0221141400, pays a coupon of 7.25% per year.
The coupons are paid 4 times per year and the Obbligazione maturity is perpetue

OFFERING CIRCULAR
US$ 500,000,000 HSH Nordbank SPHERE Securities
Each issued on a fiduciary basis by Banque de Luxembourg (incorporated as a société anonyme with limited liability in the
Grand Duchy of Luxembourg and registered with the Register of Commerce and Companies in Luxembourg under number RCS B 5310)
for the purpose of subscribing to
US$ 500,000,000 Class B Preference Shares
in
HSH N Funding II
(incorporated with limited liability in the Cayman Islands and a wholly-owned
subsidiary with the benefit of a support undertaking of)
HSH Nordbank AG
(a stock corporation incorporated under the laws of Germany)
Issue price of the SPHERE Securities: 100 per cent.
The issue price of the US$ 500,000,000 HSH Nordbank Silent Participation Hybrid Equity Regulatory (SPHERE) Securities in the
denomination of US$ 1,000 each (the "SPHERE Securities"), issued on a fiduciary basis by Banque de Luxembourg, a société
anonyme incorporated in Luxembourg (the "Fiduciary") is 100% of their principal amount.
With the proceeds of the issue of the SPHERE Securities, the Fiduciary will, in its own name but at the sole risk and for the sole benefit
and account of the holders of the SPHERE Securities (the "Securityholders"), acquire 500,000 Class B Preference Shares (the "Class
B Securities") issued by HSH N Funding II (the "Company"). With the proceeds of the issue of the Class B Securities, the Company
will acquire a silent capital interest in the commercial enterprise (Handelsgewerbe) of HSH Nordbank AG (the "Bank") in the form
of a Stille Gesellschaft under German law (the "Participation") pursuant to an agreement providing for an asset contribution to the
Bank in the amount of US$ 500,000,000 (the "Silent Contribution") and dated June 13, 2005 (the "Participation Agreement").
The Bank has undertaken in a support undertaking (the "Support Undertaking") with the Fiduciary and for the benefit of the holders
of the SPHERE Securities to ensure that the Company will at all times be in a position to meet its obligations under the Class B
Securities.
The SPHERE Securities are perpetual securities and have no fixed maturity date. They will represent a pro rata interest in the Class
B Securities and all payments actually received by the Fiduciary thereunder. The Fiduciary will hold the Class B Securities in its own
name, on a fiduciary basis, but solely at the risk and for the account of the Securityholders. The SPHERE Securities evidence a
fiduciary contract between the Securityholders and the Fiduciary (the "Fiduciary Contract"), governed by the Luxembourg law dated
July 27, 2003 relating to trust and fiduciary contracts, pursuant to which the Fiduciary is only obligated to pass on funds to the
Securityholders actually received from the Company under the Class B Securities but has no other payment obligations to the
Securityholders. The amounts of distributions under the Class B Securities depend, among others, on the profits of the Bank. By
purchasing SPHERE Securities, Securityholders will be deemed to have acknowledged and agreed to the terms of the Fiduciary
Contract.
Investing in the SPHERE Securities involves certain risks. Please review the section entitled "Investment Considerations"
beginning on page 31 of this Offering Circular.
The SPHERE Securities will initially be represented by a temporary global security in bearer form without coupons which will be
deposited on or about June 17, 2005 (the "Issue Date") with a common depositary for Euroclear Bank S.A./N.V. as operator of the
Euroclear System ("Euroclear") and Clearstream Banking société anonyme ("Clearstream Luxembourg"), where the SPHERE
Securities have been accepted for clearing. It is expected that delivery of the SPHERE Securities will be made through Euroclear and
Clearstream Luxembourg against payment therefor in immediately available funds on or about the Issue Date. The temporary global
security will be exchangeable for a permanent global security in bearer form upon certification as to non-US beneficial ownership. In
certain limited circumstances the global securities can be exchanged for definitive SPHERE Securities (as described in "Terms and
Conditions of the SPHERE Securities").
The SPHERE Securities have not been, and will not be registered under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), or under any state securities laws and may not be offered, sold or delivered in the United States unless
registered under the Securities Act or if an exemption from the registration requirements thereunder is available. The
SPHERE Securities are being offered and sold only to certain persons in transactions outside the United States in compliance
with Regulation S under the Securities Act.
Application has been made to list the SPHERE Securities on Eurolist by Euronext Amsterdam ("Euronext Amsterdam"). This
Offering Circular constitutes a prospectus for purposes of the listing and issuing rules of Euronext Amsterdam.
Joint Bookrunner
Joint Bookrunner
ABN AMRO
Deutsche Bank
Joint Bookrunner and Structuring Advisor
Joint Bookrunner
HSH Nordbank AG
UBS Investment Bank
The date of this Offering Circular is June 15, 2005.

The Bank accepts responsibility for the information contained in this Offering Circular (the "Offering
Circular"). To the best of its knowledge and belief (having taken all reasonable care to ensure that such
is the case) the information contained in this Offering Circular is in accordance with the facts and does
not omit anything likely to affect the import of such information. The Company accepts responsibility
for the information in this Offering Circular except for any information about other companies
contained in this Offering Circular and as such provided by other parties as the Company. The
Fiduciary accepts responsibility for the information contained in the first paragraph of the section
entitled "The Fiduciary and the Fiduciary Contract" but does not accept responsibility for any other
information contained in this Offering Circular.
In connection with the issue and sale of the SPHERE Securities, no person is authorised to give any
information or to make any representation not contained in this document and in the documents
referred to herein, which are made available for inspection by the public and, if given or made, such
information or representation must not be relied upon as having been authorised by the Fiduciary, the
Company the Bank or the Managers (as defined in "Subscription and Sale").
An investment in the SPHERE Securities is suitable only for financially sophisticated investors who
are capable of fully evaluating the risks involved in making such investments and who have an asset
base sufficiently substantial as to enable them to sustain any loss that they might suffer as a result of
making such investments.
Prospective investors should inform themselves as to the legal requirements and tax consequences
within the countries of their residence and domicile for the acquisition, holding or disposal of
SPHERE Securities and any foreign exchange restrictions that might be relevant to them. This
Offering Circular does not constitute an offer of, or an invitation by or on behalf of, the Fiduciary, the
Company, the Bank or the Managers to subscribe for or to purchase any of the SPHERE Securities.
Prospective investors should satisfy themselves that they understand all of the risks associated with
making investments in the SPHERE Securities. If a prospective investor is in any doubt whatsoever as
to the risks involved in investing in the SPHERE Securities, he should consult professional advisers.
This Offering Circular is not intended to provide the basis of any credit or other evaluation and should
not be considered as a recommendation by the Fiduciary, the Company, the Bank or the Managers
that any recipient of this Offering Circular should purchase any of the SPHERE Securities. Each
investor contemplating purchasing SPHERE Securities should make its own independent investigation
of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Company
and the Bank.
The distribution of this document and the offering or sale of the SPHERE Securities in certain
jurisdictions may be restricted by law. None of the Fiduciary, the Company, the Bank or the Managers
represent that this document may be lawfully distributed, or that the SPHERE Securities may be
lawfully offered, in compliance with any applicable registration or other requirements in any such
jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for
facilitating any such distribution or offering. In particular, none of the Fiduciary, the Company, the
Bank or the Managers has taken any action which would permit a public offering of the SPHERE
Securities or distribution of this document in any jurisdiction where action for that purpose is
required. Accordingly, no SPHERE Securities may be offered or sold, directly or indirectly, and
neither this Offering Circular nor any advertisement or other offering material may be distributed or
published in any jurisdiction, except under circumstances that will result in compliance with any
applicable laws and regulations. Persons into whose possession this Offering Circular or the SPHERE
Securities may come, must inform themselves about, and observe, any such restrictions (see
"Subscription and Sale" for a description, inter alia, of certain restrictions on offers, sales and
deliveries of the SPHERE Securities). Neither the delivery of this Offering Circular nor any sale
hereunder shall create under any circumstances any implication that there has been no change in the
affairs of the Fiduciary, the Company, the Bank or the HSH Nordbank Group (as defined in
"Presentation of Financial Information") since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
2

It should be noted that the SPHERE Securities do not represent partnership or other shareholder or
ownership interests in the Fiduciary or the Company.
IN CONNECTION WITH THE OFFERING, UBS LIMITED OR ANY PERSON ACTING FOR IT
MAY OVER-ALLOT OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE
MARKET PRICES OF THE SPHERE SECURITIES AT A LEVEL HIGHER THAN THAT WHICH
MIGHT OTHERWISE PREVAIL FOR A LIMITED TIME. HOWEVER, THERE IS NO
OBLIGATION ON UBS LIMITED OR ANY OF ITS AGENTS TO DO THIS. SUCH STABILISING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME AND MUST BE BROUGHT TO AN
END AT THE LATEST ON THE THIRTIETH DAY FOLLOWING THE ISSUE DATE. SUCH
TRANSACTIONS MAY BE EFFECTED ON EURONEXT AMSTERDAM OR OTHERWISE.
The SPHERE Securities have not been, and will not be, registered under the Securities Act and are
securities in bearer form that are subject to United States tax law requirements. Subject to certain
exceptions, the SPHERE Securities may not be sold or delivered, directly or indirectly, within the
United States or its possessions or to U.S. persons.
3

FORWARD-LOOKING STATEMENTS
This Offering Circular contains statements that constitute forward-looking statements with respect to the
Bank within the meaning of Section 27A of the Securities Act and Section 21E of the U.S. Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical
facts included in this Offering Circular including, without limitation, statements regarding the intent, belief
or current expectations of the Bank or its officers with respect to, among other things, (i) the use of proceeds
of the issue of the SPHERE Securities, (ii) the Bank's financing and listing plans, (iii) trends affecting the
Bank's financial condition or results of operations, (iv) the impact of competition and (v) future plans and
strategies, are forward-looking statements. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results, performance or achievements of the
Bank, or industry results, to be materially different from any such statements. Such forward-looking
statements are based on numerous assumptions regarding the Bank's present and future business strategies
and the environment in which the Bank will operate in the future. Important factors that could cause the
Bank's actual results, performance or achievements to differ materially from such forward-looking
statements include, but are not limited to, those discussed under "Investment Considerations", "Activities
and Business Description of the HSH Nordbank Group" and "Recent Developments and Outlook". These
forward-looking statements speak only as of the date of this Offering Circular. The Bank expressly disclaims
any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in the Bank's expectations with regard thereto or any change in events,
conditions or circumstances after the date of this Offering Circular on which any such statement is based.
These statements reflect the Bank's current views with respect to such matters.
PRESENTATION OF FINANCIAL INFORMATION
The operations of the Bank are based primarily in Germany. The Bank's audited consolidated financial
statements at and for the year ended December 31, 2004, including the notes thereto (the "Financial
Statements") and the Bank's audited unconsolidated financial statements at and for the year ended
December 31, 2004, including the notes thereto have been prepared in accordance with the provisions of the
German Commercial Code (HGB), the Stock Corporation Act (AktG) and the Ordinance Regarding
Accounting for Banks and Financial Services Institutions (RechKredV). In addition, the financial statements
referred to in the preceding sentence have been prepared in accordance with the relevant statements of the
Institute of Independent Auditors in Germany (IDW) and the German Accounting Standards (DRS)
promulgated by the German Accounting Standards Committee (DRSC).
The relevant provisions of the German Commercial Code, the Stock Corporation Act and the Ordinance
Regarding Accounting for Banks and Financial Services Institutions, together with the relevant statements
of the Institute of Independent Auditors in Germany and the relevant German Accounting Standards
promulgated by the German Accounting Standards Committee (DRSC), collectively are defined, for
purposes of this Offering Circular, as "German GAAP".
The Bank's consolidated financial statements reflect financial information of the Bank and its affiliates
consolidated under German GAAP (together, the "HSH Nordbank Group").
In this Offering Circular, unless otherwise specified, references to "US$", "U.S.$", "$", "U.S. dollars" or
"dollars" are to United States dollars and references to "EUR", "" or "euro" are to the single currency
introduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treaty
establishing the European Communities, as amended by the Treaty on European Union.
Certain amounts (including percentage amounts) included in this Offering Circular have been rounded for
purposes of presentation. Percentage figures included herein have not in all cases been calculated on the basis
of such rounded figures but on the basis of such amounts prior to rounding. For this reason, certain
percentage amounts may vary from those obtained by performing the same calculations using the figures in
the financial statements referred to in the first paragraph of this section "Presentation of Financial
Information".
4

TABLE OF CONTENTS
SUMMARY ..................................................................................................................................
6
Introductory Summary of the Transaction................................................................................
6
Summary of the Offering ..........................................................................................................
9
Summary of the Terms of the SPHERE Securities ..................................................................
11
Summary of the Terms of the Class B Securities ....................................................................
15
Summary of the Terms of the Participation ..............................................................................
19
Summary of the Terms of the Loan Agreement ......................................................................
23
Summary of the Terms of the Support Undertaking ................................................................
25
SUMMARY FINANCIAL INFORMATION ..............................................................................
26
SELECTED FINANCIAL INFORMATION................................................................................
28
INVESTMENT CONSIDERATIONS..........................................................................................
31
Risks associated with the Business of the HSH Nordbank Group ..........................................
31
Risks Relating to the German Banking Industry ......................................................................
33
Risks associated with an Investment in the SPHERE Securities ............................................
35
FOREIGN EXCHANGE RATES ................................................................................................
38
USE OF PROCEEDS....................................................................................................................
39
THE FIDUCIARY AND THE FIDUCIARY CONTRACT ........................................................
40
CAPITALIZATION, REGULATORY CAPITAL, DISTRIBUTABLE PROFITS
AND DIVIDENDS ......................................................................................................................
42
TERMS AND CONDITIONS OF THE SPHERE SECURITIES................................................
45
TERMS AND CONDITIONS OF THE CLASS B SECURITIES ..............................................
56
TERMS AND CONDITIONS OF THE PARTICIPATION ........................................................
66
TERMS AND CONDITIONS OF THE LOAN AGREEMENT..................................................
77
TERMS AND CONDITIONS OF THE SUPPORT UNDERTAKING ......................................
84
DESCRIPTION OF HSH N FUNDING II ..................................................................................
87
GENERAL INFORMATION ON THE BANK ..........................................................................
89
ACTIVITIES AND BUSINESS DESCRIPTION OF THE HSH NORDBANK GROUP ..........
94
RISK MANAGEMENT ................................................................................................................
129
RECENT DEVELOPMENTS AND OUTLOOK ........................................................................
140
REGULATION ............................................................................................................................
150
TAXATION ..................................................................................................................................
164
Taxation in the Cayman Islands................................................................................................
164
Taxation in the Grand Duchy of Luxembourg..........................................................................
164
Taxation in the Federal Republic of Germany..........................................................................
165
Taxation in the Netherlands ......................................................................................................
168
SUBSCRIPTION AND SALE......................................................................................................
170
GENERAL INFORMATION ......................................................................................................
173
5

SUMMARY
Introductory Summary of the Transaction
The following paragraphs contain a brief overview of the most significant features of the transaction
consisting of the issuance of the SPHERE Securities by the Fiduciary, payment of the proceeds therefrom to
the Company as consideration for the Class B Securities and payment of the proceeds raised by the Company
therefrom to the Bank under the Participation Agreement (the "Transaction"). This overview is necessarily
incomplete and investors are urged to read carefully the entire summary and the full text of the Offering
Circular for a more precise description of the offered SPHERE Securities and the information concerning
(i) the Transaction, (ii) the Bank, the Company and the Fiduciary and (iii) the agreements among them. If
not indicated otherwise, the following description is based on the situation on the Issue Date.
The Fiduciary proposes to issue US$ 500,000,000 SPHERE Securities on a fiduciary basis. Each SPHERE
Security represents a pro rata interest in the investment which is held by the Fiduciary on behalf and at the
sole risk of the Securityholders. Using the proceeds raised from the issuance of the SPHERE Securities, the
Fiduciary will acquire 500,000 Class B Securities issued by the Company, an exempted company
incorporated with limited liability under the laws of the Cayman Islands. All of the Company's ordinary
shares will be held directly or indirectly by the Bank. The SPHERE Securities will represent pro rata
interests in the Class B Securities. Securityholders will be entitled to all payments made under the Class B
Securities by the Company to the Fiduciary. The Fiduciary will hold the Class B Securities in its own name,
on a fiduciary basis, but solely at the risk and for the account of the Securityholders. The terms and
conditions of the SPHERE Securities (the "SPHERE Terms") limit Securityholders' recourse to
distributions and/or capital payments actually received by the Fiduciary under the Class B Securities. In
addition to its ordinary shares and the Class B Securities, the Company will issue 553,000 Class A
Preference Shares (the "Class A Securities") in the aggregate nominal amount of US$ 553,000,000 which
will be held, directly or indirectly, by the Bank.
The Company will, with the proceeds raised from the issuance of the Class B Securities, acquire a silent
capital interest in the aggregate amount of US$ 500,000,000 in the commercial enterprise (Handelsgewerbe)
of the Bank in the form of Stille Gesellschaft under German law pursuant to the Participation Agreement. As
silent partner under the Participation Agreement ("Silent Partner"), the Company will make the Silent
Contribution in the form of a cash contribution of US$ 500,000,000 to the Bank as principal. In return, the
Company, as Silent Partner, will earn profit participations ("Profit Participations") calculated annually on
the basis of the nominal amount of its Silent Contribution for each fiscal year of the Bank and accruing
quarterly in arrear. Profit Participations will not accrue if such accrual would create or increase an annual
loss (Jahresfehlbetrag) as calculated under the Participation Agreement in accordance with German GAAP
("Annual Loss"). The aggregate amount of accrued Profit Participations will be payable on June 30, 2036
and on each 30th anniversary of such date thereafter. Under the terms and conditions of the Class B
Securities (the "Class B Terms"), the Company is under an obligation to declare periodic distributions to the
holders of the Class B Securities ("Class B Dividends") payable quarterly in arrear and commencing
September 30, 2005. Under the Class B Terms, Class B Dividends shall be payable if the Bank did not record
an annual balance sheet loss (Jahresbilanzverlust) as calculated in accordance with German GAAP
("Annual Balance Sheet Loss") for the Bank's most recent financial year for which audited financial
statements are available and ended on or prior to the date on which the calculation period for the relevant
Class B Dividend (the "Class B Calculation Period") ends (the "Relevant Bank Fiscal Year") and the
solvency ratio is higher than 9% on a consolidated and non-consolidated basis. An Annual Balance Sheet
Loss is present if the Bank's annual unconsolidated balance sheet records no balance sheet profit
(Bilanzgewinn) as calculated in accordance with German GAAP ("Annual Balance Sheet Profit"). Under
German GAAP, the Annual Balance Sheet Profit is derived from the annual surplus (Jahresüberschuss)
adjusted for profits/losses carried over from previous fiscal years as well as transfers from and allocations to
capital and earnings reserves (Kapital- und Gewinnrücklagen) (however, neither the Bank nor its
shareholders are obligated to release any such reserves to avoid an Annual Balance Sheet Loss).
If the Company does not declare a Class B Dividend in respect of any Class B Calculation Period,
holders of the Class B Securities will have no right to receive a Class B Dividend in respect of such
6

Class B Calculation Period and there will be no corresponding payment by the Fiduciary to
Securityholders. In such case, the Company will have no obligation to pay a Class B Dividend in
respect of such Class B Calculation Period, whether or not Class B Dividends are declared and paid
in respect of any future Class B Calculation Periods.
The Silent Partner shares in an Annual Balance Sheet Loss in the proportion which the book value of its
Silent Contribution bears in relation to the aggregate book value of all loss-sharing components of the Bank's
regulatory liable capital (Haftkapitalanteile). In such case, the book value of the Silent Contribution will be
reduced in the amount of its pro rata share in the relevant Annual Balance Sheet Loss ("Reduction").
Following a Reduction, future profits will be used to write-up the book value of the Silent Contribution to
US$ 500,000,000 and Profit Participations may only accrue after a full write-up of the Silent Contribution's
book value to US$ 500,000,000. If the book value of the Silent Contribution has not yet been fully written-
up, the Company will not declare Class B Dividends and no Class B Dividends will be paid to the Fiduciary
as the holder of the Class B Securities. If the book value of the Silent Contribution has not yet been fully
written-up at the time the Silent Contribution becomes due for repayment, the amount which is repaid to the
Company for the Silent Contribution under the Participation Agreement (the "Repayment Amount") is
reduced accordingly. In such case, the redemption amount of the Class B Securities (the "Class B
Redemption Amount") to be paid by the Company to the Fiduciary will be reduced accordingly.
The Company will use the proceeds from the issuance of the Class A Securities to extend a loan documented
in the form of a German law governed Schuldscheindarlehen (the "Loan") to the Bank. The Company will
use the interest earned under the Loan to satisfy its dividend payment obligations under the Class B
Securities upon Class B Dividends having been declared. The Company will have the benefit of the Support
Undertaking from the Bank (see "Description of the Support Undertaking").
Payments of principal and interest under the SPHERE Securities are conditional upon receipt by the
Fiduciary of Class B Dividends and the Class B Redemption Amount from the Company. Class B Dividends
are dependent on (i) there being, for the relevant Class B Calculation Period, an excess of the amounts
payable (whether or not paid) to the Company under the Loan over any operating expenses of the Company
not paid or reimbursed by or on behalf of the Bank during such Class B Calculation Period (such excess the
"Company Operating Profits") at least equal to the Class B Dividend to be paid, (ii) the Bank not recording
an Annual Loss for the Relevant Bank Fiscal Year, or, if the Bank is recording an Annual Loss, but at the
same time recording an Annual Balance Sheet Profit for the Relevant Fiscal Year and the Bank's solvency
ratio on a consolidated and on an unconsolidated level being at least 9% and (iii) the Silent Contribution's
book value corresponding to US$ 500,000,000 (i.e. no Reduction having occurred and subsisting). The Class
B Redemption Amount corresponds to the Repayment Amount under the Participation Agreement or, in case
the Company exercises its right of termination of the Class B Securities on or after June 30, 2011, to
US$ 500,000,000. Hence, payments under the SPHERE Securities are dependent on the Bank's profitability
and the Fiduciary's obligation to make interest payments ("Coupon Payments") and capital payments
("Capital Payments") under the SPHERE Securities are dependent on the financial condition and results of
operations of the Bank. If the Bank incurs an Annual Balance Sheet Loss in any fiscal year,
Securityholders will receive no Coupon Payments and may not receive Capital Payments.
The SPHERE Securities have an indefinite term and will only be redeemed if the Participation Agreement is
terminated and the Silent Contribution is repaid to the Company or in case the Company chooses to exercise
its right of early termination of the Class B Securities on or after June 30, 2011. The Participation Agreement
runs for an indefinite period. Under its terms, the Participation Agreement may only be terminated by the
Bank. The Participation Agreement may not be terminated by the Company. Subject to certain exceptions
described in this Offering Circular, a termination of the Participation Agreement by the Bank may only
become effective on or after December 31, 2015 and only if the Bank's solvency ratio
(Solvabilitätskoeffizient) sustainably exceeds 9% on an unconsolidated and consolidated basis. In addition,
the Participation Agreement provides for a termination notice of two years and stipulates that no termination
shall become effective without prior regulatory approval. Therefore, Securityholders should be aware that
they may be required to bear the financial risks of an investment in the SPHERE Securities for an
indefinite period of time.
7

The Bank intends to treat the proceeds it receives as a Silent Contribution under the Participation Agreement
as solo tier one capital for purposes of compliance with regulatory capital requirements and to treat the
proceeds received from the Company from issuing the Class B Securities as consolidated tier one capital of
the Bank for purposes of determining its compliance with regulatory capital requirements. For more
information on the regulatory capital requirements applicable to the Bank and the HSH Nordbank Group,
see "Regulation Capital Adequacy Requirements".
The Fiduciary will hold the Class B Securities in its own name, on a fiduciary basis, but solely at the
risk and for the account of the Securityholders. The Fiduciary will only be liable to make payments in
respect of the SPHERE Securities when, as, if and to the extent that it actually receives amounts under
the Class B Securities. The SPHERE Securities do not constitute direct debt obligations of the
Fiduciary. Securityholders' enforcement rights against the Fiduciary are limited.
The following diagram outlines the relationship between the Bank, the Company, the Fiduciary and the
Securityholders:
HSH
Investors
Cash
Nordbank
AG
Class A
SPHERE
$ 500 million
Securities
Securities
$553 million
Fiduciary
$553 million
Loan
Class B
Securities
$ 500 million
HSH N
Cash
Funding II
Silent Contribution
$ 500 million
8

Summary of the Offering
The following overview describes the most important elements of the offering and the Transaction. It is
necessarily incomplete and investors are urged to read carefully the entire summary and the full text of the
Offering Circular for a more precise description of the offered SPHERE Securities and the information
concerning (i) the Transaction, (ii) the Bank, the Company and the Fiduciary and (iii) the agreements among
them. The following description is based on the situation on the Issue Date of the SPHERE Securities.
Securities Offered
US$ 500,000,000 SPHERE Securities; see ("--Summary of the Terms of
the SPHERE Securities").
Issuer
Banque de Luxembourg, a société anonyme incorporated in Luxembourg
acting on a fiduciary basis under Luxembourg law and in particular the law
dated July 27, 2003 relating to trust and fiduciary contracts. See "The
Fiduciary and the Fiduciary Contract".
Company
HSH N Funding II, an exempted company incorporated with limited
liability in the Cayman Islands and a wholly-owned subsidiary of the
Bank.
Bank
HSH Nordbank AG, Hamburg and Kiel, Germany, incorporated as a stock
corporation (Aktiengesellschaft) in Germany.
Fiduciary's obligations
The Fiduciary will act as a fiduciary for the Securityholders. It is only
obliged to pass amounts on to Securityholders when, as, if and to the extent
that those amounts are actually received by or on behalf of the Fiduciary.
The SPHERE Securities do not constitute direct debt obligations of the
Fiduciary.
Class B Securities
With the proceeds of the issue of the SPHERE Securities, the Fiduciary
will acquire the Class B Securities issued by the Company; see "--
Summary of the Terms of the Class B Securities".
Participation
With the proceeds of the issue of the Class B Securities, the Company will
acquire the Participation pursuant to the Participation Agreement; see "--
Summary of the Terms of the Participation".
Support Undertaking
The Bank has entered into an agreement with the Fiduciary in which it
undertakes to the Fiduciary for the benefit of the Securityholders to ensure
that the Company will at all times be in a position to meet its obligations
under the Class B Terms and to procure that Class B Dividends are
declared and paid as contemplated by the Company's memorandum and
articles of association. See "Terms & Conditions of the Support
Undertaking".
Principal Paying Agent
Deutsche Bank AG, Frankfurt, Germany.
Netherlands Paying Agent
Deutsche Bank AG, Amsterdam, The Netherlands.
Rating
The Bank expects that, upon issuance, the SPHERE Securities will be
assigned a rating of A3 by Moody's Investors Services Limited. A rating is
not a recommendation to buy, sell or hold securities, and may be subject to
revision, suspension or withdrawal at any time by Moody's Investors
Services Limited.
Listing
Application has been made to list the SPHERE Securities on Euronext
Amsterdam.
Increase of Issue
The Company's memorandum and articles of association provide that the
Company can acquire further silent participations in the form of a German
9

law Stille Gesellschaft in the Bank on terms identical to the terms of the
Participation Agreement and finance such silent participations with the
issuance of additional Class B preference shares on terms identical to the
terms of the Class B Securities to the Fiduciary. In such case, the Fiduciary
will issue additional SPHERE Securities in an aggregate principal amount
corresponding to the aggregate principal amount of such newly issued
Class B preference shares.
Security Codes
ISIN: XS0221141400
Common Code: 022114140
Fonds Code: 15380
The Offering
The Securities will be publicly offered in The Netherlands and placed
privately (excluding the United States) in accordance with applicable laws
and regulations.
Tax Consequences
For a discussion of the material German, Cayman Islands and Luxembourg
tax consequences of purchasing, owning and disposing of the SPHERE
Securities, see "Taxation".
10