Dear Shareholders (handwriting)

2008 was the most difficult year our industry has experienced in recent times. The credit crisis, which began in the second half of 2007, continued to affect our environment during 2008, and in September entered a new and more severe phase with the collapse of a large U.S. investment bank. This event triggered a sudden and significant deterioration in market conditions. The global financial system came under extreme stress, with acute shortages of liquidity, sharp reductions in interbank lending, and further pressure on credit markets. Equity markets experienced heavy falls and extreme volatility. In response, governments and central banks in the worlds’ major economies intervened on an unprecedented scale to support both markets and individual financial institutions.

Dr. Josef Ackermann (photo)

Dr. Josef Ackermann
Chairman of the Management Board and
the Group Executive Committee

These extraordinary conditions severely impacted the banking industry, and Deutsche Bank was no exception. After remaining profitable throughout the earlier part of the crisis, Deutsche Bank reported a net loss of € 4.8 billion for the fourth quarter, and consequently a full-year net loss of € 3.9 billion. These results were driven primarily by weaknesses in particular business areas which were exposed by the extreme conditions of the fourth quarter. As always, we were conservative in our election of the ‘fair value’ option on our own debt. If we had elected to use this option on all own debt, we would have booked an additional € 5.8 billion of profit before taxes in the year 2008. We succeeded in maintaining a solid capital ratio, and our funding and liquidity position also remains strong; however, in the light of the weak 2008 results we have initiated comprehensive corrective measures in the areas concerned.

The Corporate and Investment Bank recorded a loss before income taxes of € 7.4 billion in 2008, driven by a pre-tax loss of € 8.5 billion in our Corporate Banking & Securities business. This result principally reflects the impact on our business model of the market conditions in the fourth quarter. The relationships between assets and corresponding hedging instruments broke down, volatility and
correlation across asset classes reached exceptionally high levels, and liquidity became very scarce, leading to distortions in pricing. In our Sales & Trading businesses, we recorded significant losses in credit trading, equity derivatives, and equities proprietary trading. These losses were in large part attributable to substantial proprietary trading activity, the absolute size of some positions, and the complexity of some highly-structured products. Losses in these areas more than offset strong results in more liquid, ‘flow’ trading businesses including foreign exchange, money markets and commodities. Our Corporate Finance business was impacted by write-downs in leveraged loans and loan commitments, and lower market activity in M&A and equity origination, but significantly reduced legacy exposures in leveraged finance and commercial real estate during the year, and gained market share in global M&A. Our Global Transaction Banking business turned in a pre-tax profit of € 1.1 billion, up 17 %, reflecting record results in trade finance and cash management, and underlining the strength and resilience of this business even in challenging conditions.

Private Clients and Asset Management was also affected by the difficult market conditions. Pre-tax profit for 2008 was € 420 million, substantially down from 2007. This decline principally reflects a loss of € 525 million in our Asset and Wealth Management business, driven by significant specific charges in Asset Management, including impairments on certain assets and cash injections into European money market funds. Lower equity market valuations negatively affected revenues from performance fees while sharp declines in the real estate market impacted our alternative asset management business. Despite a very difficult environment, Private Wealth Management remained profitable for the year, and attracted net new client money of € 10 billion.

Private & Business Clients produced profits of € 945 million for the year, down 18 % compared to 2007. This decline principally reflects lower customer activity in brokerage and portfolio management products in the fourth quarter, coupled with a rise in loan loss provisions driven by a more difficult credit environment. Nevertheless, we will strengthen our private clients business with the recently closed acquisition of a minority stake in Deutsche Postbank, together with the exclusive option to acquire a majority holding. This gives us an option to create one of Europe’s leading retail banking platforms, which would reach nearly 30 million clients, and enjoy a position of clear leadership in Germany. In order to capture near-term opportunities, we have also sealed a co-operation agreement with Deutsche Postbank, which aims to unlock cost and revenue synergies worth over € 100 million across our two platforms.

Faced with the described exceptional conditions, we have moved swiftly to reposition our platform. In our Sales & Trading businesses, we have closed proprietary trading desks and significantly reduced our overall exposure to proprietary activity. We have scaled back resources dedicated to highly illiquid businesses, and sharpened our focus on liquid, ‘flow’ businesses which have continued to perform very well. We also significantly reduced balance sheet in key areas, cutting non-derivative trading assets by € 319 billion during the fourth quarter alone. In Corporate Finance, we have repositioned our Leveraged Finance and Commercial Real Estate businesses, while making selective investments in certain industry segments and advisory capabilities which will be in demand as financial institutions and corporate clients seek to recapitalise and restructure in tougher economic conditions. We remain firmly committed to advising and financing our mid-cap clients in Germany. In Asset Management, we are reengineering our platform to restore operating leverage in response to the pressure on asset valuations which continue to impact revenues. In Private Wealth Management, we will launch productivity and efficiency measures while also continuing to grow our business organically in a focused manner. In Private & Business Clients, we will continue to implement our Growth and Efficiency Program across Germany and other European markets, and pursue our co-operation agreement with Deutsche Postbank.

As we look forward in 2009, our industry continues to face significant challenges. A global economic downturn affects all our client segments, and financial markets remain under pressure. Nevertheless, we are confident that Deutsche Bank is correctly positioned to weather these difficult conditions. We were able to increase our Tier 1 capital by nearly € 3 billion in the course of 2008. Therewith, at the end of the year, our BIS Tier 1 ratio was 10.1 % - higher than at the beginning of the credit crisis. Our funding and liquidity position was very strong at the end of the year, with the result that our 2009 capital market funding requirements are well below the amounts we raised in 2007 or 2008. We made progress in reducing our balance sheet leverage ratio, which stood at 28 at the end of the year, thanks to substantial reductions in non-derivative trading assets. We significantly reduced legacy exposures in our trading book, including positions in leveraged finance and commercial real estate. At this stage, we do not see any requirement for raising new capital from whatever external source.

Our business model remains valid. The capital markets remain essential to the functioning of the global financial system, and investment banking therefore remains an essential service for corporations and institutions. Furthermore, the same fundamental long-term trends continue to support the investment management business: private retirement planning remains essential for ageing populations in mature economies, and wealth creation continues, albeit more slowly, in the world’s emerging economies. We remain firmly convinced that Deutsche Bank’s identity - a leading global investment bank with a strong private clients franchise – positions us well to emerge stronger from this crisis. At the time of writing, I am pleased to report that we have made a good start to 2009.

As a sign of our confidence in Deutsche Bank’s future, and of our commitment to our shareholders, the Management Board and Supervisory Board recommend a dividend of 50 cents per share to this year’s AGM.

We are very disappointed at our loss in 2008, but absolutely determined to take all necessary measures to restore Deutsche Bank to the path of profitability and performance for shareholders. We are convinced that the decisive action we have taken, and the strength of our platform, combined with the right business model, enable Deutsche Bank to face the future with confidence. Thank you for your continued support.

Yours sincerely,

Dr. Josef Ackermann
Chairman of the Management Board and
the Group Executive Committee

Frankfurt am Main, March 2009