Report of the Supervisory Board


Dr. Clemens Börsig, Chairman of the Supervisory Board (photo)

Dr. Clemens Börsig

Chairman of the Supervisory Board

The economic environment in 2011 was influenced by the sovereign debt crisis in the euro area. The tensions connected to this on the financial markets led to a clear slowing of the global economy during the second half of the year. In our home market Germany, economic activity was robust, although the German economy lost momentum due to the economic slowdown towards the end of the year.

In 2011, Deutsche Bank continued to focus on the implementation of its strategy. We expanded our Private and Business Clients, Private Wealth Management and Global Transaction Banking Business Divisions through the ongoing integration of Sal. Oppenheim and Postbank as well as parts of ABN AMRO Bank’s commercial banking business in the Netherlands. As a result, we firmly strengthened our second revenues engine alongside investment banking. The recalibration of our investment banking business led to a clear improvement in Deutsche Bank’s risk profile.

Strengthening Deutsche Bank’s capital position continues to be a top priority for the Management Board and Supervisory Board. In a challenging market environment, Deutsche Bank raised its core Tier 1 capital ratio to 9.5 % and expanded its liquidity reserves. For this year’s dividend proposal, we took into account the higher capital requirements due to regulatory provisions, in particular, those arising in connection with Basel 2.5 and Basel 3 as well as the regulations of the European Banking Authority. Furthermore, the ongoing integration of Deutsche Bank’s acquisitions continued to pose big challenges. We would like to thank the Management Board and the bank’s employees for their great personal dedication.

As in previous years, we again addressed numerous statutory and regulatory changes in 2011. Last year, we extensively discussed the bank’s economic and financial development, its operating environment, risk management system, planning and internal control system. We held in-depth discussions with the Management Board on the bank’s strategy and its implementation. The Management Board reported to us regularly, without delay and comprehensively on business policies and other fundamental issues relating to management and corporate planning, the bank’s financial development and earnings situation, the bank’s risk, liquidity and capital management along with material lawsuits and transactions and events that were of significant importance to the bank. We advised the Management Board and monitored its management of business. We were involved in decisions of fundamental importance. Regular discussions were also held between the Chairman of the Management Board and the Chairman of the Supervisory Board dealing with important topics and upcoming decisions. Between meetings, the Management Board kept us informed in writing of important events. Resolutions were passed by circulation procedure when necessary between the meetings.

Meetings of the Supervisory Board

The Supervisory Board held six meetings in 2011.

At the first meeting of the year on February 2, 2011, we discussed the development of business in the fourth quarter of 2010 and the 2010 financial year, along with a comparison of the plan-actual figures. The dividend proposal for the year 2010 as well as the corporate planning for the years 2011 to 2013 were noted with approval. Mr. Neske gave a progress report on the integration of Deutsche Postbank AG. Based on the Chairman’s Committee’s proposal, we approved amendments to the Terms of Reference for the Management Board including the Business Allocation Plan. We gave our consent to Dr. Börsig and Dr. Eick being named in the Annual Report as financial experts in accordance with German and U.S. law and confirmed the continued independence of all of the members of the Audit Committee. Furthermore, we approved an alignment of the Management Board members’ service agreements to new regulatory requirements, discussed the basis for calculating the Management Board members’ variable compensation for 2010 and subsequently determined the Management Board’s compensation – with the involvement of an external, independent legal advisor and compensation consultant – while taking into account the recommendations of the Chairman’s Committee.

At the financial statements meeting on March 11, 2011, based on the Audit Committee’s recommendation and after a discussion with the auditor, we approved the Consolidated Financial Statements and Annual Financial Statements for 2010. Furthermore, the Compliance and Anti-Money Laundering Report was discussed, along with the Remuneration Report in accordance with the Regulation on Remuneration at Financial Institutions (InstitutsVergV) for the year 2010. We approved the sale of the Taunusanlage 12 property in Frankfurt am Main to a closed-end DWS real estate fund as well as the bank’s concurrent lease-back. Changes in the composition of the Regional Advisory Boards and Advisory Councils in Germany were presented to us, and we approved the resolution proposals for the Agenda of the General Meeting 2011.

At the meeting on the day before the General Meeting, we discussed the procedures for the General Meeting and the announced counterproposals as well as the status of litigation in connection with the General Meetings 2004 – 2010. As necessary, resolutions were approved.

At an extraordinary meeting on July 25, 2011, we extended the Management Board appointments of Mr. Fitschen, Mr. Jain and Mr. Neske and resolved to appoint Mr. Fitschen and Mr. Jain Co-Chairmen of the Management Board with effect from the end of the Ordinary General Meeting 2012. We agreed with Dr. Ackermann that his appointment would end with simultaneous effect. Dr. Börsig notified the Supervisory Board that he would be stepping down as member and Chairman of the Supervisory Board with effect from the end of the Ordinary General Meeting 2012.

At the meeting on July 26, 2011, we discussed the development of the bank’s business during the first six months of 2011 and the risk profile, and we examined the recalibration of the Corporate & Investment Bank (CIB) Group Division. Dr. Ackermann reported on the results of the stress tests of the European Banking Authority (EBA), and we received status reports on the integration of Postbank, material litigation cases and the bank’s capital and liquidity management. Based on the Chairman’s Committee’s proposal, we approved the payment of a pension award to Mr. Cohrs and elected Dr. Siegert member of the Audit Committee and Ms. Labarge member of the Risk Committee, each with effect from August 1, 2011. Furthermore, we reviewed the list of actions requiring the Supervisory Board’s approval in accordance with Section 13 of the Articles of Association.

At the last meeting of the year on October 25, 2011, the Management Board informed us of the development of business in the third quarter and the current status of developments relating to the bank’s IT infrastructure. Together with the Management Board, we discussed in detail the bank’s ongoing strategic development along with the corresponding targets and planned measures, the restructuring of the bank’s European subsidiaries and the Human Resources Report.

The Committees of the Supervisory Board

The Chairman’s Committee met five times during the reporting period. Between the meetings, the Chairman of the Chairman’s Committee spoke with the Committee members regularly about issues of major importance. The Committee examined, in particular, the new statutory and regulatory requirements for Management Board compensation and the necessity arising from this to adjust the Management Board members’ service agreements, along with the preparations for determining the variable Management Board compensation for the 2010 financial year. The Committee also addressed issues of appointing members to the Supervisory Board’s committees and extending the appointments to the Management Board of Mr. Fitschen, Mr. Jain and Mr. Neske. The Committee intensively addressed the succession of Dr. Ackermann and developed a corresponding proposal for the Supervisory Board. Amendments required to the Terms of Reference and to the Business Allocation Plan for the Management Board were also discussed, in addition to the Compensation Report. When necessary, resolutions were passed or recommendations were issued for the Supervisory Board’s approval. The Chairman’s Committee gave its approval for the Management Board members’ ancillary activities and directorships at other companies, organizations and institutions.

At its six meetings, the Risk Committee addressed in particular credit, liquidity, refinancing, country, market and operational risks, as well as legal and reputational risks. In detail, the Committee discussed the bank’s risk position and provisions for credit losses, its capital funding, the risk management systems and the effects on the bank’s risk profile from the Postbank acquisition carried out last year. Another center of focus was placed on the general economic developments, the European sovereign debt crisis and the political changes in several countries in the Middle East and North Africa as well as their effects on the bank and its risk position. In addition to the development of the material legal risks in the individual business divisions and regions, discussions were held on minimizing the risks of fraud and on the effects on the bank and its risk position from changes in regulatory rules. Furthermore, the Committee focused on the development of the bank’s funding and liquidity positions, its risk absorption capacity, the stress test of the European Banking Authority and their new, sector-wide capital funding requirements. Also, global industry portfolios were presented according to a specified plan and discussed at length. The bank’s exposures subject to mandatory approval under German law and Articles of Association were discussed in detail. Where necessary, the Risk Committee gave its approval.

The Audit Committee met six times in 2011. Representatives of the bank’s auditor attended all of these meetings. Subjects covered were the audit of the Annual Financial Statements and Consolidated Financial Statements for 2010, the Interim Reports, as well as Forms 20 F and 6 K for the U.S. Securities and Exchange Commission (SEC). The Committee dealt with the proposal for the election of the auditor for the 2011 financial year, issued the audit mandate, resolved on the auditor’s remuneration and verified the auditor’s independence in accordance with the requirements of the German Corporate Governance Code and the rules of the U.S. Public Company Accounting Oversight Board (PCAOB). The Committee did not specify audit areas of focus as the Federal Financial Supervisory Authority (BaFin) made use of its right under Section 30 German Banking Act to specify extensive audit areas of focus. The Audit Committee is convinced that, as in the previous years, there are no conflicts of interest on the part of the bank’s auditor. The Committee assured itself of the effectiveness of the system of internal controls, risk management and internal audit and monitored the financial reporting, accounting process and audit of the Annual Financial Statements. When necessary, resolutions were passed or recommendations were issued for the Supervisory Board’s approval. The Audit Committee had reports submitted to it regularly on the engagement of accounting firms, including the auditor, with non-audit-related services, on the work of internal audit, on issues relating to compliance, on legal and reputational risks as well on special investigations and significant findings of regulatory authorities. Internal Audit’s plan for the year was noted with approval. The Audit Committee did not receive any complaints in connection with accounting, internal accounting controls and auditing matters. Furthermore, the Audit Committee regularly dealt with the processing of audit findings issued by the auditor for the Annual and Consolidated Financial Statements for 2010, the measures to resolve the audit findings, the requirements relating to monitoring tasks pursuant to Section 107 (3) Stock Corporation Act, the measures to prepare for the audit of the Annual Financial Statements and the audit areas of focus specified by the Federal Financial Supervisory Authority in accordance with Section 30 of the German Banking Act.

The Nomination Committee met twice in 2011 and dealt with succession issues on the Supervisory Board.

Meetings of the Mediation Committee, established pursuant to the provisions of Germany’s Co-Determination Act (MitbestG), were not necessary in 2011.

The committee chairmen reported regularly to the Supervisory Board on the work of the committees.

In 2011, all Supervisory Board members participated in the meetings of the Supervisory Board and their respective committees with only few exceptions. On average, the attendance was over 95 %.

Corporate Governance

At their meetings on May 25, 2011, the Supervisory Board and Chairman’s Committee addressed the suggestions and recommendations of the German Corporate Governance Code and in each case noted that the Government Commission’s German Corporate Governance Code did not make any changes to the Code at its plenary meeting on May 4, 2011.

In addition, the Chairman’s Committee and Supervisory Board addressed Management Board compensation at several meetings. For the review of the structure of the Management Board’s compensation system and of the appropriateness of the variable compensation for the 2011 financial year, the Supervisory Board resolved to engage an independent compensation consultant as well as an external legal advisor to examine the compliance with the statutory and regulatory requirements.

At the meeting on February 1, 2012, we determined that the Supervisory Board has what we consider to be an adequate number of independent members. We also determined that all members of the Audit Committee are independent as defined by the U.S. Securities and Exchange Commission (SEC) rules issued to implement Section 407 of the U.S. Sarbanes-Oxley Act of 2002. Dr. Börsig, Dr. Eick and Dr. Siegert, who has been an Audit Committee member since August 1, 2011, were determined to be audit committee financial experts in accordance with the regulations of the Securities and Exchange Commission as well as Sections 107 (4) and 100 (5) of the Stock Corporation Act.

The Declaration of Conformity pursuant to Section 161 of the Stock Corporation Act, last issued by the Supervisory Board and Management Board on October 27, 2010, was reissued at the meeting of the Supervisory Board on October 25, 2011. Deutsche Bank complies with the recommendations of the German Corporate Governance Code in the version dated May 26, 2010, with one exception. This was included in the Declaration as a precaution due to a non-final judgment of the Higher Regional Court (OLG) Frankfurt am Main of July 5, 2011, regarding the disclosure of conflicts of interest in the report of the Supervisory Board to the General Meeting. The text of the Declaration of Conformity issued on October 25, 2011, along with a comprehensive presentation of the bank’s corporate governance can be found in the Corporate Governance Report and on our Internet website. The terms of reference for the Supervisory Board and its committees as well as for the Management Board are also published there, each in their currently applicable versions.

Training and further education measures

Members of the Supervisory Board completed the training and further education measures required for their tasks on their own responsibility. Deutsche Bank provided the appropriate support to them in this context. The new members joining the Supervisory Board in 2011, Ms. Garrett-Cox and Ms. Voigt, were given orientation individually tailored to their levels of knowledge as well as detailed documentation. In addition, members of the Supervisory Board participated in external training courses. All of the members of the Supervisory Board were informed of the legal basis of the Supervisory Board’s work as part of a workshop carried out by an external attorney in February 2011. The members of the Audit Committee discussed the new regulations on accounting and financial reporting with staff members of the Finance department and the auditor. They also discussed the Supervisory Board’s monitoring requirements pursuant to Section 107 (3) sentence 2 of the Stock Corporation Act with an external lawyer. In addition, members of the Supervisory Board were informed of new developments in corporate governance. Furthermore, in April 2012, an internal seminar will be conducted by an external university lecturer on the topics annual financial statements and the analysis of annual accounts, risk management and functions as well as the responsibilities of members of supervisory boards.

Conflicts of interest and their handling

In connection with the agreement announced on December 21, 2010, between Deutsche Bank and the U.S. Department of Justice on non-prosecution in connection with tax-oriented transactions for clients, the bank commissioned a legal report assessing the possibility of recourse claims against former Management Board members. This expert opinion was discussed at the meetings of the Chairman’s Committee and Supervisory Board on May 25, 2011, and concluded there were no claims against active and former members of the Management Board. As the matter took place during his term of office as a member of the Management Board, Dr. Börsig did not participate in the discussion and voting on possible recourse claims.

Until the end of 2010, Ms. Ruck was a member of the Supervisory Board of Deutsche Bank Privat- und Geschäftskunden AG. She did not participate in taking the resolution of the Supervisory Board of Deutsche Bank AG required pursuant to Section 32 of the Co-Determination Act (MitbestG) on the ratification of the acts of management of the Management Board and Supervisory Board of Deutsche Bank Privat- und Geschäftskunden AG for the 2010 financial year.

Litigation

As in the preceding years, we regularly obtained information on important lawsuits and discussed further courses of action. These included the actions for rescission and to obtain information filed in connection with the General Meetings in 2006, 2007, 2008, 2009, 2010 and 2011, as well as the lawsuits of Dr. Kirch/his legal successor and KGL Pool GmbH against Deutsche Bank and Dr. Breuer.

Furthermore, reports concerning important lawsuits were presented to the Supervisory Board on a regular basis and, in detail, to the Audit and Risk Committees.

Annual financial statements

KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft has audited the accounting, the Annual Financial Statements and the Management Report for 2011 as well as the Consolidated Financial Statements with the related Notes and Management Report for 2011. KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft was elected by the General Meeting as the auditor of the Annual Financial Statements and Consolidated Financial Statements. After the Frankfurt am Main Regional Court in the first instance had ruled this appointment null and void based on an action to rescind, the Frankfurt am Main District Court appointed, upon the bank’s application in consultation with the Audit Committee, KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft the auditor of the Annual Financial Statements and Consolidated Financial Statements by way of court order. The audits led in each case to an unqualified opinion. The Audit Committee examined the documents for the Annual Financial Statements and Consolidated Financial Statements, along with the auditor’s report, and discussed these extensively with the auditor. The Chairman of the Audit Committee reported to us on this at today’s meeting of the Supervisory Board. Based on the recommendation of the Audit Committee and after inspecting the auditor’s reports, the Annual Financial Statements and Consolidated Financial Statements documents, we agreed with the results of the audits following an extensive discussion and determined that, also based on the results of our inspections, there were no objections to be raised.

Today, we approved the Annual Financial Statements and Consolidated Financial Statements prepared by the Management Board; the Annual Financial Statements are thus established. We agree to the Management Board’s proposal for the appropriation of profits.

Personnel issues

There were no personnel changes on the Management Board in 2011.

With the conclusion of the General Meeting on May 26, 2011, the term of office of Sir Peter Job as a member of the Supervisory Board came to an end. Ms. Katherine Garrett-Cox was elected member of the Supervisory Board to succeed him by the General Meeting on May 26, 2011.

Mr. Peter Kazmierczak resigned his mandate as member of the Supervisory Board with effect from October 25, 2011. Ms. Renate Voigt was appointed his successor as member of the Supervisory Board by court order on November 30, 2011, for the remainder of his term of office.

We thank the members who left last year for their dedicated work on the Supervisory Board and for their constructive assistance to the company and the Management Board over the years.

At our meeting today, March 16, the Supervisory Board appointed Dr. Stephan Leithner, Mr. Stuart Wilson Lewis and Mr. Henry Ritchotte members of the Management Board, in each case for three years with effect from June 1, 2012. Dr. Leithner has been with Deutsche Bank since 2000 and has been Co-Head of Investment Banking Coverage & Advisory since 2010. Mr. Lewis joined Deutsche Bank in 1996 and has been Deputy Chief Risk Officer since 2010. Mr. Ritchotte has been with Deutsche Bank since 1995 and has been the Chief Operating Officer of the Corporate & Investment Bank Group Division since 2010. Dr. Bänziger and Mr. Lamberti will leave the Management Board and Deutsche Bank effective at the end of May 31, 2012. Dr. Ackermann will be leaving the bank’s Management Board, which he has chaired since 2002, with effect from the end of the General Meeting on May 31, 2012.

Frankfurt am Main, March 16, 2012

The Supervisory Board

Signature Dr. Clemens Börsig – Chairman (signature)

Dr. Clemens Börsig
Chairman

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Deutsche Bank Annual Report 2011

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