Report of the Supervisory Board


The economic environment in 2012 was marked by continuing uncertainties over the high sovereign debt in many industrial countries and a slowing of the global economy. Central banks’ actions, however, mitigated risks in the financial markets and helped to prevent the severe turbulence seen in previous years. This boosted expectations that – after a weak winter period – the global economy would regain momentum over the course of 2013.

Germany mastered the difficult environment in 2012 well, despite recession in the countries on the southern periphery of the eurozone, noticeably slower emerging market growth and continuing concern over the debt crisis.

For Deutsche Bank, the 2012 financial year was decisively shaped by personnel changes in its senior management and a related realignment of its business model. In September 2012, the new Co-Chairmen of the Management Board, Mr. Fitschen and Mr. Jain, presented the bank’s ambitious strategic and financial targets for 2015 and beyond. Strategy 2015+ confirms Deutsche Bank’s commitment to its proven universal banking model, its German home market and its global business platform. Additional aspects include the need for continued risk reduction, organic growth of the capital base and enhanced operational excellence. Deutsche Bank also pledged to be at the forefront of shaping cultural change in the financial services sector.

In last year’s challenging environment, Deutsche Bank generated good operating results in its core businesses. However, these were impaired by significant one-time charges. The bank successfully raised its core Tier 1 capital ratio, on a fully loaded Basel 3 basis and further scaled back risks in its non-core business activities.

In light of the regulatory requirements, strengthening the capital base continues to be a top priority for Deutsche Bank. We also took this into account in this year’s dividend proposal. We would like to thank the Management Board and the bank’s employees for their great personal dedication.

In addition to issues surrounding the ongoing strategic development of the bank and its implementation, which we discussed in detail with the Management Board at a dedicated workshop, we addressed numerous statutory and regulatory changes again in 2012. Last year, we extensively discussed the bank’s economic and financial development, its operating environment, risk management system, planning and internal control system. 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 subsequently the Co-Chairmen 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 2012.

At the first meeting of the year on February 1, 2012, we discussed the development of business in the fourth quarter of 2011 and the 2011 financial year, along with a comparison of the plan-actual figures. The dividend proposal for the year 2011 as well as the corporate planning for the years 2012 to 2014 were noted with approval. Dr. Bänziger presented a status report on the bank’s material risks and litigation cases. We agreed to Dr. Börsig, Dr. Eick and Dr. Siegert being named in the Annual Report as financial experts in accordance with German and U.S. laws, confirmed the continued independence of all of the members of the Audit Committee and determined that the Supervisory Board has what we consider to be an adequate number of independent members. Following a review of the appropriateness of the compensation system for the Management Board, while taking the recommendations of the Chairman’s Committee account and in consultation with an independent external legal advisor and compensation expert, we determined the level of the variable compensation for the Management Board members for the 2011 financial year.

At the financial statements meeting on March 16, 2012, 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 2011. 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 2011. 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 2012. After an extensive discussion, and based on the proposal of the Chairman’s Committee, we appointed Dr. Stephan Leithner, Mr. Stuart Wilson Lewis and Mr. Henry Ritchotte members of the Management Board, each for three years with effect from June 1, 2012. Furthermore, based on the proposal of the Chairman’s Committee, we resolved to terminate the Management Board appointments of Dr. Bänziger and Mr. Hermann-Josef Lamberti with effect from May 31, 2012. Corresponding severance agreements were concluded.

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 2004-2011. As necessary, resolutions were approved in this context. Based on a proposal of the Chairman’s Committee, we resolved to adjust the Management Board service agreements of Mr. Fitschen and Mr. Jain, to extend the Management Board appointment of Mr. Krause by another five years and to appoint Dr. Leithner as Management Board member with functional responsibility for Human Resources (Arbeitsdirektor) with effect from June 1, 2012. In light of the personnel changes on the Management Board and following extensive discussion, we resolved, based on the proposal of the Chairman’s Committee, to revoke the Terms of Reference for the Management Board and the Business Allocation Plan. We authorized the Management Board to issue its own Terms of Reference and Business Allocation Plan until the Supervisory Board adopts a new resolution on the matter.

At our meeting following the General Meeting, we elected Dr. Achleitner as our Chairman and Professor Dr. Trützschler as member of our Audit Committee.

At the meeting on July 31, 2012, we discussed the development of the bank’s business during the first six months of 2012 and Dr. Leithner presented a status report on significant litigation cases. Based on a proposal of the Chairman’s Committee and in consultation with an external, independent compensation expert, we approved a supplementary adjustment to the Management Board service agreements of Mr. Fitschen and Mr. Jain.

At the last meeting of the year on October 30, 2012, the Management Board informed us of the development of business in the third quarter and we received status reports on the implementation of strategic measures, significant litigation cases and current developments relating to the bank’s IT infrastructure. We discussed the changes in the German Corporate Governance Code carried out in 2012 and resolved to adjust the objectives for the composition of the Supervisory Board pursuant to No. 5.4.1 of the German Corporate Governance Code as well as the terms of reference for the Supervisory Board, Chairman's Committee, Audit Committee and the Risk Committee. Furthermore, we issued the periodic Declaration of Conformity pursuant to Section 161 of the Stock Corporation Act.

The Committees of the Supervisory Board

The Chairman’s Committee met six 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 extensively addressed the appointments of the three new members of the Management Board and the departure of Dr. Bänziger and Mr. Lamberti. New statutory and regulatory requirements for Management Board compensation were examined, the resulting need to adjust the Management Board members’ service agreements was discussed, and preparations were carried out for the Supervisory Board to determine the variable Management Board compensation for the 2011 financial year. Discussions were held on the amendments required to the Terms of Reference and to the Business Allocation Plan for the Management Board, on the terms of reference for the Supervisory Board and its committees as well as on the Compensation Report. When necessary, resolutions were passed or recommendations made 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. The Committee’s primary focus in 2012 was on the bank’s capital resources, while a special emphasis was also placed on the hard core capital ratio, the expected effects of Basel 3, the initiatives to reduce risk and the appropriateness of our risk-weighted assets compared to the relevant peers. Other major topics were the bank’s risk culture, the emergency plans regulatory authorities are calling for in the event of insolvency (“living wills”) and the development of the European sovereign debt crisis. With regard to the latter, measures were also carried out by the bank to close refinancing gaps in Spain, Italy and Portugal. In-depth discussions also addressed several selected portfolios, including ship financing, commercial real estate finance and various trading portfolios. Besides the bank’s funding and liquidity positions, the Committee meetings examined various aspects of the bank’s risk provisions, along with the potential effects of regulatory proposals. The Risk Committee was regularly informed of current developments relating to the larger litigation cases. Furthermore, the Committee discussed risk models and limits, the development of the Risk Management infrastructure, risks of fraud and progress achieved in the integration of Postbank. Also, our risk portfolios were presented by industry according to a pre-specified plan and compared in terms of profitability. The exposures subject to mandatory approval under German law and the Articles of Association were discussed in detail. Where necessary, the Risk Committee gave its approval.

The Audit Committee met seven times in 2012. 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 2011, the Interim Reports, as well as the Annual Report on Form 20-F for the U.S. Securities and Exchange Commission (SEC). The Committee dealt with the proposal for the election of the auditor for the 2012 financial year, 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), issued the audit mandate and resolved on the auditor’s remuneration. The Committee did not specify audit areas of focus for 2012 as the Federal Financial Supervisory Authority (BaFin), in accordance with Section 30 of the German Banking Act, specified extensive audit areas of focus, as in 2011. 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 made 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 audits 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 2011, the measures to resolve the audit findings, the requirements relating to monitoring tasks pursuant to Section 107 (3) of the 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 three times in 2012 and dealt with Supervisory Board succession and appointment issues.

Meetings of the Mediation Committee, established pursuant to the provisions of Germany’s Co-Determination Act (MitbestG), were not necessary in 2012.

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

In 2012, the Supervisory Board members participated in the meetings of the Supervisory Board and their respective committees as follows:

 

Meetings (incl. committees)

Meeting participation

in %

 

Meetings (incl. committees)

Meeting participation

in %

Achleitner

13

13

100

Mark

13

13

100

Börsig

12

12

100

Platscher

6

6

100

Böhr

6

6

100

Ruck

19

19

100

Eick

13

13

100

Siegert

8

8

100

Garrett-Cox

6

6

100

Stockem

2

2

100

Herling

12

12

100

Teyssen

6

6

100

Herzberg

4

4

100

Thieme

13

13

100

Kagermann

12

12

100

Todenhöfer

12

12

100

Klee

6

6

100

Trützschler

7

7

100

Labarge

12

12

100

Viertel

6

6

100

Lévy

3

3

100

Voigt

6

6

100

Löscher

3

2

67

Wenning

6

6

100

Corporate Governance

At their meetings on October 29 and 30, 2012, the Supervisory Board and the Chairman’s Committee addressed the new suggestions and recommendations of the German Corporate Governance Code of May 15, 2012. In light of the change in the Code’s recommendation for a supervisory board’s composition, the Supervisory Board resolved that, under the premise that the performance of the Supervisory Board mandate in itself by a representative of the employees cannot be reason to doubt fulfilment of the independence criteria according to No. 5.4.2 of the Code, the Supervisory Board shall have a total of at least sixteen members that are independent within the meaning of the Code and that the Supervisory Board shall be composed such that at least six shareholder representatives are independent within the meaning of No. 5.4.2 of the Code. At the meeting on January 30, 2013, we determined that the Supervisory Board has what we consider to be an adequate number of independent members.

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

On January 30, 2013, 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. Achleitner and Professor Dr. Trützschler, who have been Audit Committee members since May 31, were determined to be audit committee financial experts in accordance with the regulations of the SEC 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 25, 2011, was reissued at the meeting of the Supervisory Board on October 30, 2012. The Management Board and Supervisory Board stated that Deutsche Bank has complied and will continue to comply with the recommendations of the German Corporate Governance Code in the version dated May 15, 2012, as before, with one exception. The exception involves the recommendation under No. 5.5.3 sentence 1 of the Code on the disclosure of conflicts of interest in the report of the Supervisory Board to the General Meeting. The Declaration of Conformity was qualified in this regard as a precaution due to two non-final judgments of the Higher Regional Court (OLG) Frankfurt. On March 19, 2013, the Management Board and Supervisory Board further qualified the Declaration of Conformity issued on October 30, 2013, to the effect that, in departure from the recommendation in No. 7.1.2 sentence 4 of the Code, the Consolidated Financial Statements of Deutsche Bank AG for the 2012 financial year would not be publicly accessible within 90 days after the end of the financial year. Deutsche Bank AG postponed the publication of its Annual Report 2012 and Form 20-F until mid-April 2013, after holding its Extraordinary General Meeting on April 11, 2013. The background to this is a ruling on December 18, 2012, of the Frankfurt am Main District Court, as the court of first instance, which, among other things, declared null and void the resolution adopted by the General Meeting of Deutsche Bank AG on May 31, 2012, to appoint KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin, the auditor of the annual and consolidated financial statement for the 2012 financial year. While Deutsche Bank AG has filed motions to appeal the ruling, it has decided that in order to exclude risks regarding the validity of the Annual Financial Statements as far as possible, the appointment of the auditor of the annual and consolidated financial statements should first be confirmed by the Extraordinary General Meeting on April 11, 2013, before the auditor’s report is issued and before publication of the financial statements. The text of the Declaration of Conformity issued on October 30, 2012, and the adjusted Declaration of Conformity issued on March 19, 2013, along with a comprehensive presentation of the bank’s corporate governance, can be found in the Corporate Governance Report of the Financial Report 2012 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. Furthermore, an internal two-day seminar was conducted for the members of the Supervisory Board in April 2012 by an external university professor. The topics covered were the annual financial statements and the analysis of annual accounts, risk management as well as functions and responsibilities of supervisory board members. In addition, members of the Supervisory Board were informed on a regular basis of new developments in corporate governance. Furthermore, members of the Supervisory Board participated in external training courses.

The Risk Committee members were informed by the Chief Risk Officer and leading staff members of the Risk Management organization of new developments on risk-specific issues (including risk appetite, setting limits and living wills) in two training sessions in October and December 2012.

Together with staff members of the Finance department and the auditor, the Audit Committee members discussed the new regulations on accounting and financial reporting.

Individual introductory courses were held for the new members who joined the Supervisory Board in 2012, Dr. Achleitner, Mr. Löscher, Mr. Stockem and Professor Dr. Trützschler.

Conflicts of Interest ond Their Handling

The Chairman’s Committee approved the conclusion of an agreement, which was reviewed by external legal counsel, between Deutsche Bank and Dr. Achleitner on the performance of functions and tasks on the bank’s behalf as well as on support services provided by the bank. Dr. Achleitner did not participate in taking this resolution due to a possible conflict of interest.

Mr. Stockem is a member of the Supervisory Board of Deutsche Bank Privat- und Geschäftskunden AG and was its member in the 2012 financial year. At the meeting on March 19, 2013, he abstained from voting on 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 2012 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, 2011 and 2012, as well as the lawsuits of Dr. Kirch/his legal successor and KGL Pool GmbH against Deutsche Bank and Dr. Breuer.

Furthermore, in plenary session, we extensively addressed the proceedings relating to possible manipulations of reference rates (IBOR, LIBOR, EuriBOR, SIBOR, etc.) as well as OFAC (possible infringements of U.S. embargo regulations) and possible sales tax (Umsatzsteuer) fraud in connection with trading in CO2 emission certificates. 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 2012 as well as the Consolidated Financial Statements with the related Notes and Management Report for 2012. KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft was elected by the Ordinary General Meeting on May 31, 2012, 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 Extraordinary General Meeting on April 11, 2013, confirmed the appointment of KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft as the auditor of the Annual Financial Statements and Consolidated Financial Statements. 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 them extensively with the auditor. The Chairman of the Audit Committee reported to us on this at today’s meeting of the Supervisory Board. Furthermore, at our meeting on March 19, 2013, we already held detailed discussions with the auditor’s representatives on the Annual Financial Statements and the Management Report for 2012 as well as the Consolidated Financial Statements with the related Notes and Management Report for 2012, along with the drafts of the auditor’s reports. Based on the recommendation of the Audit Committee, which examined the Annual Financial Statements and Management Report for 2012 as well as the Consolidated Financial Statements with the related Notes and the Management Report for 2012 at its meetings on March 18, 2013, and April 12, 2013, 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

Three new Management Board members were appointed at the meeting of the Supervisory Board on March 16, 2012. Dr. Stephan Leithner, Mr. Stuart Wilson Lewis and Mr. Henry Ritchotte were appointed members of the Management Board, each for three years with effect from June 1, 2012. They also became members of the Group Executive Committee as of this date. 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 Chief Operating Officer of the Corporate & Investment Bank Group Division since 2010. Since the end of the General Meeting on May 31, 2012, Mr. Fitschen and Mr. Jain have been equally authorized Co-Chairmen of the Management Board. Dr. Leithner has held functional responsibility on the Management Board for Human Resources (Arbeitsdirektor) since June 1, 2012.

Dr. Bänziger and Mr. Lamberti stepped down as members of the Management Board and left Deutsche Bank effective at the end of May 31, 2012. Dr. Ackermann left the bank’s Management Board, which he had chaired since 2006, with effect from the end of the General Meeting on May 31, 2012.

There were also changes on the Supervisory Board in 2012. With the conclusion of the General Meeting on May 31, 2012, Dr. Börsig, Dr. Siegert and Mr. Lévy left the Supervisory Board of Deutsche Bank. Dr. Achleitner, Mr. Löscher and Professor Dr. Trützschler were elected to the Supervisory Board by the General Meeting on May 31, 2012.

Mr. Gerd Herzberg resigned as member of the Supervisory Board on May 31, 2012. His substitute, Mr. Rudolf Stockem, succeeded him as member of the Supervisory Board on June 1, 2012, for the remainder of his term of office.

We thank the members who left last year for their dedicated work and for their constructive assistance to the company during the past years.

Frankfurt am Main, April 12, 2013

The Supervisory Board

Dr. Paul Achleitner, Chairman (signature)

Dr. Paul Achleitner
Chairman