Report of the Supervisory Board

Global economic growth slowed on an annualized average in 2013 compared to 2012. After the economy reached its low point in the first quarter of 2013, a recovery was seen over the course of the remainder of the year. This was supported above all by the extremely expansive monetary policy of the major central banks. In industrialized countries the structural problems that contributed to the financial and economic crisis remained in focus. The reduction of private and public debt dampened growth, in particular in the eurozone. Several emerging market economies experienced negative effects from the withdrawal of capital triggered by the change in the international interest rate cycle (U.S. tapering).

Although on a full year basis economic activity in Germany continued to decline in 2013 compared to the year before, a phase of recovery set in following the weak winter period 2012/2013.

In this environment marked by general economic uncertainty, we advised the Management Board on the management of the company and monitored its management of business. Last year, we extensively discussed the bank’s economic and financial development, its operating environment, risk management system, planning and internal control system. As in previous years, in 2013 we addressed numerous statutory and regulatory changes, which in some cases have already directly affected our work. We discussed issues concerning the bank’s ongoing strategic development and its implementation with the Management Board in detail during a two-day workshop. 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 were involved in decisions of fundamental importance. Regular discussions concerning important topics and upcoming decisions were also held between the Co-Chairmen of the Management Board and the Chairman of the Supervisory Board. The chairmen of the Supervisory Board’s committees held regular discussions and consultations to enhance the overall coordination of the work of the Supervisory Board and its committees. 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 seven meetings in 2013.

At the first meeting of the year on January 30, 2013, we discussed the development of business in the fourth quarter of 2012 and the 2012 financial year, along with a comparison of the plan-actual figures. The dividend proposal for the year 2012 as well as the corporate planning for the years 2013 to 2015 were noted with approval. The Management Board presented a status report on the bank’s material risks and litigation cases. Based on the recommendation of the Chairman’s Committee and Audit Committee, we agreed to Dr. Eick, Dr. Achleitner and Professor Trützschler being named financial experts in the Annual Report. We confirmed the continued independence, as defined by U.S. regulations, of all 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 into account and in consultation with an independent external compensation expert, we determined the level of the Variable Compensation for the Management Board members for the 2012 financial year.

At the meeting on March 19, 2013, we discussed the Annual Financial Statements 2012 and KPMG reported on the status of the audit procedures. Together with the Management Board, we discussed the Compliance Report, a further status report on significant litigation cases and the Compensation Report 2012, which we noted with approval. Furthermore, we approved an adjustment to the Declaration of Conformity due to the postponement of the publication of the Financial Report to April 15, 2013.

At the financial statements meeting on April 11, 2013, following the Extraordinary General Meeting and after a discussion with the auditor, we approved the Consolidated Financial Statements and Annual Financial Statements for 2012.

At the meeting on the day before the Ordinary General Meeting, we discussed the procedures for the General Meeting and the announced counterproposals as well as the status of lawsuits submitted to contest the resolutions of the Extraordinary General Meeting on April 11, 2013. As necessary, resolutions were approved in this context. After an extensive discussion and based on a proposal of the Chairman’s Committee, we resolved to approve a new version of the Terms of Reference for the Management Board including the Business Allocation Plan. Furthermore, we resolved to newly establish an Integrity Committee, approved its Terms of Reference and adjusted the terms of reference for the Supervisory Board, Nomination Committee, Audit Committee and Risk Committee. Furthermore, we were informed of new corporate governance regulations coming into force in the future and the effects of Germany’s Capital Requirements Directive 4 Implementation Act. We then discussed the results of the Supervisory Board’s efficiency review and agreed to the prompt implementation of the proposed measures for improvement.

At the constitutive meeting following the General Meeting, we re-elected Dr. Achleitner as our Chairman. Dr. Achleitner thus also became Chairman of the Nomination, Chairman’s, Risk and Mediation Committees as well as member of the Audit and Integrity Committees. We elected Mr. Herling Deputy Chairman, who thus also became member of the Chairman’s and Mediation Committees. We also elected Mr. Todenhöfer (until October 31, 2013), Professor Kagermann (as of November 1, 2013) and Mr. Bsirske as members of the Chairman’s Committee. As members of the Mediation Committee we elected Mr. Todenhöfer (until October 31, 2013), Professor Kagermann (as of November 1, 2013) and Mr. Szukalski. Furthermore, we elected Professor Kagermann and Dr. Teyssen as members of the Nomination Committee. We elected Mr. Cryan as Chairman of the Audit Committee, who thus also became member of the Risk Committee, and Ms. Mark, Ms. Platscher, Mr. Rose and Professor Trützschler as members of the Audit Committee. Professor Kagermann (until October 31, 2013), Ms. Dublon (as of November 1, 2013), Ms. Labarge and Mr. Stockem were elected as members of the Risk Committee. We elected Mr. Thoma as Chairman of the new Integrity Committee and Mr. Heider, Ms. Irrgang, Ms. Klee and Mr. Löscher as members.

At the meeting on July 30, 2013, we discussed the development of the bank’s business during the first six months of 2013 and the Management Board presented a status report on significant litigation cases. We appointed Mr. Thoma, as the successor of Mr. Todenhöfer, to be the Supervisory Board’s delegate with regard to the numerous Kirch proceedings. Progress reports on IT strategy and cultural change were noted, and we adjusted the Terms of Reference for the Supervisory Board and for the Integrity Committee based on the recommendation of the Integrity Committee. Furthermore, we consented in principle to the issue of additional Tier 1 capital based on the authorization from the General Meeting on May 31, 2012, and delegated responsibility for approving the resolutions in this context to the Chairman’s Committee.

At the last meeting of the year on October 29, 2013, we extended Mr. Fitschen’s appointment to the Management Board until the end of March 31, 2017. The Management Board informed us of the development of the bank’s business in the third quarter, and we discussed the status reports on significant litigation cases and regulatory investigations as well as current developments relating to the bank’s IT infrastructure. We resolved to establish the Compensation Control Committee and approved its Terms of Reference. We elected Dr. Achleitner as Chairman of the Compensation Control Committee, which is required by law with effect as of January 1, 2014, and Mr. Bsirske, Mr. Herling and Professor Kagermann as members. Due to new corporate governance regulations, we approved the required adjustments to our Terms of Reference and elected Mr. Herling and Mr. Bsirske as new members of the Nomination Committee based on its new tasks. 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 held eight meetings in the 2013 financial year. Between the meetings, the Chairman of the Chairman’s Committee spoke with the Committee members regularly about issues of major importance. The Committee addressed the determination of the Variable Compensation for the 2012 financial year and the extension of Mr. Fitschen’s Management Board appointment. Furthermore, the new statutory and regulatory requirements for the compensation system for the 2013 financial year were examined and, following discussion, proposals of the Independent Compensation Review Panel chaired by Mr. Hambrecht were recommended to the Supervisory Board for approval. Discussions were held on the amendments required to the Terms of Reference and the Business Allocation Plan for the Management Board and to 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. Focal points in the 2013 financial year were on the bank’s capital funding, the expected implementation of Basel 3, the initiatives to reduce the balance sheet and risks, also in our Non-Core Operations Unit, as well as the appropriateness of our risk-weighted assets in comparison to our major competitors. Additional key topics were the restructuring and resolution plans (“living wills”) as well as the ongoing development of our operational risk management. In-depth discussions also addressed several selected portfolios, including commodities, leveraged finance and emerging market countries. Along with the bank’s funding and liquidity positions, the Committee meetings examined various aspects of the bank’s risk provisions as well as the potential effects of regulatory proposals. The Risk Committee was regularly informed of current developments relating to the larger litigation cases and key regulatory investigations. Furthermore, the Committee discussed the ongoing further development of risk models and their monitoring. Also, portfolio reports were presented by industry according to a schedule specified by the Risk Committee, the respective strategies were discussed and the portfolios were 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 held eleven meetings in 2013. With the exception of one meeting, 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 2012, the interim reports, as well as the Annual Report on Form 20-F for the U.S. Securities and Exchange Commission. The Committee dealt with the proposal for the election of the auditor for the 2013 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 submitted a recommendation to the Supervisory Board for the amount of the auditor’s remuneration, which the Supervisory Board approved through written votes. 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 Audit 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 and the European Central Bank carried out additional audit procedures within the framework of its balance sheet assessment and asset quality review. The Committee assured itself of the effectiveness of the risk management system, in particular of the system of internal controls and internal audit and monitored the financial reporting, accounting process and audit of the Annual Financial Statements. Since the Terms of Reference were adjusted pursuant to the Capital Requirements Directive 4 Implementation Act on October 29, 2013, the Audit Committee has supported the Supervisory Board in its monitoring of the processes and effectiveness of the risk management system, without any material change in the tasks of the Audit Committee. 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 Group Audit, on issues relating to compliance, on legal and reputational risks as well on special audits and significant findings of regulatory authorities. Group 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 2012, the measures to resolve other 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 Integrity Committee, newly established on May 22, 2013, met five times and addressed, in particular, issues relating to corporate culture as well as the preventive monitoring and strategic analysis of legal and reputational risks. Meetings covered, first of all, the clarification of the Committee’s tasks and responsibilities and its cooperation with the Audit and Risk Committees, the review of the status of current litigation cases and regulatory investigations as well as monitoring the implementation of the cultural change initiatives. Detailed discussions also focused on issues of corporate culture as part of a presentation given by Mr. Anthony Salz, who reported on the general points of his independent investigation of Barclays in connection with LIBOR. Additional topics included the use of social media, the bank’s “Three Lines of Defense” program to further strengthen the control structures as well as the “House of Governance” to enhance the bank’s business organization.

On October 29, 2013, the new Compensation Control Committee was established. The members met together twice and, in consultation with the Management Board, appointed the Compensation Officer required pursuant to the Regulation on Remuneration in Financial Institutions (InstVV) as of January 1, 2014. They also addressed the new responsibilities of the Supervisory Board in connection with compensation rules pursuant to the German Banking Act and InstVV.

The Nomination Committee met twice in 2013 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 2013.

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

In 2013, 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

39

39

100

Mark

18

18

100

Böhr

4

4

100

Platscher

12

11

92

Bsirske

5

4

80

Rose

8

7

88

Cryan

11

11

100

Ruck

16

16

100

Dublon

1

1

100

Stockem

10

10

100

Eick

11

9

82

Szukalski

3

3

100

Garrett-Cox

7

6

86

Teyssen

7

6

86

Heider

8

8

100

Thieme

10

10

100

Herling

15

15

100

Thoma

8

8

100

Irrgang

8

8

100

Todenhöfer

17

16

94

Kagermann

12

12

100

Trützschler

18

18

100

Klee

12

12

100

Viertel

4

4

100

Labarge

13

12

92

Voigt

4

4

100

Löscher

12

10

83

Wenning

6

6

100

Corporate Governance

At several meetings, the Chairman’s Committee and the Supervisory Board addressed the new corporate governance requirements of Sections 25c and 25d of the German Banking Act and discussed their implementation. Of special importance here were the new tasks of the Supervisory Board’s committees. With effect from January 1, 2014, an audit, risk, nomination and compensation control committee must be established as required by law. As a result, the Nomination Committee received additional tasks. Apart from its previous task of submitting proposals for the election of shareholder representatives to the Supervisory Board, it will also prepare matters relating to Management Board appointments and support the Supervisory Board in the assessments to be carried out at least annually of the Management Board and Supervisory Board. These new tasks also led to the expansion of the Nomination Committee to include two members representing employees. Furthermore, on several occasions, we addressed the regulations regarding the requirements for the qualifications and composition of the Supervisory Board, obligatory training measures and the upper limit on the number of board mandates.

At their meetings on May 22, 2013, the Chairman’s Committee and Supervisory Board addressed the results of the efficiency review. The Chairman’s Committee had drawn up a company-specific questionnaire in advance for this and had it sent to all Supervisory Board members. We are of the opinion that the Supervisory Board carries out its work efficiently and that a high standard was achieved in this context. The review provided individual suggestions for improvement, several of which were already successfully implemented in 2013.

On January 28, 2014, we determined that all members of the Audit Committee are independent as defined by U.S. regulations. Dr. Achleitner, Professor Trützschler and Mr. Cryan, who has been Chairman of our Audit Committee since May 23, 2013, were determined to be audit committee financial experts in accordance with the regulations of the Securities and Exchange Commission as well as Sections 25d (9), 100 (5) and 107 (4) of the Stock Corporation Act. Furthermore, we determined that Dr. Achleitner and Professor Dr. Kagermann have expertise and professional experience in risk management and risk controlling and therefore fulfill the requirements of Section 25d (12) of the German Banking Act as compensation experts.

The Declaration of Conformity pursuant to Section 161 of the Stock Corporation Act, last issued by the Supervisory Board and Management Board on October 30, 2012, and adjusted on March 19, 2013, was reissued at the meeting of the Supervisory Board on October 29, 2013. 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 13, 2013, with the specified exceptions. The text of the Declaration of Conformity 2013 issued on October 29, 2013, along with a comprehensive presentation of the bank’s corporate governance, can be found in the Corporate Governance Statement/Corporate Governance Report and on our 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. Especially for new members of the Supervisory Board, internal two-day seminars were held in July 2013 and October 2013 on the annual financial statements, analysis of annual accounts, risk management as well as the tasks, rights, and responsibilities of supervisory board members. Several members who have been on the Supervisory Board for many years also attended. 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.

For members of the Audit Committee, internal training sessions took place in November 2013 and December 2013. Topics included, in particular, the tasks of the Audit Committee, accounting, risk management, internal audit and the auditing of financial statements. The Audit Committee members also discussed the new regulations on accounting and financial reporting together with staff members of the Finance department and the auditor.

As part of a workshop, the members of the newly established Compensation Control Committee examined the statutory and regulatory requirements and the new statutory provisions to be observed as of January 1, 2014.

Conflicts of Interest and Their Handling

There were no conflicts of interest of individual Supervisory Board members in the year under review.

Litigation and Regulatory Investigations

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 2006 to 2013, as well as the lawsuits of Dr. Kirch/his legal successor and KGL Pool GmbH against Deutsche Bank and Dr. Breuer. In particular, the Chairman’s Committee and the Integrity Committee were intensively involved in the Management Board’s deliberations regarding the settlement agreement concluded with the various plaintiffs in the Kirch proceedings on February 20, 2014.

Furthermore, both on the committees and in plenary session, we extensively addressed the proceedings relating to possible manipulations of reference rates (IBOR, LIBOR, EURIBOR, SIBOR, etc.), investigations concerning the fixing of currency exchange rates and the Office of Foreign Assets Control (possible infringements of U.S. embargo regulations) as well as the investigations in connection with transactions with Monte dei Paschi di Siena. Additional legal matters included, in particular, the proceedings relating to possible sales tax (Umsatzsteuer) fraud in connection with trading in CO2 emission certificates and the resolution of the legal dispute with the U.S. Federal Housing Finance Agency. Furthermore, reports concerning important lawsuits and the regulatory investigations of various supervisory authorities were presented on a regular basis to the Supervisory Board and, with different focal points, to the Integrity, Audit and Risk Committees.

Annual Financial Statements

KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft has audited the accounting, the Annual Financial Statements and the Management Report for 2013 as well as the Consolidated Financial Statements with the related Notes and Management Report for 2013. KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft was elected by the Ordinary General Meeting on May 23, 2013, 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 in the meeting on March 17, 2014 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. Based on the recommendation of the Audit Committee, which examined the Annual Financial Statements and Management Report for 2013 as well as the Consolidated Financial Statements with the related Notes and the Management Report for 2013 at its meeting on March 17, 2014, and after inspecting the Annual Financial Statements and Consolidated Financial Statements documents, we agreed with the results of the audits following an extensive discussion with the auditor 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 changes on the Management Board in 2013.

On the Supervisory Board, the following changes took place in 2013:

Ms. Ruck, Ms. Thieme, Ms. Voigt, Mr. Böhr, Dr. Eick, Mr. Viertel and Mr. Wenning were members of the Supervisory Board until the conclusion of the General Meeting on May 23, 2013. To succeed them, Ms. Irrgang, Mr. Bsirske, Mr. Cryan, Mr. Heider, Mr. Rose, Mr. Szukalski and Mr. Thoma were elected to the Supervisory Board. Mr. Todenhöfer left the Supervisory Board on October 31, 2013. To succeed him, Ms. Dublon was elected to the Supervisory Board with effect from November 1, 2013.

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, March 18, 2014

The Supervisory Board

Dr. Paul Achleitner, Chairman (signature)

Dr. Paul Achleitner
Chairman