Convenience Translation

Offering Circular November 23, 2004

DZ BANK Capital Funding Trust II Wilmington, State of Delaware, United States of America

(a subsidiary of DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, Federal Republic of Germany)

€ 400,000,000 Noncumulative Trust Preferred Securities (corresponding to a number of 400,000 Trust Preferred Securities)

(Denomination and Liquidation Preference Amount: € 1,000 per Trust Preferred Security; Offering Price: € 1,000 per Trust Preferred Security)

ISIN: DE000A0DCXA0; German Securities Code (WKN): A0DCXA

The € 400,000,000 registered noncumulative Trust Preferred Securities (Trust Preferred Securities) represent preferred undivided beneficial ownership interests in the assets of DZ BANK Capital Funding Trust II, a statutory trust formed under the laws of the State of Delaware, United States of America (Trust). The assets of the Trust consist, subject to an increase of the Trust Preferred Securities, solely of € 400,001,000 noncumulative Class B Preferred Securities (Company Class B Preferred Securities) of DZ BANK Capital Funding LLC II, a Delaware limited liability company (Company). The holders of the Company Class B Preferred Securities have the benefit of a subordinated support undertaking (Subordi nated Support Undert aking) issued by DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main (Bank or DZ BANK). For all other capitalized terms, see "Definitions" beginning on page 4. The Trust will pass through capital payments and redemption or liquidation proceeds on the Company Class B Preferred Securities held by it as capital payments and redemption or liquidation payments, respectively, on the Trust Preferred Securities. Capital payments on the Company Class B Preferred Securities will be payable in accordance with the terms of the Company Class B Preferred Securities from the Issue Date, on a noncumulative basis, quarterly in arrear on each Class B Payment Date at a floating rate determined on the basis of the three-month EURIBOR rate plus the margin per annum. Capital payments on the Company Class B Preferred Securities will be made at the discretion of the Company only if the Company Operating Profit Test, the Bank Dividend Payment Test, the Group Annual Profit Test, the Group BIS Tier I Capital Ratio Test and the Regulatory Authority Test are met and even if the Bank were to declare and pay a dividend on securities ranking junior to the Bank's obligations under the Subordinated Support Undertaking (such as e.g. the common shares of the Bank) or a distribution were made on Parity Securities, the Company is under no obligation to declare and make such capital payments. The Trust Preferred Securities and the Company Class B Preferred Securities have no scheduled maturity date and will not be redeemable at any time at the option of the holders thereof. The Company Class B Preferred Securities are redeemable only at the option and in the full discretion of the Company, in whole but not in part, (i) on the Initial Redemption Date or on any Class B Payment Date thereafter, or (ii) at any time upon the occurrence of certain special redemption events, in each case provided that various tests set forth herein have been met. The Trust Preferred Securities have been assigned a rating of BBB- by Standard & Poor's on October 4, 2004 and a rating of Baa2 by Moody’s on November 2, 2004. 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 the relevant rating agency. The Trust Preferred Securities are initially evidenced by a single Temporary Global Trust Preferred Certificate, interests in which will be exchangeable for interests in one or more Permanent Global Trust Preferred Certificates not earlier than 40 days after (i) the Issue Date or, if later, (ii) the completion of the distribution of the Trust Preferred Securities and upon certification of non-U.S. beneficial ownership by or on behalf of the holders of such interests. The Global Certificates will be deposited with, and registered in the name of, Clearstream Frankfurt. Beneficial interests in the Trust Preferred Securities will be shown only on, and transfers thereof will be effected only through, book-entry records maintained by Clearstream Frankfurt. The Trust Preferred Securities have been admitted to listing on the official market (Amtlicher Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) on November 23, 2004. THESE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED FROM TIME TO TIME, OR ANY SUCCESSOR LEGISLATION (SECURITIES ACT) AND ARE BEING OFFERED AND SOLD ONLY OUTSIDE THE UNITED STATES OF AMERICA TO NON-U.S. PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT, AS AMENDED FROM TIME TO TIME, OR ANY SUCCESSOR LEGISLATION (REGULATION S). FOR A DESCRIPTION OF CERTAIN RESTRICTIONS ON TRANSFER OF THESE SECURITIES, SEE "SALE – SELLING RESTRICTIONS".

INVESTMENT IN THESE SECURITIES INVOLVES CERTAIN RISKS.

Among others, risks are that Class B Capital Payments as well as a redemption of the Company Class B Preferred Securities are subject to the fulfillment of various tests and even if all the tests are fulfilled are still in the discretion of the Company, that the right to receive Capital Payments is non-cumulative, i.e. Capital Payments not declared and paid will not be made up for or paid at a later time, and that the Trust Preferred Securities are not redeemable at the option of the holders thereof.

FOR A MORE DETAILED DESCRIPTION OF THE RISKS INVOLVED, PLEASE SEE THE "INVESTMENT CONSIDERATIONS" SECTION BEGINNING ON PAGE 23 FOR A DESCRIPTION OF THESE RISKS.

The only binding offering document is the German language Börsenzulassungsprospekt (listing prospectus) dated November 23, 2004.

DZ BANK AG

2 Table of Contents

Definitions ...... 4 Responsibility, Listing and General Information...... 11 Presentation of Financial Information ...... 13 Summary ...... 14 Investment Considerations/Risk Factors ...... 23 Use of Proceeds ...... 27 Development of the Regulatory Capital of the Bank and the DZ BANK Group...... 28 Bank Distributable Profits, Group Annual Profits and Group BIS Tier I Capital Ratio...... 29 DZ BANK Capital Funding Trust II...... 31 DZ BANK Capital Funding LLC II...... 33 Description of the Trust Preferred Securities...... 36 Description of the Company Securities...... 45 Description of the Subordinated Support Undertaking...... 52 Description of the Services Agreement...... 53 Description of the Terms of the Initial Debt Securities...... 54 General Information on the Bank ...... 56 Business ...... 62 Regulation...... 66 Taxation ...... 74 Sale...... 78 Business Development and Outlook...... 80 Annex A – Subordinated Support Undertaking...... 83 Index to Financial Statements...... F-1

3 Definitions

Additional Amounts means any additional amounts payable by the Company pursuant to the terms of the Company Class B Preferred Securities and by the Trust pursuant to the terms of the Trust Preferred Securities as a result of deduction or withholding on payments thereon. Additional Company Class B Preferred Securities means additional Company Class B preferred securities with an aggregate denomination corresponding to the aggregate denomination of the Additional Debt Securities. Upon the issuance of any Additional Company Class B Preferred Securities, the terms set forth herein which apply or refer to the Company Class B Preferred Securities shall apply or refer in the same manner to the Additional Company Class B Preferred Securities. Additional Debt Securities means any subordinated notes due November 22, 2034 issued by the Bank in excess of, and on the same terms as, the Initial Debt Securities or following the issuance of Substitute Debt Securities any subordinated notes issued by the issuer of such Substitute Debt Securities in excess of, and on the same terms as, the Substitute Debt Securities. Upon the issuance of any Additional Debt Securities, the terms set forth herein which apply or refer to the Initial Debt Securities shall apply or refer in the same manner to such Additional Debt Securities. Additional Interest Amounts means any additional amounts payable by the obligor of the Debt Securities pursuant to the terms of the Debt Securities as a result of deduction or withholding on payments thereon. Additional Trust Preferred Securities means additional trust preferred securities with an aggregate denomination corresponding to the aggregate denomination of the Additional Debt Securities. Upon the issuance of any Additional Trust Preferred Securities, the terms set forth herein which apply or refer to the Trust Preferred Securities shall apply or refer in the same manner to the Additional Trust Preferred Securities. Administrative Action means any judicial decision, official administrative pronouncement, published or private ruling, regulatory procedure, notice or announcement (including any notice or announcement of intent to adopt such procedures or regulations) by any legislative body, court, governmental authority or regulatory body. Aggregated Financial Information means the comparative financial data as of and for the annual periods ended prior to December 31, 2001 which is presented on an aggregated basis to reflect the relevant consolidated financial information of the Predecessor Banks added up from the audited consolidated financial information of (i) the Predecessor Banks as of and for the annual period ended December 31, 2000 and (ii) DG BANK and the predecessor banks of GZ-Bank, GZB-Bank Genossenschaftliche Zentralbank AG Stuttgart and SGZ-Bank Südwestdeutsche Genossenschafts-Zentralbank AG, as of and for the annual periods ended prior to December 31, 2000. BaFin means the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). Bank means DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, a stock corporation incorporated under the laws of the Federal Republic of Germany. Bank Affiliate means any subsidiary of the Bank according to § 290 of the German Commercial Code or other applicable German law then in effect. Bank Distributable Profits for any financial year of the Bank means the balance sheet profit (Bilanzgewinn) as of the end of such financial year, as shown in the audited and determined (festgestellt) unconsolidated financial statements of the Bank as of the end of such financial year. Such balance sheet profit includes the annual surplus or loss (Jahresüberschuss/Jahresfehlbetrag), plus any profit carried forward from previous years, minus any loss carried forward from previous years, plus transfers made by the Bank, in its discretion, from capital reserves and surplus reserves, minus allocations made by the Bank, in its discretion, to surplus reserves, all as determined in accordance with the provisions of the German Stock Corporation Act and German GAAP as described in the German Commercial Code and other applicable German law then in effect. Bank Dividend Payment for any financial year means the aggregate dividend payment paid to the common shareholders of the Bank in relation to such financial year. Bank Dividend Payment Test means a test to see whether the Bank has paid a Bank Dividend Payment on or prior to a Class B Payment Date from the Bank Distributable Profits for the most recent financial year for which the Bank's shareholders' meeting (Hauptversammlung) has resolved on the appropriation of profits. Basel Committee means the Basel Committee on Banking Supervision. BIS means the Bank for International Settlements. Board of Directors means the board of directors of the Company.

4 Business Day means a day on which TARGET (the Trans-European Automated Real-time Gross settlement Express Transfer System) is operating credit or transfer instructions in respect of payments in euro and banks are open in Frankfurt am Main, Federal Republic of Germany. Calculation Agent means Deutsche Bank Aktiengesellschaft, Frankfurt am Main, Federal Republic of Germany, acting as calculation agent (i) of the Company in respect of the Company Class B Preferred Securities in accordance with the LLC Agreement, and (ii) of the Bank in respect of the Debt Securities in accordance with the terms thereof. Capital Payments means, with respect to the Trust Preferred Securities, the Trust Capital Payments and, with regard to the Company Class B Preferred Securities, the Class B Capital Payments. Class B Agio means an agio of € 980 per Company Class B Preferred Security. Class B Capital Payments means periodic distributions to holders of the Company Class B Preferred Securities declared and paid in accordance with the LLC Agreement. Class B Denomination means the denomination of € 1,000 per Company Class B Preferred Security. Class B Equity Component means the amount corresponding to the Liquidation Ratio multiplied by the Net Assets and divided by the aggregate number of all outstanding Company Class B Preferred Securities. Class B LPA means the liquidation preference amount of € 20 per Company Class B Preferred Security. Class B Payment Date means February 22, May 22, August 22 and November 22 of each year, commencing on February 22, 2005. If any Class B Payment Date would otherwise fall on a day which is not a Business Day, it shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event the Class B Payment Date shall be the immediately preceding Business Day. Class B Payment Period means, for any Class B Capital Payments payable on a Class B Payment Date, the period from and including the immediately preceding Class B Payment Date (or the Issue Date, in the case of the first Class B Capital Payment) to but excluding the relevant Class B Payment Date. Clearstream Frankfurt means Clearstream Banking AG, Frankfurt am Main, Federal Republic of Germany. Company means DZ BANK Capital Funding LLC II, a limited liability company formed under the laws of the State of Delaware, United States of America, or any successor entity. Company Class A Preferred Security means the noncumulative Class A preferred security of the Company representing an ownership interest in the Company. Company Class B Preferred Securities means the € 400,001,000 noncumulative Class B preferred securities of the Company representing an ownership interest in the Company. Unless the context clearly requires otherwise, references to the Company Class B Preferred Securities include Additional Company Class B Preferred Securities. Company Common Security means the voting common security of the Company representing an ownership interest in the Company. Company Operating Profits means, for any Class B Payment Period, the excess of the amounts payable (whether or not paid) to the Company on the (i) Debt Securities or (ii) after the Maturity Date, Permitted Investments that the Company may then hold in accordance with the LLC Agreement during such Class B Payment Period over any operating expenses of the Company not paid or reimbursed by the Bank during such Class B Payment Period. Company Operating Profit Test means a test to see whether there are Company Operating Profits for the Class B Payment Period ending on the day immediately preceding a Class B Payment Date at least equal to the amount of the Class B Capital Payments to be paid. Company Securities means, collectively, the Company Common Security, the Company Class A Preferred Security and the Company Class B Preferred Securities. Debt Redemption Date means any date established for redemption pursuant to a notice in accordance with the terms and conditions of the Initial Debt Securities prior to the Maturity Date. Debt Securities means the Initial Debt Securities and the Substitute Debt Securities. Unless the context clearly requires otherwise, references to Debt Securities include Additional Debt Securities. Defined Retained Earnings in relation to any financial year of the Bank means (i) the Group Annual Profit minus (ii) the Bank Dividend Payment paid during such financial year to the common shareholders of the Bank in relation to the previous financial year and minus (iii) the dividends paid to minority shareholders of the fully consolidated subsidiaries of the Bank during such financial year as published in the statement of structure and movement in equity (Eigenkapitalspiegel) in the audited and approved (gebilligt) consolidated financial statements of the Group for such financial year.

5 Delaware Trustee means Deutsche Bank Trust Company Delaware or any successor entity in a merger, consolidation or amalgamation, in its capacity as Delaware trustee of the Trust in accordance with the Trust Agreement. DG BANK means DG BANK Deutsche Genossenschaftsbank AG, Frankfurt am Main, Federal Republic of Germany. DZ BANK means the Bank. DZ BANK Group means the Bank and its consolidated subsidiaries in accordance with § 290 of the German Commercial Code or other applicable German law then in effect. EEA means Agreement on the European Economic Area. EU means countries that are member states of the European Union. FSMA means the Financial Services and Markets Act 2000 (United Kingdom), as amended from time to time, or any successor legislation. German Banking Act means the German Banking Act (Gesetz über das Kreditwesen), as amended from time to time, or any successor legislation. German Civil Code means the German Civil Code (Bürgerliches Gesetzbuch), as amended from time to time, or any successor legislation. German Commercial Code means the German Commercial Code (Handelsgesetzbuch), as amended from time to time, or any successor legislation. German Disbursing Agent means a German bank or a German financial services institution, each as defined in the German Banking Act (including a German branch of a German or foreign bank or a German or foreign financial services institution but excluding a foreign branch of a German bank or a German financial services institution), at which the Trust Preferred Securities are kept in a custodial account maintained by a holder. German GAAP means German generally accepted accounting principles. German Stock Corporation Act means the German Stock Corporation Act (Aktiengesetz), as amended from time to time, or any successor legislation. Global Certificates means the Temporary Global Trust Preferred Certificate and one or more Permanent Global Trust Preferred Certificate(s). Group means the Bank and its consolidated subsidiaries in accordance with § 290 of the German Commercial Code or other applicable German law then in effect. Group Annual Profits for any financial year of the Bank means the net income (Jahresüberschuss/Jahresfehlbetrag) as of the end of such financial year, as shown in the audited and approved (gebilligt) consolidated financial statements of the Group as of the end of such financial year as determined in accordance with the provisions of the German Stock Corporation Act and German GAAP as described in the German Commercial Code and other applicable German law then in effect. Such net income is before deduction of minority interests (Gewinnanteile anderer Gesellschafter). Group Annual Profit Test means a test to see whether there are Group Annual Profits for the most recent financial year of the Bank for which the Bank's shareholders' meeting (Hauptversammlung) has resolved on the appropriation of profits at least equal to the sum of (i) the amount of Class B Capital Payments payable and already paid in such financial year, (ii) capital payments or dividends or other distributions or payments on Parity Securities already paid in such financial year or payable on the same date, in each case on the basis of such Group Annual Profits and (iii) the Bank Dividend Payment for such financial year. Group BIS Tier I Capital Ratio means the Tier I capital ratio for the Bank and its subsidiaries consolidated for bank regulatory purposes under the applicable rules of BIS. Group BIS Tier I Capital Ratio Test means a test to see whether the Group BIS Tier I Capital Ratio as of the end of the most recent financial year of the Bank for which audited and approved (gebilligt) consolidated financial statements are available and as published in the annual report of the Group equals or exceeds 5%. GZ-Bank means GZ-Bank AG Frankfurt/Stuttgart. Independent Enforcement Director means the additional member of the Board of Directors which may be appointed by a majority of the holders of the Company Class B Preferred Securities if (i) the Company fails to pay Class B Capital Payments (plus any Additional Amounts thereon, if any) on the Company Class B Preferred Securities at the Stated Rate for four consecutive Class B Payment Periods even though all requirements for capital payments have been met and capital payments have been declared, or (ii) a holder of the Company Class B Preferred Securities has notified the Company that the Bank has failed to perform any obligation under the Subordinated Support Undertaking and such failure continues for 60 days after such notice is given. Initial Debt Redemption Date means November 22, 2011.

6 Initial Debt Securities means the € 400,003,000 subordinated notes issued by the Bank and due November 22, 2034. Initial Redemption Date means November 22, 2011. Interest Payment Date means (in relation to the Initial Debt Securities) February 22, May 22, August 22 and November 22 of each year, commencing on February 22, 2005. If any Interest Payment Date would otherwise fall on a day which is not a Business Day, it shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event the Interest Payment Date shall be the immediately preceding Business Day. Interest Period means each period from and including the immediately preceding Interest Payment Date (or the Issue Date, in the case of the first Interest Payment Date) to but excluding the relevant Interest Payment Date. Internal Revenue Code means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor legislation. Investment Company Act means the U.S. Investment Company Act of 1940, as amended from time to time, or any successor legislation. Investment Company Act Event means that the Bank will have requested and received an opinion of a nationally recognized law firm in the United States of America experienced in such matters to the effect that there is more than an insubstantial risk that the Company or the Trust is or will be considered an "investment company" within the meaning of the Investment Company Act as a result of any judicial decision, pronouncement or interpretation (irrespective of the manner made known), the adoption or amendment of any law, rule or regulation, or any notice or announcement (including any notice or announcement of intent to adopt such law, rule or regulation) by any United States of America legislative body, court, governmental agency, or regulatory authority, in each case after the date of the issuance of the Company Class B Preferred Securities and the Trust Preferred Securities. IRS means the United States Internal Revenue Service. Issue Date means November 22, 2004, the date of initial issuance of the Company Class B Preferred Securities or the Trust Preferred Securities or the Initial Debt Securities, as the case may be. KWG means the German Banking Act, as defined above. Lead Manager means DZ BANK. Liquidation Amount means the sum of (i) the Class B LPA, plus (ii) accrued and unpaid Class B Capital Payments in respect of the then current Class B Payment Period to but excluding the date of liquidation and Additional Amounts, if any, plus (iii) the Class B Equity Component, plus (iv) any assets of the Company remaining after distributions have been made under the Company Class A Preferred Securities, provided that the Company receives amounts under the Subordinated Support Undertaking given by the Bank to the Company corresponding to the sum of the amounts referred to under (i) to (iii) and provided further that the sum of (i) and (iii) shall not exceed the Class B Denomination per Company Class B Preferred Security, i.e. € 1,000. Liquidation Ratio means the (i) aggregate Class B Agio of all outstanding Company Class B Preferred Securities divided by (ii) the sum of the aggregate Class B Agio of all outstanding Company Class B Preferred Securities, the subscribed capital (gezeichnetes Kapital), the capital reserves and the surplus reserves of the Bank as determined in the unconsolidated liquidation financial state- ments (Liquidationseröffnungsbilanz) of the Bank set up by the Bank (which may be unaudited) in connection with the liquidation, dissolution or winding-up of the Bank. LLC Act means the Delaware Limited Liability Company Act, as amended from time to time, or any successor legislation. LLC Agreement means the Amended and Restated Limited Liability Company Agreement of DZ BANK Capital Funding LLC II, dated as of November 22, 2004 entered into between the Bank and the Company. Margin means 1.60 per cent. Maturity Date means November 22, 2034, the scheduled maturity date of the Initial Debt Securities. Merger means the merger of GZ-Bank into DG BANK which was registered on September 18, 2001 in the commercial register of DG BANK (which was simultaneously with the merger renamed to DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, the current name of the Bank). Moody’s means Moody’s Investors Service, Inc. Net Assets means the aggregate amount available for distribution in the liquidation, dissolution or the winding-up of the Bank after all creditors senior to the holders of common shares of the Bank have been satisfied. Non-U.S. Holder means a person other than a U.S. Person (as such term is defined in Regulation S). Offering means the offering by DZ BANK Capital Funding Trust II of up to € 500,000,000 registered noncumulative Trust Preferred Securities.

7 Offering Price means the initial offering price of € 1,000 per Trust Preferred Security. Parity Securities means (i) each class of the most senior ranking preference shares of the Bank, if any, and (ii) preference shares or any other instrument of any Bank Affiliate the distributions on which are linked to (x) a dividend payment by the Bank, or (y) a balance sheet profit (Bilanzgewinn) or an annual surplus (Jahresüberschuss) test at the level of the Bank on an unconsolidated basis or at the level of the Group on a consolidated basis, or (z) a capital adequacy test at the level of the Bank on an unconsoli- dated basis or at the level of the Group on a consolidated basis. Paying Agents means the Principal Paying Agent or any successor and such other paying agents in relation to the Trust Preferred Securities as may be appointed from time to time. Payment Date means (in relation to the Company Securities and the Trust Securities) February 22, May 22, August 22 and November 22 of each year, commencing on February 22, 2005. If any Payment Date would otherwise fall on a day which is not a Business Day, it shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event the Payment Date shall be the immediately preceding Business Day. Payment Period means each period from and including the immediately preceding Payment Date (or the Issue Date, in the case of the first Capital Payment) up to but excluding the relevant Payment Date. Permanent Global Trust Preferred Certificate means one or more single global certificate(s) representing the Trust Preferred Securities for which the Temporary Global Trust Preferred Certificate will be exchanged for after the Restricted Period has ended. Permitted Investments means any of (i) debt obligations issued by a Qualified Issuer subject to a guarantee or support under- taking by the Bank which guarantee or support undertaking ranks at least pari passu with the Initial Debt Securities, provided that such guarantee or support undertaking does not affect the quality of the Trust Preferred Securities or the Company Class B Preferred Securities to be treated as core capital or Tier I regulatory capital (aufsichtsrechtliches Kernkapital) on a consolidated basis for the Bank or (ii) in the event such an investment is not available, in bonds or notes issued by the Federal Republic of Germany or another member state of the European Economic and Monetary Union. Predecessor Banks means DG BANK and GZ-Bank. Principal Paying Agent means Deutsche Bank Aktiengesellschaft, Frankfurt am Main, Federal Republic of Germany, acting as principal paying agent in relation to the Trust Preferred Securities. Property Account means a segregated non-interest and non-commission bearing trust account in the name of, and under the exclusive control of, the Property Trustee for the benefit of the holders of the Trust Securities to hold all payments in respect of the Company Class B Preferred Securities. Property Trustee means Deutsche Bank Trust Company Americas, a New York banking corporation, or any successor entity in a merger, consolidation or amalgamation, in its capacity as property trustee of the Trust in accordance with the Trust Agreement. Qualified Issuer means a subsidiary that is consolidated with the Bank for German bank regulatory purposes and of which more than fifty percent (50%) of the outstanding voting stock or other equity interest entitled ordinarily to vote in the election of the directors or other governing body (however designated) and more than fifty percent (50%) of the outstanding capital stock or other equity interest is, at the time, beneficially owned or controlled directly or indirectly by the Bank. Qualified Subsidiary means a subsidiary of the Bank meeting the definition of "a company controlled by its parent company" as defined in Rule 3a-5 under the Investment Company Act. Rate Determination Date is the day falling two Business Days prior to the commencement of the relevant Interest Period (in relation to the Debt Securities) or the relevant Payment Period (in relation to the Company Securities and the Trust Securities) for which the Calculation Agent is to determine the Reference Rate. Redemption Amount means the redemption amount per Company Class B Preferred Security equal to the Class B Denomination, plus accrued and unpaid Class B Capital Payments for the then current Class B Payment Period up to, but excluding, the Redemption Date, plus Additional Amounts, if any. Redemption Date means the date of redemption of the Company Class B Preferred Securities. Redemption Notice means the notice of any redemption of the Company Class B Preferred Securities given by the Board of Directors on behalf of the Company and in accordance with the LLC Agreement. Reference Banks means four banks of the EURIBOR panel chosen by the Calculation Agent on the relevant Rate Determination Date whose offered rates were used to determine the Reference Rate when such rate last appeared on the Screen Page. Reference Rate means the three-month EURIBOR rate expressed as a rate per annum. Registrar means Deutsche Bank Aktiengesellschaft, Frankfurt am Main, Federal Republic of Germany, in its capacity as registrar for the Company Securities under the LLC Agreement. Regular Trustee means the Trustees who are employees or officers of, or who are affiliated with, the Bank or a Qualified Subsidiary.

8 Regulation S means Regulation S under the Securities Act, as amended from time to time, or any successor legislation. Regulatory Authority Test means a test to see that there is in effect no order of BaFin or other relevant regulatory authority pursuant to the German Banking Act or any other relevant regulatory provision prohibiting the Bank from making distributions (including to the holders of Parity Securities). Regulatory Event means that the Bank is notified by a relevant regulatory authority that, as a result of the occurrence of any amendment to, or change (including any change that has been adopted but not yet become effective) in, the applicable banking laws of the Federal Republic of Germany (or any rules, regulations or interpretations thereunder, including rulings of the relevant banking authorities) or the guidelines of the Basel Committee for Banking Supervision after the date of the issuance of the Company Class B Preferred Securities and the Trust Preferred Securities, the Bank is not, or will not be, allowed to treat the Company Class B Preferred Securities or the Trust Preferred Securities as core capital or Tier I regulatory capital (aufsichtsrechtliches Kernkapital) for capital adequacy purposes on a consolidated basis. Relevant Jurisdiction means the Federal Republic of Germany, the United States of America, any other jurisdiction of residence of the obligor of the Trust Preferred Securities or the Company Class B Preferred Securities, or the jurisdiction of residence of any obligor of the Debt Securities (or any jurisdiction from which payments are made). Repayment Claim means the claim for repayment of the Initial Debt Securities. Restricted Period means the period of 40 consecutive days beginning on and including the first day after (i) the Issue Date or, if later, (ii) the completion of the distribution of the Trust Preferred Securities. Screen Page means page 248 of the Moneyline Telerate (or such other screen page of Moneyline Telerate or such other information service that is designated as the successor to Moneyline Telerate Page 248 for the purpose of displaying the Reference Rate). Securities Act means the U.S. Securities Act of 1933, as amended from time to time, or any successor legislation. Servicer means the Servicer as defined in the Services Agreement. Services Agreement means the services agreement dated as of November 22, 2004 among the Bank, the Company, the Trust and the Servicer. Special Redemption Event means (i) a Regulatory Event, (ii) a Tax Event other than solely with respect to the Trust or (iii) an Investment Company Act Event other than solely with respect to the Trust. Standard & Poor's means Standard & Poor's Rating Services, a division of the McGraw Hill Companies, Inc. Stated Rate means the Reference Rate in effect at the relevant time plus the Margin per annum. Subordinated Support Undertaking means the subordinated support undertaking dated as of November 22, 2004 between the Bank and the Company. Subscription Period means the period from (and including) October 4, 2004 to (and including) November 11, 2004 during which period the Trust Preferred Securities were offered at the Offering Price. Substitute Debt Securities means subordinated notes issued by the Bank, a Qualified Issuer or branch of the Bank upon terms identical to those of the Initial Debt Securities, provided, that (i) such substitution or replacement does not result in a Special Redemption Event, (ii) the Bank, unless it itself is again the obligor, provides a guarantee or support undertaking with respect to the obligations of such substitute obligor, which guarantee or support undertaking ranks at least pari passu with the Initial Debt Securities, provided that such guarantee or support undertaking does not affect the quality of the Trust Preferred Securities or the Company Class B Preferred Securities to be treated as core capital or Tier I regulatory capital (aufsichtsrechtliches Kernkapital) on a consolidated basis for the Bank and (iii) the Bank has obtained any required regulatory approval. Successor Company Securities means other securities issued by a successor entity of the Company having substantially the same terms as the Company Class B Preferred Securities. Successor Trust Securities means securities having substantially the same terms as the Trust Preferred Securities and ranking the same as the Trust Preferred Securities with respect to Trust Capital Payments, distributions and rights upon liquidation, redemption or otherwise which substitute the Trust Preferred Securities. Tax Event means the receipt by the Bank of an opinion of a nationally recognized law firm or other tax adviser in a Relevant Jurisdiction, experienced in such matters, to the effect that, as a result of (i) any amendment to, or clarification of, or change (including any change that has been adopted but has not yet become effective) in, the laws or treaties (or any regulations promulgated thereunder) of the Relevant Jurisdiction or any political subdivision or taxing authority thereof or therein affecting taxation, (ii) any Administrative Action, or (iii) any amendment to, clarification of, or change in the official position or the inter- pretation of such Administrative Action or any interpretation or pronouncement that provides for a position with respect to such Administrative Action that differs from the theretofore generally accepted position, in each case, by any legislative body, court, governmental authority or regulatory body, irrespective of the manner in which such amendment, clarification or change is made known, which amendment, clarification or change is effective, or which pronouncement or decision is announced, after the date

9 of issuance of the Company Class B Preferred Securities and the Trust Preferred Securities, there is more than an insubstantial risk that (A) the Trust or the Company is or will be subject to more than a de minimis amount of taxes, duties or other governmental charges, or (B) the Trust, the Company or an obligor of the Debt Securities would be obligated to pay Additional Amounts or Additional Interest Amounts or (C) the Bank or any other obligor of the Debt Securities (x) may not for purposes of determining its taxable income in the context of determining German corporate income tax (Körperschaftsteuer) in any year, deduct in full the interest payments on the Debt Securities or (y) would, other than in cases where Class B Capital Payments may not be declared by the Company, be subject to tax on income of the Company under the rules of the German Foreign Taxation Act (Außensteuergesetz). Temporary Global Trust Preferred Certificate means the single global certificate representing the Trust Preferred Securities which will be exchangeable for the Permanent Global Trust Preferred Certificate(s) after the Restricted Period has ended. Transfer Agent means Deutsche Bank Aktiengesellschaft, Frankfurt am Main, Federal Republic of Germany, in its capacity as transfer agent in relation to the Company Securities under the LLC Agreement. Treasury Regulations means the income tax regulations, including temporary and proposed regulations, promulgated under the Internal Revenue Code by the United States Treasury Department, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). Trust means DZ BANK Capital Funding Trust II, a statutory trust formed under the laws of the State of Delaware, United States of America, or any successor entity. Trust Act means the Delaware Statutory Trust Act, as amended from time to time, or any successor legislation. Trust Agreement means the Amended and Restated Trust Agreement of DZ BANK Capital Funding Trust II dated as of November 22, 2004 between, inter alia, the Trustees, the Bank and DZ BANK Capital Funding LLC II. Trust Capital Payments means periodic distributions paid in accordance with the Trust Agreement to holders of the Trust Preferred Securities. Trust Common Security means the noncumulative trust common security issued by the Trust. Trust Denomination means the denomination of € 1,000 per Trust Security. Trustees means the trustees of the Trust appointed in accordance with the Trust Agreement or any successor entity in a merger, consolidation, replacement or amalgamation, in such capacity. Trust Enforcement Event means an enforcement event under the Trust Agreement with respect to the Trust Preferred Securities, which is the occurrence, at any time, of (i) the non-payment of Capital Payments (plus any Additional Amounts thereon, if any) on the Trust Preferred Securities or the Company Class B Preferred Securities at the Stated Rate for four consecutive Payment Periods even though all requirements for capital payments have been met and capital payments have been declared by the Company or (ii) a default by the Bank in respect of any of its obligations under the Subordinated Support Undertaking. Trust Payment Date means February 22, May 22, August 22 and November 22 of each year, commencing on February 22, 2005. If any Trust Payment Date would otherwise fall on a day which is not a Business Day, it shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event the Trust Payment Date shall be the immediately preceding Business Day. Trust Preferred Securities means the € 400,000,000 (corresponding to a number of 400,000) registered noncumulative Trust Preferred Securities issued by the Trust. Unless the context clearly requires otherwise, references to the Trust Preferred Securities shall include Additional Trust Preferred Securities. Trust Securities means the Trust Common Security and the Trust Preferred Securities. Trust Special Redemption Event means (i) a Tax Event solely with respect to the Trust, or (ii) an Investment Company Act Event solely with respect to the Trust. United States or U.S. means United States of America. U.S. Person has the meaning given to such term in Regulation S. Withholding Taxes means any present or future taxes, duties or governmental charges of any nature whatsoever imposed, levied, deducted, withheld or collected by or on behalf of any Relevant Jurisdiction or by or on behalf of any political subdivision or authority therein or thereof having the power to tax, whereby, for the avoidance of doubt, German advanced interest income tax (Zinsabschlagsteuer) and the solidarity surcharge thereon as in effect at the time of the issue of the Initial Debt Securities, the Company Class B Preferred Securities or the Trust Preferred Securities or a similar tax do not qualify as Withholding Taxes.

10 Responsibility, Listing and General Information

Subject of this Offering Circular The subject of this Offering Circular are the € 400,000,000 (corresponding to a number of 400,000) registered noncumulative Trust Preferred Securities issued by the Trust pursuant to the provisions of the Trust Agreement.

Responsibility for the Contents of this Offering Circular The Trust, the Company, the Bank and the Lead Manager assume responsibility under German law in accordance with Sec. 44 et seq. of the German Stock Exchange Act (Börsengesetz) and hereby confirm that, to the best of their knowledge, the information contained in this Offering Circular is correct and no material information has been omitted. None of the Trust, the Company, the Bank and the Lead Manager has permitted any person to make any disclosures or represen- tations that are not otherwise contained in this Offering Circular, or in other documents agreed upon in connection with the issue of the Trust Preferred Securities or in other disclosures made by either of them or in publicly available information, and that do not correspond to the content of any such documents, disclosures or information. Where any such disclosures or representations were made, the Trust, the Company, the Bank and the Lead Manager do not accept any responsibility. The delivery of the Offering Circular or the offer, sale or delivery of the Trust Preferred Securities does not mean, under any circum- stances, that the information contained in the Offering Circular will continue to apply after the date of this Offering Circular or that the financial condition of the Trust, the Company or the Bank has not deteriorated since such date.

Listing The Trust Preferred Securities have been admitted to listing on the official market (Amtlicher Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) on November 23, 2004 and quotation is expected to commence on November 26, 2004. Any notices to be made in accordance with the terms and conditions of the Trust Preferred Securities will be published in a German newspaper designated by the Frankfurt Stock Exchange (which is expected to be the Börsen-Zeitung or the Financial Times Deutschland). The Trust will maintain a Principal Paying Agent and the Company will maintain a Transfer Agent and a Registrar in relation to the Company Securities under the LLC Agreement in Frankfurt am Main, Federal Republic of Germany, for as long as any of the Trust Preferred Securities are listed on the Frankfurt Stock Exchange. The Trust and the Company reserves the right to vary such appoint- ment in accordance with the terms and conditions of the Trust Preferred Securities and the Company will publish notice of such change of appointment in a German newspaper (which is expected to be the Börsen-Zeitung or the Financial Times Deutschland).

Clearing Information The Trust Preferred Securities have been accepted for clearance through the facilities of Clearstream Frankfurt under the following codes: ISIN: DE000A0DCXA0 German Securities Code (Wertpapier-Kennnummer): A0DCXA Common Code: 020140470

Principal Paying Agent, Transfer Agent and Registrar Deutsche Bank Aktiengesellschaft, Grosse Gallusstraße 10-14, 60272 Frankfurt am Main, Federal Republic of Germany, acts as Principal Paying Agent, as Transfer Agent and as Registrar.

Availability of Documents Copies of the LLC Agreement, the Services Agreement, the Trust Agreement and the Subordinated Support Undertaking may be obtained free of charge at the office of the Transfer Agent and, for so long as the Trust Preferred Securities are listed on the Frankfurt Stock Exchange and such exchange so requires, at the offices of the Principal Paying Agent during normal business hours. In addition, for so long as the Trust Preferred Securities are listed on the Frankfurt Stock Exchange and such exchange so requires, the most recently published, audited and approved (gebilligt) or determined (festgestellt), as the case may be, consolidated and unconsolidated financial statements and the unaudited consolidated interim financial information of the Bank and the DZ BANK

11 Group and the audited unconsolidated financial statements of the Company as well as the unaudited unconsolidated financial statements of the Trust will be available free of charge at the offices of the Principal Paying Agent during normal business hours.

Disclosure Regarding Forward-looking Statements The statements included herein regarding future financial performance and results and other statements that are not historical facts are forward-looking statements. The words "believes", "expects", "predicts", "estimates" and similar expressions are also intended to identify forward-looking statements. Such statements are made on the basis of assumptions which, although reasonable at this time, may prove to be erroneous. The risks and uncertainties which the Trust, the Company and the Bank face with respect to their future development and the factors that might influence the correctness of such forward-looking statements are considered, as a general rule, throughout this Offering Circular. Actual results may, however, differ significantly from those contemplated in the forward-looking statements contained herein if one or more of any such risks and uncertainties materialize or the facts, upon which these forward-looking statements have been based, prove to be incorrect.

Exchange Rate and Currency Information In this Offering Circular, references to "euro", "EUR", and "€" are references to the common currency of the member states of the European Economic and Monetary Union, which as of January 1, 1999 replaced the respective national currencies of the relevant countries. References to "Deutsche Mark", or "DM" are references to the former national currency of the Federal Republic of Germany prior to the introduction of the euro. References to "US$", "USD" and "US dollars" are references to the dollar of the United States of America. The Bank publishes its financial statements in euro.

12 Presentation of Financial Information

After the Merger of GZ-Bank into DG BANK (together with GZ-Bank, Predecessor Banks) with effect from September 18, 2001, DG BANK was renamed DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main (the current name of the Bank) simultaneously with the Merger. The financial information for the Bank and the DZ BANK Group as of and for the annual periods ended on December 31, 2001 and December 31, 2002 is the first audited financial information of the Bank and the DZ BANK Group for financial reporting purposes and give effect to the Merger which was registered with the relevant commercial registers of the Predecessor Banks on September 18, 2001. The Bank's consolidated and unconsolidated financial information as of and for the annual periods ended on December 31, 2002 and December 31, 2003 has been prepared in accordance with German GAAP and the financial information as of and for the annual periods ended (i) December 31, 2002 has been audited by Ernst & Young Deutsche Allgemeine Treuhand AG, Wirtschaftsprüfungs- gesellschaft, Eschersheimer Landstraße 14, 60322 Frankfurt am Main, Federal Republic of Germany, and Deloitte & Touche GmbH, Wirtschaftsprüfungsgesellschaft, Franklinstraße 50, 60486 Frankfurt am Main, Federal Republic of Germany and (ii) December 31, 2003 has been audited by Ernst & Young AG, Wirtschaftsprüfungsgesellschaft, Eschersheimer Landstraße 14, 60322 Frankfurt am Main, Federal Republic of Germany, and Deloitte & Touche GmbH, Wirtschaftsprüfungsgesellschaft, Franklinstraße 50, 60486 Frankfurt am Main, Federal Republic of Germany. The Bank's consolidated financial information as of and for the six months period ended June 30, 2004 has been prepared in accordance with German GAAP but has not been audited. All financial information presented in this Offering Circular is based on the Bank's audited consolidated and unconsolidated financial statements as of and for the annual periods ended on December 31, 2002 and December 31, 2003 and the Bank's unaudited consolidated financial information as of and for the six months period ended on June 30, 2004. The comparative financial data as of and for the annual periods ended prior to December 31, 2001 is presented on an aggregated basis as it reflects the relevant consolidated financial information of the Predecessor Banks added up from the audited consolidated financial information of (i) the Predecessor Banks as of and for the annual period ended December 31, 2000 and (ii) DG BANK and the predecessor banks of GZ-Bank, i.e. GZB-Bank Genossenschaftliche Zentralbank AG Stuttgart and SGZ-Bank Südwestdeutsche Genossenschafts-Zentralbank AG, as of and for the annual periods ended prior to December 31, 2000 (Aggregated Financial Information). The Aggregated Financial Information does not purport to be indicative of what the combined financial position or results or the Bank Distributable Profits or the Group Annual Profits would have been had the Merger been in effect at the beginning of the financial years to which such financial information relates or of what the Bank's Distributable Profits might be in the future.

13 Summary

This section contains a summary of the terms of the Trust Preferred Securities and the Company Class B Preferred Securities, as well as information relating to the Offering. For a more complete description of the terms of the Trust Preferred Securities, the Company Class B Preferred Securities, the Subordinated Support Undertaking and the Initial Debt Securities, see "Description of the Trust Preferred Securities", "Description of the Company Securities", "Description of the Subordinated Support Undertaking" and "Description of the Terms of the Initial Debt Securities" as well as "Bank Distributable Profits, Group Annual Profits and Group BIS Tier I Capital Ratio". For a description of the Trust, the Company and the Bank, see "DZ BANK Capital Funding Trust II", "DZ BANK Capital Funding LLC II", "General Information on the Bank" and "Business", respectively. The following summary is qualified in its entirety by the detailed information and financial data presented elsewhere in this Offering Circular, including the financial information contained in this Offering Circular.

Summary of the Offering

Securities Offered The Trust has offered up to € 500,000,000 Trust Preferred Securities during the Subscription Period.

Securities Issued The Trust has issued € 400,000,000 Trust Preferred Securities on November 22, 2004.

The Trust DZ BANK Capital Funding Trust II is a statutory trust consolidated with the Bank which was formed under the laws of the State of Delaware, United States of America. It exists solely for the purposes of (i) issuing the registered noncumulative Trust Preferred Securities, Additional Trust Preferred Securities (if any), and one noncumulative Trust Common Security, (ii) investing the net proceeds of the sale of these securities in noncumulative Company Class B Preferred Securities issued by the Company and (iii) engaging in any activities necessary or incidental thereto. The Trust Common Security is owned by the Bank. The Trust Common Security may be transferred to a Bank Affiliate.

The Company DZ BANK Capital Funding LLC II, a limited liability company formed under the laws of the State of Delaware, United States of America, is a wholly-owned subsidiary of the Bank consolidated with the Bank. The Company has issued the Company Class B Preferred Securities which have been acquired by the Trust. In addition, the Company has issued one voting Company Common Security and one noncumulative Company Class A Preferred Security. The Company Securities represent all of the ownership interests in the Company. The Company Common Security and the Company Class A Preferred Security are owned by the Bank. The Company Common Security is freely transferable. The Company Class A Preferred Security may be transferred to a Bank Affiliate. The sole assets of the Company are the Initial Debt Securities and/or the Substitute Debt Securities. The income received by the Company from the Debt Securities will be available for distribution to the holders of the Company Class B Preferred Securities, the Company Class A Preferred Security and the Company Common Security.

Pass Through The Class B Capital Payments and redemption payments under the Company Class B Preferred Securities will be passed through to holders of the Trust Preferred Securities in the form of Trust Capital Payments and redemption payments under the Trust Preferred Securities.

Use of Proceeds The net proceeds from the sale of the Trust Securities have been invested by the Trust in the Company Class B Preferred Securities. The Company has used the funds from the sale of the Company Class B Preferred Securities, together with funds contributed for the Company Class A Preferred Security and the Company Common Security, to make an investment in the Initial Debt Securities. The Bank intends to use the net proceeds from the sale of the Initial Debt Securities for general corporate purposes of the DZ BANK Group and, for purposes of measuring regulatory capital adequacy, expects to treat the Company Class B Preferred Securities as Tier I regulatory capital (aufsichtsrechtliches Kernkapital) on a consolidated basis and the purchase price received from the Company for the Initial Debt Securities as supplementary regulatory capital on an unconsolidated basis. For a discussion of regulatory capital and the measurement of its adequacy, see "Regulation".

Subordinated Support On the Issue Date, the Bank and the Company entered into the Subordinated Support Undertaking Undertaking upon the terms set forth in Annex A hereto for the benefit of the holders of the Company Class B Preferred Securities under which the Bank undertakes to ensure, among other things, that the Company will at all times be in a position to meet its obligations if and when such obligations are due and payable, including its obligations to make Class B Capital Payments declared (including

14 Additional Amounts thereon, if any) and to pay (i) the Redemption Amount, and (ii) in the event of a liquidation, dissolution or winding-up of the Company in the context of a liquidation, dissolution or winding-up of the Bank, the amounts corresponding to the amounts set forth in (i) to (iii) of the definition of the Liquidation Amount. The Subordinated Support Undertaking does not constitute a guarantee or an under- taking of any kind that the Company will at any time have sufficient assets to declare a Class B Capital Payment or another distribution. The Bank's obligations under the Subordinated Support Undertaking are subordinated to all unsubordinated and subordinated debt obligations of the Bank (including profit participation rights (Genussrechte) and silent participation interests (Stille Beteiligungen)) and rank pari passu with the most senior ranking preference shares of the Bank, if any, and rank senior to any other preference shares and the common shares of the Bank; provided, however, that the Bank's obligation to ensure the Company's position to meet its obligations to pay the Class B Equity Component of the Liquidation Amount shall rank pari passu with the Bank's obligation to pay liquidation proceeds to its holders of common stock; as a result, the Bank's obligation to ensure the Company's position to meet its obligation to pay the Class B Equity Component of the Liquidation Amount shall only arise after all creditors of the Bank ranking senior to the common shareholders of the Bank have been satisfied. The holders of the Company Class B Preferred Securities are third party beneficiaries within the meaning of Section 328(2) of the German Civil Code under the Subordinated Support Undertaking. If a holder of the Company Class B Preferred Securities has notified the Company that the Bank has failed to perform any obligation under the Subordinated Support Undertaking, and such failure con- tinues for 60 days after such notice is given, an Independent Enforcement Director may be appointed by the majority of the holders of the Company Class B Preferred Securities. The Independent Enforcement Director will have the sole authority, right and power to enforce the rights of the Company under the Subordinated Support Undertaking. The Independent Enforcement Director does not participate in the management of the Company other than in connection with the enforcement of the Subordinated Support Undertaking.

The following diagram outlines the relationship among the Company, the Trust and the Bank following completion of the Offering:

DZ BANK AG

Trust Common Security Purchase price for the Initial Initial Debt Securities Debt Securities Company Class B Trust Preferred Preferred Subordinated Securities Securities DZ BANK DZ BANK Support Investors Undertaking Capital Funding LLC II Capital Funding Trust II Purchase price for Purchase price for the Company the Trust Preferred Company Class B Preferred Securities Class A Preferred Securities Security and Company Common Security

The legal basis for the issue of the Trust Securities is the Trust Agreement. The legal basis for the issue of the Company Securities is the LLC Agreement.

15 Summary of the Terms of the Trust Preferred Securities and the Terms of the Company Class B Preferred Securities

Form, Denomination The € 400,000,000 Trust Preferred Securities have a denomination of € 1,000 each and are and Title evidenced by one or more Global Certificate(s) registered in the name of Clearstream Frankfurt. The Company Class B Preferred Securities have a denomination of € 1,000 each and are evidenced by a certificate registered in the name of the Trust. Legal title to the Company Class B Preferred Securities has been recorded in the name of the Property Trustee for the benefit of the holders or beneficial owners of the Trust Preferred Securities.

Maturity The Trust Preferred Securities and the Company Class B Preferred Securities have no maturity date and will not be redeemable at any time at the option of the holders thereof. A redemption may only occur as set forth below under "– Redemption" and "– Special Redemption Events" at the option of the Company or in the event of a liquidation (see below under "– Distributions at Liquidation"). The Bank will procure that the Company Class B Preferred Securities are replaced with similar or more equity-like securities on the level of the Group prior to their redemption.

Capital Payments Capital Payments are, with respect to the Trust Preferred Securities, the Trust Capital Payments and, with regard to the Company Class B Preferred Securities, the Class B Capital Payments. Trust Capital Payments are paid from the income of the Trust and, therefore, are expected to be paid out of Class B Capital Payments received by the Trust from the Company. They are payable if, as and when funds available for payment are held by the Property Trustee in the Property Account. It is expected that the Trust Capital Payments per Trust Preferred Security in the denomination of € 1,000 will correspond to the Class B Capital Payments per Company Class B Preferred Security in the denomination of € 1,000. For each Class B Payment Period, Class B Capital Payments shall be calculated and accrue on the Class B Denomination at the Stated Rate (see below). Any such Capital Payments shall be calculated by applying the Stated Rate for the relevant Payment Period to the denomination of € 1,000 per Company Class B Preferred Security, multiplying the product by a fraction, the numerator of which is the actual number of days elapsed in the relevant Payment Period concerned and the denominator of which is 360 and rounding the resulting figure to the nearest € 0.01, with € 0.005 being rounded upwards. Class B Capital Payments are expected to be paid by the Company out of the net income of the Company which will be derived solely from the amounts received by the Company under the Debt Securities or Permitted Investments held by the Company from time to time or from payments received by the Company under the Subordinated Support Undertaking. If Class B Capital Payments are properly declared in accordance with the provisions of the LLC Agreement, Class B Capital Payments will be payable by the Company from the Issue Date on a noncumulative basis, quarterly in arrear on the following Class B Payment Date(s) as provided in the LLC Agreement. Class B Capital Payments may be declared and paid only if the Company Operating Profit Test, the Bank Dividend Payment Test, the Group Annual Profit Test, the Group BIS Tier I Capital Ratio Test and the Regulatory Authority Test have been met. For a more detailed description of the events in which Class B Capital Payments may be declared, see "Description of the Company Securities – Company Class B Preferred Securities – Capital Payments". If the Company does not declare a Class B Capital Payment in respect of any Class B Payment Period or if such declaration is not allowed under the provisions of the LLC Agreement, then holders of the Company Class B Preferred Securities will have no right to receive a Class B Capital Payment in respect of such Class B Payment Period and the Company will have no obligation to pay a Class B Capital Payment in respect of such Class B Payment Period, regardless of whether or not Class B Capital Payments are declared and paid in respect of any future Class B Payment Period. In such a case, no corresponding Trust Capital Payments will be made on the Trust Preferred Securities in relation to such Class B Payment Period.

16 Stated Rate The Stated Rate equals the Reference Rate plus the Margin per annum.

Reference Rate The Reference Rate is expressed as a rate per annum and is determined by the Calculation Agent on the day falling two Business Days prior to the commencement of the relevant Payment Period (in relation to the Company Securities and the Trust Securities). The Reference Rate is the three-month EURIBOR rate expressed as a rate per annum published on the Screen Page on the relevant Rate Determination Date at or about 11:00 a. m. (Brussels time) as the rate offered in the interbank market in the Euro-Zone for deposits in euro for the relevant Payment Period. If the Reference Rate cannot be determined as aforementioned because the Screen Page is not published and no other agency publishes the interest rate in question, or for any other reason, then the Reference Rate for the relevant Payment Period shall be the arithmetic mean (rounded, if necessary, to the nearest one thousandth of a percentage point, with 0.0005 being rounded upwards), determined by the Calculation Agent of the rates which the Reference Banks selected by the Calculation Agent quote to prime banks in the interbank market in the Euro-Zone at approximately 11:00 a. m. (Brussels time) on the relevant Rate Determination Date for deposits in euro for such Payment Period. Should two or more of the Reference Banks provide the relevant quotation, the arithmetic mean shall be calculated as described above on the basis of the quotations supplied. If less than two Reference Banks provide a quotation, then the Reference Rate for the relevant Payment Period shall be the rate displayed on the Screen Page on the last day preceding the relevant Rate Determination Date on which such rate was displayed.

Margin The Margin equals 1.60 per cent.

Principal Paying Agent Deutsche Bank Aktiengesellschaft, Frankfurt am Main, Federal Republic of Germany

Transfer Agent and Deutsche Bank Aktiengesellschaft, Frankfurt am Main, Federal Republic of Germany Registrar

Calculation Agent Deutsche Bank Aktiengesellschaft, Frankfurt am Main, Federal Republic of Germany

Payments of All payments by the Company and the Trust on the Company Class B Preferred Securities and the Additional Amounts Trust Preferred Securities, as the case may be, will be made without deduction or withholding by the Company or the Trust, as the case may be, for or on account of Withholding Taxes, unless such deduction or withholding is required by law. In such event, the Company or the Trust, as the case may be, shall pay, as additional Capital Payments, such Additional Amounts as may be necessary in order that the net amounts received by the holders of the Company Class B Preferred Securities and Trust Preferred Securities, after such deduction or withholding, will equal the amounts that would have been received had no such deduction or withholding been required. However, in certain events no such Additional Amounts will be payable in respect of the Company Class B Preferred Securities and the Trust Preferred Securities. See "Description of the Company Securities – Payment of Additional Amounts" and "Description of the Trust Preferred Securities – Payment of Additional Amounts".

Class B LPA and Class B Each Company Class B Preferred Security in the denomination of € 1,000 has a liquidation preference Agio amount (Class B LPA) of € 20. The difference between the Class B LPA and the Class B Denomination is the Class B Agio, i.e. € 980 per Company Class B Preferred Security, which is relevant for the amounts paid at redemption in the event of a liquidation, dissolution or winding-up of the Company in the context of a liquidation, dissolution or winding-up of the Bank and the ranking under the Subordinated Support Undertaking.

Redemption On the Initial Redemption Date (i.e. on November 22, 2011) and on any Class B Payment Date falling after the Initial Redemption Date, the Company Class B Preferred Securities shall be redeemable, in whole but not in part, at the Redemption Amount if certain conditions are met and subject to the exercise of the discretion of the Company to redeem the Company Class B Preferred Securities. For a description of these conditions, see "Description of the Company Securities – Company Class B Preferred Securities – Redemption". The redemption of the Company Class B Preferred Securities will lead to a redemption of the Trust Preferred Securities.

Special Redemption Upon the occurrence of a Trust Special Redemption Event (being either (i) a Tax Event solely with Events respect to the Trust or (ii) an Investment Company Act Event solely with respect to the Trust), holders of the Trust Preferred Securities will be entitled, in accordance with the terms of the Trust Agreement, to receive a corresponding number of the Company Class B Preferred Securities.

17 Upon the occurrence of a Special Redemption Event (being either (i) a Regulatory Event, (ii) a Tax Event other than solely with respect to the Trust or (ii) an Investment Company Act Event other than solely with respect to the Trust), the Company shall have the right to redeem the Company Class B Preferred Securities at the Redemption Amount at any time, also already prior to the Initial Redemption Date, in whole but not in part, provided that certain conditions are met. For a description of these conditions, see "Description of the Company Securities – Company Class B Preferred Securities – Redemption".

Redemption Amount The Redemption Amount per Company Class B Preferred Security equals the Class B Denomination plus accrued and unpaid Class B Capital Payments for the then current Class B Payment Period up to, but excluding, the redemption date, plus Additional Amounts, if any.

Distributions at In the event of any liquidation, dissolution, winding-up or termination of the Trust not involving a Liquidation redemption of the Company Class B Preferred Securities in whole or the liquidation, dissolution or winding-up of the Company, the holders of the Trust Preferred Securities will be entitled to receive, after payment or reasonable provision for payment of the Trust's liabilities to other creditors (if any), on a pro rata basis Company Class B Preferred Securities. The holders of the Trust Preferred Securities will have a preference over the holder of the Trust Common Security with respect to distributions and payments upon liquidation of the Trust. In the event of any liquidation, dissolution or winding-up of the Company without a liquidation, dissolution or winding-up of the Bank, the Company Class B Preferred Securities will be redeemed in which event the holder of each Company Class B Preferred Security shall be entitled to receive the Redemption Amount, provided that the Company has obtained any required regulatory approvals. In the event of any liquidation, dissolution or winding-up of the Company in the context of a liquidation, dissolution or winding-up of the Bank, the holder of the Company Class A Preferred Security will receive the Debt Securities or Permitted Investments (including accrued and unpaid interest thereon) as its liquidation distribution. Following such distribution to the holder of the Company Class A Preferred Security, the Company Class B Preferred Securities will be redeemed in which event each holder of the Company Class B Preferred Securities will be entitled to receive the Liquidation Amount.

Liquidation Amount The Liquidation Amount per Company Class B Preferred Security equals (i) the Class B LPA, plus (ii) accrued and unpaid Class B Capital Payments in respect of the then current Class B Payment Period to but excluding the date of liquidation and Additional Amounts, if any, plus (iii) the Class B Equity Component, plus (iv) any assets of the Company remaining after distributions have been made under the Company Class A Preferred Securities, provided that the Company receives amounts under the Subordinated Support Undertaking given by the Bank to the Company corresponding to the sum of the amounts referred to under (i) to (iii) and provided further that the sum of (i) and (iii) shall not exceed the amount of the Class B Denomination (i.e. € 1,000).

Ranking In the event of any liquidation, dissolution or winding-up of the Company, the Company Class B Preferred Securities will rank junior to the Company Class A Preferred Security, and the Company Class B Preferred Securities will rank senior to the Company Common Security; provided, however, that any payments made by the Bank pursuant to the Subordinated Support Undertaking shall be payable by the Company solely to the holders of the Company Class B Preferred Securities.

Voting Rights Holders of the Trust Preferred Securities will have no voting rights, except that the holders of a majority of the outstanding Trust Preferred Securities (excluding Trust Preferred Securities held by the Bank or any affiliate within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz)) will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee under the Trust Agreement. This includes the right to direct the Property Trustee, as holder of the Company Class B Preferred Securities, on how to vote the Company Class B Preferred Securities in respect of the matters on which holders of the Company Class B Preferred Securities are entitled to vote (including certain matters as to the enforcement of rights under the Company Class B Preferred Securities described under "– Enforcement Rights" below).

18 The circumstances in which holders of the Company Class B Preferred Securities are entitled to vote are described under "Description of the Company Securities - Company Class B Preferred Securities – Voting and Enforcement Rights".

Enforcement Rights If (i) the Company fails to pay Class B Capital Payments (plus Additional Amounts thereon, if any) on the Company Class B Preferred Securities at the Stated Rate for four consecutive Class B Payment Periods even though all requirements for capital payments have been met and capital payments have been declared, or (ii) a holder of the Company Class B Preferred Securities notifies the Company that the Bank has failed to perform any obligation under the Subordinated Support Undertaking and such failure continues for 60 days after such notice is given, then the majority of the holders of the Company Class B Preferred Securities shall be entitled to appoint an Independent Enforcement Director as additional member to the Board of Directors who shall have the sole authority, right and power to enforce and settle any claim of the Company under the Subordinated Support Undertaking. For further information on the Independent Enforcement Director see "Description of the Company Securities – Company Class B Preferred Securities – Voting and Enforcement Rights".

Securityholder Each meeting of the holders of the Trust Securities shall be conducted by the Regular Trustees or by Meetings such other person that the Regular Trustees may designate.

Listing The Trust Preferred Securities have been admitted to listing on the official market (Amtlicher Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) on November 23, 2004 and quotation is expected to commence on November 26, 2004.

Notices For so long as the Trust Preferred Securities are listed on the Frankfurt Stock Exchange and the rules of such stock exchange so require, all notices concerning the Trust Preferred Securities will be published in a German newspaper designated by the Frankfurt Stock Exchange (which is expected to be the Börsen-Zeitung or the Financial Times Deutschland).

Governing Law The LLC Agreement, including the terms of the Company Class A Preferred Security and the Company Class B Preferred Securities, and the Trust Agreement, including the terms of the Trust Securities, shall be governed by the laws of the State of Delaware, United States of America. The Subordinated Support Undertaking as well as the Initial Debt Securities shall be governed by the laws of the Federal Republic of Germany.

Because (i) the sole assets of the Trust are the Company Class B Preferred Securities, (ii) the Class B Capital Payments are passed through and (iii) the holders of the Trust Preferred Securities may receive the Company Class B Preferred Securities in certain circumstances, prospective purchasers of the Trust Preferred Securities are also making an invest- ment decision with respect to the Company Class B Preferred Securities and, accordingly, should carefully review all of the information regarding the Company Class B Preferred Securities. See "Description of the Company Securities – Company Class B Preferred Securities" and "Investment Considerations – Special Redemption Risks – No Fixed Redemption Date".

19 Summary of the Terms of the Company Class A Preferred Security

The Company Class A Preferred Security issued by the Company is owned by the Bank. The Company Class A Preferred Security may be transferred to a Bank Affiliate. The Company Class A Preferred Security is expected to receive capital payments only if: (i) Class B Capital Payments are not permitted to be declared on the Company Class B Preferred Securities on any Class B Payment Date at the Stated Rate because either the Company Operating Profit Test, the Bank Dividend Payment Test, the Group Annual Profit Test, the Group BIS Tier I Capital Ratio Test or the Regulatory Authority Test have not been met; and (ii) the Company has sufficient Company Operating Profits.

20 Summary of the Terms of the Initial Debt Securities

Maturity Date November 22, 2034.

Aggregate € 400,003,000 (equal to the net proceeds from the issuance of the Company Class B Preferred Denomination Securities plus the aggregate amounts contributed for the Company Class A Preferred Security and the Company Common Security) of an issue of subordinated notes of the Bank.

Interest Payments Interest shall be payable by the Bank in euro on the denomination of the Initial Debt Securities quarterly in arrear on each Interest Payment Date (i.e. on February 22, May 22, August 22 and November 22) at the Stated Rate. If any Interest Payment Date would otherwise fall on a day which is not a Business Day, it shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event the Interest Payment Date shall be the immediately preceding Business Day.

Ranking The Repayment Claim will be subordinated in the event of insolvency or liquidation of the Bank to the claims of all other creditors which are not also subordinated and shall, in such event, only be satisfied after all claims against the Bank which are not subordinated have been satisfied. Any right to set-off the Repayment Claim against claims of the Bank shall be excluded. No collateral is or will be given for the Repayment Claim; collateral that may have been or may in the future be given in connection with other indebtedness shall not secure the Repayment Claim.

The subordination described above cannot be subsequently restricted, and neither the minimum term of the Initial Debt Securities nor the notice period for an early redemption can subsequently be shortened. Pursuant to § 10 (5a) of the German Banking Act, the amount of any repurchase of the Initial Debt Securities prior to the Initial Debt Redemption Date or other redemption must be refunded to the Bank, notwithstanding any agreement to the contrary, unless a statutory exemption (replacement of the denomination of the Initial Debt Securities by contribution of other, at least equivalent own funds (haftendes Eigenkapital)) or prior approval of BaFin to the early redemption applies.

Redemption Prior to the Initial Debt Redemption Date, the Bank may cause any redemption of the Initial Debt Securities only (i) with at least 32 days notice, upon the occurrence of a Special Redemption Event, and the election of the Company to redeem the Company Class B Preferred Securities in accord- ance with the LLC Agreement, or (ii) in the event of replacement with Substitute Debt Securities, subject, in each case, to having obtained any required regulatory approvals.

On or after the Initial Debt Redemption Date but prior to the Maturity Date, the Bank may cause any redemption of the Initial Debt Securities only (i) in the events specified above in connection with a redemption prior to the Initial Debt Redemption Date, or (ii) with at least 32 days notice, upon the election of the Company to redeem the Company Class B Preferred Securities in accordance with the LLC Agreement, subject, in each case, to having obtained any required regulatory approvals. Any such redemption may be made in whole, but not in part, and will be (other than in the event of a replacement with Substitute Debt Securities) at a redemption amount equal to the denomination of the Initial Debt Securities, plus accrued and unpaid interest thereon and Additional Interest Amounts, if any. If the Maturity Date or a Debt Redemption Date falls on a day that is not a Business Day, payment of all amounts otherwise payable on such date shall be made on the first following day that is a Business Day, and there shall be no right to claim payment of any interest or other indemnity in respect of such delay in payment.

Substitution At any time, the Bank will have the right to:

(i) substitute as obligor of the Debt Securities a Qualified Issuer or any branch of the Bank; or

(ii) replace the Debt Securities with Substitute Debt Securities, provided, in each case, that (A) such substitution or replacement does not result in a Special Redemption Event, (B) the Bank, unless it itself is again the obligor, provides a guarantee or support undertaking with respect to the obligations of such substitute obligor, which guarantee or support undertaking ranks at least pari passu with the Initial Debt Securities, provided that such guarantee or support undertaking does not affect the quality of the Trust Preferred Securities or the

21 Company Class B Preferred Securities to be treated as core capital or Tier I regulatory capital (aufsichtsrechtliches Kernkapital) on a consolidated basis for the Bank, and (C) the Bank has obtained any required regulatory approval.

The LLC Agreement provides that after the Maturity Date, if the Company Class B Preferred Securities have not been redeemed by the Maturity Date, the Company shall invest the net pro- ceeds from the redemption of the Debt Securities in Permitted Investments, provided that such investment does not result in a Special Redemption Event.

Governing Law The Initial Debt Securities shall be governed by, and construed in accordance with, the laws of the Federal Republic of Germany.

22 Investment Considerations/Risk Factors

Before making an investment decision with respect to the Trust Preferred Securities, prospective investors should carefully consider the risks relating to the legal structures underlying this Offering described below in conjunction with the other information contained in this Offering Circular. Prospective investors should also carefully consider the information regarding the Bank and the DZ BANK Group contained in this Offering Circular.

Risks Associated with the Financial Condition of the Bank and the DZ BANK Group If the financial condition of the Bank or any Bank Affiliate were to deteriorate, then it could result in (i) the Bank not making a Bank Dividend Payment or having insufficient Group Annual Profits resulting in the Company not being able to declare and pay Capital Payments on the Company Class B Preferred Securities, or (ii) the Bank not having a sufficient capital ratio to meet the Group BIS Tier I Capital Ratio Test, which, in turn, could result in the Company not being able to declare and pay Capital Payments on the Company Class B Preferred Securities. There can be no assurances that the Bank will have either sufficient Distributable Profits, as shown on its unconsolidated financial statements for the financial year ended December 31, 2003 or any subsequent year, to make a Bank Dividend Payment or sufficient Group Annual Profits, as shown in the consolidated financial statements for the financial year ended December 31, 2003, or any subsequent year, for the Company to declare and pay Class B Capital Payments on the Company Class B Preferred Securities. Further, any payments made on Parity Securities, including the Trust Preferred Securities with an aggregate liquidation preference amount of EUR 300,000,000 issued by DZ BANK Funding Trust I in November 2003 (WKN 907 833), and any Parity Securities issued in the future, will be deducted from the Group Annual Profits for purposes of determining whether these are sufficient for Capital Payments on the Company Class B Preferred Securities being made. In addition, a deterioration of the Bank's financial condition could also result in the Bank not being able to satisfy its payment obligations in whole or in part to the Company under the Initial Debt Securities or the Subordinated Support Undertaking. The occurrence of any of these events would have the result that no Class B Capital Payments on the Company Class B Preferred Securities would be declared or the amounts of such Class B Capital Payments would be reduced (up to zero), which, in turn, would reduce the amounts available to the Trust for periodic distributions to holders of the Trust Preferred Securities. In addition, if a liquidation, dissolution, or winding-up of the Bank were to occur, holders of the Trust Preferred Securities could lose all or part of their investment. In particular, a liquidation, dissolution, or winding-up of the Company in the context of a liquidation, dissolution or winding-up of the Bank could lead to the holders of the Trust Preferred Securities receiving a redemption payment that is lower than the Trust Denomination, because the Liquidation Amount to be distributed under the Company Class B Preferred Securities and, accordingly, to the holders of the Trust Preferred Securities, would be calculated on the basis of the amount, if any, available for liquidation distributions to the Bank's shareholders, which may in such circumstances be limited. Accordingly, potential investors in the Trust Preferred Securities should carefully consider the financial and other information regarding the Bank and the DZ BANK Group contained in this Offering Circular.

No Guaranteed Capital Payments The Company's ability to declare Class B Capital Payments on the Company Class B Preferred Securities (and, in turn, the Trust's ability to make Trust Capital Payments on the Trust Preferred Securities) is limited by the terms of the LLC Agreement. Although it is the Company's intention to distribute the full amount of its Company Operating Profits for each financial year as Class B Capital Payments to the holders of the Company Class B Preferred Securities to the extent permitted by the LLC Agreement, the Board of Directors has discretion in declaring and making these payments. See "Description of the Company Securities – Company Class B Preferred Securities – Capital Payments". Any Class B Capital Payments will be dependent on the future profits or losses of the Bank and the DZ BANK Group and the manner in which profits, if any, are allocated by the Bank's management and shareholders. In addition, any Class B Capital Payments will be dependent on the consolidated regulatory capital ratio of the Bank. Neither the Bank's management nor the shareholders are under any obligation to approve sufficient Bank Distributable Profits for making a Bank Dividend Payment or Group Annual Profits for purposes of allowing the Company to declare and make Class B Capital Payments with respect to any financial year. Even if, for example, the Bank records an annual surplus (Jahresüberschuss) for a financial year, the Bank Distributable Profits may still be insufficient for making a Bank Dividend Payment if its management and shareholders decide to allocate all of its annual surplus (Jahresüberschuss) to reserves. Moreover, if the Bank were not to record an annual surplus (Jahresüberschuss) on an unconsolidated basis in a given financial year, the Bank's management and shareholders would be under no obligation to make up the deficit from the Bank's reserves to ensure that the Bank has sufficient Bank Distributable Profits for making a Bank Dividend Payment to allow the Company to declare and make Class B Capital Payments. Despite sufficient Company Operating Profits, the making of a Bank Dividend Payment, sufficient Group Annual Profits and the Group BIS Tier I Capital Ratio Test being met, the Company will not be able to make Class B Capital Payments on any Class B Payment Date if, on such date, the Regulatory Authority Test is not met. If the Company is not permitted to make Class B

23 Capital Payments on any Class B Payment Date, this means that there are no amounts available to the Trust for Trust Capital Payments on the Trust Preferred Securities. See "Description of the Company Securities – Company Class B Preferred Securities – Capital Payments" and "Description of the Trust Preferred Securities – Capital Payments".

Discretionary and Noncumulative Capital Payments; No Deemed Declaration of Capital Payments The declaration by the Company of Class B Capital Payments on the Company Class B Preferred Securities is discretionary, and under no circumstances will Class B Capital Payments be deemed to have been declared. Thus, even if (i) the Bank were to declare and pay a dividend on securities ranking junior to the Bank's obligations under the Subordinated Support Undertaking (such as, e.g., the common shares of the Bank) or (ii) any other issuer of Parity Securities or securities ranking junior thereto were to declare and pay a distribution thereunder, the Company would be under no obligation to make Class B Capital Payments. Further, the LLC Agreement provides that it is the Company's intention to distribute all of its Company Operating Profits. However, even if the Company Operating Profit Test, the Bank Dividend Payment Test, the Group Annual Profit Test, the Group BIS Tier I Capital Ratio Test and the Regulatory Authority Test have been met, holders of the Company Class B Preferred Securities, and in turn, holders of the Trust Preferred Securities, will have no right to receive any amounts in respect of a Class B Payment Period unless the Board of Directors declares Class B Capital Payments for the relevant Class B Payment Period, which would then be available to the Trust for Trust Capital Payments on the Trust Preferred Securities. See "Description of the Company Securities – Company Class B Preferred Securities – Capital Payments". Class B Capital Payments are noncumulative. Class B Capital Payments in subsequent Class B Payment Periods will not be increased to compensate for any shortfalls in Class B Capital Payments in previous Class B Payment Periods. In addition, there will be no deemed declarations of Class B Capital Payments in case of distributions being made on Parity Securities or securities ranking junior thereto.

Relationships between the Bank, the Company and the Trust; No Voting Rights; Certain Conflicts of Interest The Bank is, and will continue to be, significantly involved in running the Company and the Trust, unless it transfers such duties to a Bank Affiliate, in which event the following description will apply to the Bank Affiliate instead of the Bank. The Bank will control the Company through its power, as holder of the Company Common Security, to elect a majority of the Board of Directors. The Trust, to the extent that it is the holder of the Company Class B Preferred Securities, will generally have no right to vote to elect members of the Board of Directors. The only exception is that holders of Company Class B Preferred Securities will have the right to appoint one additional member to the Board of Directors, the Independent Enforcement Director, if: – the Company fails to make Class B Capital Payments (and Additional Amounts thereon) on the Company Class B Preferred Securities at the Stated Rate for four consecutive Class B Payment Periods even though all requirements for capital payments have been met and capital payments have been declared; or – a holder of the Company Class B Preferred Securities (initially, the sole holder of the Company Class B Preferred Securities is the Property Trustee) has notified the Company that the Bank has failed to perform any of its obligations under the Subordinated Support Undertaking and this failure continues for 60 days after the date such notice is given. The Company expects that all initial and future directors and officers of the Company, as well as the Regular Trustees, will be officers or employees of, or affiliated with, the Bank or a Qualified Subsidiary. Under the Services Agreement, the Bank will also provide certain accounting, legal, tax, and other support services to the Company and the Trust. Consequently, conflicts of interest may arise for officers and employees of the Bank and a Qualified Subsidiary in the discharge of their duties as officers or employees of the Company or as Regular Trustees of the Trust. It is the intention of the Bank, the Company, and the Trustees that the terms of any agreements and transactions, and in particular the LLC Agreement and the Trust Agreement, be fair to all parties and consistent with terms that could be achieved on an arm's- length basis. However, there can be no assurance that such agreements or transactions will be on terms as favorable as those that could have been obtained from unaffiliated third parties.

Special Redemption Risks Redemption Upon Occurrence of a Special Redemption Event. The Company Class B Preferred Securities (and, consequently, the Trust Preferred Securities) will be redeemable at any time at the option of the Company, in whole but not in part, upon the occurrence of a Special Redemption Event. A Special Redemption Event will arise, for example, if, as a result of changes in the law: – there are changes in the tax status of the Company or the Bank; – Additional Amounts or Additional Interest Amounts relating to Withholding Taxes become applicable to payments on the Company Class B Preferred Securities, the Trust Preferred Securities or the Debt Securities; – the Bank is not permitted to treat the Company Class B Preferred Securities or the Trust Preferred Securities as core capital or Tier I regulatory capital (aufsichtsrechtliches Kernkapital) on a consolidated basis; or

24 – the Company qualifies as an "investment company" within the meaning of the Investment Company Act. (See "Description of the Trust Preferred Securities – Redemption", and "Description of the Company Securities – Company Class B Preferred Securities – Redemption".) Liquidation of the Trust Upon Occurrence of a Trust Special Redemption Event. If a Trust Special Redemption Event occurs and is continuing with respect to the Trust, the Trust will be subject to dissolution and liquidation within 90 days in accordance with the terms of the Trust Agreement. Upon a dissolution and liquidation, each holder of Trust Preferred Securities will receive a corre- sponding number of Company Class B Preferred Securities. Holders of these Company Class B Preferred Securities and their nominees will be subject to the nominee reporting requirements under the Internal Revenue Code, and the Company will report to the IRS, on Schedule K-1, the pro rata share in the Company's income, gain, loss, deduction, or credit of each holder of Company Class B Preferred Securities for the then prior calendar year. There can be no assurance as to the market price for the Company Class B Preferred Securities that are distributed after dissolution and liquidation of the Trust or that a market for these securities will subsequently develop and be sustained thereafter. Accordingly, the Company Class B Preferred Securities may trade at a discount to the price of the Trust Preferred Securities for which they were exchanged.

No Fixed Redemption Date There is no fixed redemption date for the Company Class B Preferred Securities and hence, for the Trust Preferred Securities. Even though the Company Class B Preferred Securities and the Trust Preferred Securities may be redeemed on the Initial Redemption Date, there can be no assurance that the Company will opt to redeem the Company Class B Preferred Securities on the Initial Redemption Date. In particular, the Company Class B Preferred Securities may only be redeemed if on the Redemption Date the Bank Dividend Payment Test and the Group Annual Profit Test are met with regard to the accrued and unpaid Capital Payments, the Company has obtained all necessary regulatory approvals and, in particular, the cumulative Defined Retained Earnings since the Issue Date equal or exceed 1.5 times the aggregate Class B Agio of all outstanding Company Class B Preferred Securities. There can therefore be no assurance that at any time the requirements for the redemption of the Company Class B Preferred Securities will be met. Even if all the requirements for the redemption of the Company Class B Preferred Securities were met, the decision to redeem would remain within the discretion of the Company and the Company would be under no obligation to do so. Whether or not the Company chooses to redeem the Company Class B Preferred Securities will depend on a number of factors (most of which lie outside the control of the Bank and the Company), including, for example: – the Bank has procured that the Company Class B Preferred Securities have been replaced with similar or more equity-like securities on the level of the Group prior to such redemption; – the regulatory capital and the refinancing options of the Bank at such time; – the regulatory assessment of the Company Class B Preferred Securities, the Debt Securities, the Permitted Investments and the remaining term of the Debt Securities or, if applicable, the remaining term of the Permitted Investments; – whether the required prior consent of BaFin has been obtained; and – capital market conditions.

No Guarantee Provided by the Subordinated Support Undertaking The Bank and the Company have entered into the Subordinated Support Undertaking for the benefit of the Company and the holders of the Company Class B Preferred Securities. However, the Subordinated Support Undertaking does not represent a guarantee or an undertaking of any kind from the Bank that the Company will at any time have sufficient assets, or be allowed pursuant to the LLC Agreement, to make a Class B Capital Payment or another distribution. Furthermore, the Bank's obligations under the Subordinated Support Undertaking constitute obligations that are subordinated to all unsubordinated and subordinated debt obligations of the Bank (including profit participation rights (Genussrechte) and silent participation interests (Stille Beteiligungen)) and rank pari passu with the most senior ranking preference shares of the Bank, if any, and rank senior only to any other preference shares and the common shares of the Bank provided that the Bank's obligation to ensure the Company's position to meet its obligation to pay the Class B Equity Component of the Liquidation Amount ranks pari passu with the Bank's obligation to pay liquidation proceeds to its holders of common stock. Therefore the Bank's obligation to ensure the Company's position to meet its obligation to pay the Class B Equity Component of the Liquidation Amount will only arise after all creditors of the Bank ranking senior to the common shareholders of the Bank have been satisfied. See "Description of the Subordinated Support Undertaking". The Bank has not entered into any restrictive covenants regarding its ability to incur additional indebtedness ranking pari passu to its obligations under the Subordinated Support Undertaking.

25 Banking Regulatory Restrictions The Company is a subsidiary of the Bank, which is subject to German banking regulations. Banking and other regulatory authorities in the Federal Republic of Germany could make determinations regarding the Bank that could adversely affect the Company's ability to make Class B Capital Payments in respect of the Company Class B Preferred Securities. In addition, the Bank and its subsidiaries are active in providing financial products and services throughout Europe and in the United States of America. The international scope of the Bank's business operations may result in United States of America federal or state authorities, European Union authorities or authorities in individual European countries exerting regulatory authority over the Bank and its subsidiaries. These regulatory authorities could make determinations regarding the Bank or its subsidiaries that could adversely affect their ability to, among other things: – make distributions to holders of their securities; – engage in transactions with subsidiaries; – purchase or transfer assets and satisfy obligations; or – make redemption or liquidation payments to holders of securities.

No Prior Public Market and Resale Restrictions The Trust Preferred Securities are newly issued securities, and there is currently no public market in the Trust Preferred Securities. The Trust Preferred Securities have been admitted to the official market (Amtlicher Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) and quotation is expected to commence on November 26, 2004. Prior thereto, there has been no public market for the Trust Preferred Securities. There is no guarantee that the Offering Price of the Trust Preferred Securities will correspond to the price at which the securities will actually be traded following the Offering. Moreover, there can be no assurance that an active trading market for the Trust Preferred Securities will subsequently develop and be sustained thereafter. Investors should expect liquidity and the market prices for the Trust Preferred Securities to fluctuate with changes in: – market and economic conditions; – the financial condition and prospects of the Bank; and – other factors that generally influence the secondary market prices of securities. The Trust Preferred Securities have not been registered under the Securities Act and are subject to a number of resale restrictions. See "Sale – Selling Restrictions".

26 Use of Proceeds

The net proceeds from the sale of the Trust Securities in the amount of € 400,001,000 have been invested by the Trust in the Company Class B Preferred Securities. The Company has used the net proceeds from the sale of the Company Class B Preferred Securities, together with funds contributed in relation to the Company Class A Preferred Security and the Company Common Security, to make an investment in the Initial Debt Securities. The Bank intends that the net proceeds from the sale of the Initial Debt Securities will be used for DZ BANK Group's general corporate purposes. For purposes of measuring regulatory capital adequacy, the Bank expects to treat the Company Class B Preferred Securities or the Trust Preferred Securities as core capital or Tier I regulatory capital (aufsichtsrechtliches Kernkapital) on a consolidated basis and the proceeds received from the Company under the Initial Debt Securities as supplementary regulatory capital on an unconsolidated basis. For a discussion of regulatory capital and the measurement of its adequacy, see "Regulation".

27 Development of the Regulatory Capital of the Bank and the DZ BANK Group

The following table sets out the regulatory capital positions of the Bank and the DZ BANK Group as at June 30, 2004 and December 31, 2003 as compared to December 31, 2002. The regulatory capital positions have been calculated in accordance with the rules of the German Banking Act (KWG) and of the Basel Committee at the BIS, respectively.

As at As at As at June 30, December 31, December 31, 2004 2003 2002 (unaudited) (audited) (audited) € million 1. Regulatory capital of the Bank – KWG Subscribed capital 2,879 2,879 2,879 Capital reserves 803 803 803 Surplus reserves 913 888(1) 885(2) Fund for general banking risks (Section 340g German Commercial Code) 1,428 1,428 1,428 Own shares 10 10 10 Core capital (Kernkapital) 6,013 5,988 5,985 Supplementary capital (Ergänzungskapital) Medium/Long-term(3) 4,060 4,388 3,972 Reserves for general banking risks (Section 340f German Commercial Code)(4) 811 775 378 General provisions/ general loan loss reserves(5) - - - Deduction 123 165 183 Total 4,748 4,988 4,167 Tier III capital(6) (Drittrangmittel) 5 6 123 Total regulatory capital – Bank 10,766 10,992 10,275 2. Regulatory capital of the DZ BANK Group - BIS Core capital 7,084 6,970 6,440 Supplementary capital (Ergänzungskapital) Revaluation Reserves 376 400 454 Medium/Long-term(3) 4,964 5,162 5,384 Reserves for general banking risks (Section 340f German Commercial Code )(4) 1,231 1,107 478 General provisions/ general loan loss reserves(5) 237 224 220 Deduction from equity 547 551 459 Total 13,345 13,312 12,517 Tier III capital(6) (Drittrangmittel) 26 26 143 Total regulatory capital – DZ BANK Group 13,371 13,338 12,660 ______(1) According to regulatory reporting, excluding allocations to surplus reserves. (2) According to regulatory reporting, excluding allocations to surplus reserves. (3) Original maturity five years and more. (4) Without maturity. (5) General provisions/general loan loss reserves without maturity which qualifies as Supplementary Capital. (6) Original maturity two years and more.

Save as disclosed in section "Business Development and Outlook", there has been no material change in the development of the regulatory capital of DZ BANK since June 30, 2004.

28 Bank Distributable Profits, Group Annual Profits and Group BIS Tier I Capital Ratio

The Company's authority to declare Class B Capital Payments on the Company Class B Preferred Securities for any Class B Payment Period depends, among other things, on (i) the Bank Distributable Profits and the Group Annual Profits for the most recent financial year for which audited and determined (festgestellt) unconsolidated and audited and approved (gebilligt) consolidated financial statements are available and (ii) the Bank having a sufficient capital ratio to meet the Group BIS Tier I Capital Ratio Test. Bank Distributable Profits for any financial year means the balance sheet profit (Bilanzgewinn) as of the end of such financial year, as shown in the audited and determined (festgestellt) unconsolidated financial statements of the Bank as of the end of such financial year. Such balance sheet profit (Bilanzgewinn) includes the annual surplus or loss (Jahresüberschuss/-fehlbetrag), plus any profit carried forward from previous years, minus any loss carried forward from previous years, plus transfers made by the Bank, in its discretion, from capital reserves and surplus reserves, minus allocations made by the Bank, in its discretion, to surplus reserves, all as determined in accordance with the provisions of the German Stock Corporation Act and German GAAP as described in the German Commercial Code and other applicable German law then in effect. Group Annual Profits for any financial year means the net income (Jahresüberschuss/Jahresfehlbetrag) as of the end of such financial year, as shown in the audited and approved (gebilligt) consolidated financial statements of the Group as of the end of such financial year as determined in accordance with the provisions of the German Stock Corporation Act and German GAAP as described in the German Commercial Code and other applicable German law then in effect. Such net income is before deduction of minority interests (Gewinnanteile anderer Gesellschafter). The Group BIS Tier I Capital Ratio is the Tier I capital ratio for the Bank and its subsidiaries consolidated for bank regulatory purposes under the applicable rules of BIS (for more information on the regulatory capital requirements relating to the Bank and/or the DZ Bank Group, see "Regulation – Capital Adequacy Requirements"). The following table sets out (i) the Bank Distributable Profits and the Group Annual Profits for the financial years ended December 31, 2003, 2002 and 2001, respectively, and (ii) the Group BIS Tier I Capital Ratio as of the end of such financial years. In addition, the table sets out the individual and the aggregated Distributable Profits of (i) the two Predecessor Banks as of and for the annual period ended December 31, 2000 and (ii) DG BANK and the predecessor banks of GZ-Bank, GZB Bank Genossen- schaftliche Zentralbank AG Stuttgart and SGZ-Bank Südwestdeutsche Genossenschafts-Zentralbank AG, as of and for the annual periods ended prior to December 31, 2000, respectively. The aggregated Distributable Profits for the financial years ended December 31, 2000, 1999 and 1998, respectively, is Aggregated Financial Information which is not indicative for the financial position of the Bank in the future; see "Presentation of Financial Information". In particular, the financial information presented in the following table is not indicative of (i) what the Bank Distributable Profits or the Group Annual Profits would have been, had the Merger been in effect at the beginning of the financial years to which such financial information relates or (ii) the Bank Distributable Profits or the Group Annual Profits or the Group BIS Tier I Capital Ratio in the future.

29

Bank Distributable Profits in € million 2003 2002 2001 2000 1999 1998 DZ BANK 55 52 51 X X X DG BANK X X X 46 73 52 GZ-Bank X X X 31 X X SGZ-Bank X X X X 26 26 GZB-Bank X X X X 14 21 Aggregated(*) X X X 77 113 99

Group Annual Profits in € million 2003 2002 2001 2000 1999 1998 DZ BANK Group 382 351 114 X X X

Group BIS Tier I Capital Ratio (**) 2003 2002 2001 2000 1999 1998 DZ BANK Group 7.0 5.8 4.9 X X X

______(*) Aggregated Financial Information is not indicative for the financial position of the Bank in the future; see "Presentation of Financial Information". (**) Group BIS Tier I Capital Ratio as of December 31 of the relevant year (in %).

30 DZ BANK Capital Funding Trust II

Incorporation The Trust is a statutory trust formed under the Trust Act according to the laws of the State of Delaware, United States of America, pursuant to the Trust Agreement executed by the Company, as sponsor, Deutsche Bank Trust Company Americas, as Property Trustee and Deutsche Bank Trust Company Delaware, as Delaware Trustee and pursuant to the filing of the Certificate of Trust for the Trust with the Secretary of State of the State of Delaware, United States of America, on August 12, 2004.

Holders of the Trust The Bank owns the Trust Common Security representing a capital contribution in respect thereof equal to € 1,000. The Trust Common Security may be transferred to a Bank Affiliate. The Trust Common Security ranks pari passu, and payments thereon will be made pro rata, with the Trust Preferred Securities, except that in liquidation and in certain circumstances described under "Description of the Trust Preferred Securities – Subordination of the Trust Common Security", the rights of the holder of the Trust Common Security to periodic distributions and to payments upon liquidation, redemption and otherwise are subordinated to the rights of the holders of the Trust Preferred Securities. The rights of the holders of the Trust Preferred Securities, including economic rights, rights to information and voting rights, are as set forth in the Trust Agreement and the Trust Act. See "Description of the Trust Preferred Securities". Under the Services Agreement among the Trust, the Company and the New York branch of the Bank, (Servicer), the Servicer is obligated, among other things, to provide tax and other general administrative services to the Trust and the Company. The fees and expenses of the Company and the Trust, including any taxes, duties, assessments or governmental charges of whatsoever nature (other than Withholding Taxes) imposed by any taxing authority upon the Company or the Trust, and all other obligations of the Company and the Trust (other than with respect to the Trust Securities or the Company Securities) will be paid by the Bank. For so long as the Trust Preferred Securities remain outstanding, the Bank has covenanted in the Trust Agreement: (i) that the Trust Common Security will be held by the Bank or by a Qualified Subsidiary; (ii) to cause the Trust to remain a statutory trust and not to voluntarily dissolve, wind up, liquidate or be terminated, except as permitted by the Trust Agreement; (iii) to use its commercially reasonable efforts to ensure that the Trust will not be treated as a corporation or a partnership for United States federal income tax purposes; and (iv) not to permit the dissolution, liquidation, termination or winding-up of the Trust, unless a Trust Special Redemption Event or a Special Redemption Event occurs, or the Company is itself in liquidation and the regulatory approvals necessary therefore have been obtained.

Object and Principal Activities The Trust has used the net proceeds derived from the issuance of the Trust Securities to purchase the Company Class B Preferred Securities from the Company, and, accordingly, the assets of the Trust consist solely of the Company Class B Preferred Securities. The business purposes of the Trust are: (i) issuing the Trust Securities representing undivided beneficial ownership interests in the assets of the Trust; (ii) investing the net proceeds from the issuance of the Trust Securities, if any, in the Company Class B Preferred Securities; and (iii) engaging in such other activities which are necessary or incidental thereto. The Trust may also in the future issue, in one or more transactions, Additional Trust Preferred Securities with an aggregate denomination corresponding to the aggregate denomination of Additional Debt Securities and in consideration of the receipt of an equal number of Additional Company Class B Preferred Securities.

Trustees Pursuant to the Trust Agreement, there are initially five Trustees three of which are Regular Trustees.

Name Function Oliver d'Oelsnitz Regular Trustee Carl Amendola Regular Trustee Markus Schmalhofer Regular Trustee

31 The three Regular Trustees are employees or officers of, or are affiliated with, the Bank or a Qualified Subsidiary and can be contacted at the following address: DZ BANK, New York Branch, 609 Fifth Avenue, New York, New York 10017-1021, United States of America. The fourth Trustee will be the Property Trustee and the fifth Trustee will be the Delaware Trustee. Initially, Deutsche Bank Trust Company Americas, a New York banking corporation that is unaffiliated with the Bank, acts as Property Trustee, and Deutsche Bank Trust Company Delaware, a financial institution that is unaffiliated with the Bank, acts as Delaware Trustee, until, in each case, removed or replaced by the holder of the Trust Common Security. The Property Trustee holds legal title to the Company Class B Preferred Securities for the benefit of the holders of the Trust Preferred Securities, and the Property Trustee has the power to exercise all rights, powers and privileges as holder of the Company Class B Preferred Securities under the LLC Agreement. In addition, the Property Trustee maintains exclusive control of a Property Account, being a segregated non-interest bearing trust account to hold all payments made in respect of the Company Class B Preferred Securities for the benefit of the holders of the Trust Securities. The Bank or a Qualified Subsidiary, as the holder of the Trust Common Security, has the right to appoint, remove or replace any of the Trustees and to increase or decrease the number of Trustees, provided that at least one Trustee will be the Delaware Trustee, at least one Trustee will be the Property Trustee and at least one Trustee will be a Regular Trustee.

Principal Office The principal office of the Trust is c/o DZ BANK, New York Branch, 609 Fifth Avenue, New York, New York 10017-1021, United States of America.

Financial Year and Accounts The financial year corresponds to the calendar year. The accounts of the Trust will be prepared on an unaudited basis and will not be published.

Litigation The Trust has not been involved in any litigation, administrative proceeding or arbitration relating to claims or amounts which are material in the context of the issue of the Company Class B Preferred Securities or the Trust Preferred Securities and, so far as the Company is aware, no such litigation, administrative proceeding or arbitration is pending or threatened.

Material Changes Unless otherwise stated in this Offering Circular, the financial position of the Trust has not materially changed since August 12, 2004.

Capitalization The following table sets forth the capitalization of the Trust as of August 12, 2004 on the date of its formation and the capitalization of the Trust as of November 22, 2004, as adjusted to reflect the issue of the Trust Securities.

Date of Formation As adjusted (in € thousands) (in € thousands) Securityholders' Interests

Trust Preferred Securities: none issued and outstanding, date of formation 0 400,000 Trust Preferred Securities issued and outstanding, as adjusted 400,000 Trust Common Security: none issued and outstanding, date of formation 0 1 Trust Common Security issued and outstanding, as adjusted 1 Total securityholders' interests 0 400,001 Total Capitalization 0 400,001

32 DZ BANK Capital Funding LLC II

Incorporation and Duration The Company is a limited liability company that was formed under the LLC Act according to the laws of the State of Delaware, United States of America, and pursuant to the filing of the Certificate of Formation in respect of the Company with the Secretary of State of the State of Delaware, United States of America, on August 12, 2004.

Shareholders Pursuant to the LLC Agreement, the Company has issued two classes of non-voting preferred securities representing limited liability company interests in the Company, the Company Class A Preferred Security and the Company Class B Preferred Securities, and one class of common security representing limited liability company interests in the Company, the Company Common Security. The Property Trustee holds initially 100% of the issued and outstanding Company Class B Preferred Securities. The Bank holds initially the issued and outstanding Company Common Security and the issued and outstanding Company Class A Preferred Security. The Company Common Security is freely transferable. The Class A Preferred Security may be transferred to a Bank Affiliate. The rights of the holders of the Company Class B Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the LLC Agreement and the LLC Act. See "Description of the Company Securities – Company Class B Preferred Securities".

LLC Agreement For so long as the Company Class B Preferred Securities remain outstanding, the LLC Agreement provides that: (i) the Company will continue perpetually as a limited liability company unless the Company is dissolved in accordance with the provisions of the LLC Act and the LLC Agreement; the Company will not be dissolved and its affairs will not be wound up, except as otherwise permitted by the LLC Agreement, provided that notwithstanding the foregoing, the Company will not, to the fullest extent permitted by law, be dissolved until all claims under the Subordinated Support Undertaking have been paid in full pursuant to its terms; and (ii) the Company shall take all necessary steps to be treated as a partnership for United States federal income tax purposes.

Business Purpose The business purposes of the Company are: (a) to issue the Company Class A Preferred Security, the Company Class B Preferred Securities, the Additional Company Class B Preferred Securities as permitted under the LLC Agreement, and the Company Common Security; (b) (i) to invest the net proceeds of the Company Class A Preferred Security, the Company Class B Preferred Securities and the Company Common Security in the Initial Debt Securities and the net proceeds of Additional Company Class B Preferred Securities, if any as permitted, in the Additional Debt Securities, (ii) upon any redemption of the Initial Debt Securities prior to the Maturity Date, which does not involve a redemption of the Company Class B Preferred Securities, to reinvest the proceeds in Substitute Debt Securities, so long as any such reinvestment does not result in a Special Redemption Event, and (iii) after the Maturity Date, if the Company Class B Preferred Securities have not been redeemed until the Maturity Date, to invest in Permitted Investments; (c) in the event of any default on the Debt Securities, to enforce its rights for payment of any overdue amounts; (d) to enter into and, in certain circumstances, to enforce the Subordinated Support Undertaking for the sole benefit of the holders of the Company Class B Preferred Securities; and (e) to engage in such other activities which are necessary or incidental thereto. The Company may in the future issue, in one or more transactions, Additional Company Class B Preferred Securities in consideration of receipt of Additional Debt Securities in an aggregate denomination equal to the aggregate Class B Denomination of such Additional Company Class B Preferred Securities. The Company will not hold any asset the income from which would be treated as from United States of America sources for United States federal income tax purposes. Thus, Initial Debt Securities, Additional Debt Securities and Substitute Debt Securities will not include any obligation issued by a U.S. branch of the Bank or of a Qualified Issuer or by a Qualified Issuer incorporated in the

33 United States of America, or shown as a liability on the books of such a branch or Qualified Issuer, or the proceeds of which are lent to such a branch or Qualified Issuer except in the ordinary course of the lender's business.

Management The Company's business and affairs are conducted by its Board of Directors, which initially consists of three members, elected by the Bank as the initial holder of the Company Common Security:

Name Function Markus Schmalhofer Secretary Oliver d'Oelsnitz President Carl Amendola Treasurer

The Directors can be contacted at the address of the Company c/o RL&F Service Corp., One Rodney Square, 10th Floor, Wilmington, New Castle County, Delaware 19801, United States of America. However, in the event that: – the Company fails to pay Class B Capital Payments (plus Additional Amounts thereon) on the Company Class B Preferred Securities at the Stated Rate for four consecutive Class B Payment Periods even though all requirements for capital payments have been met and capital payments have been declared or – a holder of the Company Class B Preferred Securities (it is intended that initially the sole holder of the Company Class B Preferred Securities will be the Property Trustee, who is obligated under the Trust Agreement to enforce its rights as holder) notifies the Company that the Bank has failed to perform any obligation under the Subordinated Support Undertaking and such failure continues for 60 days after such notice is given, then a majority of the holders of the Company Class B Preferred Securities will have the right to appoint the Independent Enforcement Director. The Independent Enforcement Director's term will end if, in such Independent Enforcement Director's sole determination, the respective Class B Capital Payments (plus Additional Amounts thereon, if any) have been made at the Stated Rate by the Company for at least four consecutive Class B Payment Periods and the Bank has complied with its obligations under the Subordinated Support Undertaking.

Restrictions of the Company Certain events require the approval of the holders of the Company Class B Preferred Securities and there are different thresholds for the various events. For more details see "Description of the Company Securities – Company Class B Preferred Securities – Voting and Enforcement Rights". After the Maturity Date, if the Company Class B Preferred Securities have not been redeemed until the Maturity Date, the Company will invest the proceeds from the redemption of the Initial Debt Securities in Permitted Investments. The Company will select for purchase Permitted Investments in the following order of priority, to the extent the same are available, and within each category on terms that are the best available in relation to providing funds for the payment of Class B Capital Payments, any Additional Amounts and the Redemption Amount: – first, debt obligations of a Qualified Issuer subject to a guarantee or support undertaking by the Bank which guarantee or support undertaking ranks at least pari passu with the Initial Debt Securities, provided that such guarantee or support undertaking does not affect the quality of the Trust Preferred Securities or the Company Class B Preferred Securities to be treated as core capital or Tier I regulatory capital (aufsichtsrechtliches Kernkapital) on a consolidated basis for the Bank or – secondly, in the event such an investment is not available, bonds or notes issued by the Federal Republic of Germany or another member state of the European Economic and Monetary Union.

Services Agreement The Company has also entered into the Services Agreement with the Bank, the Trust and the Servicer, under which the Servicer is obligated, among other things, to provide, tax and other general administrative services to the Company and the Trust. The fees and expenses of the Trust and the Company, including any taxes, duties, assessments or governmental charges of whatever nature (other than Withholding Taxes) imposed by any taxing authority upon the Company or the Trust, and all other obligations of the Company and the Trust (other than with respect to the Trust Securities or the Company Securities) will be paid by the Bank.

34 Subordinated Support Undertaking The holders of the Company Class B Preferred Securities are third-party beneficiaries of the Subordinated Support Undertaking within the meaning of Section 328(2) of the German Civil Code. See "Description of the Subordinated Support Undertaking".

Registered Office / Principal Place of Business The registered office of the Company is c/o RL&F Service Corp., One Rodney Square, 10th Floor, Wilmington, New Castle County, Delaware, 19801, United States of America. The principal place of business of the Company is at 609 Fifth Avenue, New York, New York 10017-1021, United States of America.

Financial Year The financial year corresponds to the calendar year.

Auditors The auditors of the Company are Deloitte and Touche LLP, Two World Financial Center, New York, New York 10281-1414, United States of America.

Litigation The Company is not involved in any litigation, administrative or arbitration proceedings which may have had an impact on the financial position of the Company's business since its incorporation. Furthermore, the Company is not aware that any such proceedings or arbitration proceedings are imminent or being threatened.

Material Changes Unless otherwise stated in this Offering Circular, the financial position of the Company has not materially changed since August 12, 2004.

Capitalization The following table sets forth the capitalization of the Company as of August 12, 2004 on the date of its formation and the capitalization of the Company as of November 22, 2004, as adjusted to reflect the issue of the Company Securities.

Date of Formation As adjusted (in € thousands) (in € thousands) Securityholders' Equity Member's initial contribution 0.1 0.1 Company Class B Preferred Securities: none issued and outstanding, date of formation 0 400,001 Company Class B Preferred Securities issued and outstanding, as adjusted 400,001 Company Class A Preferred Securities: none issued and outstanding, date of formation 0 1 Company Class A Preferred Security issued and outstanding, as adjusted 1 Company Common Security: none issued and outstanding, date of formation 0 1 Company Common Security issued and outstanding, as adjusted 1 Total securityholders' interests 0 400,003 Total Capitalization 0.1 400,003.1

35 Description of the Trust Preferred Securities

The Trust Preferred Securities have been issued pursuant to the terms of the Trust Agreement. The following describes the material terms and provisions of the Trust Preferred Securities. This description does not purport to be complete and is subject to, and qualified in its entirety by reference to, the terms and provisions of the Trust Agreement and the Trust Act.

Form, Denomination and Title The Trust Preferred Securities have been issued in registered form on the Issue Date (i.e. November 22, 2004), without interest coupons attached, in minimum denominations of € 1,000 each, or greater integral multiples of € 1,000 in excess thereof. The Trust Preferred Securities have not been issued in bearer form. The Trust Agreement authorizes the Regular Trustees of the Trust to issue the Trust Preferred Securities, which represent undivided beneficial ownership interests in the assets of the Trust. Legal title to the Company Class B Preferred Securities has been recorded in the name of the Property Trustee for the benefit of the holders or beneficial owners of the Trust Preferred Securities. The Trust Agreement does not permit the Trust to acquire any assets other than the Company Class B Preferred Securities, issue any securities other than the Trust Preferred Securities or Additional Trust Preferred Securities (if any) or incur any indebtedness.

Capital Payments Trust Capital Payments will accrue on the Trust Denomination of € 1,000 per Trust Preferred Security at a rate per annum equal to the Stated Rate. See "Summary – Summary of the Terms of the Trust Preferred Securities and the Terms of the Company Class B Preferred Securities-Stated Rate". Trust Capital Payments will be paid, on a noncumulative basis, quarterly in arrear on each Trust Payment Date (i.e. February 22, May 22, August 22 and November 22) of each year, commencing on February 22, 2005. If any Trust Payment Date would otherwise fall on a day which is not a Business Day, it shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event the Trust Payment Date shall be the immediately preceding Business Day. See "Summary – Summary of the Terms of the Trust Preferred Securities and the Terms of the Company Class B Preferred Securities – Capital Payments". Trust Capital Payments on the Trust Preferred Securities are expected to be paid out of Class B Capital Payments received by the Trust from the Company. Class B Capital Payments are expected to be paid by the Company out of the net income of the Company which is derived from the amounts received by the Company on the Debt Securities or Permitted Investments held by the Company from time to time or from payments received by the Company under the Subordinated Support Undertaking. See "Description of the Company Securities – Company Class B Preferred Securities – Capital Payments". Accordingly, if the Company does not declare a Class B Capital Payment in respect of any Class B Payment Period or if such declaration is not allowed under the provisions of the LLC Agreement, the holders of the Company Class B Preferred Securities will have no right to receive a Class B Capital Payment in respect of such Class B Payment Period, and the Company will have no obligation to pay a Class B Capital Payment in respect of such Class B Payment Period, whether or not Class B Capital Payments are declared and paid in respect of any future Class B Payment Period. In such a case, no Trust Capital Payments will be made on the Trust Preferred Securities in respect of the corresponding Payment Period. Each declared Trust Capital Payment will be payable to the holders of record of the Trust Preferred Securities as they appear on the books and records of the Trust at the close of business on the corresponding record date. The record dates for the Trust Preferred Securities will be (i) so long as the Trust Preferred Securities remain in book-entry form, one Business Day prior to the relevant Payment Date, and (ii) in all other cases, the 15th day prior to the relevant Payment Date. Such Trust Capital Payments will be paid through the Property Trustee who will hold amounts received in respect of the Company Class B Preferred Securities in the Property Account for the benefit of the holders of the Trust Preferred Securities, subject to any applicable laws and regulations and the provisions of the Trust Agreement. The right of the holders of the Trust Preferred Securities to receive Trust Capital Payments is noncumulative which means that Trust Capital Payments which are not made on a Trust Payment Date will not be made up for or paid at a later time. Accordingly, if the Trust does not have funds available for payment of a Trust Capital Payment in respect of any Payment Period, the holders will have no right to receive a Trust Capital Payment in respect of such Payment Period, and the Trust will have no obligation to pay a Trust Capital Payment in respect of such Payment Period, whether or not Trust Capital Payments are paid in respect of any future Payment Period.

36 All Trust Capital Payments and other payments to holders of the Trust Preferred Securities will be distributed among holders of record pro rata, based on the proportion that the aggregate Trust Denomination of the Trust Preferred Securities held by each holder bears to the aggregate Trust Denomination of all Trust Preferred Securities.

Payments of Additional Amounts All payments on the Trust Preferred Securities by the Trust will be made without withholding or deduction by the Trust for or on account of Withholding Taxes unless the Trust is required by law to make such deduction or withholding. In such event, the Trust will pay, as additional Trust Capital Payments, such Additional Amounts as may be necessary in order that the net amounts received by the holders of the Trust Preferred Securities will equal the amounts that would have been received had no such deduction or withholding been required. However, no such Additional Amounts will be payable in respect of the Trust Preferred Securities: (i) if the Company is unable to pay corresponding amounts because such payment would exceed the Group Annual Profits for the most recent financial year for which the Bank's shareholders' meeting (Hauptversammlung) has resolved on the appro- priation of profits (after subtracting from such Group Annual Profits the amount of Class B Capital Payments or dividends or other distributions or payments on Parity Securities already paid or payable on the basis of such Group Annual Profits and the Bank Dividend Payment for such financial year on or prior to the day on which such Additional Amounts will be payable); or (ii) with respect to any Withholding Taxes that are payable by reason of a holder or beneficial owner of the Trust Preferred Securities having some connection with any Relevant Jurisdiction other than by reason only of the mere holding of the Trust Preferred Securities; or (iii) where such deduction or withholding can be avoided if the holder or beneficial owner of the Trust Preferred Securities makes a declaration of non-residence or other similar claim for exemption to the relevant tax authority or complies with any reasonable certification, documentation, information or other reporting requirement imposed by the relevant tax authority; or (iv) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to the European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000 on the taxation of savings income implementing or complying with, or introduced in order to conform to, such Directive.

Trust Enforcement Events The occurrence, at any time, of: (i) non-payment of Capital Payments (plus any Additional Amounts thereon, if any) on the Trust Preferred Securities or the Company Class B Preferred Securities at the Stated Rate for four consecutive Payment Periods even though all requirements for capital payments have been met and capital payments have been declared by the Company; or (ii) a default by the Bank in respect of any of its obligations under the Subordinated Support Undertaking will constitute an enforcement event under the Trust Agreement with respect to the Trust Preferred Securities (Trust Enforcement Event). Until all Trust Enforcement Events with respect to the Trust Preferred Securities have been cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the holders of the Trust Preferred Securities and only the holders of the Trust Preferred Securities will have the right to direct the Property Trustee in the manner provided in the Trust Agreement. In the case of non-payment of Class B Capital Payments (plus any Additional Amounts thereon, if any) for four consecutive Payment Periods even though all requirements for capital payments have been met and capital payments have been declared or the continuation of a failure by the Bank to perform any obligation under the Subordinated Support Undertaking for a period of 60 days after notice thereof has been given to the Company by the Property Trustee or any holder of the Company Class B Preferred Securities, the holders of a majority in aggregate Trust Denomination of the Trust Preferred Securities (excluding Trust Preferred Securities held by the Bank or Bank Affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz)) will have the right to direct the Property Trustee to enforce, on their behalf, the rights of the holders of the Company Class B Preferred Securities, including: (i) claims to receive Capital Payments (only if duly declared, plus any Additional Amounts thereon, if any) on the Company Class B Preferred Securities pursuant to the terms thereof; (ii) the right to appoint the Independent Enforcement Director (to the extent that such Trust Enforcement Event results from non- payment of Capital Payments on the Company Class B Preferred Securities for four consecutive Class B Payment Periods even though all requirements for capital payments have been met and capital payments have been declared or the continuation of a failure by the Bank to perform any obligation under the Subordinated Support Undertaking for a period of 60 days after notice thereof has been given to the Company by the Property Trustee or any holder of the Company Class B Preferred Securities); and (iii) the rights of the holders of the Company Class B Preferred Securities under the Subordinated Support Undertaking.

37 See "Description of the Company Securities – Company Class B Preferred Securities – Voting and Enforcement Rights". If the Property Trustee fails to enforce its rights under the Company Class B Preferred Securities after a holder of the Trust Preferred Securities has made a written request, such holder of record of the Trust Preferred Securities may directly institute a legal proceeding against the Company to enforce the Property Trustee's rights under the Company Class B Preferred Securities without first insti- tuting legal proceeding against the Property Trustee, the Trust or any other person or entity. The holder of record is Clearstream Frankfurt, in whose name the Global Certificates are registered (see "– Form, Clearing, Transfers and Settlement").

Redemption The Company Class B Preferred Securities and the Trust Preferred Securities have no scheduled maturity date and are not redeemable at any time at the option of the holders thereof. The Company Class B Preferred Securities are redeemable at the option of the Company, in whole but not in part, on the Initial Redemption Date or on any Class B Payment Date thereafter, at the Redemption Amount subject to the conditions of the LLC Agreement. The Company will also have a right to redeem the Company Class B Preferred Securities at any time, also already prior to the Initial Redemption Date, upon at least 31 days' prior notice, in whole but not in part, upon the occurrence of a Special Redemption Event. Any redemption, whether upon the occurrence of a Special Redemption Event or on or after the Initial Redemption Date, will be made at the Redemption Amount. The Company may exercise its right to redeem the Company Class B Preferred Securities only if: (i) it has given at least 31 days' prior notice (or such longer period as required by the relevant regulatory authorities) to the holders of the Company Class B Preferred Securities of its intention to redeem the Company Class B Preferred Securities on the Redemption Date, and (ii) certain other conditions as set forth under "Description of the Company Securities – Company Class B Preferred Securities – Redemption" are met. The Trust Agreement provides that the Property Trustee gives notice to the holders of the Trust Preferred Securities of the Company's intention to redeem the Company Class B Preferred Securities not fewer than 30 days before the Redemption Date. Subject to the provisions contained in the Trust Agreement, upon redemption of the Company Class B Preferred Securities, the Trust must apply the Redemption Amount received in connection therewith to redeem pro rata Trust Securities. Any Company Class B Preferred Securities or Trust Preferred Securities that are redeemed will be cancelled, and not reissued, following their redemption. If, at any time, a Trust Special Redemption Event occurs and is continuing, the Regular Trustees will, within 90 days following the occurrence of such Trust Special Redemption Event, dissolve the Trust upon not less than 30 nor more than 60 days' notice to the holders of the Trust Preferred Securities and upon not less than 30 nor more than 60 days' notice to, and consultation with Clearstream Frankfurt, with the result that, after satisfaction of the claims of creditors of the Trust, if any, the Company Class B Preferred Securities would be distributed on a pro rata basis to the holders of the Trust Preferred Securities and the holder of the Trust Common Security in liquidation of such holders' interests in the Trust, provided, however, that, if at such time, the Trust has the opportunity to eliminate, within such 90-day period, the Trust Special Redemption Event by taking some ministerial action (a ministerial act is an administrative action (such as filing a form or making an election or pursuing some other similar reasonable measure) which in the sole judgment of the Bank has or will cause no adverse effect on the Company, the Trust, the Bank or the holders of the Trust Preferred Securities and will involve no material costs), then the Trust will pursue any such measure in lieu of dissolution. On the date fixed for any distribution of the Company Class B Preferred Securities, upon dissolution of the Trust: (i) the Trust Securities will no longer be deemed to be outstanding, and (ii) certificates representing Trust Preferred Securities will be deemed to represent the Company Class B Preferred Securities having a denomination equal to the Trust Denomination of, and bearing accumulated and unpaid Capital Payments equal to accumulated and unpaid Capital Payments on, such Trust Preferred Securities until such certificates are presented to the Company or its agent for transfer or re-issuance. If the Company Class B Preferred Securities are distributed to the holders of the Trust Preferred Securities, the Bank will use its commercially reasonable efforts to cause the Company Class B Preferred Securities to be eligible for clearing and settlement through Clearstream Frankfurt or a successor clearing agent.

Redemption Procedures If the Trust gives a notice of redemption in respect of the Trust Preferred Securities (which notice shall be irrevocable), and if the Company has paid to the Property Trustee a sufficient amount of cash in connection with the related redemption of the Company Class B Preferred Securities, then, by 10:00 a.m., Frankfurt am Main time, on the relevant Redemption Date, the Property Trustee

38 will irrevocably deposit with Clearstream Frankfurt funds sufficient to pay the amount payable and will give Clearstream Frankfurt irrevocable instructions and authority to pay such redemption amount to the holders of the Trust Preferred Securities. If notice of redemption will have been given and funds are deposited as required, then upon the date of such deposit, or the relevant Redemption Date, as applicable, Capital Payments shall cease to accumulate on the Trust Preferred Securities so called for redemption and all rights of holders of such Trust Preferred Securities will cease, except the right of the holders of such Trust Preferred Securities to receive the redemption amount for such Trust Preferred Securities, but without interest thereon.

Purchases of the Trust Preferred Securities Subject to the foregoing redemption provisions and procedures and applicable law, the Bank may at any time purchase outstanding Trust Preferred Securities and resell, hold, cancel or otherwise dispose of Trust Preferred Securities so repurchased in the open market or otherwise.

Subordination of the Trust Common Security Payment of Trust Capital Payments and other distributions on, and amounts on redemption of, the Trust Preferred Securities will generally be made pro rata based on the Trust Denomination of the Trust Preferred Securities and the capital contribution in respect of the Trust Common Security, as the case may be. However, upon the liquidation of the Trust and upon the occurrence and during the continuance of a default under the Debt Securities or under the Subordinated Support Undertaking, holders of the Trust Preferred Securities will have a preference over the holder of the Trust Common Security with respect to payments of Trust Capital Payments and other distributions and amounts upon redemption of Trust Preferred Securities or liquidation of the Trust as no payment of Trust Capital Payments shall be made to the holder of the Trust Common Security unless payment in full have been made to the holders of the Trust Preferred Securities.

Liquidation Distribution Procedure upon Dissolution Subject to the provisions contained in the Trust Agreement, the Trust will dissolve: (i) upon the insolvency, liquidation, dissolution or winding-up of the Bank; (ii) upon the dissolution of the Company in accordance with the LLC Agreement; (iii) upon the consent of at least a majority in aggregate Trust Denomination of the Trust Securities, voting together as a single class, to dissolve the Trust; (iv) when all of the Trust Securities shall have been called for redemption and (A) the amounts necessary for redemption thereof shall have been paid to the holders of the Trust Securities or (B) all of the Company Class B Preferred Securities shall have been distributed to the holders of the Trust Securities in exchange for all of the Trust Securities; or (v) upon the distribution of all of the Company Class B Preferred Securities due to the occurrence of a Trust Special Redemption Event; provided that, if a claim has been made under the Subordinated Support Undertaking, the Trust shall not, to the fullest extent permitted by law, dissolve until (A) such claim has been satisfied and the proceeds therefrom have been distributed to the holders of the Trust Securities or (B) the Company Class B Preferred Securities have been distributed to the holders of the Trust Securities. In the event of any liquidation, dissolution, winding-up or termination of the Trust not involving a redemption of the Company Class B Preferred Securities in whole or the liquidation, dissolution or winding-up of the Company, the holders of the Trust Preferred Securities will be entitled to receive, after payment or reasonable provision for payment of the Trust's liabilities to other creditors (if any), on a pro rata basis Company Class B Preferred Securities.

Statute of Limitation The prescription period for claims for the payment of Trust Capital Payments, Additional Amounts and redemption of the Trust Preferred Securities is three years after the date on which the respective payment has become due and payable.

Voting Rights Except as expressly required by applicable law or the Delaware Statutory Trust Act, or except as provided for in the Trust Agreement or the LLC Agreement, the holders of the Trust Preferred Securities will not be entitled to vote on the affairs of the Trust or the Company. So long as the Trust holds any Company Class B Preferred Securities, the holders of the Trust Preferred Securities will have the right, subject to the provisions contained in the Trust Agreement, to direct the Property Trustee to enforce the voting rights attributable to such Company Class B Preferred Securities. These voting rights may be waived by the holders of the Trust Preferred Securities by written notice to the Property Trustee and in accordance with applicable laws.

39 Subject to the requirement of the Property Trustee obtaining a tax opinion as set forth in the last sentence of this paragraph, the holders of a majority of the outstanding Trust Preferred Securities (excluding Trust Preferred Securities held by the Bank or its affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz)) have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, and to direct the exercise of any trust or power conferred upon the Property Trustee under the Trust Agreement, including the right to direct the Property Trustee, as holder of the Company Class B Preferred Securities, to: (i) exercise the remedies available to it under the LLC Agreement as a holder of the Company Class B Preferred Securities; or (ii) consent to any amendment, modification or termination of the LLC Agreement or the Company Class B Preferred Securities where such consent will be required; provided, however, that where a consent or action under the LLC Agreement would require the consent or act of the holders of more than a majority of the Company Class B Preferred Securities affected thereby, only the holders of the percentage of the aggregate Trust Denomination of the Trust Preferred Securities which is at least equal to the percentage of the Company Class B Preferred Securities required to so consent or act under the LLC Agreement, may direct the Property Trustee to give such consent or take such action on behalf of the Trust; see "Description of the Company Securities – Company Class B Preferred Securities – Voting and Enforcement Rights". Except with respect to directing the time, method and place of conducting a proceeding for a remedy as described above, the Property Trustee will be under no obligation to take any of the actions described in clause (i) or (ii) above unless, inter alia, the Property Trustee has obtained an opinion of independent tax counsel in the United States of America to the effect that following such action the Trust will not be treated as a corporation or a partnership for United States federal income tax purposes. Any required approval or direction of holders of the Trust Preferred Securities may be given at a separate meeting of holders of the Trust Preferred Securities convened for such purpose, at a meeting of all of the holders of the Trust Preferred Securities or pursuant to a written consent. The Regular Trustees will cause a notice of any meeting at which holders of the Trust Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be made in the manner described below under "– Notices". Each such notice will include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of the Trust Preferred Securities will be required for the Trust to redeem and cancel Trust Preferred Securities or distribute Company Class B Preferred Securities in accordance with the Trust Agreement and the terms of the Trust Securities. Notwithstanding that holders of the Trust Preferred Securities are entitled to vote or consent under the circumstances described above, none of the Trust Preferred Securities that are beneficially owned at the time of such vote or consent by the Bank or its affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz) will be entitled to vote or consent and will, for purposes of such vote or consent, be treated as if such Trust Preferred Securities were not outstanding, except for the Trust Preferred Securities purchased or acquired by the Bank or its affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz) in connection with transactions effected by or for the account of customers of the Bank or customers of any of its affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz) or in connection with distribution or trading or market-making activities in connection with such Trust Preferred Securities in the ordinary course of business; provided, however, that persons (other than affiliates of the Bank within the meaning of § 15 of the German Stock Corporation Act (Aktien- gesetz)) to whom the Bank or any of its affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz) have pledged Trust Preferred Securities may vote or consent with respect to such pledged Trust Preferred Securities pursuant to the terms of such pledge. Holders of the Trust Preferred Securities will have no rights to appoint or remove the Regular Trustees, who may be appointed, removed or replaced solely by the holder of the Trust Common Security, which will be the Bank or a Qualified Subsidiary.

Securityholder Meetings Meetings of the holders of any class of Trust Securities may be called at any time by the Regular Trustees to consider and act on any matter on which holders of such class of Trust Securities are entitled to act under the terms of the Trust Agreement, the terms of the Trust Securities, the LLC Agreement, the Delaware Statutory Trust Act or other applicable law. The Regular Trustees shall call a meeting of the holders of a class if directed to do so by the holders of at least 10% in aggregate Trust Denomination of such class of Trust Securities. Such direction must be given by delivering to the Regular Trustees one or more calls in writing stating that the signing holders of the Trust Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any holders of the Trust Securities calling a meeting shall specify in writing the certificates (i.e. representing the

40 Trust Common Security or the Trust Preferred Securities) held by the holders of the Trust Securities exercising the right to call a meeting and only those Trust Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. Except to the extent otherwise provided in the terms of the Trust Securities, the following provisions shall apply to meetings of holders of the Trust Securities: – Notice of any meeting shall be given to all the holders of the Trust Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Any action that may be taken at a meeting of the holders may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the holders owning not less than the minimum amount of Trust Securities in aggregate Trust Denomination that would be necessary to authorize or take such action at a meeting at which all holders having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting will be given to the holders of the Trust Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees. – Subject to the terms of the Trust Agreement, each holder of a Trust Security may authorize any person to act for it by proxy on all matters in which a holder is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. – Each meeting of the holders of the Trust Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate.

Merger, Consolidation, Amalgamation, Conversion or Replacement of the Trust The Trust may not consolidate, amalgamate, convert, merge with or into, or be replaced by, or convey, transfer or lease substantially all of its properties and assets to any corporation or other entity, except as described below. The Trust may, with the consent of the Regular Trustees (or, if there are more than two Regular Trustees, a majority of the Regular Trustees) and without the consent of the holders of the Trust Securities, the Property Trustee or the Delaware Trustee, consolidate, amalgamate, convert, merge with or into, or be replaced by a trust organized as such under the laws of any State of the United States of America or any entity organized under any laws other than the laws of any State of the United States of America, to the extent legally permitted under applicable law and provided, that: (i) if the Trust is not the survivor, such successor entity either (A) expressly assumes all of the obligations of the Trust to the holders of the Trust Securities, or (B) substitutes Successor Trust Securities for the Trust Preferred Securities, (ii) the Company expressly acknowledges a trustee or another representative of such successor entity possessing substantially equivalent powers and duties as the Property Trustee as the holder of the Company Class B Preferred Securities, (iii) such merger, consolidation, amalgamation, conversion or replacement does not cause the Trust Preferred Securities (including the Successor Trust Securities) to be downgraded by any internationally recognized rating organization, (iv) such merger, consolidation, amalgamation, conversion or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Preferred Securities (including any Successor Trust Securities) in any material respect, (v) such successor entity has purposes substantially identical to that of the Trust, (vi) the obligations of the Bank pursuant to the Subordinated Support Undertaking will continue in full force and effect, and (vii) prior to such merger, consolidation, amalgamation, conversion or replacement, the Bank has received an opinion of a nationally recognized law firm in the United States of America experienced in such matters to the effect that: (A) such merger, consolidation, amalgamation, conversion or replacement will not adversely affect the rights, preferences and privileges of the holders of the Trust Preferred Securities (including the Successor Trust Securities) in any material respect, (B) following such merger, consolidation, amalgamation, conversion or replacement, neither the Trust nor such successor entity will be required to register under the Investment Company Act, (C) following such merger, consolidation, amalgamation, conversion or replacement, the Trust (or such successor trust) will not be treated as a corporation or a partnership for United States federal income tax purposes, and (D) following such merger, consolidation, amalgamation, conversion or replacement, the Company will not be treated as a corporation for United States federal income tax purposes. Notwithstanding the foregoing, the Trust will not, except with the consent of the holders of 100% of the outstanding Trust Preferred Securities (excluding Trust Preferred Securities held by the Bank and any affiliate within the meaning of § 15 of the

41 German Stock Corporation Act (Aktiengesetz)), consolidate, amalgamate, convert, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, convert, merge with or into, or replace it, if such consolidation, amalgamation, conversion, merger or replacement would cause the Trust or the successor entity to be treated as a corporation or a partnership for United States federal income tax purposes. Any such merger, consolidation, amalgamation, conversion or replacement shall be notified to the holders of the Trust Securities. Upon any replacement, any reference to the Trust shall forthwith be deemed to be a reference to the successor entity and any reference to the country of residence of the Trust shall forthwith be deemed to be a reference to the country of residence of the successor entity; in each case with effect from the replacement date.

Modification of the Trust Agreement Subject to the terms of the Trust Agreement and the Trust Securities, the Trust Agreement may be modified or amended in writing if approved by the Regular Trustees (or, if there are more than two Regular Trustees, a majority of the Regular Trustees) (and in certain circumstances the Property Trustee and the Delaware Trustee), provided, that, if any proposed amendment provides for, or the Regular Trustees otherwise propose to effect: (i) any action that would materially adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Trust Agreement or otherwise, or (ii) the dissolution, winding-up or termination of the Trust other than pursuant to the terms of the Trust Agreement, then such amendment or proposal will not be effective except with the approval of at least a majority in aggregate Trust Denomination of the Trust Securities affected thereby; provided, further that, if any amendment or proposal referred to in clause (i) above would adversely affect only the Trust Preferred Securities or the Trust Common Security, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal will not be effective except with the approval of a majority in such Trust Denomination of such class of the Trust Securities outstanding. The Trust Agreement may be amended without the consent of the holders of the Trust Securities to: (i) cure any ambiguity, (ii) correct or supplement any provision in the Trust Agreement that may be defective or inconsistent with any other provision of the Trust Agreement, (iii) add to the covenants, restrictions or obligations of the Bank, (iv) conform to any change in the Investment Company Act or the rules or regulations thereunder, or (v) modify, eliminate and add to any provision of the Trust Agreement to such extent as may be necessary or desirable; provided, that such amendments do not have a material adverse effect on the rights, preferences or privileges of the holders of the Trust Securities. Notwithstanding the foregoing, no amendment or modification may be made to the Trust Agreement if such amendment or modi- fication would: (i) cause the Trust to be treated as a corporation or a partnership for United States federal income tax purposes, (ii) cause the Company to be treated as a corporation for such purposes, (iii) reduce or otherwise adversely affect the powers of the Property Trustee, or (iv) cause the Trust or the Company to be required to register under the Investment Company Act.

Form, Clearing, Transfers and Settlement Trust Preferred Securities have been issued initially in the form of a single Temporary Global Trust Preferred Certificate. Beneficial interests in the Temporary Global Trust Preferred Certificate will be exchanged for beneficial interests in one or more Permanent Global Trust Preferred Certificates not earlier than following the Restricted Period, i.e. 40 consecutive days beginning on and including the first day after (i) the Issue Date or, if later, (ii) the completion of the distribution of the Trust Preferred Securities, and upon certification of non-U.S. beneficial ownership by or on behalf of the holders of such interests. The Global Certificates are deposited upon issuance with, and registered in the name of, Clearstream Frankfurt for credit to account- holders in Clearstream Frankfurt. Beneficial interests in the Trust Preferred Securities will be shown only on, and transfers thereof will be effected only through, book- entry records maintained by Clearstream Frankfurt and its participants. Trust Preferred Securities in definitive form will not be issued. Holders of beneficial interests in the Global Certificates must rely upon the procedures of Clearstream Frankfurt and its

42 participants to exercise any rights of a holder under the Global Certificates. Transfers and payments in respect of the Trust Preferred Securities may be effected through the Paying Agents subject to the terms of the Trust Preferred Securities and the operating procedures of Clearstream Frankfurt. None of the Bank, the Company or the Trust will have any responsibility or liability for any aspect of the records relating to the payments made on account of beneficial interests in the Global Certificates or for maintaining, supervising or reviewing any records relating to such beneficial interests.

Certifications by Holders of the Temporary Global Trust Preferred Certificate On or after the expiration of the Restricted Period, a certificate must be provided by or on behalf of a holder of a beneficial interest in the Temporary Global Trust Preferred Certificate to the Principal Paying Agent, certifying that the beneficial owner of the interest in the Temporary Global Trust Preferred Certificate is not a U.S. Person. Unless such certificate is provided: (i) the holder of such beneficial interest will not receive any payments of dividends, redemption amount or any other payment with respect to such holder's beneficial interest in the Temporary Global Trust Preferred Certificate, (ii) such beneficial interest may not be exchanged for a beneficial interest in the Permanent Global Trust Preferred Certificate, and (iii) settlement of trades with respect to such beneficial interest will be suspended. In the event that any holder of a beneficial interest in the Temporary Global Trust Preferred Certificate fails to provide such certification, exchanges of interests in the Temporary Global Trust Preferred Certificate for interests in the Permanent Global Trust Preferred Certificate and settlements of trades of all beneficial interests in the Temporary Global Trust Preferred Certificate may be temporarily suspended.

Paying Agent and Payments Deutsche Bank Aktiengesellschaft, Frankfurt am Main, Federal Republic of Germany, acts as Principal Paying Agent for the Trust Preferred Securities. Payments in respect of the Trust Preferred Securities will be made to or as directed by Clearstream Frankfurt as the registered holder of the Global Certificate representing the Trust Preferred Securities. Payments made to Clearstream Frankfurt shall be made by wire transfer, and Clearstream Frankfurt will credit the relevant accounts of its participants on the relevant dates. Registration of transfers of the Trust Preferred Securities will be effected without charge by or on behalf of the Trust, but upon payment (with the giving of such indemnity as the Property Trustee may require) in respect of any tax or other governmental charges that may be imposed in relation to it; provided, that no transfer or exchange of the Trust Preferred Securities (other than a transfer of the Trust Preferred Securities as a whole by the common depositary for Clearstream Frankfurt to another common depositary of Clearstream Frankfurt or to another nominee of Clearstream Frankfurt) may be registered except in limited circumstances. The Property Trustee will not be required to register or cause to be registered the transfer of the Trust Preferred Securities after such Trust Preferred Securities have been called for redemption.

Information Concerning the Property Trustee The Property Trustee, prior to the occurrence of a Trust Enforcement Event, undertakes to perform only such duties as are specifically set forth in the Trust Agreement and, in case a Trust Enforcement Event has occurred (that has not been cured or waived), will exercise the same degree of care and skill as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. Subject to the provisions of the Trust Agreement, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Trust Agreement, though it may do so at its discretion or at the request of any holder of the Trust Preferred Securities if it is satisfied, in its sole discretion, that the repayment of funds or cover for liability is assured to it, by way of indemnity or otherwise. Notwithstanding the foregoing, the Property Trustee is obliged to exercise its rights or powers at the request or discretion of any holder of the Trust Preferred Securities if such holder has provided sufficient security and indemnity to the Property Trustee in accordance with the Trust Agreement and the Property Trustee has obtained any necessary legal opinions as described in the Trust Agreement.

Notices For so long as the Trust Preferred Securities are listed on the Frankfurt Stock Exchange and the rules of such stock exchange so require, all notices concerning the Trust Preferred Securities will be published in a German newspaper designated by the Frankfurt Stock Exchange (which is expected to be the Börsen-Zeitung or the Financial Times Deutschland).

43 Governing Law The Trust Agreement and the Trust Securities shall be governed by, and construed in accordance with, the laws of the State of Delaware, United States of America.

Miscellaneous The Regular Trustees are authorized and directed to conduct the affairs of and to operate the Trust in such a way that the Trust will not be required to register under the Investment Company Act.

44 Description of the Company Securities

The following describes the material terms and provisions of the Company Securities, including the Company Class B Preferred Securities. This description is qualified in its entirety by reference to the terms and provisions of the LLC Agreement.

Upon the execution of the LLC Agreement, the Company has issued Company Securities consisting of the Company Common Security, the Company Class A Preferred Security and Company Class B Preferred Securities. For so long as the Company Class B Preferred Securities remain outstanding, the Company Common Security will be owned directly or indirectly by the Bank and the Company Class A Preferred Security will be owned directly or indirectly by the Bank. The Company Class B Preferred Securities are initially held by the Property Trustee.

Company Common Security Subject to the rights of the holders of the Company Class B Preferred Securities to appoint the Independent Enforcement Director and the terms of the LLC Agreement and the LLC Act, all voting rights are vested in the holder of the Company Common Security. The Company Common Security is entitled to one vote per security. The Company Common Security is initially held by the Bank. Capital payments may be declared and paid on the Company Common Security only if all Class B Capital Payments and Additional Amounts thereon, if any, on the Company Class B Preferred Securities in respect of the relevant Class B Payment Period have been declared and paid in full at the Stated Rate. Following the allocation of profits and losses in accordance with the LLC Agreement, a distribution of any profits to a holder of a Company Common Security shall require an unanimous resolution of all holders of a Company Common Security. If at the time of such resolution there is more than one Company Common Security, the profits shall be distributed in proportion to the paid-in capital with respect to each such Company Common Security. The Company does not expect to pay dividends on the Company Common Security. In the event of the liquidation, dissolution, termination or winding-up of the Company, after the payment of all debts and liabilities and after there have been paid or set aside for the holders of all the Company Class A Preferred Securities and the Company Class B Preferred Securities the full preferential amounts to which such holders are entitled, the holder of the Company Common Security will be entitled to share in any remaining assets.

Company Class A Preferred Security The Company Class A Preferred Security is non-voting, other than as provided in the LLC Agreement. Capital payments on the Company Class A Preferred Security will be payable, as and if duly declared by the Board of Directors, out of the assets of the Company legally available therefor; such a declaration will occur only if the Board of Directors does not declare Class B Capital Payments on the Company Class B Preferred Securities at the Stated Rate on any Class B Payment Date. It is expected that the holder of the Company Class A Preferred Security will receive capital payments only if: (i) Class B Capital Payments are not permitted to be declared on the Company Class B Preferred Securities on any Class B Payment Date at the Stated Rate because either the Company Operating Profit Test, the Bank Dividend Payment Test, the Group Annual Profit Test, the Group BIS Tier I Capital Ratio Test or the Regulatory Authority Test have not been met, and (ii) the Company has sufficient Company Operating Profits. The Company does not intend to pay capital payments on the Company Class A Preferred Security. The payment of capital payments on the Company Class A Preferred Security is not a condition to the payment of Class B Capital Payments on the Company Class B Preferred Securities. In the event of any liquidation, dissolution or winding-up of the Company, the Company Class B Preferred Securities will rank junior to the Company Class A Preferred Security, and the Company Class B Preferred Securities will rank senior to the Company Common Security; provided, however, that any payments made by the Bank pursuant to the Subordinated Support Undertaking will be payable by the Company solely to the holders of the Company Class B Preferred Securities. Accordingly, upon liquidation of the Company, the holder of the Company Class A Preferred Security will be entitled to receive a liquidation distribution of the Debt Securities or Permitted Investments. In the event of the liquidation of the Company and to the extent an Independent Enforcement Director has been appointed, the Independent Enforcement Director will enforce the Subordinated Support Undertaking solely on behalf of the holders of the Company Class B Preferred Securities. With respect to the Company's rights under the Subordinated Support Undertaking, the Company Class B Preferred Securities will rank senior to the Company Class A Preferred Security and payments thereunder will be distributed by the Company solely to the holders of the Company Class B Preferred Securities. For a description of the circumstances under which an Independent Enforcement Director may be elected, see "– Company Class B Preferred Securities – Voting Rights".

45 Company Class B Preferred Securities

General The Company will observe all corporate formalities necessary to issue the Company Class B Preferred Securities under the laws of the State of Delaware, United States of America, and the Company Class B Preferred Securities are deemed to be validly issued, fully paid and non-assessable when they are issued. The holders of the Company Class B Preferred Securities will have no pre- emptive rights with respect to any part of any new or additional issue of Company Class B Preferred Securities (i. e., will have no rights to acquire any Additional Company Class B Preferred Securities on a preferential basis). The Company Class B Preferred Securities will not have any scheduled maturity date, will not be redeemable at any time at the option of the holders thereof and will not be subject to any other obligation of the Company for their repurchase or redemption. The Bank will procure that the Company Class B Preferred Securities are replaced with similar or more equity-like securities on the level of the Group prior to their redemption.

Capital Payments Class B Capital Payments will accrue on the Class B Denomination of € 1,000 per Company Class B Preferred Security at the Stated Rate. See "Summary – Summary of the Terms of the Trust Preferred Securities and the Terms of the Company Class B Preferred Securities – Capital Payments, – Stated Rate, – Reference Rate and – Margin". Class B Capital Payments on the Company Class B Preferred Securities will be paid by the Company out of the net income of the Company which is derived from amounts received on the Debt Securities or Permitted Investments held by the Company from time to time or from payments received by the Company under the Subordinated Support Undertaking. If the Board of Directors does not declare a Class B Capital Payment on the Company Class B Preferred Securities in respect of any Class B Payment Period, the holders of the Company Class B Preferred Securities will have no right to receive a Class B Capital Payment on the Company Class B Preferred Securities in respect of such Class B Payment Period, and the Company will have no obligation to pay a Class B Capital Payment on the Company Class B Preferred Securities in respect of such Class B Payment Period, whether or not Class B Capital Payments are declared and paid on the Company Class B Preferred Securities in respect of any future Class B Payment Period. Class B Capital Payments on the Company Class B Preferred Securities may be declared and paid on any Class B Payment Date only if: (i) there are Company Operating Profits for the Class B Payment Period ending on the day immediately preceding such Class B Payment Date at least equal to the amount of such Class B Capital Payments (Company Operating Profit Test), and (ii) on or prior to such Class B Payment Date the Bank paid a Bank Dividend Payment from the Bank Distributable Profits for the most recent financial year of the Bank for which the Bank's shareholders' meeting (Hauptversammlung) has resolved on the appropriation of profits (Bank Dividend Payment Test), and (iii) there are Group Annual Profits for the most recent financial year of the Bank for which the Bank's shareholders' meeting (Hauptversammlung) has resolved on the appropriation of profits at least equal to the sum of (x) the amount of Class B Capital Payments payable and already paid in such financial year, (y) capital payments or dividends or other distributions or payments on Parity Securities already paid in such financial year or payable on the same date, in each case on the basis of such Group Annual Profits and (z) the Bank Dividend Payment for such financial year (collectively, Group Annual Profit Test), and (iv) the Group BIS Tier I Capital Ratio as of the end of the most recent financial year of the Bank for which audited and approved (gebilligt) consolidated financial statements are available and as published in the annual report of the Group equals or exceeds 5% (Group BIS Tier I Capital Ratio Test), and (v) there is in effect no order of BaFin or other relevant regulatory authority pursuant to the German Banking Act or any other relevant regulatory provision prohibiting the Bank from making any distributions (including to the holders of Parity Securities) (Regulatory Authority Test). The Company will have no obligation to make up, at any time, any Class B Capital Payments not paid in full by the Company as a result of non-fulfillment of the above-listed conditions (i) to (v). If Class B Capital Payments are duly declared, Class B Capital Payments will be paid, on a noncumulative basis, quarterly in arrear on each Class B Payment Date. Each duly declared Class B Capital Payment will be payable to the holders of record of the Company Class B Preferred Securities as they appear on the books and records of the Company on the relevant record date which shall be one Business Day prior to the Class B Payment Date. The relevant record date for the Company Class B Preferred Securities will be the 15th day prior to the relevant Class B Payment Date if the Trust Preferred Securities (or, if the Trust is liquidated, the Company Class B Preferred Securities) are not in book-entry form.

46 Payment of Additional Amounts The payment of the Class B Capital Payments on the Company Class B Preferred Securities, and any amount payable in liquidation or upon redemption thereof will be made without any deduction or withholding by the Company for or on account of Withholding Taxes, unless the Company is required by law to make such deduction or withholding. The Company will pay, as additional Class B Capital Payments, such Additional Amounts as may be necessary in order that the net amounts received by the holders of the Company Class B Preferred Securities on the Company Class B Preferred Securities and by the holders of the Trust Preferred Securities on the Trust Preferred Securities, after any deduction or withholding for or on account of Withholding Taxes, will equal the amounts that would otherwise have been received in respect of the Company Class B Preferred Securities and the Trust Preferred Securities, respectively, in the absence of such withholding or deduction. No such Additional Amounts, however, will be payable in respect of the Company Class B Preferred Securities: (i) if the Company is unable to pay such Additional Amounts because such payment would exceed the Group Annual Profits for the most recent financial year for which the Bank's shareholders' meeting (Hauptversammlung) has resolved on the appro- priation of profits (after subtracting from such Group Annual Profits the amount of Class B Capital Payments, capital payments or dividends or other distributions or payments on Parity Securities already paid or payable on the basis of such Group Annual Profits, and the Bank Dividend Payment for such financial year on or prior to the date on which such Additional Amounts will be payable); or (ii) with respect to any Withholding Taxes that are payable by reason of a holder or beneficial owner of the Company Class B Preferred Securities (other than the Trust) or the Trust Preferred Securities having some connection with any Relevant Jurisdiction other than by reason only of the mere holding of the Company Class B Preferred Securities or the Trust Preferred Securities; or (iii) where such deduction or withholding can be avoided if the holder or beneficial owner of the Company Class B Preferred Securities (other than the Trust) or the Trust Preferred Securities makes a declaration of non-residence or other similar claim for exemption to the relevant tax authority or complies with any reasonable certification, documentation, information or other reporting requirement imposed by the relevant tax authority; or (iv) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to the European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of November 26-27, 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive.

Voting and Enforcement Rights The Company Class B Preferred Securities will have no voting rights except as expressly required by the LLC Act or other applicable law or except as indicated below. In the event the holders of the Company Class B Preferred Securities are entitled to vote as indicated below, each Company Class B Preferred Security shall be entitled to one vote on matters on which holders of the Company Class B Preferred Securities are entitled to vote. In the event that: (i) the Company fails to pay Class B Capital Payments (plus Additional Amounts thereon, if any) on the Company Class B Preferred Securities at the Stated Rate for four consecutive Class B Payment Periods even though all requirements for capital payments have been met and capital payments have been declared or (ii) a holder of the Company Class B Preferred Securities notifies the Company that the Bank has failed to perform any obligation under the Subordinated Support Undertaking and such failure continues for 60 days after such notice is given, then the majority of the holders of the Company Class B Preferred Securities will have the right to appoint an Independent Enforcement Director, who will be an additional member of the Board of Directors. The Independent Enforcement Director will have the sole authority, right and power to enforce and settle any claim of the Company under the Subordinated Support Undertaking. However, the Independent Enforcement Director will have no right, power or authority to participate in the management of the business and affairs of the Company by the Board of Directors except for: – actions related to the enforcement of the Subordinated Support Undertaking on behalf of the holders of the Company Class B Preferred Securities, and – the distribution of amounts paid pursuant to the Subordinated Support Undertaking to the holders of the Company Class B Preferred Securities. The Independent Enforcement Director will be appointed by resolution passed by a majority of the holders of the Company Class B Preferred Securities entitled to vote thereon, as described in the LLC Agreement, present in person or by proxy at a separate general meeting of the holders of the Company Class B Preferred Securities convened for that purpose (which will be called at the request of any holder of a Company Class B Preferred Security entitled to vote thereon) or by a consent in writing adopted by a majority of the holders of the Company Class B Preferred Securities entitled to vote thereon. Any Independent Enforcement Director so appointed will vacate office if, in such Independent Enforcement Director's sole determination:

47 (i) the respective Class B Capital Payments (plus Additional Amounts thereon, if any) have been made at the Stated Rate by the Company for four consecutive Class B Payment Periods, and (ii) the Bank has complied with all of its obligations under the Subordinated Support Undertaking. Any such Independent Enforcement Director may be removed at any time, with or without cause by (and will not be removed except by) the vote of a majority of the holders of the outstanding Company Class B Preferred Securities entitled to vote, at a meeting of the Company's securityholders, or of holders of the Company Class B Preferred Securities entitled to vote thereon, called for that purpose. If the office of Independent Enforcement Director becomes vacant at any time during which the holders of the Company Class B Preferred Securities are entitled to appoint an Independent Enforcement Director, the holders of the Company Class B Preferred Securities will appoint an Independent Enforcement Director as provided above. No director, including the Independent Enforcement Director, will be a resident of the Federal Republic of Germany. So long as any Company Class B Preferred Securities are outstanding, the Company will not, without the affirmative vote of the holders of at least 66 2/3% in aggregate denomination of the Company Class B Preferred Securities, voting separately as a class: (i) amend, alter, repeal or change any provision of the LLC Agreement (including the terms of the Company Class B Preferred Securities) if such amendment, alteration, repeal or change would materially adversely affect the rights, preferences, powers or privileges of the Company Class B Preferred Securities; or (ii) agree to modify or amend any provision of, or waive any default in the payment of any amount under the Debt Securities in any manner that would materially affect the interests of the holders of the Company Class B Preferred Securities; or (iii) effect any merger, consolidation, or business combination involving the Company, or any sale of all or substantially all of the assets of the Company, provided, that any such merger, consolidation, or business combination involving the Company, or any sale of all or substantially all of the assets of the Company also must comply with the requirements set forth under "– Mergers, Consolidations and Sales"; or (iv) change the legal form of the Company (other than in connection with a merger, consolidation, amalgamation, conversion or replacement permitted under the LLC Agreement without a consent of the holders of the Company Class B Preferred Securities). The Company will not, without the unanimous consent of all the holders of the Company Class B Preferred Securities, issue any additional equity securities of the Company ranking senior to or pari passu with the Company Class B Preferred Securities as to periodic distribution rights or rights on liquidation or dissolution of the Company except for Additional Company Class B Preferred Securities in consideration of receipt of Additional Debt Securities in an aggregate denomination corresponding to the aggregate Class B Denomination of such Additional Company Class B Preferred Securities. Notwithstanding that holders of the Company Class A Preferred Security or Company Class B Preferred Securities may become entitled to vote or consent under any of the circumstances described in the LLC Agreement or in the by-laws of the Company, any Company Class A Preferred Security or any of the Company Class B Preferred Securities that are owned by the Bank or any of its affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz) (other than the Trust), the Company or any of its affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz) (other than the Trust), either directly or indirectly, will in such case not be entitled to vote or consent and will, for the purposes of such vote or consent, be treated as if they were not outstanding, except for a Company Class A Preferred Security or Company Class B Preferred Securities purchased or acquired by the Bank or its affiliate in connection with transactions effected by or for the account of customers of the Bank or customers of its affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz) or in connection with the distribution or trading of or market-making in connection with such Company Class A Preferred Security or Company Class B Preferred Securities in the ordinary course of business. However, certain persons (other than affiliates of the Bank within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz) excluding the Trust) to whom the Bank or any of its affiliates within the meaning of § 15 of the German Stock Corporation Act (Aktiengesetz) have pledged a Company Class A Preferred Security or Company Class B Preferred Securities may vote or consent with respect to such pledged Company Class A Preferred Security or Company Class B Preferred Securities pursuant to the terms of such pledge.

Redemption The Company Class B Preferred Securities have no scheduled maturity date and are at no time redeemable at the option of the holders thereof. The Company Class B Preferred Securities are redeemable at the option of the Company, in whole but not in part, on the Initial Redemption Date or any Class B Payment Date thereafter at the Redemption Amount, provided that: (i) the Company has given at least 31 days' prior notice (or such longer period as may be required by the relevant regulatory authorities) to the holders of the Company Class B Preferred Securities of its intention to redeem the Company Class B Preferred Securities on the Redemption Date, and (ii) the cumulative Defined Retained Earnings for (x) the financial year during which the Issue Date occurs and (y) each of the financial years thereafter up to (and including) the most recent financial year for which there are audited and approved (gebilligt)

48 consolidated financial statements of the Group available, equal or exceed 1.5 times the aggregate Class B Agio of all out- standing Company Class B Preferred Securities, and (iii) the Bank Dividend Payment Test as well as the Group Annual Profit Test are met with regard to the accrued and unpaid Class B Capital Payments for the then current Class B Payment Period to, but excluding, the Redemption Date, plus Additional Amounts, if any, and (iv) the Company has obtained any required regulatory approvals, and (v) the following other conditions are met on the relevant Redemption Date: (x) the Company has sufficient funds (by reason of the Debt Securities, Permitted Investments or the Subordinated Support Undertaking) to pay the Redemption Amount, and (y) the Regulatory Authority Test is met. In addition, the Company will have a right to redeem the Company Class B Preferred Securities at any time, also already prior to the Initial Redemption Date, in whole but not in part, at the Redemption Amount upon the occurrence of a Special Redemption Event, provided that (i) it has given at least 31 days' prior notice (or such longer period as may be required by the relevant regulatory authorities) to the holders of the Company Class B Preferred Securities of its intention to redeem the Company Class B Preferred Securities, and (ii) it has obtained any required regulatory approvals, and (iii) the following other conditions are met on the relevant Redemption Date: (x) the Company has sufficient funds (by reason of the Debt Securities, Permitted Investments or the Subordinated Support Undertaking) to pay the Redemption Amount, and (y) the Regulatory Authority Test is met. Any redemption, whether upon the occurrence of a Special Redemption Event or on or after the Initial Redemption Date, will be made at the Redemption Amount. The Redemption Amount equals the Class B Denomination, plus accrued and unpaid Class B Capital Payments for the then current Class B Payment Period to, but excluding, the redemption date, plus Additional Amounts, if any. Subject to the provisions contained in the Trust Agreement, upon redemption of the Company Class B Preferred Securities, the Trust must apply the Redemption Amount received in connection therewith to redeem the Trust Securities pro rata. In the event that payment of the Redemption Amount in respect of any Company Class B Preferred Securities is improperly with- held or refused and not paid, Class B Capital Payments will continue to accrue from the Redemption Date up to but excluding the date of actual payment of such Redemption Amount at the Stated Rate. Any redemption of the Company Class B Preferred Securities, whether on a Class B Payment Date on or after the Initial Redemption Date or upon the occurrence of a Special Redemption Event, will not require the vote or consent of any of the holders of the Company Class B Preferred Securities.

Redemption Procedures Notice of any redemption of the Company Class B Preferred Securities will be given by the Board of Directors on behalf of the Com- pany by mail to the record holder of each Company Class B Preferred Security in accordance with the LLC Agreement not less than 31 days prior to the date fixed for redemption, or such other time period as may be required by the relevant regulatory authorities. For purposes of the calculation of the Redemption Date and the dates on which notices are given pursuant to the LLC Agreement, a Redemption Notice will be deemed to be given on the day such notice is first mailed, by first-class mail, postage prepaid, to holders of the Company Class B Preferred Securities. Each Redemption Notice will be addressed to the holders of the Company Class B Preferred Securities at the address of each such holder appearing in the books and records of the Company. No defect in the Redemption Notice or in the mailing thereof with respect to any holder will affect the validity of the redemption proceedings with respect to any other holder. If the Company has given a Redemption Notice (which notice will be irrevocable) and, if the Company Class B Preferred Securities are held in certificated form, the Company, on the Redemption Date, will deposit irrevocably with the Principal Paying Agent funds sufficient to pay the applicable Redemption Amount as and when it becomes due and will give to the Principal Paying Agent irrevocable instructions and authority to pay such amounts to the holders of the Company Class B Preferred Securities to be redeemed, upon surrender of their certificates, by check, mailed to the address of the relevant holder of the Company Class B Preferred Securities appearing on the books and records of the Company on the Redemption Date, provided that for so long as the Company Class B Preferred Securities are held by the Property Trustee on behalf of the Trust, payment will be made by wire transfer in same day funds to the holder of the Company Class B Preferred Securities by 10:00 a.m., Frankfurt am Main time, on the Redemption Date. Upon satisfaction of the foregoing conditions, then immediately prior to the close of business on the date of payment, all rights of the holders of the Company Class B Preferred Securities so called for redemption, except the right of the holders to receive the

49 Redemption Amount, will cease, and from and after the date fixed for redemption such Company Class B Preferred Securities will not accrue Class B Capital Payments or bear interest.

Liquidation and Liquidation Distribution Upon liquidation, dissolution or winding-up of the Company, the holder of the Company Class A Preferred Security has a claim to receive its liquidation distribution senior to that of the holders of the Company Class B Preferred Securities, and the holders of the Company Class B Preferred Securities have a claim to receive their liquidation distribution senior to the claim of the holder of the Company Common Security to receive any distribution of assets; provided, however, that any payments made by the Bank pursuant to the Subordinated Support Undertaking will be distributed by the Company pro rata to the holders of the Company Class B Preferred Securities until the holders of the Company Class B Preferred Securities have received the full amount payable under the Subordinated Support Undertaking. The holder of the Company Class A Preferred Security will be entitled to receive the Debt Securities or Permitted Investments, as the case may be, (including accrued and unpaid interest thereon) as its liquidation distribution. In the event of any liquidation, dissolution or winding-up of the Company in the context of a liquidation, dissolution or winding- up of the Bank, the Company Class B Preferred Securities will be redeemed in which event each holder of the Company Class B Preferred Securities will, subject to the limitations described below, be entitled to receive the Liquidation Amount being (i) the Class B LPA, plus (ii) accrued and unpaid Class B Capital Payments in respect of the then current Class B Payment Period to but excluding the date of liquidation and Additional Amounts, if any, plus (iii) the Class B Equity Component, plus (iv) any assets of the Company remaining after distributions have been made under the Company Class A Preferred Securities, provided that the Company receives amounts under the Subordinated Support Undertaking corresponding to the sum of the amounts referred to under (i) to (iii) and provided further that the sum of (i) and (iii) shall not exceed the Class B Denomination, i.e. € 1,000. In the event of any liquidation, dissolution or winding-up of the Company without a liquidation, dissolution or winding-up of the Bank, the Company Class B Preferred Securities will be redeemed in which event each holder of Company Class B Preferred Securities shall be entitled to receive the Redemption Amount provided that the Company has obtained any required regulatory approvals. Under the terms of the LLC Agreement the Company may be liquidated, dissolved or wound-up only in limited events specified in the LLC Agreement (e.g., relating to a bankruptcy or insolvency of the Company or the Bank, judicial dissolution of the Company under the LLC Act, redemption, repurchase or exchange of all outstanding Company Class B Preferred Securities or with the written consent of the holders of all interests in the Company). Notwithstanding the foregoing, the Company will not be dissolved pursuant to the terms of the LLC Agreement until all obligations under the Subordinated Support Undertaking have been paid in full pursuant to its terms and to the fullest extent permitted by law.

Mergers, Consolidations, Replacements and Sales Subject to the terms of the LLC Agreement, the Company may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease substantially all of its properties and assets to any corporation or other body, except as described below. The Company may, without the consent of the holders of the Company Class B Preferred Securities, consolidate, amalgamate, merge with or into, or be replaced by a limited partnership, limited liability company or trust organized as such under the laws of any State of the United States of America or any entity organized under any laws other than the laws of any State of the United States of America, to the extent legally permitted under applicable law and provided, that: (i) such successor entity either expressly assumes all of the obligations of the Company under the Company Class B Preferred Securities or substitutes Successor Company Securities for the Company Class B Preferred Securities so long as the Successor Company Securities are not junior to any equity securities of the successor entity, with respect to participation in the profits, distributions and assets of the successor entity, except that they may rank junior to the Company Class A Preferred Security or any successor Company Class A Preferred Security to the same extent that the Company Class B Preferred Securities rank junior to the Company Class A Preferred Security; (ii) the Bank expressly acknowledges such successor entity as the holder of the Debt Securities and holds, directly or indirectly, all of the voting securities (within the meaning of Rule 3a-5 under the Investment Company Act) of such successor entity; (iii) such consolidation, amalgamation, merger or replacement does not cause the Trust Preferred Securities (or, in the event that the Trust is liquidated, the Company Class B Preferred Securities (including any Successor Company Securities)) to be down- graded by any internationally recognized rating organization;

50 (iv) such consolidation, amalgamation, merger or replacement does not adversely affect the powers, preferences and other special rights of the holders of the Trust Preferred Securities or Company Class B Preferred Securities (including any Successor Company Securities) in any material respect; (v) such successor entity has a purpose substantially identical to that of the Company; (vi) prior to such consolidation, amalgamation, merger or replacement, the Company has received an opinion of a nationally recognized law firm in the United States of America experienced in such matters to the effect that: (A) such successor entity will not be treated as a corporation for United States federal income tax purposes, (B) such consolidation, amalgamation, merger or replacement would not cause the Trust to be treated as a corporation or a partnership for United States federal income tax purposes, (C) following such consolidation, amalgamation, merger or replacement, such successor entity will not be required to register under the Investment Company Act, and (D) such consolidation, amalgamation, merger or replacement will not adversely affect the limited liability of the holders of the Company Class B Preferred Securities; and (vii) the Bank provides an undertaking to the successor entity under the Successor Company Securities equivalent to that provided by the Subordinated Support Undertaking with respect to the Company Class B Preferred Securities. Any such merger, consolidation, amalgamation, conversion or replacement shall be notified to the holders of the Company Class B Preferred Securities. Upon any replacement, any reference to the Company shall forthwith be deemed to be a reference to the successor entity and any reference to the country of residence of the Company shall forthwith be deemed to be a reference to the country of residence of the successor entity; in each case with effect from the replacement date.

Book-Entry and Settlement If the Company Class B Preferred Securities are distributed to holders of the Trust Preferred Securities in connection with the liquidation, dissolution, winding-up or termination of the Trust, the Bank will use its commercially reasonable efforts to cause the Company Class B Preferred Securities to be eligible for clearing and settlement through Clearstream Frankfurt or a successor clearing agent.

Transfer Agent, Registrar and Calculation Agent Deutsche Bank Aktiengesellschaft, Frankfurt am Main, Federal Republic of Germany, acts as Transfer Agent, Registrar and Calculation Agent for the Company Class B Preferred Securities. Registration of transfers or exchanges of the Company Class B Preferred Securities will be effected without charge by or on behalf of the Company but the Registrar may require payment of a sum sufficient to cover (with the giving of such indemnity as may be required) any tax or other governmental charges that may be imposed in relation to any transfer or exchange. The Company will not be required to register or cause to be registered the transfer of the Company Class B Preferred Securities after such Company Class B Preferred Securities have been called for redemption.

Governing Law The LLC Agreement and the Company Class B Preferred Securities shall be governed by, and construed in accordance with, the laws of the State of Delaware, United States of America.

Miscellaneous The Board of Directors is authorized and directed to conduct the affairs of the Company in such a way that: (i) the Company will not be required to register under the Investment Company Act, and (ii) the Company will not be treated as a corporation for United States federal income tax purposes. In this connection, the Board of Directors is authorized to take any action, not inconsistent with applicable law or the LLC Agreement, that the Board of Directors determines in its discretion to be necessary or desirable for such purposes.

51 Description of the Subordinated Support Undertaking

The following describes the material terms and provisions of the Subordinated Support Undertaking. This description is qualified in its entirety by reference to the terms and provisions of such agreement, which is attached hereto as Appendix A. The Bank and the Company have entered into the Subordinated Support Undertaking prior to the issuance of the Company Class B Preferred Securities, pursuant to which the Bank undertakes to ensure that the Company will at all times be in a position to meet its obligations if and when such obligations are due and payable, including its obligation to make Class B Capital Payments declared (plus Additional Amounts thereon, if any) and to pay the Redemption Amount, and, in the event of a liquidation, dissolution or winding-up of the Bank, the amounts corresponding to the amounts set forth in (i) to (iii) of the definition of the Liquidation Amount, i.e. (i) the Class B LPA, (ii) accrued and unpaid Class B Capital Payments in respect of the then current Class B Payment Period to but excluding the date of liquidation and Additional Amounts, if any, plus (iii) the Class B Equity Component. In the Subordinated Support Undertaking, the Bank also undertakes not to give any guarantee or similar undertaking with respect to, or enter into any other agreement relating to the support or payment of any amounts in respect of, any other preference securities (or instruments ranking pari passu with or junior to such preference securities) of any other Bank Affiliate that would in any regard rank senior to the most senior obligations of the Bank under the Subordinated Support Undertaking, unless the Subordinated Support Undertaking is amended so that it ranks at least pari passu with and contains substantially equivalent rights of priority as to payment as any such other guarantee or similar undertaking. So long as any Company Class B Preferred Securities remain outstanding, the Subordinated Support Undertaking may not be modified or terminated without the consent of 100% of the holders of the Company Class B Preferred Securities as provided in the LLC Agreement, except for such modifications that are not adverse to the interests of the holders of the Company Class B Preferred Securities. The Subordinated Support Undertaking does not represent a guarantee or an undertaking of any kind that the Company will at any time have sufficient assets to declare a Class B Capital Payment or other distributions. The Bank's obligations under the Subordinated Support Undertaking are subordinated to all unsubordinated and subordinated debt obligations of the Bank (including profit participation rights (Genussrechte) and silent partnership interests (Stille Beteiligungen), rank pari passu with the most senior ranking preference shares of the Bank, if any, and rank senior to any other preference shares and the common shares of the Bank; provided that the Bank's obligation to ensure the Company's position to meet its obligations to pay the Class B Equity Component of the Liquidation Amount rank pari passu with the Bank's obligation to pay liquidation proceeds to its holders of common stock; therefore, the Bank's obligation to ensure the Company's position to meet its obligation to pay the Class B Equity Component of the Liquidation Amount will only arise after all creditors of the Bank ranking senior to the common shareholders of the Bank have been satisfied. The holders of the Company Class B Preferred Securities are third-party beneficiaries of the Subordinated Support Undertaking within the meaning of Section 328(2) of the German Civil Code. As titleholder of the Company Class B Preferred Securities for the benefit of the holders of the Trust Securities, the Property Trustee has the power to exercise all rights, powers and privileges with respect to the Company Class B Preferred Securities under the Subordinated Support Undertaking. If a holder of the Company Class B Preferred Securities has notified the Company that the Bank has failed to perform any obligation under the Subordinated Support Undertaking, and such failure continues for 60 days after such notice is given, the holders of the Company Class B Preferred Securities (and, accordingly, the holders of Trust Preferred Securities acting through the Property Trustee) will have the right to appoint the Independent Enforcement Director, who will have the sole authority, right and power to enforce the rights and settle any claim of the Company under the Subordinated Support Undertaking. All payments under the Subordinated Support Undertaking will be distributed by the Company pro rata to holders of the Company Class B Preferred Securities until the holders of the Company Class B Preferred Securities receive the full amount payable in respect of the Company's obligations under the Company Class B Preferred Securities. So long as the Trust holds the Company Class B Preferred Securities, the Property Trustee will distribute such payments received by the Trust to the holders of the Trust Preferred Securities pro rata. The Subordinated Support Undertaking shall be governed by, and construed in accordance with, the laws of the Federal Republic of Germany.

52 Description of the Services Agreement

The following describes the material terms and provisions of the Services Agreement. This description is qualified in its entirety by reference to the terms and provisions of such agreement.

Under the Services Agreement, the Servicer is obligated, among other things, to provide tax and other administrative services to the Trust and the Company. The fees and expenses of the Company and the Trust, including any taxes, duties, assessments or governmental charges of whatsoever nature (other than Withholding Taxes) imposed by any taxing authority upon the Company or the Trust, and all other obligations of the Company and the Trust (other than with respect to the Trust Securities or the Company Securities), will be paid by the Bank in accordance with the LLC Agreement. The Services Agreement does not prevent the Bank or any of its Bank Affiliates or employees from engaging in any other activities. The Services Agreement may be terminated by the Bank, the Trust or the Company at any time upon 90 days' prior notice.

53 Description of the Terms of the Initial Debt Securities

The following describes the material terms and provisions of the Initial Debt Securities. This description is qualified in its entirety by reference to the terms and provisions of the Initial Debt Securities.

General The aggregate denomination of the Initial Debt Securities amounts to € 400,003,000 and is equal to the sum of the aggregate Class B Denomination plus the aggregate amounts contributed for the Company Class A Preferred Security and the Company Common Security. All of the proceeds from the issuance of the Company Class B Preferred Securities, together with the funds contributed for the Company Class A Preferred Security and the Company Common Security, have been used by the Company to purchase the Initial Debt Securities. The aggregate denomination of the purchased Initial Debt Securities is such that the aggregate interest income paid on the Initial Debt Securities on any Interest Payment Date will be sufficient to make the aggregate Class B Capital Payments on a corresponding Class B Payment Date. The purchase of the Initial Debt Securities occurred contemporaneously with the issuance of the Company Class B Preferred Securities. The Initial Debt Securities consist of an issue of registered subordinated notes issued by the Bank which will mature on the Maturity Date. Interest will be payable by the Bank in euro on the outstanding denomination of the Initial Debt Securities at a rate per annum equal to the Stated Rate. Interest will be payable by the Bank in euro on the denomination of the Initial Debt Securities quarterly in arrear on the Interest Payment Dates. Payments on the Initial Debt Securities will be made by the Bank free and clear of, and without deduction or withholding by the Bank for Withholding Taxes imposed by the Federal Republic of Germany, the United States of America, the jurisdiction of residence of any issuer substituted for the Bank in accordance with the terms of the Initial Debt Securities or any political subdivision of any of these or any other jurisdiction from which such payment is made unless the Bank is required by operation of law or otherwise to make such deduction or withholding. If, by operation of law or otherwise, the Bank is required to make such deduction or withholding for Withholding Taxes from any payments on the Initial Debt Securities, the Bank will, in accordance with the terms of the Initial Debt Securities, pay Additional Interest Amounts. Additional Interest Amounts will be paid to the extent necessary in order that the net amounts actually received by the Company on the Initial Debt Securities will equal the amounts the Company would have received had no such deduction or withholding for Withholding Taxes been required. However, no such Additional Interest Amounts shall be payable in respect of the Initial Debt Securities relating to any Withholding Taxes: (i) that are payable by reason of the holder or beneficial owner of the Initial Debt Securities having some connection with the jurisdiction imposing such tax other than by reason only of the mere holding of the Initial Debt Securities; or (ii) where such deduction or withholding can be avoided if the holder or beneficial owner of the Initial Debt Securities makes a declaration of non-residence or other similar claim for exemption to the relevant tax authority or complies with any reasonable certification, documentation, information or other reporting requirement imposed by the relevant tax authority; or (iii) where such withholding or deduction is imposed on a payment to or for an individual and is required to be made pursuant to the European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council Meeting of November 26-27, 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive. Prior to the Initial Debt Redemption Date, the Bank may cause any redemption of the Initial Debt Securities only: (i) with at least 32 days' notice, upon the occurrence of a Special Redemption Event and the election of the Company to redeem the Company Class B Preferred Securities in accordance with the LLC Agreement; or (ii) in the event of replacement with Substitute Debt Securities; subject, in each such case, to having obtained any required regulatory approvals. On or after the Initial Debt Redemption Date but prior to the Maturity Date, the Bank may cause any redemption of the Initial Debt Securities only: (i) in the events specified above in connection with a redemption prior to the Initial Debt Redemption Date; or (ii) with at least 32 days' notice, upon the election of the Company to redeem the Company Class B Preferred Securities in accordance with the LLC Agreement; subject, in each such case, to having obtained any required regulatory approvals.

54 Any such redemption may be made only in whole, but not in part, and will be (other than in the event of a replacement with Substitute Debt Securities) at a redemption amount equal to the denomination of the Initial Debt Securities plus accrued and unpaid interest thereon, and Additional Interest Amounts, if any. The Company will not be able to accelerate payment of the Initial Debt Securities in the case of a default in the payment of the principal of, interest on, or other amounts owing under, the Initial Debt Securities. If the Maturity Date or any Debt Redemption Date falls on a day that is not a Business Day, payment of all amounts otherwise payable on such date shall be made on the first following day that is a Business Day, and there shall be no right to claim payment of any interest or other indemnity in respect of such delay in payment. The Repayment Claim will be subordinated in the event of insolvency or liquidation of the Bank to the claims of all other creditors which are not also subordinated and will, in any such event, only be satisfied after all claims against the Bank which are not sub- ordinated have been satisfied. Any right to set-off the Repayment Claim against claims of the Bank will be excluded. No collateral is or will be given for the Repayment Claim; collateral that may have been or may in the future be given in connection with other indebtedness shall not secure the Repayment Claim. The subordination described above cannot be subsequently restricted, and the minimum term of the Initial Debt Securities cannot subsequently be shortened. Pursuant to § 10 (5a) of the German Banking Act, the amount of any repurchase of the Initial Debt Securities prior to the Initial Debt Redemption Date or other redemption must be refunded to the Bank, notwithstanding any agreement to the contrary, unless a statutory exemption (replacement of the denomination of the Initial Debt Securities by contri- bution of other, at least equivalent own funds (haftendes Eigenkapital)) or prior approval of BaFin to the early redemption applies.

Substitution, Redemption and Reinvesting of Proceeds At any time, the Bank will have the right to replace the Debt Securities with Substitute Debt Securities issued by the Bank, a Qualified Issuer or any branch of the Bank upon identical terms to those of the Initial Debt Securities, provided, that (i) such substitution or replacement does not result in a Special Redemption Event, (ii) the Bank, unless it itself is again the obligor, provides a guarantee or support undertaking with respect to the obligations of such substitute obligor, which guarantee or support undertaking ranks at least pari passu with the Initial Debt Securities, provided that such guarantee or support under- taking does not affect the quality of the Trust Preferred Securities or the Company Class B Preferred Securities to be treated as core capital or Tier I regulatory capital (aufsichtsrechtliches Kernkapital) on a consolidated basis for the Bank and (iii) the Bank has obtained any required regulatory approval. After the Maturity Date, if the Company Class B Preferred Securities have not been redeemed until the Maturity Date, the Company will invest the net proceeds from the repayment of the Debt Securities in Permitted Investments. The Company will attempt to purchase Permitted Investments in the following order of priority, to the extent the same are available (and within each category on terms that are the best available in relation to providing funds for the payment of Class B Capital Payments and the redemption of the Company Class B Preferred Securities): – first, debt obligations issued by a Qualified Issuer subject to a guarantee or support undertaking by the Bank which guarantee or support undertaking ranks at least pari passu with the Initial Debt Securities, provided that such guarantee or support undertaking does not affect the quality of the Trust Preferred Securities or the Company Class B Preferred Securities to be treated as core capital or Tier I regulatory capital (aufsichtsrechtliches Kernkapital) on a consolidated basis for the Bank; or – second, in the event such investments are not available, in bonds or notes issued by the Federal Republic of Germany or another member state of the European Economic and Monetary Union.

Additional Debt Securities Upon the issuance of any subordinated notes due November 22, 2034 issued by the Bank in excess of, and on the same terms as, the Initial Debt Securities or following the issuance of Substitute Debt Securities any subordinated notes issued by the issuer of such Substitute Debt Securities in excess of, and on the same terms as, the Substitute Debt Securities (Additional Debt Securities), the terms contained herein which apply or refer to the Initial Debt Securities shall apply or refer in the same manner to such Additional Debt Securities.

Governing Law The Initial Debt Securities shall be governed by, and construed in accordance with, the laws of the Federal Republic of Germany.

55 General Information on the Bank

Registered Office, Incorporation and Object DZ BANK is a German law stock corporation registered with the commercial register of the local court (Amtsgericht) in Frankfurt am Main under registration number HRB 45651. Its head office is located at Platz der Republik, D-60265 Frankfurt am Main, Federal Republic of Germany. On August 16, 2001, the shareholders of GZ-Bank AG Frankfurt/Stuttgart (GZ-Bank) and DG BANK Deutsche Genossenschaftsbank AG (DG BANK) approved the merger of both institutions into DZ BANK AG Deutsche Zentral- Genossenschaftsbank, Frankfurt am Main, in separate general meetings. Upon the recording of GZ-Bank's merger into DG BANK with the commercial register of the local court (Amtsgericht) in Frankfurt am Main (under registration number HRB 45651) on September 18, 2001, DG BANK became the successor of all rights and duties of GZ-Bank. Simultaneously with the merger, DG BANK was renamed DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main. Former DG BANK acted as the central bank for the cooperative banks in Bavaria, Northern Germany, parts of Hesse and the new (Eastern German) federal states, as a commercial bank and, moreover, as a central credit institution to promote the cooperative system. The original precursor to it as a credit cooperative was Preussische Central-Genossenschaftskasse, which was founded in Berlin in 1895. With the Act governing the Transformation of Deutsche Genossenschaftsbank (Gesetz zur Umwandlung der Deutsche Genossenschaftsbank) of August 18, 1998, DG BANK was transformed with retroactive effect as of January 1, 1998, from a corporation under public law into a public limited company. Former GZ-Bank – the central bank for the Volksbanken and Raiffeisenbanken (the local cooperative banks, together, the cooperative banks) in Baden-Wurttemberg, Hesse, Rhineland-Palatinate and Saarland – was formed in 2000 from the merger of SGZ-Bank Südwestdeutsche Genossenschafts-Zentralbank AG, Frankfurt/Karlsruhe, and GZB-Bank Genossenschaftliche Zentralbank AG Stuttgart, Stuttgart. The origins of SGZ-Bank trace back to 1883; the oldest predecessor institute of GZB-Bank was founded in 1893. According to its articles of association, DZ BANK's corporate purpose is to function as a central bank in promoting the entire cooperative system. A key part of its statutory responsibility of promotion is to support the primary level cooperatives and central banks. It also participates in promoting the cooperative housing industry. A mandatory guideline of the business policy is the economic support of the shareholders. This corresponds to the obligation of the shareholders to support DZ BANK in discharging its duties. DZ BANK may not merge with primary level cooperative banks. The Bank engages in any and all types of standard banking business and any related complementary businesses such as equity investments. It may also pursue its purpose indirectly. DZ BANK also operates as a central bank in providing balanced liquidity to the primary level member cooperatives and the inte- grated cooperative specialist service providers (Verbundinstitute). In exceptional cases, the Bank may - for the purpose of promoting the cooperative system and the cooperative housing industry - deviate from the standard banking principles when granting loans. In evaluating whether a loan may be granted, the liability of the cooperatives may be reasonably taken into account. DZ BANK has six domestic and five international branches. And additionally three offices are allocated to the six domestic branches.

Capital Structure At an extraordinary general meeting of shareholders of DG BANK held on August 16, 2001, the DG BANK shareholders voted to increase the company's registered share capital of EUR 1,473,638,400 by up to EUR 1,200,681,440.40 by issuing up to 461,800,554 registered no par shares. The purpose of this capital increase was to implement the merger with GZ-Bank. As consideration for transferring the assets of GZ-Bank by way of a merger into DG BANK, the new shares were issued to GZ-Bank shareholders in a ratio of 92.4072 no par shares of DG BANK with a notional par value of EUR 2.60 for each 1 (one) share of GZ-Bank no par stock with a notional par value of approximately EUR 51.13. At the time the shareholders resolved the increase of capital for purposes of carrying out the merger, the capital increase figure, which was applied, was slightly higher than was ultimately used. There was a possibility that any realignments in the shareholder structure at GZ-Bank (e. g. as a result of mergers among shareholders) could have had a direct effect on the number of new shares issued at the time. In order to cover any such potential discrepancies with shares, a capital increase of up to EUR 1,200,681,440.40 was resolved. After the merger was registered with the commercial register on September 18, 2001, DZ BANK's registered share capital equalled EUR 2,647,317,989.20 and was divided into 1,028,583,842 no par shares. On June 25, 2002, the shareholders of DZ BANK resolved to increase DZ BANK's existing registered share capital of EUR 2,674,317,989.20 by EUR 204,109,250.80 to EUR 2,878,427,240. The capital increase was recorded in the Commercial Register on November 19, 2002. Since November 19, 2002, the registered share capital has equaled EUR 2,878,427,240 and is divided

56 into 1,107,087,400 no par shares with a notional share in the registered share capital of EUR 2.60 per no par share. These shares are fully paid in, registered and subject to restrictions on transferability. There are currently no securities outstanding which give creditors the right to convert or otherwise subscribe DZ BANK shares. The board of managing directors is authorized, with the consent of the supervisory board, to increase the share capital of DZ BANK by up to EUR 50,000,000 in total by issuing shares against cash contributions or contributions in kind on one or more occasions through to July 31, 2006. Provided the supervisory board agrees, the board of managing directors may exclude the right of existing shareholders to subscribe to either a capital increase against cash contributions or a capital increase against contributions in kind where the capital increase is intended to finance the issue of new staff shares, the acquisition of companies or equity stakes in companies, or to make available equity interests in DZ BANK to underpin strategic partnerships. Furthermore the board of managing directors is empowered, with the consent of the supervisory board, to exclude the right of existing shareholders to subscribe in relation to fractional amounts (Authorized Capital I). The general meeting of shareholders also authorized the board of managing directors, with the consent of the supervisory board, to increase the share capital of DZ BANK by up to EUR 100,000,000 in total by issuing shares against cash contributions on one or more occasions through July 31, 2006 (Authorized Capital II). The board of managing directors may, with the consent of the supervisory board, exclude the right of existing shareholders to subscribe in relation to fractional amounts. The Authorized Capital I and II were registered with the commercial register of the local court (Amtsgericht) in Frankfurt am Main on September 18, 2001. The general meeting of shareholders held on May 25, 2004 also authorized the board of managing directors to issue guarantees and letters of comfort on one or more occasions through December 31, 2008 to secure the creditor against financing instruments issued by subsidiaries of the company (with the exception of convertible bonds). As a result of the collateralization at DZ BANK level, these are to be viewed as profit-sharing rights or income bonds. Such guarantees and letters of comfort can refer to all payment obligations of the issuing subsidiaries arising from the financing instruments. However, the redemption claims, which are secured by DZ BANK, of creditors of the financing instruments should not exceed the amount of EUR 1,000,000,000. The funds raised by the issuing subsidiaries should correspond to the recognized components of the liable capital in accordance with § 10 KWG (German Banking Act), so that these funds constitute liable capital of the DZ BANK institution group. The board of managing directors is authorized to exclude the legal subscription right under the premises mentioned in the general meeting resolution.

57

Capitalization of DZ BANK AG (as of June 30, 2004 – unaudited)

(in EUR million) June 30, 2004 Dec. 31, 2003 Dec. 31, 2002

1. Deposits from other banks 111,092 97,912 106,647 a) Repayable on demand 24,588 25,810 28,093 b) Fixed-term or agreed notice 86,504 72,102 78,554 2. Amounts owed to other depositors 29,893 30,451 29,584 3. Liabilities in certificate form 26,093 26,051 31,113 a) Issued bonds 24,545 23,936 27,914 b) Other certificated liabilities 1,548 2,115 3,199 4. Liabilities arising from trust operations 1,816 1,824 1,857 5. Other liabilities 3,914 3,190 3,093 6. Accrued expenses and deferred income 515 324 350 7. Provisions 1,170 1,240 1,214 8. Subordinated liabilities 2,543 2,722 2,649 9. Participatory capital 2,108 2,178 2,205 10. Fund for general banking risks 1,428 1,428 1,428 11. Capital and reserves 4,595 4,650 4,622 a) Subscribed capital 2,879 2,879 2,879 b) Capital reserve 803 803 803 c) Surplus reserve 913 913 888 d) Cumulative profit n/a 55 52 Total 185,167 171,970 184,762

1. Contingent liabilities 3,020 3,188 4,921 2. Other liabilities 11,391 11,277 12,881

No information relating to partial amounts of outstanding bonds and other borrowings and liabilities for which a guarantee obligation exists is collected within any financial year. Information as of the accounting dates December 31, 2002 and December 31, 2003 are included in Note 10 of the Notes to the financial statements of DZ BANK AG for the financial year 2003 on page F-174 of this Offering Circular. Save as disclosed in section "Business Development and Outlook", there has been no material change in the capitalization of DZ BANK since June 30, 2004.

Shareholders Approximately 92 per cent of DZ BANK's share capital is held by cooperative societies, the cooperative central institutions and other corporate entities and trading companies.

Governing Bodies of DZ BANK DZ BANK's governing bodies are the board of managing directors, the supervisory board and the general meeting of shareholders. The responsibilities of these various governing bodies are prescribed in the German Stock Corporation Act (Aktiengesetz) and in DZ BANK's articles of association.

Board of Managing Directors Pursuant to the articles of association, the board of managing directors consists of at least three members. The supervisory board is responsible for determining the number of members of the board of managing directors, their appointment and their dismissal. The supervisory board may designate one chairman of the board of managing directors and up to two deputy chairmen. The board of managing directors currently consists of the following persons: Dr. Ulrich Brixner, Frankfurt am Main -Chairman- Dr. Thomas Duhnkrack, Frankfurt am Main Heinz Hilgert, Frankfurt am Main Wolfgang Kirsch, Frankfurt am Main

58 Albrecht Merz, Frankfurt am Main Dietrich Voigtländer, Frankfurt am Main DZ BANK is represented by two members of the board of managing directors or by one member of the board of managing directors acting jointly with a commercial attorney-in-fact (Prokurist).

Supervisory Board Pursuant to the DZ BANK's articles of association, the supervisory board consists of 20 members. Of these members, nine members are elected by the shareholders and ten members by the employees under the terms of the Co-Determination Act of 1976 (Mitbestimmungsgesetz 1976). The German cooperative banking industry association (Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V.) has the right to delegate a member of its board of managing directors to the supervisory board.

The supervisory board currently consists of the following persons: Dr. Christopher Pleister, President of Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. (German cooperative banking industry association) - Chairman - Helga Preußer, Employee, DZ BANK – First Deputy Chairwoman - Rolf Hildner, Chairman of the board of managing directors of Wiesbadener Volksbank eG – Second Deputy Chairman -

-Members- Wolfgang Apitzsch, Attorney at law Rüdiger Beins, Employee, DZ BANK Werner Böhnke, Chairman of the board of managing directors of WGZ-Bank Westdeutsche Genossenschafts-Zentralbank eG Gerhard Bramlage, Chairman of the board of managing directors of Emsländische Volksbank eG Carl-Christian Ehlers, Chairman of the board of managing directors of Kieler Volksbank eG Helmut Gottschalk, Chairman of the board of managing directors of Volksbank Herrenberg- Rottenburg eG Michael Groll, Management Employee, DZ BANK Siegfried Hägele, Employee, VR Kreditwerk Hamburg- Schwäbisch Hall AG Hans-Josef Hoffmann, Chairman of the board of managing directors of Bank 1 Saar eG Walter Kaufmann, Secretary of ver.di, the German services industry union Sigmar Kleinert, Employee, DZ BANK Willy Köhler, Chairman of the board of managing directors of Volksbank Rhein-Neckar eG Walter Müller, Chairman of the board of managing directors of Volksbank Raiffeisenbank Fürstenfeldbruck eG Adolf Rückl, Operations Manager, Schwäbisch Hall Facility Management GmbH Gudrun Schmidt, Regional Group Director, ver.di Winfried Willer, Employee, VR Kreditwerk Hamburg-Schwäbisch Hall AG Dr. h.c. Uwe Zimpelmann, Member of the board of managing directors of Landwirtschaftliche Rentenbank The term of office for members of the supervisory board shall end at the latest upon the conclusion of the general meeting of share- holders at which a resolution is adopted concerning the discharge of the relevant members of the supervisory board for the fourth financial year following the commencement of the term of office. The financial year during which the term of office commenced will not be included in this calculation. Re-elections are permissible. At the time of election of members of the supervisory board, alternate members may be appointed as substitutes for those super- visory board members, who were elected by the shareholders but who leave before their term of office has expired. The number of alternate members to be elected by the general meeting of shareholders is limited to five. The supervisory board will be paid a fixed remuneration, which is unrelated to profits and will be set by the general meeting of shareholders. The supervisory board will determine how such remuneration will be distributed among its individual members. In addition, any expenditures and any turnover tax charged on the remuneration will be reimbursed. The supervisory board and the board of managing directors may be contacted at DZ BANK's business address: DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Platz der Republik, 60265 Frankfurt am Main.

59 General Meeting of Shareholders The general meeting is held at the official location of the corporation or – upon resolution of the Supervisory Board – at other locations in the Federal Republic of Germany where the corporation maintains branches or offices or at the official location of one of the corporation's affiliated national enterprises.

Notice of the general meeting of shareholders shall be made by the board of managing directors or, in certain cases stipulated by law, by the supervisory board through publication in the Electronic German Federal Official Gazette (Bundesanzeiger). Notice must be made at least one month prior to the last day stipulated for the shareholders to register their participation in the general meeting of shareholders and must include the meeting agenda. In determining whether this notice period is met, the aforementioned date and the date of publication will not be included. If the Bank knows the names of the shareholders, then notice of the general meeting of shareholders may be sent via registered mail, telecopy or e-mail. The date on which notice is dispatched will be deemed the date of notice. Any other forms of notice for the general meeting of shareholders as recognized by law are permissible. The ordinary general meeting of shareholders shall be held within the first six months of each financial year. Any shareholders, who are recorded in the shareholders' register (Aktienregister) and who register in time, will be entitled to attend the general meeting of shareholders. Registration must be made with the board of managing directors at the Bank's registered office either in writing, by telecopier or electronically in a manner to be specified by the Bank. There must be at least one business day between the date of registration and the date of the general meeting of shareholders. Details regarding the registration will be enclosed with a notice of the general meeting of shareholders. Only shareholders who are themselves entitled to attend the general meeting of shareholders may act as representatives (proxies) at the general meeting of shareholders. If the shareholder is a legal entity, then the power of attorney (for its own shares and/or that of a third party) may be issued to a member of a governing body or an employee of the legal entity. The power of attorney shall be issued either in writing or electronically in a manner to be specified by the Bank. Details regarding the granting of powers of attorney will be announced in the notice. The person chairing the meeting may allow attendance at and voting in the general meeting of shareholders as well as the trans- mission of the general meeting of shareholders via electronic media, provided such procedure is provided for in the notice of the general meeting of shareholders and is otherwise permitted by law. Each no par share represents one vote.

Cover Assets Trustee The following persons are currently appointed to act as cover assets trustee (Treuhänder der Deckungswerte): Trustee: Dr. Dieter Eschke, Presiding Judge of the superior provincial court (Oberlandesgericht) of Frankfurt am Main (retd.) Deputy Trustee: Klaus Schlitz, Vice-President of the district court (Landgericht) of Frankfurt am Main (retd.)

Financial Year and Notices The financial year of DZ BANK is the calendar year. Any notices made by DZ BANK shall be published in the electronic German Federal Official Gazette (elektronischer Bundes- anzeiger).

Use of Balance Sheet Profits The general meeting of shareholders shall decide how to use the balance sheet profits (Bilanzgewinn) shown in the approved annual financial statement.

Litigation DZ BANK is not involved in any litigation or arbitration, which could have, or in the last two financial years has had, a material effect on its financial condition, nor is DZ BANK aware that any such proceedings are pending or threatened.

60 Auditors The joint auditors of DZ BANK for the financial year 2002 were Ernst & Young Deutsche Allgemeine Treuhand AG, Wirtschafts- prüfungsgesellschaft, Eschersheimer Landstraße 14, 60322 Frankfurt am Main, Federal Republic of Germany and Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Franklinstraße 50, 60486 Frankfurt am Main, Federal Republic of Germany. The joint auditors of DZ BANK for the financial year 2003 were Ernst & Young AG, Wirtschaftsprüfungsgesellschaft, Eschersheimer Landstraße 14, 60322 Frankfurt am Main, Federal Republic of Germany and Deloitte & Touche GmbH Wirtschaftsprüfungs- gesellschaft, Franklinstraße 50, 60486 Frankfurt am Main, Federal Republic of Germany. The non-consolidated financial statements and consolidated financial statements as of December 31, 2002 and 2003 were jointly audited and certified with an unqualified audit opinion. On May 25, 2004 the general meeting of shareholders of DZ BANK, on proposal of the supervisory board, has elected Ernst & Young AG, Wirtschaftsprüfungsgesellschaft, Eschersheimer Landstraße 14, 60322 Frankfurt am Main, Federal Republic of Germany, as auditor and group auditor for the financial year 2004.

61 Business

Business Activities In 2001, DZ BANK emerged as a new lead institution of the cooperative FinanzVerbund (Cooperative Banking Group) and as a central bank for approximately 1,150 cooperative banks. In its central bank function, DZ BANK regards itself expressly as a subsidiary partner of the local and regional cooperative banks developing a range of services or strengthening the position of the Cooperative Banking Group through joint marketing efforts with the local and regional cooperative banks and with the specialist service providers. DZ BANK assists the cooperative banks in all the product and service segments that are relevant to their corporate and private clients and helps develop – if necessary or requested – innovative sales strategies for their regional markets. In addition, DZ BANK is responsible for providing a balance of liquidity among the cooperative banks and provides such banks with refinancing funds, both in the form of global loans or - as an intermediary - by passing on financing granted from public development institutes.

Payment Systems As a central bank and clearing office, DZ BANK is responsible for the payment systems of the cooperative banks. As a result of the merger of GZ-Bank and DG BANK, within DZ BANK a payment systems department was created, which enjoys a sustainable market position as a service provider for the cooperative banks and other customers with a 17 per cent market share in the Federal Republic of Germany and 5 per cent market share in Europe. As a result of this market situation, DZ BANK took the necessary steps for a forward-looking positioning of the cooperative sector in European payment transactions by creating a transaction bank in April 2003. On September 1, 2003, the Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG (TAI) was launched in a field of business that is dominated by segment-wide downsizing pressures with regard to the pricing of services in national and cross-border payment transactions and increasing cost pressures in the respective business lines. As an independent entity, the transaction bank also opens its already market-proven processes and systems to banks outside the cooperative sector. As a result of the creation of the transaction bank, the cooperative sector becomes a market mover in the German segment-wide payment transactions market.

SME Corporate Clients and Large Corporate Customer Business DZ BANK's activities in the SME Corporate Clients business line are concentrated primarily on joint lending ("metacredits") together with primary cooperative banks. As a partner of the primary level banks, DZ BANK supports their corporate customer business by providing all relevant products and services. In direct business, where DZ BANK has responsibility for initiative and control depending upon the sales volume of the corporate customers to be supported, DZ BANK provides a complete range of products and offers the services of its specialist banks. In addition to the lending business, other areas of specialization are corporate finance and investment banking. In the large corporate client business sector, DZ BANK provides German and selected European companies specialized consulting know-how on financing issues and meets any resulting product needs through product solutions, primarily in the capital markets and structured financing segments. In export trade financing, its product range encompasses both short-term commercial export transactions, including core products such as letters of credit and collection, and long-term financing forms such as Hermes-/ECA covered buyer's credit.

Money Market and Capital Market Business In the money market and capital market business sector, DZ BANK provides services for enterprises of the Cooperative Banking Group and their corporate customers. In the fixed income segment, DZ BANK acts as a platform for managing interest rate, exchange rate and credit risks within the Cooperative Banking Group. The fixed income segment covers all steps in the process: from initial public offerings, structuring, risk management and trading, to consulting and sale. DZ BANK acts on behalf of the Cooperative Banking Group as a centre of expertise in the areas of hedging, diversification and the securitisation of interest rate, credit and currency risks. In advising the cooperative banks on their own account investment business, the focus is on managing their strategic own-account and bank-wide business as well as on investment and refinancing. DZ BANK provides comprehensive services and consulting for the private investment business of the cooperative banks. DZ BANK's very solid placement strength among customers of the cooperative banks as well as among institutional investors ensures that DZ BANK is represented in prominent positions on a number of national and international syndicates and is a leading investment bank on stock offerings and other capital market transactions of important stock corporations. On the secondary markets, inter alia equities and equity derivatives are traded, warrants and other derivative products are issued, and risk and bank limits are managed. Sales and brokerage services (inter alia stock selling, trading in futures and spot products) round out DZ BANK's range of services.

62 International Business DZ BANK acts as the international platform for cooperative banks in the international business sector. DZ BANK provides the cooperative banks with an opportunity to participate in the entire range of international transactions on behalf of their customers, execute export financing, undertake foreign exchange hedging, and produce both domestic and export contracts. The support network operates in all time zones and is primarily Cooperative Banking Group-centered and capital markets-oriented. Cooperation agreements are in place with numerous cooperative partners in Europe, and these agreements supplement DZ BANK's direct presence in financial centres where no national cooperative banks or banking groups exist.

Group Business Sectors Through its substantial interests in specialized institutions, DZ BANK has at its disposal a group platform, which allows for an intensive and efficient joint working relationship among the cooperative service providers. This applies in particular to the areas of real estate finance, insurance and asset management/private banking; sectors in which the relevant companies have leading market positions. Moreover, through one of its own specialized institutions, DZ BANK provides processing services for securities transactions. These services include securities administration and custody services, as well as settlement of securities transactions. DZ BANK, which is already the current market leader, takes on settlement and clearing responsibilities for institutes of the savings banks organization (Institute der Sparkassenorganisation) through Deutsche WertpapierService Bank AG following the first cross- sector merger in the German banking industry.

Table 1: DZ BANK in figures – financial years 2003 and 2002

DZ BANK AG 2003 2002 Change Employees (year´s average) 4,562 5,300 -13.9% General and Administrative expenses (€ million) 922 951 -3.0% Cost-income ratio (in %) 1 64.0 85.4 -21.4 percentage points Loans and advances to non-bank customers (€ billion) 26.0 32.3 -19.5% Weighted risk assets (€ billion) 64.8 70.8 -21.1% Regulatory capital ratios (KWG) at year end (in %) Tier 1 capital ratio 12.2 10.5 +1.7 percentage points Total capital ratio 17.0 14.5 +2.5 percentage points DZ BANK Group 2003 2002 Change Employees (year´s average) 25,313 25,247 +0.3% General and Administrative expenses (€ million) 2,403 2,502 -4.0% Cost-income ratio (in %) 2 65.0 71.9 -6.9 percentage points Loans and advances to non-bank customers (€ billion) 102.5 106.9 -4.1% Weighted risk assets (€ billion) 114.4 120.9 -16.1% Regulatory capital ratios (BIS) at year end (in %) Tier 1 capital ratio 7.0 5.8 +1.2 percentage points Total capital ratio 11.7 10.5 +1.2 percentage points ______1 2002 figures include comparable operating income. 2 2002 figures include comparable operating income.

63

Table 2: Extract from the Income Statement (€ million) - Financial years 2003 and 2002

DZ BANK AG 2003 2002 Change in % Net interest income 753 1,223 -38.4% Net commission income 285 254 +12.2% Net income from financial transactions 322 205 +57.1% General and Administrative expenses 922 951 -3.0% Operating result before risk provisioning 518 932 -44.4% Risk provisioning 371 1,709 -78.3% Operating result 1 147 -777 >100% Net income for the year 80 55 +45.5% DZ BANK Group 2003 2002 Change in % Net interest income 1,965 1,937 +1.4% Net commission income 773 853 -9.4% Net income from financial transactions 335 216 +55.1% Result of insurance operations 182 591 -69.2% General and Administrative expenses 2,403 2,502 -4.0% Operating result before risk provisioning 1,293 1,498 -13.7% Risk provisioning 326 2,307 -85.9% Operating result 2 967 -809 >100 % Net income for the year 382 351 +8.8% ______1 Net interest income and net commission income and net income from financial transactions and other operating income less general administrative expenses, depreciation and write-downs on tangible and intangible assets, other operating expenses and depreciation and write-downs on loans and advances and certain securities, plus additions to provisions on lending business 2 Net interest income and net commission income and net income from financial transactions and net income from insurance operations and other operating income less general administrative expenses, depreciation and write-downs on tangible and intangible assets, other operating expenses and depreciation and write-downs on loans and advances and certain securities, plus additions to provisions on lending business

Table 3: Extract from the balance sheet as of December 31 (€ million)

DZ BANK AG ASSETS 2003 2002 LIABILITIES 2003 2002 Loans and advances to 75,948 80,364 Liabilities to banks 97,912 106,647 other banks of which: to affiliated 37,252 37,419 of which: to affiliated banks 36,351 39,619 banks Loans and advances to 26,044 32,278 Liabilities to non-bank customers 30,451 29,584 non-bank customers Securities *) 54,767 58,217 Certificated liabilities 26,051 31,113 Other assets 15,211 13,903 Other liabilities 11,533 11,420 Proprietary capital according to balance 6,023 5,998 sheet **) Balance sheet total 171,970 184,762 Balance sheet total 171,970 184,762

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DZ BANK Group ASSETS 2003 2002 LIABILITIES 2003 2002 Loans and advances to 89,264 93,637 Liabilities to banks 115,417 122,922 banks of which: to affiliated 41,455 42,505 of which: to affiliated banks 39,716 43,631 banks Loans and advances to 102,462 106,935 Liabilities to non-bank customers 78,521 72,649 non-bank customers Securities *) 85,944 85,888 Certificated liabilities 75,612 83,035 Insurance related 35,715 33,776 Actuarial reserves 32,540 30,838 investments Other insurance-specific liabilities 4,380 4,141 Other liabilities 18,543 18,285 Proprietary capital according to balance 6,710 6,385 sheet **) Balance sheet total 331,723 338,255 Balance sheet total 331,723 338,255

______*) Bonds and other fixed-interest securities and equity shares and other valuable-yield securities. **) Balance sheet equity, less cumulative profit (group: less consolidated profit and other profit owing to shareholders) including fund for general banking risks.

65 Regulation

The following explains certain regulatory matters which are of significance for the business of the DZ BANK Group.

Overview

The DZ BANK Group's operations throughout the world are subject to the banking supervisory regimes of the various jurisdictions in which the DZ BANK Group conducts business. Banking supervisory regulations contain, inter alia, restrictions on DZ BANK's banking and non-banking activities, capital adequacy requirements, limitations of large exposures, conduct of business rules, requirements as to DZ BANK's organisational structure and numerous reporting requirements. Furthermore, they provide various regulatory authorities with investigative and enforcement powers with respect to the DZ BANK Group. In addition, a number of countries in which DZ BANK operates impose limitations on (or which affect) foreign or foreign-owned or controlled banks and financial services institutions, which have an impact on its business activities including: • restrictions on the opening of local offices, branches or subsidiaries and the types of banking and non-banking activities that may be conducted by those local offices, branches or subsidiaries; • restrictions on the acquisition of local banks or requirements of specified percentages of local ownership or specified numbers of local management personnel; and • restrictions on investment and other financial flows in and out of the country. Changes in the regulatory and supervisory regimes of the countries in which the DZ BANK Group operates determine, to some degree, its ability to expand into new markets, the services and products that it is able to offer in those markets, the costs of providing such services and products and how DZ BANK structures its specific operations. The DZ BANK Group's principal supervisor in the Federal Republic of Germany is the BaFin. In addition, many of DZ BANK's operations outside the Federal Republic of Germany are regulated by local supervisors. Within the EU or other contracting states of the EEA , DZ BANK's branches generally conduct regulated business under the "European Passport". The European Passport is a single banking license that permits DZ BANK to spread its activities throughout the EU, either via branches or by offering products and services in other member states. Under the European Passport, DZ BANK's EU and EEA branches are subject to supervision primarily by BaFin. When DZ BANK opens a branch in another member state, DZ BANK is required to notify BaFin and the German Central Bank (Deutsche Bundesbank), and BaFin will, upon receipt of the complete documents, inform the competent authorities of the host country. The host country regulator is entitled to impose certain restrictions on DZ BANK in the public interest. When DZ BANK forms a subsidiary in another member state of the EU or the EEA, it must obtain a separate authorization from the relevant local bank regulator. In the United States of America, DZ BANK's New York branch is supervised mainly by the New York Banking Department and the Board of Prime Ministers of the Federal Reserve System. The following sections provide a description of the regulatory framework applicable to DZ BANK in the Federal Republic of Germany, which DZ BANK views as the most significant jurisdiction in which it does business. Outside the Federal Republic of Germany and the EEA member states, where, as noted, DZ BANK conducts business on the basis of the European Passport, local country regulations generally have a limited impact on DZ BANK's operations.

Principal Laws and Regulators DZ BANK is authorized to conduct general banking business and to provide financial services under and, subject to the requirements set forth in, the German Banking Act. DZ BANK, as well as those of its German subsidiaries that engage in the banking or financial services business and those that have banking or financial service related operations, are subject to comprehensive supervision by the German Central Bank and BaFin. The European Central Bank regulates DZ BANK in relation to minimum reserves on deposits and issued bonds.

The German Banking Act The German Banking Act contains the basic set of rules applicable to German banks, including the requirement for a banking license, and regulates the business activities of German banks. The German Banking Act defines a "banking institution" (Kreditinstitut) as an enterprise that engages in one or more of the activities defined in the Act as "banking business". The German Banking Act also applies to "financial services institutions" (Finanzdienstleistungsinstitute). Banking institutions and financial services institutions are subject to the licensing requirements and other provisions of the German Banking Act. The German Banking Act and the rules and regulations adopted thereunder implement certain EU directives relating to banks which, in turn, implement recommendations of the Basel Committee at the BIS. These European directives address issues such as accounting

66 standards, regulatory capital, capital adequacy, consolidated supervision, the monitoring and control of large exposures, the establishment of branches within the EU and the creation of a single EU-wide banking market with no internal barriers to cross- border banking services.

Supervision by BaFin BaFin is a federal public law institution with legal capacity supervised by the German Federal Minister of Finance. It has the power to adopt administrative acts (Verwaltungsakte), regulations (Verordnungen) and guidelines (Verlautbarungen und Rundschreiben) that implement or interprete German banking laws and other laws affecting German banks. BaFin supervises the operations of German banks to ensure that they are in compliance with the German Banking Act and other applicable German laws and regulations. It places particular emphasis on compliance with capital adequacy and liquidity requirements, large exposure limits and restrictions on certain activities imposed by the German Banking Act and related regulations.

Regulation by the German Central Bank BaFin carries out its supervisory role in close cooperation with the German Central Bank. Nevertheless, these two institutions have distinct functions. BaFin has the authority to issue administrative orders; before it issues general regulations, it is required to consult with the German Central Bank. In addition, BaFin must obtain the German Central Bank's consent before it issues any general regulations that would affect the German Central Bank's operations, such as the Principles on Own Funds and Liquidity of Institutions (Grundsätze über die Eigenmittel und Liquidität der Institute), which consist of two regulations (Grundsätze I und II or "Principles I and II") on capital adequacy and liquidity requirements. The Principles I and II will soon be restated in the form of regulations whereby Principle I will be replaced with the Solvability Regulation (Solvabilitätsverordnung) and Principle II will be replaced with the Liquidity Regulation (Liquiditätsverordnung). The German Central Bank is responsible for the collection and analysis of statistics and reports from German banks and the execution of audits for the evaluation of solvability and risk manage- ment of German banks. The German Central Bank has nine regional offices (Hauptverwaltungen). These regional offices analyze the statistics and reports of all German banks that have their corporate seat in the federal states they are responsible for.

Securities Regulation by BaFin Under the German Securities Trading Act (Wertpapierhandelsgesetz), BaFin regulates and supervises securities trading in the Federal Republic of Germany. The German Securities Trading Act prohibits, among other things, insider trading with respect to securities admitted to trading or included in the over-the-counter market at a German exchange or the exchange in another country that is a member state of the EU or another contracting state of the Agreement on the EEA. To enable BaFin to carry out its supervisory functions, banking institutions are subject to comprehensive reporting requirements with respect to securities and derivatives transactions. The reporting requirements apply to transactions for the banking institution's own account as well as for the account of its customers. The German Securities Trading Act also contains rules of business conduct. These rules apply to all businesses that provide securities services. Security services include, in particular, the purchase and sale of securities or derivatives for others and the intermediation of transactions in securities or derivatives. BaFin has broad powers to investigate businesses providing securities services to monitor their compliance with the rules of conduct and the reporting requirements. In addition, the German Securities Trading Act requires an independent auditor to perform an annual audit of the securities services provider's compliance with its obligations under the German Securities Trading Act.

The European Central Bank The European Central Bank sets the minimum reserve requirements for institutions that engage in the customer deposit and lending business. These minimum reserves must equal a certain percentage of the institutions' liabilities resulting from certain deposits, plus the issuance of bonds.

Capital Adequacy Requirements German capital adequacy principles are based on the principle of risk adjustment. German capital adequacy principles, as set forth in Principle I, mainly address capital adequacy requirements for both counterparty risks (Adressenausfallrisiken) and market risks (Marktrisiken). German banks are required to cover counterparty and market risks with Tier I capital (Kernkapital or "core capital") and Tier II capital (Ergänzungskapital or "supplementary capital") (together, haftendes Eigenkapital or "regulatory banking capital"). They may also cover market risk with Tier III capital (Drittrangmittel) and (to the extent not required to cover counter- party risk) with regulatory banking capital. The calculation of regulatory banking capital and Tier III capital is set forth below. Principle I requires each German bank to maintain a solvency ratio (Eigenkapitalquote) of regulatory banking capital to risk-weighted assets (gewichtete Risikoaktiva) of at least 8%. The calculation of risk-weighted assets is explained below. The solvency ratio rules implement the European Banking directive, which in turn, is based on the recommendations of the Basel Committee on

67 Banking Supervision. See "–The Basel II Capital Accord" as to proposed changes to the current recommendation of the Basel Committee.

Regulatory Banking Capital Under the German Banking Act and in the case of the relevant bank being a stock corporation such as DZ BANK, regulatory banking capital (Eigenkapital), the numerator of the solvency ratio, consists of: Tier I (core) capital: • Paid-in share capital. • Capital reserves and surplus reserves. • Special fund for general banking risks. A bank may record this fund on the liability side of its balance sheet to secure general risks inherent in the banking business. A bank must use its reasonable commercial judgment in making this determination. • Silent partnership interests (stille Beteiligungen). Silent partnership interests are participations in the business of a bank which fulfill the criteria of equity instruments within the meaning of the German Banking Act. Under the German Banking Act, the qualification of silent partnership interests as regulatory banking capital is subject to certain conditions, including a minimum term of five years, limitations of the cumulative payment of interest, participation in the bank's losses and subordination to the rights of all creditors in the event of insolvency or liquidation of the bank. In the case of banks which are active on an international basis, such as DZ BANK, additional requirements apply; notably the instruments must not be callable by the investor, must have a maturity of at least 10 years and interest payments must not be cumulative. Treasury shares held by the bank, losses, certain intangible assets and, subject to certain conditions, loans to shareholders and silent partners are subtracted from the Tier I capital calculation. Tier II capital (limited to the amount of Tier I capital) includes: • Participation rights (Genussrechte). These rights are subject to certain conditions, including a minimum term of five years, participation in the bank's losses and subordination to the rights of all unsubordinated creditors in the event of insolvency or liquidation of the bank. • Preference shares with cumulative dividend rights (Vorzugsaktien). • Longer-term subordinated debt (limited to 50% of the amount of Tier I capital). This debt is subject to certain criteria, including a minimum term of five years and subordination to the rights of all unsubordinated creditors in the event of insolvency or liquidation of the bank. • Reserves pursuant to Section 6b of the German Income Tax Law (Einkommensteuergesetz). A bank may include 45% of these reserves in regulatory banking capital. However, any reserves included in regulatory banking capital must have been created from the proceeds of the sale of real property, property rights equivalent to real property or buildings. • Reserves for general banking risks. A bank may record certain receivables on its balance sheet at a lower value than would be permitted for industrial and other non-banking entities. Such receivables include loans and securities that are neither considered investment securities under the German Commercial Code nor part of the trading portfolio. The bank may record these receivables at a lower value if the use of a lower value is advisable, in its reasonable commercial judgment, to safeguard against the special risks inherent in the banking business. Reserves for general banking risks may not exceed 4% of the book value of the receivables and securities recorded. • Certain unrealised reserves. These may include up to 45% of the difference between the book value and the lending value (Beleihungswert) of land and buildings, and up to 35% of the difference between the book value of unrealised reserves (including provisioning reserves) and the sum of the market value of securities listed on a stock exchange, the value of non-listed securities issued by corporate members of the cooperative banks or savings banks association and the published redemption price of shares issued by certain investment funds. A bank may include these unrealised reserves in Tier II capital only if its Tier I capital amounts to at least 4.4% of its risk-weighted assets. Unrealised reserves may be included in Tier II capital only up to a maximum amount of 1.4% of risk-weighted assets. Capital components that meet the above criteria and which a bank has provided to another bank, financial services institution or financial enterprise which is not consolidated with the bank for regulatory purposes, are subtracted from the bank's regulatory banking capital if the bank holds more than 10% of the capital of such other bank, financial services institution or financial enter- prise. In addition, to the extent the aggregate book value of investments and components of own funds constituting, in each case, up to 10% of the capital of another bank, financial services institution or financial enterprise exceeds 10% of the regulatory banking capital of the bank which has granted the capital components, such exceeding aggregate amount will also be deducted from the bank's regulatory banking capital.

68 Risk-weighted Assets For a bank's investment book, the calculation of risk-weighted assets, the denominator of the solvency ratio, is set forth in Principle I. Assets are assigned to one of six basic categories of relative credit risk based on the debtor and the type of collateral, if any, securing the respective assets. Each category has a risk-classification multiplier (0%, 10%, 20%, 50%, 70% and 100%). The value of each asset as determined pursuant to Principle I is then multiplied by the risk-classification multiplier for the asset's category. The resulting figure is the risk-weighted value of the asset. Traditional off-balance sheet items attributable to a bank's investment book, such as financial guarantees and letters of credit are subject to a two-tier adjustment. First, the value of each item is determined. The value of each item is multiplied by one of four risk- classification multipliers (0%, 20%, 50% and 100%) depending on the type of instrument. In the second step, the off-balance sheet item is assigned to one of the six credit risk categories set forth above for balance sheet items. Selection of an appropriate risk multiplier is based on the type of counterparty or debtor and the type of collateral, if any, securing the asset. The adjusted value of the off-balance sheet item is then multiplied by the risk multiplier to arrive at the risk-weighted value of the off-balance sheet item.

Tier III Capital and Market Risk Principle I also sets forth the principles governing capital adequacy requirements for market risk. The market risk positions of a bank include the following: • foreign exchange positions; • commodities positions; • certain trading book positions, including those involving counterparty risk of the trading book, interest rate risk and share price risk; and • options positions. The net positions must be covered by own funds (Eigenmittel) that are not required to cover counterparty risk. Own funds consist of regulatory banking capital (Tier I plus Tier II capital) and Tier III capital. The calculation of net positions must be made in accord- ance with specific rules set forth in Principle I or, at the request of a bank, in whole or in part in accordance with the bank's internal risk rating models approved by BaFin. As a trading book institution (Handelsbuchinstitut), DZ BANK operates an internal risk rating model which has been approved by the BaFin and pursuant to which most of the bank's market risk positions are calculated. At the close of each business day, a bank's total amount counted for market risk positions must not exceed the sum of: • the difference between the bank's regulatory banking capital and 8% of its aggregate amount of riskweighted risk assets; and • the bank's Tier III capital. Tier III capital consists of the following items: • Net profits. Net profits are defined as the proportionate profit of a bank which would result from closing all trading book positions at the end of a given day minus all foreseeable expenses and distributions and minus losses resulting from the investment book which would likely arise upon a liquidation of the bank. • Short-term subordinated debt. This debt must meet certain criteria, including a minimum term of two years, subordi- nation to the rights of all unsubordinated creditors in the event of insolvency or liquidation of the bank and suspension of the payment of interest and principal if such payment would result in a breach of the own funds requirements applicable to the bank. Net profits and short-term subordinated debt qualify as Tier III capital only up to an amount which, together with the Tier II capital not required to cover risks arising from the investment book (as described below), does not exceed 250% of the core capital required to cover risks arising from the investment book. The German Banking Act defines the investment book as all positions and transactions, which are not part of the trading book. The trading book is defined as consisting primarily of the following: • financial instruments (such as securities and derivatives) that a bank holds in its portfolio for resale or that a bank acquires to exploit existing or expected spreads between the purchase and sale price or price and interest rate movements; • positions and transactions for the purpose of hedging market risks arising from the trading book and related refinancing transactions; • transactions subject to the designation of the counterparty (Aufgabegeschäfte);

69 • payment claims in the form of fees, commissions, interest, dividends and margins directly linked to trading book positions; and • repurchase, lending and similar transactions related to trading book positions.

The Basel II Capital Accord The capital adequacy requirements applicable to DZ BANK are based upon the 1988 capital accord of the Basel Committee at the BIS. The Basel Committee is a committee of central banks and bank supervisors/regulators from the major industrialized countries that develops broad policy guidelines that each country's supervisors can use to determine the supervisory policies they apply. In January 2001, the BIS released a proposal to replace the 1988 capital accord with a new capital accord. In January 2001, the Basel Committee published proposals for an overhaul of the existing international capital adequacy standards. The two principal goals of the proposals were: (i) to align capital requirements more closely with the underlying risks; and (ii) to introduce a capital charge for operational risk (comprising, among other things, risks related to certain external factors, as well as to technical errors and errors of employees). Following extensive negotiations the proposals have been adopted by the Basel Committee in June 2004 and are expected to become effective as of year-end 2006 or with regard to the most advanced approaches for risk evaluation as of year-end 2007. The Basel II Framework comprises three pillars. The first pillar represents a significant amendment of the minimum requirements under the 1988 Accord. It requires higher levels of capital for those borrowers which present higher levels of credit risk, and vice versa. Moreover, an explicit capital charge for a bank's exposure to the risk of losses caused by failures in systems, processes or staff or by external disasters is established. Capital charges are aligned more closely to a bank's own measures of its exposures to credit and operational risk. The second pillar provides for a supervisory review of bank's internal assessments of their overall risks to ensure that the management is exercising sound judgement and has set aside adequate capital for its risks. The third pillar shall enhance the degree of transparency in banks' public reporting. In July 2004, the European Commission has issued its proposed revisions to the Banking Directive 2000/12/EC which shall implement the Basel II Framework in a coherent manner throughout the EU. DZ BANK may need to maintain higher levels of capital for bank regulatory purposes, which could increase its financing costs.

Regulation of financial conglomerates In the future, financial groups which offer services and products in various financial sectors will be subject to supplementary super- vision. At present, a group-wide supervision does not exist for credit institutions, insurance firms and investment firms which belong to such a conglomerate. In order to ensure a supplementary supervision of financial groups engaging in cross-sector financial activities, the directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supple- mentary supervision of credit institutions, insurance and investment firms in a financial conglomerate has been released which has to be implemented by the EU Member States. Provided that certain thresholds have been exceeded, the supplementary supervision will apply to conglomerates which engage in substantial cross-sector activities. The supervision on the level of the conglomerate will comprise requirements regarding solvability, risk concentration, transactions within the group, internal risk management and the reliability and professional suitability of the management. Due to its structure the DZ BANK Group might be considered a financial conglomerate which will be subject to the future supplementary supervision.

Consolidated Regulation and Supervision The German Banking Act's provisions on consolidated supervision require that each group of institutions (Institutsgruppe) taken as a whole meets the own funds requirements. Under the German Banking Act, a group of institutions consists of a credit institution or financial services institution, having its corporate seat in the Federal Republic of Germany as the parent company, and all other credit institutions, financial services institutions, financial enterprises and ancillary bank service enterprises in which the parent company holds more than 50% of the capital or voting rights or on which the parent company can otherwise exert a controlling influence. Special rules apply to so-called qualified minority participations in another credit institution, financial services institution, financial enterprise or ancillary bank service enterprise. Moreover, banks are authorized to consolidate entities which would not be subject to consolidation upon application of the rules described above, on a voluntary basis. The consolidation of the DZ BANK Group according to the guidelines of the Basel Committee (BIS) comprises only subsidiaries which are institutions, financial enterprises or ancillary bank service enterprises.

Liquidity Requirements The German Banking Act requires German banks and certain financial services institutions to invest their funds so as to maintain adequate liquidity at all times. Principle II prescribes these specific liquidity requirements applicable to banks and to certain financial services institutions. The liquidity requirements set forth in Principle II are based on a comparison of the remaining terms of certain assets and liabilities. Principle II requires maintenance of a ratio (Liquiditätskennzahl or "one-month liquidity ratio") of liquid assets to liquidity reductions falling due during the month following the date on which the ratio is determined of at least one. German banks and certain financial services institutions are required to report the one-month liquidity ratio and estimated

70 liquidity ratios for the next eleven months to BaFin and the German Central Bank on a monthly basis. The liquidity requirements set forth in Principle II do not apply on a consolidated basis.

Limitations on Large Exposures The German Banking Act and the Large Exposure Regulation (Grosskredit- und Millionenkreditverordnung) limit a bank's concen- tration of credit risks on an unconsolidated and a consolidated basis through restrictions on large exposures (Grosskredite). DZ BANK is subject to the large exposure rules applicable to trading book institutions. These rules contain separate restrictions for large exposures related to the investment book (investment book large exposures) and aggregate large exposures (aggregate book large exposures) of a bank or group of institutions. Investment book large exposures are exposures incurred in the investment book and related to a single client (and persons affiliated with it) that equal or exceed 10% of a bank's or group's regulatory banking capital. Individual investment book large exposures must not exceed 25% of the bank's or group's regulatory banking capital (20% in the case of exposures to affiliates of the bank that are not consolidated for regulatory purposes). Aggregate book large exposures are created when the sum of investment book large exposures and the exposures incurred in the trading book related to a client (and persons affiliated with it) (trading book large exposures) equals or exceeds 10% of the bank's or group's own funds. The 25% limit (20% in the case of unconsolidated affiliates), calculated by reference to a bank's or group's own funds, also applies to aggregate book large exposures. Exposures incurred in the trading book include: • the net amount of long and short positions in financial instruments involving interest rate risk (interest net positions); • the net amount of long and short positions in financial instruments involving equity price risk (equity net positions); and • the counterparty risk arising from positions in the trading book. In addition to the above limits, the total investment book large exposures must not exceed eight times the bank's or group's regulatory banking capital, and the aggregate book large exposures must not exceed in the aggregate eight times the bank's or group's own funds. A bank or group of institutions may exceed these ceilings only with the prior approval of BaFin. In such a case, the bank or group is required to support the amount of the large exposure that exceeds the ceiling with regulatory banking capital (in the case of ceilings calculated with respect to regulatory banking capital) or with own funds (in the case of ceilings calculated with respect to own funds) on a one-to-one basis. Furthermore, total trading book exposures to a single client (and persons affiliated with it) must not exceed five times the bank's or group's own funds, to the extent such own funds are not required to meet the capital adequacy requirements with respect to the investment book. Total trading book exposures to a single client (and persons affiliated with it) in excess of the aforementioned limit are not permitted.

Limitations on Qualified Participations The German Banking Act places limitations on the investments of deposit-taking credit institutions in enterprises outside the financial and insurance industry, where such investment (called a "qualified participation"): • directly or indirectly amounts to 10% or more of the capital or voting rights of an enterprise; or • would give the owner significant influence over the management of the enterprise. Participations that meet the above requirements are not counted as qualified participations if the bank does not intend for the participation to establish a permanent relationship with the enterprise in which the participation is held. For purposes of calculating qualified participations, all indirect participations held by a bank through one or more subsidiaries are fully attributed to the Bank. The nominal value of a bank's qualified participation in an enterprise must not exceed 15% of the bank's regulatory banking capital. Furthermore, the aggregate nominal value of all qualified participations of a bank must not exceed 60% of the bank's regulatory banking capital. A bank may exceed those ceilings only with BaFin's approval. The bank is required to support the amount of the qualified participation or participations that exceed a ceiling with regulatory banking capital on a one-to-one basis. The limitations on qualified participations also apply on a consolidated basis.

71 Financial Statements and Audits German GAAP for banks primarily reflect the requirements of the German Commercial Code and the Regulation on Accounting by Credit Institutions (Verordnung über die Rechnungslegung der Kreditinstitute). The Regulation on Accounting by Credit Institutions requires a uniform format for the presentation of financial statements for all banks. Under German law, DZ BANK is required to be audited annually by a certified public accountant (Wirtschaftsprüfer). BaFin must be informed of and may reject the accountant's appointment. The German Banking Act requires that a bank's accountant inform BaFin of any facts that come to the accountant's attention that would lead it to refuse to certify or to limit its certification of the bank's annual financial statements or which would adversely affect the financial position of the bank. The accountant is also required to notify BaFin in the event of a material breach by management of the bank's articles of association or of any other applicable law. The accountant is required to prepare a detailed and comprehensive annual audit report (Prüfungsbericht) for submission to the bank's administrative board, BaFin and the German Central Bank.

Reporting Requirements BaFin and the German Central Bank require German banks to file comprehensive information in order to monitor compliance with the German Banking Act and other applicable legal requirements and to obtain information on the financial condition of banks. Compliance with the capital adequacy requirements is determined on the basis of the periodic reporting.

Internal Auditing BaFin requires every German bank to have an effective internal auditing department. The internal auditing department must be adequate in size and quality and must establish adequate procedures for monitoring and controlling the bank's activities. Banks are also required to have a written plan of organization that sets forth the responsibilities of the employees and operating procedures. The bank's internal audit department is required to monitor compliance with the plan.

Investigations and Official Audits BaFin conducts audits of banks on a random basis, as well as for cause. It may require banks to furnish information and documents in order to ensure that the bank is complying with the German Banking Act and its regulations. BaFin may conduct investigations without having to state a reason for its investigation. BaFin may also conduct investigations at a foreign entity that is part of a bank's group for regulatory purposes in order to verify data on consolidation, large exposure limitations and related reports. Investigations of foreign entities are limited to the extent that the law of the jurisdiction where the entity is located restricts such investigations. BaFin may attend meetings of a bank's administrative board and shareholders' meetings. It also has the authority to require that such meetings be convened.

Enforcement Powers BaFin has a wide range of enforcement powers in the event it discovers any irregularities. It may remove the bank's managers from office or prohibit them from exercising their current managerial capacities. If a bank's own funds are inadequate or if a bank does not meet the liquidity requirements and the bank fails to remedy the deficiency within a given period, then BaFin may prohibit or restrict the bank from distributing profits or extending credit. This prohibition also applies to the parent bank as the superior entity of a group of institutions in the event that the own funds of the group are inadequate on a consolidated basis. If a bank fails to meet the liquidity requirements, BaFin may also prohibit the bank from making further investments in illiquid assets. If a bank is in danger of defaulting on its obligations to creditors, BaFin may take emergency measures to avert default. These emergency measures may include: • issuing instructions relating to the management of the bank; • prohibiting the acceptance of deposits and the extension of credit; • prohibiting or restricting the bank's managers from carrying on their functions; and • appointing supervisors. If these measures are inadequate, BaFin may revoke the bank's license and, if appropriate, order the closure of the bank.

72 To avoid the insolvency of a bank, BaFin may prohibit payments and disposals of assets, close the bank's customer services, and prohibit the bank from accepting any payments other than payments of debts owed to the bank. Only BaFin may file an application for the initiation of insolvency proceedings against a bank. Violations of the German Banking Act may result in criminal and administrative penalties.

73 Taxation

PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS AS TO THE UNITED STATES OF AMERICA FEDERAL AND GERMAN INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF TRUST PREFERRED SECURITIES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.

Certain United States Federal Income Tax Considerations The following is a summary based on present law of certain United States federal income tax considerations for a prospective purchaser of the Trust Preferred Securities. This summary addresses only the tax considerations for a prospective purchaser that acquires Trust Preferred Securities on their issue at their offering price (Trust Preferred Securityholder) and that is a Non-U.S. Holder. For this purpose, a "Non-U.S. Holder" means any corporation, partnership, individual or estate or trust that, for U.S. federal income tax purposes, is (i) a foreign corporation, (ii) a foreign partnership all of whose partners are Non-U.S. Holders, (iii) a non-resident alien individual or (iv) a foreign estate or trust all of whose beneficiaries are Non-U.S. Holders. This summary does not address all tax considerations for a beneficial owner of the Trust Preferred Securities and does not address the tax consequences to a Non-U.S. Holder in special circumstances. For example, this summary does not address a Non-U.S. Holder subject to United States federal income tax on a net income basis. This summary is based upon the Internal Revenue Code, Treasury Regulations, IRS rulings and pronouncements and judicial decisions as of the date hereof, all of which are subject to change (possibly with retroactive effect). Prospective investors should note that no rulings have been or are expected to be sought from the IRS with respect to the tax treatment of the Trust Preferred Securities and no assurance can be given that the IRS will not take contrary positions. Moreover, no assurance can be given that the tax consequences described herein will not be challenged by the IRS or, if challenged, that such a challenge would not be successful.

Tax Treatment of the Trust and the Company Assuming full compliance with the terms of the Trust Agreement and the LLC Agreement (and certain other transaction documents described herein), neither the Trust nor the Company will be treated for United States federal income tax purposes as a corporation or be subject to United States federal income tax. In purchasing the Trust Preferred Securities, each Trust Preferred Securityholder agrees with the Bank, the Company and the Trustees that the Bank, the Company, the Trustees and the Trust Preferred Securityholders will treat the Trust as a grantor trust and the Trust Preferred Securityholders for all United States federal income tax purposes as holders of an undivided interest in the Trust assets, including the Company Class B Preferred Securities, and not as holders of an interest in the Bank or in any other person. The Bank will treat the Company as a partnership for all United States federal income tax purposes. The following assumes that such treatments are correct.

Income and Withholding Tax The Company intends to operate so that it will not be treated as engaged in the conduct of a trade or business within the United States of America. The Company will hold only obligations the interest from which is not from sources within the United States of America. Accordingly, a Non-U.S. Holder will not be subject to withholding of United States federal income tax on payments in respect of the Trust Preferred Securities and a Non-U.S. Holder also will not be subject to United States federal income tax on its allocable share of the Company's income unless such income is effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States of America. A Non-U.S. Holder will not be subject to United States withholding tax on gain realized on the sale or exchange of the Trust Preferred Securities. A Non-U.S. Holder also will not be subject to United States federal income tax on such gain, unless (i) such gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States of America or (ii) in the case of gain realized by an individual Non-U.S. Holder, the Non-U.S. Holder is present in the United States of America for 183 days or more in the taxable year of the sale and certain other conditions are met.

Backup Withholding Backup withholding may apply to payments to, and proceeds of disposition by a non-corporate holder. However, in general, no backup withholding will be required for payments to Non-U.S. Holders that provide proper certification of foreign status. Even without such certification, backup withholding will not apply to payments made outside the United States of America to a non- U.S. bank account. Amounts withheld under the backup withholding rules will be allowed as a refund or credit against the holder's United States federal income tax liability, provided certain required information is furnished to the IRS.

74 German Taxation The following is a general discussion of certain German tax considerations that may be relevant to a holder of Trust Preferred Securities. The information contained in this summary is not to be construed as tax advice. It is based on an interpretation of the German tax laws as of the date hereof and such tax laws are subject to change. Any such change may be applied retroactively and may adversely affect the tax consequences described herein. This summary does not purport to deal with all aspects of taxation that may be relevant to investors in the light of their individual circumstances. Prospective purchasers of Trust Preferred Securities are advised to consult their own tax advisors as to the tax consequences of the purchase, ownership and disposition of Trust Preferred Securities, including the effect of any state or local taxes, under the tax laws in the Federal Republic of Germany and in each country of which they are residents.

Tax Residents

—Trust Capital Payments Trust Capital Payments, including Trust Capital Payments having accrued up to the disposition of a Trust Preferred Security and being credited separately, paid to a holder of Trust Preferred Securities who is subject to unlimited German tax liability (i.e. a person whose residence, habitual abode, statutory seat, or place of effective management and control is located in the Federal Republic of Germany) or to holders of Trust Preferred Securities who are subject to limited German tax liability (that includes persons with a German tax presence, e.g. a permanent establishment or a permanent representative, holding the Trust Preferred Securities as property within such German tax presence) is subject to German personal or corporate income tax. In addition, a solidarity surcharge of 5.5% on the amount of the personal or corporate income tax will be levied and, in the case of a holder of Trust Preferred Securities who is an individual, may be subject to church tax. Trust Capital Payments are also subject to trade tax if the Trust Preferred Securities are held as assets of a German commercial business. If the Trust Preferred Securities are kept by a German Disbursing Agent (inländische Zahlstelle), such German Disbursing Agent will have to withhold tax (Zinsabschlag) at a rate of 30% of the gross amount of all Trust Capital Payments to the holder of Trust Preferred Securities. In addition, a solidarity surcharge of 5.5% will be withheld on this amount by the German Disbursing Agent resulting in an effective tax burden of 31.65% on the gross amount of Trust Capital Payments paid to a holder of Trust Preferred Securities. We assume that, as a consequence of the Book-Entry, Settlement and Clearance conditions, the holders of Trust Preferred Securities will generally keep their Trust Preferred Securities in a custodial account. However, if the Trust Capital Payments are paid on Trust Preferred Securities not kept in a custodial account (Tafelgeschäft), tax at a rate of 35% and a solidarity surcharge of 5.5% thereon will be withheld from the gross amount of the Trust Capital Payments paid to the holder of Trust Preferred Securities resulting in an effective tax burden of 36.925%. The tax withheld will be credited against the final German personal or corporate income tax liability of the holder of Trust Preferred Securities and against the solidarity surcharge due. Individuals subject to unlimited German tax liability are entitled to a savers' tax exemption (Sparerfreibetrag) on interest payments of up to € 1,370 including any other income from capital investments and a deductible expense allowance of € 51 (€ 2,740 and € 102, respectively, for married couples). Such holders of Trust Preferred Securities can take advantage of the savers' tax exemption for the Trust Capital Payments they receive, unless the Trust Preferred Securities are attributable to their German business assets, if the holder of Trust Preferred Securities files a certificate of exemption (Freistellungsauftrag) with the German Disbursing Agent. In this case, the German Disbursing Agent will not withhold tax up to the amount shown in the certificate of exemption (see the maximum amounts above) taking into account other income from capital investments. As well, the German Disbursing Agent will not withhold any tax, if the holder of Trust Preferred Securities submitted a certificate of non-assessment (Nichtveranlagungsbescheinigung) issued by the local tax office to the German Disbursing Agent.

—Gains from the Sale or Redemption of the Trust Preferred Securities Gains from the sale of the Trust Preferred Securities, including gains from the redemption of the Trust Preferred Securities, are considered accrued interest and are subject to personal or corporate income tax and a solidarity surcharge at a rate of 5.5% thereon for persons that are subject to unlimited or limited German tax liability as described above and, in the case of a holder of Trust Preferred Securities who is an individual, may be subject to church tax. In the case the Trust Preferred Securities are held as assets of a German commercial business, the gains are subject to trade tax. The taxable gain from the sale or redemption of the Trust Preferred Securities is calculated as the difference between the proceeds from the sale or redemption and the initial acquisition cost of the Trust Preferred Securities (Marktrendite). If the Trust should consolidate, amalgamate, convert, merge with or into, or be replaced by, any corporation or other entity or if a successor entity assumes all rights and obligations of the Trust under the Trust Securities, a holder of Trust Preferred Securities should assume that this will be treated equivalent to a sale (exchange transaction) for tax purposes.

75 If the Trust Preferred Securities are kept by a German Disbursing Agent, and if the Trust Preferred Securities have been held in custody with such German Disbursing Agent since the acquisition of the Trust Preferred Securities, the German Disbursing Agent must withhold 30% (plus a solidarity surcharge of 5.5% thereon) of the gains from the sale or redemption of the Trust Preferred Securities. If custody has changed since the acquisition of the Trust Preferred Securities, the tax basis for such withholding is an amount equal to 30% of the proceeds arising from the sale or redemption of the Trust Preferred Securities. We assume that, as a consequence of the Book-Entry, Settlement and Clearance conditions, the holders of Trust Preferred Securities will generally keep their Trust Preferred Securities in a custodial account. However, if the sale or redemption involves Trust Preferred Securities not kept in a custodial account (Tafelgeschäft), the withholding tax will be imposed at a rate of 35% (plus a solidarity surcharge 5.5% thereon) of 30% of the sales or redemption proceeds. The tax withheld will be credited against the final personal or corporate income tax liability of the holder of Trust Preferred Securities and against the solidarity surcharge due. Individuals subject to unlimited German tax liability are entitled to a savers' tax exemption on gains which are considered accrued interest up to the amount of € 1,370 taking into account other income from capital investments and a deductible expense allowance of € 51 (€ 2,740 and € 102, respectively, for married couples). Individual holders of Trust Preferred Securities can take advantage of the savers' tax exemption (Sparerfreibetrag) for the gains they receive from the sale or redemption of the Trust Preferred Securities, unless the Trust Preferred Securities are attributable to their German business assets, if the holder of Trust Preferred Securities files a certificate of exemption (Freistellungsauftrag) with the German Disbursing Agent. In this case, the German Disbursing Agent will not withhold tax up to the amount shown in the certificate of exemption (see the maximum amounts above) taking into account other income from capital investments. As well, the German Disbursing Agent will not withhold any tax, if the holder of Trust Preferred Securities submitted a certificate of non- assessment (Nichtveranlagungsbescheinigung) issued by the local tax office to the German Disbursing Agent.

Non-Residents Income of persons which are neither subject to unlimited nor to limited tax liability in the Federal Republic of Germany, are in general exempt from withholding tax (Zinsabschlag). However, in the case of over-the-counter-transactions (Tafelgeschäft) withholding tax will be imposed at a rate of 35% (plus a solidarity surcharge of 5.5% thereon) of the gross amount paid, if the Trust Capital Payments or the proceeds arising from the sale, replacement (exchange) or redemption of the Trust Preferred Securities are paid through a German branch of a German or non-German credit institution or financial services institution on Trust Preferred Securities.

EU Savings Tax Directive On June 3, 2003 the ECOFIN Council of the European Union (Council) agreed on the final wording of the directive on the taxation of savings income (EU Directive). The EU Member States were obliged to implement the EU Directive in national law by January 1, 2004. The EU Directive obliges all EU Member States with the exception of Austria, Luxembourg and Belgium to introduce a system for the automatic exchange of information on cross-border interest payments made within the European Union to natural persons in another member state. Austria, Luxembourg and Belgium will be allowed to levy a withholding tax on such payments in lieu of exchanging information. The rate of the withholding tax is initially 15% and will rise successively to 35% until 2011. 75% of the proceeds derived from this withholding tax on interest payments will be passed on by Austria, Belgium and Luxembourg to the countries of residence of these natural persons. The agreement of June 3, 2003 does not necessarily commit Austria, Luxembourg and Belgium to move to an automatic information-exchange system after 2011, but makes this move dependent upon the Council's agreeing unanimously that the USA has committed itself to an exchange of information and on the EU's unanimously reaching agreement on satisfactory information-exchange arrangements with Switzerland, Monaco, Liechtenstein, Andorra, San Marino and the associated territories of the EU-member states. The Directive is to be applied for the first time as of January 1, 2005 provided that Switzerland, Liechtenstein, San Marino, Monaco and Andorra apply 'equivalent measures' from the same point in time on the basis of the agreements made with the EU and that all relevant dependent and associated territories of the EU Member States use either the information-exchange system or the withholding tax system from the same point in time. The Council was to have determined by June 30, 2004 at the latest whether these application requirements had been fulfilled. This, however, was not the case, in particular because the referendum system in Switzerland made it impossible to guarantee that the withholding tax on savings income could be introduced in Switzerland by January 1, 2005. A new earliest effective date has, therefore, been envisaged for July 1, 2005.

Inheritance and Gift Tax The receipt of Trust Preferred Securities in case of succession upon death, or by way of a gift among living persons is subject to German inheritance and/or gift tax on the fair market value at the time of the taxable event if the deceased, donor and/or the recipient is a German resident at the time of the taxable event or is a German citizen who has not been continuously outside the Federal Republic of Germany for a period of more than five years at the time of the taxable event. German inheritance and gift

76 tax is also triggered if neither the deceased, nor the donor nor the recipient of the Trust Preferred Securities are German residents, if the Trust Preferred Securities are attributable to German business activities and if for such business activities a German permanent establishment is maintained or a permanent representative is appointed in the Federal Republic of Germany. Double taxation treaties may provide for exceptions to the domestic inheritance and gift tax regulations.

Other Taxes No stamp, issue, registration or similar direct or indirect taxes or duties will be payable in the Federal Republic of Germany in connection with the issuance, delivery or execution of the Trust Preferred Securities. Currently, net assets tax is not levied in the Federal Republic of Germany.

77 Sale

The Trust Preferred Securities were offered by the Lead Manager at an offering price of € 1,000 per Trust Preferred Security (Offering Price) within the Subscription Period, i.e. from (and including) October 4, 2004 to (and including) November 11, 2004. The Trust Preferred Securities were issued on November 22, 2004 against payment therefor. Payment and delivery was through the facilities of Clearstream Frankfurt. The Trust Preferred Securities are a new issue of securities for which currently no established trading exists. The Bank and the Company have been advised by the Lead Manager that it currently intends to trade the Trust Preferred Securities. However, the Lead Manager is not obligated to do so and any such market making activity will be subject to the limits imposed by applicable law and may be interrupted or discontinued at any time without notice. In connection with the Offering, the Lead Manager may, up to an amount of 3% of the aggregate denomination of the Trust Preferred Securities and to the extent permitted by applicable laws, carry out stabilization measures with a view to supporting the market price of the Trust Preferred Securities at a level higher than that which might otherwise prevail for a limited period after the Issue Date. However, there is no obligation of the Lead Manager to do this and no assurance that stabilization measures will be undertaken. Such stabilizing, if commenced, may be discontinued at any time and, in any case, will not exceed a period of 30 days after receipt by the Issuer of the proceeds of the issue of the Trust Preferred Securities or 60 days after the allotment of the Trust Preferred Securities, whichever period ends earlier, and shall be in compliance with all applicable laws. By engaging in stabilizing transactions the Lead Manager shall act as principal and not as agent for the Issuer. Stabilization may create the risk that the market price and/or the market liquidity of the Trust Preferred Securities is kept at an artificial level during such stabilization.

Selling Restrictions

United States of America The Lead Manager has agreed that it will offer or sell Trust Preferred Securities only in offshore transactions in reliance on Regulation S and each purchaser of Trust Preferred Securities offered hereby will be deemed to have represented and agreed that such purchaser understands that the Trust Preferred Securities have not been registered under the Securities Act and may not be offered, sold or delivered within the United States of America or its possessions or to, or for the account of, any U.S. Person, unless an exemption from the registration requirements of the Securities Act is available (terms used above that are defined in Regulation S are used above as therein defined). The Lead Manager has agreed that it has not offered and sold and will not offer or sell the Trust Preferred Securities, (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the Offering or the Issue Date, within the United States of America or to, or for the account or benefit of, U.S. Persons. The Trust Preferred Securities may not be purchased by or transferred to any employee benefit plan subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor legislation, any plan or arrange- ment subject to Section 4975 of the Internal Revenue Code, or any entity whose underlying assets include the assets of any such employee benefit plans, plans or arrangements.

United Kingdom The Lead Manager has represented, warranted and agreed that: – it has not offered or sold and, prior to the expiry of a period of six months from the Issue Date, will not offer or sell any Trust Preferred Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circum- stances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995 (United Kingdom), as amended from time to time, or any successor legislation; – it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA received by it in connection with the issue of sale or any Trust Preferred Securities in circumstances in which Section 21(1) of the FSMA does not apply to the Bank, the Company or the Trust; and – it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Trust Preferred Securities in, from or otherwise involving the United Kingdom.

78 Netherlands The Lead Manager has represented, warranted and agreed that the Trust Preferred Securities will not be offered, sold, transferred or delivered, as part of their initial distribution, or at any time thereafter, directly or indirectly, other than to individuals or legal entities in The Netherlands who or which trade or invest in securities in the conduct of a profession or trade within the meaning of Section 2 of the exemption regulation to the Netherlands Securities Market Supervision Act 1995, as amended from time to time, ("Vrijstellingsregeling Wet toezicht effectenverkeer 1995"), which includes banks, securities firms, insurance companies, pension funds, investment institutions, central governments, large international and supranational organizations, other institutional investors and other parties, including treasury departments of commercial enterprises, which are regularly active in the financial markets in a professional manner.

General No action has been taken in any jurisdiction that would permit a public offering of any of the Trust Preferred Securities, of possession or distribution of the Offering Circular or any other offering material, in any country or jurisdiction where action for that purpose is required. The Lead Manager has agreed that it will comply with all relevant securities laws and regulations in each jurisdiction in which it purchases, offers, sells or delivers Trust Preferred Securities or has in its possession or distributes this Offering Circular or any other offering material.

79 Business Development and Outlook

In the first six months of 2004, DZ BANK AG and the DZ BANK Group have been able to more than double their earnings after provisions for risk compared with the first half of 2003, and in the process strengthen and maintain the heartening trend that was emerging a year ago into the first half of the current year. Significantly stronger income streams lifted operating profit after provisions for risk to EUR 110 million in the case of DZ BANK AG (H1-2003: EUR - 53 million) and EUR 529 million for the DZ BANK Group (H1-2003: EUR 194 million). These results are evidence of the sustained improvement of operating profitability, the credit for which is due to the strong demand for the retail-banking products the Bank provides for the primary cooperative banks, the new more market-responsive structure of the investments portfolio, rationalisation of the process and cost structures, and the adoption of a risk-centric lending policy. The positive earnings trend is a clear confirmation of the strategic realignment of the DZ BANK Group over the recent years. At 62 percent for the Bank and 60 percent for the Group, the cost-income ratios have fallen almost into line with the management projections.

DZ BANK AG

Extract from the Income Statement of DZ BANK AG 01.01.2004 - 30.06.2004 (unaudited) in Euro million 01.01.-30.06.2004 01.01.-30.06.2003 Change in % Net interest income 384 292 32 Net commission income 134 147 -9 Net trading income 168 150 12 Balance of other operating 11 11 0 income/expense General and administrative expense -434 -469 -7 Profit before provisions for risk 263 131 >100 Provisions for risk -153 -184 -17 Profit after provisions for risk 110 -53 >100 Cost-Income ratio as at 30.06.2004: 62 per cent

The Bank's interest surplus has recovered markedly in the first half and the net interest income of EUR 384 million was 32 percent higher than the year-earlier total. The increase is attributable in roughly equal proportions to the improvements in the operating interest result, reflecting the more favorable refinancing base, and in the shares of affiliates. Last year's demerger of the Bank's payments handling activities reduced its net fee and commission income while also permanently lowering administration expenses. However, this decline was largely compensated by commissions on the successful placements of capital-guarantee certificates through the primary cooperative banks. Net commission income to June 30, 2004 totaled EUR 134 million. Net trading income increased to EUR 168 million (H1-2003: 150 million). The Bank has systematically expanded its popular customer-induced capital market operations and is now one of the leading German issuing houses. Administration costs have been reduced by a further 7 percent in the first six months to EUR 434 million and are now within the range of the ambitious management targets. The cost savings from optimising processing and system platforms are particularly noteworthy; this expense heading has been reduced by 34 percent in the period. With the risk costs in relation to lending operations coming in at EUR 101 million (H1-2003: 173 million), the Bank's total provisioning expense was EUR 153 million (H1-2003: 184 million). This means the provisions for credit risk are well within the planned full-year budget.

80 DZ BANK Group

Extract from the Income Statement of DZ BANK Group 01.01.2004 - 30.06.2004 (unaudited) in Euro million 01.01.-30.06.2004 01.01.-30.06.2003 Change in % Net interest income 1,073 908 18 Net commission income 472 348 36 Net trading income 171 156 10 Result for insurance operations 51 61 -16 Balance of other operating income/expense 224 130 72 General and administrative expense -1,198 -1,181 1 Profit before provisions for risk 793 422 88 Provisions for risk -264 -228 16 Profit after provisions for risk 529 194 >100 Cost-Income ratio as at 30.06.2004: 60 per cent

The DZ BANK Group, which includes the Bank, Cooperative Banking Group-owned companies such as Bausparkasse Schwäbisch Hall, DG Hyp, R + V Versicherung, Union Asset Management Holding, VR Leasing and norisbank as well as subsidiaries such as Deutsche Verkehrsbank, was able to substantially increase its operating profit after provisions for risk in the period to EUR 529 million (H1-2003: 194 million). Total operating income increased over the period under report by EUR 388 million or 24 percent to EUR 1,991 million. The increase of net interest income to EUR 1,073 million (H1-2003: 908 million) was essentially due to the higher interest surpluses at DZ BANK AG and DG Hyp. The rise in the Group's fee and commission surplus to EUR 472 million (H1-2003: 348 million) was due amongst other factors to the increase in the average funds under management at Union Asset Management Holding. The primary cooperative banks are the biggest beneficiaries of the DZ BANK Group companies' expanding commission-based business as they are the distribution partners within the cooperative financial services sector. In the 2003 financial year the primary cooperative banks earned more than EUR 1 billion in commissions on their sales of DZ BANK Group products. Net trading income improved at the Group level – in line with the increase at DZ BANK AG – to EUR 171 million (H1-2003: 156 million). Total provisions for risk increased to EUR 264 million (H1-2003: 228 million); this was exclusively due to the net change in the valuation of securities held in the liquidity reserve, as credit risk provisioning was actually lower. The striking earnings improvement at the DZ BANK Group level over the last six months represents another step along the road to achieving our profitability targets. The Group's defined strategic objectives, most importantly the exploitation of already identified cost savings potential and the reaping of production and distribution synergies, will further strengthen the earnings accretion process.

Balance sheet Both the Bank's and the Group's balance sheets have expanded again in the first half of the year. The increase in the Bank's balance sheet assets by 7.7 percent over the end-2003 position to EUR 185 billion was primarily the result of higher loans and advances to other banks together with increased securities holdings. Loans and advances to primary cooperative banks were virtually unchanged. The DZ BANK Group's total balance sheet assets increased by 6.4 percent to EUR 353 billion, due principally to changes at the Bank and also to increased securities holdings at DG Hyp.

81 Outlook Turning to the further course of the year, DZ BANK AG is confident of continuing strong demand from the primary cooperative banks for the specialist retail products developed by the companies of the DZ BANK Group. The Bank will also prioritise the expansion of the banking services provided for SME corporate customers on a joint basis with the primary cooperative banks. DZ BANK AG also intends to sustain the substantial income contribution from its ongoing customer-led capital market operations at a high level. With lending expanding but remaining strictly risk-sensitive, DZ BANK AG foresees positive earnings stimulus coupled with a further reduction of full-year risk provisioning. Management accordingly predicts significantly higher full-year earnings than in 2003. In September 2004, the supervisory board of DZ BANK instructed the board of managing directors to enter into exploratory talks with WGZ-Bank in Düsseldorf with a view to forging a closer relationship between the two banks. The outcome of these talks is unpredictable and no time limit has been stipulated for these talks.

82 Annex A – Subordinated Support Undertaking

83 This Subordinated Support Undertaking (the Agreement), dated as of November 22, 2004, is entered into between DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, a German stock corporation, and DZ BANK Capital Funding LLC II, a limited liability company formed unter the laws of Delaware, United States of America, (the Company).

Preamble

WHEREAS, DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, a German stock corporation (the Bank) owns the security of DZ BANK Capital Funding LLC II, a limited liability company formed under the laws of the State of Delaware, United States of America, (the Company) representing the common limited liability interest in the Company (the Common Security);

WHEREAS, pursuant to the LLC Agreement (as defined below), the Company will issue a Class A Preferred Security (as defined below) to the Bank and all of the Class B Preferred Securities (as defined below) to the Trust (as defined below);

WHEREAS, pursuant to the Trust Agreement (as defined below), the Trust will issue the Trust Preferred Securities (as defined below) upon the same terms as, and representing corresponding amounts of, the Class B Preferred Securities;

WHEREAS, the Company intends to use the net proceeds from the issuance of the Class B Preferred Securities to purchase subordinated notes of the Bank;

WHEREAS, the Company may from time to time declare Class B Capital Payments (as defined below) on the Class B Preferred Securities pursuant to and in accordance with the LLC Agreement; and

WHEREAS, the Bank wishes, prior to the issuance of the Class B Preferred Securities, to undertake for the benefit of the Company and the holders of Class B Preferred Securities to ensure that (i) the Bank shall maintain direct or indirect ownership of the Class A Preferred Security and the Common Security as long as any Class B Preferred Securities remain outstanding, (ii) the Company shall at all times be in a position to meet its obligations, if and when such obligations are due and payable, including its obligation to make Class B Capital Payments (as defined below and including Additional Amounts (as defined below) thereon) and to pay the Redemption Amount (as defined below) and (iii) in liquidation or dissolution of the Company, the Company will have sufficient funds to pay the amounts corresponding to the amounts set forth in (i) to (iii) of the definition of Liquidation Amount (as defined below).

NOW, THEREFORE, the parties agree as follows:

Section 1 Certain Definitions

Additional Amounts has the meaning specified in Section 7.04(c) of the LLC Agreement.

Agreement has the meaning specified on the cover page.

Bank has the meaning specified in the preamble.

Class A Preferred Security means the class of preferred limited liability company interests in the Company designed as Class A.

Class B Agio means the agio of € 980 per Class B Preferred Security having a denomination of € 1,000.

Class B Capital Payments means any cash distributions at any time after the date hereof declared by the Board of Directors of the Company in accordance with the LLC Agreement, but not yet paid, on the Class B Preferred Securities.

Class B Equity Component means the amount corresponding to the Liquidation Ratio multiplied by the Net Assets and divided by the aggregate number of all outstanding Class B Preferred Securities.

Class B LPA means the liquidation preference amount of € 20 per Class B Preferred Security.

Class B Payment Period has the meaning set forth in Section 7.04(b)(ii) of the LLC Agreement.

84 Class B Preferred Securities mean the class of preferred limited liability company interests in the Company designed as Class B, with a denomination of € 1,000, a Class B LPA of € 20 and a Class B Agio of € 980 per security.

Common Security has the meaning specified in the preamble.

Company has the meaning specified in the preamble.

Independent Enforcement Director means the additional member of the board of directors of the Company appointed by the holders of the Class B Preferred Securities upon the occurrence of certain events in accordance with, and under the terms set forth in, the LLC Agreement.

Liquidation Amount means the sum of (i) the Class B LPA, plus (ii) accrued and unpaid Class B Capital Payments in respect of the then current Class B Payment Period to but excluding the date of liquidation and Additional Amounts, if any, plus (iii) the Class B Equity Component, plus (iv) any assets of the Company remaining after distributions have been made under the Class A Preferred Securities, provided that the Company receives amounts under the Subordinated Support Undertaking given by the Bank to the Company corresponding to the sum of the amounts referred to under (i) to (iii) of the definition of Liquidation Amount and provided further that the sum of (i) and (iii) shall not exceed the Class B Denomination per Class B Preferred Security, i.e. € 1,000.

Liquidation Ratio means the (i) aggregate Class B Agio of all outstanding Class B Preferred Securities divided by (ii) the sum of the aggregate Class B Agio of all outstanding Class B Preferred Securities, the subscribed capital (gezeichnetes Kapital), the capital reserves and the surplus reserves of the Bank as determined in the unconsolidated liquidation financial statements (Liquidations- eröffnungsbilanz) of the Bank set up by the Bank (which may be unaudited) in connection with the liquidation, dissolution or winding-up of the Bank.

LLC Agreement means the limited liability company agreement of the Company dated as of August 12, 2004 between the Bank and the Company, as amended and restated as of November 22, 2004, and as the same may be further amended from time to time in accordance with its terms.

Net Assets means the aggregate amount available for distribution in the liquidation, dissolution or the winding-up of the Bank after all creditors senior to the holders of common shares of the Bank have been satisfied.

Person means any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company, or other legal entity or organization.

Preferred Securities mean the Class A Preferred Security and the Class B Preferred Securities, collectively.

Redemption Amount shall be the amount at which the Class B Preferred Securities are redeemable at the option of the Company pursuant to Section 7.04(d)(i) of the LLC Agreement or upon the occurrence of a Special Redemption Event pursuant to Section 7.04(d)(ii) of the LLC Agreement.

Trust means DZ BANK Capital Funding Trust II, a statutory trust formed pursuant to the Trust Agreement under the laws of the State of Delaware, United States of America.

Trust Agreement means the trust agreement dated as of August 12, 2004 between the Bank, the Company, the property trustee, the Delaware trustee and the regular trustees named therein as amended and restated as of November 22, 2004 and as the same may be further amended from time to time in accordance with its terms.

Trust Preferred Securities means the noncumulative trust preferred securities issued by the Trust.

Section 2 Subordinated Support Undertaking

(a) The Bank undertakes to ensure that the Company shall at all times be in a position to meet its obligations if and when such obligations are due and payable, including its obligations to make Class B Capital Payments (including Additional Amounts thereon, if any) and to pay (i) the Redemption Amount and (ii) in the event of any liquidation or dissolution of the Company in the context of a liquidation, dissolution or winding-up of the Bank, the amounts corresponding to the amounts set forth in (i) to (iii) of the definition of Liquidation Amount.

(b) The obligations of the Bank under this Section 2 shall be subordinated to all unsubordinated and subordinated debt obligations of the Bank (including profit participation rights (Genussrechte) and silent partnership interests (Stille Beteiligungen)), and shall rank pari passu with the most senior ranking preference shares of the Bank, if any, and shall rank senior to any other

85 preference shares and the common shares of the Bank; provided that the Bank's obligation to ensure the Company's position to meet its obligations to pay the Class B Equity Component of the Liquidation Amount shall rank pari passu with the Bank's obligation to pay liquidation proceeds to its holders of common stock; therefore, the Bank's obligation to ensure the Company's position to meet its obligation to pay the Class B Equity Component of the Liquidation Amount shall only arise after all creditors of the Bank ranking senior to the common shareholders of the Bank have been satisfied.

(c) This Agreement shall not constitute a guarantee or an undertaking of any kind that the Company will at any time have sufficient assets, or be authorized pursuant to the LLC Agreement, to declare a Class B Capital Payment or another distribution.

Section 3 Third Party Beneficiaries and Enforcement of Rights

(a) The parties hereto agree that this Agreement is entered into as a third party beneficiary contract within the meaning of Section 328(2) of the German Civil Code (echter Vertrag zugunsten Dritter gem. § 328 Abs. 2 BGB) for the benefit of the Company and all current and future holders of the Class B Preferred Securities and that the Company and any holder of any such Class B Preferred Securities may severally enforce the obligations of the Bank under Section 2.

(b) The Parties hereto acknowledge that, as provided in the LLC Agreement, if a holder of Class B Preferred Securities has notified the Company that the Bank has failed to pay any amount then due hereunder, and such failure continues for sixty (60) days after such notice is given, the majority of the holders of the Class B Preferred Securities shall have the right to appoint one Independent Enforcement Director who will have the sole authority, right and power to enforce the rights and settle any claim of the Company under this Agreement.

Section 4 No Exercise of Rights

The Bank shall not exercise any right of set-off or counterclaim that it may have against the Company as long as any Class B Preferred Securities are outstanding.

Section 5 Burden of Proof

Any failure of the Company to pay Class B Capital Payments, the Redemption Amount or the amounts set forth in (i) to (iii) of the definition of Liquidation Amount (or any part thereof), plus, in either case, Additional Amounts, if any, as and when such amounts are due shall constitute prima facie evidence of a breach by the Bank of its obligations hereunder. The Bank shall have the burden of proof that the occurrence of such breach results neither from its negligent nor its wilful misconduct.

Section 6 No Senior Support to Other Subsidiaries

The Bank undertakes that it shall not give any guarantee or similar undertaking with respect to, or enter into any other agreement relating to, the support or payment of any amounts in respect of any other preference securities (or instruments ranking pari passu with or junior to such preference securities) of any other Bank Affiliate that would in any regard rank senior in right of payment to the Bank's most senior obligations under this Agreement, unless the parties hereto modify this Agreement such that the Bank's obligations under this Agreement rank at least pari passu with, and contain substantially equivalent rights of priority as to payment as such guarantee or similar undertaking.

Section 7 Continued Ownership of the Class A Preferred Security and the Common Security

The Bank undertakes to maintain direct or indirect ownership of the Class A Preferred Security and the Common Security as long as any Class B Preferred Securities remain outstanding.

Section 8 No Dissolution of the Company

Under the terms of the LLC Agreement and to the fullest extent permitted by law, the Company shall not be dissolved until all obligations under this Agreement have been paid in full pursuant to its terms.

86 Section 9 Modification and Termination

So long as Class B Preferred Securities remain outstanding, this Agreement may not be modified or terminated without the consent of 100 per cent. of the holders of such Class B Preferred Securities as provided in the LLC Agreement, except for such modifications that are not adverse to the interests of the holders of the Class B Preferred Securities.

Section 10 No Assignment

So long as any Class B Preferred Securities remain outstanding, the Bank shall not assign or transfer its rights or obligations under this Agreement to any Person without the consent of 100 per cent. of the holders of such Class B Preferred Securities.

Section 11 Successors

This Agreement shall be binding upon successors to the parties.

Section 12 Severability

Should any provision of this Agreement be found invalid, illegal or unenforceable for any reason, it is to be deemed replaced by the valid, legal and enforceable provision most closely approximating the intent of the parties, as expressed in such provision, and the validity, legality and enforceability of the remainder of this Agreement shall in no way be affected or impaired thereby.

Section 13 Governing Law and Jurisdiction

This Agreement shall be governed by, and construed in accordance with, the laws of the Federal Republic of Germany and the parties irrevocably submit to the non-exclusive jurisdiction of the district court (Landgericht) Frankfurt am Main.

87

Contents of the Financial Part

Consolidated Financial Statements 2003 of DZ BANK Group ...... F-3 Annual Financial Statements 2003 of DZ BANK AG ...... F-127

F-1 F-2 Financial Part

DZ BANK Group Consolidated Financial Statements 2003

F-3 I. Overview of trading in fiscal 2003 2. Continuation of the strategic realignment launched in 2001 1. Macroeconomic framework During the year under report DZ BANK AG (DZ BANK) has successfully maintained our strategy of focusing our business activity more closely on the local cooperative banks and The banking sector continued to find itself confronted with ex- applying a risk-aware lending policy. At the same time we ceptional challenges during the year under report. The existing were able to make further progress on the projects launched need to resize the credit industry in response to the globali- at the time of the merger in 2001 to migrate our databases sation of markets was further exacerbated by the persistence and harmonise our IT platforms, and to bring many of these of extremely weak economic conditions during the year just projects to a successful conclusion during 2003. ended. In the shadow of the Iraq crisis, economic output weakened by 0.3 percent in the first half of 2003 before rising There have also been changes in the DZ BANK Group’s port- by 0.2 percent in the second half of the year. folio of businesses during the year, all of them aimed at strengthening the effectiveness of the cooperative banking With economic activity and demand unsatisfactory, the persis- sector as a whole: tently difficult conditions on the labor market weighed on con- sumer sentiment and private household demand fell again by - Spin-off of payments processing division 0.1 percent in 2003. Corporate investment activity also re- mained well below expectations as the only investments com- The separating out of DZ BANK’s payments processing divi- panies made were primarily aimed at improving productivity. sion into a newly-founded specialist company Transaktions- The European Central Bank’s lowering of the interest rates institut für Zahlungsverkehrsdienstleistungen AG, Frankfurt level by a total of 75 basis points in two steps did not deliver am Main, (Transaktionsinstitut) with effect from September 1, the hoped-for stimulative effect on investment and consumer 2003 has created the nucleus for a neutral processing platform demand. to service national and international payments transactions. The benefit of efficiency gains achieved through the expansion The biggest burdens on German business in the year under of transaction volumes and the modernisation of processing report were its locational disadvantages, however.We had to technologies will feed through to the local cooperative banks wait until the end of 2003 to see the start of the necessary in the form of significantly reduced unit costs. In December policy changes when reform initiatives aimed at reducing cor- 2003 WestLB AG, Düsseldorf, announced it is interested in porate taxes and social costs were finally passed. partnering with Transaktionsinstitut. Between them, these banks handle no less than 26 percent of the total domestic payments traffic measured by numbers of transactions

F-4 - Acquisition of norisbank AG, Nürnberg - Amalgamation of factoring business with France- based Natexis Factorem S.A., Paris DZ BANK’s takeover of the specialist consumer credit provider norisbank AG as from October 1, 2003 has created the neces- In November 2003 Natexis Banque Populaire, Paris, and sary foundation for increasing the cooperative banking sector’s VR-LEASING AG, Eschborn, signed a joint-venture agreement share of this fast-growing market segment. norisbank’s partner to establish VR FACTOREM GmbH, Eschborn. The new under- banks model gives local cooperative banks the opportunity to taking, 51 percent owned by our French partner and 49 per- distribute its high-profile “easyCredit” brand product. noris- cent owned by VR-LEASING AG, will specialise in the provision bank has installed a high-grade risk management system and of factoring services for small and midsize enterprises and also a modern, low-cost processing technology. By the end of 2003 absorb the factoring operations of VR DISKONTBANK GmbH, no less than 438 partner banks had already registered their Eschborn, a subsidiary of VR-LEASING AG. DZ BANK and interest in distributing “easyCredit”. Natexis Banque Populaire have also agreed to intensify our existing cooperation in the areas of research, asset manage- -Cross-sector merger of securities processing businesses ment and private equity.

The merger of the municipal savings bank sector’s specialist - Investment custody business service provider WPS WertpapierService Bank AG, Düsseldorf, with its cooperative sector equivalent Bank für Wertpapierser- In January of the current year, Union Asset Management vice and -systeme AG, Frankfurt am Main, to form Deutsche Holding AG, Frankfurt am Main, and DekaBank Deutsche WertpapierService Bank AG, Frankfurt am Main, (dwpbank) in Girozentrale, Frankfurt am Main, started to jointly explore August 2003 has created Germany’s biggest specialist securi- the possibility of pooling their investment custody activities. ties processor.The involvement of further partners in future and the harmonisation of processing platforms will deliver In order to further the structural streamlining of the DZ BANK permanent efficiency advances. At the end of November the Group, in addition to the initiatives described DZ BANK has new entity was able to sign an agreement on future coopera- also acquired (effective December 31, 2003) ReiseBank AG, tion with Dresdner Bank AG, Frankfurt am Main. The shares Frankfurt am Main, and CashExpress Gesellschaft für Finanz- of dwpbank are held in equal proportions by the cooperative and Zahlungsverkehrsdienstleistungen mbH, Frankfurt am sector (40 percent by DZ BANK, 10 percent by WGZ-Bank Main, from DVB Bank AG, Frankfurt am Main. These moves Westdeutsche Genossenschafts-Zentralbank eG, Düsseldorf) will free DVB Bank to focus on its core international transport and the savings bank sector.The intention is to bring further finance and consultancy business. equity partners on board in the future.

F-5 3. Earnings for the previously mentioned exceptional factors in the prior-year figures, this represents a change of € +216 million or +6.2 percent. The DZ BANK Group’s key income statement measures evolved as follows in the year under report: Administrative expense reduced by € 99 million to € 2,403 million. Operating profit before risk provisions amounted to € 1,293 million (2002: € 1,498 million). Excluding the ex- The cost-income ratio was 65.0 percent (2002: 71.9 percent). ceptional income of € 453 million under the previous year’s net income from insurance activities heading and correcting Including a partial liquidation of the group’s prudential the previous year’s profit positions to reflect subsequent reserves (§ 340f HGB), the net new risk provisioning of changes in accounting methods, this represents an increase € -326 million was around 86 percent lower than the preced- of 32.2 percent. ing year.

Our total operating income for the 2003 financial year amounted to € 3,696 million (2002: € 4,000 million). Adjusted

Income statement DZ BANK Group 2003/2002

2003 2002 Change in € million in % Net interest income 1 1,965 1,937 1.4 Net commission income 773 853 -9.4 Net earnings from financial activities 335 216 55.1 Net income from insurance activities 182 591 -69.2 Personnel expense 1,140 1,172 -2.7 Other administrative expenses 2 1,263 1,330 -5.0 General and administrative expense 2,403 2,502 -4.0 Balance of other operating expense/ income 441 403 9.4 Operating result before risk provisions 1,293 1,498 -13.7 Risk provisions -326 -2,307 -85.9 Operating result 967 -809 >100.0 1 includes current earnings, earnings from profit trans- Balance of other expenses/income 3 -244 -63 >100.0 fer agreements Profit before taxes 723 -872 >100.0 2 other administrative expenses plus depreciation and Taxes 341 -1,223 >100.0 write-downs on fixed and intangible assets

3 Net profit on period 382 351 8.8 Result from financial investments, special items with reserve character, extraordinary expenditure/income and other items

F-6 The detailed breakdown of the fiscal 2003 results is as tomers’ export business through financing arrangements that follows: are then paid down against deliveries of marketable goods (counterdeals). The specialist market position we have estab- The DZ BANK Group’s net interest income was 1.4 percent lished in earlier years in the financing of Hermes-backed higher year-on-year at € 1,965 million. It should be noted that export transactions also enabled us to sign additional frame- this change is essentially the result of the two presentation work agreements with foreign banks in India, Indonesia, methodology changes described below that were implemented Russia and the Ukraine; these will also provide the basis for last year and which are more consonant with the operating future business. logic. Unlike last year, the expenses arising from prepayment penalties on the premature redemption of note loans and re- In 2003 Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall, gistered bonds are no longer shown as part of the balance of (BSH) was once again able to top the previous year’s demand- other (non-operating) expenses and income, but as part of the ing target by recording 4.7 percent net interest income interest result. Furthermore, the net earnings from financial growth. Its interest income was virtually unchanged but inte- activities total for 2003 includes for the first time the balance rest expense was sharply lower.The reduction on the expense of income and expense from repurchase agreements that in side was due to increased reliance on low-interest “A-pro- the previous year was still part of the net interest income gram“ financing in the home savings and loan business, heading. If we adjust the previous year to reflect these two coupled with a systematic policy of variable-rate borrowing method changes, net interest income increased by 5.8 percent during a period of falling rates in the non-collective segment. in 2003; if we additionally adjust for the income variances due to changes in the sphere of consolidation, the group’s net Net interest income came in 5.0 percent lower than a year interest income increased by 3.0 percent. earlier at Deutsche Genossenschafts-Hypothekenbank AG, Hamburg, (DG HYP) due to the expiry of higher-margin lending The evolution of the interest surplus across the various sub- arrangements from earlier years; this pattern is typical for the sidiaries was inconsistent. sector.The success of DG HYP’s treasury operations in the area of risk- and yield-optimised national and international port- After adjusting for the previously mentioned exceptional pre- folio management enabled it to make a bigger contribution to sentational effects (and before shares of affiliates), DZ BANK the interest result than in 2002. DG HYP’s new business re- improved its net interest income by +2.3 percent. corded noteworthy volume growth on the back of rising mar- gins and falling loan maturities in the household and commer- The credit and money market operations made a significant cial real estate finance segments as well as in the state finance contribution to the overall interest result. The structured trade segment. Overall DG HYP has further reinforced its market finance business in particular was able to make impressive position in a difficult economic environment. progress. We were able to expand our market position thanks primarily to the encouraging growth of the demand for finance from the oil and gas sector – even though the domestic and European markets were marked by constrained demand and slow growth. We were also able to further strengthen our leading position in Germany as a provider of two-way-trade- backed export finance, in which the bank supports its cus-

F-7 Important steps were taken during 2003 to reposition DG HYP mission income reduced by 1.3 percent. The international as a lean but fit real estate bank under the umbrella of the operations were once again able to increase their contribution DZ BANK Group’s specialist property subgroup VR-Immobilien to the group interest result year-on-year, while the credit AG,Frankfurt am Main. Its new business policy focus will see operations fell short of last year’s outcome. Across the group, DG HYP concentrating in future on four core businesses: per- net interest income fell slightly in the securities and payments sonal real estate credit portfolios, commercial real estate credit handling business lines. business, real estate credit treasury, and treasury. DZ BANK’s securities-related business was exceptionally pro- DZ BANK International S.A., Luxembourg-Strassen, (DZI) was fitable overall last year and was able to substantially more able to increase its net interest income by 4.6 percent in the than compensate for the reduced contributions of the other year under report, thanks especially to its treasury operations. business lines, payments handling, lending and international DZI’s focus on four core businesses – international private operations. During the year under report we significantly ad- banking, investment funds, credit and treasury – has enabled it vanced the process of accelerating and concentrating our retail to once again demonstrate its strength as an important center banking sales activities that was launched in 2002. The twin of expertise for the German cooperative banking sector. priorities were to extend our product offering and increase our product specialisation, in both cases centrally driven by cus- Although it was able to raise its interest margin, the net in- tomer interests. The uncertainty emanating from the Iraq crisis terest income of our specialist international transport finance and the resulting slump of the stock market indices to multi- subgroup DVB fell by 2.1 percent in the year under report. year lows in March 2003 combined with the difficult economic Almost 90 percent of DVB’s international lending business is environment in Germany to undermine investors’ confidence in US-dollar-denominated, so its results suffered as the euro risk assets and further reinforce our customers’ pronounced strengthened against the dollar in 2003. need for security. Continuing the previous year’s evident trend of increasing demand for structured products that offer capital The highly satisfactory trend of business at norisbank AG, which guarantees coupled with the chance to participate in the rising has been part of the DZ BANK Group’s sphere of consolidation value of selected baskets of stocks or indices, our certificates since the closing quarter of 2003, contributed € 52 million to offering attracted exceptional interest – especially the Multi- the group’s fiscal 2003 net interest income on a pro rata basis. Zins and VarioZins versions and the product innovation of The integration of this installment credit specialist into the the year in 2003, the MaxiRend Tracker.We were delighted in cooperative banking sector will be assisted by norisbank’s November 2003 when the readers of the specialist magazine “partner banks model“ that most importantly will allow the “Zertifikate Journal“ and of the newspaper “Welt am Sonn- participating local cooperative banks to start to distribute tag“ voted DZ BANK “Issuer of the Year“ and the jurors norisbank’s high-profile “easyCredit“ branded product. As at awarded us the distinction of “Best Issuer of Protected-Capital the end of 2003, no less than 438 partner banks had regis- Products“. tered their interest in marketing “easyCredit“. DVB’s net commission income was 5.4 percent lower com- The group’s net fee and commission income moderated by pared with the previous year. Credit commissions in the in- 9.4 percent to € 773 million. Much of this big variance is due ternational transport finance advisory and syndication business to the impact on the income statement of the changes in the increased by around 7 percent year-on-year. Falling commis- circle of consolidation. If we adjust for these effects, net com- sion income from ReiseBank AG’s currency exchange business

F-8 as a result of the decline in tourism and the loss of the pay- In the pension provision market that is so promising for the ments handling and securities services DVB used to provide for funds industry, the new SME pension product “VR Mittel- the Sparda banks reduced the net commission income total standsRente“ – jointly developed and marketed by UMH and overall, however. R+V Versicherung AG, Wiesbaden – was a proactive response to the need of small and midsize businesses for advice and The Union Investment Group (UMH) was able to increase its support in the pensions area. “VR MittelstandsRente“ is a net commission income, which basically depends on the total standardised package that offers employees of SME compa- fund assets under management, by 3.4 percent last year. nies a cost-effective opportunity to convert their pay into However, the further declines of prices on the international pension cover by taking out a direct insurance policy with R+V stock markets in the first half of 2003 helped to keep investors Versicherung AG. The surpluses over the life-cover premiums nervous. They therefore tended to favor low-risk investments, are invested into a UMH equity funds of funds. Employees can especially fixed-income and real estate funds. The Union also take advantage of the Riester subsidy and invest additio- Investment Group responded to investors’ changing needs nal contributions into either R+V Versicherung’s “VR-Renten- structure by launching a line of capital-guaranteed products polster“ product or the Union Investment Group’s “UniProfi- as well as a fund of hedge funds for institutional investors. Rente“ product. Overall the subgroup was able to lift its total funds under management across all product categories from € 101 billion BSH’s net commission income reduced by 38.8 percent while to € 110 billion. its new business expanded by 42.9 percent. DG HYP’s net commission income reduced by 67.9 percent year-on-year on UMH was once again the market leader as measured by net the back of a 17.1 percent increase in the volume of new pro- funds inflow last year, as it attracted € 7.8 billion of new perty loans extended. Both BSH and DG HYP pay commissions money into its stable of retail funds (including open-ended real to the local cooperative banks for the new business they sign estate funds). Building on this sales success, the Union Invest- up, and the expansion of new save-to-build plans at BSH and ment Group again improved its ranking in the BVI retail fund new loan commitments at DG HYP meant they had to pay out assets table; as at December 31, 2003 its market share includ- more in fees than in the previous year.The consequence was ing open real estate funds stood at 17.6 percent compared to BSH’s commission expenses increased in the year under report just 17.1 percent a year earlier. and since its higher expenses outweighed the fees it received on new save-to-build contracts, BSH posted a much smaller commission surplus than in the preceding year. DG HYP’s commission expenses were also influenced during the year by the higher issuance fees it had to pay on its successful capital market initiatives compared with the preceding year and its increased placement of pfandbriefe. The increase of DG HYP’s commission income (primarily due to higher fees received for administering the commercial property loans portfolio) was comparatively smaller.

F-9 BSH was once again able to significantly increase the volume DZ BANK Group operating income 2003/2002 of its home savings and loan new business year-on-year, and in € million impressively extend its market leadership position in new 3,696 4,000 save-to-build business. This growth was also boosted by the 4.000 (-7.6%) public debate that started in the closing months of 2003 3.500 about reducing the government subsidies for homebuilding. 3.000 1,937 2.500 1,965 norisbank AG has been fully consolidated from October 1, 2.000 2003 and the new group member made a pro rata contribu- 1.500 853 773 tion of € 14 million to the group commission surplus. This 1.000 216 500 335 591 resulted primarily from the transacting of quasi-credit and 182 with-profits insurance business. 0 441 403 2003 2002 The group’s net earnings from financial activities, which was 55.1 percent higher, essentially depends on DZ BANK’s Net interest income proprietary trading activities. If we adjust the prior-year value Net commission income for the net result on repurchase agreements, the net result Net income from financial activities increased by 46.9 percent. Net income from insurance operations Other net operating income Strong year-on-year income growth was recorded both in the area of equity-price-sensitive products and in the results from trading exchange rate and especially interest rate risks. The group’s general and administrative expenses were The group’s net income from insurance activities, generated reduced by 4.0 percent to € 2,403 million. Within this total, exclusively by the R+V Versicherung subgroup, amounted to non-personnel expenses moderated by 5.0 percent and € 182 million 2003 compared with € 591 million in 2002. personnel expenses reduced by 2.7 percent. However, if we exclude the equity interests disposal gains component of € 453 million from the prior-year total, the total The parent bank played a major role in the reduction of the income from the insurance operations increased by € 213 mil- group’s general and administrative expenses. DZ BANK’s lion. This improvement was assisted by higher premium personnel expenses moderated by 4.4 percent and its non- receipts due to a marked pickup in the demand for life and personnel expenses reduced by 1.8 percent. pension insurance as well as higher health insurance revenues (at R+V Krankenversicherung). Adjusted for the one-off effect in last year’s results, our net income from the insurance opera- tions was improved by € 44 million.

F-10 Once again, the focus at the group level last year was on con- of the local cooperative banks covered by the computing center centrating our business activities in newly defined fields of of FIDUCIA IT AG at Karlsruhe. Integrating this capability into endeavor with the objective of realising further efficiency our systems landscape has released substantial synergies. The potentials, in line with the fundamental strategic realignment now nationwide availability of “VR Marktplatz“, our market of the DZ BANK Group described at the start of this report. information platform designed for end customers, also repre- sents a further substantial quality enhancement of our internet We expect the concentration of “back-office ” services pro- brokerage package. vision into the specialist companies Transaktionsinstitut, dwpbank and VR Kreditwerk Hamburg-Schwäbisch Hall AG, The essential prerequirement for reorganising DZ BANK’s IT Hamburg and Schwäbisch Hall, to strengthen the competitive- systems was to reduce the wealth of different systems de- ness of the DZ BANK Group and the entire cooperative bank- ployed in investment banking and to switch to the standard ing sector. software of the SAP Banking Platform. One result was that we have already reduced our IT costs by 30 percent compared We passed further milestones and did further groundwork in with 2001, the first year of the merger. By 2004, when we will 2003 on harmonising and integrating IT systems across the have completed our technology harmonisation in less than companies that make up the integrated cooperative financial three years, the total savings will be more than 50 percent. services system. Having successfully introduced our central in- formation and communications medium “DZ-InfoNet“ in In the year under report we were able to improve the group’s 2002, we expanded the functionality and performance spec- cost-income ratio, adjusted for the previously mentioned ex- trum of this platform during 2003 to transform it into the all- ceptional factors in the prior-year net interest income and net round information portal “VR-BankenPortal“. Since the end of income from insurance operations headings, to 65.0 percent last year, the primary banks now have a central point of access compared with 71.9 percent in 2002. to the product and service offerings of virtually all the coope- rative banking sector’s household-name “product providers“. The balance of other operating expenses and income of The “Konto-Online“ application integrated into the “VR-Ban- € 441 million is primarily due to the net leasing income kenPortal“ site also allows local cooperative banks to obtain a generated by the VR LEASING subgroup, which increased by close-to-real-time overview of their credit and current account 5.5 percent last year as the total volume of new business positions vis-à-vis DZ BANK, and provides access to end-to- expanded by 14 percent (especially outside Germany). The end-supported online transaction processing. refocusing of the real estate leasing and fleet management operations onto the SME business customer segment and the Additionally, the nationwide availability of the “GENO-Broker“ spin-off of VR DISKONTBANK GmbH’s factoring business into application means all the cooperative banks within DZ BANK’s VR FACTOREM GmbH both helped boost the 2003 positive territory can take advantage of this online service to support outcome. their investment advisers. “VR-Networld Brokerage“ now pro- vides a single system for dealing in securities for the customers

F-11 The group’s net new risk provisioning amounted in 2003 existing social plan from ongoing early retirement obligations, to € -326 million compared with a prior-year total of plus expenses in connection with the spin-off of the payment € -2,307 million. The key factor in this big improvement, handling operation to the new Transaktionsinstitut. apart from the change in the section 340f HGB prudential reserve each year, was the much lower levels of risk provisions The group’s net profit on the year amounted to € 382 million required compared with the difficult 2002 year; most of the compared to the previous year’s € 351 million. new provisions related to commercial real estate lending ex- posures and energy sector exposures. Our new business, which The consolidated profit amounted to € 55 million after mi- as far as Germany is concerned was once again overshadowed nority interests of € 88 million and the allocation of € 239 mil- in 2003 by the clear signs of demand and growth weakness, lion to the surplus reserves. remained subject to the binding risk limits and profitability criteria imposed immediately after the merger.We have conti- nued to systematically refine our credit risk strategy and risk management procedures; another priority was to redesign the 4. Volume development organisation of our credit management structures and pro- cesses in anticipation of the more demanding credit processing quality requirements that Basel II will impose as well as the The group’s total assets as at December 31, 2003 were Minimum Requirements for the Conduct of Lending Business € 6.6 billion or 2.0 percent lower than a year earlier, at (MaK). € 331.7 billion. This volume reduction was predominantly due to developments at DZ BANK, whose balance sheet shrank The balance of other expenses and income closed 2003 by € 12.7 billion. On the other hand the first-time consoli- at the amount of € -244 million (2002: € -63 million). This in- dation of norisbank AG boosted the group’s total assets by cludes net earnings from financial investments in the sum of € 3.1 billion. € -108 million (2002: € 181 million). The 2003 total includes value adjustments on securities treated as fixed assets and an DZ BANK Group: Balance sheet total at income contribution from the transactions surrounding the 12.31.2003/12.31.2002 dwpbank joint venture. The 2002 total included an income contribution of € 218 million resulting from the fundamental in € billion strategic realignment of the DZ BANK Group’s portfolio of 400 businesses. The extraordinary expenses total of € 78 million (2002: € 224 million) essentially comprises personnel and non- 300 personnel restructuring expenses, expenses arising under the 331.7 338.3 200 (-2.0%)

100

0

12.31.2003 12.31.2002

F-12 The total volume of business amounted at the year-end to Deposits from other banks amounted to € 115.4 billion at € 467.6 billion (12.31.2002: € 466.5 billion). the end of the year under report and were therefore € 7.5 bil- lion lower in total year-on-year, mainly due to a reduction in The nominal volume of off-balance-sheet futures trans- this liabilities heading of € 8.7 billion at DZ BANK. actions was € 57.3 billion higher at the year-end, at € 741.6 billion. The relevant replacement costs were Non-bank customer deposits increased at the group level by € 0.4 billion higher at € 14.9 billion. € 5.8 billion or 8.0 percent to € 78.5 billion. At DZ BANK, customer deposits were € 0.9 billion higher than a year earlier Placements with, and loans and advances to, other banks due to a sharp rise in the volume of time deposits coupled reduced by € 4.3 billion or 4.6 percent to € 89.3 billion. At with slightly higher current deposits and overnight funds. DZI DZ BANK this measure declined by € 4.4 billion. The year-on- and BSH also posted higher customer deposits, by € +1.8 bil- year change at DG HYP amounted to € 2.1 billion as the total lion and € +1.5 billion respectively. As a new constituent of state-sector credit extended reduced. BSH’s claims on banks the group’s sphere of consolidation, norisbank AG contributed increased by € 1.9 billion due to business expansion. an additional € 2.0 billion to this heading.

The marked reduction in the total consolidated loans and ad- Certificated liabilities reduced at the group level by € 7.4 bil- vances to other (non-bank) customers by € 4.4 billion or lion or 8.9 percent to € 75.6 billion. This was primarily the 4.1 percent to € 102.5 billion resulted primarily from the de- result of reduced bond issuance by DZ BANK (€ -3.9 billion) clining trend of lending business at DZ BANK, where the and DG HYP (€ -2.6 billion). pronounced weakness of economic growth and demand in the year under report produced a € 6.3 billion contraction in the The group’s reported capital and reserves amounted to debtors total. At the group level by contrast, claims on non- € 6.1 billion (12.31.2002: € 6.0 billion). Its capital on the BIS bank customers rose by € 2.7 billion as a consequence of the definition totaled € 13.3 billion (12.31.2002: € 12.7 billion), first-time consolidation of norisbank AG. with core capital (BIS) accounting for € 7.0 billion of the total (12.31.2002: € 6.4 billion). The group clearly exceeded the The volume of the group’s securities holdings closed the year prescribed minimum standards with a BIS tier 1 capital ratio under report at € 85.9 billion compared with the year-earlier of 7.0 percent (12.31.2002: € 5.8 percent) and a BIS total total of € 85.9 billion. DG HYP’s securities holdings increased capital ratio of 11.7 percent (12.31.2002: € 10.5 percent). by € 3.6 billion compared to a year earlier due to the expan- sion of the securities portfolio it uses for return and liquidity management purposes. There was an overall € 3.4 billion reduction in the value of the parent bank’s securities as it sig- nificantly reduced its holdings of stocks and other variable- yield securities.

F-13 II. Risk Report as well as group-wide risk capital management. This ensures the group’s subsidiaries are integrated into a coordinated 1. The DZ BANK Group’s risk management and controlling approach and guarantees a supervision system holistic view.

The Group Risk Controlling Working Group also meets at least quarterly to assist the Group Treasury Committee with The systematic and controlled acceptance of risks in relation to work on any risk themes and issues arising from the group- return targets is an integral component of corporate manage- wide management of risk capital. This working party is also ment at the DZ BANK Group. The operating activities resulting the central coordination point for implementing Basel II across from our business model require the capability to effectively the DZ BANK Group. The Operational Risks sub-working group identify, measure and manage risk together with adequate addresses specific operational risk issues affecting the group. capital backing. Our activities are guided by the principle that we only take on the minimum risk required to achieve our The Group Credit Committee commenced its work in Febru- business-policy goals. ary 2004. It consists of the directors responsible for the group companies’ credit operations and the members of DZ BANK We have implemented and we apply a group-wide risk moni- AG’s Board of Managing Directors responsible for credit ope- toring and management system that fully complies with the rations and risk controlling. This new management committee statutory requirements while also going further and assisting is tasked with the group-wide measurement, controlling and our internal commercial management requirements. All the management of credit risks. It also explores the organisational group companies are integrated into the DZ BANK Group’s and methodological dimensions of specific exposure manage- risk management system according to the materiality of the ment. risks involved. As part of the merger that created DZ BANK, we established Committees a Group IT Circle to most importantly minimise pertinent risks within interrelated group operations by defining ultimate The DZ BANK Group’s central risk management body is the directing and decision-making authorities. The Group IT circle, Group Treasury Committee. Its membership comprises the which is made up of board directors from a range of group members of the Board of Managing Directors and the division companies, has been entrusted with group-wide authority to heads of DZ BANK AG (DZ BANK) responsible for Treasury, issue guidelines on information technology issues, to define Controlling and Accounting plus the directors of group com- the strategic thrust of group information technology policies panies that have a significant influence on the group’s risk and practices, and manage group-wide IT line functions and profile. This committee meets at least quarterly and concerns IT projects. itself with all the types of risk relevant to the DZ BANK Group

F-14 Other committees have been set up to manage DZ BANK’s The separate risk controlling function is responsible for en- overall risk; the parent bank’s Treasury Committee is respon- suring the permanent transparency of the risks entered into sible for the areas of market price risk and liquidity risk. It across all risk categories. Risk Control monitors limit com- meets weekly to discuss the management of the bank-specific pliance, produces risk reports and is additionally responsible risk and performance parameters as well as capital ratios for for ensuring that the risk measurement approaches, proce- the bank and the DZ BANK Group, and prepares correspond- dures and models employed are methodologically up-to-date. ing action proposals for submission to the full Board of Manag- DZ BANK’s Risk Control unit coordinates the methodologies ing Directors. The Board of Managing Directors has formed a to be used with the Controlling units of the group companies Credit Committee from amongst its own members tasked and thereby ensures group-wide risk capital management. with managing the bank’s overall credit portfolio. The Credit DZ BANK’s central risk controlling unit also works together Committee decides on significant loan commitments in rela- with the group companies to produce a system of group- tion to the bank’s and the group’s credit risk strategy. This wide risk reports that cover virtually every risk category on committee is also responsible for controlling country risk a basically methodologically consistent basis. across the DZ BANK Group. Risk reporting Separation of functions The quarterly group risk report is our central instrument for At the DZ BANK Group we distinguish between risk manage- reporting on group risks to the Board of Managing Directors ment and risk controlling. Risk management encompasses and the Group Treasury Committee. We have additionally the measures taken locally by the risk-bearing operating units installed reporting systems specific to all the relevant risk types to implement the risk strategy. The business units responsible at DZ BANK and in all the key group companies; these are for risk management decide whether to consciously assume or intended – subject to the materiality of the risk positions reduce risk. In doing so they observe the centrally prescribed concerned – to ensure that decision makers at all times have universal prescriptions and the relevant risk limits. The risk sufficient transparency as to the risk profile of the risk units management units are kept organisationally and functionally they are responsible for. separate from their downstream units. This applies most im- portantly in the areas of controlling, accounting and process- A Risk Manual is made available to all staff via the Intranet. ing. In addition to listing the universal prescriptions governing the management of risk capital and risk types, this manual also provides extensive descriptions and definitions of the methods, processes and responsibilities deployed.

F-15 Internal Audit price risks also stem from our home savings and loan business. The activities of our insurance subsidiaries generate actuarial Internal Audit, a capability established at all the relevant group risk for the DZ BANK Group. Liquidity risks are also typical companies, is a second independent component of our risk risks of on-balance-sheet banking transactions. Finally, opera- management and supervision system. It performs systematic tional risks and strategic risks are associated with all forms of and regular audits. Internal Audit is tasked with ensuring the business activity and are therefore relevant for all the group functionality and effectiveness of the risk supervision system companies. and also the rectification of established shortcomings. The group companies’ internal audit units report directly to their The relative significance of each risk type for the DZ BANK respective Managing Director or Chairman of the Board of Group was as follows at December 31, 2003: Managing Directors. Germany’s defined Minimum Require- ments for the Organisation and Performance of Banks’ Internal Audit Function are fully complied with in the bank’s Risk positions of the DZ BANK Group subsidiaries. Risk position Share As part of our planned upgrading of the DZ BANK Group’s in € million 12.31.2003 management and supervision toolkit, we are currently working Default risk 2,079 66% with the most risk-exposed companies to refine the core func- Market price risk 295 9% tionalities of a group audit capability. To this end, the internal Operational risk 602 19% audit teams of the relevant companies are assisting DZ BANK’s Strategic risk 192 6% internal audit to investigate and evaluate the most important group-relevant processes and procedures in the respective units. We measure default and market price risk using internal models Risk types based on value-at-risk approaches. We are still using the Basel II standard approach to estimate the loss potential arising from Default risk is the most important category of risk for the operational risk at the group level; individual companies are DZ BANK Group. It results especially from our group-wide already using more advanced methods. The quantification of corporate banking and investment banking activities as well strategic risk is based on empirical benchmark analyses. Actuarial as our retail-oriented credit operations. Market price risk origi- risk is quantified on the basis of a risk based capital model. nates primarily in the companies that conduct trading opera- tions or make significant capital market investments. Market

F-16 2. Risk capital management our risk assets is in conformance with our defined strategy. This process ends with the specification of a group-wide planning target regulatory capital requirement. The covering One objective of the DZ BANK Group’s risk management is of this need and the performance of the resulting issuance to ensure that the group’s overall risk exposure remains in transactions is centrally coordinated by DZ BANK’s Treasury harmony with its capital underpinning at all times. We do this function. by actively managing both our regulatory capital adequacy as defined by Principle I KWG and also the economic capital The DZ BANK Group’s regulatory capital ratios as at Decem- adequacy that results from our own internal risk measurement ber 31, 2003 on the BIS and KWG definitions can be seen in methods. We also integrate their risk capital requirements into the following table. our measurement of the performance of the DZ BANK Group’s main business lines and thereby extend the conventional earn- These ratios were significantly higher than the prescribed mini- ings components by also factoring in the capital tied up by mum values at all times during 2003 both for the individual their risk exposures. institutions and for the DZ BANK Group as a whole.

Managing regulatory capital adequacy It is probable that as from 2005 the DZ BANK Group will fall under the provisions of the EU financial conglomerates For the purposes of managing the DZ BANK Group’s regula- directive. Among other things, this will extend the regulatory tory capital adequacy, we work with significantly higher inter- capital requirements currently applicable to the group to in- nal targets than the minimum standards defined by the regu- surance providers as well. To prepare the ground for these new lators of 4 percent for the Tier1 capital ratio and 8 percent for requirements, we have already started to include our insurance the total capital ratio. We perform an annual group-wide risk subsidiary in our regulatory capital requirement analyses. At assets planning process to avoid unforeseen stressing of these the same time we are regularly participating in the Basel capital ratios and to ensure that the growth or reduction of Committee’s worldwide quantitative impact studies and are

DZ BANK regulatory capital requirement and regulatory capital ratios

Group companies (KWG) in € billion at DZ BANK DZ BANK DZ BANK AG Schwäbisch DG HYP DVB- DZ BANK DZ BANK norisbank 12.31.2003 Group (BIS1) Group (KWG) Hall Gruppe International Ireland Risk positions 114.4 114.4 56.3 14.6 18.5 6.9 3.0 1.7 2.1 Capital - Tier I capital 7.0 8.0 6.0 1.8 1.2 0.4 0.5 0.2 0.1 - Tier II und III 6.3 6.0 5.2 0.4 0.7 0.3 0.1 0.0 0.1 Ratios - Tier I capital ratio 7.0% 8.2% 12.2% 12.1% 6.4% 6.2% 12.3% 12.0% 6.8% - Total capital ratio 11.7% 12.1% 17.0% 14.7% 10.4% 10.5% 13.9% 12.0% 9.8%

1 Bank for International Settlements

F-17 performing indicative trial calculations of our future capital The risk tolerance capacity and the economic risk capital made needs under Basel II. In particular the greater proportional available by the Board of Managing Directors of the group significance of our retail business in the DZ BANK Group’s mix parent for the 2003 and 2004 financial year were as follows: will reduce our regulatory capital requirement under Basel II and bring this measure at least approximately into line with DZ BANK Group’s risk tolerance capacity our economic capital requirement. in € million 2003 2004 Managing economic capital adequacy Risk cover assets 7,000 7,500 Economic risk capital 4,500 5,500 In addition to regulatory capital management, we have also established a system of economic capital management based on our internal risk measurement methods. This factors in not just the risk types defined by the present KWG Principle I, but Our insurance business risks were also fully incorporated all the risk categories relevant to the DZ BANK Group, in other into our analysis of the DZ BANK Group’s economic capital words default risk, market price risk, operational risk, actuarial adequacy for the first time in respect of the 2004 year. risk and strategic risk. Default risk and market price risk are quantified using value-at-risk approaches. There is still a need The risk capital provided was allocated between default risk, for further across-the-board methodological improvement, market price risk, operational risk and strategic risk as follows: most importantly to ensure the economically adequate mea- surement of operational and strategic risk as well as risk stem- ming from the insurance business. DZ BANK Group: risk capital by risk type

When calculating the DZ BANK Group’s overall risk capital re- 2003 2004 quirement, we allow for correlations between individual group Risk Share Risk Share companies’ risk positions within the default risk and market in € million capital capital price risk categories. We use simple addition to aggregate the Default risk 2,900 65% 2,422 54% various types of risk. This reflects our conservative assumptions Market price risk 600 13% 1,067 24% that extreme losses occur simultaneously across all risk cate- Operational risk 600 13% 735 16% gories and that the various risk types correlate completely. Strategic risk 400 9% 247 6%

We derive the DZ BANK Group’s risk tolerance capacity from the available risk cover assets. This value is determined The available risk capital was also allotted to the individual on the basis of a commercial analysis of the group’s capital group companies for fiscal 2004. We have accordingly now after allowing for all relevant consolidation effects. Regulatory laid the necessary foundations for optimising the group-wide capital components that are external capital in character are allocation of risk capital. The individual companies’ respective excluded from the risk cover assets total. To this extent, our risk management process and operating risk limit systems are internal risk tolerance formula is more narrowly defined than now based on this new group-wide framework. the regulators’ concept.

F-18 Risk-capital-based performance management 3. Default risk

To ensure that the risk capital requirement is also factored into the measurement of performance, the Board of Managing We understand default risk as the risk of loss arising from Directors of DZ BANK has decided to introduce two risk- the failure of a business partner to fulfill its contractual obliga- capital-based performance ratios – RORAC (return on risk tions. The risk of a loss can however also result from a down- adjusted capital) and EVA (economic value added) – to assist grade of the counterparty’s credit rating. the management of the DZ BANK Group’s subsidiaries and principal business lines. RORAC is a relative return measure Risk strategy that shows the extent to which the respective business has achieved a positive rate of return on the capital tied up by the We aim to engage in lending business primarily as the subsidi- risk it has entered into. EVA is an absolute performance mea- ary partner of local cooperative banks. Building on this funda- sure that shows the business’s absolute earnings contribution mental business policy decision, since 2003 DZ BANK has after servicing the shareholders’ return entitlement and there- been implementing a credit risk strategy that concentrates on fore identifies the business’s economic value contribution to customers that offer a good credit standing and cross-selling the overall success of the DZ BANK Group. Both ratios are potential. The group companies formulate similar strategic reciprocally reconcilable through the application of straight- goals and guidelines for the assumption of default risks in forward logic. consultation with the parent bank and in the light of their own business policy positioning. The starting point for applying this We will start reporting these ratios by operating segments risk strategy is our risk tolerance capacity. in 2004. The first stage of the rollout is to use the regulatory capital requirement as a method of capital allocation. The MaK-conformant structural and process organisation changeover to Basel II will significantly, if not completely harmonise the measurement of economic and regulatory The structural requirements defined by the banking regulators capital. Our objective is to put the main businesses’ economic are already an integral component of our lending business capital requirement right at the center of their performance organisation. We have implemented forward-looking structural management. We will do this by continuing to progressively and processing organisational arrangements that create the refine the bank’s internal risk measurement procedures and necessary foundation for the future risk-oriented conduct of the essential data foundations they are built on. our credit operations. For instance we have implemented a graduated competences scale that clearly defines credit pro- We also see the ongoing upgrading of the DZ BANK Group’s cess authorities from application through approval to ongoing risk capital management as helping to prepare the ground contract processing including periodic loan monitoring with for us to meet the requirements of Basel II. Under the rubric regular credit quality analysis, the whole system being docu- of pillar 2 especially, the banking regulators will expect us to mented in organisation manuals. Established reporting and implement a bank-internal capital adequacy process that review processes help keep the decision makers promptly in- encompasses all material risks and meshes seamlessly with formed of changes in the risk structures of our credit portfolios other bank-wide management processes. and provide the basis for the active management of default risk.

F-19 Rating systems and pricing in the lending operations Early-warning systems and work out units

We are developing credit rating procedures in collaboration DZ BANK especially has built up a wide range of tools for moni- with the BVR cooperative banking industry association and the toring and managing problem credit exposures in the classic other cooperative central bank WGZ-Bank. The so-called BVR lending business. These include reports that assist the early II rating is intended to produce a harmonised rating system detection of at-risk cases, the monitoring of exposures at for use right across the cooperative banking sector. BVR II latent risk of default, and the observation of acute default- ratings are differentiated by customer segments and we are threatened credits. These reports permit highly informative, successively extending them to cover all relevant customer target-group-specific and close-to-real-time reporting to the groups. In developing these ratings, we have already taken management levels and Board of Managing Directors. Credit account of the future Basel II requirements. Our goal is that structure analyses are also performed regularly to support the when the development work is completed, all the new rating portfolio managers; these identify risk concentrations in the modules will satisfy the Basel II requirements for internal- lending portfolio. As part of our rating-linked credit monitoring ratings-based approaches. The credit analysis procedures also process, we also review the size of the agreed lines as the provide the basis for the introduction of risk-adjusted pricing need arises, but always within maximum twelve-monthly in our lending operations and for the expansion of our activi- intervals. ties in the area of securitising credit risks. Identified problem credits are transferred to DZ BANK’s work To ensure lending business is profitable we calculate standard out units at a very early critical stage. By providing hands-on risk costs in many areas of the DZ BANK Group. Standard risk “intensive care“ and applying tailor-made rehabilitation con- costs are intended to help cover the average predictable los- cepts to critical problem cases, these specialist units create ses. The procedure involves estimation coupled with post facto the necessary basis for rescuing and optimising problem risk verification, i.e. pre- and post-calculation. The SRC are factored positions. as a cost component into the contribution costing of transac- tions and are determined using empirical default probabilities. Portfolio management Other factors influencing the calculation of standard risk costs are the credit take-up rate (utilisation of the agreed facility) The implementation of a portfolio management organisation and the anticipated loss at the time of the default adjusted for structure at DZ BANK in 2003 has created the foundation for customer-provided collateral. The aim of this approach is to an aggregated management level that supplements specific permit credit-differentiated pricing. At the same time we want risk management. The initial focus of our portfolio manage- to ensure that in actuarial terms, our net risk provisioning ment effort during 2004 will be to establish a new structural – principally loan loss provisions and direct write-downs – is limits system that will be centered on the lending operations’ covered by the standard risk costs we receive on a long-term economic risks. Most importantly, this will allow us to adequa- average basis. The integration of capital costs into the contri- tely integrate the effects of correlated default risks into the bution margin calculation makes it possible to identify a risk- operational management of our credit business. Based on sensitive return on tied-up capital. detailed quantitative analyses and the ongoing assessment of our current aggregated credit risk position, this will also provide us with new opportunities to utilise the increasingly more liquid credit markets to actively manage DZ BANK’s credit portfolio structure.

F-20 As part of our toolkit for actively managing default risk, we expresses a very low long-term risk, while the worst risk use the securitisation of receivables to optimise our risk- class G implies acute danger of losses. return relativities. Our ABS primary market activities are addi- tionally intended to lighten the load on our economic and Measuring the default risk on trading transactions regulatory capital. We plan to further intensify these activities in the future. We will focus on multiseller transactions that will Default risk on trading transactions occurs primarily at be designed to also provide our local cooperative bank part- DZ BANK and takes the forms of counterparty risk and issuer ners with a vehicle for risk transfer and thereby improve the risk. Counterparty risk is made up of replacement risk and spread of their risks. fulfillment risk.

Managing credit exposures and lines To calculate the accepted value of the counterparty risk com- ponent of the replacement risk arising from DZ BANK’s We further improved our group-wide exposure management trading operations, the current market value of the transaction system in 2003. Our established credit exposure reporting sys- concerned is increased by a so-called “add-on“ – i.e. the tem provides quarterly credit portfolio reports that cover the markup for potential market price fluctuations during the life- key group companies. The report provides a breakdown of the time of the transaction – based on the global add-on factors various portfolios – for each group company separately and defined by Principle I. To calculate the exposure, we recognise also as a group view – by exposure size, country assignment, the risk-reducing effects of both netting agreements and colla- residual term, sector and risk rating. It also analyses each teral agreements. Automating our collateral management group company’s ten biggest exposures by a range of risk process has enabled us to significantly increase the number parameters. of collateral agreements signed compared with 2002 and to steadily expand the circle of our collateral counterparties. We At DZ BANK we have installed framework limits for individual plan to extend the collateral management process to repo business partners and borrower units. To support portfolio- and securities lending transactions. The accepted value of level limit management, we also use analyses of selected stra- the counterparty risk component of the fulfillment risk is tegic portfolios by parameters such as country, country group, the payment owed, in other words the size of the amount the product type or sector. Early warning processes have been im- counterparty is due to actually pay to DZ BANK. The fulfillment plemented as the essential key to timely limit reviews. We have risk is related to an assumed fulfillment period. The accepted also defined processes for handling overdraft situations. value of the issuer risk is the sum of the current market values of the relevant securities. We monitor compliance with the DZ BANK Group’s defined country risk limits using a pre-deal limit check procedure. The Line management of default risk on trading transactions basis for assessing country risks is DZ BANK’s own internal country risk model. Each country’s risk factors – essentially, To limit the default risk arising from trading transactions, we macroeconomic risk ratios and certain political risk measures – have implemented a volume-oriented limits system. These are evaluated by the country risk model on the basis of a non-product-specific volume limits are further subdivided into scoring approach that automatically generates a country risk maturity bands to help manage replacement risk at the coun- index, whose reading determines the assignment of that state terparty level. A daily limit is assigned to manage fulfillment to one of the seven country risk classes. The best risk class A risk and each issuer is assigned a rating-dependent global or specific limit to help manage issuer risk.

F-21 As in the classic lending business, we have also implemented Analysing the credit portfolio adequate early warning and overdrawn procedures in respect of the trading operations. Daily reports notify the member of An initial pointer to the inherent riskiness of the DZ BANK the Board of Managing Directors responsible for risk monito- Group’s credit portfolio can be obtained by analysing the indi- ring of any infringement of the counterparty and issuer risk vidual group companies’ risk-weighted assets. The risk assets lines. We also have monthly reports of all open forward tran- structure as defined by Principle I provides a clue to the rela- sactions with significant counterparties. The Board of Mana- tive risk of the individual credit portfolios based on at least a ging Directors is additionally notified of counterparty risks rough credit weighting. The average risk weights for each com- through the monthly report required under the Minimum pany are an indicator of the type of business it engages in. For Requirements for the Conduct of Trading Transactions by Banks instance a high proportion of classic corporate customers busi- (MaH Report). ness results in a high risk weight, while a high proportion of lending transactions with state-sector borrowers or banks will We use a centralised DP system to ensure the methodologi- produce a lower average risk weight. cally consistent measurement and supervision of the default risk from DZ BANK’s trading transactions. The vast majority of The changeover to Basel II and the significantly more highly our front-office systems are linked into this software. Linking differentiated risk weightings under the internal ratings-based the collateral management system to this DP system ensures approach means that this sort of analysis will in future gene- that collateral provided on OTC derivatives and forex transac- rate much more risk-sensitive outcomes. The Basel committee tions is automatically counted against the default risk arising will make the publication of what it calls the “average risk from trading transactions. From 2004 onward, we will also be weight“ of banks’ credit portfolios mandatory in future under using this software to measure and monitor issuer risk. Basel II’s pillar 3. The average risk weights of the overwhel- ming majority of DZ BANK Group companies have reduced compared with 2002:

F-22 DZ BANK Group average risk weights as We currently use two approximative methodologies to measure per Principle I the credit value-at-risk at the group level and consistently across the group companies. One method is based on ana-

Weighted Average risk lyses of the individual group companies’ net risk provisioning in € million risk assets weights ratios and enables us to draw conclusions about default risk 12.31.2003 12.31.2003 12.31.2002 correlations between the various companies’ credit portfolios DZ BANK AG 49.3 43.5% 45.0% and thereby point up group-wide diversification effects. In the Schwäbisch second method the anticipated credit defaults value is weighted Hall 15.0 47.3% 49.5% and scored using a fluctuation factor we have identified by DG HYP 18.8 26.2% 26.4% empirical analysis.This factor represents a sector-typical relation- DVB 7.1 66.8% 68.0% ship between the rate of unforeseen losses and anticipated DZ BANK losses. International 3.8 25.3% 26.8% DZ BANK The following summary shows the group’s risk potential based Ireland 1.7 39.6% 43.4% on this empirical fluctuation factor: norisbank 2.1 84.7% 84.0% VR LEASING 2.9 88.5% 92.1% Risk potential of the DZ BANK Group’s lending business

Our work on the economic management of the DZ BANK in € million 12.31.2003 12.31.2002 Change Group’s credit portfolio draws a distinction between the Anticipated loss 650 765 -15.1% anticipated losses on individual transactions and unex- Unexpected loss 2,079 2,448 -15.1% pected credit portfolio losses. Firstly we pre-empt “creeping“ capital erosion by pre-calculating the anti- cipated loss per discrete transaction. Most of the group companies are currently already in the process of im- The marked reduction of the unexpected loss total is partly plementing the necessary calculation of rating-dependent explained by the significant volume reduction in the DZ BANK standard risk costs. Secondly we quantify the unforeseen Group’s default-risk-laden exposures. losses on the group’s credit portfolios using a credit value-at-risk approach. This provides the basis for our group-wide economic capital adequacy analysis and also the basis for allocating economic risk capital to the group companies and DZ BANK.

F-23 Risk structure of the DZ BANK Group’s credit portfolio

Take-up of facilities (in € billion) at December 31, 2003

100 90 80 70 60 50 40 30 20 10 0

Miscellaneous 1 234567 credit rating classes

In addition to the group-wide credit value-at-risk methods The above chart shows the take-up of credit facilities by BVR I described, individual group companies such as for instance credit rating classes, with the ascending order of ratings on DZ BANK and Deutsche Genossenschafts-Hypothekenbank AG, the horizontal axis indicating reducing borrower credit quality. Hamburg, (DG HYP), also use industry-standard credit risk portfolio models. These derive anticipated and unforeseen Under DZ BANK’s default risk strategy, new lending business loss estimates from information on discrete transactions. They can be taken on up to a qualifying rating class ceiling of 3, factor in rating information, default probabilities, business and provided the other ancillary conditions are fulfilled. Existing customer-specific loss ratios and sector correlations. We intend credit exposures that conflict with the credit risk strategy to deploy standard approaches of this kind for the purposes of accordingly need to be reduced. All credit exposures subject to group-wide portfolio management in future. a specific risk provision are assigned to rating classes 6 and 7. The “critical” rating classes 4 through 7 account for 9 percent We also regularly analyse our credit portfolio with regard to of the total credit volume. The “miscellaneous” heading covers a wide range of differentiated discrete criteria such as risk business partners that did not require a credit quality judg- structures based on our internal rating methodologies or ment under the provisions of section 18 KWG or internal rules. country risk groupings. The following overview shows the geographical distribution of the DZ BANK Group’s credit portfolio by country risk groups:

F-24 DZ BANK Group´s credit portfolio by country risk groups

Country limit utilisation in € million 12.31.2003 12.31.2002

CR group Group country limit Gross Net Gross Net A Unlimited 65,747 60,841 79,421 69,634 B 2.256 1,270 1,078 1,311 1,086 C 4.617 5,359 2,176 4,211 1,852 D 1.887 1,439 582 2,360 841 E 523 659 176 1,095 328 F 70 147 30 131 27 G Case by case 70 32 84 9 Unrated 208 50 9 30 24 Offshore Unlimited 43 3 187 157 Total 74,784 64,927 88,830 73,958

The term gross utilisation relates to the types of business Analysing the default risk on trading transactions defined in section 19.1 KWG. We deduct collateral and allow for third-country insurance cover to identify the net utilisation Utilisation was significantly reduced in the area of replace- rate. As at December 31, 2003 more than 98 percent of the ment risk over the course of the year, primarily as a result of bank’s net foreign credit volume was assigned to the country the recognition of close-out netting and collateral agreements risk groups A through C, for which we do not form country risk to reduce risk. Moreover, the setting of restrictive limits resul- provisions. The 12 percent year-on-year reduction in the net ted in a higher utilisation rate while simultaneously reducing utilisation results from our conservative risk policy and risk. Our conservative limits policy also reduced our exposure exchange rate effects. At present the country limits for Ivory in the area of issuer risk.The year-on-year increase in fulfill- Coast, Georgia, Uruguay and Venezuela have been suspended. ment risk was due to the first-time inclusion of cross currency No new business can be transacted in these countries until fur- swaps. Our participation in the so-called Continuous Linked ther notice. Settlement initiative, a procedure for the worldwide clearing of

DZ BANK AG: Default risk on trading transactions

12.31.2003 12.31.2002

in € million Lines Utilisation Lines Utilisation Replacement risk 134.5 18.7 131.5 25.4 Fulfillment risk 86.9 9.6 70.9 8.4 Issuer risk 88.3 27.5 109.5 30.0

F-25 foreign-currency trading payments, substantially reduced the Summary and outlook risk arising from spot and forward foreign exchange trans- actions. During 2003 we took further steps to improve the risk situa- tion in DZ BANK’s credit operations that had been put under Risk provisioning and write-downs strain in earlier years. The year’s significant milestones include the progress made towards building a high-performance credit Under the terms of our internal guidelines, a specific loan loss organisation, the improvements in our rating procedures and provision must be formed when a borrower’s unsatisfactory the resulting adoption of risk-sensitive pricing, and the expan- financial circumstances or lack of adequate collateral provide sion of our exposure management and early risk detection reasonable grounds to question the collectibility of the out- systems. The success of these initiatives is also reflected in the standing entitlements or when there are indications that the significantly lower level of new risk provisioning despite the borrower will not be able to service the loan long-term. The persistently difficult economic environment. Based not least specific risk provision must comply with the requirements of on the modestly positive outlook for the national economy, we the Commercial Code, and most importantly comply with the expect this positive trend to continue in 2004. prudential principle. In other words, it must be sufficiently dimensioned to at least cover the probable loss in the circum- During 2004 we intend to further refine and extend our group- stances of the individual case. This requirement also applies wide exposure and line management. A central building block for the valuation of collaterals. in this process will be the implementation of integrated data economies. We at DZ BANK will also complete the coverage The table below shows the DZ BANK Group’s provisions for of our main customer segments by rolling out further BVR II risk: rating modules. We will accompany this by introducing diffe- rentiated standard risk cost and capital cost sets specific to DZ BANK Group´s provisions for risks these segments. We will also continue to work on enhancing our credit value-at-risk management and credit portfolio Specific Country risk Global management at individual group companies. loan loss provisions loan loss in € million provisions provisions1 Position at 12.31.2002 3,652 96 174 4. Market price risk Change during 2003 124 -22 14 Position at By market price risk we understand the risk of loss that can re- 12.31.2003 3,776 74 188 sult from detrimental changes in market prices or price-deter- mining parameters. Market price risk further subdivides accor- ding to the underlying factors into the following component 1 The global loan loss provisions total includes a collective loan loss provision of € 3 million at DZ BANK’s Luxembourg branch categories: interest rate and exchange rate change risk, share price risk and commodity price risks.

F-26 Risk strategy Organisation and responsibilities

At DZ BANK we engage in proprietary trading in fixed-income, In the group’s trading book institutions, we manage market equity and forex products primarily to support our customer price risk on a distributed basis by portfolios, with the risk and business. In contrast to “classic“ own-account trading, which performance responsibilities assigned to the individual port- centers on the achieving of profit through risk-taking, we see folio managers. A quarterly report on the key market price our core expertise as the ability to enter into and manage risk and performance measures at the group level is submitted risk in order thereby to be in a position to offer a customer- to the Group Treasury Committee. As a routine part of manage- demand-driven product range. ment reporting, the Risk Control units of the group companies provide daily, weekly and monthly updates to both the members Market price risks arise for the DZ BANK Group primarily of the Board of Managing Directors responsible for risk through our customer-account and own-account trading ac- management and risk controlling and the portfolio managers tivities as well as from our lending, real estate and insurance themselves. Limit infringements at the level of group compa- operations. Market price risks also arise from our own securi- nies are notified to DZ BANK on an ad-hoc reporting basis. ties issuance. Interest rate change risk is the most significant category of market price risk for the DZ BANK Group. While Measuring and limiting market price risks significant portions of the interest rate change risks facing DZ BANK are credit-dependent interest rate change risks, We measure market price risk using the value-at-risk con- general non-credit-dependent interest rate change risks are cept (VaR), identifying the value-at-risk both across the group predominant in the other group companies. and at each individual group company covered. By relying on DZ BANK’s internal model for the group-wide calculation, The market price risk strategy for capital investments in we ensure that correlations and hedging effects between indi- connection with our insurance activities is governed by the vidual companies’ risk positions can be taken into account. strict prescriptions of Germany’s Insurance Supervision Act and the rules it lays down for investing tied assets. Insurance At the majority of the banking subsidiaries, we manage market companies are obliged to so invest their cover pool portfolios price risk by means of a limits system that is matched to and other reserved assets as to ensure the maximum possible the sub-portfolios structure and which sets limits for both the security and return while maintaining the liquidity of the cover market price risk entered into in specified parts of the group at all times as well as the commensurate mix and spread of in- and also the losses that potentially accumulate over the course vestments. The assets invested have to be constantly balanced of the year.To support operational risk management within against the payment liabilities inherent in the insurance con- DZ BANK’s trading divisions, during 2003 we introduced a tracts. Insurers are obliged to perform annual stress tests sensitivities- and scenarios-oriented limits structure to supple- based on a formula defined by the German financial services ment the existing value-at-risk-based risk management tools. regulator BaFin to demonstrate their continuing ability to meet their obligations to policyholders even in the event of an enduring capital markets crisis situation.

F-27 Most of our trading activities are concentrated at DZ BANK. We also run stress tests to factor extreme market movements As required by Principle I, we calculate the value-at-risk in our into the internal risk model. The crisis scenario tests involve trading units at a 99 percent confidence level and assuming simulating high-magnitude fluctuations in the risk factors and a retention period of ten business days, also for internal risk serve to identify potential losses not shown up by the daily management purposes. A DZ BANK value at risk calculation VaR approach. These stress tests model both extreme market is performed daily for all levels of the portfolio hierarchy with movements that have actually occurred in the past and also the aid of an historic simulation over a one-year observation crisis scenarios which – irrespective of the market data history period. We do this using DZ BANK’s own internal risk model – are deemed to be economically relevant. The value losses that has been approved by the German banking regulator simulated through this stress testing are used as the basis for (BaFin) for calculating the capital backing required for market continuously reviewing the adequacy of the internal limits price risk positions based on VaR – in line with Principle I. The hierarchy. add-on factor (relevant to the capital backing calculation) required by Clause 33 of Principle I is currently 0.6. This is the As part of the quarterly reporting system, the group compa- same model we use to calculate the value-at-risk at the level nies report to DZ BANK both any infringements of the insti- of the group. tution-specific value-at-risk identified by back testing and any infringements of the limits simulated during stress testing. The market price risk on our non-trading portfolios results primarily from the group’s strategic capital investments. Our Analysis of market price risks procedures for quantifying and limiting the risk in our non- trading portfolios basically follow the same approach as for The value-at-risk on the group’s banking operations identified the trading operations. by DZ BANK’s internal model amounted to € 125.8 million as at December 31, 2003. The value-at-risk in the group’s (essen- Back tests and stress tests tially DZ BANK’s) trading portfolios amounted at December 31, 2003 to € 30.0 million (December 31, 2002: € 27.0 million). We perform back tests to verify the predictive quality of our The chart shows the changes in the trading divisions’ daily value-at-risk approaches. This involves a comparison of the value-at-risk over the course of 2003: actual daily losses and gains with the VaR values calculated using the internal risk model. The model assumption for calcu- The increased risk after September is primarily the result of lating the loss potential stipulates that the actual loss must including general credit spread risks in the risk calculation not exceed the simulated VaR on more than one percent of and essentially relates to our holdings of securities for trading trading days. purposes.

F-28 Change in DZ BANK AG’s trading divisions’ daily value-at-risk in € million

50 Maximum (43.5) 40

30

20 Mean (20.3)

10 Minimum (8.8) 0 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sept 03 Oct 03 Nov 03 Dec 03

Simple addition of the institution-specific value-at-risk results Following the integration of R+V and norisbank during 2003, as at December 31, 2003 produced a risk position of € 166 mil- all the major group companies are now part of our group-wide lion for our non-trading portfolios; this is in line with the market price risk management process. prior-year figure. Since September 2003 we have been recog- nising correlation effects when calculating the value-at-risk in We will continue to maintain the market price risk strategy the DZ BANK Group’s non-trading portfolios. The value-at-risk we have applied in previous years during 2004 as well and identified on this basis as of the year-end was € 118.7 million. will continue to base the limits we assign on the group’s risk Our ad-hoc reporting system has not established any in- tolerance capacity. As in previous years, our trading operations fringements of the bank-wide limits at group companies. will continue to focus basically on customer servicing.

Summary and outlook In recognition of the significance of our credit products activi- ties, DZ BANK made a start in 2002 on creating a database of The prescribed group-wide framework limits for the assump- historic credit spread time series. We integrated general credit- tion of market price risks, expressed as the allocated risk capi- spread risks into our internal risk model during 2003. We plan tal of € 600 million, were complied with at all times in 2003. to integrate the trading divisions’ specific interest rate risks On December 31, 2003 the aggregate market price risk of the into the internal risk model during 2004. DZ BANK Group amounted to € 294.9 million. This value is the sum of the group-wide value-at-risk in banking activities of € 125.8 million and a risk position from capital investments in the context of non-banking activities of € 169.1 million.

F-29 5. Liquidity risk term liquidity risk including the most significant deterministic and stochastic cash-flows. Cover surplus and shortfall posi- tions can be promptly detected in the maturity range from one By liquidity risk we mean the danger that insufficient funds day through to 3 months. The resulting countermeasures to will be available to fulfill due payment obligations (liquidity procure additional liquidity or reduce the need for liquidity can risk as strictly defined) or that funds can only be procured on then be initiated in a timely manner. more demanding conditions when needed (refinancing risk). Market liquidity risk is created by the holding of financial As part of the daily liquidity reporting system, the size of the instruments that cannot be sold or settled at all, or only at a intraday liquidity position is limited using a traffic light loss, due to insufficient market depth or disturbances of the model.The management of intraday liquidity is established market. We subdivide liquidity risk into the following three within the framework of the ongoing planning of the accounts maturity categories according to the periodicity of the liquidity maintained at central banks and other nostro accounts. processes involved: short-term (same business day up to 3 months), medium-term (3 months up to 2 years) and long- Our short and medium-term refinancing is built on the prin- term (over 2 years). ciple of appropriately broad diversification across investor groups, regions and products. Our principal source of refinanc- Risk strategy ing is placements by local cooperative banks. Over the course of fiscal 2003 we reduced our unsecured refinancing by 9 per- We manage our liquidity with the objective of ensuring our cent. The following table shows the changes in the composi- solvency (our capacity to pay our way) at all times. We also tion of the most important headings of our unsecured short strive to sustainably minimise our liquidity costs. and medium-term refinancing compared with 2002:

Managing short and medium-term liquidity The DZ BANK Group’s unsecured short and medium-term refinancing by investor groups The strategic framework requirements for the DZ BANK Group’s liquidity management are defined and approved by the Group 12.31.2003 12.31.2002 Treasury Committee. It is on this foundation that DZ BANK’s Local cooperative banks 43% 46% Treasury unit centrally coordinates the management of our Interbanks 32% 33% short and medium-term liquidity. Operational liquidity mana- Corporate customers 20% 14% gement is located both at DZ BANK and at the group compa- Commercial paper/ nies and covers both the euro and foreign-currency positions. certificates of deposit 5% 7% To ensure the short and medium-term liquidity of the DZ BANK Group, we combine the payment flows of significant group companies through DZ BANK’s Group clearing function. Since our ability to raise unsecured liquidity from the money To assist liquidity management we use a daily analysis pre- market is restricted, our liquidity management function per- pared by the Controlling unit of DZ BANK’s predicted and forms weekly and monthly analyses of the structure of our unforeseen liquidity flows. We use this report to monitor short- differentiated liabilities-side resources. These analyses provide

F-30 Liquidity ratios for the DZ BANK Group 1

Band I Band II Band III Band IV (up to 1 month) (1 month to 3 months) (3 months to 6 months) (6 months to 12 months) Liquidity ratios 12.31.2003 12.31.2002 12.31.2003 12.31.2002 12.31.2003 12.31.2002 12.31.2003 12.31.2002 per maturity band 1.21 1.32 1.56 1.68 0.80 0.71 0.96 0.90 Cumulative liquidity ratios across maturity bands 1.21 1.32 1.12 1.16 1.08 1.10 1.06 1.07

1 Calculations based on Principle II approach management information and are the basis for the active To act as a liquidity-risk early warning indicator at DZ BANK, management of our liabilities profile. we use an internally defined planning threshold value of 1.20 for the maturity band I liquidity ratio. This value is based on In addition to our internal management tools, our short-term empirical experience and is designed to provide a lower limit liquidity risk is also limited by regulator-imposed rules.This that permanently secures sufficient liquidity discretion. We ini- is the case both for DZ BANK and for our main German and tiate targeted countervailing measures as soon as the liquidity foreign subsidiaries and affiliates, which are all subject to ratio falls to the level of the planning threshold. equivalent regulatory regimes governing liquidity monitoring under the relevant national law.The companies of the DZ BANK To secure day-to-day liquidity, the liquidity management func- Group complied with the requirements of principle II KWG at tion has a portfolio of qualifying securities for central bank all times during 2003. repurchase operations at its disposal that it can sell at short notice or deposit as security for refinancing transactions with As part of the group-wide liquidity risk reporting system, each central banks. quarter we consolidate the Principle II data for the domestic group companies with bank status and the Principle-II-equi- Managing long-term liquidity valent values of the foreign group companies and non-bank companies with the corresponding data for DZ BANK. On We use the liquidity process balance tool to manage long- this basis we calculate what we call a “Group Principle II” term liquidity processes. At DZ BANK and the other banking measure that would enable us to detect survival-threatening subsidiaries, we draw up liquidity process balances at least liquidity risks within the group. once a month and report the results to the committees respon- sible for strategic liquidity positioning decisions. Strategically The above table shows the DZ BANK Group’s liquidity ratios undesirable liquidity gaps are closed by managing the pattern for 2003 compared with 2002. The liquidity ratios for each of our issuance and repurchases. We also help to manage our maturity band are calculated applying the Principle II system. liquidity by defining internal buying-in rates for liquidity-bind- The cumulative multi-band liquidity ratios predict the future ing assets and liabilities balancing transactions. trend of the ratios excluding the effects of new business.

F-31 Our long-term funding is generated through structured and Summary and outlook unstructured capital market products that are mostly dis- tributed via local cooperative banks’ own- and third-party The liquidity gaps identified by the liquidity process balances securities account operations. Both DZ BANK and DG HYP do not constitute potentially existence-threatening incon- are authorised to raise liquidity by issuing covered bonds – gruences in the DZ BANK Group’s refinancing structure. We DZ BANK Briefe in the case of DZ BANK and pfandbriefe in do not expect our liquidity risk to increase in 2004. the case of DG HYP. We are currently in the process at DZ BANK of further up- Managing market liquidity risk grading our non-trading-related liquidity reporting. As well as completing our data picture of deterministic cash flows, we Market liquidity risk refers to our management of both market intend most importantly to improve our modeling of stochastic price risk and liquidity risk. In the context of liquidity risk cash flows and refine our understanding and definition of management, the market liquidity of financial instruments is position limits in respect of unforeseen liquidity processes both especially relevant when liquidity-binding positions need to be in the normal scenario and in crisis scenarios. We also hope sold to raise short-term funds – for instance, during a liquidity to further refine our modeling and management of market crisis. As we would never expect the entire securities portfolio liquidity risks in 2004. to be sold immediately and without loss in such circumstances, we on principle treat as not liquidatable all securities that cannot be used as refinancing-eligible collateral for open- 6. Actuarial risk market transactions with central banks.

In the context of DZ BANK’s market price risk management by Actuarial risk arises within the DZ BANK Group through the contrast, market liquidity risk does not relate to the selling of business activities of our insurance subgroup R+V Versiche- liquidity-binding positions but to the hedging of open market rung AG, Wiesbaden (R+V). risk positions. Portfolio managers bear the responsibility for, and manage, hedging-related market liquidity risk. Any Insurance solvency losses incurred under this heading count towards the relevant manager’s annual loss limit. Moreover market liquidity risks R+V uses the regulatory solvency requirements as the basis over the assumed retention period of 10 trading days are for evaluating its overall risk situation. All the companies of included in the value-at-risk calculated for the purposes of the R+V group individually satisfy these solvency requirements supervising market price risks. Significant hedging-related even without taking their valuation reserves into considera- market liquidity risks only exist in relation to certain credit-risk- tion. The R+V group as a whole equally satisfies these require- laden securities and credit derivatives positions. These are ments. mainly asset backed securities held on the basis of strategic considerations.

F-32 Risk management in the directly-contracted life and Risk management in the directly-contracted property and health insurance business casualty insurance business

The key determinant of the actuarial risk situation in the life The key determinants of the actuarial risk situation for insurance operations is the long-term nature of the benefit property and casualty insurers are the premiums/claims risk guarantees on the insured event at the same time as the and the reserve risk. To make these risks manageable, the premiums are fixed. To ensure their ability to satisfy all their pricing of this category of business is the subject of precise payment obligations under the insurance contracts, the com- calculations based on mathematical-statistical models. Actively panies set aside reserves. The dimensioning of these reserves managing the composition of its business enables R+V to is based on assumptions about the future trend of biometric balance its risks over regions and segments. Passive reinsu- risks, investment returns and costs. The risk that the calculation rance helps to limit the cost of discrete risks and cumulative basis will change over time is kept manageable through the claims such as natural catastrophes. Claims reserves have companies’ prudent product development and actuarial been formed to cover both known and unknown losses at a controlling systems. level commensurate with the risk. R+V continuously monitors the consumption of these reserves and the lessons learned are The outstanding feature of the actuarial risk situation in health fed back into the current estimates. The equalisation reserve insurance is the steady rise in the costs of claims, due firstly to also helps to balance out chance variations in the claims the expansion of the customer base and secondly to changes incidence over time. in the behavior of policyholders and service providers. The companies are countering these risks by applying a risk-aware The overall claims situation has eased again in 2003 follow- business acceptance policy characterised by binding accep- ing the drain on the reserves in 2002 due to the so-called tance guidelines, prudent risk selection and targeted benefits hundred-year floods and the surge of storm damage claims. and costs management. Management actuaries continuously monitor the adequacy of the assumptions and parameters factored into the calculation.

Claims rates on actuarial risks in the direct P&C insurance business

Net claims rate in % of earned premiums 1 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 Including large-scale/ catastrophic claims 71.8 80.7 73.2 71.3 68.0 64.2 60.4 63.8 66.1 71.5 Excluding large-scale/ catastrophic claims 71.2 77.7 72.0 71.2 66.6 63.9 60.4 63.7 65.9 71.5

1 Accounting system changed from 1995 on

F-33 Risk management in the insurance underwriting business caused through human actions, technological failures, process or project management weaknesses or external events. This The main actuarial risks facing insurance underwriters are definition includes legal risks, but excludes strategic risks and imbalances in the portfolio, excessive exposure to catastrophe reputation risks. claims and far-reaching changes in the fundamental trends of the principal market segments. R+V counters these risks Risk strategy through continuous observation of the market. Its pays particu- lar attention to maintaining a balanced portfolio, both in terms Our strategy for handling operational risk is based on the of its worldwide territorial diversification and in terms of its DZ BANK Group’s risk tolerance capacity. At present the im- sectoral mix. Its assumption of risks is subject to prescribed plementation of the risk strategy is predominantly qualitative subscription limits that cap its liability in respect of both indi- in nature since our risk quantification system is still under vidual and cumulative claims. development.

The possible burden from catastrophe losses is continuously Organisation and responsibilities recorded, broken down by scale and frequency, and monitored using market-standard methods including a DP system and Our functional organisation model provides a key point of backed up by in-house-developed verification processes. R+V reference for all our other tools, in that it comprehensively reinsures the liabilities it underwrites, especially potential describes the roles and responsibilities of all process partici- cumulative claims, through the national and international pants. The model distinguishes four top-level dimensions: reinsurance markets. The group only places business with companies of first-class credit quality. - Distributed risk management - Central risk management - Independent risk controlling 7. Operational risk - Internal Audit

The fundamental management responsibility for operational We have made a start at DZ BANK during 2003 on a large- risks has been distributed to the individual organisation units. scale project to design and implement sophisticated tools for Specified universal issues, such as personnel or IT manage- controlling and managing operational risks. This involves over- ment, are centrally supported by specialised units. To preserve hauling all our existing methodologies and tools. The group the necessary separation of functions, the group companies companies are similarly systematising their operational risk have set up dedicated units to perform independent controll- control and management toolkits. ing of operational risk; these units are charged with develop- ing and implementing methodologies for the controlling and Basing our approach closely on the banking regulators’ defini- management of operational risks and with supervising risk tion, we understand operational risk as the threat of losses management.

F-34 Management tools An important sub-aspect of strategic risk is business risk. By this we understand the potential for losses that results We gather loss data group-wide so that we can promptly from the fact that falling revenue cannot be fully compensated analyse historic loss events in order to be able to identify by equivalent cost reductions. This risk is also referred to as trends in the development of risks and concentrations of fixed cost cover risk or cost overhang risk. We have made operational risks in specific operating units. We are also using preliminary quantifications of our business risk using an earn- the collected loss data to build up the necessary data history ings-at-risk approach coupled with intra-sector comparisons. to quantify operational risks in future. The construction of suitable methods for measuring strategic risks has been flagged as a bolt-on development priority for In order to identify all operational risks and create the maxi- our Risk Control unit. There are still no industry standards for mum possible transparency as to our risk situation, we have quantifying strategic risk. implemented extensive self-assessment processes in many areas of the DZ BANK Group. This involves experts from the The management of the DZ BANK Group’s strategic risks responsible units making judgments on their operational risk is the primary role of the Board of Managing Directors of with the aid of prescribed questionnaires. DZ BANK in consultation with the directors of the group companies. Our present system for managing strategic risk Finally we deploy a system of risk indicators based on pre- relies on the forward-looking evaluation of success factors scribed thresholds combined with a traffic light system that coupled with the definition from these of performance targets enables us to draw conclusions about trends and thereby for the key group companies. functions as an early warning screen. Risk indicators are extensively, systematically and regularly surveyed within the This is founded on a revolving planning process that perio- DZ BANK Group. dically updates the strategic multi-year plan and the annual operating plans. The core components of the planning process are the observation of market trends – most importantly in the 8. Strategic risk area of customers, products and competitors – and environ- mental conditions, such as changes in the legal framework, plus critical analyses of our own strengths and weaknesses By strategic risk we understand the danger of losses that result profile. A management information system monitors the from management decisions on the business-policy position- achievement of targets. ing of the DZ BANK Group. Strategic risks are realised when important changes in environmental conditions or market As a result of important decisions of principle to reposition trends are not recognised early enough or their impact is DZ BANK as a central bank, as a corporate bank and as a wrongly assessed and as a consequence disadvantageous group holding company, significant steps were taken during fundamental decisions are made that are then difficult to 2003 to limit and actively manage our strategic risks. reverse.

F-35 The acquisition of norisbank, a specialist consumer finance 9. Summary bank, has helped to further round out the DZ BANK Group’s product offering. norisbank will strengthen the strategic positioning of the cooperative grouping as an end-to-end The DZ BANK Group has consistently operated within the integrated financial services provider and also help to stabilise boundaries of our risk tolerance capacity during 2003. We the group’s underlying profitability. New spin-offs and joint will ensure the same is true in 2004. Our economic risk-taking ventures in the area of high-volume securities and payments is commensurate with our capital backing. We also satisfied, transaction processing services have allowed us to further and continue to satisfy, the regulatory capital adequacy re- variabilise our cost base and thereby limit our business risk. quirements at all times; the DZ BANK Group’s capital ratios were and are substantially higher than the regulators’ mini- Substantial strategic risks arising from the merger that created mum standards. DZ BANK were finally eliminated during the 2003 financial year.Among other achievements, we have realised almost all We are deploying modern management and monitoring tools the synergy potential that we predicted on the non-personnel in every area of risk, and we will continue to progressively costs front, and we have largely completed the optimisation of refine and improve them. We will be guided in this process our personnel structure. by the future Basel II requirements for risk management by banks as well as the Solvency II regime for risk management by insurance providers.

F-36 III. Outlook some of which will only come to market this year – including DZ BANK’s new business customer products – to produce sig- nificant volume growth that should help the cooperative bank- Using our combined strength to reap synergies ing sector to increase our market share. Moreover, boosting and make the most of the economic upturn the efficiency of our sales effort is a key focus of our drive to harvest synergies between the constituents of the cooperative We see more favorable economic omens for the 2004 financial sector, and we are confident of further positive progress on year.We have developed a wealth of new products and this front in the current year. simultaneously regrouped both processes and resources at the parent bank and across the DZ BANK Group during the DZ BANK’s administration costs are set to fall again, assuming year under report specifically to equip ourselves to actively the measures we are taking to boost the cost effectiveness of exploit – together with our partners in the cooperative bank- the Group’s processes and functions deliver the anticipated ing sector – the opportunities the market is about to offer us. positive effects. Thanks to our high-throughput central process- In this light, we expect 2004 to bring improved results across ing service providers such as Transaktionsinstitut für Zahlungs- the board. verkehrsdienstleistungen and dwpbank, the local cooperative banks will also share the benefit of these effects. This outlook is based on the anticipated brightening of the economic climate this year.After a year of economic stagna- We are convinced of the effectiveness of the parent bank’s and tion in 2003 when consumer demand and corporate invest- the group’s upgraded credit management systems. With new ment both contracted, we are confident that 2004 will see business now margin and risk-oriented, we have built a good a slightly stronger contribution from the domestic component foundation for further reducing our risk provisioning costs. We and a substantially stronger contribution from the export will continue to optimise our corporate portfolio in 2004 in component of the German economy. The consequential effects line with our defined strategy. of the government’s program of legal reforms coupled with a cyclical recovery of corporate investment are likely to moder- To summarise these economic trends and this internal progress ately stimulate overall domestic economic output. in a sentence, we believe the 2004 financial year will bring improved trading and results for DZ BANK and the DZ BANK Our chosen focus on the cooperative banking sector requires Group and we are confident – especially in the light of our us both to continuously develop our products and most im- subsidiary role within the cooperative banking sector – that portantly to provide effective support for the local cooperative all our business partners are also set to share in this positive banks’ sales organisation. We expect the product innovations trend. that the group companies put so much effort into last year and

F-37 Report of the Supervisory Board

The Supervisory Board was also kept informed about the bank’s and the Group’s risk situation and the refinement of their systems and procedures for controlling risks, especially market price and default risks and the other risks typical of the banking industry. Significant individual business transactions were submitted to the Supervisory Board for approval.

To enable it to perform its duties and comply with the statu- tory requirements, the Supervisory Board formed a Personnel Sub-committee, an Audit Sub-committee, a Credit and Invest- ments Sub-committee and a Mediation Sub-committee pur- suant to section 27.3 of the German Codetermination Act. The first three sub-committees met on several occasions. The full Supervisory Board was kept regularly informed about the Dr Christopher Pleister Chairman of the Supervisory Board activities of its sub-committees. of DZ BANK AG Outside of formal meetings, the chairman of the Supervisory Board and the chairmen of the Audit and the Credit and As required by the law and the Articles of Association, the Investments Sub-committees were kept informed of key Supervisory Board and its sub-committees have monitored the decisions and exceptional business occurrences through conduct of the business by the Board of Managing Directors regular discussions with the chairman of the Board of Manag- during the 2003 financial year and have discussed and voted ing Directors. on the proposed transactions requiring their consent. Dr Rainer Märklin resigned from the Supervisory Board with The Supervisory Board was kept regularly informed by the effect from the end of the ordinary general meeting of share- Board of Managing Directors about the situation and progress holders held on May 28, 2003. Mr Helmut Gottschalk was of the bank and the Group and the general trend of trading. elected as a new member of the Supervisory Board. The Supervisory Board held a total of six meetings whose primary focuses, in addition to the in-depth discussion of Dr Thomas Duhnkrack was appointed as a full member of the current business developments, were the future business policy Board of Managing Directors with effect from January 1, 2003. of the bank including its principal strategic and organizational Mr Uwe E. Flach and Mr Peter Dieckmann resigned from the dimensions, and key issues concerning the integrated co- Board of Managing Directors of DZ BANK as at December 31, operative financial system. 2003.

F-38 Deloitte&Touche GmbH, Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, and Ernst&Young AG, Wirtschafts- prüfungsgesellschaft, Frankfurt am Main, jointly audited the bookkeeping records, annual financial statements and management report of DZ BANK for the year to December 31, 2003 presented by the Board of Managing Directors as well as the consolidated financial statements and the Group manage- ment report, and found them to be in conformance with the statutory regulations. The auditors accordingly issued an un- qualified audit certificate in both cases. The audit reports were submitted to the members of the Supervisory Board and com- prehensively examined and discussed. The Supervisory Board is in agreement with the findings of the auditors.

Representatives of the auditors attended the meeting of the Supervisory Board called to approve the annual financial state- ments in order to report in detail on the key audit outcomes. They also made themselves available to the members of the Supervisory Board to answer any queries.

The Supervisory Board and the Audit Sub-committee chaired by Mr Rolf Hildner have examined in detail the annual and consolidated financial statements and management reports for DZ BANK and the DZ BANK Group as well as the proposed ap- propriation of profits. We have no objections to raise. Frankfurt am Main, April 14, 2004 At its meeting on April 14, 2004 the Supervisory Board ap- proved the annual financial statements for the year to Decem- DZ BANK AG ber 31, 2003 prepared by the Board of Managing Directors, Deutsche Zentral-Genossenschaftsbank, which are therefore formally adopted. The Supervisory Board is Frankfurt am Main in agreement with the proposal from the Board of Managing Directors for the appropriation of the available profits.

The Supervisory Board thanks the Board of Managing Directors and all employees for their exceptional personal commitment Dr Christopher Pleister and efforts on behalf of the bank and the Group in 2003. Chairman, Supervisory Board

F-39 Group Financial Statements

86 Consolidated Balance Sheet of the 110 B. Notes to the Balance Sheet DZ BANK Group as at December 31, 2003 110 7| Maturity structure of assets and liabilities 111 8| Arrears of interest and capital repayments on 90 Consolidated Income Statement of the DZ BANK building loans advanced by Bausparkasse Schwä- Group for the period from Jan. 1 to Dec. 31, 2003 bisch Hall. 112 9| Building loans agreed but not yet paid out by 92 Consolidated Cash Flow Statement Bausparkasse Schwäbisch Hall 112 10 | Related companies and companies with which a 95 Segment Reporting participation relationship exists 113 11 | Claims and liabilities in respect of affiliated banks 98 Capital Structure and Movement 113 12 | Subordinated assets 114 13 | Insurance-related investments 99 Notes to the Financial Statements 116 14 | Other insurance-specific assets 99 A. General Information 116 15 | Trust operations 99 1| Legal basis on which these Group Financial 116 16 | Foreign currency positions Statements have been drawn up 117 17 | Business subject to repurchase agreements 100 2| Sphere of consolidation 117 18 | Assets assigned as security for liabilities 101 3| Principles of consolidation 117 19 | Structure of securities portfolio by purpose 102 4| Presentation and valuation rules 118 20 | Securities eligible for stock exchange listing 108 5| Deferred taxation in the Consolidated Financial 119 21 | Fixed asset structure and movements Statements 120 22 | Own shares 109 6| Currency translation 121 23 | Authorised capital 121 24 | Shareholder disclosures

F-40 121 25 | Other assets 132 42 | Other operating income and expense 122 26 | Tax deferrals and provisions for deferred tax liabi- 132 43 | Exceptional income and expense lities 133 44 | Taxes on income 123 27 | Accruals and deferrals 123 28 | Other liabilities 134 D. Other information 123 29 | Provisions 134 45 | Other financial obligations 124 30 | Actuarial reserves 134 46 | Placing and underwriting obligations 124 31 | Other insurance-specific liabilities 134 47 | Declaration of backing 125 32 | Participatory capital 135 48 | Employees 127 33 | Subordinated liabilities 135 49 | Cover statement for DZ BANK AG 127 34 | Off-balance-sheet futures business by product 136 50 | Cover assets trustees structure 136 51 | Cover statement for the mortgage bank’s mortgage 129 35 | Off-balance-sheet futures business by counterpar- and local authority lending business ties structure 137 52 | Information on leasing business 138 53 | Changes in the business book of Bausparkasse 130 C. Notes to the Income Statement Schwäbisch Hall 130 36 | Breakdown of income by geographical markets 139 54 | Change in the loan allocation volume of Bauspar- 130 37 | Commission income and expense kasse Schwäbisch Hall 130 38 | Net income from financial transactions 140 55 | Statutory bodies 143 56 | Appointments held by members of the Board of Ma- 131 39 | Income from insurance operations naging Directors and employees on the Supervisory 131 40 | Expense from insurance operations Boards of major corporations 132 41 | Administration and agency services provided for third parties

F-41 Consolidated Balance Sheet of the DZ BANK Group as at December 31, 2003 Assets

in € million (Note) 12.31.2003 12.31.2002 1. Cash reserve 879 878 a) Cash on hand 132 87 b) Balances with central banks 746 790 of which: eligible for refinancing at Deutsche Bundesbank (573) (509) c) Balances with postal giro agencies 1 1 2. Debt instruments of public-sector entities and bills of exchange eligible for refinancing at central banks 74 38 a) Treasury bills, discountable Treasury notes and similar debt instruments of public-sector entities 57 17 of which: eligible for refinancing at Deutsche Bundesbank (51) (2) b) Bills of exchange 17 21 of which: eligible for refinancing at Deutsche Bundesbank (17) (21) 3. Placements with, and loans and advances to, other banks (7) 89,264 93,637 a) Repayable on demand 3,089 2,907 b) Term deposits and loans 86,175 90,730 of which: relating to saver´s building loan (49) (90) relating to mortage loans (236) (247) relating to local authority loans (7,159) (9,268) 4. Loans and advances to non-bank customers (7) 102,462 106,935 of which: secured by mortages (excluding BSH construction loans) (26,598) (26,791) a) Mortage loans 24,520 24,911 b) Local authority loans 18,702 19,220 c) Construction loans advanced by Bausparkasse Schwäbisch Hall 19,957 20,462 of which: secured by mortages (15,039) (15,119) ca) Allocations of saver’s building loans 9,662 10,836 cb) Preliminary and bridge finance 9,281 8,574 cc) Other 1,014 1,052 d) Other loans and advances 39,283 42,342 5. Bonds and other fixed-interest securities (7, 19, 20) 82,732 78,090 a) Money market instruments issued by 104 99 aa) public-sector issuers – – of which: qualifying as repo collateral at Deutsche Bundesbank (–) (–) ab) other issuers 104 99 of which: qualifying as repo collateral at Deutsche Bundesbank (57) (60)

F-42 in € million (Note) 12.31.2003 12.31.2002 b) Bond issued by 75,339 74,121 ba) public-sector issuers 15,563 11,620 of which: qualifying as repo collateral at Deutsche Bundesbank (14,787) (11,047) bb) other issuers 59,776 62,501 of which: qualifying as repo collateral at Deutsche Bundesbank (41,840) (44,675) c) own bonds 7,289 3,870 Nominal value (7,144) (3,754) 6. Equity shares and other available-yield securities (19, 20) 3,212 7,798 7. Insurance-related investments after offsets (13) 35,715 33,776 8. Other insurance-specific assets (14) 2,149 2,144 9. Participations (20, 21) 420 440 of which: In banks (254) (205) In financial services institutions (12) (12) 10. Participations in associated companies (20, 21) 251 180 of which: In banks (237) (171) In financial services institutions (14) (9) 11. Shares in related companies (20, 21) 824 905 of which: In banks (88) (161) In financial services institutions (35) (39) 12. Assets held on trust basis (15) 2,411 2,326 of which: trust loans (841) (750) 13. Equalization claims against government agencies - Including claims converted into bonds 133 221 14. Intangible assets (21) 21 21 15. Property and equipment (21) 5,206 5,309 16. Own equity or partnership shares (22) 24 24 Nominal value (10) (10) 17. Other assets (25) 3,110 2,807 18. Deferred tax assets (26) 1,933 1,960 19. Accrued income and deferred expenses (27) 903 766 a) From issuance and lending operations 656 512 b) other 247 254 Total assets 331,723 338,255

F-43 Equity and liabilities

in € million (Note) 12.31.2003 12.31.2002 1. Deposits from other banks (7) 115,417 122,922 a) Repayable on demand 27,720 30,015 b) Fixed-term or agreed notice 87,697 92,907 of which: issued registered mortage pfandbriefe (645) (630) issued registered public pfandbriefe (980) (929) issued registered mortage and public pfandbriefe assigned to lenders as security on loans taken out (26) (34) saving deposits under save-to-build plans (259) (182) of which: on advanced saver´s building loan (1) (1) 2. Amounts owed to other depositors (7) 78,521 72,649 a) Deposits under save-to-build plans and on saving accounts 27,159 25,314 aa) Savings deposits with three months notice term 767 352 ab) Savings deposits with more than three months notice term 22 105 ac) Saving deposits under save-to-build plans 26,370 24,857 of which: relating to plans under notice (56) (59) relating to allocated saver´s building loans (107) (93) b) Other liabilities 51,362 47,335 ba) Repayable on demand 10,764 8,412 bb) Fixed-term or agreed notice 40,598 38,923 of which: issued registered mortage pfandbriefe (3,942) (4,170) issued registered public pfandbriefe (3,936) (4,052) issued registered mortgage and public pfand- briefe assigned to lenders as security on loans taken out (124) (140) 3. Liabilities in certificate form (7) 75,612 83,035 a) Issued bonds 70,772 77,785 aa) Mortage pfandbriefe 13,497 13,161 ab) Public pfandbriefe 26,649 29,880 ac) Other bonds 30,626 34,744 b) Other certificated liabilities 4,840 5,250 of which: money market instruments (2,115) (3,199) 4. Liabilities arising from trust operations (15) 2,411 2,326 of which: trust loans (841) (750) 5. Other liabilities (28) 3,555 3,535

F-44 in € million (Note) 12.31.2003 12.31.2002 6. Accrued expenses and deferred income (27) 2,661 2,460 a) From inssuance and lending operations 332 376 b) Other 2,329 2,084 7. Provisions (7, 26, 29) 3,067 2,873 a) Provisions for pensions and similar obligations 959 877 b) Provisions for taxes 419 478 c) Other provisions 1,689 1,518 8. Building savings & loan guarantee fund 459 456 9. Actuarial reserves (30) 32,540 30,838 10. Other insurance-specific liabilities (31) 4,380 4,141 11. Subordinated liabilities (7, 33) 3,567 3,602 12. Participatory capital (7, 32) 2,680 2,685 of which: Maturing within two years (277) (233) 13. Fund for general banking risks 743 741 14. Capital and reserves (23) 6,110 5,992 a) Subscribed capital 2,879 2,879 b) Capital reserve 528 528 c) Surplus reserves 45 107 ca) Statutory reserve 9 5 cb) Reserve for own shares 24 24 cc) Other surplus reserves 12 78 d) Balancing item for minority interests 2,603 2,426 e) Cumulative profit 55 52 Total Equity and Liabilities 331,723 338,255

1. Contingent liabilities 12,916 13,262 Liabilities arising from guarantees and warranties provided 12,916 13,262 2. Other obligations 14,195 16,158 Irrevocable credit commitments 14,195 16,158 3. Specialist funds managed on behalf of shareholders 108,765 98,846 Sum of inventory values 108,765 98,846 Number of specialist funds administered: 658 (PY: 685)

F-45 Consolidated Income Statement of the DZ BANK Group for the period from January 1 to December 31, 2003

in € million (Note) 2003 2002 1. Interest income from 11,099 12,812 a) Lending and money market operations 8,719 10,151 of which: relating to saver´s building loans (518) (561) relating to preliminary and bridge loans (508) (473) relating to other construction loans (67) (63) b) Fixed-interest securities and government-inscribed debt 2,380 2,661 2. Interest expense 9,478 11,277 of which: on savings deposits under save-to-build plans (707) (700) 3. Current income from 318 379 a) Equity shares and other variable-yield securities 272 318 b) Participations 20 28 c) Shares in associated companies 6 10 d) Shares in related companies 20 23 4. Income from profit pools and profit transfer or pro- fit sharing agreements 26 23 5. Commission income (37) 1,847 1,726 of which: Business conclusion and introduction fees from Bausparkasse Schwäbisch Hall (252) (164) Loan administration fees following allocation by Bausparkasse Schwäbisch Hall (47) (52) 6. Commission expense (37) 1,074 873 of which: Business conclusion and introduction fees paid to Bausparkasse Schwäbisch Hall (527) (408) 7. Net income from financial transactions (38) 335 216 8. Income from insurance operations (39) 9,473 9,713 9. Expense from insurance operations (40) 9,291 9,122 10. Other operating income (42) 2,228 2,159 11. Income from liquidation of special item with reserve portion – 7 12. General administrative expenses 2,226 2,299 a) Personnel expenses 1,140 1,172 aa) Wages and salaries 896 930 ab) Compulsory social security contributions and expenses for pension benefits and welfare 244 242 of which: for pensions provision (111) (108) b) Other administrative expenses 1,086 1,127

F-46 in € million (Note) 2003 2002 13. Depreciation and write-downs on tangible and intangible assets 177 203 14. Other operating expense (42) 1,787 1,756 15. Depreciation and write-downs on loans and advan- ces and certain securities, plus additions to provi- sions on lending business 326 2,307 16. Depreciation and write-downs on participations, shares in related companies and securities treated as fixed assets 108 – 17. Income from write-ups on participations, shares in related companies and securities treated as fixed assets – 181 18. Expenses from the assumption of losses 42 71 19. Result of ordinary operations 817 -692 20. Exceptional income (43) – 2 21. Exceptional expense (43) 78 224 22. Taxes on net exceptional income (44) -31 -89 23. Net exceptional result -47 -133 24. Taxes on the result of ordinary operations (44) 345 -1,229 25. Other taxes not included under “Other operating expense” heading -4 6 26. Earnings paid out under profit pools and profit transfer or profit sharing agreements 47 47 27. Net income on period 382 351 28. Attributable to minority interests 88 296 29. Withdrawals from surplus reserves – 39 from own-shares reserve – 39 30. Allocations to surplus reserves 239 42 a) to statutory reserve 4 3 b) to other surplus reserves 235 39 31. Consolidated earnings 55 52

F-47 Consolidated Cash Flow Statement

in € million 2003 Net income on period (including shares of earnings of minority-owned companies) before exceptional items and taxes 817 Non-cash positions in net income and adjustments to reconcile net income with cash provided by ongoing activities: Depreciation, write-downs and write-ups on loans and advances, investments and property and equipment (including leasing) 1,528 Change in provisions (excluding tax liabilities) 41 Change in actuarial reserve 1,702 Change in other non-cash positions (including insurance-related items) -286 Profit/loss from the sale of investments, property and equipment -131 Other adjustments (net) -2,006 Sub-total 1,665 Change in assets and liabilities from ongoing activities after correction for non-cash components: Claims - Placements with and loans and advances to other banks 3,376 - Loans and advances to non-bank customers 6,673 Securities held for dealing purposes -1,935 Other assets from ongoing activities -437 Other insurance-specific assets -5 Liabilities - Deposits from other banks -6,803 - Amounts owed to other depositors 3,999 Promissory notes and other liabilities in certificate form -7,247 Other liabilities from ongoing activities -19 Other insurance-specific liabilities 239 Interest and dividend receipts 12,530 Interest payments -10,505 Actual income tax payments -176 Cash flow from operating activities 1,355

F-48 in € million 2003 Proceeds from - the sale of investments 6,352 - the sale of property and equipment 892 Payments for - the acquisition of investments -4,543 - the acquisition of property and equipment -1,796 Proceeds from the sale of insurance-related investments 10,532 Payments for the acquisition of insurance-related investments -12,146 Effects from changes in the sphere of consolidation -220 Change in funds from other investing activity (net) -6 Cash flow from investing activities -935 Receipts from capital increases _ Payments to shareholders and minority shareholders - Dividend payments -291 - Other payments -12 Change in funds from other capital (net) – including participatory and subordinated capital -80 Cash flow from financing activities -383

Funds at start of period 916 Cash flow from operating activities 1,355 Cash flow from investing activities -935 Cash flow from financing activities -383 Funds at end of period 953

F-49 The Consolidated Cash Flow Statement for the DZ BANK Group is structured in compliance with the require- ments of accounting standard DRS 2-10. It reconciles the starting value of the group’s cash and cash- equivalents (funds) with the funds position at the close of the year by representing the year’s net payment flows from operating, investing and financing activities. We have not reported prior-year figures for compar- ison purposes as this is the first year a cash flow statement has been prepared.

The funds reported include cash in hand and balances at central banks (cash reserve). The cash equivalents include debt instruments of public entities and bills of exchange.

Cash of € 422 million was used to acquire shares in fully consolidated companies during 2003, while sales of this kind generated cash inflows of € 72 million. Cash totaling € 130 million was acquired in the process.

To summarise the main aggregate effects of the above transactions, claims on customers totaling € 2,698 million and liabilities to customers totaling € 2,206 million were acquired.

F-50 Segment Reporting

by business lines Central and Retail Property Insurance Other/ Total Corporate Banking Finance Consolidation 12.31.2003 in € million Banking Net interest income 751 275 1,129 – -190 1,965 Risk provisions -382 -29 -147 – 232 -326 Net commission income 411 545 -183 – 0 773 Surplus from insurance operations – – – 183 1 -1 182 Net income from financial transactions 326 9 – – – 335 General and administrative expense -1,207 -620 -580 – 4 -2,403 Net other income and expense 389 28 74 – -50 441 Profit after risk provisions 288 208 293 183 -5 967 Segment assets 167,576 22,118 101,048 37,864 -12,193 316,413 Segment liabilities 166,603 19,950 96,199 36,920 -13,202 306,470 Balance sheet equity 5,280 1,509 2,946 1,173 -4,853 6,055 Return on equity in percent 5.5 13.8 9.9 15.6 – 16.0 Risk positions 67,503 8,307 33,128 9,339 624 118,901 Cost-income ratio in percent 64.3 72.3 56.9 – – 65.0 Total employees 7,019 4,227 3,791 10,276 – 25,313

1 The specific earnings calculation rules governing life and health insurance providers mean that if they make high tax payments, the reported surplus on insurance operations is increased correspondingly.

F-51 by regions Germany Rest of Europe Rest of world Consolidation Total in € million 12.31.2003 Profit before risk provisions 1,098 214 97 -116 1,293 Risk provisions on lending business -460 -10 -86 230 -326 Profit after risk provisions 638 204 11 114 967 Segment assets 287,132 30,914 10,577 -12,210 316,413 Segment liabilities 279,478 31,392 7,442 -11,842 306,470 Cost-income ratio in percent 66.1 58.3 34.8 – 65.0

The Summary Operating Segments Report is prepared in accordance with the requirements of the account- ing standards DRS 3 and DRS 3-10. The results are broken out into segments firstly on the basis of core operating business lines and secondly on the basis of geographical areas. We have not reported prior-year figures for comparison purposes as this is the first year a summary operating segments report has been prepared.

The annual results, assets and liabilities of the group’s consolidated subsidiaries have all been valued on a consistent basis and allocated to the operating segment that best reflects their respective business focus.

The Central and Corporate Banking segment encompasses all the DZ BANK Group’s activities in the areas of business with local cooperative banks, business with corporate customers, business with institutional cus- tomers and investment banking. In other words, the focus is on business customers as a target group. The VR-LEASING AG, Eschborn, and DVB Bank AG, Frankfurt am Main, subgroups are also included under this heading, as are the companies DZ BANK Ireland plc, Dublin, Transaktionsinstitut für Zahlungsverkehrs- dienstleistungen AG, Frankfurt am Main, and DZ BANK AG.

The Retail Banking segment covers the DZ BANK Group’s private banking operations and activities relating primarily to asset management, and the focus is therefore on personal customers as a target group. The main companies included are cosba private banking ag, Zürich, DZ BANK International SA, Luxembourg- Strassen and norisbank AG, Nürnberg, plus the subgroups Union Asset Management Holding AG, Frankfurt am Main, and SÜDWESTBANK Aktiengesellschaft, Stuttgart.

The Property Finance segment takes in the group’s home savings and loan and mortgage lending busi- nesses. The main companies concerned are Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall, Deutsche Genossenschafts-Hypothekenbank AG, Hamburg, and VR Kreditwerk Hamburg-Schwäbisch Hall AG, Hamburg and Schwäbisch Hall.

F-52 The Insurance segment covers the group’s insurance operations in the form of the R+V Allgemeine Versiche- rung AG, Wiesbaden, subgroup.

The Others/Consolidation heading reports the companies that do not count as part of the DZ BANK Group’s core operating business lines. This segment also includes the inter-segment consolidation adjustments. They include the impact on the income statement of the deconsolidation of VR-Immobilien SAGA GmbH of € 97 million and the consolidation of DG HYP’s income of € 32 million from the sale of land and buildings, valued differently at the group level.

The components taken into account in reporting the profitability of the segments include their net interest income, risk provisions, net commission income, surplus from insurance operations, net proprietary trading income, administration expense and balance of other income and expense.

The segments’ net worth and financial situation is shown by reference to their assets and liabilities. The seg- ment assets include their cash reserve, claims on other banks and non-bank customers, bonds and other fixed-interest securities, equity shares and other variable-yield securities, insurance-related investments and other insurance-specific assets. The segment liabilities include their liabilities to other banks and non-bank customers, certificated liabilities, actuarial reserves and other insurance-specific liabilities.

The Balance-sheet Equity heading breaks down the DZ BANK Group’s balance-sheet equity excluding the consolidated net profit. The segment figures aggregate the equity of the companies assigned to the seg- ment, adjusted for intra-segment effects.

The measures chosen for judging the success of the operating segments are the rate of return on their balance-sheet equity and their cost-income ratio. The return on equity has been calculated as the ratio of profit after risk provisions to balance-sheet equity. The cost-income ratio shows the relationship between their total general and administrative costs and their operating income and reflects the segments’ cost efficiency.

The second reporting format breaks down some of the same parameters according to the registered office of the operating units concerned.

F-53 Capital Structure and Movement

Position at Shares Own Dividends Changes in Consolida- Earnings- Position at 12.31.2002 issued shares paid consolida- ted profit neutral 12.31.2003 acquired/ tion sphere effects in € million cancelled DZ BANK Group Subscribed capital 2,879 – – – – – – 2,879 Capital reserve 528 – – – – – – 528 Earned group equity 159 – – -52 -350 294 – 51 Cumulative net other group items: - Currency translation balancing item – – – – – – 9 9 - Other neutral transactions – – – – – – 40 40 Group balance-sheet equity (excluding minorities) 3,566 – – -52 -350 294 49 3,507 Own shares not intended for cancellation 24 – – – – – – 24 Equity 3,542 – – -52 -350 294 49 3,483

Minority interests Minority capital 2,426 183 – -239 211 88 – 2,669 Cumulative net other group items: - Currency translation balancing item – – – – – – -84 -84 - Other neutral transactions – – – – – – 18 18 Equity 2,426 183 – -239 211 88 -66 2,603

Group equity 5,968 183 – -291 -139 382 -17 6,086

This group capital structure and movements statement has been drawn up in accordance with DRS 7. Because this table is an innovation, we have not included prior-year values for the currency translation balancing item and other neutral transactions headings. The group equity total in this table is lower than the figure shown in the consolidated balance sheet by the value of the own shares holding, a deduction required by DRS 7.

F-54 Notes to the Financial Statements

A. General Information

1| Legal basis on which These Consolidated Financial Statements of the DZ BANK Group for the year ending December 31, 2003 these Consolidated have been prepared in accordance with the requirements of the German Commercial Code (HGB) and the Financial Statements Order on the Accounting of Credit Institutions and Financial Services Institutions (RechKredV). At the same have been drawn up time, the Consolidated Financial Statements are in compliance with the provisions of Germany’s Joint Stock Corporations Act (AktG) and the DG BANK Reorganization and Transformation Act (UmwG), as well as the Articles of Association of DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main (DZ BANK AG). The Consolidated Financial Statements additionally comply in all respects with other stan- dards drawn up by the German accountings standards committee (Deutsche Standardisierungsrat, DSR) and officially promulgated by the Federal Justice Ministry (Bundesministerium der Justiz, BMJ) as required by section 342.2 HGB.

On February 26, 2002 the federal government’s Corporate Governance Commission presented its German Corporate Governance Code. The currently valid version was published in the online Federal Gazette on May 21, 2003. This code brings together all the important legal requirements regulating the leadership and supervision of German stock corporations as well as internationally recognized standards of best practice in responsible corporate governance.

The German Act to Promote Transparency and Public Information through the Further Reform of Company and Accounting Law (TransPuG), incorporated into the Joint Stock Corporations Act through the addition of a new section 161 AktG, makes this Code an integral component of the reporting duties of all listed com- panies’ executive and supervisory boards.

DZ BANK Group has one stock exchange listed company in DVB Bank Aktiengesellschaft, Frankfurt am Main (DVB). As required by the law and within the set time frame, on December 30, 2003 the Board of Managing Directors and Supervisory Board of DVB published a second declaration of conformity within the terms of section 161 AktG in conjunction with section 15 EG AktG.

All monetary values are stated in euro in compliance with section 298.1 HGB in conjunction with section 244 HGB. Advantage has been taken of the option to provide information through the notes rather than the balance sheet. In the interests of clarity, we have aggregated certain balance sheet and income statement headings.

The separate financial statements of all the companies consolidated into the group were prepared using the same presentation and valuation principles that applied for DZ BANK AG. Separate notes have been prepa- red for DZ BANK AG and the DZ BANK Group.

F-55 Significant information on the group’s building savings & loan business has been included in the standard forms prescribed by the RechKredV. In addition, aggregated headings from the reporting forms prescribed for insurance companies have been included in the balance sheet and income statement. Insurance-specific items have been expanded on in the Notes. The Consolidated Financial Statements also comply with the special rules for reporting on leasing and investment companies.

2| Sphere of consolidation The Consolidated Financial Statements for the year to December 31, 2003 include, in addition to DZ BANK AG as the parent company, a further 23 subsidiary companies and five sub-groups numbering among them 810 companies.

The DZ BANK Group’s sphere of consolidation has changed as follows from the end-2002 position:

5 new companies were consolidated for the first time at December 31, 2003. These are:

- DZ BANK Capital Funding LLC I, Wilmington, USA - DZ BANK Capital Funding Trust I, Wilmington, USA - norisbank AG, Nürnberg -Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main - WÜRTT. GENO-HAUS GmbH & Co. KG, Stuttgart

The fully consolidated subsidiary company SÜDWESTBANK Aktiengesellschaft, Stuttgart, was consolidated as a subgroup for the first time as at 31 December 2003.

The following 2 companies were removed from the sphere of consolidation during 2003: - FinanzVerbund Beteiligungsgesellschaft mbH, Schwäbisch Hall (FinanzVerbund) - VR-Immobilien SAGA GmbH, Frankfurt am Main

The assignment of 51 percent of the voting rights in VR-Immobilien SAGA GmbH resulted in the company’s deconsolidation and also reduced the group’s holding in Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall, from 94.9 percent to 82.8 percent.

FinanzVerbund only survived as a shell company in 2003 and was deconsolidated on the grounds of triviality as permitted by section 296.2 HGB.

F-56 With retroactive effect from 1 January 2003, Bank für Wertpapierservice und -systeme AG, Frankfurt am Main, (bws bank) was amalgamated with WPS WertpapierService Bank Aktiengesellschaft, Düsseldorf, to create Deutsche WertpapierService Bank AG, Frankfurt am Main (dwpbank). This merger led to the deconsol- idation of bws bank. The newly created company dwpbank, in which DZ BANK AG now holds 40 percent of the share capital, is consolidated at equity.

A total of 141 related companies were not included in the Consolidated Financial Statements because of their overall minor significance to the group’s assets and liabilities, financial position and profit situation as defined by section 296.2 HGB.

It was decided not to apply the at-equity method in the case of 7 associated companies on the grounds of triviality, as permitted by section 311.2 HGB.

The complete list of shareholdings is listed in the Frankfurt am Main Commercial Register.An overview of the group’s major participations is available on request from DZ BANK AG.

3| Principles of In line with previous practice, capital consolidation was carried out according to the book value method consolidation based on the valuations at the date of the first-time consolidation of the equity interests. The resulting goodwill of € 332 million for FY 2003 following the proportional disclosure of undisclosed reserves and liabilities in the acquired assets and debts has been set directly against the surplus reserves.

We show a balancing item to reflect minority interests.

The group’s shares in associated companies are valued and reported at equity based on their book values at the time of first-consolidation. Their valuation has accordingly not been aligned with the group- wide valuation methods as allowed under section 312.5.2 HGB.

Österreichische Volksbanken-AG, Vienna, VB-Leasing International Holding GmbH, Vienna, and Deutsche WertpapierService Bank AG, Frankfurt am Main, (dwpbank) are valued as associated companies, i.e. at equity under the terms of section 312 HGB and DRS 8, because their business and financial policy is subject to significant control by the group.

dwpbank was included at equity for the first time in the DZ BANK Group’s sphere of consolidation in 2003. The inter-company profit arising from the merger was proportionally eliminated in line with point 30 of DRS 8.

Its existing goodwill was charged against the surplus reserves under the provisions of section 312.2.3 HGB in conjunction with section 309.1.3 HGB.

F-57 Intra-group receivables, liabilities, provisions, accrued and deferred items, contingent liabilities, and income and expenditure have been consolidated as required by sections 303 and 305 HGB. Intra-group profits and losses have been eliminated (section 304 HGB). However, this consolidation has been dispensed with where the sums involved were trivial.

In variance of these principles, the group insurance subsidiaries’ results were included in these Consolidated Financial Statements on an unadjusted basis due to the unique nature of this business. Their intra-group components have accordingly not been consolidated.

4| Presentation and Claims on banks and non-bank customers valuation rules Claims on banks and non-bank customers (placements, loans and advances) are shown at their nominal value or cost of acquisition. Differences between their nominal value and disbursement value are appor- tioned pro rata to time and shown under accrued and deferred items. Note receivables, registered bonds and lease receivables purchased from third parties are shown at purchase cost. Without exception, all receivables fall under current assets and are valued strictly at the lower of cost or market. The total shown for loans and advances to non-bank customers includes registered bonds assigned to the bank’s investment book and lease receivables that are matched by corresponding hedge transactions.These constitute distinct valuation units.

The provision for risk in the lending business encompasses write-downs and loan-loss provisions in respect of credit, country and latent default risks plus the fund for general banking risk (section 340f.1 HGB). Appro- priate provision at the level of the anticipated loss was made in respect of all identifiable credit and country risks. Latent risks in the lending business are covered by a global provision, based on the average actual loan loss incurred in the preceding five financial years. This is in accordance with the responsible authority’s rules for the tax recognition of general provisions by banks.

Bonds and other fixed-interest securities and equity shares and other variable-yield securities

Bonds and other fixed-interest securities and equity shares and other variable-yield securities are valued using the lower of cost or market rule governing current assets (holdings in the dealing portfolio and liquidity reserve), i.e. are shown at cost of acquisition or the stock market value at the accounting date if lower.

F-58 Only where the value loss on securities held as fixed assets is temporary in nature is their value retained under the terms of section 340e.1 HGB. The value of the securities not carried at the lower of cost or market (a disclosure required by section 35.1.2 RechKredV) is € 3,339 million for the balance sheet item “Bonds and other fixed-interest securities” and € 100 million in respect of the balance sheet item “Equity shares and other variable-yield securities”. In the case of specifically identified securities held as fixed assets or as part of the liquidity reserve, their valuation has been linked with corresponding hedging transactions.

Financial trading transactions - including note loans and registered bonds - were valued at market prices or their synthetic valuations at the end of the year.These transactions are essentially all performed by DZ BANK AG. Where standardized, exchange-traded products are concerned, the valuation is based on the end-of-year closing prices of the relevant stock exchanges. Swap trading positions were valued on the basis of the prevailing yield curves using the present value method.

The current interest payments on swaps held for trading purposes (including accrued and deferred items) and price gains and losses on note loans and registered bonds held for trading purposes are shown in the income statement under the heading of net income from financial activities. Those trading transactions in foreign exchange, securities and derivatives which are subject to the same market price change risk or credit risk (interest rate, exchange rate and other price risks plus spread risks) are also aggregated for accounting purposes into cross-product portfolios that form part of the bank’s harmonized risk management system.

Within a portfolio, unrealized valuation losses are offset against unrealized valuation gains. Furthermore, realized losses are offset against residual valuation gains within the same portfolio provided the required criteria are fulfilled. A balancing item is included in the balance sheet under the other assets heading to the value of the unrealized profits offset against realized losses.

In all cases, dividend income from shares and other variable-yield securities is shown under the heading of “Current income from shares and other variable-yield securities”.

F-59 Participations and shares in related companies Shares in related companies and participations are shown at updated cost of acquisition. The shares in associated companies include participating interests valued by the at-equity method.

Tangible and intangible fixed assets

Intangible fixed assets are capitalized at updated cost of acquisition. Tangible fixed assets (property and equipment) are valued at cost of acquisition or production less regular depreciation over their expected service life, based in all cases on the values shown in the tables published by the German tax authorities. Minor-value assets are written off in full in the year of acquisition.

The property and equipment heading includes leasing assets as well as office and plant equipment. As a rule office and plant equipment, including office furniture, are depreciated on a straight-line basis. Depreciation is taken for the full year on acquisitions made in the first half of the year and for a half-year on additions in the second half of the year.

Where value diminutions are expected to be enduring in nature, exceptional write-downs are made. If the causes of the write-down cease to apply, the value is written up again.

Liabilities

Liabilities are shown at their repayment value. The difference between their nominal and repayment values has been taken to accruals and deferrals and apportioned pro rata.

Provisions

Provisions for pensions and similar obligations are calculated according to actuarial principles. Current pension commitments to retired pensioners and contributions on behalf of ex-employees with pension enti- tlement are shown at their pro-rata value. The pension entitlements of still-active future beneficiaries are shown in accordance with section 6a of the Income Tax Act (Einkommenssteuergesetz - EStG). To ensure that its current pension obligations are covered from independent resources, DZ BANK AG availed itself of the good offices of DZ BANK Mitarbeiter-Unterstützungseinrichtung GmbH during 2003 in respect of a significant proportion of its current pension obligations.

F-60 Provisions for actual tax liabilities and other provisions were formed in accordance with the German tax regulations or on the basis of prudent business judgment to correspond with the group’s uncertain liabilities or threatened losses from uncompleted transactions.

Unrealized losses on uncompleted transactions aggregated together with other trading transactions in cross- product portfolios, are only shown as separate provisions in the consolidated financial statements if they are exceptional in scale and cause a loss “excursion”.

Insurance-specific positions

Investments made for the account and at the risk of holders of life assurance policies are shown at their present value.

The shares and equity funds treated as fixed assets under the terms of section 341b HGB are valued at cost of acquisition or the stock market value at the accounting date if lower.This principle is not followed if the accounting date market price of securities treated as fixed assets is based on a merely transitory value di- minution. This has to be demonstrated using a discounted cash flow valuation based on the IBES (Institu- tional Brokers Earnings System) consensus earnings estimates. Both direct holdings and special funds are valued by aggregating the values of the individual stocks they contain. If the DCF value identified as sustain- able is marginally higher than the stock market value on the accounting date, the DCF value is shown. If the identified DCF value is lower, the stock exchange price is shown.

Receivables from directly concluded insurance business are shown at their nominal value. Where necessary, value adjustments are undertaken.

The formation of actuarial reserves encompasses the following positions and approaches: the insurance cover provisions reflect the individual value of all policies; the calculation of the provisions for outstanding insurance claims is also individualized; the provision for premium reimbursements (“bonus reserve”) was formed in accordance with statutory requirements as well as contractual agreements; the equalization re- serve and similar provisions were formed in accordance with the relevant statutory requirements; the other actuarial provisions were dimensioned to cater for the anticipated need.

Tax valuations / Special items in the Consolidated Financial Statements

The setting aside of section 308.3 HGB by the Transparency and Public Information Law (TransPuG) has removed the option to incorporate valuations grounded in tax law or include special items with reserve character motivated by tax considerations in commercial consolidated financial statements. This is to prevent tax considerations overriding commercial accounting considerations. The new version of section 308 HGB applies first to the financial year commencing after December 31, 2002.

F-61 The most immediate consequences of the setting aside of section 308.3 HGB are fixed-asset write-ups totaling € 75 million and deferred tax liabilities of € 30 million. The valuation adjustments and the deferred tax positions are earnings-neutral.

Miscellaneous

Following a presentation change, DZ BANK AG’s net interest income includes negative price effects from the premature redemption of issued borrower note loans to the value of € -108 million (PY: € -67 million), reflecting the economic relationship with the effects of closing countervailing hedging transactions.

To ensure the accurate relation of earnings to operating units, for the first time these Consolidated Financial Statements show the interest and dividend income from securities held for dealing purposes and the refinancing expenses assignable to dealing transactions as part of the net trading result. Moreover, the first- time inclusion of the interest result on repurchase agreements at DZ BANK AG results in an additional amount of € 33 million (PY: € 12 million) in the same heading.

Investment expenses are offset against the corresponding income; equally, valuation income and expense from lending transactions and securities held as part of the liquidity reserve are shown net.

The revaluation of assets and liabilities acquired from Genossenschaftsbank Berlin in 1990 resulted in a claim for compensation against the currency conversion compensation fund (Ausgleichsfonds Währungsum- stellung) under the terms of section 40 of the Accounting Act (DM-Bilanzgesetz - DMBilG). The values shown for these items are subject to future adjustment under the terms of section 36 of the same act.

The fund for general banking risks required under the terms of section 340g HGB amounts to € 743 million; the € 2 million increase from the end-2002 figures results from the first-time consolidation of norisbank AG, Nürnberg, into the DZ BANK Group. Prudential reserves have also been established within the meaning of section 340f HGB.

F-62 Application of German Accounting Standards (DRS)

The German Standardisation Council (Deutscher Standardisierungsrat, DSR) develops recommendations for the correct application of consolidated accounting principles in order to achieve greater harmonisation with international accounting standards. The Federal Justice Ministry (BMJ) has contractually recognised the DSR as a private accounting standards body to promote this end. Standards approved by the DSR and published by the BMJ in the Federal Gazette are assumed to constitute principles of orderly group accounting within the meaning of section 342.2 HGB. DZ BANK’s Consolidated Financial Statements comply consistently with the following German Accounting Standards (DRS):

DRS 2 Cash flow statements DRS 2-10 Banks’ cash flow statements DRS 3 Operating segment reports DRS 3-10 Banks’ operating segment reports DRS 5 Risk reports DRS 5-10 Banks’ and financial services institutions’ risk reports DRS 7 Consolidated equity and consolidated earnings DRS 8 Accounting for shares in associated companies in consolidated financial statements DRS 10 Deferred taxation in consolidated financial statements DRS 11 Reporting dealings with related persons DRS 12 Intangible fixed assets DRS 13 Continuity principle and correcting errors

DRS 4 Company acquisitions in consolidated financial statements (applied where consistent with the German Commercial Code (HGB – see also 3 | Consolidation Principles).

F-63 5| Deferred taxation in the Under the provisions of sections 274 and 306 HGB, deferred tax positions have been formed solely in Consolidated Financial respect of differences between the results shown in the commercial (HGB) financial statements and the tax Statements accounts that are expected to be neutralized in the subsequent financial years (timing differences concept).

In addition to the HGB rules, DZ BANK has also applied German Accounting Standard No. 10 (DRS 10) ”Deferred Taxation in Consolidated Financial Statements”.

DRS 10 was approved by the German Standardisation Council (Deutscher Standardisierungsrat, DSR) on January 18, 2002 and formally promulgated under the powers of section 342.2 HGB by the Federal Justice Ministry (BMJ) on April 9, 2002, and must be applied to all financial years commencing after December 31, 2002. On the assumption however that the new regime constitutes best practice for drawing up consolida- ted accounts (GAAP), this standard was already applied to the 2002 financial year.

Deferred tax entitlements and obligations have to be derived from the reported valuation differences between an asset or liability in the balance sheet and in the tax balance sheet.

Deferred tax positions are shown for timing differences whose resolution can be expected to generate tax liabilities or reliefs in future years. These timing differences also include quasi-permanent differences. Asset- side deferred tax positions are reported for timing differences and also for tax-allowable loss carryovers and tax credits whose realization is sufficiently probable.

Deferred tax credits and debits are valued by reference to the tax rate that is anticipated will apply at the date when the timing differences are resolved. With the exception of section 340 HGB reserves, individual tax rates are applied for each company.

Deferred tax credits are shown under tax deferrals and deferred tax liabilities are shown as part of tax provisions.

The aggregate value of exceptional income is shown in the income statement after the deduction of taxes on income (i.e. net).

F-64 6| Currency Translation Assets and liabilities, and rights and delivery obligations arising from foreign exchange transactions, are translated in accordance with the principles defined in section 340h HGB and Statement BFA 3/1995 of the German Institute of Public Accountants (IDW).

For the purposes of the Consolidated Financial Statements, the accounting data of foreign group subsi- diaries are translated using the relevant official ESCB reference rate on the balance sheet date as announced by the European Central Bank. Gains and losses arising out of the translation of the consolidated capital, liabilities and income and expense are taken through the balance sheet and offset against the surplus reserves and minority interests.

Book receivables, securities holdings, liabilities and open spot transactions denominated in foreign currency are in all cases translated in the preconsolidation accounts of DZ BANK AG and its consolidated subsidiaries at the ESCB reference rate on the balance sheet date. Income and expenses arising from currency translation are reported in the income statement in compliance with section 340h HGB.

Unrealised gains on open foreign currency forward transactions are offset against unrealised losses in the same currency across all maturities until the unrealised losses are exhausted. The remaining unrealised gains are set against realised losses from currency translation where permissible through to equalisation. A balan- cing item equal to the offset unrealised gains is included in the balance sheet. Provisions for pending losses on open transactions are formed in the Consolidated Financial Statements in respect of any remaining un- realised losses. Any balance of unrealised gains remaining after these offsets is ignored.

Where forward exchange deals are connected with the hedging of interest-bearing balance sheet items, the resulting swap expense and income is treated as interest expense and interest income, reflecting its character.

F-65 B. Notes to the Balance Sheet

7| Maturity structure of asset positions in € million 12.31.2003 12.31.2002 Other claims on banks 86,175 90,730 - less than 3 months 22,200 24,313 - between 3 months and 1 year 10,413 10,389 - between 1 year and 5 years 28,253 27,796 - more than 5 years 25,309 28,232 Claims on non-bank customers 102,462 106,935 - less than 3 months 9,518 9,955 - between 3 months and 1 year 9,621 10,088 - between 1 year and 5 years 33,349 29,297 - more than 5 years 46,687 53,599 - no fixed term 3,287 3,996 Bonds and other fixed-interest securities 82,732 78,090 - less than 3 months (= maturing in the subsequent year) 6,625 5,172 - between 3 months and 1 year (= maturing in the subsequent year) 10,907 12,509 - between 1 year and 5 years 42,744 35,774 - more than 5 years 22,456 24,635

liability positions in € million 12.31.2003 12.31.2002 Liabilities to other banks with an originally agreed term or notice period (excluding savings deposits under save-to-build plans) 87,438 92,725 - less than 3 months 40,675 45,417 - between 3 months and 1 year 7,960 8,810 - between 1 year and 5 years 19,926 19,521 - more than 5 years 18,877 18,977 Liabilities to non-bank customers: Savings deposits with an agreed notice period of more than three months 22 105 - less than 3 months 6 16 - between 3 months and 1 year 12 79 - between 1 year and 5 years 4 10 Other liabilities with an agreed term or notice period 40,598 38,923 - less than 3 months 11,885 9,821 - between 3 months and 1 year 2,891 2,128 - between 1 year and 5 years 8,681 9,321 - more than 5 years 17,141 17,653

F-66 in € million 12.31.2003 12.31.2002 Liabilities in certificate form: Bonds issued 70,772 77,785 of which: Maturing in subsequent year 13,654 11,826 Other certificated liabilities 4,840 5,250 - less than 3 months 2,138 2,954 - between 3 months and 1 year 871 1,296 - between 1 year and 5 years 1,339 852 - more than 5 years 492 148 Provisions 3,067 2,873 - less than 3 months 742 823 - between 3 months and 1 year 517 379 - between 1 year and 5 years 503 551 - more than 5 years 1,305 1,120 Subordinated liabilities 3,567 3,602 - less than 3 months 100 288 - between 3 months and 1 year 280 463 - between 1 year and 5 years 1,485 1,316 - more than 5 years 1,702 1,535 Participatory capital 2,680 2,685 - less than 3 months 169 172 - between 3 months and 1 year 108 51 - between 1 year and 5 years 1,141 919 - more than 5 years 1,262 1,543

8|Arrears of interest and The ‘Loans and advances to non-bank customers’ heading includes arrears of € 73 million capital repayments on (2002: € 63 million) outstanding on the interest and capital payments on building loans advanced building loans advanced by Bausparkasse Schwäbisch Hall. by Bausparkasse Schwä- bisch Hall

F-67 9|Building loans agreed The following construction loans were committed but not yet paid out on the accounting date: but not yet paid out by Bausparkasse Schwä- in € million 12.31.2003 12.31.2002 bisch Hall To banks 323 412 of which: allocated 323 412 To non-bank customers 2,880 2,579 of which: a) allocated 2,272 2,123 b) preliminary or bridging finance 569 413 c) other 39 43

10 | Related companies and Claims and liabilities in respect of related companies: companies with which a participation relationship in € million 12.31.2003 12.31.2002 exists Deposits with, and loans and advances to, other banks 248 181 Loans and advances to non-bank customers 543 663 Bonds and other fixed-interest securities – 109 Amounts owed to other banks 274 1,393 Amounts owed to non-bank customers 520 503 Certificated liabilities 3,357 3,055 Subordinated liabilities 102 104

Claims and liabilities in respect of companies with which a participation relationship exists:

in € million 12.31.2003 12.31.2002 Deposits with, and loans and advances to, other banks 19,204 18,504 Loans and advances to non-bank customers 1,130 1,111 Bonds and other fixed-interest securities 248 3,315 Amounts owed to other banks 16,948 19,372 Amounts owed to non-bank customers 743 348 Certificated liabilities 2,397 5,477 Subordinated liabilities 101 76

F-68 11 | Claims and liabilities in The reported claims and liabilities totals include the following sums due from or to affiliated banks: respect of affiliated banks 1 in € million 12.31.2003 12.31.2002 Due from affiliated banks 41,455 42,505 of which: from cooperative central banks 737 578 Due to affiliated banks 39,716 43,631 of which: to cooperative central banks 137 191

1 Defined as local cooperative banks (Volksbanken and Raiffeisenbanken).

12 | Subordinated assets Subordinated assets are included in the following headings:

in € million 12.31.2003 12.31.2002 Placements with, and loans and advances to, other banks 352 341 Loans and advances to non-bank customers 167 224 Bonds and other fixed-interest securities 588 901 Equity shares and other variable-yield securities 291 402

F-69 13 | Insurance-related The structure of the insurance-related investments is as follows: investments a) Own-account investments:

Balance Additions Reclassifi- Disposals Write-ups Write- Balance sheet value cations downs sheet value in € million 12.31.2002 12.31.2003 Land, leasehold rights and buildings including buildings on third-party land 994 161 1 – 50 – 74 1,031 Participations, shares in related companies 517 130 – 25 – 3 619 Lending to companies with which a participation relationship exists and to related companies 2,510 2,489 – 2,521 – 2 2,476 Equity shares, investment holdings and other variable-yield securities 7,835 1,568 – 743 44 387 8,317 Bearer bonds and other fixed-interest securities 4,111 3,292 – 2,884 4 32 4,491 Claims secured by mortgages, land charges and annuity land charges 3,806 270 – 280 – 1 3,795 Registered bonds, promissory notes, loans and other lending 12,330 4,190 – 3,433 – 1 13,086 Deposits with other banks 171 – – 8 – 2 161 Other investments 214 46 – 33 – – 227 Custody receivables from reinsurance business 506 – – 157 – – 349 Total 32,994 12,146 – 10,134 48 502 34,552

1 The additions total includes € 53 million of earnings-neutral write-ups taken to the Balance Sheet due to the setting aside of section 308.3 HGB effective January 1, 2003.

F-70 b) Investments for the account and at the risk of life insurance policy holders:

Specialist funds in € million Shares 12.31.2003 R+V Aktien Europa 6,689,420 44 R+V Anleihen Europa 2,602,173 32 R+V-Kurs 42,598,368 195 R+V-Zins 31,864,019 166 UniDeutschland 92,187 7 UniEuroKapital 285,778 17 UniEuropa 28,945 30 UniEuropaRenta 399,225 17 VR-VermögensKonzept (A30, A50, A70, A100) 646,605 23 VR-VermögensKonzept R 279,021 12 PIU' FUTURO (PRUDENTE + CRESCENTE + BRILLANTE) 736,006 3 EUROQUOTA (PRUDENTE + EQUILIBRATA + AGGRESSIVA) 11,128,794 48 RAIFFPLANET (PRUDENTE + EQUILIBRATA + AGGRESSIVA) 21,294,362 86 VALORE UNICO NIKKEI I + II 45 VALORE UNICO MIX 23 PIANETA BORSA 62 PIANETA BORSA 1-99 15 PIANETA BORSA 2-99 33 PIANETA BORSA 1-00 13 INDEX AUREO 9 INDEX SHARE 22 NEW INDEX SHARE 20 INDEX EUROPE 17 INDEX BEST EUROPE 10 INDEX 4 YOU 9 INDEX FOR 8 6 INDEX USA&EUROPE 6 INDEX LIGHT 28 INDEX LIGHT NOVEMBRE 14 INDEX TOP FIFTY 24 INDEX EASY VALUE 12 INDEX TITANIUM 45 INDEX EASY GOLD 28 INDEX EASY GOLD 2 10 Miscellaneous 32 Total 1,163

F-71 14 | Other insurance-specific in € million 12.31.2003 12.31.2002 assets Receivable on directly written insurance business 335 323 - from insurance customers 235 208 - from insurance intermediaries 100 115 Settlement receivables on reinsurance business 312 138 Other receivables 1,502 1,683 Total 2,149 2,144

The ‘Other assets of insurance companies’ heading comprises mainly entitlements arising from insurance transactions and due from policy holders, intermediaries and reinsurance providers, current balances with banks, plus interest and rent receivables.

15 | Trust operations The total value of the group’s trust assets and liabilities is apportioned between the following assets-side and liabilities-side headings:

in € million 12.31.2003 12.31.2002 Trust assets - Placements with, and loans and advances to, other banks 602 623 - Loans and advances to non-bank customers 399 282 -Participations 1,410 1,421 Total 2,411 2,326 Trust liabilities - Deposits from other banks 816 715 - Amounts owed to other depositors 1,561 1,577 - Other 34 34 Total 2,411 2,326

16 | Foreign currency Assets and liabilities denominated in foreign currencies exist in the following amounts: positions in € million 12.31.2003 12.31.2002 Assets 31,899 40,162 Liabilities 23,744 32,138

F-72 17 | Business subject to As at December 31, 2003 the book value of assets sold subject to a repurchase agreement amounted to repurchase agreements € 16,806 million (2002: € 18,939 million).

18 | Assets assigned as Assets with the (aggregate) value stated below were assigned in respect of the following liabilities and security for liabilities contingent liabilities:

in € million 12.31.2003 12.31.2002 Deposits from other banks 32,603 36,058 Amounts owed to other depositors 3,009 1,869 Other obligations such as liabilities arising from securities loan transactions 2,278 2,720 Total value of assigned security 37,890 40,647

19 | Structure of securities The securities portfolio breaks down into the following categories according to the purpose of the holding: portfolio by purpose in € million 12.31.2003 12.31.2002 Bonds and other fixed-interest securities 82,732 78,090 - Investment portfolio 31,901 24,590 -Trading portfolio 18,509 16,978 - Liquidity reserve 32,322 36,522 Equity shares and other variable-yield securities 3,212 7,798 - Investment portfolio 380 5,216 -Trading portfolio 1,078 1,229 - Liquidity reserve 1,754 1,353

F-73 20 | Securities eligible for The following assets-side headings include securities eligible for stock exchange listing in the stock exchange listing amounts stated:

in € million 12.31.2003 12.31.2002 Bonds and other fixed-interest securities 82,705 78,072 of which: listed 74,984 70,786 Equity shares and other variable-yield securities 1,839 1,694 of which: listed 843 922 Participations 171 147 of which: listed 160 138 Participations in associated companies – 9 of which: listed – – Shares in related companies 65 84 of which: listed 65 83

F-74 21 | Fixed asset structure and movements

Property and Equipment

Cost of Additions Disposals Reclassifi- Write-ups Cumulative Book value Book value Depreciation acquisition/ cations depreciation at at and write- production and write- 12.31.2003 12.31.2002 downs in € million downs in 2003 Intangible fixed assets 35 7 0 – – 21 21 21 7 Land and buildings 822 114 184 10 0 297 465 470 21 Of which: used for own operations (669) (100) (120) (8) (0) (250) (407) (369) (18) Operating and office equipment 1,491 112 234 32 0 1,089 312 345 149 Other physical assets 7 12 4 – – 0 15 7 0 Leasing assets 6,740 1,597 1,540 – 0 2,399 4,398 4,407 901 Prepayments made 80 18 40 -42 – – 16 80 – Total 9,175 1,860 2,002 – 0 3,806 5,227 5,330 1,078

The depreciation on leasing assets is included in other operating expenses.

The Additions total includes € 22 million of earnings-neutral write-ups due to the setting aside of section 308.3 HGB effective January 1, 2003. The Disposals heading includes € 39 million transferred to the current assets of DZ BANK AG.

Financial asset structure and movements Net changes Book value at Book value at in € million 12.31.2003 12.31.2002 Bonds and other fixed-interest securities 7,311 31,901 24,590 Shares and other variable-yield securities -4,836 380 5,216 Participations -20 420 440 Participations in associated companies 71 251 180 Shares in related companies -81 824 905 Total 2,445 33,776 31,331

F-75 22 | Own shares At the accounting date, group companies held a total of 3,665,569 of our own registered unit shares repre- senting in total € 9,530,479.40 or 0.3311 percent of the DZ BANK Group’s share capital. All these own shares are held at DZ BANK AG.

Of this total, 200,000 shares had passed from the federal government to DG BANK AG on August 19, 1998 under the terms of section 2.2 of the DG BANK Transformation Act. This is equivalent to € 520,000.00 or 0.0181 percent of the share capital. DG BANK AG had also acquired a further 293,000 of its own shares on September 30, 1999 under the powers of a time-limited authority to acquire its own shares, approved by the general meeting held on June 15, 1999 and effective through October 31, 2000. This is equivalent to € 761,800.00 or 0.0265 percent of the company‘s share capital. Subsequently, DG BANK AG acquired a further 1,220,000 of its own unit shares on November 15, 1999. This is equivalent to € 3,172,000.00 or 0.1102 percent of the share capital.

On the strength of the resolution passed by the extraordinary general meeting held on August 16, 2001 to approve a time-limited authority, effective through January 31, 2003, permitting DZ BANK AG to acquire its own shares for purposes other than securities trading (section 71.1.8 AktG) up to an aggregate ceiling of 10 percent of the current share capital, DZ BANK AG acquired a further 5,082 of its own shares on December 28, 2001 equivalent to € 13,213.20 or 0.0005 percent of the share capital. This purchase was in connection with the partial consolidation of DZ BANK AG’s circle of shareholders following the merger.

On the basis of the aforementioned resolution DZ BANK AG in January 2002 additionally acquired 475,648 own shares equivalent to € 1,236,684.80 of the registered capital and a share of the registered capital of 0.0430 percent. In February 2002 DZ BANK AG acquired 536,772 own shares equivalent to € 1,395,607.20 of the registered capital and a share of the registered capital of 0.0485 percent. In March 2002 DZ BANK AG acquired 859,848 own shares equivalent to € 2,235,604.80 of the registered capital and a share of the registered capital of 0.0777 percent. In April 2002 DZ BANK AG acquired 75,219 own shares equivalent to € 195,569.40 of the registered capital and a share of the increased registered capital of 0.0068 percent. These purchases were effected in connection with the partial consolidation of DZ BANK AG’s circle of shareholders.

F-76 23 | Authorised capital The group’s subscribed capital consists of DZ BANK AG’s registered capital of € 2,878,427,240.00. The sub- scribed capital is divided into 1,107,087,400 registered shares each conveying a notional proportional enti- tlement in the share capital of € 2.60.

The general meeting held on August 16, 2001 authorized the Board of Managing Directors, with the consent of the Supervisory Board, to increase the share capital of DZ BANK AG by up to € 50 million in total by issu- ing shares against cash contributions or contributions in kind on one or more occasions through to July 31, 2006. Provided the Supervisory Board agrees, the Board of Managing Directors may exclude the right of existing shareholders to subscribe to either a capital increase against cash contributions or a capital increase against contributions in kind where the capital increase is intended to finance the issue of new staff shares, the acquisition of companies or equity stakes in companies, or to make available equity interests in the com- pany to underpin strategic partnerships. Furthermore the Board of Managing Directors is empowered, with the consent of the Supervisory Board, to exclude the right of existing shareholders to subscribe in relation to fractional amounts (“Authorized capital I“).

The general meeting also authorized the Board of Managing Directors, with the consent of the Supervisory Board, to increase the share capital of DZ BANK AG by up to € 100 million in total by issuing shares against cash contributions on one or more occasions through to July 31, 2006. The Board of Managing Directors may, with the consent of the Supervisory Board, exclude the right of existing shareholders to subscribe in relation to fractional amounts (“Authorized capital II“).

The Board of Managing Directors did not make use of these authorities during the year under report.

The changes in the group’s capital structure are shown in the Capital Structure and Movement statement.

24 | Shareholder disclosures The proportion of the share capital held by cooperative undertakings at the end of the financial year under report was approximately 92.9 percent. Cooperative undertakings include the cooperative societies, the co- operative central banks and other corporate entities and trading companies.

25 | Other assets The ‘Other assets’ heading primarily comprises valuation gains on trading transactions after the offset of realised losses (€ 1,168 million) and premiums for acquired option rights (€ 1,133 million).

F-77 26 | Tax deferrals and Deferred tax entitlements and provisions for deferred tax liabilities are shown for the valuation differences provisions for deferred between the commercial and the tax balance sheets in respect of the following balance-sheet headings: tax liabilities Deferred tax entitlements in € million 12.31.2003 12.31.2002 Assets-side positions -Tax-allowable loss carryovers 462 626 - Placements with, and loans and advances to, other banks 20 – - Loans and advances to non-bank customers 372 439 - Securities 25 30 -Participations/Shares in related companies 1 4 - Intangible fixed assets 13 3 - Property and equipment 3 3 - Other assets 5 2 Liabilities-side positions - Provisions 529 347 - Fund for general banking risk and building savings & loan guarantee fund 473 471 - Other liabilities 30 35 Total 1,933 1,960

Deferred tax liabilities in € million 12.31.2003 12.31.2002 Assets-side positions - Placements with, and loans and advances to, other banks 6 7 - Loan and advances to non-bank customers 5 6 - Securities 118 85 -Participations/Shares in related companies 114 54 - Intangible fixed assets 7 – - Property and equipment 33 45 - Other assets 2 1 Liabilities-side positions - Amounts owed to other depositors 6 5 - Provisions 4 6 - Other liabilities 6 7 Total 301 216

F-78 Deferred tax credits on unutilized tax-allowable loss carryovers are taken to the balance sheet when it appears probable that the company concerned will generate sufficient taxable profits in the future. DZ BANK AG and its subsidiaries and affiliates have claimed deferred tax assets on tax-allowable loss carryovers that will reduce their actual future tax expenses.

Thanks to the management action taken in the area of risk provisioning and to limit credit risks, coupled with the group’s cost-cutting drive and the synergy benefits that will flow from the merger, and assuming an improvement in the wider economic framework, the group is confident of achieving a level of sustained taxable earnings that will allow it to realize the tax benefits of its brought-forward losses. This process will also be assisted by initiatives to extend the circle of the group’s tax unity.

Under the terms of DRS 10, deferred tax entitlements have not been shown in respect of € 61 million (2002: 63 million) of tax-allowable loss carryovers.

27 | Accruals and deferrals in € million 12.31.2003 12.31.2002 Assets side 903 766 - Discounts on payables 531 402 - Premiums on receivables 125 110 - Other deferred expenses and accrued income 247 254 Liabilities side 2,661 2,460 - Discounts on receivables 244 268 - Premiums on issued bonds 88 108 - Deferred proceeds from sales of leasing receivables 1,422 1,632 - Other deferred income and accrued expenses 907 452

28 | Other liabilities This heading includes most importantly deferred option premiums received totaling € 3,007 million.

29 | Provisions The aggregate deferred tax provisions pursuant to sections 274.1 and 306 HGB in conjunction with DRS 10 amounted to € 301 million (2002: € 216 million) and correspond with the anticipated tax liability arising from the differences between the fiscal and commercial income statements based on the applicable national tax rates.

Provisions relating to leasing business totaled € 95 million (PY: € 99 million).

F-79 30 | Actuarial reserves in € million 12.31.2003 12.31.2002 Actuarial reserves 31,377 30,056 - Premium transfers 997 1,009 - Level premium reserve 23,845 22,812 - Outstanding claims reserve 3,327 3,096 - Reserve for refund of premiums (bonus fund) 2,489 2,517 - Equalization fund and similar reserves 671 574 - Other actuarial reserves 48 48 Life-assurance-related actuarial reserves on which the policy holders bear the investment risk 1,163 782 Level premium reserve 1,163 782 Total 32,540 30,838

The actuarial reserves represent the insurer’s obligations to policy holders and qualifying claimants and are backed by investments on the assets side of the balance sheet.

31 | Other insurance-specific in € million 12.31.2003 12.31.2002 liabilities Custody liabilities from reinsurance business 763 731 Payable on directly written insurance business 2,523 2,491 - to insurance customers 2,445 2,435 - to insurance intermediaries 78 56 Settlement payables on reinsurance business 311 143 Other liabilities 783 776 Total 4,380 4,141

The ‘Other liabilities of insurance companies’ heading comprises mainly liabilities arising from insurance transactions and payable to policy holders, intermediaries and reinsurance providers. The liabilities to policyholders essentially include guaranteed with-profits bonuses and premium reserve accounts for with- profit life assurance policies.

F-80 32 | Participatory capital The total volume of participatory capital recognized as qualifying (liable) capital within the definition of section 10.5 of the German Banking Act (KWG) was € 2,385 million.

Participation certificate holders’ entitlements to repayment of their capital are subordinate to the rights of other creditors. DZ BANK AG has issued the following series of bearer participation certificates:

Year of issue Nominal amount Interest rate Due in € million in percent 1984 133 8.50 2011 1987 102 7.25 2006 1989 42 7.50 2009 1993 26 7.00 2008 1994 36 6.75 2006 1994 26 6.25 2005 1994 26 7.25 2004 1995 64 7.50 2006 1996 51 7.50 2006 1996 41 7.25 2007 1997 9 6.50 2004 1997 38 6.75 2008 1998 1 3.27 2004 1998 22 6.50 2010 1999 160 3.55 1 2009 1999 1 7.00 2010 2000 60 6.25 2009 2000 1 2.75 2006 2001 100 5.50 2008 2001 61 7.60 2006 2002 28 6.50 2 2011

1 tied to market rate: H1: 4.29 percent, H2: 3.55 percent 2 Distribution in respect of FY 2002 is scheduled to be paid together with 2003 payout on July 1, 2004.

The issue terms of the 1984, 1987, 1998 (maturing through 2004), and 2000 participatory capital tranches (maturing through 2006) make the eventual distribution dependent on the dividend declared.

F-81 Other issues by group companies:

Year of issue Nominal amount Interest rate Due in € millions in percent 1993 26 7.25 2004 1993 51 7.25 2009 1993 51 7.00 2014 1994 26 6.50 2007 1994 38 6.75 2004 1994 9 7.50 2004 1995 15 7.75 2005 1995 51 = dividend (min. 7.00) 2011 1998 51 6.27 2007 1998 6 6.00 2008 2000 75 7.59 2009 2001 11 6.50 2011 2002 11 6.50 2012 2003 11 5.25 2013

Registered participation certificates with an aggregate nominal volume of € 1,051 million have been issued by DZ BANK Group companies. This total is composed of 440 separate issues with original terms of between 6 and 30 years and bearing interest of between 5.38 per cent and 7.63 per cent.

Servicing the interest on the participation certificate stock involved expense of € 171 million in 2003 (2002: € 172 million).

Deferred interest of € 169 million payable after the end of 2003 is included in the “Participatory capital“ total.

F-82 33 | Subordinated liabilities The subordinated borrowings do not involve any early redemption obligation on the part of the issuers. The rights arising from these liabilities (including entitlement to interest) are secondary to the claims of all the issuer’s other, non-subordinated creditors in the event of bankruptcy or liquidation.

There is no agreement or intention to convert these funds to capital or another form of debt.

Subordinated liabilities are mainly issued in the form of fixed-interest securities, variable-rate securities and reverse floaters.

This heading does not include any single item which exceeds 10 per cent of the total value of the subordi- nated liabilities.

The interest expense on the group’s subordinated liabilities amounted to € 189 million (2002: € 234 million).

Deferred interest totaling € 95 million (2002: € 99 million) payable in a later period is included in the ‘Sub- ordinated liabilities’ heading.

34 | Off-balance-sheet The following table shows the breakdown of the DZ BANK Group’s off-balance-sheet futures transactions futures business by by product area: product structure

F-83 Nominal amount Replacement costs Residual term Total in € million ≤1 year >1 – 5 years >5 years 12.31.2003 12.31.2002 12.31.2003 12.31.2002 Interest-based transactions 210,315 277,914 205,002 693,231 634,294 13,583 13,391 OTC products - FRAs 8,189 50 – 8,239 16,152 2 8 - Interest swaps (same currency) 157,516 224,171 178,375 560,062 478,138 12,772 12,754 - Interest options - calls 9,559 21,977 10,834 42,370 37,767 805 626 - Interest options – puts 15,448 30,701 15,777 61,926 45,877 – – - Other interest contracts 64 – 16 80 694 4 3 Exchange-traded products - Interest futures 19,038 1,015 – 20,053 55,261 – – - Interest options 501 – – 501 405 – – Forex-based transactions 22,132 8,793 3,685 34,610 42,509 1,016 1,003 OTC products -Forward exchange transactions 16,610 1,021 87 17,718 19,732 618 376 - Cross currency swaps 2,813 7,439 3,590 13,842 18,159 343 608 -Forex options – calls 1,391 166 8 1,565 2,610 55 19 -Forex options – puts 1,300 167 – 1,467 2,007 – – Exchange-traded products -Forex futures 18 – – 18 1 – – Equity and index-based transactions 2,421 1,500 2,259 6,180 2,199 216 62 OTC products - Equity and index options - calls 56 1,194 1,941 3,191 327 216 62 - Equity and index options – puts 307 277 318 902 219 – – Exchange-traded products - Equity and index futures 907 – – 907 933 – – - Equity and index options 1,151 29 – 1,180 720 – – Other transactions 25 – – 25 4 5 – - Precious metals transactions 25 – – 25 4 5 – Credit derivatives 868 5,454 1,281 7,603 5,276 125 58 Credit Default Swaps -DZBANK as hedge beneficiary 217 2,906 1,137 4,260 2,735 115 34 -DZBANK as hedge provider 608 2,499 144 3,251 2,449 7 20 Total return swaps -DZBANK as hedge beneficiary 43 19 – 62 62 3 4 -DZBANK as hedge provider – 30 – 30 30 0 – Total 235,761 293,661 212,227 741,649 684,282 14,945 14,514

A substantial proportion of the transactions listed here were entered into to hedge interest rate, exchange rate or market price fluctuations. The bulk of these transactions related to trading activities.

F-84 35 | Off-balance-sheet The following table shows the breakdown by counterparty: futures business by counterparties structure Replacement costs in € million 12.31.2003 12.31.2002 OECD governments – 16 Banks in OECD countries 13,717 13,981 Financial services institutions in OECD countries 0 217 Other companies and private individuals 1,228 297 Banks in non-OECD countries 0 3 Total 14,945 14,514

F-85 C. Notes to the Income Statement

36 | Breakdown of income by The origin of the sum total of interest income, current income from equity shares and other variable-yield geographical markets securities, participations and shares in related companies, commission income, net proprietary trading income and other operating income is as follows:

in percent 2003 2002 Germany 83.76 81.95 International 16.24 18.05

37 | Commission income The surplus of commission income over commission expense resulted from the following services: and expense in € million 2003 2002 Securities business 738 764 Lending and guarantees business 17 30 International payments business 115 124 Asset management 15 12 Other 116 115 Building savings & loan business -228 -192 Total 773 853

38 | Net income from The group’s surplus on proprietary dealing activities derived from the following risk classes: financial transactions in € million 2003 2002 Interest risk 281 216 Share price risk 15 -7 Currency risk 39 5 Other risks 0 2 Total 335 216

F-86 39 | Income from insurance in € million 2003 2002 operations Earned net premiums 6,811 6,262 - Property and casualty insurance 3,328 3,074 - Life and health insurance 3,483 3,188 Income from investments 2,415 3,036 Other actuarial income 132 262 Other non-actuarial income 115 153 Total 9,473 9,713

40 | Expenses from insurance in € million 2003 2002 operations Claims 4,922 4,649 - Property and casualty insurance 2,388 2,479 - Life and health insurance 2,534 2,170 Change in actuarial net reserves 1,592 1,562 - Property and casualty insurance 121 107 - Life and health insurance 1,471 1,455 Premium refunds (bonus fund) 334 279 - with-profits bonuses 320 271 - non-profit-related bonuses 14 8 Operating expenses 1,327 1,233 Investment expenses 548 1,061 Other actuarial expenses 310 124 Other non-actuarial expenses 258 214 Total 9,291 9,122

The group’s final result from insurance operations was € 182 million. A more detailed comparison with the previous year is not informative since the prior-year outcome (€ 591 million) was distorted by changes in the group’s structure and the resulting realisation of substantial disposal gains.

F-87 41 | Administration and Services to third parties relate most significantly to asset management and securities custody administration agency services provided and trust assets administration. for third parties

42 | Other operating income The ‘Other operating income’ heading in the consolidated financial statements includes most importantly and expense current income from leasing business, but also income from sales of fixed assets, from the writing back of provisions, rent revenues, income from the VISA card operations, revenues from organized seminars and publications, fees for non-banking-related services, and refunds of tax.

The group’s ‘Other operating expenses’ resulted primarily from sundry leasing expenses and depreciation on leased assets. The heading also includes losses on sales of fixed assets and depreciation on sundry assets, non-personnel costs in relation to buildings not used for banking, expenses from the VISA card operations, and ex gratia payments.

43 | Exceptional income The ‘Exceptional expenses’ heading essentially includes personnel and non-personnel restructuring and expense expenses, costs from ongoing early retirement obligations under the social plan currently in force, and expenses arising from the spin-off of the Payments Handling division into Transaktionsinstitut für Zahlungs- verkehrsdienstleistungen AG, Frankfurt am Main. The reported exceptional result includes a tax effect of €31million (2002: € 89 million).

F-88 44 | Taxes on income The ‘Taxes on income’ heading encompasses the current tax liabilities on income and earnings plus the positive value of deferred taxation:

Tax expense in € million 2003 2002 Taxes on actual income 228 50 of which: relating to result from ordinary operations 259 139 of which: relating to exceptional result -31 -89 Balance of deferred tax credits and debits 86 -1,368 of which: relating to result from ordinary operations 86 -1,368 Final taxes on income 314 -1,318

During the year under report deferred taxes totaling € 26 million (2002: € 92 million) were taken to the balance sheet and booked against shareholders´ equitiy.

The following reconciliation statement shows the relationship between the reported tax outcome and the tax outcome calculated using the currently applicable German tax rate:

Reconciliation in € million 2003 2002 Net income for year before taxes on income 696 -967 Group effective tax rate 40.143% 40.143% Notional income tax expense 279 -388 Tax effects: -Tax mitigation from tax-exempt income streams -166 -818 - Increase in tax liability from non-deductible expenses 195 67 -Variances in tax rates -28 -16 -Tax in respect of earlier years 58 -49 - Effects from lagacy differences 5 -465 - Miscellaneous -29 351 Final taxes on income 314 -1,318

Under German corporation tax law, the uniform tax rate applicable to corporations during the year under report was 26.5 percent, reverting to 25 percent as from 2004. The applied basis for calculating the deferred tax effects in the 2003 financial statements was an effective corporation tax rate of 26.375 percent (includ- ing the solidarity surcharge) for German companies plus an effective municipal trade tax of 13.768 percent for DZ BANK and its tax-integrated companies.

F-89 D. Other information

45 | Other financial The total amount of the group’s other financial obligations is € 875 million (2002: € 762 million). The com- obligations mitments essentially relate to rental contracts, investment projects and unsettled transactions.

This amount does not include liabilities of € 7 million from capital shares of cooperative societies (2002: € 8 million).

DZ BANK AG has also indemnified the protection scheme operated by the Federal Association of German Cooperative Banks (BVR) in respect of any obligations incurred by the guarantee fund in relation to Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft, VR DISKONTBANK GmbH, DVB Bank Aktien- gesellschaft, or Frankfurt Bukarest Bank AG.

Furthermore, DG BANK AG has given transfer guarantee declarations to domestic companies and public institutions in respect of certain deposits at its branches in Great Britain and the USA for the event that the branches are prevented by national decision from discharging their repayment obligations.

46 | Placing and underwriting As last year, no claims have been made against the companies of the DZ BANK Group under guarantees obligations given to issuers over the placement or underwriting of financial instruments.

47 | Declaration of backing In respect of its directly and indirectly held equity interests in banks, financial services providers, finance companies and companies providing banking-related ancillary services and which are listed in DZ BANK AG’s List of Shareholdings and identified therein as falling within the ambit of this declaration of responsibility, DZ BANK AG will ensure the ability of these companies to fulfill their contractual obligations in proportion to its shareholding and excluding political risk. During the year under report, DZ BANK AG has also issued a subordinated declaration of responsibility in respect of DZ BANK Capital Funding LLC I, Wilmington, USA.

F-90 48 | Employees Grouped by gender and time commitment, the average number of persons employed in 2003 was as follows:

2003 2002 Female staff 11,395 11,431 of which: Full-time employees 8,633 8,747 Part-time employees 2,762 2,684 Male staff 13,918 13,816 of which: Full-time employees 13,549 13,334 Part-time employees 369 482 Total employees 25,313 25,247

49 | Cover statement for The following cover is in place for the total value of DZ BANK AG bonds in circulation (including registered DZ BANK AG bonds):

in € million 12.31.2003 12.31.2002 Regular cover 24,818 22,421 Loans and advances - to banks 9,426 10,329 - to non-bank customers 877 1,359 Bonds and other fixed-interest securities 14,440 10,596 Equalization claims 75 137 Cover requirement 22,129 19,653 Issued, covered - bearer bonds 8,434 8,580 - bonds registered to banks 5,936 3,438 - bonds registered to non-bank customers 7,007 7,152 Currently unissued bonds (held in treasury) 640 339 Registered bonds given over as collateral - to banks 15 8 - to non-bank customers 97 136 Excess cover 2,689 2,768

F-91 50 | Cover assets trustees The trustees are appointed by the German financial services regulator (Bundesanstalt für Finanzdienst- leistungsaufsicht, BAFin) and their statutory duty is to ensure that the issuance, administration and collateralization of DZ BANK AG’s covered bonds comply with the legal requirements and the provisions of the bank’s own statutes as well as the bonds’ terms and conditions.

Trustee: Deputy Trustee:

Dr Ekkehard Buchwaldt Dr Dieter Eschke Presiding Judge, Superior Provincial Court Presiding Judge, Superior Provincial Court Frankfurt am Main, (retd.) Frankfurt am Main, (retd.)

51 | Cover statement for the The liabilities listed below are collateralized as follows: mortgage bank’s mort- gage and local authority Mortgage pfandbriefe Public-sector pfandbriefe lending business in € million 12.31.2003 12.31.2002 12.31.2003 12.31.2002 Regular cover 19.540 19,419 33,167 37,018 Mortgage loans - to other banks 156 162 – 1 1 - to non-bank customers 19,329 19,165 63 11402 State-sector loans - to other banks – – 480 609 - to non-bank customers – – 22,761 24,722 Securities - of other banks – – 9,863 11,284 Charges over bank-owned land 55 92 – – Substitute cover – 13 – 1 Other claims on banks – 13 – 1 Total cover 19,540 19,432 33,167 37,019 Cover requirement 17,814 17,668 31,413 34,156 Pfandbriefe requiring cover 17,814 17,668 31,413 34,156 Excess cover 1,726 1,764 1,754 2,863

1 Subject to state-sector guarantees

F-92 52 | Information on leasing The composition of the leasing business is essentially as follows: business in € million 12.31.2003 12.31.2002 Leasing assets 4,398 4,407 Deposits from other banks 928 904 Amounts owed to non-bank customers 160 195 Other liabilities 200 198 Accrued expenses and deferred income from leasing business 1,422 1,632 Provisions 95 99 Current income from leasing business 1,878 1,810 Depreciation on leasing assets 901 913 Other expenses from leasing business 785 715

F-93 53 | Changes in the business Overview of the changes in the number of existing (allocated and unallocated) save-to-build contracts and book of Bausparkasse savings balances Schwäbisch Hall Loan not allocated Loan allocated Total Number of Cumulative Number of Cumulative Number of Cumulative Cumulative savings target in € million contracts savings target contracts savings target contracts savings target Position at end of previous year 5,074,738 121,047 2,036,130 44,487 7,110,868 165,534 Additions during year through: a) New business (activated contracts) 1 1,123,696 27,256 – – 1,123,696 27,256 b) Transfers 27,077 607 5,327 162 32,404 769 c) Loan not requested or revoked 5,793 147 – – 5,793 147 d) Splits 118,937 – 711 – 119,648 – e) Loan acceptances – – 481,295 9,209 481,295 9,209 f) Other 181,830 4,358 – – 181,830 4,358 Total 1,457,333 32,368 487,333 9,371 1,944,666 41,739 Retirements during year through: a) Loan acceptances 481,295 9,209 – – 481,295 9,209 b) Target reductions – 1,063 – – – 1,063 c) Cancellations 334,901 6,276 298,089 4,858 632,990 11,134 d) Assignments 27,077 607 5,327 162 32,404 769 e) Combinations 1 130,325 – 52 – 130,377 – f) Contract maturities – – 369,224 7,710 369,224 7,710 g) Loan not requested or revoked – – 5,793 147 5,793 147 h) Other 181,830 4,358 – – 181,830 4,358 Total 1,155,428 21,513 678,485 12,877 1,833,913 34,390 Net additions/retirements 301,905 10,855 -191,152 -3,506 110,753 7,349 Position at end of year 5,376,643 131,902 1,844,978 40,981 7,221,621 172,883

1 includes target increases Contracts not activated:

Number of Cumulative contracts savings target in € million a) Accounts opened prior to 01.01.2003 33,993 1,186 b) Accounts opened during year 291,195 8,034

For information on changes at different levels of the tariff structure, please refer to the annual report of Bausparkasse Schwäbisch Hall.

F-94 54 | Change in the loan A. Additions in € million allocation volume I. Brought-forward from previous year (surplus) of Bausparkasse Not yet advanced loans 14,519 Schwäbisch Hall II. Additions during the year a) Savings inputs (including credited house building premiums) 6,864 b) Capital repayments (including credited house building premiums) 1 3,186 c) Interest on save-to-build deposits 687 d) Building savings & loan guarantee fund 2 30 Total 25,286

B. Withdrawals I. Withdrawals during the year a) Allocated loans paid out aa) Save-to-build deposits 5,010 ab) Construction loans 1,975 b) Repayment of save-to-build deposits on unallocated save-to-build contracts 953 c) Balancing of reduced capital repayments through term extension (debt reduction) 2 II. Surplus of additions (not yet advanced volume) at end of financial year 3 17,346 Total 25,286

1 Capital repayments are those portions of installments used solely for loan redemption. 2 The additional funds allocation to the building savings & loan guarantee fund at the group level was the minimum statutory endowment of € 3 million. 3 The additions surplus includes inter alia: a) the not yet returned save-to-build deposits of savers who have been allocated a loan € 109 million b) the not yet paid out loan components of allocated saver’s building loans € 2,595 million

F-95 55 | Statutory bodies The total remuneration for members of the Board of Managing Directors of DZ BANK AG during 2003 amounted to € 5,647,000 (2002: € 5,191,000) and € 428,000 for members of the Supervisory Board (2002: € 462,000).

Total emoluments of € 7,343,000 were paid to former members of the Board of Managing Directors or their surviving dependents (2002: € 6,866,000), and pension reserves of € 72,743,000 (2002: € 67,236,000) were endowed to their benefit.

Board of Managing Directors DZ BANK AG

Dr Ulrich Brixner Uwe E. Flach (Chairman) (Deputy Chairman, to December 31, 2003)

Peter Dieckmann Dr Thomas Duhnkrack (to December 31, 2003) (from January 1, 2003)

Heinz Hilgert Wolfgang Kirsch

Albrecht Merz Dietrich Voigtländer

F-96 Supervisory Board DZ BANK AG

Dr Christopher Pleister Chairman President Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V.

Helga Preußer Rolf Hildner First Deputy Chairwoman Second Deputy Chairman Employee Chairman of the Board of Managing Directors DZ BANK AG Wiesbadener Volksbank eG Deutsche Zentral-Genossenschaftsbank

Members

Wolfgang Apitzsch Rüdiger Beins Attorney at law Employee DZ BANK AG Deutsche Zentral-Genossenschaftsbank

Werner Böhnke Gerhard Bramlage Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors WGZ-Bank Emsländische Volksbank eG Westdeutsche Genossenschafts-Zentralbank eG

Carl-Christian Ehlers Dipl.-Kfm. Gerhard Engler Chairman of the Board of Managing Directors Bank Director (retd.) Kieler Volksbank eG Volksbank Müllheim eG

Helmut Gottschalk Michael Groll Speaker of the Board of Managing Directors Management Employee Volksbank Herrenberg-Rottenburg eG DZ BANK AG (from May 28, 2003) Deutsche Zentral-Genossenschaftsbank

F-97 Siegfried Hägele Walter Kaufmann Employee Secretary VR Kreditwerk Hamburg-Schwäbisch Hall AG ver.di United Services Trade Union

Sigmar Kleinert Klaus Lambert Employee President & Chairman of the Board of DZ BANK AG Managing Directors Deutsche Zentral-Genossenschaftsbank Genossenschaftsverband Frankfurt e.V. Hessen/Rheinland-Pfalz/Saarland/Thüringen

Dr Rainer Märklin Adolf Rückl Bank Director retd. Operations Manager Volksbank Reutlingen eG Schwäbisch Hall Facility Management GmbH (to May 28, 2003)

Gudrun Schmidt Bernhard Sorge Regional Group Director Member of the Board of Managing Directors ver.di United Services Trade Union Raiffeisen-Volksbank Grafing-Ebersberg eG

Winfried Willer Dr h. c. Uwe Zimpelmann Employee Member of the Board of Managing Directors VR Kreditwerk Hamburg-Schwäbisch Hall AG Landwirtschaftliche Rentenbank

F-98 56 | Appointments held by Bank officers and directors served on the supervisory boards of the following major German corporations at members of the Board of December 31, 2003 (group companies are identified by (*)): Managing Directors and employees on the supervisory boards of major corporations

Members of the Board of Managing Directors and employees of DZ BANK AG:

Dr Ulrich Brixner Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall, (Chairman) Deputy Chairman of the Supervisory Board (*)

Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft, Hamburg, Chairman of the Supervisory Board (*)

R+V Versicherung AG, Wiesbaden, Deputy Chairman of the Supervisory Board (*)

Südzucker AG, Mannheim/Ochsenfurt, Member of the Supervisory Board

Uwe E. Flach Andreae-Noris-Zahn AG, Frankfurt am Main, (Deputy Chairman, Member of the Supervisory Board to December 31, 2003) Deutsche Börse AG, Frankfurt am Main, Member of the Supervisory Board

STADA-ARZNEIMITTEL AG, Bad Vilbel, Member of the Supervisory Board

F-99 Dr Thomas Duhnkrack DVB Bank Aktiengesellschaft, Frankfurt am Main, Chairman of the Supervisory Board (*)

VR-LEASING Aktiengesellschaft, Eschborn, Chairman of the Supervisory Board (*)

Heinz Hilgert norisbank Aktiengesellschaft, Nürnberg, Chairman of the Supervisory Board (*)

ReiseBank Aktiengesellschaft, Frankfurt am Main, Chairman of the Supervisory Board (*)

R+V Versicherung AG, Wiesbaden, Member of the Supervisory Board (*)

SÜDWESTBANK Aktiengesellschaft, Stuttgart, Deputy Chairman of the Supervisory Board (*)

Union Asset Management Holding AG, Frankfurt am Main, Chairman of the Supervisory Board (*)

F-100 Wolfgang Kirsch BAG Bankaktiengesellschaft, Hamm, Member of the Supervisory Board

Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall, Member of the Supervisory Board (*)

Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft, Hamburg, Member of the Supervisory Board (*)

Deutsche WertpapierService Bank AG, Frankfurt am Main, Member of the Supervisory Board (*)

DVB Bank Aktiengesellschaft, Frankfurt am Main, Member of the Supervisory Board (*)

EDEKABANK AG, Hamburg, Member of the Supervisory Board

norisbank Aktiengesellschaft, Nürnberg, Deputy Chairman of the Supervisory Board (*)

Südfleisch Holding Aktiengesellschaft, Munich, Member of the Supervisory Board

VR-LEASING Aktiengesellschaft, Eschborn, Member of the Supervisory Board (*)

Albrecht Merz BayWa Aktiengesellschaft, Munich, Member of the Supervisory Board

R+V Allgemeine Versicherung AG, Wiesbaden, Member of the Supervisory Board (*)

SÜDWESTBANK Aktiengesellschaft, Stuttgart, Chairman of the Supervisory Board (*)

Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main, Member of the Supervisory Board (*)

F-101 Dietrich Voigtländer Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall, Member of the Supervisory Board (*)

Deutsche WertpapierService Bank AG, Frankfurt am Main, Chairman of the Supervisory Board (*)

FIDUCIA IT AG, Karlsruhe, Member of the Supervisory Board

Karlsruher Hinterbliebenenkasse Aktiengesellschaft, Lebens- versicherung für Beamte und Angestellte der öffentlichen Verwaltung, Karlsruhe, Deputy Chairman of the Supervisory Board

Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main, Chairman of the Supervisory Board (*)

VR Kreditwerk Hamburg-Schwäbisch Hall AG, Hamburg und Schwäbisch Hall, Member of the Supervisory Board (*)

Employees of DZ BANK AG

Ulrich Dexheimer Raiffeisen-Warenzentrale Kurhessen-Thüringen GmbH, Kassel, Member of the Supervisory Board

Dr Wilhelm Esselmann LOHMANN & CO. AG, Visbek, Member of the Supervisory Board

NFZ Norddeutsche Fleischzentrale GmbH, Hamburg, Member of the Supervisory Board

RHG Nord Raiffeisen Hauptgenossenschaft Nord AG, Kiel, Member of the Supervisory Board

Frank Westhoff Stuttgarter Volksbank AG, Stuttgart, Member of the Supervisory Board

F-102 Board members and employees of other DZ BANK Group companies

Dr Alexander Erdland Deutsche Genossenschafts-Hypothekenbank Chairman of the Board of Managing Aktiengesellschaft, Hamburg, Directors Member of the Supervisory Board (*) (Bausparkasse Schwäbisch Hall AG) WL-BANK WESTFÄLISCHE LANDSCHAFT Bodenkreditbank AG, Münster, Member of the Supervisory Board

Dr Matthias Metz GWG Gesellschaft für Wohnungs- und Gewerbebau Member of the Board of Managing Baden-Württemberg AG, Stuttgart, Directors Member of the Supervisory Board (*) (Bausparkasse Schwäbisch Hall AG) VR Kreditwerk Hamburg-Schwäbisch Hall AG, Hamburg und Schwäbisch Hall, Chairman of the Supervisory Board (*)

Dr Wolf Schumacher M.M. Warburg & CO Hypothekenbank AG, Hamburg, Speaker of the Board of Managing Member of the Supervisory Board Directors (Deutsche Genossenschafts-Hypotheken- bank Aktiengesellschaft)

Friedrich Piaskowski Gillardon AG financial software, Bretten, Member of the Board of Managing Chairman of the Supervisory Board Directors (Deutsche Genossenschafts-Hypotheken- VR Kreditwerk Hamburg-Schwäbisch Hall AG, Hamburg bank Aktiengesellschaft) und Schwäbisch Hall, Deputy Chairman of the Supervisory Board(*)

F-103 Wolfgang F. Driese CashExpress Gesellschaft für Finanz- und Reisedienst- Chairman of the Board of Managing leistungen mbH, Frankfurt am Main, Directors Deputy Chairman of the Supervisory Board (*) (DVB Bank Aktiengesellschaft) KRAVAG-SACH VVaG, Hamburg, Member of the Supervisory Board

ReiseBank Aktiengesellschaft, Frankfurt am Main, Deputy Chairman of the Supervisory Board (*)

Dagfinn Lunde CashExpress Gesellschaft für Finanz- und Reisedienst- Member of the Board of Managing leistungen mbH, Frankfurt am Main, Directors Member of the Supervisory Board (*) (to December 31, (DVB Bank Aktiengesellschaft) 2003)

ReiseBank Aktiengesellschaft, Frankfurt am Main, Member of the Supervisory Board (*) (to December 31, 2003)

Dr Jürgen Förterer Hermes Kreditversicherungs-AG, Cologne, Chairman of the Board of Managing Member of the Supervisory Board Directors (R+V Versicherung AG) KRAVAG-LOGISTIC Versicherungs-AG, Hamburg, Chairman of the Supervisory Board (*)

R+V Allgemeine Versicherung AG, Wiesbaden, Chairman of the Supervisory Board (*)

R+V Krankenversicherung AG, Wiesbaden, Chairman of the Supervisory Board (*)

R+V Lebensversicherung AG, Wiesbaden, Chairman of the Supervisory Board (*)

R+V Pensionsfonds AG, Wiesbaden, Chairman of the Supervisory Board (*)

R+V Rechtsschutzversicherung AG, Wiesbaden, Chairman of the Supervisory Board (*)

F-104 Hans-Christian Marschler R+V Krankenversicherung AG, Wiesbaden, Member of the Board of Managing Member of the Supervisory Board (*) Directors (R+V Versicherung AG) R+V Rechtsschutzversicherung AG, Wiesbaden, Deputy Chairman of the Supervisory Board (*)

Bernhard Meyer KRAVAG-ALLGEMEINE Versicherungs-AG, Hamburg, Chairman of the Board of Managing Member of the Supervisory Board (*) Directors (R+V Allgemeine Versicherung AG) KRAVAG-LOGISTIC Versicherungs-AG, Hamburg, Member of the Supervisory Board (*)

Securitas Sicherheitsdienste Holding GmbH, Düsseldorf, Member of the Supervisory Board

Dr Manfred Mücke DVB Bank Aktiengesellschaft, Frankfurt am Main, Chairman of the Board of Managing Member of the Supervisory Board (*) Directors (KRAVAG-SACH VVaG) KRAVAG-ALLGEMEINE Versicherungs-AG, Hamburg, Chairman of the Supervisory Board (*)

KRAVAG Holding AG, Hamburg, Member of the Supervisory Board

F-105 Rainer Neumann GWG Gesellschaft für Wohnungs- und Gewerbebau Member of the Board of Managing Baden-Württemberg AG, Stuttgart, Directors Member of the Supervisory Board (*) (R+V Versicherung AG) KRAVAG-LOGISTIC Versicherungs-AG, Hamburg, Member of the Supervisory Board (*)

Paul Hartmann AG, Heidenheim, Member of the Supervisory Board

Protektor Versicherung AG, Mannheim, Member of the Supervisory Board

Hans-Dieter Schnorrenberg R+V Pensionsfonds AG, Wiesbaden, Member of the Board of Managing Member of the Supervisory Board (*) Directors (R+V Versicherung AG)

Peter Weiler R+V Pensionsfonds AG, Wiesbaden, Member of the Board of Managing Member of the Supervisory Board (*) Directors (R+V Versicherung AG)

Dr Rüdiger Ginsberg DIFA Deutsche Immobilien Fonds AG, Hamburg, Speaker of the Board of Managing Chairman of the Supervisory Board (*) Directors (Union Asset Management Holding AG)

Ulrich Köhne Union Investment Service Bank AG, Frankfurt am Main, Member of the Board of Managing Chairman of the Supervisory Board (*) Directors (Union Asset Management Holding AG)

F-106 Hans Joachim Reinke Union Investment Service Bank AG, Frankfurt am Main, Managing Director Member of the Supervisory Board (*) (Union Investment Privatfonds GmbH)

Oliver Best Union Investment Service Bank AG, Frankfurt am Main, Employee Member of the Supervisory Board (*) (Union Asset Management Holding AG)

Reinhard Gödel KRAVAG-LOGISTIC Versicherungs-AG, Hamburg, Chairman of the Board of Managing Member of the Supervisory Board (*) Directors (VR-LEASING Aktiengesellschaft)

F-107 Frankfurt am Main, March 9, 2004

DZ BANK AG Deutsche Zentral-Genossenschaftsbank

Board of Managing Directors

Dr Brixner Dr Duhnkrack Hilgert

Kirsch Merz Voigtländer

F-108 Independent audit opinion

Based on the conclusive findings of our audit, we have issued the following unqualified audit opinion dated March 15, 2004:

“We have audited the consolidated financial statements and the Group management report prepared by DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, for the financial year from 1 January to 31 December 2003. The preparation of the consolidated financial statements and the Group management report in compliance with German commercial law is the responsibility of the Company’s Board of Managing Directors. Our responsibility is to express an opinion on these consolidated fi- nancial statements and the Group management report based on our audit.

We conducted our audit in accordance with section 317 HGB and in compliance with the generally accepted audit principles defined by the Institut der Wirtschaftsprüfer (IDW). These standards require that we plan and perform the audit such that misstate- ments materially affecting the presentation of the net assets, financial position and results of operations in the consolidated finan- cial statements in accordance with German principles of proper accounting and in the Group management report are detected with reasonable assurance. Knowledge of the business activities of the Company and the economic and legal environment of the Company and evaluations of possible misstatements are taken into account in the determination of audit procedures. The effec- tiveness of the internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Group management report are examined primarily on a test basis within the framework of the audit. An audit includes assessing the annual financial statements of the companies included in consolidation, the determination of the companies to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the company’s Board of Manag- ing Directors, as well as evaluating the overall presentation of the consolidated financial statements and the Group management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion the consolidated financial statements give a fair and true view of the net assets, financial position and results of operations of the Group in accordance with German principles of proper accounting. On the whole the Group management report provides a suitable understanding of the Group’s position and suitably presents the risks of future development.”

Stuttgart, March 15, 2004 Frankfurt am Main, March 15, 2004

Ernst&Young AG Deloitte&Touche GmbH Wirtschaftsprüfungsgesellschaft Wirtschaftsprüfungsgesellschaft

(Müller-Tronnier) (Prof. Dr Caduff) (Prof. Dr Kläs) (Apweiler) Wirtschaftsprüfer Wirtschaftsprüfer Wirtschaftsprüfer Wirtschaftsprüfer

F-109 Advisory Committees of DZ BANK AG

Members of the Baden-Württemberg Wilfried Freiherr von Enzberg (to 02/2003) Speaker of the Board of Managing Directors Advisory Committee of DZ BANK AG Volksbank Donau-Neckar eG

Chairman: Heinz Frankenhauser Willy Köhler Speaker of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Nagoldtal eG Volksbank Rhein-Neckar eG Horst Gauggel Deputy Chairman: Member of the Board of Managing Directors Hans-Georg Leute Raiffeisenbank Donau-Iller eG Chairman of the Board of Managing Directors Volksbank Tübingen eG Dr Roman Glaser Chairman of the Board of Managing Directors Dr Peter Aubin Volksbank Baden-Baden-Rastatt eG Speaker of the Board of Managing Directors Volksbank Göppingen eG Dr Wolfgang Heinle Chairman of the Board of Managing Directors Manfred Basler Volksbank Kraichgau eG Chairman of the Board of Managing Directors Volksbank Lahr eG Horst Heller Chairman of the Board of Managing Directors Rainer Bauer Volksbank Hochrhein eG Chairman of the Board of Managing Directors Volksbank Ludwigsburg eG Claus Hepp Member of the Board of Managing Directors Winfried Baumann (from 03/2003) Volksbank Allgäu-West eG Speaker of the Board of Managing Directors Volksbank Donau-Neckar eG Dr Albrecht Hermann (to 06/2003) Speaker of the Board of Managing Directors Richard Bruder Filderbank Stuttgart eG Chairman of the Board of Managing Directors Volksbank Offenburg eG Ludwig Hofmann Member of the Board of Managing Directors Arnhold Budick Volksbank Möckmühl-Neuenstadt eG Chairman of the Board of Managing Directors Volksbank Schwarzwald-Neckar eG Klaus Holderbach Member of the Board of Managing Directors Wolfgang Burger Volksbank Franken eG Chairman of the Board of Managing Directors Bruhrainer Volksbank eG

F-110 Fritz Karcher Dr Wolfgang Müller Speaker of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Breisgau Nord eG BBBank eG, Karlsruhe

Edgar Kipper Adolf Oppermann Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Karlsruhe eG Volksbank Heilbronn eG

Hans Kircher Wolfgang Riedlinger Speaker of the Board of Managing Directors Member of the Board of Managing Directors Raiffeisenbank Bretzfeld eG Volksbank Baiersbronn eG

Dr Rainer Kunadt Gerd Rothenbacher Chairman of the Board of Managing Directors Member of the Board of Managing Directors Volksbank Pforzheim eG Raiffeisenbank Rottal eG

Manfred Kuner Paul-Erich Schaaf Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Triberg eG Untertürkheimer Volksbank eG

Peter Lächler Werner Schmidgall Speaker of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Kirchheim-Nürtingen eG Volksbank Backnang eG

Dr Franz G. Leitner Wolfgang Traut (to 06/2003) Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Freiburg eG Vereinigte Volksbank AG, Sindelfingen

Werner Luz Peter Vetter Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Region Leonberg eG Volksbank Wilferdingen-Keltern eG

Walter Mauch Siegfried Wolber Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank eG Überlingen Volksbank eG Villingen

Martin Mayer Otto Zoller Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Tailfingen eG Raiffeisenbank Eberhardzell-Ummendorf eG

F-111 Members of the Bavaria Advisory Wilhelm Frankenberger Association President Committee of DZ BANK AG Genossenschaftsverband Bayern (Raiffeisen/Schulze-Delitzsch) e.V. Chairman: Richard Steiner (to 11/2003) Dr Christoph Glenk (from 10/2003) Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Raiffeisenbank Dinkelsbühl-Hesselberg eG Volksbank Dinkelsbühl eG

Dietmar Küsters (from 11/2003, Michael Haas previously Deputy Chairman) Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank-Raiffeisenbank Dachau eG Volksbank Straubing eG Friedrich Hertle Deputy Chairman: Member of the Board of Managing Directors Konrad Irtel (from 11/2003) Raiffeisen-Volksbank Donauwörth eG Speaker of the Board of Managing Directors Raiffeisenbank Rosenheim eG Eugen Hurler Member of the Board of Managing Directors Walter Alt Raiffeisenbank-Volksbank Meitingen eG Deputy Chairman of the Board of Managing Directors LIGA Bank eG Regensburg Franz Inkmann Chairman of the Board of Managing Directors Hans Berger VR-Bank Uffenheim-Neustadt eG Raiffeisen-Volksbank Chairman of the Board of Managing Directors Volksbank Raiffeisenbank Ismaning eG Friedrich Küffner (to 06/2003) Chairman of the Board of Managing Directors Peter Daxenberger Volksbank Pfaffenhofen a.d. Ilm eG Chairman of the Board of Managing Directors Freisinger Bank eG Volksbank-Raiffeisenbank Bernhard Link Chairman of the Board of Managing Directors Andreas Dichtl Volksbank Raiffeisenbank Nürnberg eG Chairman of the Board of Managing Directors Volksbank Raiffeisenbank Walter Müller (from 09/2003) Berchtesgadener Land eG Chairman of the Board of Managing Directors Volksbank Raiffeisenbank Fürstenfeldbruck eG

Josef Murr Chairman of the Board of Managing Directors Raiffeisenbank Parkstetten eG

F-112 Leonhard Roßmann Rainer Wiederer Chairman of the Board of Managing Directors Member of the Board of Managing Directors Volksbank-Raiffeisenbank Oberhaching-Wolfratshausen eG Volksbank Raiffeisenbank Würzburg eG

Rainer Schaidnagel Josef Wilhelm Member of the Board of Managing Directors Chairman of the Board of Managing Directors Raiffeisenbank Kempten eG Raiffeisenbank München-Feldmoching eG

Erich Schaller Helmut Wölfel Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Raiffeisenbank Hof eG Raiffeisen-Volksbank Kronach-Ludwigsstadt eG

Norbert Schmidt Günther Zollner Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank-Raiffeisenbank Amberg eG Raiffeisenbank Cham eG

Siegfried Schuberth Chairman of the Board of Managing Directors Raiffeisenbank Hallstadt eG

Claudius Seidl Chairman of the Board of Managing Directors VR-Bank Rottal-Inn eG

Georg Sell Chairman of the Board of Managing Directors Raiffeisenbank Hammelburg eG

Elmar Staab Member of the Board of Managing Directors Raiffeisenbank Aschaffenburg eG

Johann Weigele Chairman of the Board of Managing Directors Raiffeisenbank Pfaffenhausen eG

F-113 Members of the Central Germany Hans-Werner Diehl Chairman of the Board of Managing Directors Advisory Committee of DZ BANK AG Mainzer Volksbank eG

Chairman: Peter Eisermann Hans-Josef Hoffmann Member of the Board of Managing Directors Chairman of the Board of Managing Directors Raiffeisenbank eG Wolfhagen Bank1Saar eG, Saarbrücken Erwin Failing Deputy Chairman: Chairman of the Board of Managing Directors Georg Kleinschmidt Volksbank Heuchelheim eG Chairman of the Board of Managing Directors Kasseler Bank eG Heinrich Fülberth Speaker of the Board of Managing Directors Claus-Rüdiger Bauer Volksbank Odenwald eG Speaker of the Board of Managing Directors Raiffeisenbank eG, Baunatal Manfred Gerhard Member of the Board of Managing Directors Herbert Bauer VR Genossenschaftsbank Fulda eG Chairman of the Board of Managing Directors Volksbank Neunkirchen eG Ina Görbing Chairwoman of the Board of Managing Directors Dr Dr Claus Becker Volksbank Erfurt eG Chairman of the Board of Managing Directors Volksbank Darmstadt eG Peter Haffelt Member of the Board of Managing Directors Kurt Becker Dresdner Volksbank Raiffeisenbank eG Chairman of the Board of Managing Directors VEREINIGTE VOLKSBANK AG, Cochem Peter Hanker Speaker of the Board of Managing Directors Helmut Colloseus Volksbank Gießen-Friedberg eG Chairman of the Board of Managing Directors Rheingauer Volksbank eG Andreas Hof Chairman of the Board of Managing Directors Heiner J. Conrad Volksbank Raiffeisenbank Main-Kinzig eG Chairman of the Board of Managing Directors Groß-Gerauer Volksbank eG

F-114 Gerhard Holstein Harro Meurer Member of the Board of Managing Directors Chairman of the Board of Managing Directors Bankverein Bebra eG Volksbank Riesa eG

Erich Isele Harald Meyer Chairman of the Board of Managing Directors Speaker of the Board of Managing Directors PSD Bank RheinNeckarSaar eG Marburger Bank Volksbank Raiffeisenbank eG

Dieter Jurgeit Jakob Müller Chairman of the Board of Managing Directors Speaker of the Board of Managing Directors PSD Bank Hamburg eG VR Bank Biedenkopf-Gladenbach eG

Walfried Kauffmann (to 06/2003) Karl Oppermann Member of the Board of Managing Directors Member of the Board of Managing Directors Kreuznacher Volksbank eG Waldecker Bank eG

Gabriele Klöpfel Dieter Rembde Chairwoman of the Board of Managing Directors Member of the Board of Managing Directors GERAER BANK eG VR-Bank Schwalm-Eder Volksbank-Raiffeisenbank eG

Günter Köhler Volker Remmele (to 09/2003) Member of the Board of Managing Directors Member of the Board of Managing Directors Evangelische Kreditgenossenschaft eG Volksbank Gießen-Friedberg eG

Dr Wolfgang Licht Karl-Hermann Rininsland-Schröder (to 03/2003) Chairman of the Board of Managing Directors Member of the Board of Managing Directors Freiberger Bank eG Volks- und Raiffeisenbank Raiffeisenbank eG Borken

Hans-Theo Macke Werner Röhrig Chairman of the Board of Managing Directors Speaker of the Board of Managing Directors Westerwald Bank eG Volks- und Raiffeisenbank VVB Vereinigte Volksbank Maingau eG

Heinrich Mai Tilman Römpp Member of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Lauterbach-Schlitz eG Volksbank Bautzen eG

F-115 Jürgen Schlesier Bernhard Slavetinsky Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors Raiffeisenbank Vogelsberg eG PSD Bank Karlsruhe-Neustadt eG

Fritz-Ludwig Schmidt Dr Wolfgang Thomasberger Chairman of the Board of Managing Directors Member of the Board of Managing Directors Volksbank Kreis Bergstraße eG VR Bank eG Ludwigshafen

Paul-Heinz Schmidt Ulrich Tolksdorf Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors VR Bank eG Alsfeld Kirchhain Schwalmstadt vr bank Untertaunus eG

Erhard Schmitt Horst Weyand (from 10/2003) Member of the Board of Managing Directors Member of the Board of Managing Directors Volksbank Alzey eG Volksbank Nahetal eG

Günter Schmitt Laurent Wolf (to 10/2003) Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors VR Bank Südliche Weinstraße eG Volksbank Sonneberg-Neuhaus eG

Peter Schmitt Chairman of the Board of Managing Directors Raiffeisenbank eG Großenlüder

Hans-Georg Schneider Speaker of the Board of Managing Directors Raiffeisenbank Kirtorf eG

Reinhold Schreck Chairman of the Board of Managing Directors VR Bank Südpfalz eG

Hans-Jürgen Simon Speaker of the Board of Managing Directors Volksbank Wetzlar-Weilburg eG

F-116 Members of the North/East Germany Fritz Buck Member of the Board of Managing Directors Advisory Committee of DZ BANK AG Spar- und Kreditbank eG, Hammah

Chairman: Eckard Busch (to 11/2003) Alfred Runge Member of the Board of Managing Directors Chairman of the Board of Managing Directors Raiffeisenbank Butjadingen-Abbehausen eG Volksbank Burgdorf-Celle eG Jürgen Dämmig (to 10/2003) Deputy Chairman: Member of the Board of Managing Directors Dr Bernd Hübner Ostfriesische Volksbank eG Chairman of the Board of Managing Directors Raiffeisen-Volksbank Oder-Spree eG Josef Dahl Speaker of the Board of Managing Directors Rüdiger Adamy Ostharzer Volksbank eG Speaker of the Board of Managing Directors Brandenburger Bank Volksbank-Raiffeisenbank eG Dr Paul Albert Deimel Chairman of the Board of Managing Directors Günther Bartels Volksbank Helmstedt eG Speaker of the Board of Managing Directors Volksbank Stadthagen eG Henning Deneke-Jöhrens Member of the Board of Managing Directors Bernd Borchers Volksbank eG Lehrte-Springe-Pattensen-Ronnenberg Member of the Board of Managing Directors Volksbank Wolfenbüttel-Salzgitter eG Helmut Dommel Member of the Board of Managing Directors Dr Michael Brandt Raiffeisenbank Waren eG Member of the Board of Managing Directors Volksbank Lübeck-Landbank von 1902 eG Karl-Heinz Driehorst Member of the Board of Managing Directors Martin Brödder Volksbank Solling eG Member of the Board of Managing Directors Volks- und Raiffeisenbank Prignitz eG Heinrich Ehlers Member of the Board of Managing Directors Eckehard Brüning Volksbank-Raiffeisenbank im Kreis Rendsburg eG Member of the Board of Managing Directors Haldensleber Bank-Raiffeisenbank eG

F-117 Berthold Engelke Gerhard Husmann Chairman of the Board of Managing Directors Member of the Board of Managing Directors Volksbank eG, Stolzenau Volksbank Obergrafschaft eG

Carsten-Peter Feddersen Walter Jaeger Member of the Board of Managing Directors Member of the Board of Managing Directors Raiffeisenbank Südstormarn eG Volksbank Wittenberg eG

Heinrich Fenne Heinz-Dieter Katze Member of the Board of Managing Directors Speaker of the Board of Managing Directors Volksbank Osnabrück eG Volksbank Oldenburg eG

Alfons Fennen Detlef Kentler Chairman of the Board of Managing Directors Speaker of the Board of Managing Directors Volksbank Bösel eG Volksbank eG, Seesen

Dr Rolf Flechsig Heinz-Harold Kleen Member of the Board of Managing Directors Member of the Board of Managing Directors Berliner Volksbank eG Raiffeisenbank Hatten-Wardenburg eG

Detlef Großweischede Gerd Köhn Association Director Executive Board Member Genossenschaftsverband Norddeutschland e.V. Volksbank Jever eG

Johann Heins Johannes Kux Member of the Board of Managing Directors Member of the Board of Managing Directors Zevener Volksbank eG Volksbank Neumünster eG

Michael Hietkamp Hans-Heinrich Langholz Member of the Board of Managing Directors Member of the Board of Managing Directors Volksbank Raiffeisenbank eG Greifswald Volksbank Raiffeisenbank eG Schleswig

Klaus Hinsch Georg Litmathe (from 04/2003) Member of the Board of Managing Directors Association Director Raiffeisenbank eG, Hagenow Genossenschaftsverband Weser-Ems e.V.

F-118 Norbert Lohmann Günther Scheffczyk Member of the Board of Managing Directors Member of the Board of Managing Directors Volksbank Spelle-Freren eG Hümmlinger Volksbank eG

Ubbo Lorenz Christian Scheinert Member of the Board of Managing Directors Member of the Board of Managing Directors Raiffeisenbank-Volksbank eG Fresena Volksbank eG, Elmshorn

Herman Mehrens Werner Schierenbeck Speaker of the Board of Managing Directors Speaker of the Board of Managing Directors Hannoversche Volksbank eG Volksbank eG, Syke

Henning Melcher Friedrich Schmidt Member of the Board of Managing Directors Member of the Board of Managing Directors Volksbank eG Bremerhaven-Wesermünde Volksbank Ostkreis Uelzen eG

Heinz-Horst Meyer Reinhard Schoon Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors VR-Bank Halstenbek-Schenefeld eG Raiffeisen-Volksbank eG, Uplengen

Dr Dieter Radtke (to 03/2003) Michael Schwarz Deputy Chairman of the Board of Managing Directors Member of the Board of Managing Directors Evangelische Darlehensgenossenschaft eG, Kiel Volksbank Lüneburg eG

Eckard Rave Michael Siegers Member of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank Raiffeisenbank eG, Husum Volksbank Hildesheim eG

Paul Reisdorf Dieter Soechtig Speaker of the Board of Managing Directors Member of the Board of Managing Directors VR Bank Lausitz eG Volksbank eG Wolfsburg

Stephan Schack Heinz Tabeling Member of the Board of Managing Directors Chairman of the Board of Managing Directors Volksbank eG Itzehoe Volksbank Visbek eG

F-119 Peter Weihe (to 03/2003) Member of the Board of Managing Directors Volksbank Nordharz eG

Heinz-Walter Wiedbrauck Chairman of the Board of Managing Directors Volksbank Hameln-Pyrmont eG

Bernd-Michael Williges (from 10/2003) Member of the Board of Managing Directors Volksbank Celler Land eG

Holger Willuhn Speaker of the Board of Managing Directors Volksbank Eichsfeld-Northeim eG

Bernd Wolfram Member of the Board of Managing Directors Volksbank Celler Land eG

F-120 Members of the Employers Advisory Hans-Jürgen Burkert Member of the Board of Managing Directors Committee of DZ BANK AG Hymer AG, Bad Waldsee

Chairman: Prof. Dr Hans Heinrich Driftmann Prof. Dr Wolfgang König Managing Partner Johann Wolfgang Goethe-Universität Peter Kölln KGaA, Elmshorn Institut für Wirtschaftsinformatik Frankfurt am Main Stefan Durach Managing Director Deputy Chairman: Develey Senf+Feinkost GmbH, Unterhaching Dr Wilhelm Bender Chairman of the Board of Managing Directors Konsul Anton-Wolfgang, Graf von Faber-Castell Fraport AG, Frankfurt am Main Chairman of the Board of Managing Directors Faber-Castell AG, Stein Carl Fritz Bardusch Managing Director Manfred Finger Bardusch GmbH&Co., Ettlingen Member of the Board of Managing Directors Villeroy & Boch AG, Mettlach Dr Wolfgang Baur Member of the Board of Managing Directors Alfons Frenk (from 2004) Schuler AG, Göppingen Chairman of the Board of Managing Directors (previously Member of the Board of Managing Directors EDEKA AG & Co. KG, Hamburg Dürr AG, Stuttgart) Dr Hans-Jörg Gebhard Dr Werner Brandt Chairman of the Supervisory Board Member of the Board of Managing Directors SZVG Süddeutsche Zuckerrübenverwertungs- SAP Aktiengesellschaft,Walldorf Genossenschaft eG, Ochsenfurt

Gerhard Erwin Bruckermann Karl-Heinz Glauner Chairman Chairman of the Board of Managing Directors CEO DEPFA BANK plc., Dublin Aareal Bank AG, Wiesbaden

Gerd Bruse Rüdiger A. Günther Member of the Board of Managing Directors Executive Board Speaker REWE-Zentral AG, Köln CLAAS KGaA mbH, Harsewinkel

F-121 Dr Jochen Gutbrod Dr Gerd Krick Managing Director Chairman of the Supervisory Board Verlagsgruppe Georg von Holtzbrinck GmbH, Fresenius AG, Bad Homburg Stuttgart Andreas Lapp Dr Jürgen Heraeus Chairman of the Board of Managing Directors Chairman of the Supervisory Board LAPP HOLDING AG, Stuttgart Heraeus Holding GmbH, Hanau Roland Mack Dr Dirk Hoffmann Managing Partner Chairman of the Board of Managing Directors EUROPA-PARK Freizeit- und Familienpark Mack KG, Rust ALLGEMEINE HYPOTHEKENBANK RHEINBODEN AG, Frankfurt am Main Peter Mager Chairman of the Supervisory Board Ernst-Albert Holzapfel Nordenia International AG, Steinfeld Managing Partner friedola Gebr. Holzapfel GmbH & Co. KG, Dr Arno Mahlert (to 2003) Meinhard-Frieda Member of the Supervisory Board Verlagsgruppe Georg von Holtzbrinck GmbH, Stuttgart Volker T. Husmann (to 2003) Former Member of the Board of Managing Directors Ludwig Merckle Kennametal Hertel AG, Fürth Executive Board Chairman Merckle/ratiopharm Arzneimittel GmbH, Ulm Wolfgang Jeblonski (from 2004) Member of the Board of Managing Directors Dr Klaus Naeve STADA ARZNEIMITTEL AG, Bad Vilbel Member of the Central Board of Managing Directors Schörghuber Stiftung & Co. Holding KG, Munich Dr Dagobert Kotzur Executive Board Chairman Manfred Nüssel Schunk GmbH, Thale President Deutscher Raiffeisenverband e.V., Bonn Prof. Dr Jan Pieter Krahnen Johann Wolfgang Goethe-Universität Dipl. Kfm. Kommerzialrat Lehrstuhl für Kreditwirtschaft und Finanzierung Gerhard Ortner Frankfurt am Main President of the Supervisory Board Österreichische Volksbanken-AG, Salzburg

F-122 Prof. Dr Rolf Peffekoven Joachim Siebert Johannes Gutenberg-Universität Mainz, Chairman of the Board of Managing Directors Lehrstuhl für VWL und Finanzwissenschaft, Mainz anwr Ariston-Nord-West-Ring eG, Mainhausen

Manfred Renner Gerd Sonnleitner Chairman of the Board of Managing Directors President Sanacorp Pharmahandel AG, Planegg Deutscher Bauernverband e.V., Bonn

Hartmut Retzlaff (to 2003) Dr Theo Spettmann Chairman of the Board of Managing Directors Speaker of the Board of Managing Directors STADA ARZNEIMITTEL AG, Bad Vilbel SÜDZUCKER AG Mannheim/Ochsenfurt, Mannheim

Jürgen Rudolph Dr Friedrich-Leopold Freiherr v. Stechow Managing Partner Executive Board Chairman Rudolph Logistik Gruppe/Rudolph Holding GmbH, Baunatal Partner für Berlin Hauptstadtmarketing mbH, Berlin Diethelm Sack Member of the Board of Managing Directors Dr Thomas Strüngmann Deutsche Bahn AG, Frankfurt am Main Member of the Board of Managing Directors Hexal AG, Holzkirchen Prof. Dr Christian Schlag Johann Wolfgang Goethe-Universität Hans Wall Professur für Derivate und Financial Engineering Chairman of the Board of Managing Directors Frankfurt am Main Wall Aktiengesellschaft, Berlin

Dr Werner Schreglmann (to 2003) Paul-Heinz Wesjohann Former Member of the Board of Managing Directors Chairman of the Board of Managing Directors Schuler AG, Goeppingen PHW-Gruppe, Visbek

Dr Eric Schweitzer Alexander von Witzleben Member of the Board of Managing Directors Chairman of the Board of Managing Directors ALBA AG, Velten bei Berlin Jenoptik AG, Jena

F-123 Major subsidiaries and participating interests of DZ BANK AG

Banks

Name/head office Consolidated1 Share of capital in percent Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall (indirectly) • 82.8 Bellevue and More AG, Hamburg 50.0 Ceskomoravska stavebni sporitelna a.s., Praha 45.0 Fundamenta Magyar-Nemet Lakastakarekpentar Rt., Budapest 51.2 Prva stavebna sprital´na a.s., Bratislava 32.5 VR Kreditwerk Hamburg-Schwäbisch Hall AG, Hamburg und Schwäbisch-Hall (jointly with Deutsche Genossenschafts-Hypothekenbank AG) • 60.0 cosba private banking ag, Zürich (indirectly) • 65.0 Deutsche Genossenschafts-Hypothekenbank AG, Hamburg • 100.0 Deutsche WertpapierService Bank, Frankfurt am Main 40.0 DVB Bank AG, Frankfurt am Main 2 • 92.3 Nedship Bank N.V., Rotterdam • 100.0 DZ Financial Markets LLC, New York 100.0 DZ BANK International S.A., Luxembourg-Strassen 2 • 89.7 DZ CAPITAL MANAGEMENT GmbH, Frankfurt am Main 96.7 DZ BANK Ireland plc, Dublin 2 • 100.0 Magyar Takarékszövetkezeti Bank Részvénytársaság, Budapest 46.9 norisbank AG, Nürnberg • 100.0 Österreichische Volksbanken AG, Wien (indirectly) 25.001 3 SÜDWESTBANK AG, Stuttgart • 89.6

1 Consolidated under terms of section 294.1 HGB; aggregate capital shares held by DZ Bank AG or the respective parent company 2 Declaration of backing by DZ BANK AG 3 Share of voting rights

F-124 Other specialist service providers

Name/head office Consolidated1 Share of capital in percent Betriebswirtschaftliches Institut der Deutschen Kreditgenossenschaften BIK GmbH, Frankfurt am Main 73.6 DZ Equity Partner GmbH, Frankfurt am Main 100.0 EURO Kartensysteme GmbH, Frankfurt am Main 19.6 Genossenschaftlicher Informationsservice GIS GmbH, Frankfurt am Main 97.0 GVA GENO-Vermögens-Anlage-Gesellschaft mbH, Frankfurt am Main 66.7 GZS Gesellschaft für Zahlungssysteme, Frankfurt am Main 20.0 Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main • 100.0 VR-LEASING AG, Eschborn • 83.5 BFL LEASING GmbH, Eschborn • 70.9 VR-BAUREGIE GmbH, Eschborn • 100.0 VR DISKONTBANK GmbH, Eschborn • 100.0 VR FACTOREM GmbH, Eschborn 49.0 VR-IMMOBILIEN-LEASING GmbH, Eschborn • 100.0 VR MEDICO LEASING GmbH, Eschborn 100.0

1 Consolidated under terms of section 294.1 HGB; aggregate capital shares held by DZ BANK AG or the respective parent company

F-125 Investment trusts

Name/head office Consolidated1 Share of capital in percent Union Asset Management Holding AG, Frankfurt am Main • 64.8 DEFO Deutsche Fonds für Immobilienvermögen GmbH, Frankfurt am Main • 90.0 DIFA DEUTSCHE IMMOBILIEN FONDS AG, Hamburg • 94.5 Union Investment Institutional GmbH, Frankfurt am Main • 100.0 Union Investment Luxembourg S.A., Luxembourg • 100.0 Union Investment Privatfonds GmbH, Frankfurt am Main • 100.0 UNICO Asset Management S.A., Luxembourg • 100.0

1 Consolidated under terms of section 294.1 HGB; aggregate capital shares held by DZ BANK AG or the respective parent company

Insurance companies

Name/head office Consolidated1 Share of capital in percent R+V Versicherung AG, Wiesbaden • 73.0 KRAVAG-Allgemeine Versicherungs-AG, Hamburg • 76.0 KRAVAG-LOGISTIC Versicherungs-AG, Hamburg • 51.0 R+V Allgemeine Versicherung AG, Wiesbaden • 88.6 R+V Krankenversicherung AG, Wiesbaden • 100.0 R+V Lebensversicherung AG, Wiesbaden • 100.0 R+V Pensionsfonds AG, Wiesbaden (jointly with Union Asset Management Holding) • 51.0 R+V Rechtsschutzversicherung AG, Wiesbaden • 100.0

1 Consolidated under terms of section 294.1 HGB; aggregate capital shares held by DZ BANK AG or the respective parent company

F-126 DZ BANK AG Annual Financial Statements 2003

F-127 Management Report on the 2003 financial year for DZ BANK AG

I. Overview of trading in fiscal 2003 2. Continuation of the strategic Other specialist service providers realignment launched in 2001 Name/head office Consolidated1 Share of capital 1. Macroeconomic framework in percent During the year under report DZ BANK has successfully main- Betriebswirtschaftliches Institut der Deutschen Kreditgenossenschaften tained our strategy of focusing our business activity more BIK GmbH, Frankfurt am Main 73.6 The fraught economic environment continued to present closely on the cooperative primary banks and applying a risk- DZ Equity Partner GmbH, Frankfurt am Main 100.0 DZ BANK AG (DZ BANK) with exceptional challenges during aware lending policy. At the same time we were able to make EURO Kartensysteme GmbH, Frankfurt am Main 19.6 the year under report. Most importantly, the uncertainty further progress on the projects launched at the time of the Genossenschaftlicher Informationsservice GIS GmbH, Frankfurt am Main 97.0 stemming from the Iraq crisis dashed the hopes of an econo- merger in 2001 to migrate our databases and harmonise our GVA GENO-Vermögens-Anlage-Gesellschaft mbH, Frankfurt am Main 66.7 mic upturn that had emerged at the start of the year.The out- IT platforms, and to bring many of these projects to a success- GZS Gesellschaft für Zahlungssysteme, Frankfurt am Main 20.0 put of the economy even weakened by a further 0.3 percent. ful conclusion during 2003. Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main • 100.0 VR-LEASING AG, Eschborn • 83.5 The persistently difficult conditions on the labor market There have also been changes in DZ BANK’s portfolio of busi- BFL LEASING GmbH, Eschborn • 70.9 weighed on consumer sentiment and private household nesses during the year, all of them aimed at strengthening the VR-BAUREGIE GmbH, Eschborn • 100.0 demand fell again by 0.1 percent in 2003. Corporate invest- effectiveness of the integrated cooperative financial services VR DISKONTBANK GmbH, Eschborn • 100.0 ment activity also remained well below expectations as sector as a whole: VR FACTOREM GmbH, Eschborn 49.0 companies cut their plant and equipment investment by VR-IMMOBILIEN-LEASING GmbH, Eschborn • 100.0 3.0 percent year-on-year. - Spin-off of payments processing division VR MEDICO LEASING GmbH, Eschborn 100.0

Domestic GDP did expand in the second half of 2003 – albeit The separating out of DZ BANK’s payments processing division at the exceptionally modest rate of just 0.2 percent – thanks into a newly-founded specialist company Transaktionsinstitut 1 Consolidated under terms of section 294.1 HGB; aggregate capital shares held by DZ BANK AG or the respective parent company to higher exports, which defied the strong appreciation of the für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main, euro to record an overall gain of 1.2 percent over the full year. (Transaktionsinstitut) with effect from September 1, 2003 This rise was helped by strong economic growth in the USA, has created the nucleus for a neutral processing platform to eastern Europe and Asia. The first tentative progress on service national and international payments transactions. The the economic policy reform front at the end of the year also benefit of efficiency gains achieved through the expansion of helped produce a gradual improvement in the economic transaction volumes and the modernisation of processing climate. technologies will feed through to the local cooperative banks in the form of significantly reduced unit costs. In December 2003 WestLB AG, Düsseldorf, announced it is interested in partnering with Transaktionsinstitut. Between them, these banks handle no less than 26 percent of the total domestic payments traffic measured by numbers of transactions.

F-128 71 - Acquisition of norisbank AG, Nürnberg - Amalgamation of factoring business with France-based Natexis Factorem S.A., Paris DZ BANK’s takeover of the specialist consumer credit provider norisbank AG as from October 1, 2003 has created the neces- In November 2003 Natexis Banque Populaire, Paris, and sary foundation for increasing the cooperative financial servi- VR-LEASING AG, Eschborn, signed a joint-venture agreement ces sector’s share of this fast-growing market segment. to establish VR FACTOREM GmbH, Eschborn. The new under- norisbank’s partner banks model gives local cooperative banks taking, 51 percent owned by our French partner and 49 per- the opportunity to distribute its high-profile “easyCredit” brand cent owned by VR-LEASING AG, will specialise in the provision product. norisbank has installed a high-grade risk manage- of factoring services for small and midsize enterprises and also ment system and modern, low-cost processing technology. absorb the factoring operations of VR DISKONTBANK GmbH, By the end of 2003 no less than 438 partner banks had Eschborn, a subsidiary of VR-LEASING AG. DZ BANK and already registered their interest in distributing “easyCredit”. Natexis Banque Populaire have also agreed to intensify our existing cooperation in the areas of research, asset manage- - Cross-sector merger of securities processing businesses ment and private equity.

The merger of the municipal savings bank sector’s specialist - Investment custody business service provider WPS WertpapierService Bank AG, Düsseldorf, with its cooperative sector equivalent Bank für Wertpapier- In January of the current year, Union Asset Management service and -systeme AG, Frankfurt am Main, to form Deutsche Holding AG, Frankfurt am Main, and DekaBank Deutsche WertpapierService Bank AG, Frankfurt am Main, (dwpbank) in Girozentrale, Frankfurt am Main, started to jointly explore August 2003 has created Germany’s biggest specialist secu- the possibility of pooling their investment custody activities. rities processor.The involvement of further partners in future and the harmonisation of processing platforms will deliver per- In order to further the structural streamlining of the DZ BANK manent efficiency advances. At the end of November the new Group, in addition to the initiatives described DZ BANK has entity was able to sign an agreement on future cooperation also acquired (effective December 31, 2003) ReiseBank AG, with Dresdner Bank AG, Frankfurt am Main. The shares of Frankfurt am Main, and CashExpress Gesellschaft für Finanz- dwpbank are held in equal proportions by the cooperative and Zahlungsverkehrsdienstleistungen mbH, Frankfurt am sector (40 percent by DZ BANK, 10 percent by WGZ-Bank Main, from DVB Bank AG, Frankfurt am Main. These moves Westdeutsche Genossenschafts-Zentralbank eG, Düsseldorf) will free DVB Bank to focus on its core international transport and the savings bank sector.The intention is to bring further finance and consultancy business. equity partners on board in the future.

F-129 3. Key results overview The cost-income ratio is 64.0 percent (2002: 85.4 percent).

Operating profit before risk provisions amounted to DZ BANK’s key income statement measures evolved as follows € 518 million. Allowing for the previously mentioned adjust- in the year under report: ments to the prior-year figures, this represents a € 355 million increase. Risk provisions were substantially reduced to Our operating income totaled € 1,440 million in the year €-371 million (2002: € -1,709 million). under report (2002: € 1,883 million). Excluding the exceptional income of € 513 million under the previous year’s share Operating profit came in at € 147 million in 2003. After the of affiliates heading and correcting the previous year’s profit balance of non-operating expenses and income of € -198 mil- positions to reflect subsequent changes in accounting methods, lion, the net profit on the year was € 80 million. this represents a change of +29.3 percent. We will propose the annual general meeting approves the Administrative expense moderated by 3.0 percent to distribution of a dividend of € 0.05 per share. € 922 million.

Income statement DZ BANK AG 2003/2002

2003 2002 Change in € million in% Net interest income 1 753 1,223 -38.4 Net commission income 285 254 12.2 Net earnings from financial activities 322 205 57.1 Personnel expense 435 455 -4.4 Other administrative expenses 2 487 496 -1.8 General and administrative expense 922 951 -3.0 Balance of other operating expense/ income 80 201 -60.2 Operating result before risk provisions 518 932 - 44.4 Risk provisions -371 -1,709 -78.3 Operating result 147 -777 >100.0 1 Includes current earnings, earnings from profit transfer Balance of other expenses/ agreements 3 income -198 807 >100.0 2 Other administrative expenses plus depreciation and Taxes -131 -25 >100.0 write-downs on fixed and intangible assets

3 Net profit on period 80 55 45.5 Result from financial investments, special items with reserve character, extraordinary expenditure/income and other items

F-130 The detailed breakdown of the fiscal 2003 results is as from the oil and gas sector – even though the domestic and follows: European markets were marked by constrained demand and slow growth. We were also able to further strengthen our Net interest income leading position in Germany as a provider of two-way-trade- backed export finance, in which the bank supports its custo- DZ BANK’s net interest income (excluding shares of affiliates) mers’ export business through financing arrangements that are was 14.6 percent lower year-on-year at € 409 million. It then paid down against deliveries of marketable goods. The should be noted that this change is essentially the result of the specialist market position we have established in earlier years two presentation methodology changes described below that in the financing of Hermes-backed export transactions also were implemented last year and which are more consonant enabled us to sign additional framework agreements with with the operating logic. Unlike last year, the expenses arising foreign banks in India, Indonesia, Russia and the Ukraine; from prepayment penalties on the premature redemption of these will also provide the basis for future business. note loans and registered bonds are no longer shown as part of the balance of other (non-operating) expenses and income, The reported income from participations (share of affiliates) but as part of the interest result. Furthermore, the net trading fell by 53.8 percent to € 344 million. It should be noted that income total for 2003 includes for the first time the balance of the total for the 2002 year includes an amount of € 513 mil- income and expense from repurchase agreements that in the lion arising from the previously mentioned strategic reorganiz- previous year was still part of the net interest income heading. ation of the DZ BANK Group’s entire businesses portfolio. If we adjust the previous year to reflect these two method Excluding this exceptional effect, our income from participa- changes, net interest income increased by 2.3 percent in 2003. tions was € 113 million or 48.9 percent higher than the preceding year. The credit and money market operations made a significant contribution to the overall interest result. The structured trade finance business in particular was able to make impressive progress. It was able to expand its market position thanks primarily to the encouraging growth of the demand for finance

Total operating income of DZ BANK AG 2003/2002

in € million

2.000 1.750 1,883 1.500

1.250 1,440 1.000 (-23.5%) 750 500 250 0 2003 2002

F-131 Net commission income Net earnings from financial activities

The parent bank’s fees and commissions surplus increased by Our net earnings from financial activities increased by 12.2 percent to € 285 million. 57.1 percent to € 322 million. If we adjust the prior-year total by the net result of repurchase agreements, the increase is DZ BANK’s securities-related business was exceptionally profit- 48.4 percent. able overall last year and was able to substantially more than compensate for the earnings contributions of the other busi- Substantial increases were recorded both in the area of equity- ness lines, payments handling, lending and international price-sensitive products and in the net income from trading operations. exchange-rate risks and interest-rate risks.

During the year under report we significantly advanced the General and administrative expenses process of accelerating and concentrating our retail banking sales activities that was launched in 2002. The twin priorities The parent bank’s general and administrative expenses were were to extend our product offering and increase our product reduced by 3.0 percent to € 922 million. Within this total, per- specialisation, in both cases centrally driven by customer inte- sonnel expenses moderated by 4.4 percent and non-personnel rests. The uncertainty emanating from the Iraq crisis and the expenses reduced by 1.8 percent. resulting slump of the stock market indices to multi-year lows in March 2003 combined with the difficult economic environ- The cost-cutting program launched in 2001, the year of the ment in Germany to shatter investors’ confidence in risk assets merger, was continued in a systematic and focused manner and further reinforce our customers’ pronounced need for se- during the year under report. The total savings volume in the curity. Continuing the previous year’s evident trend of increa- area of personnel costs in 2003 was € 20 million; non-person- sing demand for structured products that offer capital guaran- nel costs reduced by € 9 million. tees coupled with the chance to participate in the rising value of selected baskets of stocks or indices, our certificates offering We expect the concentration of “back-office” services pro- attracted exceptional interest – especially the MultiZins and vision into the specialist companies Transaktionsinstitut, VarioZins versions and the product innovation of the year in dwpbank and VR Kreditwerk Hamburg-Schwäbisch Hall AG, 2003, the MaxiRend Tracker.We were delighted in November Hamburg and Schwäbisch Hall, to strengthen the competitive- 2003 when the readers of the specialist magazine “Zertifikate ness of DZ BANK and the entire integrated cooperative Journal” voted DZ BANK “Issuer of the Year” and the jurors of financial services sector. the “Welt am Sonntag” prize panel awarded us the distinction of “Best Issuer of Protected-Capital Products”.

F-132 Administrative expense DZ BANK AG 2003/2002 territory can take advantage of this online service to support their investment advisers. “VR-Networld Brokerage” now in € million provides a single system for dealing in securities for the custo- 1.000 mers of the local cooperative banks covered by the computing center of FIDUCIA IT AG at Karlsruhe. Integrating this capability 922 951 750 (-3.0%) into our systems landscape has released substantial synergies. The now nationwide availability of “VR Marktplatz”, our market 500 information platform designed for end customers, also repre- sents a further substantial quality enhancement of our internet 250 brokerage package.

0 The essential prerequirement for reorganising DZ BANK’s 2003 2002 IT systems was to reduce the wealth of different systems deployed in investment banking and to switch to the standard software of the SAP Banking Platform. One result was that we have already reduced our IT costs by 30 percent compared We passed further milestones and did further groundwork in with 2001, the first year of the merger. By 2004, when we will 2003 on harmonising and integrating IT systems across the have completed our technology harmonisation in less than companies that make up the integrated cooperative financial three years, the total savings will be more than 50 percent. services system. Having successfully introduced our central information and communications medium “DZ-InfoNet” in In the year under report we were able to improve our cost- 2002, we expanded the functionality and performance spec- income ratio, adjusted for the exceptional factors in the prior- trum of this platform during 2003 to transform it into the all- year profit headings, to 64.0 percent compared with 85.4 per- round information portal “VR-BankenPortal”. Since the end of cent in 2002. last year, the primary banks now have a central point of access to the product and service offerings of virtually all the coope- rative financial services sector’s household-name “product providers”. The “Konto-Online” application integrated into the “VR-BankenPortal” site also allows local cooperative banks to obtain a close-to-real-time overview of their credit and current account positions vis-à-vis DZ BANK, and provides access to end-to-end-supported online transaction processing.

Additionally, the nationwide availability of the “GENO-Broker” application means all the cooperative banks within DZ BANK’s

F-133 Net other operating income Operating profit

The positive balance of other operating income and expense Operating profit before provisions for risk totaled € 518 million reduced last year by 60.2 percent to € 80 million. This was for the year just ended. essentially due to the reclassification of corporation tax and municipal trade tax transfers arising from DZ BANK’s tax unity If we correct the 2002 figures for the exceptional effects with Group constituents. These transfers are reported in the previously described, operating income increased by 2003 financial statements under the taxes heading, whereas € 326 million to € 1,440 million. This rise contrasts with the in the preceding year they were still a component of other €29million reduction of our general and administrative costs operating income. to € 922 million. On this basis therefore, our operating profit before provisions for risk improved in 2003 by € 355 million Provisions for risk compared with the adjusted prior-year value of € 163 million. The € 1,338 million reduction in our net new risk provisioning The 2003 net risk provisioning of € -371 million is only around to € -371 million includes an endowment of the prudential one-fifth of the prior-year total of € -1,709 million. These reserve (section 340f HGB). figures demonstrate the progress we have made on cleaning non-strategy-conformant risks out of the credit portfolio. Valuation corrections were still necessary however, especially on exposures in the commercial real estate lending business and the energy sector.

Our new business, which as far as Germany is concerned was once again overshadowed by the clear signs of demand and growth weakness, remained subject to the binding risk limits and profitability criteria imposed immediately after the merger. We have continued to systematically refine our credit risk strategy and risk management procedures; another priority was to redesign the organisation of our credit management structures and processes in anticipation of the more demand- ing credit processing quality requirements that Basel II will impose as well as the Minimum Requirements for the Conduct of Lending Business (MaK).

F-134 The balance of other expenses and income closed 2003 at the Regulatory capital amount of € -198 million (2002: € 807 million). This includes net earnings from financial activities in the sum of € -99 million The detailed composition of DZ BANK’s regulatory capital (2002: € 1,094 million); this includes most importantly value was as follows at December 31, 2003: adjustments on securities treated as fixed assets and an in- -Tier 1 capital stood at € 5,988 million come contribution from the transactions surrounding the dwp- (12.31.2002: € 5,985 million); bank joint venture. The sharp fall from the 2002 total primarily - Supplementary capital totaled € 5,163 million reflects the fact that the prior-year value was significantly (12.31.2002: € 4,350 million); distorted by an income contribution of € 1,168 million result- -Tier 3 capital totaled € 6 million ing from the fundamental strategic realignment of DZ BANK’s (12.31.2002: € 123 million). participations portfolio. The extraordinary expenses total of € 78 million (2002: € 220 million) essentially comprises In aggregate, our regulatory capital totaled € 10,992 million personnel and non-personnel restructuring expenses of (12.31.2002: € 10,275 million) on the closing day of the year €60million, expenses arising under the existing social plan under report. Our KWG total capital ratio is now 17.0 percent from ongoing early retirement obligations of € 14 million, plus (12.31.2002: 14.5 percent) and our core capital ratio is expenses of € 4 million in connection with the spin-off of the 12.2 percent (12. 31.2002: 10.5 percent). payment handling operation to the new Transaktionsinstitut . Number of branches The net profit on the year is € 80 million compared with €55million in 2002. As of December 31, 2003, the bank had four branch establish- ments in Germany and five abroad. The four German branch establishments oversee a further six business offices.

F-135 4. Balance sheet Placements with, and loans and advances to, other banks

Placements with, and loans and advances to, other banks Total assets reduced by € 4.4 billion to € 76.0 billion. Most of the decline related to claims on non-affiliated banks, which decreased by The bank’s total assets as at December 31, 2003 were € 4.3 billion or 10.0 percent to € 38.7 billion. By contrast, € 12.8 billion or 6.9 percent lower than a year earlier, at deposits with and loans to affiliated banks only decreased by € 172.0 billion. The total volume of business amounted at € 0.1 billion or 0.3 percent to € 37.3 billion. the year-end to € 186.4 billion (12.31.2002: € 202.6 billion). The foreign branches accounted for around 10.7 percent of Loans and advances to other (non-bank) customers the balance sheet total or a volume of € 18.4 billion. Loans and advances to non-bank customers reduced by € 6.3 billion to € 26.0 billion. The principal causes of this Balance sheet total of DZ BANK AG decline were the low-demand, low-growth character of the 12.31.2003/12.31.2002 economic environment and DZ BANK’s prudent and strict control of new business through the application of demanding in € billion risk and profitability criteria. 200

Securities 150 172.0 184.8 (-6.9%) At € 54.8 billion, the value of the parent bank’s securities 100 holdings was € 3.4 billion lower than the prior-year figure. An increase of € 1.7 billion in the bonds and other fixed-interest 50 securities heading compares with a decline of € 5.1 billion in the holdings of equity shares and other variable-yield securities. 0

12.31.2003 12.31.2002 Deposits from other banks

Off-balance-sheet futures transactions Liabilities to banks reduced by € 8.7 billion to € 97.9 billion. While the liabilities to affiliated banks declined by € 3.3 billion The nominal volume of off-balance-sheet futures transactions or 8.3 percent to € 36.3 billion, deposits from non-affiliated was € 61.8 billion higher at € 697.3 billion as at banks fell year-on-year by € 5.4 billion or 8.1 percent to December 31, 2003, while the replacement costs increased € 61.6 billion. by € 0.5 billion to € 14.0 billion.

F-136 Non-bank customer deposits Capital and reserves

At € 30.5 billion, customer deposits were € 0.9 billion higher The reported equity of € 4.6 billion represents an increase of than a year earlier due to a sharp rise in the volume of time €28million. Of this total, € 25 million stems from the endow- deposits coupled with slightly higher current deposits and ment of the surplus reserves and a further € 3 million stems overnight funds. from the marginal increase in the cumulative earnings total.

Certificated liabilities

Certificated liabilities closed the year at € 26.1 billion (2002: € 31.1 billion). The issuance of own bonds was reduced by € 3.9 billion to € 24.0 billion in the year under report, while that of other certificated liabilities fell by € 1.1 billion to € 2.1 billion.

Share ownership structure of DZ BANK AG in € million

Total share capital: 2,878.43

Credit cooperatives (direct and indirect) 2,328.63 (80.90%)

WGZ-Bank Westdeutsche Genossenschafts-Zentralbank eG (direct and indirect) 191.53 (6.65%)

Other cooperative organisations 153.18 (5.32%)

Others 205.09 (7.13%)

F-137 II. Risk Report Separation of functions

At DZ BANK we distinguish between risk management and 1. DZ BANK’s risk supervision system risk controlling. Risk management encompasses the meas- ures taken locally by the risk-bearing operating units to imple- ment the risk strategy. The business units responsible for risk The systematic and controlled acceptance of risks in relation to management decide whether to consciously assume or reduce return targets is an integral component of corporate manage- risk. In doing so they observe the centrally prescribed universal ment at DZ BANK AG (DZ BANK). The operating activities prescriptions and the relevant risk limits. The risk management resulting from our business model require the capability to units are kept organisationally and functionally separate from effectively identify, measure and manage risk together with the units they oversee. This applies most importantly in the adequate capital backing. Our activities are guided by the areas of controlling, accounting and processing. principle that we only take on the minimum risk required to achieve our business-policy goals. We have implemented and The separate risk controlling function is responsible for we apply a risk monitoring and management system that fully ensuring the permanent transparency of the risks entered into complies with the statutory requirements while also going across all risk categories. Risk Control monitors limit compli- further and assisting our internal commercial management ance and produces all risk reports. This unit is additionally requirements. responsible for ensuring that the risk measurement approach- es, procedures and models employed are methodologically Committees up-to-date.

The Treasury Committee is responsible for managing A Risk Manual is made available to all staff via the bank’s DZ BANK’s market price risk and liquidity risk. The Treasury Intranet. In addition to listing the universal prescriptions Committee meets weekly to discuss the management of the governing the management of risk capital and risk types, this bank-wide risk and performance parameters as well as capital manual also provides extensive description and explanations ratios, and prepares corresponding action proposals for sub- of the methods and processes deployed and of DZ BANK’s mission to the full Board of Managing Directors. responsibilities as group parent.

The Board of Managing Directors has formed a Credit Internal Audit Committee from amongst its own members tasked with managing the bank’s overall credit portfolio. The Credit Internal Audit is a second independent component of the Committee decides on significant loan commitments in bank’s risk management and supervision system. It performs relation to the bank’s credit risk strategy. systematic and regular audits. Internal Audit is tasked with ensuring the functionality and effectiveness of the risk super- vision system and also the rectification of established short- comings. Internal Audit reports directly to the Chairman of the Board of Managing Directors. Germany’s defined Minimum Re- quirements for the Organisation and Performance of Banks’ In- ternal Audit Function are fully complied with.

F-138 Risk types 2. Risk capital management

Default risk is the most important category of risk for DZ BANK. It results from our corporate banking and investment banking One objective of DZ BANK’s risk management is to ensure that activities. Market price risk stems primarily from our trading the bank’s overall risk exposure remains in harmony with its operations and capital market investments. Liquidity risks are capital underpinning at all times. We do this by actively the typical risks of on-balance-sheet banking transactions. managing both our regulatory capital adequacy as defined by Finally, operational risks and strategic risks are associated with Principle I KWG and also the economic capital adequacy that all forms of business activity. results from our own internal risk measurement methods. We also integrate their risk capital requirements into our measure- The relative significance of each risk type was as follows at ment of the performance of DZ BANK’s main business lines December 31, 2003: and thereby extend the conventional earnings components by also factoring in the capital tied up by their risk exposures. DZ BANK AG’s risk positions Managing regulatory capital adequacy

Risk position Share in € million 12.31.2003 For the purposes of managing DZ BANK’s regulatory capital Default risk 1,511 81% adequacy, we work with significantly higher internal targets Market price risk 36 2% than the minimum standards defined by the regulators of Operational risk 231 12% 4 percent for the Tier 1 capital ratio and 8 percent for the total Strategic risk 89 5% capital ratio. We perform an annual risk assets planning pro- cess to avoid unforeseen stressing of these capital ratios and ensure that the growth or reduction of our risk assets is in conformance with our defined strategy. This process ends with We measure default and market price risk using internal the specification of a planning target regulatory capital models based on value-at-risk approaches. We use the Basel II requirement. The covering of this need and the performance standard approach to estimate the loss potential arising from of the resulting issuance transactions is coordinated by our operational risk. The quantification of strategic risk is based on Treasury function. empirical benchmark analyses.

F-139 DZ BANK’s regulatory capital ratios on the KWG definition We use simple addition to aggregate the various types of risk were as follows at December 31, 2003: in order to identify DZ BANK’s risk capital requirement. This reflects our conservative assumptions that extreme losses DZ BANK AG’s regulatory capital requirement occur simultaneously across all risk categories and that the and regulatory capital ratios various risk types correlate completely.

in € billion 12.31.2003 We derive the bank’s risk tolerance capacity from the avail- Risk positions 56.3 able risk cover assets. This value is determined on the basis of Capital a commercial analysis of the group’s capital after allowing for - Tier I capital 6.0 all relevant consolidation effects. Regulatory capital compo- - Tier II and Tier III 5.2 nents that are external capital in character are excluded from Ratios the risk cover assets total. To this extent, our internal risk - Tier I capital ratio 12.2% tolerance formula is more narrowly defined than the regula- - Total capital ratio 17.0% tors’ concept.

The risk tolerance capacity and the economic risk capital made available by the Board of Managing Directors of DZ BANK AG These ratios were significantly higher than the prescribed for the DZ BANK Group for the 2004 financial year were as minimum values at all times during 2003. follows:

Managing economic capital adequacy DZ BANK Group’s risk tolerance capacity

In addition to regulatory capital management, we have also in € million 2004 established a system of economic capital management based Risk cover assets 7,500 on our internal risk measurement methods. This factors in not Economic risk capital 5,500 just the risk types defined by the present KWG Principle I, but all the relevant risk categories, in other words default risk, market price risk, operational risk and strategic risk. Default risk and market price risk are quantified using value-at-risk Within DZ BANK and before consolidation, the risk capital approaches. There is still a need for further methodological provided was allocated to the risk categories as follows: improvement, most importantly to ensure the economically adequate measurement of operational and strategic risk. DZ BANK AG’s risk capital according to risk categories

Risk capital Share in € million 2004 Default risk 1,800 69% Market price risk 400 15% Operational risk 275 11% Strategic risk 124 5%

F-140 Our risk management process and operating risk limit systems 3. Default risk are based on this framework.

Risk-capital-based performance management We understand default risk as the risk of loss arising from the failure of a business partner to fulfill its contractual To ensure that the risk capital requirement is also factored obligations. The risk of a loss can however also result from a into the measurement of performance, the Board of Managing downgrade of the counterparty’s credit rating. Directors of DZ BANK has decided to introduce two risk- capital-based performance ratios – RORAC (return on risk Risk strategy adjusted capital) and EVA (economic value added) to assist the management of the bank’s principal business lines. RORAC We aim to engage in lending business primarily as the is a relative return measure that shows the extent to which the subsidiary partner of local cooperative banks. Building on this respective business line has achieved a positive rate of return fundamental business policy decision, since 2003 DZ BANK on the capital tied up by the risk it has entered into. EVA is has been implementing a credit risk strategy that concentrates an absolute performance measure that shows the business on customers that offer a good credit standing and cross- line’s absolute earnings contribution after servicing the share- selling potential. The starting point for applying this risk holders’ return entitlement and therefore identifies the busi- strategy is our risk tolerance capacity. ness line’s economic value contribution to the overall success of DZ BANK. Both ratios are reciprocally reconcilable through MaK-conformant structural and process organisation the application of straightforward logic. The structural requirements defined by the banking regulators We will start reporting these ratios by operating segments are already an integral component of our lending business in 2004. The first stage of the rollout is to use the regulatory organisation. We have implemented forward-looking structural capital requirement as a method of capital allocation. The and processing organisational arrangements that create the changeover to Basel II will significantly, if not completely necessary foundation for the future risk-oriented conduct of harmonise the measurement of economic and regulatory cap- our credit operations. For instance we have implemented a ital. Our objective is to put the main business lines’ economic graduated competences scale that clearly defines credit pro- capital requirement right at the center of their performance cess authorities from application through approval to ongoing management. We will do this by continuing to progressively contract processing including periodic loan monitoring with refine the bank’s internal risk measurement procedures and regular credit quality analysis, the whole system being docu- the essential data foundations they are built on. mented in organisation manuals. Established reporting and review processes help keep the decision makers promptly in- We also see the ongoing strengthening of DZ BANK’s risk cap- formed of changes in the risk structures of our credit portfolios ital management as helping to prepare the ground for us to and provide the basis for the active management of default meet the requirements of Basel II. Under the rubric of pillar 2 risk. especially, the banking regulators will expect us to implement an internal capital adequacy process that encompasses all material risks and meshes seamlessly with other bank-wide management processes.

F-141 Rating systems and pricing in the lending operations Early-warning systems and the work out unit

We are developing credit rating procedures in collaboration DZ BANK has built up a wide range of tools for monitoring with the BVR cooperative banking industry association and the and managing problem credit exposures in the classic lending other cooperative central bank WGZ-Bank. The so-called BVR business. These includes reports that assist the early detection II rating is intended to produce a harmonised rating system for of at-risk cases, the monitoring of exposures at latent risk of use right across the cooperative banking sector. BVR II ratings default, and the observation of acute default-threatened are differentiated by customer segments and we are success- credits. These reports permit highly informative, target-group- ively extending them to cover all relevant customer groups. specific and close-to-real-time reporting to the management In developing these ratings, we have already taken account of levels and Board of Managing Directors. Credit structure the future Basel II requirements. Our goal is that when the analyses are also performed regularly to support the portfolio development work is completed, all the new rating modules managers; these identify risk concentrations in the lending will satisfy the Basel II requirements for internal-ratings-based portfolio. As part of our rating-linked credit monitoring pro- approaches. The credit analysis procedures also provide the cess, we also review the size of the agreed lines as the need basis for the introduction of risk-adjusted pricing in our lend- arises, but always within maximum twelve-monthly intervals. ing operations and for the expansion of our activities in the area of securitising credit risks. Identified problem loans are transferred to our work out unit at a very early critical stage. By providing hands-on “intensive To ensure lending business is profitable we calculate standard care” and applying tailor-made rehabilitation concepts to risk costs. Standard risk costs are intended to cover the critical problem cases, this specialist unit creates the necessary average anticipated losses. The procedure involves estimation basis for rescuing and optimising problem risk positions. coupled with post facto verification, i.e. pre- and post-calculat- ion. The SRC are factored as a cost component into the Portfolio management contribution costing of transactions and are determined using empirical default probabilities. Other factors influencing the The implementation of a portfolio management organisation calculation of standard risk costs are the credit take-up rate structure in 2003 has created the foundation for an aggregat- (utilisation of the agreed facility) and the anticipated loss at ed management level that supplements specific risk manage- the time of the default adjusted for customer-provided collate- ment. The initial focus of our portfolio management effort ral. The aim of this approach is to permit credit-differentiated during 2004 will be to establish a new structural limits system pricing. At the same time we want to ensure that in actuarial that will be centered on the lending operations’ economic terms, our net risk provisioning – principally loan loss provisions risks. Most importantly, this will allow us to adequately inte- and direct write-downs – is covered by the standard risk costs grate the effects of correlated default risks into the operational we receive on a long-term average basis. The integration of management of our credit business. Based on detailed quanti- capital costs into the contribution margin calculation makes it tative analyses and the ongoing assessment of our current ag- possible to identify a risk-sensitive return on tied-up capital. gregated credit risk position, this will also provide us with new opportunities to utilise the increasingly more liquid credit mar- kets to actively manage DZ BANK’s credit portfolio structure.

F-142 As part of our toolkit for actively managing default risk, we Measuring the default risk on trading transactions use the securitisation of receivables to optimise our risk- return ratio. Our ABS primary market activities are additionally Default risk on trading transactions takes the forms of counter- intended to lighten the load on our economic and regulatory party risk and issuer risk. Counterparty risk is made up of capital. We plan to further intensify these activities in the replacement risk and fulfillment risk. future. We will focus on multiseller transactions that will be designed to also provide our local cooperative bank partners To calculate the accepted value of the counterparty risk with a vehicle for risk transfer and thereby improve the spread component of the replacement risk arising from the bank’s of their risks. trading operations, the current market value of the transaction concerned is increased by a so-called “add-on” – i.e. the Managing credit exposures and lines markup for potential market price fluctuations during the life- time of the transaction – based on the global add-on factors We further improved our exposure management system in defined by Principle I. To calculate the exposure, we recognise 2003. Our established credit exposure reports system provides the risk-reducing effects of both netting agreements and quarterly credit portfolio reporting. The report provides a collateral agreements. Automating our collateral management breakdown of the various portfolios by exposure size, country process has enabled us to significantly increase the number assignment, residual term, sector and risk rating. It also of collateral agreements signed compared with 2002 and to analyses the ten biggest exposures by a range of risk para- steadily expand the circle of our collateral counterparties. We meters plan to extend the collateral management process to repo and securities lending transactions. DZ BANK has installed framework limits for individual business partners and borrower units. To support portfolio-level limit management, we also use analyses of selected strategic port- folios by parameters such as country, country group, product type or sector. Early warning processes have been implement- ed as the essential key to timely limit reviews. We have also defined processes for handling overdraft situations.

The basis for assessing country risks is DZ BANK’s own country risk model. Each country’s risk factors – essentially, macroeconomic risk ratios and certain political risk measures – are evaluated by the country risk model on the basis of a scoring approach that automatically generates a country risk index, whose reading determines the assignment of that state to one of the seven country risk classes. The best risk class A expresses a very low long-term risk, while the worst risk class G implies acute danger of losses.

F-143 The accepted value of the counterparty risk component of the We use a centralised DP system to ensure the methodologi- fulfillment risk is the payment owed, in other words the size cally consistent measurement and supervision of the default of the amount the counterparty is due to actually pay to risk from trading transactions. The vast majority of our front- DZ BANK. The fulfillment risk is related to an assumed fulfill- office systems are linked into this software. Linking the collate- ment period. The accepted value of the issuer risk is the sum ral management system to this DP system ensures that collate- of the current market values of the relevant securities. ral provided on OTC derivatives and forex transactions is automatically counted against the default risk arising from Line management of default risk on trading transactions trading transactions. From 2004 onward, we will also be using this software to measure and monitor issuer risk. To limit the default risk arising from trading transactions, we have implemented a volume-oriented limits system. These Analysing the credit portfolio non-product-specific volume limits are further subdivided into maturity bands to help manage replacement risk at the An initial pointer to the inherent riskiness of the lending port- counterparty level. A daily limit is assigned to manage fulfill- folio can be obtained by analysing the risk-weighted assets. ment risk and each issuer is assigned a rating-dependent The risk assets structure as defined by Principle I provides a global or specific limit to help manage issuer risk. clue to the relative risk of the credit portfolio based on at least a rough credit weighting. The changeover to Basel II and the As in the classic lending business, we have also implemented significantly more highly differentiated risk weightings under adequate early warning and overdrawn processes in respect of the internal ratings-based approach means that this sort of the trading operations. Daily reports notify the member of the analysis will in future generate much more risk-sensitive out- Board of Managing Directors responsible for risk monitoring of comes. The Basel committee will make the publication of what any infringement of the counterparty and issuer risk lines. We it calls the “average risk weight” of banks’ credit portfolios also have monthly reports of all open forward transactions mandatory in future under Basel II’s pillar 3. DZ BANK’s with significant counterparties. The Board of Managing Direc- average risk weight has reduced compared with 2002: tors is additionally notified of counterparty risks through the monthly report required under the Minimum Requirements for DZ BANK AG: Average risk weight the Conduct of Trading Transaction by Banks (MaH Report).

Weighted Average risk assets risk weights 12.31.2003 12.31.2003 12.31.2002 € 49.3 billion 43.5% 45.0%

Our work on the economic management of the credit portfolio draws a distinction between the anticipated losses on indivi- dual transactions and unexpected credit portfolio losses. Firstly we pre-empt “creeping” capital erosion by pre-calculating the

F-144 anticipated loss per discrete transaction. We will have already The following summary shows the bank’s risk potential based performed the necessary calculation of the rating-dependent on this internal model: standard risk costs. Secondly we quantify the unforeseen loss on our credit portfolio using a credit value-at-risk approach. Risk potential of DZ BANK AG’s lending business This is the basis for our economic capital adequacy analysis.

in € million 12.31.2003 Since the fourth quarter of 2003 we have been calculating our Anticipated loss 400 credit value-at-risk on the basis of the data for the trans- Unexpected loss 1,511 action-specific reporting date. This involves using our internal rating techniques to assign customers 1-year default probabili- ties. Transaction- and customer-specific loss rates are taken into account and default correlations between customers We also regularly analyse our credit portfolio with regard to assigned according to their sector memberships. These para- a wide range of differentiated discrete criteria such as risk meters permit the direct determination of the anticipated value structures based on our internal rating methodologies, sector and standard deviation of the portfolio loss during the assumed structures or country risk groupings. one-year retention period. The loss distribution quantiles and the economic capital requirement are established using market- The chart below shows the take-up of credit facilities by BVR I standard procedures. credit rating classes, with the ascending order of ratings on the horizontal axis indicating reducing borrower credit quality.

Risk structure of DZ BANK AG’s credit portfolio

Take-up of facilities (in € billion) at December 31, 2003

100 90 80 70 60 50 40 30 20 10 0 Miscell- 1 234567 aneous credit rating classes

F-145 Under DZ BANK AG’s default risk strategy, new lending busi- As a central bank, we invest free liquidity into high-grade ness can be taken on up to a qualifying rating class ceiling of securities. This results in the exceptionally high proportion of 3, provided the other ancillary conditions are fulfilled. Existing claims on other banks in the assets total. Another of our credit exposures that conflict with the credit risk strategy ac- central bank functions is the provision of refinancing resources cordingly need to be reduced. All credit exposures subject to a to the local cooperative banks. This is the second-biggest specific risk provision are assigned to rating classes 6 and 7. assets position in our credit portfolio. We also assist the local The “critical” rating classes 4 through 7 account for 6 percent cooperative banks in major financing deals for their corporate of the total credit volume. The “miscellaneous” heading covers customers on a syndication basis. This and our direct business business partners that did not require a credit quality judg- with domestic and international corporate customers explains ment under the provisions of section 18 KWG or internal rules. the sector composition of the rest of the credit portfolio.

The credit portfolio’s sector structure reflects our role within the cooperative financial services group:

Sector structure of DZ BANK AG’s credit portfolio

Credit volume (in € billion) at December 31, 2003

100 90 80 70 60 50 40 30 20 10 0 Banks 1 Services Retail Real estate Public Manufac- Miscell- Other financial Local sector turing aneous institutions cooperative banks

1 Excluding cooperative banks

F-146 The following overview shows the geographical distribution of our credit portfolio by country risk groups.

The term gross utilisation relates to the types of business de- fined in section 19.1 KWG. We deduct collateral and allow for third-country insurance cover to identify the net utilisation rate. As of December 31, 2003 more than 98 percent of the bank’s net foreign credit volume was assigned to the country risk groups A through C, for which we do not form country risk provisions. The 16 percent year-on-year reduction in the net utilisation results from our conservative risk policy and exchange rate effects. At present the country limits for Ivory Coast, Georgia, Uruguay and Venezuela have been suspended. No new business can be transacted in these countries until further notice.

Country risk structure of DZ Bank AG’s total credit extended

in € million Country limit utilisation CR group Group country 12.31.2003 12.31.2003 12.31.2002 12.31.2002 limit Gross Net Gross Net A Unlimited 48,463 47,061 62,258 56,317 B 2,256 1,011 989 954 960 C 4,617 1,748 1,404 1,853 1,450 D 1,887 1,066 525 1,167 700 E 523 524 133 989 310 F 70 143 29 126 24 G Case by case 70 32 80 9 Unrated 208 23 7 6 0 Offshore Unlimited 3 3 157 157 Total 53,051 50,183 67,590 59,927

F-147 DZ BANK AG: Default risk on trading transactions

12.31.2003 12.31.2003 12.31.2002 12.31.2002 in € billion Lines Utilisation Lines Utilisation Replacement risk 134.5 18.7 131.5 25.4 Fulfillment risk 86.9 9.6 70.9 8.4 Issuer risk 88.3 27.5 109.5 30.0

Analysing default risk on trading transactions Risk provisioning and write-downs

Utilisation was significantly reduced in the area of replace- Under the terms of our internal guidelines, a specific loan loss ment risk over the course of the year, primarily as a result of provision must be formed when a borrower’s unsatisfactory the recognition of close-out netting and collateral agreements financial circumstances or lack of adequate collateral provide to reduce risk. Moreover, the setting of restrictive limits result- reasonable grounds to question the collectibility of the out- ed in a higher utilisation rate while simultaneously reducing standing entitlements when there are indications that the risk. Our conservative limits policy also reduced our exposure borrower will not be able to service the loan long-term. The in the area of issuer risk. The year-on-year increase in fulfill- specific risk provision must comply with the requirements of ment risk was due to the first-time inclusion of cross currency the Commercial Code, and most importantly comply with the swaps. Our participation in the so-called Continuous Linked prudential principle. In other words, it must be sufficiently Settlement initiative, a procedure for the worldwide clearing dimensioned to at least cover the probable loss in the circum- of foreign-currency trading payments, substantially reduced stances of the individual case. This requirement also applies the risk arising from spot and forward foreign exchange trans- for the valuation of collaterals. actions. The table below shows DZ BANK’s provisions for risk compa- red with the preceding year.

DZ BANK AG: Risk provisioning

Specific loan Country risk Global loan Collective loan in € million loss provisions provisions loss provisions loss provisions Position at 12.31. 2002 2,971 95 115 3 Change during 2003 -120 -21 -13 0 Position at 12.31. 2003 2,851 74 102 3

F-148 Summary and outlook 4. Market price risk

During 2003 we took further steps to improve the risk situa- tion in DZ BANK’s credit operations that had been put under By market price risk we understand the risk of loss that can strain in earlier years. The year’s significant milestones include result from detrimental changes in market prices or price- the progress made towards building a high-performance credit determining parameters. Market price risk further subdivides organisation, the improvements in our rating procedures and according to the underlying factors into the following compo- the resulting adoption of risk-sensitive pricing, and the nent categories: interest rate and exchange rate change risk, expansion of our exposure management and risk early detect- share price risk and commodity price risks. ion systems. The success of these initiatives is also reflected in the significantly lower level of new risk provisioning despite Risk strategy the persistently difficult economic environment. Based not least on the modestly positive outlook for the national eco- We engage in proprietary trading in fixed-income, equity and nomy, we expect this positive trend to continue in 2004. forex products primarily to support our customer business. In contrast to “traditional” own-account trading, which centers During 2004 we intend to further refine and extend our expo- on the achieving of profit through risk-taking, we see the sure and line management. A central building block in this pro- bank’s core expertise as the ability to enter into and manage cess will be the implementation of integrated data economies. risk in order thereby to be in a position to offer a customer- We will also complete the coverage of our main customer demand-driven product range. segments by rolling out further BVR II rating modules. We will accompany this by introducing differentiated standard risk Market price risks are inherent in DZ BANK’s customer-account cost and capital cost sets specific to these segments. We will and own-account trading activities. Market price risks also also continue to work on enhancing our credit value-at-risk arise from our own securities issuance. Interest rate change management. risk is the most significant category of market price risk for DZ BANK.

Organisation and responsibilities

We manage market price risk on a distributed basis by port- folios, with the risk and performance responsibilities assigned to the individual portfolio managers. As a routine part of management reporting, the Risk Control unit provides daily, weekly and monthly information on the key market price risk and performance measures to both the members of the Board of Managing Directors responsible for risk management and risk controlling and the portfolio managers themselves.

F-149 Measuring and limiting market price risks Back tests and stress tests

We measure market price risk using the value-at-risk concept We perform back tests to verify the predictive quality of the (VaR). As required by principle I, we calculate the value-at-risk value-at-risk approaches. This involves a comparison of the in our trading portfolios at a 99 percent confidence level actual daily losses and gains with the VaR values calculated and assuming a retention period of ten business days, inclu- using the internal risk model. The model assumption for cal- ding for internal risk management purposes. A value at risk culating the loss potential stipulates that the actual loss must calculation is performed daily for all levels of the portfolio hier- not exceed the simulated VaR on more than one percent of archy with the aid of an historic simulation over a one-year trading days. During 2003, losses in excess of the simulated observation period. We do this using an internal risk model VaR at the entire trading portfolio level were experienced on that has been approved by the German banking regulator three trading days. (BaFin) for calculating the capital backing required for market price risk positions based on VaR – in line with Principle I. The We also run stress tests to factor extreme market movements add-on factor (relevant to the capital backing calculation) re- into the internal risk model. The crisis scenarios tests involve quired by Clause 33 of Principle I is currently 0.6. simulating high-magnitude fluctuations in the risk factors and serve to identify potential losses not shown up by the daily Themarket price risk arising from our non-trading operations VaR approach. These stress tests model both extreme market is essentially dominated by our lending and issuance business movements that have actually occurred in the past and also and by separately assumed strategic positions. This risk is crisis scenarios which – irrespective of the market data history managed through the Central Planning and Strategic Positions – are deemed to be economically relevant. The value losses portfolios. The Treasury division is responsible for operational simulated through this stress testing are used as the basis for risk management in respect of Central Planning. continuously reviewing the adequacy of the internal limits hierarchy. We manage market price risk by means of a limits system that applies to all the sub-portfolios and which sets limits for Analysis of market price risks both the market price risk entered into and also the losses that potentially accumulate over the course of the year.To support The value-at-risk in the trading portfolios amounted at operational risk management within the trading divisions, December 31, 2003 to € 30.0 million (December 31, 2002: during 2003 we introduced a sensitivities- and scenarios- € 27.0 million). The chart shows the changes of the daily oriented limits structure to supplement the existing value-at- value-at-risk of the trading divisions over the course risk-based risk management tools. of 2003:

F-150 Change in DZ BANK AG’s trading divisions’ daily value-at-risk in € million

50 Maximum (43.5) 40

30

20 Mean (20.3)

10 Minimum (8.8) 0 Jan 03 Feb 03 Mar 03 Apr 03 May 03 Jun 03 Jul 03 Aug 03 Sept 03 Oct 03 Nov 03 Dec 03

The increased risk after September is primarily the result of € 400 million, were complied with at all times in 2003. On including general credit spread risks in the risk calculation and December 31, 2003 our all-portfolios correlated market price essentially relates to our holdings of securities for trading risk amounted to € 36 million. purposes. We will continue to maintain the market price risk strategy we Our non-trading portfolios produced the following value-at- have applied in previous years during 2004 as well and will risk results for 2003. continue to base the limits we assign on the bank’s risk tole- rance capacity. As in previous years, our trading operations will The increased risk in the Central Planning portfolio is also pri- continue to focus basically on customer servicing. marily the result of including general credit spread risks in the risk calculation. In recognition of the significance of the bank’s credit products activities, a start was made in 2002 on creating a database of Summary and outlook historic credit spread time series. We integrated general credit- spread risks into DZ BANK AG’s internal risk model during The prescribed framework limits for the assumption of 2003. We plan to integrate the trading divisions’ specific inte- market price risks, expressed as the allocated risk capital of rest rate risks into the internal risk model during 2004.

Value-at-risk in DZ BANK AG’s non-trading portfolios

12.31.2003 2003 2003 2003 12.31.2002 in € million Mean Minimum Maximum Central Planning 8.9 5.7 1.4 12.4 1.5 Strategic Positions 20.7 20.3 11.0 31.3 16.5

F-151 5. Liquidity risk day through to 3 months. The resulting countermeasures to procure additional liquidity or reduce the need for liquidity can then be initiated in a timely manner. By liquidity risk we mean the danger that insufficient funds will be available to fulfill due payment obligations (liquidity As part of the daily liquidity reporting system, the size of the risk as strictly defined) or that funds can only be procured on intraday liquidity position is limited using a traffic light more demanding conditions when needed (refinancing risk). model. The management of intraday liquidity is established Market liquidity risk is created by the holding of financial in- within the framework of the ongoing planning of the accounts struments that cannot be sold or settled at all, or only at a maintained at central banks and other nostro accounts. loss, due to insufficient market depth or disturbances of the market. Our short and medium-term refinancing is built on the prin- ciple of appropriately broad diversification across investor We subdivide liquidity risk into the following three maturity groups, regions and products. Our principal source of refinanc- categories according to the periodicity of the liquidity proces- ing is placements by local cooperative banks. Over the course ses involved: short-term (same business day up to 3 months), of fiscal 2003 we reduced our unsecured refinancing by medium-term (3 months up to 2 years) and long-term (over 2 11 percent. The following table shows the changes in the years). composition of the most important headings of our unsecured short and medium-term refinancing compared with 2002: Risk strategy Unsecured short and medium-term refinancing We manage our liquidity with the objective of ensuring our of DZ BANK AG by investor groups solvency (our capacity to pay) at all times. We also strive to sustainably minimise our liquidity costs. 12.31.2003 12.31.2002 Local cooperative Managing short and medium-term liquidity banks 50% 51% Interbanks 29% 29% The strategic framework requirements for liquidity manage- Corporate customers 16% 13% ment are defined and approved by the Treasury Committee. Commercial paper/certificates of The operational management of short and medium-term deposit 5% 7% liquidity is performed by our Treasury unit and covers both the euro and foreign-currency positions.

To assist liquidity management we use a daily analysis pre- pared by the Controlling unit of the bank’s predicted and unforeseen liquidity flows. We use this report to monitor short- term liquidity risk including the most significant deterministic and stochastic cash-flows. Cover surplus and shortfall posi- tions can be promptly detected in the maturity range from one

F-152 Since our ability to raise unsecured liquidity from the money market is restricted, our liquidity management function per- forms weekly and monthly analyses of the structure of our differentiated liabilities-side resources. These analyses provide management information and are the basis for the active management of our liabilities profile.

In addition to our internal management tools, the bank’s short-term liquidity risk is also limited by regulator-imposed rules. We complied with the requirements of principle II KWG at all times during 2003:

Liquidity ratios of DZ BANK AG as per Principle II

12.31.2003 09.30.2003 06.30.2003 03.31.2003 12.31.2002 Band I (up to 1 month) 1.25 1.26 1.33 1.37 1.33

To act as a liquidity-risk early warning indicator we use an Managing long-term liquidity internally defined planning threshold value of 1.20 for the maturity band I liquidity ratio. This value is based on empirical We use the liquidity process balance tool to manage the experience and is designed to provide a lower limit that bank’s long-term liquidity processes. We draw up a liquidity secures the bank permanent liquidity discretion. Targeted process balance at least once a month and report it to the countervailing measures are triggered as soon as the liquidity Treasury Committee. Strategically undesirable liquidity gaps are ratio reaches or falls below the level of the planning threshold. closed by managing the pattern of our issuance and repur- chases. We also help to manage our liquidity by defining inter- To secure its day-to-day liquidity, the bank’s liquidity manage- nal buying-in rates for liquidity-binding assets and liabilities ment function has a portfolio of qualifying securities for central balancing transactions. bank repurchase operations at its disposal that it can sell at short notice or deposit as security for refinancing transactions Our long-term funding is generated through structured and with central banks. unstructured capital market products that are mostly distribut- ed via local cooperative banks’ own- and third-party securities account operations. We are authorised to raise liquidity by issuing covered bonds – so-called DZ BANK Briefe.

F-153 Managing market liquidity risk Summary and outlook

Market liquidity risk refers to our management of both market The liquidity gaps identified by the liquidity process balance do price risk and liquidity risk. In the context of liquidity risk not constitute potentially existence-threatening incongruences management, the market liquidity of financial instruments is in DZ BANK’s refinancing structure. We do not expect our especially relevant when liquidity-binding positions need to be liquidity risk to increase in 2004. sold to raise short-term funds- for instance, during a liquidity crisis. As we would never expect the entire securities portfolio We are currently in the process of further upgrading our non- to be sold immediately and without loss in such circumstances, trading-related liquidity reporting. As well as completing our we on principle treat as not liquidatable all securities that can- data picture of deterministic cash flows, we intend most im- not be used as refinancing-eligible collateral for open-market portantly to improve our modeling of stochastic cash flows transactions with central banks. and refine our understanding and definition of position limits in respect of unforeseen liquidity processes both in the normal In the context of market price risk management by contrast, scenario and in crisis scenarios. We also hope to further refine market liquidity risk does not relate to the selling of liquidity- our modeling and management of market liquidity risks in binding positions but to the hedging of open market risk 2004. positions. Portfolio managers bear the responsibility for, and manage, hedging-related market liquidity risk. Any losses incurred under this heading count towards the relevant manager’s annual loss limit. Moreover market liquidity risks over the assumed retention period of 10 trading days are included in the value-at-risk calculated for the purposes of supervising market price risks. Significant hedging-related market liquidity risks only exist in relation to certain credit-risk- laden securities and credit derivatives positions. These are mainly asset backed securities held on the basis of strategic considerations.

F-154 6. Operational risk The fundamental management responsibility for operational risks has been distributed to the individual organisation units. Specified universal issues, such as personnel or IT manage- We have made a start in 2003 on a large-scale project to ment, are centrally supported by specialised units. To preserve design and implement sophisticated tools for controlling and the necessary separation of functions, a dedicated unit has managing operational risks. This involves overhauling all our been set up to perform independent controlling of operational existing methodologies and tools. risk; this unit is charged with developing and implementing methodologies for the controlling and management of opera- Basing our approach closely on the banking regulators’ defini- tional risks and with supervising risk management. tion, we understand operational risk as the threat of losses caused through human actions, technological failures, process Management tools or project management weaknesses or external events. This definition includes legal risks, but excludes strategic risks and We gather loss data so that we can promptly analyse historic reputation risks. loss events in order to be able to identify trends in the develop- ment of risks and concentrations of operational risks in specific Risk strategy operating units. We are also using the collected loss data to build up the necessary data history to quantify operational Our strategy for handling operational risk is based on the risks in future. bank’s risk tolerance capacity. At present the implementation of the risk strategy is predominantly qualitative in nature since In order to identify all operational risks and create the maxi- our risk quantification system is still under development. mum possible transparency as to our risk situation, we have implemented a self-assessment process. This involves Organisation and responsibilities experts from the responsible units making judgments on their operational risk with the aid of prescribed questionnaires. Our functional organisation model provides a key point of reference for all our other tools, in that it comprehensively Finally we deploy a system of risk indicators based on describes the roles and responsibilities of all process parti- prescribed thresholds combined with a traffic light system that cipants. The model distinguishes four top-level dimensions: enables us to draw conclusions about trends and thereby functions as an early warning screen. - Distributed risk management - Central risk management - Independent risk controlling - Internal Audit

F-155 7. Strategic risk As a result of important decisions of principle to reposition DZ BANK as a central bank, as a business bank and as a group holding company, significant steps were taken during 2003 to By strategic risk we understand the danger of losses that result limit and actively manage our strategic risks. Substantial stra- from management decisions on the business-policy positioning tegic risks arising from the merger that created DZ BANK were of DZ BANK. Strategic risks are realised when important chan- finally eliminated during the 2003 financial year.Among other ges in environmental conditions or market trends are not achievements, we have realised almost all the synergy poten- recognised early enough or their impact is wrongly assessed tial that we predicted on the non-personnel costs front, and and as a consequence disadvantageous fundamental decisions we have largely completed the optimisation of our personnel are made that are then difficult to reverse. structure.

An important sub-aspect of strategic risk is business risk. By this we understand the potential for losses that results from 8. Summary the fact that falling revenue cannot be fully compensated by equivalent cost reductions. This risk is also referred to as fixed cost cover risk or cost overhang risk. We have made prelimi- DZ BANK has consistently operated within the boundaries of nary quantifications of our business risk using an earnings-at- our risk tolerance capacity during 2003. We will ensure the risk approach coupled with intra-sector comparisons. The con- same is true in 2004. Our economic risk-taking is commensu- struction of suitable methods for measuring strategic risks has rate with our capital backing. We also satisfied, and continue been flagged as a bolt-on development priority for our Risk to satisfy, the regulatory capital adequacy requirements at all Control unit. There are still no industry standards for quantify- times; our capital ratios were and are substantially higher than ing strategic risk. the regulators’ minimum standards.

The management of strategic risks is the primary role of the We are deploying modern management and monitoring tools Board of Managing Directors of DZ BANK. Our present system in every area of risk, and we will continue to progressively for managing strategic risk relies on the forward-looking refine and improve them. We will be guided in this process evaluation of success factors coupled with the definition from by the future Basel II requirements for risk management. these of performance targets for the business lines. This is founded on a revolving planning process that periodically up- dates the strategic multi-year plan and the annual operating plans. The core components of the planning process are the observation of market trends – most importantly in the area of customers, products and competitors – and environmental conditions, such as changes in the legal framework, plus critical analyses of our own strengths and weaknesses profile. A management information system monitors the achievement of targets.

F-156 III. Outlook DZ BANK’s administration costs are set to fall again, assuming the measures we are taking to boost the cost effectiveness of the Group’s processes and functions deliver the anticipated Using our combined strength to reap synergies and make positive effects. Thanks to our high-throughput central proces- the most of the economic upturn sing service providers such as Transaktionsinstitut für Zahlungsverkehrsdienstleistungen and dwpbank, the local We see more favorable economic omens for the 2004 financial cooperative banks will also share the benefit of these effects. year.We have developed a wealth of new products and simul- taneously regrouped both processes and resources at the We are convinced of the effectiveness of the parent bank’s parent bank and across the DZ BANK Group during the year and the Group’s upgraded credit management systems. With under report specifically to equip ourselves to actively exploit – new business now margin and risk-oriented, we have built a together with our partners in the integrated cooperative good foundation for further reducing our risk provisioning financial services sector – the opportunities the market is costs. We will continue to optimise our corporate portfolio in about to offer us. In this light, we expect 2004 to bring 2004 in line with our defined strategy. improved results across the board. To summarise these economic trends and this internal progress This outlook is based on the anticipated brightening of the in a sentence, we believe the 2004 financial year will bring economic climate this year.After a year of economic stagna- improved trading and results for DZ BANK and the DZ BANK tion in 2003 when consumer demand and corporate invest- Group and we are confident – especially in the light of our ment both contracted, we are confident that 2004 will see a subsidiary role within the integrated cooperative financial slightly stronger contribution from the domestic component services sector – that all our business partners are also set and a substantially stronger contribution from the export com- to share in this positive trend. ponent of the German economy. The consequential effects of the government’s program of legal reforms coupled with a cyclical recovery of corporate investment are likely to moderately stimulate overall domestic economic output.

Our chosen focus on the integrated cooperative financial ser- vices sector requires us both to continuously develop our pro- ducts and most importantly to provide effective support for the local cooperative banks’ sales organisation. We expect the product innovations that the Group companies put so much effort into last year and some of which will only come to mar- ket this year – including DZ BANK’s new business customer products – to produce significant volume growth that should help the cooperative banking sector to increase our market share. Moreover, boosting the efficiency of our sales effort is a key focus of our drive to harvest synergies between the constituents of the cooperative sector, and we are confident of further positive progress on this front in the current year.

F-157 Report of the Supervisory Board

The Supervisory Board was also kept informed about the bank’s and the Group’s risk situation and the refinement of their systems and procedures for controlling risks, especially market price and default risks and the other risks typical of the banking industry. Significant individual business transactions were submitted to the Supervisory Board for approval.

To enable it to perform its duties and comply with the statu- tory requirements, the Supervisory Board formed a Personnel Sub-committee, an Audit Sub-committee, a Credit and Invest- ments Sub-committee and a Mediation Sub-committee pur- suant to section 27.3 of the German Codetermination Act. The first three sub-committees met on several occasions. The full Supervisory Board was kept regularly informed about the Dr Christopher Pleister activities of its sub-committees. Chairman of the Supervisory Board of DZ BANK AG Outside of formal meetings, the chairman of the Supervisory Board and the chairmen of the Audit and the Credit and As required by the law and the Articles of Association, the Investments Sub-committees were kept informed of key Supervisory Board and its sub-committees have monitored the decisions and exceptional business occurrences through conduct of the business by the Board of Managing Directors regular discussions with the chairman of the Board of Manag- during the 2003 financial year and have discussed and voted ing Directors. on the proposed transactions requiring their consent. Dr Rainer Märklin resigned from the Supervisory Board with The Supervisory Board was kept regularly informed by the effect from the end of the ordinary general meeting of share- Board of Managing Directors about the situation and progress holders held on May 28, 2003. Mr Helmut Gottschalk was of the bank and the Group and the general trend of trading. elected as a new member of the Supervisory Board. The Supervisory Board held a total of six meetings whose primary focuses, in addition to the in-depth discussion of Dr Thomas Duhnkrack was appointed as a full member of the current business developments, were the future business policy Board of Managing Directors with effect from January 1, 2003. of the bank including its principal strategic and organizational Mr Uwe E. Flach and Mr Peter Dieckmann resigned from the dimensions, and key issues concerning the integrated co- Board of Managing Directors of DZ BANK as of December 31, operative financial system. 2003.

F-158 Deloitte&Touche GmbH, Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, and Ernst&Young AG, Wirtschafts- prüfungsgesellschaft, Frankfurt am Main, jointly audited the bookkeeping records, annual financial statements and management report of DZ BANK for the year to December 31, 2003 presented by the Board of Managing Directors as well as the consolidated financial statements and the Group manage- ment report, and found them to be in conformance with the statutory regulations. The auditors accordingly issued an un- qualified audit certificate in both cases. The audit reports were submitted to the members of the Supervisory Board and com- prehensively examined and discussed. The Supervisory Board is in agreement with the findings of the auditors.

Representatives of the auditors attended the meeting of the Supervisory Board called to approve the annual financial state- ments in order to report in detail on the key audit outcomes. They also made themselves available to the members of the Supervisory Board to answer any queries.

The Supervisory Board and the Audit Sub-committee chaired by Mr Rolf Hildner have examined in detail the annual and consolidated financial statements and management reports for DZ BANK and the DZ BANK Group as well as the proposed ap- propriation of profits. We have no objections to raise. Frankfurt am Main, April 14, 2004 At its meeting on April 14, 2004 the Supervisory Board ap- proved the annual financial statements for the year to Decem- DZ BANK AG ber 31, 2003 prepared by the Board of Managing Directors, Deutsche Zentral-Genossenschaftsbank, which are therefore formally adopted. The Supervisory Board is Frankfurt am Main in agreement with the proposal from the Board of Managing Directors for the appropriation of the available profits.

The Supervisory Board thanks the Board of Managing Directors and all employees for their exceptional personal commitment Dr Christopher Pleister and efforts on behalf of the bank and the Group in 2003. Chairman, Supervisory Board

F-159 Annual Financial Statements of DZ BANK AG

Balance Sheet of DZ BANK AG as at December 31, 2003: Assets

in € million (Notes) 12.31.2003 12.31.2002 1. Cash reserve 317 221 a) Cash on hand 5 8 b) Balances with central banks 312 213 of which: with Deutsche Bundesbank 296 (188) 2. Debt instruments of public-sector entities and bills of exchange eligible for refinancing at national central banks 57 17 Treasury bills as well as non-interest-earning treasury notes and similar debt instruments of public-sector entities 57 17 of which: eligible for refinancing at Deutsche Bundesbank 51 (2) 3. Placements with, and loans and advances to, other banks (3, 5) 75,948 80,364 a) Repayable on demand 2,749 2,531 b) Term deposits and loans 73,199 77,833 4. Loans and advances to non-bank customers (3) 26,044 32,278 of which: secured by mortgages 873 (1,029) local authority loans 1,793 (2,121) 5. Bonds and other fixed-interest securities (3, 11) 53,343 51,716 a) Money market instruments issued by 5 60 other issuers 5 (60) of which: qualifying as repo collateral at Deutsche Bundesbank 0 (20) b) Bonds issued by 51,050 49,031 ba) public sector issuers 4,109 (4,355) of which: qualifying as repo collateral at Deutsche Bundesbank 3,523 (3,870) bb) other issuers 46,941 (44,676) of which: qualifying as repo collateral at Deutsche Bundesbank 32,457 (30,309) c) Own bonds 2,288 2,625 Nominal volume 2,205 (2,539) 6. Equity shares and other variable-yield securities (11) 1,424 6,501 of which: own participation shares 2 (25) Nominal value 3 (24) 7. Participations (11, 12) 423 300 of which: in banks 304 (187) in financial services institutions 3 (3) 8. Shares in related companies (11, 12) 9,185 8,292 of which: in banks 1,557 (1,196) in financial services institutions 26 (34) 9. Assets held on trust basis (7) 1,824 1,857 of which: trust loans 447 (470)

F-160 in € million (Notes) 12.31.2003 12.31.2002 10. Equalization claims against government agencies including claims converted into bonds 133 221 11. Intangible assets (12) 0 0 12. Property and equipment (12) 212 321 13. Own equity or partnership shares (13) 24 24 Nominal value 10 (10) 14. Other assets (15) 2,519 2,274 15. Accrued income and deferred expenses (16) 517 376 Total Assets 171,970 184,762

F-161 Balance Sheet of DZ BANK AG as at December 31, 2003: Equity and Liabilities

in € million (Notes) 12.31.2003 12.31.2002 1. Deposits from other banks (3, 5) 97,912 106,647 a) Repayable on demand 25,810 28,093 b) Fixed-term or agreed notice 72,102 78,554 2. Amounts owed to other depositors (3) 30,451 29,584 a) Saving deposits 0 0 aa) With three month notice term 0 (0) ab) With more than three month notice term 0 (0) b) Other liabilities 30,451 29,584 ba) Repayable on demand 5,434 (5,294) bb) Fixed-term or agreed notice 25,017 (24,290) 3. Liabilities in certificate form (3) 26,051 31,113 a) Issued bonds 23,936 27,914 b) Other certificated liabilities 2,115 3,199 of which money market instruments 2,115 (3,199) 4. Liabilities arising from trust operations (7) 1,824 1,857 of which: trust loans 447 (470) 5. Other liabilities (17) 3,190 3,093 6. Accrued expenses and deferred income (16) 324 350 7. Provisions 1,240 1,214 a) Provisions for pensions and similar obligations 454 439 b) Provisions for taxes 38 101 c) Other provisions 748 674 8. Subordinated liabilities (18) 2,722 2,649 9. Participatory capital (19) 2,178 2,205 of which: maturing within two year 172 (175) 10. Fund for general banking risks 1,428 1,428 11. Capital and reserves (14) 4,650 4,622 a) Subscribed capital 2,879 2,879 b) Capital reserve 803 803 c) Surplus reserves 913 888 ca) Statutory reserve 9 (5) cb) Reserve for own shares 24 (24) cc) Other surplus reserves 880 (859) d) Cumulative earnings 55 52 Total Equity and Liabilities 171,970 184,762

F-162 in € million (Notes) 12.31.2003 12.31.2002 1. Contingent liabilities 3,188 4,921 Liabilities arising from guarantees and warranties provided* 3,188 4,921 2. Other liabilities 11,277 12,881 Irrevocable credit commitments 11,277 12,881

* See also disclosure in Note 31 “Other financial obligations”

F-163 Income Statement of DZ BANK AG for the period from January 1 to December 31, 2003

in € million (Notes) 2003 2002 1. Interest income from (22) 5,096 6,383 a) Lending and money market operations 3,844 4,926 b) Fixed-interest securities and government-inscribed debt 1,252 1,457 2. Interest expense 4,870 226 6,166 3. Current income from 429 893 a) Equity shares and other variable-yield securities 183 262 b) Participations 6 18 c) Shares in associated companies 240 613 4. Income from profit pools and profit transfers or profit-sharing agreements 98 113 5. Commission income 495 447 6. Commission expense 210 285 193 7. Net income form financial transactions (22) 322 205 8. Other operating income (24) 105 264 9. General administrative expenses 839 862 a) Personnel expenses 435 455 aa) Wages and salaries 331 (357) ab) Compulsory social security contributions and expenses for pension benefits and welfare 104 (98) of which: for pensions provision 57 (48) b) Other administrative expenses 404 407 10. Depreciation and write-downs on tangible and intangible assets 83 89 11. Other operating expenses (25) 25 63 12. Depreciation and write-downs on loans and advances and certain securities, plus additions to provisions on lending business 371 1,709 13. Amortisation of participations,shares in related companies and revaluation of securities treated as fixed assets (26) 99 – 14. Income from write-ups on participations, shares in related companies and securities treated as fixed assets – 1,094 15. Expenses from the assumption of losses 43 69 16. Result of ordinary operations 5 248

F-164 in € million (Notes) 2003 2002 17. Exceptional income (28) 22 2 18. Exceptional expenses (27) 78 220 19. Net exceptional result -56 -56 -218 20. Taxes on income (29) -123 -29 21. Other taxes not included under “Other operating expenses” heading -8 -131 4 22. Net income on period 80 55 23. Prior year's earnings carried forward 0 0 24. Withdrawls from surplus reserves – 5 from other surplus reserves – 5 25. Allocations to surplus reserves 25 8 a) to statutory reserve 4 3 b) To own-shares reserve – 5 c) To other surplus reserves 21 – 26. Cumulative earnings 55 52

F-165 Notes to the financial statements of DZ BANK AG for the year to December 31, 2003

Basis

The financial statements of DZ BANK AG for the year ending December 31, 2003 have been prepared in accordance with the requirements of the German Commercial Code (HGB) and the Order on the Accounting of Credit Institutions and Financial Services Institutions (RechKredV). At the same time, the financial statements are in compliance with the provisions of Germany’s Joint Stock Corporations Act (AktG), the DG BANK Transformation Act and DZ BANK AG’s own statutes.

All monetary values are shown in millions of euro (€ m). For the sake of clarity, certain balance sheet and income statement headings have been aggregated.

Separate notes have been prepared for DZ BANK AG and the DZ BANK Group.

1| Presentation and Claims on banks and non-bank customers (placements, loans and advances) are shown at their nominal valuation methods value or cost of acquisition. Differences between their nominal value and disbursement value are shown under accrued and deferred items. Note receivables, registered bonds and lease receivables purchased from third parties are shown at purchase cost. Without exception, all receivables fall under current assets and are valued strictly at the lower of cost or market. The total shown for loans and advances to non-bank customers includes registered bonds and lease receivables assigned to the bank’s investment book that are matched by corresponding hedge transactions that respectively constitute distinct valuation units.

Appropriate provision at the level of the anticipated loss was made in respect of all identifiable credit and country risks. Latent risks in the lending business are covered by global provisions, applied in accordance with the responsible authority’s rules for the tax recognition of general provisions by banks. The basis of calculation is the average actual loan loss incurred in the preceding five financial years.

All securities held as current or fixed assets were valued in the reporting period strictly at the lower of cost or market. In the case of specifically identified securities held as fixed assets or as part of the liquidity reserve, their valuation has been linked with corresponding hedging transactions.

F-166 Financial trading transactions including note loans and registered bonds were valued at market prices or their synthetic valuations at the end of the year.Where standardized, exchange-traded products are con- cerned, the valuation is based on the end-of-year closing prices of the relevant stock exchanges. Swap trading positions were valued on the basis of the prevailing yield curves using the present value method.

Following a presentation policy change, price results on the premature redemption of issued note loans are now shown as part of the interest surplus in order to make clear their economic relationship with the results of closing the corresponding hedge transactions.

Current interest payments on swaps (including accrued and deferred items) and price gains and losses on note loans and registered bonds held for trading purposes were shown in the income statement under the heading of net income from financial activities. Those trading transactions in foreign exchange, securities and derivatives which are subject to the same market price change risk or credit risk (interest, exchange rate and other price risks plus spread risks) are also aggregated for accounting purposes into cross-product portfolios that form part of the bank’s harmonized risk management system.

Within a portfolio, unrealized valuation losses are offset against unrealized valuation gains. Furthermore, realized losses are offset against residual valuation gains within the same portfolio provided the required criteria are fulfilled. A balancing item is included in the balance sheet under the other assets heading to the value of the unrealized profits offset against realized losses.

To ensure the accurate relation of earnings to operating units, these financial statements show the interest and dividend income from securities held for dealing purposes and for the first time from repurchase agree- ments, and the refinancing expenses assignable to dealing transactions, as part of net trading income.

Shares in related companies and participations are shown at cost of acquisition or updated book value.

The revaluation of assets and liabilities acquired from Genossenschaftsbank Berlin (GBB) in 1990 resulted in a claim for compensation against the currency conversion compensation fund (Ausgleichsfonds Währungs- umstellung) under the terms of section 40 of the Accounting Act (DM-Bilanzgesetz – DMBilG). The values shown for these items are subject to future adjustment under the terms of section 36 of the same act.

Intangible fixed assets are capitalized at cost of acquisition or production. Tangible fixed assets are valued at cost of acquisition or production less regular depreciation over their expected service life, based in all cases on the values shown in the tables published by the German tax authorities. Minor-value assets are written off in full in the year of acquisition.

F-167 Operating equipment and systems, including office furniture, is depreciated on a straight-line basis. Depreciation is taken for the full year on acquisitions made in the first half of the year and for a half-year on additions in the second half of the year.

Liabilities are shown at their repayment value. The difference between their nominal and actual amounts has been taken to accruals and deferrals.

Provisions were made in the amount required on the basis of reasonable commercial judgment. Unrealized losses on uncompleted transactions aggregated together with other trading transactions in cross-product portfolios, are only shown as separate provisions in the commercial financial statements to the extent that they are not offset by unrealized profits.

Pension reserves are calculated according to actuarial principles. Current pension commitments to retired pensioners and contributions on behalf of ex-employees with pension entitlement are shown at their pro- rata value. The pension entitlements of still-active future beneficiaries are shown in accordance with section 6a of the Income Tax Act (Einkommenssteuergesetz – EStG). To ensure that current pension obligations are covered from independent resources, a substantial proportion of the current annuity obligations were transferred in 2003 to DZ BANK Mitarbeiter-Unterstützungseinrichtung GmbH.

The value of the fund for general banking risks required by section 340g HGB is unchanged at € 1,428 million. Prudential reserves have also been created pursuant to section 340f HGB.

Expense from financial investments is set off against corresponding income; in the same way expense and income from the valuation of lending business and securities in the liquidity reserve are shown net.

F-168 2| Currency translation In the financial statements of DZ BANK AG, foreign book assets, liabilities and securities holdings are trans- lated into euro using the European Central Bank’s official “ESCB reference rate” on the balance sheet date. Currency translation is fully in harmony with section 340h HGB and Statement 3/95 of the German Institute of Public Accountants (IDW).

Where specifically covered, shares in related companies and participations denominated in foreign curren- cies are translated using the official “ESCB reference rate” at the valuation and accounting date in line with section 340h HGB. “Specifically covered” refers to all investment assets internally released from Treasury to the care of the forex dealing unit for the purposes of managing currency risks.

Sufficient unrealized profits from unsettled foreign currency forward transactions in the trading portfolio are offset against unrealized losses in the same currency across all maturities to cancel out said losses. The remaining unrealized profits are offset against the realized losses from currency translation until exhausted, provided the required criteria are fulfilled. A balancing item is included in the balance sheet to the value of the unrealized profits offset in this way. Provisions for impending losses from unsettled transactions are made in the commercial accounts in respect of the remaining unrealized losses. No entry is made in respect of the balance of any unrealized profits remaining after offsetting.

Where foreign currency forward transactions were entered into for the purpose of hedging interest-bearing assets and liabilities, then their swap income and expense are treated as interest income or expense, reflect- ing their interest character.

F-169 Notes to the Balance Sheet

3| Maturity structure of in € million 12.31.2003 12.31.2002 asset positions Claims on other banks - less than 3 months 25,083 27,860 - between 3 months and 1 year 10,603 10,723 - between 1 year and 5 years 19,723 19,659 - more than 5 years 17,790 19,591 Claims on non-bank customers - less than 3 months 4,227 5,364 - between 3 months and 1 year 3,594 4,499 - between 1 year and 5 years 8,232 10,030 - more than 5 years 7,254 8,763 - no fixed term 2,737 3,622 Bonds and other fixed-interest securities - maturing in the subsequent year 13,519 12,374

F-170 3| Maturity structure of in € million 12.31.2003 12.31.2002 liability positions Liabilities to other banks with an originally agreed term or notice period - less than 3 months 33,260 38,083 - between 3 months and 1 year 6,283 8,288 - between 1 year and 5 years 15,846 16,045 - more than 5 years 16,713 16,138 Liabilities to non-bank customers a) Savings deposits with an agreed notice period of more than three months - between 3 months and 1 year 0 0 - between 1 year and 5 years 0 0 b) Other liabilities with an agreed term or notice period - less than 3 months 9,013 7,569 - between 3 months and 1 year 1,739 1,268 - between 1 year and 5 years 4,205 4,286 - more than 5 years 10,060 11,167 Liabilities in certificate form a) Bonds issued - maturing in the subsequent year 7,524 7,957 b) Other certificated liabilities - less than 3 months 1,581 2,631 - between 3 months and 1 year 534 568

F-171 4| Related companies and Claims and liabilities in respect of related companies: companies with which a participation relationship in € million 12.31.2003 12.31.2002 exists Placements with, and loans and advances to, other banks 8,639 11,323 Loans and advances to non-bank customers 2,256 1,709 Bonds and other fixed-interest securities 3,985 3,343 Amounts owed to other banks 5,083 4,587 Amounts owed to non-bank customers 1,671 1,280 Certificated liabilities 15 208 Subordinated liabilities 320 24

Claims and liabilities in respect of companies with which a participation relationship exists:

in € million 12.31.2003 12.31.2002 Placements with, and loans and advances to, other banks 18,972 17,996 Loans and advances to non-bank customers 1,118 1,099 Bonds and other fixed-interest securities 180 3,246 Amounts owed to other banks 16,725 19,336 Amounts owed to non-bank customers 724 328 Certificated liabilities 2,397 5,477 Subordinated liabilities 88 63

A complete list of the investment holdings is lodged in the Commercial Register in Frankfurt am Main. A summary of the principal holdings is available on request from DZ BANK AG direct.

F-172 5|Claims and liabilities The reported claims and liabilities totals include the following sums due from or to affiliated banks: in respect of affiliated banks in € million 12.31.2003 12.31.2002 Due from affiliated banks 37,252 37,419 of which: from cooperative central banks 434 82 Due to affiliated banks 36,351 39,619 of which: to cooperative central banks 36 27

6|Subordinated assets Subordinated assets are included in the following headings:

in € million 12.31.2003 12.31.2002 Placements with, and loans and advances to, other banks 316 305 Of which: due from related companies 16 – due from participation-relationship companies 16 – Loans and advances to non-bank customers 157 197 Of which: due from participation-relationship companies 26 – Bonds and other fixed-interest securities 567 844 Of which: due from related companies 3 0 Shares and other variable-yield securities 291 400 Of which: due from related companies 72 72 due from participation-relationship companies – 7

7 | Trust operations The total value of the bank’s trust assets and liabilities is apportioned between the following assets-side and liabilities-side headings:

in € million 12.31.2003 12.31.2002 Deposits with, and loans and advances to, other banks 446 469 Loans and advances to non-bank customers 1 1 Participations 1,377 1,387 Trust assets 1,824 1,857 Amounts owed to other banks 447 470 Amounts owed to other depositors 1,377 1,387 Trust liabilities 1,824 1,857

F-173 8| Foreign-currency Values of assets and liabilities in foreign currencies: positions in € million 12.31.2003 12.31.2002 Assets 19,133 24,684 Liabilities 17,771 21,354

9| Business subject to The book value at December 31, 2003 of the assets committed to sale and repurchase operations was repurchase agreements € 13,454 million (2002: € 14,879 million).

10 | Assets assigned as security Assets with the value stated below were assigned in respect of the following liabilities:

in € million 12.31.2003 12.31.2002 Amounts owed to banks 31,337 33,997 Amounts owed to other depositors 2,881 1,869

A total of € 2,278 million (2002: € 2,696 million) was additionally deposited as security for stock exchange forward transactions and under the terms of collateral agreements for OTC trading transactions.

11 | Securities eligible for Listed securities as a proportion of the total securities eligible for stock exchange listing in each category: stock exchange listing in € million 12.31.2003 12.31.2002 Bonds and other fixed-interest securities eligible for stock exchange listing 53,343 51,716 of which: listed 47,174 46,160 Shares and other variable-yield securities eligible for stock exchange listing 1,283 1,472 of which: listed 697 806 Participations eligible for stock exchange listing 154 138 of which: listed 154 138 Shares in related companies eligible for stock exchange listing 1,974 1,813 of which: listed 316 291

F-174 12 | Fixed asset structure and movements

Cost of acquisition/production Depreciation Residual book value at 01.01.2003 Additions Disposals Reclass. Revalution Current Cumula- 12.31.2003 12.31.2002 in € million year tive I. Intangible fixed assets 0 0 0 0 0 0 0 0 0 II. Tangible fixed assets 1,015 53 240 -40 0 83 576 212 321 1. Land and buildings 139 3 55 -39 0 2 17 31 95 2. Equipment 876 50 185 -1 0 81 559 181 226 Net changes III. Financial assets 25,011 477 25,488 24,603 1. Participations 395 28 423 300 2. Shares in related companies 8,329 856 9,185 8,292 3. Securities forming part of fixed assets 16,287 -407 15,880 16,011

The book value of the land and buildings in use by DZ BANK AG in the course of its own operations amounted on December 31, 2003 to € 22 million (12.31.2002: € 83 million).

F-175 13 | Own shares At the accounting date, DZ BANK AG held a total of 3,665,569 of its own registered unit shares represent- ing in total € 9,530,479.40 or 0.3311 percent of the company’s share capital.

Of this total, 200,000 shares had passed from the federal government to DG BANK AG on August 19, 1998 under the terms of section 2.2 of the DG BANK Transformation Act. This is equivalent to € 520,000.00 or 0.0181 percent of the company’s share capital. DG BANK AG had also acquired a further 293,000 of its own shares on September 30, 1999 under the powers of a time-limited authority to acquire its own shares, approved by the general meeting held on June 15, 1999 and effective through October 31, 2000. This is equivalent to € 761,800.00 or 0.0265 percent of the company’s share capital. Subsequently, DG BANK AG acquired a further 1,220,000 of its own unit shares on November 15, 1999. This is equivalent to € 3,172,000.00 or 0.1102 percent of the company’s share capital.

On the strength of the resolution passed by the extraordinary general meeting held on August 16, 2001 to approve a time-limited authority, effective through January 31, 2003, permitting DZ BANK AG to acquire its own shares for purposes other than securities trading (section 71.1.8 AktG) up to an aggregate ceiling of 10 percent of the current share capital, DZ BANK AG acquired a further 5,082 of its own shares on Decem- ber 28, 2001 equivalent to € 13,213.20 or 0.0005 percent of the company’s share capital. This purchase was in connection with the partial consolidation of DZ BANK AG’s circle of shareholders following the merger.

On the basis of the aforementioned resolution DZ BANK AG in January 2002 additionally acquired 475,648 own shares equivalent to € 1,236,684.80 of the registered capital and a share of the registered capital of 0.0430 percent. In February 2002 DZ BANK AG acquired 536,772 own shares equivalent to € 1,395,607.20 of the registered capital and a share of the registered capital of 0.0485 percent. In March 2002 DZ BANK AG acquired 859,848 own shares equivalent to € 2,235,604.80 of the registered capital and a share of the registered capital of 0.0777 percent. In April 2002 DZ BANK AG acquired 75,219 own shares equivalent to € 195,569.40 of the registered capital and a share of the increased registered capital of 0.0068 percent. These purchases were effected in connection with the partial consolidation of DZ BANK AG’s circle of share- holders.

F-176 14 | Changes in capital The subscribed capital of DZ BANK AG consists of its registered capital of € 2,878,427,240.00. The structure Company’s subscribed capital is divided into 1,107,087,400 registered shares each conveying a notional proportional entitlement in the Company’s share capital of € 2.60.

The parent bank’s equity capital evolved as follows during the year under report:

01.01.2003 Additions/ 12.31.2003 in € million (-)Withdrawals Subscribed capital 2,879 2,879 Capital reserve 803 803 Surplus reserves 888 913 - Statutory reserve 5 4 9 - Reserve for own-shares 24 – 24 - Other surplus reserves 859 21 880 4,570 25 4,595 Cumulative profit 52 55 - Appropriation/distribution from prior year 52 -52 – - Cumulative profit 2003 – 55 55 4,622 28 4,650

The general meeting held on August 16, 2001 authorized the Board of Managing Directors, with the consent of the Supervisory Board, to increase the share capital of DZ BANK AG by up to € 50 million in total by issuing shares against cash contributions or contributions in kind on one or more occasions through to July 31, 2006. Provided the Supervisory Board agrees, the Board of Managing Directors may exclude the right of existing shareholders to subscribe to either a capital increase against cash contributions or a capital increase against contributions in kind where the capital increase is intended to finance the issue of new staff shares, the acquisition of companies or equity stakes in companies, or to make available equity interests in the bank to underpin strategic partnerships. Furthermore the Board of Managing Directors is empowered, with the consent of the Supervisory Board, to exclude the right of existing shareholders to subscribe in re- lation to fractional amounts (“Authorized capital I”).

The general meeting also authorized the Board of Managing Directors, with the consent of the Supervisory Board, to increase the share capital of DZ BANK AG by up to € 100 million in total by issuing shares against cash contributions on one or more occasions through to July 31, 2006. The Board of Managing Directors may, with the consent of the Supervisory Board, exclude the right of existing shareholders to subscribe in relation to fractional amounts (“Authorized capital II”).

The Board of Managing Directors did not make use of these authorities during the year under report.

F-177 15 | Other assets The “Other assets” heading most importantly reports valuation gains from trading transactions after the offset of realized losses (€ 1,168 million) plus premiums for acquired option rights (€ 958 million).

16 | Accruals The asset and liability side accruals and deferrals headings include premiums/discounts totaling as follows: and deferrals in € million 12.31.2003 12.31.2002 Discount on payables 292 149 Discount on receivables 119 132 Premium on payables 40 37

17 | Other liabilities This heading includes most importantly deferred option premiums received totaling € 3,005 million.

18 | Subordinated Out of the total volume of subordinated liabilities as at December 31, 2003, € 2,420.2 million is recognized liabilities as qualifying (liable) capital within the definition of section 10.5a of the German Banking Act (KWG) and € 5.8 million as third-tier capital within the definition of section 10.7 KWG.

The subordinated borrowings do not involve any early redemption obligation. The rights arising from these liabilities (including entitlement to interest) are secondary to the non-subordinated claims of all the issuer’s other creditors in the event of bankruptcy or liquidation.

There is no agreement or intention to convert these funds to capital or another form of debt.

The subordinated liabilities have an average interest rate of 5.17 percent (2002: 6.06 percent) and initial terms of between 4 and 30 years.

The overall figure includes one single item which exceeds 10 per cent of the aggregate value of the sub- ordinated liabilities. This € 300 million registered bond pays interest at the 3-month EURIBOR rate and matures in 2033, though the issuer has an annual call option first exercisable in 2008.

In the year under review, the liabilities shown under this heading resulted in expense amounting to € 135 million at DZ BANK AG (2002: € 171 million).

F-178 19 | Participatory capital Out of the total volume of participatory capital as at December 31, 2003, € 1,968.2 million is recognized as qualifying (liable) capital within the definition of section 10.5 of the German Banking Act (KWG).

Participatory capital participates to the full extent in potential losses. Interest payments are only made subject to the availability of unappropriated profit. Participation certificate holders’ entitlements to repayment of their capital are subordinate to the rights of other creditors.

The following series of bearer participation certificates have been issued:

Year of issue Nominal amount Interest rate Due in € million in percent 1984 133 8.50 2011 1987 102 7.25 2006 1989 42 7.50 2009 1993 26 7.00 2008 1994 36 6.75 2006 1994 26 6.25 2005 1994 26 7.25 2004 1995 64 7.50 2006 1996 51 7.50 2006 1996 41 7.25 2007 1997 9 6.50 2004 1997 38 6.75 2008 1998 1 3.27 2004 1998 22 6.50 2010 1999 160 3.55* 2009 1999 1 7.00 2010 2000 60 6.25 2009 2000 1 2.75 2006 2001 100 5.50 2008 2001 61 7.60 2006 2002 28 6.50** 2011

* Tied to market rate: H1: 4.29 percent, H2: 3.55 percent. ** Distribution in respect of FY 2002 is scheduled to be paid together with 2003 payout on July 1, 2004.

F-179 The issue terms of the 1984, 1987, 1998 (maturing through 2004), and 2000 participatory capital tranches (maturing through 2006) make the eventual distribution dependent on the dividend declared.

Registered participation certificates with an aggregate nominal volume of € 1,016 million have been issued. This total is composed of 430 separate issues with original terms of between 6.6 and 15.6 years and bearing interest of between 5.38 per cent and 7.63 per cent.

Servicing the interest on the participation certificate stock involved expense of € 138 million in 2003 (2002: € 151 million).

F-180 20 | Off-balance-sheet futures business by product structure

The following table shows the breakdown of off-balance-sheet futures transactions by product area:

Nominal amount Replacement costs Residual term Total in € million ≤1 year >1–5 years >5 years 12.31.2003 12.31.2002 12.31.2003 12.31.2002 Interest-based transactions 205,188 260,322 186,611 652,121 587,896 12.775 12,569 OTC products FRAs 8,121 50 – 8,171 15,772 2 8 - Interest swaps (same currency) 152,453 206,701 159,469 518,623 432,401 11,993 11,962 - Interest options – calls 9,556 21,917 10,163 41,636 36,512 776 596 - Interest options – puts 15,453 30,639 16,943 63,035 46,851 – – - Other interest contracts 66 – 36 102 694 4 3 Exchange-traded products - Interest futures 19,038 1,015 – 20,053 55,261 – – - Interest options 501 – – 501 405 – – Forex-based transactions 16,777 9,010 3,724 29,511 37,551 799 805 OTC products Forward exchange transactions 11,174 1,010 87 12,271 14,753 392 194 - Cross-currency swaps 3,033 7,667 3,629 14,329 18,229 353 592 -Forex options – calls 1,321 166 8 1,495 2,586 54 19 -Forex options – puts 1,231 167 – 1,398 1,982 – – Exchange-traded products -Forex futures 18 – – 18 1 – – Equity and index-based transactions 2,714 1,501 3,790 8,005 4,820 246 62 OTC products - Equity and index options – calls 101 1,194 1,941 3,236 327 246 62 - Equity and index options – puts 416 278 1,849 2,543 2,841 – – - Other equity and index contracts 142 – – 142 – 0 – Exchange-traded products - Equity and index futures 907 – – 907 933 – – - Equity and index options 1,148 29 – 1,177 719 – – Other transactions 11 – – 11 – 3 – - Precious metal transactions 11 – – 11 – 3 – Credit derivatives 868 5,454 1,281 7,603 5,276 125 58 Credit default swaps - DZ BANK as hedge beneficiary 217 2,906 1,137 4,260 2,735 115 34 - DZ BANK as hedge provider 608 2,499 144 3,251 2,449 7 20 Total return swaps - DZ BANK as hedge beneficiary 43 19 – 62 62 3 4 - DZ BANK as hedge provider – 30 – 30 30 0 – Total 225,558 276,287 195,406 697,251 635,543 13,948 13,494

F-181 A substantial proportion of the transactions listed here were entered into to hedge interest rate, exchange rate or market price fluctuations. The bulk of these transactions related to trading activities. The nominal volume of all transactions totaled € 697,251 million (2002: € 635,543 million). The replacement-purchase cost (the sum of positive market values) amounted to € 13,948 million without taking netting agreements into account (2002: € 13,494 million).

Off-balance-sheet futures The following table shows the breakdown by counterparty: business by counterparties structure Replacement costs in € million 12.31.2003 12.31.2002 OECD central governments – 16 Banks in OECD countries 12,752 12,783 Financial services institutions in OECD countries – 416 Other companies and private individuals 1,196 276 Banks in non-OECD countries 0 3 Total 13,948 13,494

F-182 Notes to the Income Statement

21 | Breakdown of income The following table shows the breakdown between the domestic and international markets for the by geographical markets aggregate of interest income, current income from shares and other variable-yield securities, participations and shares in related companies, commission income, net income from financial transactions, and other operating income:

in € million 2003 2002 Germany 5,567 7,128 International 727 1,063

22 | Change in the reporting The net income from financial transactions total includes a sum of € 33 million due to the first-time of net interest and net inclusion of the interest result on repurchase agreements under this heading. trading income

23 | Administration and Services to third parties relate most significantly to securities custody administration and trust assets agency services provided administration, plus the intermediation of insurance business. for third parties

24 | Other operating The “Other operating income” heading in the financial statements includes (amongst other items), income income from fixed-asset disposals totaling € 44 million, income from the writing back of provisions totaling €13million, rent revenues of € 9 million, income from the Visa card operation totaling € 6 million, revenues from organized seminars and publications totaling € 6 million, fees for non-banking services totaling € 4 million, and tax refunds totaling € 4 million.

25 | Other operating The “Other operating expenses” heading includes (amongst other items) losses on fixed-asset disposals and expenses write-downs on sundry assets totaling € 7 million, expenses arising from the Visa card operations totaling €4million, non-personnel costs in relation to buildings not used for banking totaling € 4 million, and compensation for performance failures totaling € 3 million.

F-183 26 | Write-downs on The strict application of the lower-of-cost-or-market valuation principle to all fixed-asset securities resulted securities held as fixed in additional write-downs totaling € 53 million during the year. assets

27 | Exceptional expenses The “Exceptional expenses” heading essentially includes personnel and non-personnel restructuring expenses totaling € 60 million, costs totaling € 14 million from ongoing early retirement obligations under the social plan currently in force, and total € 4 million expenses arising from the spin-off of the Payments Handling division into Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG.

28 | Exceptional income The exceptional income heading includes an amount of € 22 million in consideration for the transfer of the Payments Handling division to Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG.

29 | Taxes on income Revenues arising from taxes on income essentially comprise the corporation and municipal trade tax contributions received on the basis of tax unity relationships; such transfers amounted to € 101 million in the year under report and are shown under this heading for the first time. In 2002 tax transfers were included under other operating income.

F-184 Other disclosures

30 | Shareholder The proportion of DZ BANK AG’s share capital held by cooperative enterprises was approximately information 92.9 percent at December 31, 2003. The definition of cooperative enterprises includes the cooperative societies, the central cooperative institutions and other corporate entities and trading companies.

31 | Other financial The total amount of these liabilities is € 235 million (2002: € 274 million). obligations This amount does not include liabilities of € 7 million from capital shares of cooperative associations (2002: € 8 million).

DZ BANK AG has indemnified the protection scheme operated by the BVR cooperative banks association in respect of any obligations incurred by the guarantee fund in relation to Deutsche Genossenschafts- Hypothekenbank AG,VR DISKONTBANK GmbH, DVB Bank Aktiengesellschaft, or Frankfurt Bukarest Bank AG.

Furthermore, DG BANK AG has given transfer guarantee declarations to domestic companies and public institutions in respect of certain deposits at its branches in Great Britain and the USA for the event that the branches are prevented by national decision from discharging their repayment obligations.

In respect of three subordinated, consolidated credit institutions that are listed in the list of shareholdings required by section 285.11 HGB and identified therein as falling within the ambit of this declaration of responsibility, DZ BANK AG will ensure the ability of these companies to fulfill their contractual obligations in proportion to its shareholding and excluding political risk. During the year under report, DZ BANK AG has also issued a subordinated declaration of responsibility in respect of DZ BANK Capital Funding LLC I, Wilmington.

F-185 32 | Number of The average number of persons employed in fiscal 2003 was as follows: employees 2003 2002 Female staff Full-time employees 1,538 1,896 Part-time employees 508 565 Male staff Full-time employees 2,436 2,742 Part-time employees 80 97 Total employees 4,562 5,300

33 | Cover statement The following cover is in place for the total value of bonds in circulation (including registered bonds):

in € million 12.31.2003 12.31.2002 Regular cover Loans and advances to banks 9,426 10,329 to non-bank customers 877 1,359 Bonds and other fixed-interest securities 14,440 10,596 Equalization claims 75 137 Total cover 24,818 22,421 Issued, covered bearer bonds 8,434 8,580 bonds registered to banks 5,936 3,438 bonds registered to non-bank customers 7,007 7,152 21,377 19,170 Currently unissued bonds (held in treasury) 640 339 Registered bonds given over as collateral to banks 15 8 to non-bank customers 97 136 Cover requirement 22,129 19,653 Excess cover 2,689 2,768

F-186 34 | Cover assets The trustees are appointed by the German financial services regulator (Bundesanstalt für Finanzdienst- trustees leistungsaufsicht, BAFin) and their statutory duty is to ensure that the issuance, administration and collateralization of DZ BANK AG’s covered bonds comply with the legal requirements and the provisions of the bank’s own statutes as well as the bonds’ terms and conditions.

Trustee: Deputy Trustee: Dr Ekkehard Buchwaldt Dr Dieter Eschke Presiding Judge, Superior Provincial Court Presiding Judge, Superior Provincial Court Frankfurt am Main, (retd.) Frankfurt am Main, (retd.)

35 | Statutory bodies The total remuneration for members of the Board of Managing Directors of DZ BANK AG during 2003 amounted to T€ 5,647 (2002: T€ 5,191) and T€ 428 for members of the Supervisory Board (2002: T€ 462).

Total emoluments of T€ 7,343 were paid to former members of the Board of Managing Directors or their surviving dependents (2002: T€ 6,866), and pension reserves of T€ 72,743 (2002: T€ 67,236) were endowed to their benefit.

Board of Managing Directors: Dr Ulrich Brixner Uwe E. Flach (Chairman) (Deputy Chairman, to December 31, 2003)

Peter Dieckmann Dr Thomas Duhnkrack (to December 31, 2003) (from January 1, 2003)

Heinz Hilgert Wolfgang Kirsch

Albrecht Merz Dietrich Voigtländer

F-187 Supervisory Board: Dr Christopher Pleister (Chairman) President Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V.

Helga Preußer Rolf Hildner (First Deputy Chairwoman) (Second Deputy Chairman) Employee Chairman of the Board of Managing Directors DZ BANK AG Wiesbadener Volksbank eG Deutsche Zentral-Genossenschaftsbank

Members:

Wolfgang Apitzsch Rüdiger Beins Attorney at law Employee DZ BANK AG Deutsche Zentral-Genossenschaftsbank

Werner Böhnke Gerhard Bramlage Chairman of the Board of Managing Directors Chairman of the Board of Managing Directors WGZ-Bank Emsländische Volksbank eG Westdeutsche Genossenschafts-Zentralbank eG

Carl-Christian Ehlers Dipl.-Kfm. Gerhard Engler Chairman of the Board of Managing Directors Bank Director (retd.) Kieler Volksbank eG Volksbank Müllheim eG

Helmut Gottschalk Michael Groll Speaker of the Board of Managing Directors Management employee Volksbank Herrenberg-Rottenburg eG DZ BANK AG (from May 28, 2003) Deutsche Zentral-Genossenschaftsbank

Siegfried Hägele Walter Kaufmann Employee Secretary VR Kreditwerk Hamburg-Schwäbisch Hall AG ver.di United Services Trade Union

F-188 Sigmar Kleinert Klaus Lambert Employee President & Chairman of the Board of Managing DZ BANK AG Directors Deutsche Zentral-Genossenschaftsbank Genossenschaftsverband Frankfurt e.V., Hessen/Rheinland-Pfalz/Saarland/Thüringen

Dr Rainer Märklin Adolf Rückl Bank Director (rtd.) Operations Manager Volksbank Reutlingen eG Schwäbisch Hall Facility Management GmbH (to May 28, 2003)

Gudrun Schmidt Bernhard Sorge Regional Group Director Member of the Board of Managing Directors ver.di Raiffeisen-Volksbank Grafing-Ebersberg eG United Services Trade Union

Winfried Willer Dr h.c. Uwe Zimpelmann Employee Member of the Board of Managing Directors VR Kreditwerk Hamburg-Schwäbisch Hall AG Landwirtschaftliche Rentenbank

F-189 36 | Appointments held by Bank officers and directors served on the supervisory boards of the following major German corporations members of the Board at December 31, 2003 (Group companies are identified by (*)): of Managing Directors and employees on the supervisory boards of Members of the Board of Managing Companies major corporations Directors

Dr Ulrich Brixner Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall, (Chairman) Deputy Chairman of the Supervisory Board (*`)

Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft, Hamburg, Chairman of the Supervisory Board (*)

R+V Versicherung AG, Wiesbaden, Deputy Chairman of the Supervisory Board (*)

Südzucker AG, Mannheim/Ochsenfurt, Member of the Supervisory Board

Uwe E. Flach Andreae-Noris-Zahn AG, Frankfurt am Main, (Deputy Chairman, Member of the Supervisory Board to December 31, 2003) Deutsche Börse AG, Frankfurt am Main, Member of the Supervisory Board

STADA-ARZNEIMITTEL AG, Bad Vilbel, Member of the Supervisory Board

Dr Thomas Duhnkrack DVB Bank Aktiengesellschaft, Frankfurt am Main, Chairman of the Supervisory Board (*)

VR-LEASING Aktiengesellschaft, Eschborn, Chairman of the Supervisory Board (*)

F-190 Heinz Hilgert norisbank Aktiengesellschaft, Nürnberg, Chairman of the Supervisory Board (*)

ReiseBank Aktiengesellschaft, Frankfurt am Main, Chairman of the Supervisory Board (*)

R+V Versicherung AG, Wiesbaden, Member of the Supervisory Board (*)

SÜDWESTBANK Aktiengesellschaft, Stuttgart, Deputy Chairman of the Supervisory Board (*)

Union Asset Management Holding AG, Frankfurt am Main, Chairman of the Supervisory Board (*)

Wolfgang Kirsch BAG Bankaktiengesellschaft, Hamm, Member of the Supervisory Board

Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall, Member of the Supervisory Board (*)

Deutsche Genossenschafts-Hypothekenbank Aktiengesellschaft, Hamburg, Member of the Supervisory Board (*)

Deutsche WertpapierService Bank AG, Frankfurt am Main, Member of the Supervisory Board (*)

DVB Bank Aktiengesellschaft, Frankfurt am Main, Member of the Supervisory Board (*)

EDEKABANK AG, Hamburg, Member of the Supervisory Board

norisbank Aktiengesellschaft, Nürnberg, Deputy Chairman of the Supervisory Board (*)

Südfleisch Holding Aktiengesellschaft, München, Member of the Supervisory Board

F-191 VR-LEASING Aktiengesellschaft, Eschborn, Member of the Supervisory Board (*)

Albrecht Merz BayWa Aktiengesellschaft, München, Member of the Supervisory Board

R+V Allgemeine Versicherung AG, Wiesbaden, Member of the Supervisory Board (*)

SÜDWESTBANK Aktiengesellschaft, Stuttgart, Chairman of the Supervisory Board (*)

Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main, Member of the Supervisory Board (*)

Dietrich Voigtländer Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall, Member of the Supervisory Board (*)

Deutsche WertpapierService Bank AG, Frankfurt am Main, Chairman of the Supervisory Board (*)

FIDUCIA IT AG, Karlsruhe, Member of the Supervisory Board

Karlsruher Hinterbliebenenkasse Aktiengesellschaft, Lebensversicherung für Beamte und Angestellte der öffentlichen Verwaltung, Karlsruhe, Deputy Chairman of the Supervisory Board

Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main, Chairman of the Supervisory Board (*)

VR Kreditwerk Hamburg-Schwäbisch Hall AG, Hamburg und Schwäbisch Hall, Member of the Supervisory Board (*)

F-192 Employees of DZ BANK AG Companies

Ulrich Dexheimer Raiffeisen-Warenzentrale Kurhessen- Thüringen GmbH, Kassel, Member of the Supervisory Board

Dr Wilhelm Esselmann LOHMANN&CO. AG, Visbek, Member of the Supervisory Board

NFZ Norddeutsche Fleischzentrale GmbH, Hamburg, Member of the Supervisory Board

RHG Nord Raiffeisen Hauptgenossenschaft Nord AG, Kiel, Member of the Supervisory Board

Frank Westhoff Stuttgarter Volksbank AG, Stuttgart, Member of the Supervisory Board

F-193 Frankfurt am Main, March 9, 2004

DZ BANK AG Deutsche Zentral-Genossenschaftsbank

Board of Managing Directors

Dr Brixner Dr Duhnkrack Hilgert

Kirsch Merz Voigtländer

F-194 Independent audit opinion

Based on the conclusive findings of our audit, we have issued the following unqualified audit opinion dated March 15, 2004:

“We have audited the financial statements, together with the bookkeeping system, and the management report of DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, for the business year from 1 January to 31 December 2003. The maintenance of the books and records and the preparation of the annual financial statements and management report in ac- cordance with German commercial law (and supplementary provisions in the Articles of Association) are the responsibility of the Company’s Board of Managing Directors. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and the management report based on our audit.

We conducted our audit of the annual financial statements in accordance with section 317 HGB and the generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). These standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with German principles of proper accounting and in the management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Company and evaluations of possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by the Company’s Board of Managing Directors, as well as evaluating the overall presentation of the annual financial statements and the management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion the annual financial statements give a fair and true picture of the net assets, financial position and results of operations of the Company in accordance with German principles of proper accounting. On the whole the management report provides a suitable understanding of the Company’s position and suitably presents the risks of future development.”

Frankfurt am Main, March 15, 2004

Ernst &Young AG Deloitte&Touche GmbH Wirtschaftsprüfungsgesellschaft Wirtschaftsprüfungsgesellschaft

(Müller-Tronnier) (Wagner) (Prof. Dr Kläs) (Apweiler) Wirtschaftsprüfer Wirtschaftsprüfer Wirtschaftsprüfer Wirtschaftsprüfer

F-195 Major subsidiaries and participating interests of DZ BANK AG

Banks

Name/head office Consolidated1 Share of capital in percent Bausparkasse Schwäbisch Hall AG, Schwäbisch Hall (indirectly) • 82.8 Bellevue and More AG, Hamburg 50.0 Ceskomoravska stavebni sporitelna a.s., Praha 45.0 Fundamenta Magyar-Nemet Lakastakarekpentar Rt., Budapest 51.2 Prva stavebna sprital´na a.s., Bratislava 32.5 VR Kreditwerk Hamburg-Schwäbisch Hall AG, Hamburg und Schwäbisch-Hall (jointly with Deutsche Genossenschafts-Hypothekenbank AG) • 60.0 cosba private banking ag, Zürich (indirectly) • 65.0 Deutsche Genossenschafts-Hypothekenbank AG, Hamburg • 100.0 Deutsche WertpapierService Bank, Frankfurt am Main 40.0 DVB Bank AG, Frankfurt am Main 2 • 92.3 Nedship Bank N.V., Rotterdam • 100.0 DZ Financial Markets LLC, New York 100.0 DZ BANK International S.A., Luxembourg-Strassen 2 • 89.7 DZ CAPITAL MANAGEMENT GmbH, Frankfurt am Main 96.7 DZ BANK Ireland plc, Dublin 2 • 100.0 Magyar Takarékszövetkezeti Bank Részvénytársaság, Budapest 46.9 norisbank AG, Nürnberg • 100.0 Österreichische Volksbanken AG, Wien (indirectly) 25.001 3 SÜDWESTBANK AG, Stuttgart • 89.6

1 Consolidated under terms of section 294.1 HGB; aggregate capital shares held by DZ Bank AG or the respective parent company 2 Declaration of backing by DZ BANK AG 3 Share of voting rights

F-196 Management Report on the 2003 financial year for DZ BANK AG

I. Overview of trading in fiscal 2003 2. Continuation of the strategic Other specialist service providers realignment launched in 2001 Name/head office Consolidated1 Share of capital 1. Macroeconomic framework in percent During the year under report DZ BANK has successfully main- Betriebswirtschaftliches Institut der Deutschen Kreditgenossenschaften tained our strategy of focusing our business activity more BIK GmbH, Frankfurt am Main 73.6 The fraught economic environment continued to present closely on the cooperative primary banks and applying a risk- DZ Equity Partner GmbH, Frankfurt am Main 100.0 DZ BANK AG (DZ BANK) with exceptional challenges during aware lending policy. At the same time we were able to make EURO Kartensysteme GmbH, Frankfurt am Main 19.6 the year under report. Most importantly, the uncertainty further progress on the projects launched at the time of the Genossenschaftlicher Informationsservice GIS GmbH, Frankfurt am Main 97.0 stemming from the Iraq crisis dashed the hopes of an econo- merger in 2001 to migrate our databases and harmonise our GVA GENO-Vermögens-Anlage-Gesellschaft mbH, Frankfurt am Main 66.7 mic upturn that had emerged at the start of the year.The out- IT platforms, and to bring many of these projects to a success- GZS Gesellschaft für Zahlungssysteme, Frankfurt am Main 20.0 put of the economy even weakened by a further 0.3 percent. ful conclusion during 2003. Transaktionsinstitut für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main • 100.0 VR-LEASING AG, Eschborn • 83.5 The persistently difficult conditions on the labor market There have also been changes in DZ BANK’s portfolio of busi- BFL LEASING GmbH, Eschborn • 70.9 weighed on consumer sentiment and private household nesses during the year, all of them aimed at strengthening the VR-BAUREGIE GmbH, Eschborn • 100.0 demand fell again by 0.1 percent in 2003. Corporate invest- effectiveness of the integrated cooperative financial services VR DISKONTBANK GmbH, Eschborn • 100.0 ment activity also remained well below expectations as sector as a whole: VR FACTOREM GmbH, Eschborn 49.0 companies cut their plant and equipment investment by VR-IMMOBILIEN-LEASING GmbH, Eschborn • 100.0 3.0 percent year-on-year. - Spin-off of payments processing division VR MEDICO LEASING GmbH, Eschborn 100.0

Domestic GDP did expand in the second half of 2003 – albeit The separating out of DZ BANK’s payments processing division at the exceptionally modest rate of just 0.2 percent – thanks into a newly-founded specialist company Transaktionsinstitut 1 Consolidated under terms of section 294.1 HGB; aggregate capital shares held by DZ BANK AG or the respective parent company to higher exports, which defied the strong appreciation of the für Zahlungsverkehrsdienstleistungen AG, Frankfurt am Main, euro to record an overall gain of 1.2 percent over the full year. (Transaktionsinstitut) with effect from September 1, 2003 This rise was helped by strong economic growth in the USA, has created the nucleus for a neutral processing platform to eastern Europe and Asia. The first tentative progress on service national and international payments transactions. The the economic policy reform front at the end of the year also benefit of efficiency gains achieved through the expansion of helped produce a gradual improvement in the economic transaction volumes and the modernisation of processing climate. technologies will feed through to the local cooperative banks in the form of significantly reduced unit costs. In December 2003 WestLB AG, Düsseldorf, announced it is interested in partnering with Transaktionsinstitut. Between them, these banks handle no less than 26 percent of the total domestic payments traffic measured by numbers of transactions.

2 F-197 Contents

Investment trusts Key Figures

Name/head office Consolidated1 Share of capital 2 Management Report 2003 of DZ BANK AG in percent Union Asset Management Holding AG, Frankfurt am Main • 64.8 2 Overview of trading in fiscal 2003 DEFO Deutsche Fonds für Immobilienvermögen GmbH, Frankfurt am Main • 90.0 DIFA DEUTSCHE IMMOBILIEN FONDS AG, Hamburg • 94.5 12 Risk report Union Investment Institutional GmbH, Frankfurt am Main • 100.0 Union Investment Luxembourg S.A., Luxembourg • 100.0 31 Outlook Union Investment Privatfonds GmbH, Frankfurt am Main • 100.0 UNICO Asset Management S.A., Luxembourg • 100.0 32 Report of the Supervisory Board

34 Annual Financial Statements of DZ BANK AG

1 Consolidated under terms of section 294.1 HGB; aggregate capital shares held by DZ BANK AG or the respective parent company 34 Balance Sheet

38 Income Statement

40 Notes to the Financial Statements

Insurance companies 69 Auditor’s Report

Name/head office Consolidated1 Share of capital 70 Major Subsidiaries of DZ BANK AG in percent R+V Versicherung AG, Wiesbaden • 73.0 KRAVAG-Allgemeine Versicherungs-AG, Hamburg • 76.0 KRAVAG-LOGISTIC Versicherungs-AG, Hamburg • 51.0 R+V Allgemeine Versicherung AG, Wiesbaden • 88.6 R+V Krankenversicherung AG, Wiesbaden • 100.0 R+V Lebensversicherung AG, Wiesbaden • 100.0 R+V Pensionsfonds AG, Wiesbaden (jointly with Union Asset Management Holding) • 51.0 R+V Rechtsschutzversicherung AG, Wiesbaden • 100.0

1 Consolidated under terms of section 294.1 HGB; aggregate capital shares held by DZ BANK AG or the respective parent company

F-198

Principal Place of Business of the Bank

DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main Platz der Republik 60265 Frankfurt am Main Federal Republic of Germany

The Company The Trust

DZ BANK Capital Funding LLC II DZ BANK Capital Funding Trust II 609 Fifth Avenue 609 Fifth Avenue New York, New York 10017-1021 New York, New York 10017-1021 United States of America United States of America

Principal Paying Agent, Transfer Agent, Registrar and Calculation Agent

Deutsche Bank Aktiengesellschaft Grosse Gallusstraße 10 - 14 60272 Frankfurt am Main Federal Republic of Germany

Property Trustee Delaware Trustee

Deutsche Bank Trust Companies Americas Deutsche Bank Trust Company Delaware 60 Wall Street c/o Deutsche Bank Services New Jersey, Inc. 27th Floor 100 Plaza One New York, New York 10005 Jersey City United States of America New Jersey 07311 United States of America

Legal Advisors to the Bank

As to German and United States Federal Law As to Delaware Law Freshfields Bruckhaus Deringer Richards, Layton & Finger Taunusanlage 11 One Rodney Square, 10th Floor 60329 Frankfurt am Main Wilmington, New Castle County Federal Republic of Germany Delaware 19801 United States of America

Structuring Advisor to the Bank

Lehman Brothers International (Europe) 25 Bank Street London E14 5LE United Kingdom

Listing Agent

DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main Platz der Republik 60265 Frankfurt am Main Federal Republic of Germany