Annual Financial Statements and Management Report of Deutsche Bank AG 2015 Annual Financial Statements and Management Report 2015 Deutsche AG of Management Bank Statements and Financial Annual Deutsche Bank Content 1 – Management Report Operating and Financial Review – 3 Outlook – 14 Risks and Opportunities – 21 Risk Report – 24 Compensation Report – 51 Internal Control over Financial Reporting – 92 Non-financial Key Performance Indicators – 96 Information pursuant to Section 289 (4) of the German Commercial Code and Explanatory Report – 100 2 – Annual Financial Statements Balance Sheet as of December 31, 2015 – 106 Income Statement for the period from January 1 to December 31, 2015 – 108 Notes to the Accounts – 109 3 – Confirmations Responsibility Statement by the Management Board – 172 Auditor’s Report – 173 1 Management Report Operating and Financial Review – 3 Risk Management Tools – 32 Our Organization – 3 Types of Risk – 33 Economic Environment – 5 Risk Profile – 39 Executive Summary – 5 Credit Risk – 40 Income Statement – 8 Market Risk – 42 Balance Sheet – 11 Leverage Ratio – 43 Events after the Reporting Period – 13 Liquidity Risk – 45 Outlook – 14 Capital Requirements and Adequacy – 46 Risks and Opportunities – 21 Compensation Report – 51 Risk Report – 24 Internal Control over Financial Reporting – 92 Risk Management Principles – 24 Risk Management Framework – 25 Non-financial Key Performance The Risks of Deutsche Bank AG Indicators – 96 within the Group Network – 25 Information pursuant to Section 289 (4) Risk Management Organization – 26 of the German Commercial Code and Risk Strategy and Appetite – 30 Explanatory Report – 100 3 Deutsche Bank Operating and Financial Review – 3 Non-Financial Key Performance Annual Financial Statements Outlook – 14 Indicators – 96 and Management Report Risk and Opportunities – 21 Information pursuant to Section – 289 (4) of Deutsche Bank AG 2015 Risk Report – 24 of the German Commercial Code and Compensation Report – 51 Explanatory Report – 100 Internal Control over Financial Reporting – 92 Operating and Financial Review Our Organization Deutsche Bank Group Deutsche Bank: Our Organization Headquartered in Frankfurt am Main, Germany, we are the largest bank in Germany and one of the largest financial institutions in Europe and the world, as measured by total assets of € 1,629 billion as of December 31, 2015. As of that date, we employed 101,104 people on a full-time equivalent basis and operated in 70 countries out of 2,790 branches worldwide, of which 65 % were in Germany. We offer a wide variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world. As of December 31, 2015 we were organized into the following five corporate divisions: ‒ Corporate Banking & Securities (CB&S) ‒ Private & Business Clients (PBC) ‒ Global Transaction Banking (GTB) ‒ Deutsche Asset & Wealth Management (Deutsche AWM) ‒ Non-Core Operations Unit (NCOU) The five corporate divisions are supported by infrastructure functions. In addition, we have a regional management function that covers regional responsibilities worldwide. From 2016 onwards and in accordance with our Strategy 2020 our business operations are going to be organized under a new structure with the segments Global Markets (GM), Corporate & Investment Banking (CIB), Private, Wealth and Commercial Clients (PW&CC), Postbank, Deutsche Asset Management (AM) and Non-Core Operations Unit (NCOU). We have operations or dealings with existing or potential customers in most countries in the world. These operations and dealings include: ‒ subsidiaries and branches in many countries; ‒ representative offices in many other countries; and ‒ one or more representatives assigned to serve customers in a large number of additional countries. Until the recently announced reorganisation in October 2015, CB&S comprised the Global Markets and Corporate Finance businesses. These businesses offer financial products worldwide including the underwriting of stocks and bonds, trading services for investors and the tailoring of solutions for companies’ financial requirements. The Global Markets business combines the sales, trading and structuring of a wide range of financial markets’ products, including bonds, equities and equity-linked products, exchange-traded and over-the-counter derivatives, foreign exchange, money market instruments, and securitized products. Coverage of institutional clients is provided by the Institutional Client Group, while Research provides analysis of markets, products and trading strategies for clients. Corporate Fi- nance offers mergers and acquisitions (M&A) services as well as debt and equity advisory and origination. Regional, industry-focused teams are responsible for the delivery of the entire range of financial products and services to the Bank’s corporate clients. The CB&S businesses are supported by the Credit Portfolio Strategies Group (CPSG), which has responsibility for a range of loan portfolios and centralized the hedging of certain uncollateralized counterparty derivative exposure, ac- tively managing the risk of these through the implementation of a structured hedging regime. Deutsche Bank 1 – Management Report 4 Annual Financial Statements and Management Report of Deutsche Bank AG 2015 GTB delivers commercial banking products and services to corporate clients and financial institutions, including domes- tic and cross-border payments, financing for international trade, lending, as well as the provision of trust, agency, de- positary, custody and related services. Our business divisions consist of: ‒ Trade Finance and Cash Management Corporates ‒ Institutional Cash and Securities Services Deutsche AWM is one of the world’s leading investment organizations. Deutsche AWM helps individuals and institu- tions worldwide to protect and grow their wealth, offering traditional active, passive and alternative investments across all major asset classes. Deutsche AWM also provides customized wealth management solutions and private banking services to high-net-worth and ultra-high-net-worth individuals and family offices. Deutsche AWM’s investment capabili- ties span both active and passive strategies and a diverse array of asset classes including equities, fixed income, real estate, infrastructure, private equity and hedge funds. The division also offers customized wealth management solu- tions and private banking services, including lending and discretionary portfolio management. PBC serves retail and affluent clients as well as small and medium sized business customers. The PBC Corporate Division follows the “Powerhouse” business model comprising three businesses under one strategic steering, sup- ported by a joint services and IT platform in the Deutsche Bank Group: ‒ Private & Commercial Banking comprises all of PBC’s activities in Germany under Deutsche Bank brand. ‒ Advisory Banking International, which covers PBC’s activities in Europe (outside Germany) and Asia. ‒ Postbank, which comprises among others Postbank, norisbank, BHW and DB Bauspar. PBC offers a similar range of banking products and services throughout Europe and Asia, with some variations among countries that are driven by local market, regulatory and customer requirements. We offer Investment and Insurances, Mortgages, Business Products, Consumer Finance, Payments, Cards & Accounts, Deposits, mid-cap related products provided by other divisions as part of our mid-cap joint venture. In the second half of 2012, Non-Core Operations Unit (NCOU) was established as the fifth pillar of Deutsche Bank’s business structure. Its aim was to help the Bank reduce risks associated with capital-intensive assets that are not core to the strategy, thereby reducing capital demand. As set out in our previous Strategy announcements, our objectives in setting up the NCOU were to improve external transparency of our non-core positions; to increase management focus on the core operating businesses by separating the non-core activities; and to facilitate targeted accelerated de-risking. Pursuant to our recent Strategy 2020 announcements, NCOU’s aim is to reduce leverage and risk-weighted assets with an ambition to materially unwind the remaining positions by December 2016, such that residual risk-weighted assets at that time will be less than € 10 billion in aggregate on group level. In carrying out this mandate, the NCOU will look to exit the remaining positions having less favorable capital and risk return profiles, thereby enabling the Bank to strengthen its fully loaded Common Equity Tier 1 ratio. 5 Deutsche Bank Operating and Financial Review – 3 Non-Financial Key Performance Annual Financial Statements Outlook – 14 Indicators – 96 and Management Report Risk and Opportunities – 21 Information pursuant to Section – 289 (4) of Deutsche Bank AG 2015 Risk Report – 24 of the German Commercial Code and Compensation Report – 51 Explanatory Report – 100 Internal Control over Financial Reporting – 92 Economic Environment Executive Summary The Global Economy Economic growth (in %) 2015 2014 Main driver Global Economy1 3.1 3.4 Global economic growth faltered during 2015 due to the slowdown in Thereof: emerging markets, whose growth was dampened mainly by structural Industrialized countries1 1.8 1.7 weaknesses and the weak oil price. The industrialized countries, by contrast Thereof: Emerging markets1 4.1 4.7 benefited on balance from the low oil price and expansionary monetary policy, with the result that their