Dresdner Bank Group Financial Report 2007 A company of Key Figures 1 Key Figures Income Statement 2007 2006 Change €m €m % Total operating income 5,446 6,813 -20.1 Total operating expenses 4,868 5,436 -10.4 Loan impairment losses -132 27 -1) Operating profit 710 1,350 -47.4 Net income from financial investments 183 276 -33.7 Restructuring charges 50 422 -88.2 Profit before tax 843 1,204 -30.0 Tax expense 373 258 44.6 Profit after tax 470 946 -50.3 Profit attributable to minority interests 60 76 -21.1 Profit for the period 410 870 -52.9 Balance sheet 31/12/2007 31/12/2006 Change €m €m % Total assets 500,209 554,897 -9.9 Lending volume 113,026 112,375 0.6 Equity 12,406 14,198 -12.6 Ratios 31/12/2007 31/12/2006 Change €m €m %/% points Cost-income ratio 89.4 79.8 9.6 Loan loss ratio2) -0.11 0.02 –1) Return on risk-adjusted capital3) 2.5 9.2 -6.7 Return on equity before tax4) 8.5 15.6 -7.1 Return on equity after tax 4.0 8.5 -4.5 Earnings per share 0.73 1.51 -51.7 Employees5) 26,309 27,625 -4.8 Branch offices 1,074 952 12.8 Risk-weighted assets (€m) 123,115 119,980 2.6 Core capital ratio (%) 9.1 10.4 -1.3 Total capital ratio (%) 13.8 15.6 -1.8 Short-/Long-term rating 31/12/2007 31/12/2006 Moody’s Investors Service, New York P-1/Aa2 P-1/A1 Standard & Poor’s, New York A-1/A+ A-1/A+ Fitch Ratings, London F1+/A+ F1/A 1) Change from positive to negative figure. 2) Loan impairment losses as a percentage of the average risk-weighted assets in the banking book. 3) As defined by the Allianz Group: the ratio of normalised profit after tax to the adjusted risk capital. 4) Profit before tax and restructuring charges as a percentage of the average capital resources according to IFRSs. 5) Full-time equivalents (excluding vocational trainees). Contents 1 Financial Report 2007 Letter from the Chairman 3 Report of the Supervisory Board 4 Group Management Report 7 Group Risk Report 51 Consolidated Financial Statements 101 Notes 107 Responsibility Statement 184 Auditors’ Report 185 The Supervisory Board 186 The Board of Managing Directors 187 Quarterly and Five-years Overviews 188 2 Dresdner Bank – Financial Report 2007 Letter from the Chairman 3 The past year was an extremely challenging one for banks and financial markets all over the globe. Two contrary developments were seen: following a very good first half of the year, the second half was dominated by the financial market crisis. These devel- opments were also reflected in Dresdner Bank’s results. Overall we can say that, although we suffered setbacks in some business areas in 2007 in a difficult environment, we also saw extremely encouraging progress in many areas. We generated an operating profit of €710 million for full-year 2007 – our second-best operating profit since 2000. In our Private & Corporate Clients business, we recorded the best year in the Bank’s history by far. We also made good progress in Investment Banking in those areas not affected by the financial crisis, although we reported an operating loss overall. Our capital base Dr. Herbert Walter, remains comfortable despite a return of capital to Allianz, while Chairman of the Board of Managing Directors our strong liquidity situation helped cushion us against the fi- nancial market crisis. Our efforts and strict cost discipline in past years have paid off. We achieved significant suc- cesses and recorded solid growth rates, especially in our customer-facing business areas. This is reflected in the clear increase in net interest and current income and net fee and commission income. In our German home market, we are fully leveraging our strength as the provider of “advice you can bank on” in our business with private clients, the middle market and large companies. We have successfully attracted customers and increased our business volume in all segments of our Private & Corporate Clients division. We gained a net figure of almost 100,000 new customers via our branches. Together with the 300,000 new customers acquired via Allianz agencies, this allowed us to increase our customer base by 400,000 to 6.5 million customers. This shows how attractive we are to our customers. In Investment Banking, we will focus on our core competencies and systematically implement our measures to increase efficiency. We have already adapted our capacities for trading in structured credit products to market developments and are focussed on promising business areas such as cash management and infrastructure financing. We will have to live with ongoing difficult market conditions in the coming months. No change in market trends can be expected as long as the uncertainty regarding the US economy and the impact of the financial market crisis persist. We predict that the situation on the financial mar- kets will calm and that the real economy will pick up towards the end of the second half of 2008. Dresdner Bank has shown that it is able to systematically leverage the opportunities it is of- fered, even in a difficult environment. We are on track with our customer-driven orientation and are reiterating our return targets in the medium term. Sincerely, 4 Dresdner Bank – Financial Report 2007 Michael Diekmann, Chairman of the Supervisory Board In fiscal year 2007, the Supervisory Board performed its duties in accordance with the law and the Articles of Association and continuously supervised the activities of the Bank's Board of Managing Directors. It was informed in writing and verbally by the Board of Managing Directors in a regular, comprehensive and timely manner of the intended business strategies and other fundamental issues concerning corporate planning, the position and development of the Bank and the Group, and key transactions. The Supervisory Board also regularly discussed these matters with the Board of Managing Directors. In its three regular meetings, the Supervisory Board was informed by the Board of Managing Directors of the course of business, significant lending commitments and investments, and other matters of material importance to the Group. In particular, the Supervisory Board dis- cussed further developments to the Bank's business model and the effects of the real estate crisis in the USA on the international financial markets. The Supervisory Board also discussed in detail the impact of the financial market crisis on the Bank’s business development. The Supervisory Board was also informed in all meetings of the status of the "Neue Dresdner Plus" programme. In addition, it discussed issues relating to the Bank's investment portfolio. Where necessary, the Supervisory Board approved the measures concerned. The Board of Managing Directors submitted regular reports on the extent to which Group risk frame limits had been utilised. The Supervisory Board also examined aspects of risk control within the Group, as in the past, and addressed in particular the key figures used for long-term planning. The report on the main findings of the internal audit required for regulatory pur- poses was submitted to the Supervisory Board by the Board of Managing Directors. As the German Corporate Governance Code primarily addresses listed companies, and Dresd- ner Bank AG was delisted with effect from the end of 11 July 2002, the Supervisory Board and the Board of Managing Directors have not issued a separate declaration of compliance with the Code due to the Bank's integration within the Allianz Group; however, Dresdner Bank AG's cor- porate governance concept includes the key principles of the Code. 5 Report of the Supervisory Board The Supervisory Board has formed the following committees: the Executive Committee (Präsi- dium), the Credit and Risk Committee, the Audit Committee, the Operations Committee (Be- triebsausschuss) and the Mediation Committee set up in accordance with the Mitbestim- mungsgesetz (German Co-determination Act). The Executive Committee met on three occasions in fiscal year 2007 to discuss human re- sources issues concerning the Board of Managing Directors and to prepare individual agenda items for forthcoming Supervisory Board meetings. The Credit and Risk Committee met three times to address lending issues and business transactions falling within its area of responsibil- ity as defined by the law and the Articles of Association; decisions on such issues were also taken by circulating documents and by passing resolutions outside meetings. Additional dis- cussions were held with the Board of Managing Directors on the analysis of the Bank's portfolio structure, its credit risk strategy, risk management and exposures subject to particular risks. In particular, the Credit and Risk Committee discussed the effects of the real estate crisis in the USA and the financial market crisis on the Bank. The Audit Committee held five meetings in fiscal year 2007, discussing the single-entity and consolidated financial statements as at 31 December 2006 in the presence of the auditors. It also reviewed the quarterly financial state- ments and addressed the tasks entrusted to it by the Supervisory Board. The Operations Com- mittee of the Supervisory Board met three times in fiscal year 2007. It considered structural, organisational, social and other internal issues. A meeting of the Mediation Committee was not required. The full Board was informed regularly of the work of the Supervisory Board Committees. In addition to the meetings of the Supervisory Board and its Committees, the Chairman of the Supervisory Board met frequently with the Board of Managing Directors as a whole, as well as with individual members of the Board of Managing Directors and, in particular, with the Chairman of the Board of Managing Directors.