Deutsche Bank (DB) 20-F 2005 FY Annual report (foreign)

As filed with the Securities and Exchange Commission on March 23, 2006

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 20-F

	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
	or
X	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
	or
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	or
	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report.

Commission file number 1-15242

Deutsche Bank Aktiengesellschaft

(Exact name of Registrant as specified in its charter)

Deutsche Bank Corporation

(Translation of Registrant’s name into English)

Federal Republic of Germany

(Jurisdiction of incorporation or organization)

Taunusanlage 12, 60325 Frankfurt am Main, Germany

(Address of Registrant’s principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
Ordinary Shares, no par value	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

NONE
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

NONE
(Title of Class)

     Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary Shares, no par value          505,557,676
(as of December 31, 2005)

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  X          No

     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes          No  X

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  X          No

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non- accelerated filer.

     See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer X Accelerated filer Non-accelerated filer

     Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17          Item 18  X

     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes          No  X

Table of Contents

Table of Contents	ii
PART I		1
Item 1: Identity of Directors, Senior Management and Advisers		1
Item 2: Offer Statistics and Expected Timetable		1
Item 3: Key Information		1
Selected Financial Data		1
Dividends		5
Exchange Rate and Currency Information		6
Long-Term Credit Ratings		7
Capitalization and Indebtedness		7
Reasons for the Offer and Use of Proceeds		7
Risk Factors		7
Item 4: Information on the Company		14
History and Development of the Company		14
Business Overview		14
Our Group Divisions		19
Corporate and Investment Bank Group Division		19
Private Clients and Asset Management Group Division		23
Corporate Investments Group Division		27
Infrastructure and Regional Management		29
Competitive Environment		29
Regulation and Supervision		31
Organizational Structure		44
Property, Plant and Equipment		44
Information Required by Industry Guide 3		45
Item 4A: Unresolved Staff Comments		45
Item 5: Operating and Financial Review and Prospects		46
Overview		46
Significant Accounting Policies and Critical Accounting Estimates		46
Effects of 1999/2000 German Tax Reform Legislation and Accounting for Income Taxes		50
Operating Results		52
Results of Operations by Segment (2005 vs. 2004)		59
Group Divisions		62
Comparison between 2004 and 2003		72
Liquidity and Capital Resources		75
Pension Plans		76
Off-balance Sheet Arrangements with Unconsolidated Entities		78
Tabular Disclosure of Contractual Obligations		79
Research and Development, Patents and Licenses		79
Recently Adopted Accounting Pronouncements		80
New Accounting Pronouncements		80
IFRS		82
Item 6: Directors, Senior Management and Employees		84
Directors and Senior Management		84
Board Practices of the Management Board		91
Group Executive Committee		91
Compensation		92
Employees		95
Share Ownership		96
Item 7: Major Shareholders and Related Party Transactions		100

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Major Shareholders	100
Related Party Transactions	101
Interests of Experts and Counsel	103
Item 8: Financial Information	104
Consolidated Statements and Other Financial Information	104
Significant Changes	108
Item 9: The Offer and Listing	109
Offer and Listing Details	109
Plan of Distribution	110
Markets	111
Selling Shareholders	112
Dilution	112
Expenses of the Issue	112
Item 10: Additional Information	113
Share Capital	113
Memorandum and Articles of Association	113
Material Contracts	113
Exchange Controls	113
Taxation	113
Dividends and Paying Agents	117
Statement by Experts	117
Documents on Display	117
Subsidiary Information	117
Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk	118
Risk Management	118
Item 12: Description of Securities other than Equity Securities	147
PART II	148
Item 13: Defaults, Dividend Arrearages and Delinquencies	148
Item 14: Material Modifications to the Rights of Security Holders and Use of Proceeds	148
Item 15: Controls and Procedures	148
Item 16A: Audit Committee Financial Expert	148
Item 16B: Code of Ethics	149
Item 16C: Principal Accountant Fees and Services	149
Item 16D: Exemptions from the Listing Standards for Audit Committees	150
Item 16E: Purchases of Equity Securities by the Issuer and Affiliated Purchasers	151
PART III	153
Item 17: Financial Statements	153
Item 18: Financial Statements	153
Item 19: Exhibits	153
Signatures	154
Financial Statements	F-1
Supplemental Financial Information	S-1

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Deutsche Bank Aktiengesellschaft, which we also call Deutsche Bank AG, is a stock corporation organized under the laws of the Federal Republic of Germany. Unless otherwise specified or required by the context, in this document, references to “we”, “us”, and “our” are to Deutsche Bank Aktiengesellschaft and its consolidated subsidiaries.

Due to rounding, numbers presented throughout this document may not add up precisely to the totals we provide and percentages may not precisely reflect the absolute figures.

Our registered address is Taunusanlage 12, 60325 Frankfurt am Main, Germany, and our telephone number is +49-69-910-00.

Cautionary Statement Regarding Forward-Looking Statements

We make certain forward-looking statements in this document with respect to our financial condition and results of operations. In this document, forward-looking statements include, among others, statements relating to:

– our implementation of our strategic initiatives and management agenda;

– the development of aspects of our results of operations;

– our expectations of the impact of risks that affect our business, including the risks of loss on our credit exposures and risks relating to changes in interest and currency exchange rates and in asset prices; and

– other statements relating to our future business development and economic performance.

In addition, we may from time to time make forward-looking statements in our periodic reports to the United States Securities and Exchange Commission on Form 6-K, annual and interim reports, invitations to Annual General Meetings and other information sent to shareholders, offering circulars and prospectuses, press releases and other written materials. Our Management Board, Supervisory Board, officers and employees may also make oral forward-looking statements to third parties, including financial analysts.

Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. We use words such as “believe”, “anticipate”, “expect”, “intend”, “seek”, “estimate”, “project”, “should”, “potential”, “reasonably possible”, “plan” and similar expressions to identify forward-looking statements.

By their very nature, forward-looking statements involve risks and uncertainties, both general and specific. We base these statements on our current plans, estimates, projections and expectations. You should therefore not place too much reliance on them. Our forward-looking statements speak only as of the date we make them, and we undertake no obligation to update any of them in light of new information or future events.

We caution you that a number of important factors could cause our actual results to differ materially from those we describe in any forward-looking statement. These factors include, among others, the following:

– changes in general economic and business conditions;

– changes and volatility in currency exchange rates, interest rates and asset prices;

– changes in governmental policy and regulation, and political and social conditions;

– changes in our competitive environment;

– the success of our acquisitions, divestitures, mergers and strategic alliances;

– our success in implementing our management agenda and realizing the benefits anticipated therefrom; and

– other factors, including those we refer to in “Item 3: Key Information – Risk Factors” and elsewhere in this document and others to which we do not refer.

Use of Non-GAAP Financial Measures

This document contains non-U.S. GAAP financial measures. Non-U.S. GAAP financial measures are measures of our historical or future performance, financial position or cash flows that contain adjustments that exclude or include amounts that are included or excluded, as the case may be, from the most directly comparable measure calculated and presented in accordance with U.S. GAAP in our financial statements. Examples of our non-U.S. GAAP financial measures are: operating cost base,

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underlying pre-tax profit, underlying cost/income ratio, average active equity and underlying pre-tax return on equity. For descriptions of these non-U.S. GAAP financial measures and the adjustments made to the most directly comparable U.S. GAAP financial measures to obtain them, please refer to Note [27] to our consolidated financial statements, which is incorporated by reference herein.

Use of Internet Addresses

This document contains inactive textual addresses of Internet websites operated by us and third parties. Reference to such websites is made for informational purposes only, and information found at such websites is not incorporated by reference into this document.

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PART I

Item 1: Identity of Directors, Senior Management and Advisers

Not required because this document is filed as an annual report.

Item 2: Offer Statistics and Expected Timetable

Not required because this document is filed as an annual report.

Item 3: Key Information

Selected Financial Data

We have derived the data we present in the tables below from our audited consolidated financial statements for the years presented. You should read all of the data in the tables below together with the consolidated financial statements and notes included in “Item 18: Financial Statements” and the information we provide in “Item 5: Operating and Financial Review and Prospects.” Except where we have indicated otherwise, we have prepared all of the consolidated financial information in this document in accordance with generally accepted accounting principles in the United States (which we refer to as U.S. GAAP). Our group division and segment data come from our management reporting systems and are not necessarily based on, or prepared in accordance with, U.S. GAAP. For a discussion of the major differences between our management reporting systems and our consolidated financial statements under U.S. GAAP, see “Item 5: Operating and Financial Review and Prospects – Results of Operations by Segment.”

In reading our income statement data, you should note that the financial accounting treatment under U.S. GAAP for changes in German income tax rates results in a negative impact on our results of operations in the years 2001 through 2005. These tax rate changes, which were enacted in 2000 and 1999, were:

– significant reductions, effective in 1999 and 2001, in the corporate income tax rate; and

– the reduction to zero, effective in 2002, of the tax rate applicable to capital gains on the sale of certain equity securities.

These reductions in tax rates resulted in significant decreases in our deferred taxes payable, with a corresponding reduction in our income tax expense for 2000. In the years 2001 through 2005, when we sold securities that had accumulated deferred tax provisions within other comprehensive income, we reversed such deferred tax provisions, which resulted in a significant increase in income tax expense.

We more fully explain the financial accounting treatment of these tax rate changes in “Item 5: Operating and Financial Review and Prospects – Effects of 1999/2000 German Tax Reform Legislation and Accounting for Income Taxes.”

Due to sales of equity securities for which there were accumulated deferred tax provisions in other comprehensive income, it was necessary to reverse€ 544 million,€ 120 million,€ 215 million,€ 2.8 billion and€ 995 million of those provisions as income tax expense in 2005, 2004, 2003, 2002 and 2001, respectively. During these years, our net income was€ 3.5 billion,€ 2.5 billion,€ 1.4 billion,€ 397 million and€ 167 million, respectively. Without the additional income tax expense we describe above, and also without the cumulative effect of accounting changes we describe below, our net income would have been€ 4.1 billion,€ 2.6 billion,€ 1.4 billion,€ 3.2 billion and€ 1.4 billion in 2005, 2004, 2003, 2002 and 2001, respectively. We recommend that you consider our net income excluding the impact of the changes in income tax rates and the reversing effect and the cumulative effect of

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accounting changes when you compare the years 2001 through 2005 to one another and to earlier and future periods.

In 2003, as a result of the application of FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), we recorded a€ 140 million gain, net of tax, as a cumulative effect of a change in accounting principles in our Consolidated Statement of Income. Also in 2003, we adopted SFAS No. 150, “Accounting for Certain Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”) and recorded an after-tax gain of€ 11 million. The requirements of SFAS 150 also resulted in a reduction in shareholders’ equity of€ 2.9 billion during 2003. Upon adoption of the requirements of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) as of January 1, 2002, we discontinued the amortization of goodwill with a net carrying amount of€ 8.7 billion and we recognized a€ 37 million tax-free gain as a cumulative effect of a change in accounting principles in our Consolidated Statement of Income. In addition, in 2001, we adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) and in that year recorded an expense of€ 207 million, after tax, as a cumulative effect of a change in accounting principles in our Consolidated Statement of Income.

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Income Statement Data

in€ m. and U.S.$ m. (except per share data)	2005		1	2005			2004			2003			2002			2001
Net interest revenues	$	7,106			6,001			5,182			5,847			7,186			8,620
Provision for loan losses	$	443			374			372			1,113			2,091			1,024
Net interest revenues after provision for loan losses	$	6,663			5,627			4,810			4,734			5,095			7,596
Commissions and fee revenues	$	11,947			10,089			9,506			9,332			10,834			10,727
Trading revenues, net	$	8,798			7,429			6,186			5,611			4,024			6,031
Other noninterest revenues	$	2,512			2,121			1,044			478			4,503			4,163
Total net revenues	$	29,920			25,266			21,546			20,155			24,456			28,517
Compensation and benefits	$	13,018			10,993			10,222			10,495			11,358			13,360
Goodwill impairment2/impairment of intangibles		–			–			19			114			62			871
Restructuring activities	$	908			767			400			(29	)		583			294
Other noninterest expenses	$	8,756			7,394			6,876			6,819			8,904			12,189
Total noninterest expenses	$	22,682			19,154			17,517			17,399			20,907			26,714
Income before income tax expense and cumulative effect of accounting changes	$	7,238			6,112			4,029			2,756			3,549			1,803
Income tax expense	$	2,415			2,039			1,437			1,327			372			434
Income tax expense from the 1999/2000 change in effective tax rate and the reversing effect	$	644			544	3		120	3		215	3		2,817	3		995	3
Income before cumulative effect of accounting changes, net of tax	$	4,179			3,529	3		2,472	3		1,214	3		360	3		374	3
Cumulative effect of accounting changes, net of tax		–			–			–			151			37			(207	)
Net income	$	4,179			3,529	3		2,472	3		1,365	3		397	3		167	3
Basic earnings per share4
Income before cumulative effect of accounting changes, net of tax	$	9.02			7.62	3		5.02	3		2.17	3		0.58	3		0.60	3
Cumulative effect of accounting changes, net of tax		–			–			–			0.27			0.06			(0.33	)
Net income	$	9.02			7.62	3		5.02	3		2.44	3		0.64	3		0.27	3
Diluted earnings per share5
Income before cumulative effect of accounting changes, net of tax	$	8.23			6.95	3		4.53	3		2.06	3		0.57	3		0.60	3
Cumulative effect of accounting changes, net of tax		–			–			–			0.25			0.06			(0.33	)
Net income	$	8.23			6.95	3		4.53	3		2.31	3		0.63	3		0.27	3
Dividends paid per share6	$	2.01			1.70			1.50			1.30			1.30			1.30

1	Amounts in this column are unaudited. We have translated the amounts solely for your convenience at a rate of U.S.$ 1.1842 per€, the noon buying rate on December 30, 2005 (the last business day of 2005).
2	Goodwill amortization in 2001.
3	These figures reflect the income tax expense (benefit) from changes in 1999 and 2000 effective tax rates pursuant to German tax law and the reversing effect. We describe these changes and their effects in “Item 5: Operating and Financial Review and Prospects – Effects of 1999/2000 German Tax Reform Legislation and Accounting for Income Taxes.”
4	We calculate basic earnings per share for each period by dividing our net income by the weighted average number of common shares outstanding.
5	We calculate diluted earnings per share for each period by dividing our net income by the weighted average number of common shares and potential dilutive common shares outstanding.
6	Dividends we declared and paid in the year.

Balance Sheet Data

in€ m. and U.S.$ m.	2005		1	2005		2004		2003		2002		2001
Total assets	$	1,174,917			992,161		840,068		803,614		758,355		918,222
Loans, net	$	179,235			151,355		136,344		144,946		167,303		259,838
Deposits	$	450,928			380,787		320,796		299,335		323,541		373,578
Long-term debt	$	134,471			113,554		106,870		97,480		104,055		166,908
Common shares	$	1,682			1,420		1,392		1,490		1,592		1,591
Total shareholders’ equity	$	35,450			29,936		25,904		28,202		29,991		40,193
Tier I risk-based capital (BIS*)	$	25,932			21,898		18,727		21,618		22,742		24,803
Total risk-based capital (BIS*)	$	40,128			33,886		28,612		29,871		29,862		37,058

*	Bank for International Settlements.
1	Amounts in this column are unaudited. We have translated the amounts solely for your convenience at a rate of U.S.$ 1.1842 per€, the noon buying rate on December 30, 2005 (the last business day of 2005).

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Certain Key Ratios and Figures

The post-tax return on average total shareholders’ equity, adjusted average total shareholders’ equity (which we call “average active equity”), post-tax return on average total assets and price/earnings ratio appearing below are based on our net income, which includes the effects of the financial accounting treatment under U.S. GAAP for the aforementioned income tax rate changes as well as the cumulative effects of accounting changes, net of tax.

	2005			2004			2003
Return on average total shareholders’ equity (post-tax)1		12.51	%2		9.09	%2		4.72	%2
Return on average active equity (post-tax)3		14.04	%2		9.98	%2		4.99	%2
Return on average total assets (post-tax)4		0.35	%2		0.28	%2		0.16	%2
Equity to assets ratio5		2.82	%2		3.08	%2		3.31	%2
Cost/income ratio6		74.7	%		79.9	%		81.8	%
Employees7:
In Germany		26,336			27,093			29,878
Outside Germany		37,091			38,324			37,804
Branches:
In Germany		836			831			845
Outside Germany		752			728			731
Market price:
High	€	85.00		€	77.77		€	66.04
Low	€	60.90		€	52.37		€	32.97
End of year	€	81.90		€	65.32		€	65.70
Price/earnings ratio8 (at year-end)		11.78	2		14.42	2		28.44	2

1	Net income as a percentage of average month-end shareholders’ equity.
2	These figures reflect income tax expense of€ 544 million in 2005, income tax expense of€ 120 million in 2004, and income tax expense of€ 215 million in 2003 resulting from the reversal of 1999/2000 credits for tax rate changes pursuant to German tax law. We describe these changes and their effects in “Item 5: Operating and Financial Review and Prospects – Effects of 1999/2000 German Tax Reform Legislation and Accounting for Income Taxes.” The table at the bottom of this page presents these figures excluding these effects.
3	Net income as a percentage of adjusted average month-end shareholders’ equity. We calculate this adjusted measure of our return on average total shareholders’ equity to make it easier to compare us to our competitors. We refer to this adjusted measure as our “post-tax return on average active equity.” This is not a measure of performance provided for in U.S. GAAP, however, and you should not compare our ratio to other companies’ ratios without considering the differences in calculation of these ratios. The items for which we adjust our ratio result primarily from our portfolio of shareholdings in publicly-listed industrial companies. We have held most of our larger participations for over 20 years, and are reducing these holdings over time. For further information on our industrial holdings, see “Item 4: Information on the Company – Our Group Divisions – Corporate Investments Group Division.” We realize gains or losses on these securities only when we sell them. These securities are also responsible for most of the accounting effects of the income tax rate changes we describe above. Accordingly, the adjustments we make to our average total shareholders’ equity to derive our average active equity are to exclude average unrealized net gains on securities available for sale, net of applicable tax effects. In addition we adjust our average total shareholders’ equity for the effect of expected dividend payments to our shareholders. The following table shows the adjustments we make to our average total shareholders’ equity to calculate our average active equity:

in€ m.	2005			2004			2003
Average total shareholders’ equity		28,201			27,194			28,940
Average unrealized net gains on securities available for sale, net of applicable tax effects		(2,023	)		(1,601	)		(810	)
Average dividends		(1,048	)		(815	)		(756	)
Average active equity		25,130			24,778			27,374

4	Net income as a percentage of average total assets.
5	Average shareholders’ equity as a percentage of average total assets for each year.
6	Total noninterest expenses as a percentage of net interest revenues before provision for loan losses, plus noninterest revenues.
7	Number of full-time equivalent employees as of the end of each period.
8	Market price per share at year-end divided by diluted earnings per share.

Our net income included the material effects of reversing income tax credits related to 1999 and 2000 tax law changes, as described in “Item 5: Operating and Financial Review and Prospects – Effects of 1999/2000 German Tax Reform Legislation and Accounting for Income Taxes”, and the cumulative effect of accounting changes as described in Note [2] to our consolidated financial statements. The following table shows our net income excluding these effects.

in€ m.	2005		Per share		Per share		2004		Per share		Per share		2003			Per share			Per share
(except per share amounts)			(basic)		(diluted)				(basic)		(diluted)					(basic)			(diluted)
Net income		3,529		7.62		6.95		2,472		5.02		4.53		1,365			2.44			2.31
Add (deduct):
Reversal of 1999/2000 credits for tax rate changes		544		1.18		1.07		120		0.24		0.23		215			0.39			0.36
Cumulative effect of accounting changes, net of tax		–		–		–		–		–		–		(151	)		(0.27	)		(0.25	)
Net income before reversal of 1999/2000 credits for tax rate changes and cumulative effect of accounting changes, net of tax		4,073		8.80		8.02		2,592		5.26		4.76		1,429			2.56			2.42

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Dividends

The following table shows in euro and in U.S. dollars the dividend per share for the years ended December 31, 2005, 2004, 2003, 2002 and 2001. We declare our dividends at our Annual General Meeting following each year. Our dividends are based on the nonconsolidated results of Deutsche Bank as prepared in accordance with German accounting principles. Because we declare our dividends in euro, the amount an investor actually receives in any other currency depends on the exchange rate between the euro and that currency at the time the euros are converted into that currency.

The table does not reflect German withholding tax that will apply to payments made to non-German residents. These are the German withholding tax rates that apply to our dividend payments made to German taxpayers or to non-German residents:

– dividends that we paid before 2002 were subject to German withholding tax at an aggregate rate of 26.375% (consisting of a 25% withholding tax and a 1.375% surcharge); and

– dividends that we paid in 2002 and thereafter have been subject to, as a result of changes in German tax law, German withholding tax at an aggregate rate of 21.1% (consisting of a 20% withholding tax and a 1.1% surcharge).

Residents of countries that have entered into an income tax convention with Germany may be eligible to receive a refund from the German tax authorities of a portion of the amount withheld. For dividends paid before 2002, residents of the United States who are fully eligible for benefits under the income tax convention entered into between the United States and Germany were entitled to receive a refund from the German tax authorities equal to 16.375% of those dividends. For dividends paid in 2002 and thereafter, those U.S. residents have been entitled to receive a refund equal to 6.1% of those dividends.

For dividends we paid before 2002, U.S. residents who received a refund from the German tax authorities were treated for U.S. federal income tax purposes as though they had received an additional dividend of 5.88% of the dividend we actually paid. For example, for a declared dividend of 100, U.S. residents were treated for U.S. federal income tax purposes as though they received a dividend of 105.88. For dividends paid in 2002 and thereafter, U.S. residents have not been treated as though they received the additional dividend.

For U.S. federal income tax purposes, the dividends we pay are not eligible for the dividends received deduction generally allowed for dividends received by U.S. corporations from other U.S. corporations.

See “Item 10: Additional Information – Taxation” for more information on the tax treatment of our dividends beginning in 2002.

	Dividends per			Dividends per		Payout ratio		2, 3
	share		1	share
2005 (proposed)	$	2.96		€	2.50		33	%
2004	$	2.30		€	1.70		33	%
2003	$	1.89		€	1.50		61	%
2002	$	1.36		€	1.30		203	%
2001	$	1.16		€	1.30		481	%

1	For your convenience, we present dividends in U.S. dollars for each year by translating the euro amounts at the noon buying rate described below under –“Exchange Rate and Currency Information” on the last business day of that year.
2	We define our payout ratio as the dividends we paid per share in respect of each year as a percentage of our basic earnings per share for that year.
3	In reading our payout ratios for each year, you should note the effects we describe above on our net income of the financial accounting treatment under U.S. GAAP for income tax rate changes and also of the cumulative effects of accounting changes. We describe the tax rate changes and their effects in “Item 5: Operating and Financial Review and Prospects – Effects of 1999/2000 German Tax Reform Legislation and Accounting for Income Taxes.” We describe the accounting changes and their cumulative effects in Note [2] to our consolidated financial statements.

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Exchange Rate and Currency Information

Germany’s currency is the euro. For your convenience, we have translated some amounts denominated in euro appearing in this document into U.S. dollars. Unless otherwise stated, we have made these translations at U.S.$ 1.1842 per euro, the noon buying rate for euros on December 30, 2005 (the last business day of 2005). The “noon buying rate” is the rate the Federal Reserve Bank of New York announces for customs purposes as the buying rate for foreign currencies in the City of New York on a particular date. You should not construe any translations as a representation that the amounts could have been exchanged at the rate used on December 31, 2005 or any other date.

The noon buying rate for euros on December 30, 2005 may differ from the actual rates we used in the preparation of the financial information in this document. Accordingly, U.S. dollar amounts appearing in this document may differ from the actual U.S. dollar amounts that we originally translated into euros in the preparation of our financial statements.

Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar equivalent of the euro price of our shares quoted on the German stock exchanges and, as a result, are likely to affect the market price of our shares on the New York Stock Exchange. These fluctuations will also affect the U.S. dollar value of cash dividends we may pay on our shares in euros. Past fluctuations in foreign exchange rates may not necessarily be predictive of future fluctuations.

The following table shows the period-end, average, high and low noon buying rates for the euro. In each case, the period-end rate is the noon buying rate announced on the last business day of the period.

in U.S.$ per€	Period-end		Average		1	High		Low
2006:
March (through March 17)		1.2197		–			1.2197		1.1886
February		1.1925		–			1.2092		1.1860
January		1.2158		–			1.2276		1.1842
2005:
December		1.1842		–			1.2041		1.1699
November		1.1790		–			1.2067		1.1667
October		1.1995		–			1.2148		1.1914
September		1.2058		–			1.2538		1.2011
2005		1.1842		1.2400			1.3476		1.1667
2004		1.3538		1.2478			1.3625		1.1802
2003		1.2597		1.1411			1.2597		1.0361
2002		1.0485		0.9499			1.0485		0.8594
2001		0.8901		0.8909			0.9535		0.8370

¹ We calculated the average rates for each year using the average of the noon buying rates on the last business day of each month during the year. We did not calculate average exchange rates within months.

On March 17, 2006, the noon buying rate was U.S.$ 1.2197 per euro.

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Long-Term Credit Ratings

We believe that maintaining our credit quality is a key part of the value we offer to our clients, bondholders and shareholders. Below are our long-term credit ratings.

	Dec 31, 2005	Dec 31, 2004	Dec 31, 2003
Moody’s Investors Service, New York1	Aa3	Aa3	Aa3
Standard & Poor’s, New York2	AA-	AA-	AA-
Fitch Ratings, New York3	AA-	AA-	AA-

1	Moody’s defines the Aa3 rating as denoting bonds that are judged to be high quality by all standards. Moody’s rates Aa bonds lower than the best bonds (which it rates Aaa) because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat greater than Aaa securities. The numerical modifier 3 indicates that Moody’s ranks the obligation in the lower end of the Aa category.
2	Standard and Poor’s defines its AA rating as denoting an obligor that has a very strong capacity to meet its financial commitments. The AA rating is the second-highest category of Standard and Poor’s ratings. Standard and Poor’s notes that an AA rated obligor differs from the highest rated obligors only in small degree. The minus sign shows relative standing within the AA rating category.
3	Fitch Ratings defines its AA rating as very high credit quality. Fitch Ratings uses the AA rating to denote a very low expectation of credit risk. According to Fitch Ratings, AA-ratings indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. Category AA is Fitch Ratings second-highest rating category.

As of the date of this document, there has been no change in any of the above ratings.

Each rating reflects the view of the rating agency only at the time it gave us the rating, and you should evaluate each rating separately and look to the rating agencies for any explanations of the significance of their ratings. The rating agencies can change their ratings at any time if they believe that the circumstances so warrant. You should not view these long-term credit ratings as recommendations to buy, hold or sell our securities.

Capitalization and Indebtedness

Not required because this document is filed as an annual report.

Reasons for the Offer and Use of Proceeds

Not required because this document is filed as an annual report.

Risk Factors

An investment in our shares involves a number of risks. You should carefully consider the following information about the risks we face, together with the other information in this document when you make investment decisions involving our shares.

Market declines and volatility can materially adversely affect our revenues and profits.

In recent years we have increased our exposure to the financial markets as we have emphasized growth in our investment banking activities, including trading activities. Accordingly, we believe that we are more at risk from adverse developments in the financial markets than we were when we derived a larger percentage of our revenues from traditional lending activities. Market declines can cause our revenues to decline, and, if we are unable to reduce our expenses at the same pace, can cause our profitability to erode. Volatility can sometimes also adversely affect us.

An overall market downturn can adversely affect our business and financial performance. Market downturns can occur not only as a result of purely economic factors, but also as a result of war, acts of terrorism, natural disasters or other similar events.

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We may incur significant losses from our trading and investment activities due to market fluctuations.

We enter into and maintain large trading and investment positions in the fixed income, equity and currency markets, primarily through our Corporate Banking & Securities Corporate Division. We describe these activities in “Item 4: Information on the Company – Our Group Divisions – Corporate and Investment Bank Group Division.” We also have made significant investments in individual companies through our Corporate Investments Group Division, which we describe in “Item 4: Information on the Company – Our Group Divisions – Corporate Investments Group Division”. We also maintain smaller trading and investment positions in other assets. Many of these trading positions include derivative financial instruments.

In each of the product and business lines in which we enter into these kinds of positions, part of our business entails making assessments about the financial markets and trends in them. The revenues and profits we derive from many of our positions and our transactions in connection with them are dependent on market prices. When we own assets, market price declines can expose us to losses. Many of the more sophisticated transactions we describe in our discussions of our Corporate Banking & Securities Corporate Division are designed to profit from price movements and differences among prices. If prices move in a way we have not anticipated, we may experience losses. Also, when markets are volatile – characterized by rapid changes in price direction – the assessments we have made may prove to lead to lower revenues or profits, or losses, on the related transactions and positions.

In addition, we sometimes commit capital and take market risk to facilitate certain capital markets transactions and doing so can result in losses as well as income volatility.

Protracted market declines can reduce liquidity in the markets, making it harder to sell assets and possibly leading to material losses.

In some of our businesses, protracted market movements, particularly asset price declines, can reduce the level of activity in the market or reduce market liquidity. These developments can lead to material losses if we cannot close out deteriorating positions in a timely way. This may especially be the case for assets we hold for which there are not very liquid markets to begin with. Assets that are not traded on stock exchanges or other public trading markets, such as derivatives contracts between banks, may have values that we calculate using models other than publicly-quoted prices. Monitoring the deterioration of prices of assets like these is difficult and could lead to losses we did not anticipate.

Even where losses are for our clients’ accounts, they may fail to repay us, leading to material losses for us, and our reputation can be harmed.

While our clients would be responsible for losses we incur in taking positions for their accounts, we may be exposed to additional credit risk as a result of their need to cover the losses. Our business may also suffer if our clients lose money and we lose the confidence of clients in our products and services.

Our investment banking revenues may decline in adverse market or economic conditions.

Our investment banking revenues, in the form of financial advisory and underwriting fees, directly relate to the number and size of the transactions in which we participate and are susceptible to adverse effects from sustained market downturns. These fees and other revenues are generally linked to the value of the underlying assets and therefore decline as asset values decline. In particular, our revenues and profitability could sustain material adverse effects from a significant reduction in the number or size of debt and equity offerings and merger and acquisition transactions.

We may generate lower revenues from brokerage and other commission- and fee-based businesses.

Market downturns are likely to lead to declines in the volume of transactions that we execute for our clients and, therefore, to declines in our noninterest revenues. In addition, because the fees that we charge for managing our clients’ portfolios are in many cases based on the value or performance of those portfolios, a market downturn that reduces the value of our clients’ portfolios or increases the amount of withdrawals would reduce the revenues we receive from our asset management and private banking businesses.

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Even in the absence of a market downturn, below-market performance by our mutual funds may result in increased withdrawals and reduced inflows, which would reduce the revenue we receive from our asset management business.

Our nontraditional credit businesses materially add to our traditional banking credit risks.

Like other banks and providers of financial services, we are exposed to the risk that third parties that owe us money, securities or other assets will not perform their obligations. Many of the businesses we engage in beyond the traditional banking businesses of deposit-taking and lending also expose us to credit risk.

In particular, many of the businesses we have engaged in through our Corporate Banking & Securities Corporate Division entail credit transactions, frequently ancillary to other transactions. Nontraditional sources of credit risk can arise, for example, from:

– holding securities of third parties;

– entering into swap or other derivative contracts under which counterparties have obligations to make payments to us;

– executing securities, futures, currency or commodity trades that fail to settle at the required time due to nondelivery by the counterparty or systems failure by clearing agents, exchanges, clearing houses or other financial intermediaries; and

– extending credit through other arrangements.

Parties to these transactions, such as trading counterparties, may default on their obligations to us due to bankruptcy, political and economic events, lack of liquidity, operational failure or other reasons. We describe our credit risk and the methods we use to monitor it in “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Risk Management – Credit Risk.”

If we are unable to implement our management agenda, we may be unable to sustain our return on equity or achieve growth in our earnings per share, and our share price may be materially and adversely affected.

Beginning in 2002, we undertook a variety of measures that have enabled us to reduce costs, lower our risk profile, increase efficiency and raise our profitability. To further pursue these objectives, we announced the Business Realignment Program (BRP) in the fourth quarter of 2004. The BRP covers five key initiatives: aligning our sales and trading platforms, aligning our corporate banking efforts, reorganizing our Asset Management Business Division, adding regional focus in Germany and other regions as well as streamlining our infrastructure. The BRP made significant progress in 2005 and the majority of BRP-related restructuring measures were completed by year-end, with the remainder to be completed in 2006 as originally scheduled. In 2005, we reached our published financial target of 25% pre-tax return on average active equity (our target definition of pre-tax return excludes restructuring charges and substantial gains on the sale of our industrial holdings from our income before income taxes). Our ratios of income before income taxes to average active equity and average total shareholders equity were 24% and 22%, respectively.

Going forward, we aim to deliver similar levels of pre-tax return on average active equity (using our target definition) across the business cycle, together with double-digit growth in earnings per share. We also aim to grow all our core businesses, both organically and by targeted, incremental acquisitions, while maintaining a sound capitalization and returning excess capital to our shareholders.

We may be unable to sustain our return on equity or achieve our earnings per share growth objective, and our share price may be materially and adversely affected, should we fail to implement our management agenda or growth initiatives or should such initiatives that are implemented fail to produce the anticipated benefits. A number of internal and external factors could prevent the implementation of these initiatives or the realization of their anticipated benefits, including changes in the markets in which we are active, global, regional and national economic conditions and increased competition for business and employees.

We describe our management agenda and its anticipated benefits, as well as factors that could affect the success of this agenda, in ''Item 4: Information on the Company – Business Overview – Our

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Business Strategy’’ and ''Item 5: Operating and Financial Review and Prospects – Operating Results – Executive Summary.’’

Operational risks may disrupt our businesses.

We face operational risk arising from errors made in the execution, confirmation or settlement of transactions or from transactions not being properly recorded, evaluated or accounted for. Derivative contracts, particularly for credit derivatives, are not always confirmed with the counterparties on a timely basis; while the transaction remains unconfirmed, we are subject to heightened credit and operational risk and in the event of a default may find it more difficult to enforce the contract.

Our businesses are highly dependent on our ability to process, on a daily basis, a large number of transactions across numerous and diverse markets in many currencies, and the transactions we process have become increasingly complex. Consequently, we rely heavily on our financial, accounting and other data processing systems. If any of these systems do not operate properly, or are disabled, we could suffer financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage.

In addition, despite the contingency plans we have in place, our ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports our businesses and the communities in which we are located. This may include a disruption involving electrical, communications, transportation or other services used by us or third parties with which we conduct business, terrorist activities or disease pandemics.

The size of our clearing operations exposes us to a heightened risk of material losses should these operations fail to function properly.

We have very large clearing and settlement businesses. While many other banks and financial institutions operate large clearing businesses, we believe that the sheer scope of ours heightens the risk that we, our customers or other third parties could lose substantial sums if our systems fail to operate properly for even short periods. This will be the case even where the reason for the interruption is external to us. In such a case, we might suffer harm to our reputation even if no material amounts of money are lost. This could cause customers to take their business elsewhere, which could materially harm our revenues and our profits.

Our risk management policies, procedures and methods may leave us exposed to unidentified or unanticipated risks, which could lead to material losses.

We have devoted significant resources to developing our risk management policies, procedures and assessment methods and intend to continue to do so in the future. Nonetheless, our risk management techniques and strategies may not be fully effective in mitigating our risk exposure in all economic market environments or against all types of risk, including risks that we fail to identify or anticipate. Some of our qualitative tools and metrics for managing risk are based upon our use of observed historical market behavior. We apply statistical and other tools to these observations to arrive at quantifications of our risk exposures. These tools and metrics may fail to predict future risk exposures. These risk exposures could, for example, arise from factors we did not anticipate or correctly evaluate in our statistical models. This would limit our ability to manage our risks. Our losses thus could be significantly greater than the historical measures indicate. In addition, our quantified modeling does not take all risks into account. Our more qualitative approach to managing those risks could prove insufficient, exposing us to material unanticipated losses. See “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk” for a more detailed discussion of the policies, procedures and methods we use to identify, monitor and manage our risks. If existing or potential customers believe our risk management is inadequate, they could take their business elsewhere. This could harm our reputation as well as our revenues and profits.

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We may have difficulty in identifying and executing acquisitions, and both making acquisitions and avoiding them could materially harm our results of operations and our share price.

We consider business combinations from time to time. Even though we review the companies we plan to acquire, it is generally not feasible for these reviews to be complete in all respects. As a result, we may assume unanticipated liabilities, or an acquisition may not perform as well as expected. Were we to announce or complete a significant business combination transaction, our share price could decline significantly if investors viewed the transaction as too costly or unlikely to improve our competitive position. In addition, we might have difficulty integrating any entity with which we combine our operations. Failure to complete announced business combinations or failure to integrate acquired businesses successfully into ours could materially adversely affect our profitability. It could also affect investors’ perception of our business prospects and management, and thus cause our share price to fall. It could also lead to departures of key employees, or lead to increased costs and reduced profitability if we felt compelled to offer them financial incentives to remain.

If we avoid entering into additional business combination transactions or fail to identify attractive companies to acquire, market participants may, especially in the current climate of consolidation, perceive us negatively. We may also be unable to expand our businesses, especially into new business areas, as quickly or successfully as our competitors if we do so through organic growth alone. These perceptions and limitations could cost us business and harm our reputation.

We may have difficulties selling noncore assets at favorable prices, or at all.

As part of our efforts to focus on our core businesses, we may seek to sell certain noncore assets. Unfavorable business or market conditions may make it difficult for us to sell such assets at favorable prices, or may preclude such a sale altogether.

Events at companies in which we have invested may make it harder to sell our holdings and result in material losses irrespective of market developments.

We have made significant investments in individual companies, primarily through our Corporate Investments Group Division. Where we have done so, the effect of losses and risks at those companies may restrict our ability to sell our shareholdings and may reduce the value of our holdings considerably, including the value thereof reflected in our financial statements, or require us to take charges to our earnings, even where general market conditions are favorable. Our larger, less liquid interests are particularly vulnerable given the size of these exposures.

Intense competition, in our home market of Germany as well as in international markets, could materially hurt our revenues and profitability.

Competition is intense in all of our primary business areas in Germany and the other countries in which we conduct large portions of our business, including other European countries and the United States. If we are unable to respond to the competitive environment in Germany or in our other major markets with attractive product and service offerings that are profitable for us, we may lose market share in important areas of our business or incur losses on some or all of our activities. In addition, downturns in the German economy could add to the competitive pressure, through, for example, increased price pressure and lower business volumes for us and our competitors.

In recent years there has been substantial consolidation and convergence among companies in the financial services industry, particularly in Europe. This trend has significantly increased the capital base and geographic reach of some of our competitors and has hastened the globalization of the securities and other financial services markets. In order to take advantage of some of our most significant challenges and opportunities, we will have to compete successfully with financial institutions that are larger and better capitalized than us and that may have a stronger position in local markets.

As mentioned above, we sometimes commit capital and take market risk to facilitate certain capital markets transactions. We have experienced, and expect to continue to experience, competitive pressure to retain market share by committing capital to businesses or transactions on terms that offer returns that may not be commensurate with their risks. In particular, corporate clients sometimes seek

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such commitments (such as credit commitments) from financial services firms in connection with investments banking and other assignments. We have also experienced intense price competition in some of our businesses in recent years.

We operate in an increasingly regulated and litigious environment, potentially exposing us to liability and other costs, the amounts of which may be difficult to estimate.

The financial services industry has historically been and continues to be among the most highly regulated industries. Our operations throughout the world are regulated and supervised by the central banks and regulatory authorities in the jurisdictions in which we operate. Regulation and supervision includes requirements regarding our structure and function, as well as requirements relating to the conduct of our business. In recent years, regulation and supervision in a number of areas has increased, and regulators, counterparties and others have sought to subject financial services providers to increasing responsibilities and liabilities. As a result, we may be subject to an increasing incidence or amount of liability or regulatory sanctions and may be required to make greater expenditures and devote additional resources to address potential liability.

Due to the nature of our business, we and our subsidiaries are involved in litigation, arbitration and regulatory proceedings in Germany and in a number of jurisdictions outside Germany, including the United States. Such matters are subject to many uncertainties, and the outcome of individual matters is not predictable with assurance.

We may settle litigation or regulatory proceedings prior to a final judgment or determination pursuant to which our liability is established and quantified. We may do so to avoid the cost, management efforts or negative business, regulatory or reputational consequences of continuing to contest liability, even when we believe we have valid defenses to liability. We may also do so when the potential economic, business, regulatory or reputational consequences of failing to prevail would be disproportionate to the costs of settlement. Furthermore, we may, for similar reasons, reimburse counterparties for losses incurred by them even in situations where we do not believe that we are legally compelled to do so. See “Item 8: Financial Information – Legal Proceedings” and Note [34] to our consolidated financial statements for information on our judicial, regulatory and arbitration proceedings.

The financial impact of legal risks might be considerable but may be hard or impossible to estimate and so to quantify, so that amounts eventually paid may exceed the amount of reserves set aside therefore. See “Item 5: Operational and Financial Review and Prospects – Significant Accounting Policies and Critical Accounting Estimates – Legal, Regulatory and Tax Contingencies”.

Transactions with counterparties in countries designated by the U.S. State Department as state sponsors of terrorism may lead some potential customers and investors in the U.S. and other countries to avoid doing business with us or investing in our shares.

We engage in a limited amount of business with counterparties in Iran, Libya and Sudan, including counterparties owned or controlled by the governments of such countries, and have a representative office in Tehran, Iran. The U.S. State Department has designated such countries as state sponsors of terrorism, and U.S. law generally prohibits U.S. persons from doing business with such countries. We are a German bank and our activities with respect to such countries have not involved any U.S. person in either a managerial or operational role and have been subject to policies and procedures designed to ensure compliance with United Nations, European Union and German embargoes.

Our business with counterparties of such countries consists mostly of arranging large trade finance facilities to finance the export contracts of exporters in Europe and Asia, which exporters are primarily multinational corporations supplying goods, equipment and related services in the petrochemical and hydrocarbon processing industries. Other business activities include correspondent banking services to banks located in such countries and private banking loans to nationals of such countries. We do not believe our business activities with counterparties of such countries are material to overall business, with our outstandings to borrowers of such countries representing less than 0.1% of our total assets as of December 31, 2005 and our revenues from all such activities representing less than 0.1% of our total revenues for the year ended December 31, 2005.

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We are aware, through press reports and other means, of initiatives by governmental entities in the U.S. and by U.S. institutions such as universities and pension funds, to adopt laws, regulations or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business with such countries. It is possible that such initiatives may result in our being unable to gain or retain entities subject to such prohibitions as customers or as investors in our shares. In addition, our reputation may suffer due to our association with these countries. Such a result could have significant adverse effects on our business or the price of our shares.

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Item 4: Information on the Company

History and Development of the Company

The legal and commercial name of our company is Deutsche Bank Aktiengesellschaft. The original Deutsche Bank was founded in Berlin in 1870 as a joint stock company principally dedicated to financing foreign trade. To support this business, after its founding, Deutsche Bank expanded by opening branches in Bremen, Yokohama, Shanghai, Hamburg and London. This international growth was supported by Deutsche Bank’s establishment of the German Overseas Bank (Deutsche Ueberseeische Bank) in 1886 and by Deutsche Bank’s taking a stake in the newly created German Asian Bank (Deutsch-Asiatische Bank) in 1889. To complement its international activities, Deutsche Bank developed a strong domestic presence in Germany by accepting cash deposits and developing relationships with large corporations. Beginning in the 1880s, Deutsche Bank began underwriting securities of these large corporations, with particular emphasis on the electrical engineering and steel industries. In the 1890s, Deutsche Bank expanded its domestic presence by opening new branches and acquiring smaller regional banks.

In 1929, following a long period of retrenchment after World War I, Deutsche Bank merged with the second largest bank in Germany, Disconto-Gesellschaft. The merged company operated under the name Deutsche Bank und Disconto-Gesellschaft until 1937, at which time it reverted to the Deutsche Bank name.

In 1952, Deutsche Bank disincorporated and split into three separate institutions (Norddeutsche Bank Aktiengesellschaft, Rheinisch-Westfälische Bank Aktiengesellschaft, and Süddeutsche Bank Aktiengesellschaft) pursuant to a 1952 law limiting the scope of credit institutions. These three institutions later reunified. Deutsche Bank Aktiengesellschaft, as it is known today, is a stock corporation organized under the laws of Germany.

The merger of the three institutions and our corporate name were entered into the Commercial Register of the District Court in Frankfurt am Main on May 2, 1957. We operate under the German Stock Corporation Act(Aktiengesetz).We are registered under registration number HRB 30 000. Our registered address is Taunusanlage 12, 60325 Frankfurt am Main, Germany, and our telephone number is +49-69-910-00. Our agent in the United States is: Peter Sturzinger, Deutsche Bank Americas, c/o Office of the Secretary, 60 Wall Street, Mail Stop NYC60-4006, New York, NY 10005.

We have made the following significant capital expenditures or divestitures since January 1, 2005:

– Sale of 3.5% in DaimlerChrysler AG to institutional investors on July 28, 2005 with a total value of€ 1.4 billion and a further sale of 2.5% in DaimlerChrysler to institutional investors on November 22, 2005 with a total value of€ 1.1 billion.

– Agreement to sell our entire holding of 37.72% in EUROHYPO AG to Commerzbank AG, which was signed on November 16, 2005, for a total consideration of€ 2.6 billion. The sale of the first tranche with a total value of€ 0.7 billion was closed on December 15, 2005. Our remaining holding is expected to be sold in the first quarter of 2006.

– Acquisition of the remaining 60% in United Financial Group, Russia, signed on December 5, 2005 and closed on February 27, 2006.

Since January 1, 2005, there have been no public takeover offers by third parties with respect to our shares and we have made no public takeover offers in respect of other companies’ shares.

Business Overview

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€ 992 billion as of December 31, 2005. As of this date, we employed 63,427 people on a full-time equivalent basis, operating in 73 countries out of 1,588 facilities worldwide, of which 53% were in Germany. We offer a wide

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variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world.

In order to best serve our clients and manage our own investments, we are organized into three group divisions, two of which are further sub-divided into corporate divisions. As of December 31, 2005, our group divisions were:

– The Corporate and Investment Bank(CIB), comprising two corporate divisions:

– Corporate Banking & Securities (CB&S)

– Global Transaction Banking (GTB)

– Private Clients and Asset Management(PCAM), comprising two corporate divisions:

– Asset and Wealth Management (AWM)

– Private & Business Clients (PBC)

– Corporate Investments(CI)

Our organization also includes an infrastructure group into which we centralized our business support areas (which were formerly part of our group divisions) and our Corporate Center. Additionally, we created a regional management function that covers regional responsibilities worldwide.

We have operations or dealings with existing or potential customers in almost every country 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 almost every other country.

The following table shows our net revenues by geographical region, based on our management reporting systems.

in€ m.	2005			2004		1	2003		1
Germany:
CIB		2,437			2,363			2,558
PCAM		4,606			4,393			4,309
Total Germany		7,043			6,756			6,867
Rest of Europe:
CIB		6,145			4,514			5,019
PCAM		2,539			2,171			2,169
Total Rest of Europe2		8,684			6,685			7,188
North America (primarily U.S.):
CIB		4,996			4,437			4,669
PCAM		1,182			1,196			1,468
Total North America		6,177			5,634			6,136
South America:
CIB		233			70			139
PCAM		–			1			1
Total South America		233			71			141
Asia-Pacific:
CIB		2,107			2,029			1,908
PCAM		267			262			253
Total Asia-Pacific3		2,374			2,291			2,161
Corporate Investments		1,229			621			(920	)
Consolidation & Adjustments		(102	)		(140	)		(305	)
Consolidated net revenues4		25,640			21,918			21,268

1	Restated to conform to the 2005 management structure.
2	The United Kingdom accounted for over one-half of these revenues in 2005, 2004, and 2003. Rest of Europe also includes our African operations.
3	Asia-Pacific also includes the Middle East.
4	Consolidated total net revenues comprise interest revenues, interest expense and total noninterest revenues (including net commission and fee revenues). Revenues are attributed to countries based on the location in which the Group’s booking office is located. The location of a transaction on our books is sometimes different from the location of the headquarters or other offices of a customer and different from the location of our personnel who entered into or facilitated the transaction. Where we record a transaction involving our staff and customers and other third parties in different locations frequently depends on other considerations, such as the nature of the transaction, regulatory considerations and transaction processing considerations.

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Management Structure

We operate the three group divisions and the Infrastructure functions under the umbrella of a“virtual holding company”.We use this term to mean that, while we subject the group divisions and infrastructure areas to the overall responsibility of our Management Board, which is supported by the Corporate Center, we do not have a separate legal entity holding these three group divisions and we nevertheless allocate substantial managerial autonomy to them. To support this structure, key governance bodies function as follows:

TheManagement Boardhas the overall responsibility for the management of Deutsche Bank, as provided by the German Stock Corporation Act. Its members are appointed and removed by theSupervisory Boardwhich is a separate corporate body. Our Management Board focuses on strategic management, corporate governance, resource allocation, risk management and control.

TheGroup Executive Committee (GEC),established in 2002, comprises the members of the Management Board and the Business Heads of our two client-facing group divisions, CIB and PCAM. Following a change to the responsibilities of the Business Heads of our group divisions in September 2004, one GEC member represents the management of our regions. The GEC is a body that is not required by the Stock Corporation Act. It serves as a tool to coordinate our businesses and regions. We believe this underscores our commitment to a virtual holding structure.

Within each group division, coordination and management functions are handled byOperating Committeesat the group division level andExecutive Committeesfor each of the individual business divisions.Functional Committeesassist the Management Board in the management across businesses of specific support and control areas.

Our Business Strategy

Deutsche Bank has a clearly defined business strategy, which encompasses all dimensions of our practice: our corporate identity; our mission and values; our brand; and the program of transformation and profitable growth initiatives which the Bank has implemented in recent years.

Our identity.We are a leading global investment bank with a strong and successful private clients franchise. These are mutually reinforcing businesses; taking full advantage of the synergy potential between these businesses is a strategic priority for us. We are a leader in Europe, with powerful and growing positions in North America, Asia, and key emerging markets. Given the strong positions we enjoy in our core businesses, our focus is on organic and incremental growth initiatives.

Our mission and values.We compete to be the leading global provider of financial solutions for demanding clients, creating exceptional value for our shareholders and people. We are committed to our core values of customer focus, teamwork, innovation, performance and trust.

Our brand.Deutsche Bank’s brand is synonymous with strength and quality throughout the world and our logo is one of the best-recognized brand symbols in the global financial industry as confirmed byGlobal B2B Brand Monitor. Our brand campaign leverages a distinctive logo, significant business achievements, and a unique, innovative offering to our clients. This campaign has further strengthened our profile in established markets and built awareness in new growth markets.

Transformation.Since 2002, Deutsche Bank has pursued an ambitious and far-reaching ‘transformation’ strategy. Our management agenda focused on four fundamental priorities: capitalizing on global leadership in Corporate and Investment Banking (CIB); achieving profitable growth in Private Clients and Asset Management (PCAM); maintaining strict cost, capital and risk discipline; and establishing Deutsche Bank as the most reputable brand. The success of our ‘transformation’ strategy has given Deutsche Bank significant strategic advantages. We have made significant gains in profitability; we command leading positions in our chosen core businesses; we have substantially reduced credit risk, market risk and alternative asset risk; and we have a clear, balanced capital management strategy, which has allowed us to maintain core capital strength while simultaneously investing in business growth and rewarding shareholders.

Profitable growth.Having created a strong and focused platform, Deutsche Bank pursues a strategy of profitable growth. Our objective is to consolidate our leadership position in Europe; expand our business in the important North American market; and take advantage of growth opportunities in the Asia-Pacific region and other key emerging markets. We aim to grow all our core businesses, both

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organically and by targeted, incremental acquisitions. Growth initiatives are carefully assessed for their strategic and financial logic, and for their potential to create shareholder value. During 2005 we made significant investments in future growth of our core businesses in all major regions. With growth, we also aim to deliver profitability. In 2005, we successfully reached our published financial target, of 25% pre-tax return on average active equity (our target definition of pre-tax return excludes restructuring charges and substantial gains on the sale of our industrial holdings from our income before income tax). Our ratios of income before income tax to average active equity and to average total shareholders’ equity were 24% and 22%, respectively.

Going forward, we aim to deliver similar levels of pre-tax return on average active equity (using our target definition) across the business cycle, together with double-digit growth in earnings per share. We gained added impetus from our Business Realignment Program, or BRP, which made significant progress during 2005 and was largely executed by year-end, with the remainder to be completed in 2006. This plan produced both revenue and cost synergies by streamlining our business structure, and significantly improved our delivery to our clients.

Growth strategies in our CIB businesses:

InCorporate Banking & Securities, our overall aim is to consolidate and develop our position as a world-leading investment bank (based upon publicly available revenue information). We seek to expand our leading position in Europe (source:Dealogic), and reach top-5 positions in the U.S. and Asia-Pacific. In Sales & Trading, we aim to leverage our commanding share in ‘market access’ products, such as our world no. 1 position in foreign exchange (source:Euromoney) and cash equities, where we rank no. 1 in Europe by volume according toThomson AutEx. Additionally, we aim to expand in sophisticated, high-value ‘intellectual capital’ products such as derivatives, where our pre-eminent position was reflected in the awards for ‘Derivatives House of the Year’ in bothInternational Financing Review and Risk magazine. We also plan to exploit synergies across our debt and equity platforms and selectively take advantage of profitable proprietary trading opportunities. We aim to expand our presence in the U.S. market by growth in key businesses, such as equity derivatives and mortgage-backed securities. In Asia-Pacific, we aim to capitalize on our strong platforms in all key markets across the region to take advantage of the rapid growth and increasing sophistication of local capital markets. In our corporate finance businesses, we aim to consolidate a strong position in Europe with further gains in market share in the Americas and Asia, by investing in product and industry specialist capabilities, capitalizing on leading franchises in key segments such as financial sponsors and commercial real estate, and deepening our client relationships by means of an integrated corporate coverage model. During 2005, we signaled our determination to expand in the world’s fast-growing corporate banking and securities markets by acquiring leading local capital markets businesses in Russia, Turkey and Mexico, and sealing partnership agreements or joint ventures in China, Saudi Arabia and Australia.

InGlobal Transaction Banking, we aim to grow revenues by expanding our strong positions in Cash Management in U.S. dollar and euro clearing for both corporate clients and financial institutions, and in Trade Finance, where we aim to build on successful cross-selling collaboration with our colleagues in the Global Markets Business Division. We will expand our Trust and Securities Services business by acquiring the UK Depository and Clearing Centre business from JP Morgan Chase, a transaction which is expected to close in the first half of 2006 subject to regulatory approvals. We aim to further boost earnings by means of recent cost savings initiatives.

Growth strategies in our PCAM businesses:

InAsset and Wealth Management, we aim to further develop Deutsche Bank’s global investment management business, which already has a significant global presence as reflected by invested assets of € 704 billion at the end of 2005 and is a substantial contributor to Group revenues. In the Asset Management Business Division, we aim to expand our global mutual funds business, creating an integrated, global platform which leverages the European strength of our DWS unit. We aim to further expand DWS in Europe, reposition Scudder Investments as DWS Scudder in North America, and extend DWS’s distribution reach into Asian markets. We aim to develop our institutional asset management business by expanding in the fast-growing and profitable area of alternative investments, building our presence in Absolute Return Strategies and consolidating our global leadership in Real Estate Asset Management (source:Euromoney) through our RREEF unit. We aim to expand our traditional

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institutional asset management business by leveraging key areas of strength, such as our global leadership in the insurance sector wherePensions & Investments identified us as no. 1 manager of non-affiliated insurance assets. In 2005, we signaled our determination to fix or sell unprofitable or non-core business units with the sale of a substantial part of our UK- and Philadelphia-based asset management business to Aberdeen Asset Management PLC. In Private Wealth Management, we aim to grow our business with high net worth individuals and families by further refining our fully-integrated, ‘holistic’ offering of wealth management services, collaborating with product specialists in CIB and Asset Management to further develop sophisticated investment options, and hiring experienced client advisors in markets with significant growth potential.

InPrivate & Business Clients, we pursue a multi-country strategy to expand our business in investment management, consumer financing and traditional banking products. We aim to consolidate and build on our positions in our core European markets – Germany, Italy and Spain – while simultaneously opening new avenues of growth in emerging Europe and Asia. In Germany, we aim to grow business by adopting innovative approaches to new client segments. We aim to leverage our package of student banking services, launched in 2005, and our distribution agreement with ADAC, Germany’s largest automobile club, which gives us access to 15 million club members. We also aim to capitalize on investments in our distribution network in 2005, which included hiring new client-facing staff, building up our independent sales force, and modernizing and expanding our network of investment and finance centers. We aim to expand our pan-European consumer finance business through our hub in Italy. We also aim to expand in the most important Asian markets – through our branch network in India, which was the focus of investment during 2005, and through our equity stake in Hua Xia Bank in China, as well as our partnership agreement with Hua Xia Bank to develop credit cards, investment products, and other services. We further aim to expand our presence in emerging Europe through the expansion of our branch network in Poland.

Regional management.Our Regional Management is a worldwide management function across businesses and infrastructure areas, whose aim is to provide our clients with the local support they need, ensure effective regional governance, local implementation of our growth strategies, consistent performance management, and to respond to continuously changing market and regulatory requirements. The Regional Management function is represented in the Group Executive Committee (GEC) by the Head of Regional Management worldwide who also chairs the global Regional Management Executive Committee where the six regional CEOs (Germany, Europe, Americas, Asia, Japan/Australia and New Zealand, Middle East/North Africa) are represented. To continue the growth momentum of our operations in our home market Germany, we have implemented various initiatives to drive growth through product innovation, improved client coverage and utilization of cross-divisional revenue and cost synergies. The coordination lies with the Management Committee Germany, which is chaired by the Head of Regional Management worldwide in his role as CEO Germany and further comprises the Business Heads of our Group Divisions, CIB and PCAM, and selected central functions in Germany.

Capital management strategy. We aim to maintain tight management of our risks and capital. Our main capital management objective is to sustain a sound capitalization, both from a regulatory and economic perspective, while supporting profitable business growth. To this end, protection of our strong credit ratings is key. The target is to keep our BIS Tier I capital ratio between 8 and 9%. Our risk position and regulatory capitalization are either directly denominated in foreign currencies or exhibit foreign exchange-sensitive components. The U.S. dollar is particularly important in this regard. The impact of U.S. dollar movements on our risk position is almost completely offset by U.S. dollar-sensitive capital components, such as hybrid Tier I instruments. As a result, our BIS Tier I capital ratio is not adversely impacted by fluctuations in the exchange rate of the euro versus the U.S. dollar.

Our significantly improved profitability has resulted in strong capital formation, which supports our sound capital position. In addition, issuing innovative capital instruments and subordinated debt are among the tools we use to support our regulatory capital. This allows us to reinvest capital into profitable business growth, thus creating sustainable future value for our shareholders – either by supporting increases in risk positions as we grow organically, or by funding the impact on regulatory capital of goodwill/intangible assets in instances where we grow by making incremental acquisitions. As we deploy the capital we generate, however, we will continue to strike a balance between growing our busi-

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nesses and rewarding our shareholders. We are committed to return capital in excess of our regulatory and economic capital requirements to our shareholders via both share buy-back programs and dividend payments. In doing so, our shareholders benefit, directly and substantially, from our financial success. In addition, we use shares bought back to hedge equity-based compensation plans.

Our Group Divisions

Group division is a term we use to describe the three highest-level divisions of our firm, which are the Corporate and Investment Bank Group Division (CIB), the Private Clients and Asset Management Group Division (PCAM) and the Corporate Investments Group Division (CI). The CIB and PCAM Group Divisions are divided into several corporate divisions, each of which may have several business divisions. The CI Group Division has several business divisions and does not use the intermediate corporate division designation.

In the first quarter 2005, the Group implemented structural changes associated with the Business Realignment Program. Most of the revisions related to organizational changes below the corporate division level. Since January 1, 2005, the business support areas formerly reported as part of CIB, PCAM and CI were centralized into one infrastructure group (which also covers the Corporate Center functions). As a group-internal service provider, the infrastructure group acts on a non-profit basis and allocates its total noninterest expenses to the recipients of the services (i.e., the corporate divisions) as part of their non-compensation expenses.

Corporate and Investment Bank Group Division

The Corporate and Investment Bank Group Division primarily serves large and medium-sized corporations, financial institutions and sovereign, public sector and multinational organizations. This group division generated 62% of our net revenues in 2005, 61% in 2004 and 67% in 2003 (on the basis of our management reporting systems).

The Corporate and Investment Bank Group Division’s operations are predominantly located in the world’s primary financial centers, including London, New York, Frankfurt, Tokyo, Singapore and Hong Kong.

The businesses that comprise the Corporate and Investment Bank Group Division seek to reach and sustain a leading global position in corporate and institutional banking services, measured by financial performance, market share, reputation and customer franchise, while making optimal usage of, and achieving optimal return on, our economic capital. The division also continues to exploit business synergies with the Private Clients and Asset Management Group Division and the Corporate Investments Group Division. The Corporate and Investment Bank Group Division’s activities and strategy are primarily client driven. Teams of specialists in each business division give clients access not only to their own products and services, but also to those of our other businesses.

At December 31, 2005, this group division included two corporate divisions, comprising the following business divisions:

– Corporate Banking & Securities Corporate Division

– Global Markets

– Corporate Finance

– Global Transaction Banking Corporate Division

– Trade Finance and Cash Management Corporates

– Trust and Securities Services and Cash Management Financial Institutions

Corporate Banking & Securities includes our combined debt and equity sales and trading businesses, both of which are housed in our Global Markets Business Division. Global Markets has nine primary business lines and three horizontally-integrated client-facing groups (Debt Capital Markets / Corporate

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Coverage, the Institutional Client Group, and Research), unified at a local level by strong regional management. In addition, Corporate Banking & Securities includes the Corporate Finance Business Division, which focuses on providing advisory, equity and debt financing and structuring services to corporates and financial institutional clients. CIB’s client coverage functions are also a key part of the division.

Global Transaction Banking is closely aligned with Corporate Finance, but is a separately managed corporate division, providing trade finance, cash management and trust and securities services. Corporate Finance and Global Transaction Banking are together named Global Banking.

In addition, Corporate Banking & Securities and Global Transaction Banking are supported by the Loan Exposure Management Group (LEMG). LEMG has responsibility for a range of loan portfolios, actively managing the risk of these through the implementation of a hedging regime on a selective basis. LEMG manages credit risk of loans and lending-related commitments within:

– the investment-grade portfolio of our Corporate and Investment Bank Group Division where original maturities are greater than 180 days, and

– the medium-sized German companies’ portfolio where original maturities are greater than 360 days, excluding legacy business booked prior to April 2004.

From 2006 onwards, we have expanded the above scope to include previously uncovered maturities and the aforementioned legacy business.

Corporate Banking & Securities Corporate Division
Corporate Division Overview

Corporate Banking & Securities is made up of the business divisions Global Markets and Corporate Finance. These businesses offer financial products worldwide ranging from the underwriting of stocks and bonds to the tailoring of structured solutions for complex financial requirements.

In August 2004, we signed an agreement with Berkshire Mortgage Finance L.P., a subsidiary of the Boston-based Berkshire Group, to acquire substantially all of their origination and servicing assets. The acquisition was closed in October 2004.

In March 2005 we signed a definitive agreement to acquire the remaining 60% of Bender Menkul Degerler Anonim Sirketi (“Bender Securities”) in Turkey, after we initially acquired a 40% equity stake in 2000. The transaction was closed in May 2005.

In April 2005 we signed a Joint Proposal with Al Azizia Commercial Investment Company for the establishment of an investment banking joint venture to provide equities brokerage and other financial services in Saudi Arabia.

In January 2004 we closed on the purchase of a 40% stake in United Financial Group, a Moscow investment bank. In December 2005, we signed definitive agreements to acquire the remaining 60% of the Group, and the acquisition was completed on February 27, 2006.

Products and Services

The Global Markets Business Division is responsible for origination, sales, structuring and trading activities across a wide range of debt, equity, equity-linked, convertible bond, foreign exchange, commodities, derivatives, money market and prime services products. The division aims to deliver creative solutions to the capital-raising, investing and hedging needs of customers, by being able to price and hedge any market risk that clients anywhere in the world may wish to assume or avoid.

Within our Corporate Finance Business Division, our clients are offered not only mergers and acquisitions and general corporate finance advice, together with leveraged debt and equity origination services, but also a variety of credit products and financial services. In addition, we also provide a variety of financial services to the public sector. Corporate Finance also includes coverage functions related to corporate, financial and institutional clients globally.

Within Corporate Banking & Securities, in addition to providing products and services to customers, we conduct proprietary trading, or trading on our own account. Most trading activity is undertaken in the normal course of facilitating client business. For example, to facilitate customer flow business, traders will maintain long positions (accumulating securities) and short positions (selling securities we do not yet own) in a range of securities and derivative products, reducing this exposure by hedging transac-

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tions where appropriate. While these activities give rise to market and other risk, we do not view this as proprietary trading. However, we also use our capital to exploit market opportunities, and this is what we term proprietary trading.

We undertake designated proprietary trading in foreign exchange, fixed income, credit and equity products. Some of this proprietary trading activity takes the form of arbitrage. For example, in index arbitrage we identify differences between the prices of exchange-traded derivatives (such as futures contracts on an equity index) and the underlying prices on the stock exchange of the individual stocks in the index. In convertible arbitrage, we identify volatility-related pricing differences between the market for convertible debt instruments and the cash and derivatives markets. In credit and equity arbitrage, we use statistics-driven trading strategies based on short-term market movements and indicators to manage our trading book so that the market value of our long positions remains roughly equal to the market value of our short positions. We also undertake risk-arbitrage, which is generally related to mergers and acquisitions, involving, for example, transactions such as buying a target company’s shares at the same time as selling the bidding company’s shares.

All our trading activities, including proprietary trading, are covered by our risk management procedures and controls which are described in detail in “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Risk Management – Market Risk – Value-at-Risk Analysis.”

Distribution Channels and Marketing

In the Corporate Banking & Securities Corporate Division the focus of our corporate and institutional coverage bankers and sales teams is on our client relationships. We have structured our client coverage model so as to provide varying levels of standardized or dedicated services to our customers depending on their needs and level of complexity.

Global Transaction Banking Corporate Division
Corporate Division Overview

Global Transaction Banking is primarily engaged in the gathering, moving, safeguarding and controlling of assets for its clients throughout the world. It provides processing, fiduciary and trust services to corporations, financial institutions and governments and their agencies and comprises the following business divisions:

– Trade Finance and Cash Management Corporates

– Trust and Securities Services and Cash Management Financial Institutions

In January 2003 we closed the sale of substantial parts of our Global Securities Services business to State Street Corporation, with the completion of the sale of the Italian and Austrian parts of the business following in the third quarter of 2003. In January 2004, we completed the acquisition of Dresdner Bank AG’s German domestic custody business which we successfully integrated by December 2004.

In January 2006, we signed a definitive agreement to acquire the UK Depository and Clearing Centre business from JP Morgan. This acquisition is expected to close in the first half of 2006, subject to regulatory approvals.

Products and Services

Trade Finance provides comprehensive solutions along the client’s trade value chain by combining international trade risk mitigation products and services with custom-made solutions for structured trade and export finance as well as – in a continuously growing number of regions – cross-selling of interest and currency risk products.

Cash Management caters to the needs of a diverse client base of corporates and financial institutions. With the provision of a comprehensive range of innovative and robust solutions, we handle the complexities of global and regional treasury functions including customer access, payment and collection services, liquidity management, information and account services and electronic bill presentation and payment solutions.

Trust and Securities Services provides a range of trust, payment, administration and related services for selected securities and financial transactions, as well as domestic securities custody in more than 25 markets.

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Distribution Channels and Marketing

The Global Transaction Banking Corporate Division develops and markets its own products and services in Europe, Asia and the Americas. The marketing is carried out in conjunction with the coverage functions both in this division and in the Corporate Banking & Securities Corporate Division.

Customers can be differentiated in two main groups: financial institutions, such as banks, mutual funds and retirement funds, broker-dealers, fund managers and insurance companies, as well as multinational corporations. In Germany we also focus on middle-market corporations.

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Private Clients and Asset Management Group Division

The Private Clients and Asset Management Group Division primarily serves retail and small corporate customers as well as affluent and wealthy clients and provides asset management services to retail and institutional clients. This group division generated 34% of our net revenues in 2005, 37% of our net revenues in 2004, and 39% in 2003 (on the basis of our management reporting systems).

At December 31, 2005, this group division included the following corporate divisions:

– Asset and Wealth Management (AWM)

– Private & Business Clients (PBC)

The Asset and Wealth Management Corporate Division is comprised of the Asset Management Business Division (AM) and the Private Wealth Management Business Division (PWM).

The Private & Business Clients Corporate Division serves retail and affluent clients as well as small corporate customers in our key markets of Germany, Italy and Spain, as well as in Belgium, Portugal and Poland. This is complemented by our newly established market presence in India and China.

In June 2004 our wholly-owned subsidiary, european transaction bank ag (etb), which had been managed within the infrastructure groups of the Private Client and Asset Management Group Division, was deconsolidated in the course of entering into a securities processing partnership with Xchanging Holdings. The etb continues to provide securities, funds and derivatives processing. Our holding as well as the operational management of etb was transferred to Xchanging etb GmbH (formerly Zweite Xchanging GmbH), an equity method investment under the infrastructure service group.

In July 2004, we sold our wholly-owned subsidiary DB Payment to a subsidiary of Deutsche Postbank AG. Prior to the sale, DB Payment had been managed within the infrastructure groups of the Private Client and Asset Management Group Division.

Asset and Wealth Management Corporate Division
Corporate Division Overview

The Asset and Wealth Management Corporate Division operates our global asset management and private wealth management businesses and is among the leading asset managers in the world based on total invested assets. The division serves a range of retail, private and institutional clients, the latter including:

– insurance companies

– pension funds

– corporations

– governments

– charities

Starting January 1, 2005, our AM Business Division is organized into three distinct global product lines: Institutional Fixed Income and Equity, Mutual Funds including all DWS and Scudder mutual funds, and Alternative Investments, including Hedge Funds, Quantitative Strategies, Real Estate and Structured Products. This product-centric focus divided the prior traditional asset management into its already existing products with slight modifications. The alternative investments of Hedge Funds and Real Estate remain primarily unchanged, while the emphasis on Quantitative Strategies and Structured Products has been increased with those two becoming a new alternative product offering. During 2005, we saw the implementation of key elements of our realignment program transforming the division from being a collection of regional businesses to a strategically positioned entity with integrated global product lines. We integrated Scudder Investments, the U.S. mutual fund business into the DWS global branding as DWS Scudder effective February 1, 2006 creating a worldwide investment platform of approximately 700 investment professionals. DWS Scudder will focus on the advisor-driven channel in the U.S., with an emphasis on servicing the needs of financial advisors. In Asia-Pacific, DWS launched its first series of mutual funds in Singapore, developing products for the Chinese market through a joint venture with Harvest Asset Management, which was created in March 2005. In October, we closed

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Trust Bank in Japan and integrated two separate units into a single entity, DeAM Japan. Also in 2005, we integrated all insurance-related functions – including fixed income management, distribution and advisory services – into a single global unit, creating the no. 1 manager of insurance assets globally (according to “Pensions & Investment”, October 2005), and launched a Specialty Fixed Income business in the U.S.

Our PWM Business Division includes private banking activities for high net worth clients, their families and selected institutions, as well as the Private Client Services (PCS) business in the U.S.

Private Wealth Management (excluding PCS) is organized into regional teams specialized in their respective regional markets. In the U.S., our two PWM franchises, with their specific offering of private banking and brokerage for high net worth individuals, were brought closer together in 2005, which we believe created beneficial synergies for our clients and our businesses due to improved service offering and cost efficiency.

In July 2005, AM announced the sale of a substantial part of its UK- and Philadelphia-based business to Aberdeen Asset Management PLC. The first tranche of the transaction closed on September 30, 2005 and included the UK-based institutional Equity, Fixed Income, Global Equity and Multi-Asset businesses and the UK retail DWS business. In December 2005, AM completed this transaction by selling a substantial part of its UK- and Philadelphia-based business. Excluded from the sale was the Philadelphia-based high yield business, which remains an integral part of AWM’s global platform.

In January 2005, PWM acquired investment manager Wilhelm von Finck AG. The company continues to operate under its own name and offers specific investment solutions for large-scale private and family wealth portfolios.

In 2004, AM merged three Australian trusts – Deutsche Diversified Trust, Deutsche Office Trust and Deutsche Industrial Trust – into a new trust, DB RREEF Trust, creating Australia’s fourth largest listed property trust. In connection with this transaction we also transferred our Australian fiduciary real estate trust management and property management business into a subsidiary, renamed DB RREEF Holdings, subsequently selling a 50% interest in DB RREEF Holdings.

Later in 2004, PWM sold a portion of the private client unit of Scudder, Scudder Private Investment Counsel (PIC), to Legg Mason. In addition AM completed the acquisition of the remaining minority interests in DWS Holding & Service GmbH. Also in 2004 we transferred a London based PCS business unit from AWM to CB&S.

In 2003, we acquired Rued, Blass & Cie AG Bankgeschaeft, a Swiss private bank. In addition, we sold most of our Passive Asset Management business to Northern Trust Corporation and transferred a substantial part of our direct real estate private equity portfolio to a third-party fund.

Products and Services

AWM’s portfolio/fund management products include active fund management, passive/quantitative fund management, alternative investments and discretionary portfolio management.

AM’s active fund management service offers management of client funds via mutual funds, commingled accounts, and separately managed accounts. Our fund managers invest in equity, fixed income and balanced products that are global, regional, country or industry-specific.

The passive/quantitative fund management services in AM provide a full suite of products, including those of a passive nature, to our customers through a preferred provider agreement with Northern Trust Corporation. We still pursue the passive business within our German Passive Asset Management business, which was not part of the 2003 sale to Northern Trust Corporation, and with specialized passive products that we have chosen strategically to continue as investment management services.

Alternative Investments within AM covers our real estate and hedge fund activities. We manage all of our real estate activities through DB Real Estate, which acquires and manages investments in institutional grade properties and real estate securities on behalf of our institutional and private clients worldwide. We specialize in managing core, value-enhancing and high-yield property investments as well as investments in publicly traded real estate securities and mezzanine loans. We offer several types of structures through which our clients may invest, including commingled funds, both closed and open-end, as well as investment programs that can be customized to meet an individual client’s specific needs. Our hedge fund activities are managed through DB Absolute Return Strategies (DB ARS),

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whose platform provides access to both Deutsche Bank and third-party hedge fund strategies, and offers both single-manager and multi-manager funds. Our selection process is designed to produce a pool of qualified managers in a range of sectors, strategies and styles. As an asset class, hedge funds are designed to provide attractive risk-adjusted returns in most market environments and offer portfolio diversification benefits to investors. We distribute our products globally to institutions and high net worth individuals.

PWM offers discretionary portfolio management, in which our specialized fund managers have discretion to manage clients’ investments within the clients’ general guidelines. The fund managers invest client funds in various investment products, such as stocks, bonds, mutual funds, hedge funds and other alternative investments including derivatives, where permitted.

AWM also provides brokerage services in which our relationship managers and client advisors provide investment advice to clients where we do not exercise investment discretion. Our services also include advice on wealth management and growth, including tax-optimized investments and estate planning. Our investment advice covers stocks, bonds, mutual funds, hedge funds and other alternative investments, including derivatives where permitted. The relationship managers also advise their clients on the products of third parties in all asset classes.

We further expanded our offering of alternative investments in 2005, especially with respect to innovative solutions within the private equity asset class. We continued to successfully generate foreign exchange products as well as structured investment products in cooperation with the Global Markets Business Division.

Our loans/deposits products include traditional deposit products (including current accounts, time deposits and savings accounts) and more specialized secured and unsecured lending. We offer our clients both standardized and more specialized finance and savings products.

We also offer payment, account & remaining financial services, processing and disposition of cash and non-cash payments in local currency, international payments, letters of credit, guarantees, and other cash transactions.

AWM generates revenues from other products, including direct real estate investments included in our alternative investments business, rental revenues and gains and losses earned on real estate deal flows and revenues that are not part of our core business, specifically, the gain on sale of businesses.

Distribution Channels and Marketing

In AM we market our retail products in Germany and other Continental European countries, generally through our established internal distribution channels, and Private & Business Clients Corporate Division’s distribution channels. We also distribute our funds through other banks, insurance companies and independent investment advisors. We market our retail funds outside Europe via our own Asset and Wealth Management distribution channels and through third-party distributors. DWS Scudder Investments distributes its retail products to U.S. investors primarily through financial representatives, including brokers at regional firms, independent financial advisors and registered investment advisors. In addition, we distribute our funds directly to members of the American Association of Retired Persons (AARP) Investment Program.

We distribute products for institutional clients through our substantial sales and marketing network within AM and through third-party distribution channels. We also distribute these products through our other businesses, notably the Corporate and Investment Bank Group Division.

Within the traditional retail and institutional businesses, we have in place strong regional investment teams and businesses that understand the needs of their clients and the dynamics of their specific markets. While these teams are led by regional Chief Investment Officers, we remain committed to our global investment platform.

We distribute our alternative investment products predominantly to high net worth clients, institutions and retail customers worldwide through our sales and marketing network within Asset and Wealth Management and through third-party distribution channels.

Within our alternative investments business, we employ global investment management teams that understand the needs of their clients and the dynamics of their specific markets. Within DB Absolute Return Strategies, the investment management teams are divided between single-manager and multi-

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manager strategies. DB Real Estate relies on direct client relations staff to provide clients and brokers with access to real estate investment options.

PWM pursues an integrated holistic business model to cater to the complex needs of high net worth clients, their families and selected institutions. Our financial solutions are part of an integrated offering, which includes real estate investment advice as well as advice on philanthropic activities. We tailor our offering to the unique risk-return profile of each client. The relationship managers work within target customer groups, assisting clients in developing individual investment strategies and creating enduring relationships with our clients.

In our Private Wealth Management onshore business, wealthy customers are served via our relationship manager network in the respective countries. Our customers also have access to our retail branch network and other general banking products we offer through our Private & Business Clients Corporate Division. The offshore business encompasses all of our clients who establish accounts outside their countries of residence. These customers are able to use our offshore services to access financial products that may not be available in their countries of residence.

In addition, the client advisors of the Private Client Services business focus on traditional brokerage offering and asset allocation, including a wide range of third party products.

Private & Business Clients Corporate Division
Corporate Division Overview

The Private & Business Clients Corporate Division established a single business model across Europe with a focused, sales-driven management structure under the Deutsche Bank brand. PBC serves retail and affluent clients as well as small corporate customers.

In 2005 we expanded our presence in selected European and Asian emerging markets. We invested into the growth of the branch network in Poland with the objective to double our presence in this country.

Also in 2005, we established market presence in India and China. We opened our first branches in major Indian cities to participate in the rapid growth of this important emerging Asian market. In China, we signed a contract to buy, together with Sal. Oppenheim, a participation of 14% in Hua Xia Bank. In parallel, Hua Xia Bank and Deutsche Bank agreed on a long-term strategic cooperation.

Additionally, in 2005, we sold our Private Banking business in the Netherlands to Theodoor Gilissen Bankiers N.V.

Products and Services

Generally, similar banking products and services are offered throughout Europe, except that there are some variations from country to country to meet local market, regulatory and customer requirements.

In offering portfolio/fund management and brokerage services, we provide investment advice, brokerage services, discretionary portfolio management and securities custody services to our clients.

We provide loan and deposit services, with the most significant being building financing (including mortgages) and consumer and commercial loans, as well as traditional current accounts, savings accounts and time deposits. The building finance business, which includes mortgages and construction finance, is our most significant lending business. We provide building finance loans primarily for private purposes, such as home financing. Most of our mortgages have an original fixed interest period of five or ten years. In 2005 we also started several initiatives to foster our consumer finance business. For example, in Italy we continued to expand our successful Consumer Finance Platform “Prestitempo”, and we introduced a special student loan program in Germany. Loan and deposit products also include the home loan and savings business in Germany, offered through our subsidiary Deutsche Bank Bauspar AG.

PBC’s payments, account & remaining financial services comprise administration of current accounts in local and foreign currency as well as settlement of domestic and cross-border payments on these accounts. They also comprise the purchase and sale of payment media and the sale of insurance products, home loan and savings contracts and credit cards. In Italy, Private & Business Clients issues credit cards and processes credit card payments under the Bankamericard brand.

Other products include primarily activities related to asset and liability management.

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Distribution Channels and Marketing

To achieve a strong brand position internationally, we market our services consistently throughout Europe. In order to make banking products and services more attractive to clients, we are seeking to optimize the accessibility and availability of our services. To do this, we look to self-service functions and technological advances to supplement our branch network with an array of access channels to its products and services. These channels consist of the following in-person and remote distribution points:

– Investment and Finance Centers.Investment and Finance Centers offer the entire range of products and advice. In 2005, we launched the so-called ‘Branch of the future – Q 110’ in Berlin, a pilot new branch concept to serve private and business clients.

– Financial Agents.In most countries, we market our retail banking products and services through self-employed financial agents. In 2005, we invested in our mobile sales force network in Germany, opening new offices and hiring additional sales representatives.

– Call Centers.Call centers provide clients with remote services supported by automated systems. Remote services include access to account information, securities brokerage and other basic banking transactions.

– Internet.On our website, we offer clients brokerage services, account information and product information on proprietary and third-party investment products. These offerings are complemented with services that provide information, analysis tools and content to support the client in making independent investment decisions.

– Self-service Terminals.These terminals support our branch network and allow clients to withdraw and transfer funds, receive custody account statements and make appointments with the Bank’s financial advisors.

In addition to our branch network and financial agents, we also enter into country-specific distribution arrangements. In Germany, for example, we have a cooperation agreement with Deutsche Vermögensberatung AG (referred to as DVAG) whereby we distribute our mutual funds and other banking products through DVAG’s independent distribution network. We also entered into an exclusive sales co-operation with ADAC (Germany’s largest automobile club with more than 15 million members) in 2005. In order to complement our product range, we have signed distribution agreements, whereby PBC distributes the products of reputable product suppliers. These include an agreement with Zurich Financial Services for insurance products, and a strategic alliance with nine fund companies for the distribution of their investment products.

Corporate Investments Group Division

The Corporate Investments Group Division manages the majority of our alternative assets portfolio and certain other debt and equity positions. The portfolio includes our industrial holdings, certain private equity and venture capital investments, private equity fund investments, certain corporate real estate investments, our holdings in EUROHYPO AG and Atradius N.V., certain credit exposures and certain other non-strategic investments. Historically, its mission has been to provide financial, strategic, operational and managerial capital to enhance the values of the portfolio companies in which the group division has invested.

We believe that the group division enhances the bank’s portfolio management and risk management capability. The group division is in the course of reducing its equity and other exposure significantly. In this context a number of significant transactions were entered into during 2005, including the agreement to sell our stake in EUROHYPO AG.

Corporate Investments holds interests in a number of manufacturing and financial services corporations (our “Industrial Holdings”). The largest two of these Industrial Holdings, by market value at December 31, 2005, were interests of 4.4% in DaimlerChrysler AG and 2.4% in Allianz AG. Currently, over 98% of our Industrial Holdings are in German corporations.

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In 2005, our investment in DaimlerChrysler AG was reduced from 10.4% to 4.4%, our investment in DEUTZ AG was reduced from 4.5% to 2.0%, our investment in Deutsche Beteiligungs AG was reduced from 15.0% to 11.9% and we sold our remaining stake in Südzucker AG.

In 2004, our investment in DaimlerChrysler AG was reduced from 11.8% to 10.4%, our investment in DEUTZ AG was reduced from 10.5% to 4.5% and our investments in Fresenius AG and Motor-Columbus AG were sold.

In 2003, our investment in Allianz AG was reduced from 3.2% to 2.5%, and our investments in mg technologies ag and HeidelbergCement AG were sold.

Rather than engaging in proprietary trading, which involves buying and selling securities on a day-to-day basis, Corporate Investments usually holds our investments in listed securities for several years. The majority of the larger shareholdings in listed companies have been in the portfolio for more than 20 years.

The total market value of these holdings was€ 4.1 billion at December 31, 2005. See “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Risk Management – Market Risk – Market Risk in Our Nontrading Portfolios” for further information.

Corporate Investments also holds certain private equity type investments that have been transacted both on behalf of clients and for our own account, in private equity directly and through private equity funds, including venture capital opportunities and leveraged buy-out funds.

Morgan Grenfell Private Equity (MGPE) funds allow a number of external investors to invest in selected companies. MGPE actively acquires investments in companies and places them with the funds, which generally keep their investments for a period of years until the company is deemed fit for a public offering or a resale to an unrelated party. The Private Equity business is also an investor in the MGPE funds. Since April 2003, management and administration services in relation to the MGPE business have been provided by MidOcean Partners UK Advisors LLP, a partnership formed by certain members of the former Corporate Investments management team under the terms of a secondment and services agreement.

In July 2005, the merger of our investment in Memec Group Holdings Limited with Avnet Inc. was closed, resulting in a 2.4% stake in Avnet Inc.

In 2005 we continued to reduce our Private Equity on-balance sheet exposure by approximately€ 100 million in CI. In particular, several fund investments were sold in the U.S. and Germany.

In 2004, we closed several transactions, reducing our Private Equity on-balance sheet exposure by approximately€ 700 million.

In 2003, the major divestiture was the sale of much of our late-stage portfolio to MidOcean Partners LP, in a€ 1.5 billion transaction. Less significant transactions included the sale of our investment in Tele Columbus GmbH and in Tele Columbus Ost GmbH (formerly SMATcom GmbH), the reduction of our on-balance sheet exposure by approximately€ 110 million by securitization of Private Equity funds, approximately€ 350 million by the sale of certain fund investments, and several transactions which further reduced our venture capital exposure.

The Corporate Investments’ portfolio additionally covers certain real estate holdings in Germany, many of which are occupied by Deutsche Bank AG. In 2005 a small number of buildings were sold to various investors.

In 2004 the major real estate transaction was the sale of a German real estate portfolio, which the Group will continue to partly occupy on a medium- to long-term basis, to Eurocastle Investment Limited, an investment company managed by Fortress Investment Group LLC. In 2003 the major transaction was the sale of a real estate portfolio to The Blackstone Group. Due largely to these sales, real estate exposure decreased by approximately€ 500 million in 2004 and€ 800 million in 2003.

At December 31, 2005, Corporate Investments’ largest equity method investment was a 27.99% stake in EUROHYPO AG. In November 2005, we entered into a sale and purchase agreement to sell our entire 37.72% stake in EUROHYPO AG to Commerzbank AG for a total consideration of€ 2.6 billion. In December 2005, the first tranche of this transaction was completed, reducing our stake to 27.99%. The remaining tranche of the transaction is expected to be completed in the first quarter of 2006.

In 2005 our stake in HCL Technologies Limited was reduced from 6.1% to 3.6% in a partial sale.

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In 2004 we closed the sale of our interest in the operations of maxblue Americas to Banco do Brazil, our joint venture partner in this investment. maxblue Americas is a brokerage providing a variety of advisory and investment management products and services through internet-based technology, investment centers and personal consultants.

In 2003 we signed contracts to divest our 34.6% stake in Gerling-Konzern-Versicherungs-Beteiligungs-AG (GKB) and to restructure, simultaneously with Swiss Re, Sal. Oppenheim and GKB, the ownership of Atradius N.V. (formerly Gerling NCM Credit and Finance AG), a global credit insurer. When the deal closed in 2003 our stake in Atradius N.V. was 38.4%. After a capital increase by Compañia Española de Seguros y Reaseguros de Crédito y Caucion and Seguros Catalan Occidente in 2004, our stake in Atradius N.V. was diluted to 33.9%. In December 2005, we agreed to sell 21.2% out of our 33.9% stake in Atradius N.V. to Compañia Española de Seguros y Reaseguros de Crédito y Caucion and Seguros Catalan Occidente. This transaction is expected to be completed in the first quarter 2006.

In 2003 we also sold a 2.7% stake in SES Global S.A. and our entire stake in Greek EFG Eurobank Ergasias S.A.

Infrastructure and Regional Management

Effective January 1, 2005 we centralized our business support areas, which were formerly part of our group divisions, and our Corporate Center into one infrastructure group. The business support areas comprise control and service functions for the businesses which mainly relate to CIB and PCAM. The Corporate Center comprises those supra-divisional functions that support the Management Board in its management of the Group.

This infrastructure group is organized along the Management Board members’ areas of responsibilities into COO functions (e.g., information technology, operations and global sourcing), CFO functions (e.g., controlling, tax, risk management and corporate security), CAO functions (e.g., human resources, legal, audit and compliance), and CEO functions (e.g., corporate development and treasury).

The Regional Management function covers regional responsibilities worldwide. Country heads and management committees are established in the regions to enhance client-focused product coordination across businesses and to ensure compliance with regulatory and control requirements, both from a local and Group perspective. Additionally, in a global context, the Regional Management function represents regional interests at the Group level and enhances cross-regional coordination.

All expenses and revenues incurred within the Infrastructure and Regional Management areas are fully allocated to the Group Divisions CIB, PCAM and CI.

Competitive Environment

Competitors, Markets and Competitive Factors

The financial services industry – and all of our businesses – are intensely competitive, and we expect them to remain so. Our main competitors are other commercial banks, savings banks, other public sector banks, brokers and dealers, investment banking firms, insurance companies, investment advisors, mutual funds and hedge funds. We compete with some of our competitors globally and with some others on a regional, product or niche basis. We compete on the basis of a number of factors, including transaction execution, our products and services, innovation, reputation and price.

In Germany, our wholesale and retail business is influenced by a significant fragmentation of the banking sector into three pillars: private sector banks like us, public sector banks (Landesbankenand savings banks), and cooperative banks. In particular for the wholesale business, foreign banks also have become important competitors. The public sector banks and the cooperative banks cooperate closely with other banks within their respective pillar and thus operate as networks for most products. Consolidation in the German banking sector has therefore predominantly taken place within the three pillars. In addition, the different legal form of private sector banks, public sector banks and mutual

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banks impedes cross-pillar consolidation. By virtue of their legal form as public-law institutions, public sector banks were only permitted to be owned by municipalities and other public bodies and were able to rely on unlimited state guarantees in the form of a business continuation obligation(Anstaltslast)and a statutory ultimate guarantee obligation(Gewährträgerhaftung)by the public body or bodies that created them (mainly the GermanLänderand municipalities). Following an agreement of the European Commission and the German government, these mechanisms have generally been discontinued after July 18, 2005, subject to transition rules for liabilities existing on that date. In the meantime, a discussion has evolved as to whether the traditional boundaries between the private sector banks, the public sector banks and the cooperative banks should be abandoned in whole or in part in order to improve the competitiveness of German banks within Europe and globally.

In Europe, wholesale and, even more so, retail banking is characterized by regional fragmentation. Consolidation in the banking industry has mainly taken place within countries. Following a number of acquisitions of European banks by banks from other European countries and technical advice of the Committee of European Banking Supervisors (CEBS) to the European Commission on the review of bank mergers and acquisitions under bank regulatory laws, a discussion has evolved as to how banks within Europe should consolidate also across country borders in order to improve the competitiveness of European banks globally. We monitor these discussions closely and analyze carefully any potential business opportunities or challenges that might emerge in this context.

Our performance is largely dependent on the talents and efforts of highly-skilled individuals. Competition for qualified employees in the banking, securities and financial services industries is intense. We also compete for employees with companies outside of the financial services industry. Our continued ability to compete effectively in our businesses depends on our ability to attract new employees as necessary and to retain and motivate our existing employees.

Our reputation for financial strength and integrity is vital to our ability to attract and maintain customers. To keep our well-established reputation we have to adequately promote and market our brand. The loss of business that would result from damage to our reputation could affect our results of operations and financial condition.

We have generally experienced intensifying price competition in recent years. We are observing this pressure on pricing of loans, trading commissions, management fees, transaction spreads and many other areas. We believe that we may experience pricing pressure in these and other areas in the future as some of our competitors seek to obtain market share by reducing prices.

Consolidation and Globalization

In recent years there has been substantial consolidation and convergence among companies in the financial services industry. In particular, a number of large commercial banks, insurance companies and other broad-based financial services firms have merged with other financial institutions. Many of these firms have the ability to offer a wide range of products, from loans, deposit-taking and insurance to brokerage, asset management and investment banking services, which may enhance their competitive position. They also have the ability to support investment banking and securities products with commercial banking, insurance and other financial services revenues in an effort to gain market share, which could result in pricing pressure in our businesses.

In the United States, one of our major markets, consolidation was further facilitated and accelerated by the passage of the Gramm-Leach-Bliley Act of 1999, which allowed commercial banks, securities firms and insurance firms to consolidate.

As indicated by a rebound in industry-wide mergers and acquisitions, especially in the banking, securities and financial services industries, the trend toward consolidation and convergence is expected to continue. This trend has significantly increased the capital base and geographic reach of our competitors and has hastened the globalization of the securities and other financial services markets. As a result, we have committed capital to support our international operations and to execute large global transactions for our clients.

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Competition in Our Businesses
Corporate and Investment Bank Group Division

Our investment banking operation competes in domestic and international markets directly with numerous investment banking firms, investment advisors, brokers and dealers in securities and commodities, securities brokerage firms and certain commercial banks. Within Germany and other European countries, our main competitors include German private universal banks, public state banks and foreign banks.

Private Clients and Asset Management Group Division

In the retail banking business we face intense competition from savings banks and cooperative banks, other universal banks, insurance companies, home loan and savings companies and other financial intermediaries. In Germany, savings and cooperative banks are our biggest group of competitors. These banks generally operate regionally. In other European countries, private universal banks and savings banks are our main competitors.

Our private wealth management business faces intensifying competition from the private banking and wealth management units of other global financial service companies and from investment banks.

Our main competitors in the asset management business are asset management subsidiaries of major financial services companies, mutual fund managers and institutional fund managers in Europe and the United States.

Regulation and Supervision

Our operations throughout the world are regulated and supervised by the central banks and regulatory authorities in each of the jurisdictions where we conduct operations. As we have operations in almost every country in the world, ranging from subsidiaries and branches in many countries down to representative offices in other countries, or employee representatives assigned to serve customers in yet others, we are regulated and supervised in virtually every country. Local authorities impose certain organizational, reserve and reporting requirements and controls (such as capital adequacy, depositor protection, activity limitations and other types of prudential supervision) on our banking and nonbanking operations. In addition, a number of countries in which we operate impose additional limitations on (or which affect) foreign or foreign-owned or controlled banks and financial services institutions, including:

– restrictions on the opening of local offices, branches or subsidiaries and the types of banking and nonbanking 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 where we operate will determine, to some degree, our ability to expand into new markets, the services and products that we will be able to offer in those markets and how we structure specific operations.

The German Federal Financial Supervisory Authority(Bundesanstalt für Finanzdienstleistungsaufsicht,referred to as BaFin)is our principal supervisor on an unconsolidated (Deutsche Bank AG only) and on a consolidated basis (Deutsche Bank AG and the entities consolidated with it for German regulatory purposes). Additionally, many of our operations outside Germany are regulated by local authorities. Within countries that are member states of the European Union or other contracting states of the Agreement on the European Economic Area (Iceland, Liechtenstein and Norway), our branches generally operate under the so-called “European Passport.” Under the European Passport, our branches are subject to regulation and supervision primarily by the BaFin. The authorities of the host country are responsible for the regulation and supervision of the liquidity requirements and the markets of the host country. In the United States, our New York branch, as well as our principal U.S. subsidiary bank (Deutsche Bank Trust Company Americas (DBTCA), formerly Bankers Trust Company), are principally supervised by the New York State Banking Department and the Board of Governors of the Federal Reserve System.

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In the following sections, we present a description of the supervision of our business by the authorities in Germany and the United States, which we view as the most significant for us, and more generally with respect to the other jurisdictions in which we operate. Beyond these countries, and the European Economic Area member states where the European Passport applies, local country regulations generally have limited impact on our operations that are unconnected with these countries.

Regulation and Supervision in Germany

We are authorized to conduct general banking business and to provide financial services under, and subject to the requirements set forth in, the German Banking Act(Kreditwesengesetz).

We are subject to comprehensive regulation and supervision by the BaFin and theDeutsche Bundesbank(referred to as Bundesbank, the German central bank). The European Central Bank regulates us in regard to minimum reserves on deposits and issued securities. We are materially in compliance with the German laws that are applicable to our business.

The German Banking Act

The German Banking Act contains the principal rules for German banks, including the requirements for a banking license, and regulates the business activities of German banks. The 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 Banking Act also applies to “financial services institutions”(Finanzdienstleistungsinstitute), which are enterprises that engage in one or more of the activities defined in the Act as “financial services”. Banking institutions and financial services institutions are subject to the licensing requirements and other provisions of the Banking Act.

The Banking Act and the rules and regulations adopted thereunder implement certain recommendations of the Basel Committee on Banking Supervision (which we refer to as the Basel Committee) the secretariat of which is provided by the Bank for International Settlements (which we refer to as the BIS), as well as certain European Union directives relating to banks. These directives address issues such as accounting standards, regulatory capital, risk-based capital adequacy, consolidated supervision, the monitoring and control of large exposures, and the creation of a single European Union-wide banking market with no internal barriers to banking and financial services. The Agreement on the European Economic Area extends this single market to Iceland, Liechtenstein and Norway.

In June 2004, the Basel Committee adopted revised recommendations for international capital adequacy standards widely referred to as the Basel II capital framework. The two principal features of the new framework are (1) to align capital requirements more closely with the underlying risks and (2) 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). The framework has to be implemented in the various countries that participate in the Basel Committee by year-end 2006. Legislation to that effect has been proposed both on a European Union level and in Germany in 2005. We may have to maintain higher levels of capital for bank regulatory purposes, which could increase our financing costs.

The German Securities Trading Act

Under the German Securities Trading Act(Wertpapierhandelsgesetz), the BaFin regulates and supervises securities trading in Germany. The 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 European Union or another contracting state of the Agreement on the European Economic Area.

The Securities Trading Act also contains rules of conduct. These rules of conduct apply to all businesses that provide securities services. Securities services include, in particular, the purchase and sale of securities or derivatives for others and the intermediation of transactions in securities or derivatives. The 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 Securities Trading Act requires an independent auditor to perform an annual audit of the securities services provider’s compliance with its obligations under the Securities Trading Act. The Directive on markets in financial

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instruments of 2004 (commonly referred to as the MiFiD) aims to further integrate the securities markets and improve competition within the European Union and the European Economic Area by harmonizing rules of conduct. Under the present stage of legislative process we are required to implement such rules by October 2007.

Regulation by the BaFin

The BaFin is a federal regulatory authority and reports to the German Federal Ministry of Finance. The BaFin issues regulations and guidelines that implement German banking laws and other laws affecting German banks.

The BaFin supervises the operations of German banks on an unconsolidated and a consolidated basis to ensure that they are in compliance with the 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 Banking Act and related regulations.

Regulation by the Bundesbank

The Bundesbank supports the BaFin and closely cooperates with it. The cooperation includes the ongoing review and evaluation of reports submitted by us and of our audit reports as well as examinations to assess the adequacy of our capital base and risk management systems. In this supervisory role the Bundesbank follows the guidelines issued by the BaFin acting in conjunction with the Bundesbank. The Bundesbank is also responsible for the collection and analysis of statistics and reports from German banks.

Nevertheless, these two institutions have distinct functions. While the BaFin has the sole authority to issue administrative orders(Verwaltungsakte)binding on German banks, it is required to consult with the Bundesbank before it issues general regulations(Verordnungen). In addition, the BaFin must obtain the Bundesbank’s consent before it issues any general regulations or guidelines that would affect the Bundesbank’s operations, such as the Principles on Own Funds and Liquidity of Credit Institutions(Grundsätze über die Eigenmittel und Liquidität der Kreditinstitute), which relate to capital adequacy (Grundsatz Ior “Principle I”) and liquidity (Grundsatz IIor “Principle II”).

The European Central Bank Minimum Reserve Requirements

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 and money market instruments. Liabilities to European Monetary Union national central banks and to other European Monetary Union banking institutions that are themselves subject to the minimum reserve requirements are not included in this calculation.

Capital Adequacy Requirements

German capital adequacy principles are based on the principle of risk assessment. German capital adequacy principles, as set forth in Principle I, address capital adequacy requirements for both counterparty risk(Adressenausfallrisiko)and market price risk(Marktrisiko). German banks are required to cover counterparty and market risks with Tier I capital (Kernkapitalor “core capital”) and Tier II capital (Ergänzungskapitalor “supplementary capital”) (together,haftendes Eigenkapitalor “regulatory banking capital”). They may also cover market price risk with Tier III capital(Drittrangmittel)and (to the extent not required to cover counterparty 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%. Risk-weighted assets include financial swaps, financial forward transactions, options and other off-balance sheet items. We further explain the calculation of risk-weighted assets below. The solvency ratio rules implement European Union directives, which in turn, are based on the recommendations of the Basel Committee.

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Regulatory Banking Capital and Risk-Weighted Assets

Regulatory banking capital, the numerator of the solvency ratio, is defined in the Banking Act for banks, such as ourselves, that are organized as stock corporations, as consisting principally of the following items:

Tier I capital:

– Paid-in Subscribed Capital(not including capital with respect to preferred shares with cumulative dividend rights).

– Capital Reserves.

– Earnings (Revenues) Reserves.

– Fund for General Banking Risks.A bank may record this fund on the liability side of its balance sheet to reflect special 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 hybrid participations in the business of a bank. Such interests are subject to certain conditions, including a minimum term of five years (or ten years for purposes of BIS capital rules), noncumulative dividends, participation in the bank’s losses and subordination to the rights of all creditors in the event of insolvency or liquidation of the bank.

Own shares held by the bank, losses and certain intangible assets are subtracted from the Tier I capital calculation.

Tier II capital (limited to the amount of Tier I capital):

– Preferred Shares (Vorzugsaktien)with cumulative dividend rights.

– Profit-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 nonsubordinated creditors in the event of insolvency or liquidation of the bank.

– 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 nonsubordinated 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 nonbanking entities. Such receivables include loans and securities that are neither investment securities 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 Unrealized 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 unrealized reserves (including provisioning reserves) and the sum of the market value of securities listed on a stock exchange and the published redemption price of shares issued by certain securities or real estate funds. A bank may include these reserves in Tier II capital only if its Tier I capital amounts to at least 4.4% of its risk-weighted assets. 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 enterprise or to the extent the aggregate book value of such investments exceeds 10% of the bank’s regulatory banking capital.

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The calculation of risk-weighted assets, the denominator of the solvency ratio, is set forth in Principle I. Assets are assigned to one of five 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% and 100%). The balance sheet value of each asset is then multiplied by the risk-classification multiplier for the asset’s category. The resulting figure is the risk-weighted value of the asset.

Off-balance sheet items, such as financial guarantees, letters of credit, swaps and other financial derivatives, 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 three risk-classification multipliers (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 five 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 Price Risk

Principle I also sets forth the principles governing capital adequacy requirements for market price risk. The market price risk positions of a bank include the following:

– foreign exchange net positions;

– commodities net positions;

– certain trading book positions, including those involving counterparty risk, interest rate risk and share price risk; and

– options positions.

The net risk-weighted market price risk 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 risk-weighted market price risk positions must be made in accordance 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 the BaFin.

At the close of each business day, a bank’s total net risk-weighted market price risk positions must not exceed the sum of:

– the difference between the bank’s regulatory banking capital and 8% of its aggregate amount of risk-weighted 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 banking book which would likely arise upon a liquidation of the bank, unless such losses must be deducted from the bank’s regulatory banking capital pursuant to an order of the BaFin.

– Short-term Subordinated Debt.This debt must meet certain criteria, including a minimum term of two years, subordination to the rights of all nonsubordinated 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 supplementary capital not required to cover risks arising from the banking book (as described below), does not exceed 250% of the core capital not required to cover risks arising from the banking book.

The Banking Act defines the banking book as all positions and transactions that are not part of the trading book. The trading book is defined as consisting primarily of the following:

– financial instruments 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;

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– positions and transactions for the purpose of hedging market price risks arising from the trading book and related refinancing transactions;

– transactions subject to the designation of the counterparty(Aufgabegeschäfte);

– 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.

Banks must set internal criteria according to which they allocate positions and transactions to the trading book and notify such criteria to the BaFin and the Bundesbank.

Consolidated Regulation and Supervision

The 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 Banking Act, a group of institutions consists of a bank or financial services institution, as the parent company, and all other banks, financial services institutions, financial enterprises and 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 joint venture arrangements that result in the joint management of another bank, financial services institution, financial enterprise or bank service enterprise by a bank and one or more third parties.

Financial groups which offer services and products in various financial sectors (banking and securities business, insurance and reinsurance business) are subject to supplementary supervision as a financial conglomerate (Finanzkonglomerat) once certain thresholds have been exceeded. The supervision on the level of the conglomerate is exercised by the BaFin. It comprises requirements regarding Own Funds, risk concentration, risk management, transactions within the group and organization. We are not a financial conglomerate but we would become subject to such supplementary supervision once certain the assets attributed to the insurance sector exceed certain thresholds as the result of an acquisition or organic growth.

Capital Requirements under the Basel Capital Accord

We have agreed with the BaFin to calculate and report our consolidated capital adequacy ratios in direct application of the recommendations made by the Basel Committee in 1988 (which we call the Basel Capital Accord) in addition to the calculation and reporting requirements in accordance with the Banking Act as described above. The Basel Capital Accord provides that banks shall maintain (on a consolidated basis) a risk-based core capital ratio of at least 4% and a risk-based regulatory banking capital ratio of at least 8%. In some respects (for example, for the treatment of goodwill and commercial real estate loans), the calculation of these ratios is different from the calculation under the Banking Act.

Liquidity Requirements

The 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(Liquiditätskennzahlor “one-month liquidity ratio”) of liquid assets to liquidity reductions expected 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 liquidity ratios for the next eleven months to the BaFin on a monthly basis. The liquidity requirements set forth in Principle II do not apply on a consolidated basis.

Limitations on Large Exposures

The Banking Act and the Large Exposure Regulation(Grosskredit- und millionenkreditverordnung) limit a bank’s concentration of credit risks on an unconsolidated and a consolidated basis through restrictions on large exposures(Grosskredite). We are subject to the large exposure applicable to banks and groups of institutions with more than minor trading book positions (trading book institutions).

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These rules contain separate restrictions for large exposures related to the banking book (banking book large exposures) and aggregate large exposures (aggregate book large exposures) of a bank or group of institutions.

Banking book large exposures are exposures incurred in the banking book and related to a single client (and clients affiliated with it) that equal or exceed 10% of a bank’s or group’s regulatory banking capital. Individual banking 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 banking book exposures and the exposures incurred in the trading book related to a client, and clients 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 of all banking book large exposures must not exceed eight times the bank’s or group’s regulatory banking capital, and the total of all 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 approval of the BaFin and subject to increased capital requirements for the amount of the large exposure that exceeds the ceiling.

Furthermore, total trading book exposures to a single client (and clients 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 banking book. Total trading book exposures to a single client (and clients affiliated with it) in excess of the aforementioned limit are not permitted.

Limitations on Significant Participations

The Banking Act places limitations on the investments of deposit-taking banks, such as ourselves, in enterprises outside the financial and insurance industry, where such investment (called a “significant 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 significant 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 significant participations, all indirect participations held by a bank through one or more subsidiaries are fully attributed to the parent bank.

The nominal value (as opposed to book value or price paid) of a bank’s significant participation in an enterprise must not exceed 15% of the bank’s regulatory banking capital. Furthermore, the aggregate nominal value of all significant participations of a bank must not exceed 60% of the bank’s regulatory banking capital. A bank may exceed those ceilings only with the approval of the BaFin. The bank is required to support the amount of the significant participation or participations that exceed a ceiling with regulatory banking capital on a one-to-one basis.

The limitations on significant participations also apply on a consolidated basis.

Financial Statements and Audits

As required by the German Commercial Code(Handelsgesetzbuch), we prepare our non-consolidated financial statements in accordance with German GAAP. German GAAP for banks primarily reflect the Commercial Code and the Regulation on Accounting by Credit Institutions and Financial Services Institutions(Verordnung über die Rechnungslegung der Kreditinstitute und Finanzdienstleistungsinstitute)which in turn implement EU Directives on accounting. The Regulation on Accounting by Credit Institu-

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tions and Financial Services Institutions requires a uniform format for the presentation of financial statements for all banks.

Compliance with the capital adequacy requirements of the German Banking Act, the liquidity requirements, large exposure rules and other requirements of the German Banking Act are based on financial statements prepared in accordance with German GAAP.

Pursuant to the German Commercial Code, exchange-listed companies, such as us, are permitted to prepare their consolidated financial statements in accordance with certain internationally recognized accounting principles, such as International Accounting Standards, or IAS, now called International Financial Reporting Standards, or IFRS, and U.S. GAAP. In July 2002, the European Union issued a Regulation which requires companies governed by the law of a European Union member state to prepare their financial statements from and including the financial year 2005 onwards in accordance with IFRS, if their securities are admitted to trading on a regulated market in the European Union. The member states may postpone the application of this Regulation until 2007 for companies like us which have their securities also listed outside the European Union and apply other internationally recognized accounting standards like U.S. GAAP.

Compliance with the capital adequacy ratios pursuant to the Basel Capital Accord (see “Capital Adequacy Requirements – Capital Requirements under the Basel Capital Accord”) is based on financial statements prepared for consolidation purposes. Therefore, our compliance with such capital adequacy ratios is based on financial statements prepared in accordance with U.S. GAAP. We anticipate that such compliance will be based on financial statements prepared in accordance with IFRS once we apply the EU Regulation of July 2002.

Under German law, we are required to be audited annually by a certified public accountant(Wirtschaftsprüfer). The accountant is appointed at the shareholders’ meeting. However, the supervisory board mandates the accountant and supervises the audit. The BaFin must be informed of and may reject the accountant’s appointment.

The Banking Act requires that a bank’s auditor informs the BaFin of any facts that come to the accountant’s attention which 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 auditor is also required to notify the BaFin in the event of a material breach by management of the articles of association or of any other applicable law.

The auditor is required to prepare a detailed and comprehensive annual audit report(Prüfungsbericht)for submission to the bank’s supervisory board, the BaFin and the Bundesbank.

Reporting Requirements

The BaFin and the Bundesbank 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.

Internal Auditing

The 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.

Enforcement of Banking Regulations; Investigative Powers
Investigations and Official Audits

The 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 Banking Act and its regulations. The BaFin may conduct investigations without having to state a reason for its investigation.

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The 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.

The BaFin may attend meetings of a bank’s supervisory board and shareholders’ meetings. It also has the authority to require that such meetings be convened.

Enforcement Powers

The BaFin has a wide range of enforcement powers in the event it discovers any irregularities. It may remove the bank’s managers from office, transfer their responsibilities in whole or in part to a special commissioner 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 certain period, then the BaFin may prohibit or restrict the bank from distributing profits or extending credit. This prohibition also applies to the parent bank 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, the 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, the 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, the BaFin may revoke the bank’s license and, if appropriate, order the closure of the bank.

To avoid the insolvency of a bank, the 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 the 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.

Deposit Protection in Germany
The Deposit Guarantee Act

The Law on Deposit Insurance and Investor Compensation(Einlagensicherungs- und Anlegerentschädigungsgesetz, the Deposit Guarantee Act) provides for a mandatory deposit insurance system in Germany. It requires that each German bank participate in one of the licensed government-controlled investor compensation institutions (Entschädigungseinrichtungen). The investor compensation institutions are supervised by the BaFin.Entschädigungseinrichtung deutscher Banken GmbHacts as the investor compensation institution for private sector banks such as us.

The investor compensation institutions collect and administer the contributions of the member banks and settle the compensation claims of investors in accordance with the Deposit Guarantee Act. In the event a bank’s financial condition leaves the bank permanently unable to repay deposits or perform its obligations under securities transactions, the Deposit Guarantee Act authorizes creditors of the bank to make claims against the bank’s investor compensation institution. Certain entities, such as banks, financial institutions(Finanzinstitute), insurance companies, investment funds, the Federal Republic of Germany, the German federal states, municipalities and medium-sized and large corporations, are not eligible to make such claims.

Investor compensation institutions are liable only for obligations resulting from deposits and securities transactions that are denominated in euro or the currency of a contracting state to the Agreement on the European Economic Area. Investor compensation institutions are not liable for obligations represented by instruments in bearer form or negotiable by endorsement. Investor compensation institutions’ liabilities for failed banks are limited to 90% of the aggregate value of each creditor’s deposits

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with the bank and to 90% of the aggregate value of obligations arising from securities transactions. The maximum liability of an investor compensation institution to any one creditor is limited to€ 20,000.

Banks are obliged to make annual contributions to the investor compensation institution in which they participate. An investor compensation institution must levy special contributions on the banks participating therein or take up loans, whenever it is necessary to settle compensation claims by such institution in accordance with the Deposit Guarantee Act. The investor compensation institution may exempt a bank from special contributions in whole or in part if full payments of such contributions are likely to render such bank unable to repay its deposits or perform its obligations under securities transactions. The amount of such contribution will then be added proportionately to the special contributions levied on the other participating banks.

Voluntary Deposit Protection System

Liabilities to creditors that are not covered under the Deposit Guarantee Act may be covered by one of the various protection funds set up by the banking industry on a voluntary basis. We take part in the Deposit Protection Fund of the Association of German Banks(Einlagensicherungsfonds des Bundesverbandes deutscher Banken e.V.). The Deposit Protection Fund covers liabilities to customers up to an amount equal to 30% of the bank’s core capital and supplementary capital (to the extent that supplementary capital does not exceed 25% of core capital). Liabilities to other banks and other specified institutions, and obligations of banks represented by instruments in bearer form, are not covered. To the extent the Deposit Protection Fund makes payments to customers of a bank, it will be subrogated to their claims against the bank.

Banks that participate in the Deposit Protection Fund make regular contributions to the fund based on their liabilities to customers, and may be required to make special contributions up to the amount of their regular contributions to the extent requested by the Deposit Protection Fund to enable it to fulfill its purpose.

Regulation and Supervision in the United States

Our operations are subject to extensive federal and state banking and securities regulation and supervision in the United States. We engage in U.S. banking activities directly through our New York branch. We also control U.S. banking subsidiaries, including DBTCA, and U.S. broker-dealers, such as Deutsche Bank Securities Inc., U.S. nondeposit trust companies and nonbanking subsidiaries.

Regulatory Authorities

Deutsche Bank AG is a bank holding company under the U.S. Bank Holding Company Act of 1956, as amended (the Bank Holding Company Act), by virtue of, among other things, our ownership of DBTCA. As a result, we and our U.S. operations are subject to regulation, supervision and examination by the Federal Reserve Board as our U.S. “umbrella supervisor”.

DBTCA is a New York state-chartered bank and a member of the Federal Reserve System, and its deposits are insured by the Federal Deposit Insurance Corporation (the FDIC). As such, DBTCA is subject to regulation, supervision and examination by the Federal Reserve System and the New York State Banking Department and to relevant FDIC regulation. Deutsche Bank Trust Company Delaware is an FDIC-insured Delaware state-chartered bank, but is not a member of the Federal Reserve System. As a state non-member bank, it is subject to regulation, supervision and examination by the FDIC and the Delaware Office of the State Banking Commission. Our New York branch is supervised by the Federal Reserve System and the New York State Banking Department, but its deposits are not insured (or eligible to be insured) by the FDIC. Our federally-chartered nondeposit trust companies are subject to regulation, supervision and examination by the Office of the Comptroller of the Currency. Certain of our subsidiaries are also subject to regulation, supervision and examination by state banking regulators of certain states in which we conduct banking operations, including New Jersey.

Restrictions on Activities

Federal and state banking laws and regulations restrict our ability to engage, directly or indirectly through subsidiaries, in activities in the United States.

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We are required to obtain the prior approval of the Federal Reserve Board before directly or indirectly acquiring the ownership or control of more than 5% of any class of voting shares of U.S. banks, certain other depository institutions, and bank or depository institution holding companies. Under the Bank Holding Company Act and Federal Reserve Board regulations, our U.S. banking operations (including our New York branch and DBTCA) are also restricted from engaging in certain “tying” arrangements involving products and services.

Our two U.S. insured bank subsidiaries are subject to requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be made and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of these subsidiaries.

Under U.S. law, our activities and those of our subsidiaries are generally limited to the business of banking, managing or controlling banks, and other activities that the Federal Reserve Board determines to be a proper incident to banking or managing or controlling banks. Following the Gramm-Leach Bliley Act of 1999 (the GLB Act), however, qualifying bank holding companies and foreign banks that become financial holding companies may engage in a substantially broader range of nonbanking activities in the United States, including securities, merchant banking, insurance and other financial activities, in many cases, without prior notice to, or approval from, the Federal Reserve Board or any other U.S. banking regulator. We became a financial holding company in March 2000 and, so long as we maintain that designation, we are able to engage in this broader range of activities. As a non-U.S. bank, we are generally authorized under the Bank Holding Company Act and Federal Reserve Board regulations to acquire a non-U.S. company engaged in nonfinancial activities provided that the company’s U.S. operations do not exceed thresholds specified in Federal Reserve Board regulations. In addition, under the merchant banking authority granted by the GLB Act and Federal Reserve Board regulations, we and our nonbank subsidiaries may invest in companies that engage in activities that are not financial in nature, as long as we intend to limit the duration of the investment and do not routinely manage any such portfolio company and do not engage in any cross-marketing with our U.S. branch or bank subsidiaries.

Our status as a financial holding company, and resulting ability to engage in the broader range of activities permitted under the GLB Act, are dependent on Deutsche Bank AG and our two insured U.S. depository institutions remaining “well capitalized” and “well managed” and upon our insured U.S. depository institutions meeting certain requirements under the Community Reinvestment Act. In order to meet the “well capitalized” test, we and our U.S. depository institutions are required to maintain capital ratios comparable to those of a well-capitalized U.S. bank, including a Tier I risk-based capital ratio of at least 6% and a total risk-based capital ratio of at least 10%. If we or one of our U.S. depository institutions cease to be well-capitalized or well-managed, or otherwise fail to meet any of the requirements for financial holding company status, then, depending on which requirement we fail to meet, we may be required to discontinue activities and investments authorized under GLB or terminate our U.S. banking operations.

The GLB Act and Federal Reserve Board regulations contain other provisions that could affect our operations and the operations of all financial institutions. One of these provisions requires us to disclose our privacy policy to consumers and to offer them the ability to opt out of having their non-public information disclosed to third parties. In addition, the states are permitted to adopt more extensive privacy protections through legislation or regulation.

In addition, the so-called “push-out” provisions of the GLB Act narrow the exclusion of banks (including U.S. branches of foreign banks, such as our New York branch) from the definitions of “broker” and “dealer” under the Securities Exchange Act of 1934. The rules of the Securities and Exchange Commission narrowing the exclusion of banks from the definition of “dealer” became effective on September 30, 2003, while those narrowing the exclusion of banks from the definition of “broker” are proposed to become effective on September 1, 2006. As a result of these rules, certain securities activities conducted by DBTCA and our New York branch have been or will be restructured or transferred to one or more U.S. registered broker-dealer subsidiaries.

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Additionally, under U.S. federal banking laws, state-chartered banks (such as DBTCA) and state-licensed branches and agencies of foreign banks (such as our New York branch) may engage only in activities that would be permissible for their federally chartered or licensed counterparts, unless the FDIC (in the case of DBTCA) or the Federal Reserve Board (in the case of our New York branch) determines that the additional activity would pose no significant risk to the FDIC’s Bank Insurance Fund (in the case of DBTCA) and is consistent with sound banking practices (in the case of DBTCA and our New York branch). United States federal banking laws also subject state branches and agencies to the same single-borrower lending limits that apply to federal branches or agencies, which generally are the same as the lending limits applicable to national banks. These single-borrower lending limits are based on the worldwide capital of the entire foreign bank.

Under the International Banking Act of 1978, as amended, the Federal Reserve Board may terminate the activities of any U.S. office of a foreign bank if it determines that the foreign bank is not subject to comprehensive supervision on a consolidated basis in its home country (unless the home country is making demonstrable progress toward establishing such supervision), or that there is reasonable cause to believe that such foreign bank or its affiliate has violated the law or engaged in an unsafe or unsound banking practice in the United States and, as a result of such violation or practice, the continued operation of the U.S. office would be inconsistent with the public interest or with the purposes of federal banking laws.

There are various legal restrictions on the extent to which we and our nonbank subsidiaries can borrow or otherwise obtain credit from our U.S. banking subsidiaries or engage in certain other transactions involving those subsidiaries. In general, these transactions must be on terms that would ordinarily be offered to unaffiliated entities and must be secured by designated amounts of specified collateral. In addition, certain transactions, such as certain extensions of credit by a U.S. bank subsidiary to, or purchases of assets by such a subsidiary from, us or our nonbank subsidiaries are subject to volume limitations. These restrictions also apply to transactions of our New York Branch with our U.S. broker-dealer and certain of our other affiliates.

Our New York Branch

Our New York branch is licensed by the New York Superintendent of Banks to conduct a commercial banking business. Under the New York State Banking Law and regulations, our New York branch is required to maintain eligible high-quality assets with banks in the State of New York in an amount equal to 1% of its liabilities (excluding liabilities to other offices and our subsidiaries), as security for the protection of depositors and certain other creditors. The amount of assets required to be pledged is subject to a maximum of U.S.$400,000,000 in the case of foreign banking corporations that have been designated as “well-rated” by the New York State Superintendent of Banks, as our New York branch has been. Should our New York Branch cease to be “well-rated” by the New York State Superintendent of Banks we may need to maintain substantial additional amounts of eligible assets with banks in the State of New York.

The New York State Banking Law also empowers the Superintendent of Banks to establish asset maintenance requirements for branches of foreign banks, expressed as a percentage of each branch’s liabilities. The presently designated percentage is 0%, although the Superintendent may impose additional asset maintenance requirements upon individual branches on a case-by-case basis. No such requirement has been imposed upon our New York branch.

The New York State Banking Law authorizes the Superintendent of Banks to take possession of the business and property of a New York branch of a foreign bank under circumstances involving violation of law, conduct of business in an unsafe manner, impairment of capital, suspension of payment of obligations, or initiation of liquidation proceedings against the foreign bank at its domicile or elsewhere. In liquidating or dealing with a branch’s business after taking possession of a branch, only the claims of creditors which arose out of transactions with a branch are to be accepted by the Superintendent of Banks for payment out of the business and property of the foreign bank in the State of New York, without prejudice to the rights of the holders of such claims to be satisfied out of other assets of the foreign bank. After such claims are paid, the Superintendent of Banks will turn over the remaining assets, if any, to the foreign bank or its duly appointed liquidator or receiver.

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Under the New York State Banking Law, our New York branch is generally subject to the same limits on lending to a single borrower, expressed as a ratio of capital, that apply to a New York state-chartered bank, except that for our New York branch such limits are based on our worldwide capital.

Deutsche Bank Trust Company Americas

DBTCA, like other FDIC-insured banks, is required to pay assessments to the FDIC for deposit insurance under the FDIC’s Bank Insurance Fund (calculated using a risk-based assessment system). These assessments are based on deposit levels and other factors.

The Federal Deposit Insurance Corporation Improvement Act of 1991 (referred to as FDICIA) provides for extensive regulation of depository institutions (such as DBTCA and its direct and indirect parent companies), including requiring federal banking regulators to take “prompt corrective action” with respect to FDIC-insured banks that do not meet minimum capital requirements. For this purpose, FDICIA establishes five tiers of institutions: “well capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized” and “critically undercapitalized”. As an insured bank’s capital level declines and the bank falls into lower categories (or if it is placed in a lower category by the discretionary action of its supervisor), greater limits are placed on its activities and federal banking regulators are authorized (and, in many cases, required) to take increasingly more stringent supervisory actions, which could ultimately include the appointment of a conservator or receiver for the bank (even if it is solvent). In addition, FDICIA generally prohibits an FDIC-insured bank from making any capital distribution (including payment of a dividend) or payment of a management fee to its holding company if the bank would thereafter be undercapitalized. If an insured bank becomes undercapitalized, it is required to submit to federal regulators a capital restoration plan guaranteed by the bank’s holding company. The guarantee is limited to 5% of the bank’s assets at the time it becomes undercapitalized or, should the undercapitalized bank fail to comply with the plan, the amount of the capital deficiency at the time of failure, whichever is less. If an undercapitalized bank fails to submit an acceptable plan, it is treated as if it were “significantly undercapitalized”. Significantly undercapitalized banks may be subject to a number of restrictions, including requirements to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and restrictions on accepting deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator. Since the enactment of FDICIA, both of our U.S. insured banks have been categorized as “well capitalized” under Federal Reserve Board regulations.

Other

In the United States, our U.S.-registered broker-dealers are regulated by the Securities and Exchange Commission. Broker-dealers are subject to regulations that cover all aspects of the securities business, including:

– sales methods;

– trade practices among broker-dealers;

– use and safekeeping of customers’ funds and securities;

– capital structure;

– recordkeeping;

– the financing of customers’ purchases; and

– the conduct of directors, officers and employees.

In addition, our principal U.S. SEC-registered broker dealer subsidiary, Deutsche Bank Securities Inc., is a member of and regulated by the New York Stock Exchange and is regulated by the individual state securities authorities in the states in which it operates. The U.S. government agencies and self-regulatory organizations, as well as state securities authorities in the United States having jurisdiction over our U.S. broker-dealer affiliates, are empowered to conduct administrative proceedings that can result in censure, fine, the issuance of cease-and-desist orders or the suspension or expulsion of a broker-dealer or its directors, officers or employees.

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Regulation and Supervision in Other Jurisdictions

Our operations elsewhere in the world are subject to regulation and control by local supervisory authorities, including local central banks and monetary authorities, which supplement the home country supervision exercised by the BaFin.

For our branches within the European Economic Area, our primary regulator remains the BaFin pursuant to the “European Passport” we summarize above. Where we operate a branch outside the European Economic Area we do so under two licenses: our German banking license and a license from the host country. We may conduct businesses in the host country only to the extent that our German banking license and the host country’s license both permit them. When we operate a subsidiary outside Germany, the subsidiary holds whichever license is required by local law.

Organizational Structure

We operate our business along the structure of our three group divisions. Deutsche Bank AG is the direct or indirect holding company for our subsidiaries. The following table sets forth the significant subsidiaries we own, directly or indirectly. We used the three-part test for significance set out in Section 1-02 (w) of Regulation S-X under the U.S. Securities Exchange Act of 1934. We do not have any other subsidiaries we believe are material based on other, less quantifiable, factors, except that we have provided information on Taunus Corporation’s principal subsidiaries to give you an idea of Taunus’ business and on DB Capital Markets (Deutschland) GmbH’s principal subsidiary. We have also included Deutsche Bank Privat- und Geschäftskunden Aktiengesellschaft, which was just below the quantifiable factors in 2005, but was a significant subsidiary in previous years. We own 100% of the equity and voting interests in these significant subsidiaries.

Subsidiary	Place of Incorporation
Taunus Corporation1	Delaware, United States
Deutsche Bank Trust Company Americas2	New York, United States
Deutsche Bank Securities Inc.3	Delaware, United States
Deutsche Bank Privat- und Geschäftskunden Aktiengesellschaft4	Frankfurt am Main, Germany
DB Capital Markets (Deutschland) GmbH5	Frankfurt am Main, Germany
DWS Investment GmbH6	Frankfurt am Main, Germany
DB Investments (GB) Limited7	London, United Kingdom
DB Value GmbH8	Soessen-Gostau, Germany

1	This company is a holding company for most of our subsidiaries in the United States.
2	This company is a subsidiary of Taunus Corporation. Deutsche Bank Trust Company Americas is a New York State-chartered bank which originates loans and other forms of credit, accepts deposits, arranges financings and provides numerous other commercial banking and financial services.
3	This company is a subsidiary of Taunus Corporation. Deutsche Bank Securities Inc. is a U.S. SEC-registered broker dealer and a member of, and regulated by, the New York Stock Exchange. It is also regulated by the individual state securities authorities in the states in which it operates.
4	The company serves private individuals, affluent clients and small business clients with banking products.
5	This company is a German limited liability company and operates as a holding company for a number of European subsidiaries, mainly institutional and mutual fund management companies located in Germany, Luxembourg, France, Austria, Switzerland, Italy, Poland and Russia.
6	This company, in which DB Capital Markets (Deutschland) GmbH indirectly owns 100% of the equity and voting interests, is a limited liability company that operates as a mutual fund manager.
7	This company principally acts as an investment holding company. It is a direct subsidiary of Deutsche Bank AG and is the holding company for most of our subsidiaries in the United Kingdom providing financial services in the United Kingdom and to clients outside the United Kingdom (principally centered around the international equities business). Its subsidiaries also provide equity capital for unlisted companies and arrange purchases of interests in companies by their managements.
8	DB Value GmbH is the holding company for DB Equity S.à r.l., Luxembourg, which is the holding company for our major industrial shareholdings (Allianz Aktiengesellschaft, DaimlerChrysler Aktiengesellschaft, and Linde Aktiengesellschaft).

Property, Plant and Equipment

On December 31, 2005, we operated in 73 countries out of 1,588 facilities around the world, of which 53% were in Germany. We lease a majority of our offices and branches under long term agreements.

On December 31, 2005, we had premises and equipment with a total book value of approximately€ 5.1 billion. Included in this amount were land and buildings with a carrying value of approximately

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€ 3.5 billion, of which approximately€ 2.0 billion was for our own operations and approximately€ 1.5 billion was held for investment purposes.

We continue to review our property requirements worldwide taking into account cost containment measures as well as growth initiatives in selected businesses.

See Note [35] to our consolidated financial statements regarding the damage to our property resulting from the September 11 terrorist attacks.

Information Required by Industry Guide 3

Please see “Item 3: Key Information”, “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Credit Loss Experience and Allowance for Loan Losses”, Note [5] to the consolidated financial statements and pages S-1 through S-11 of the supplemental financial information, which pages are incorporated by reference herein, for information required by Industry Guide 3.

Item 4A: Unresolved Staff Comments

We have not received written comments from the Securities and Exchange Commission regarding our periodic reports under the Exchange Act, as of any day 180 days or more before the end of the fiscal year to which this annual report relates, which remain unresolved.

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Item 5: Operating and Financial Review and Prospects

Overview

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes to them included in Item 18 of this document, on which we have based this discussion and analysis. Our consolidated financial statements for the years ended December 31, 2005, 2004 and 2003 have been audited by KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, as described in the “Report of Independent Registered Public Accounting Firm” on page F-3.

Significant Accounting Policies and Critical Accounting Estimates

We have prepared our consolidated financial statements in accordance with U.S. GAAP. Our significant accounting policies, as described in Note [1] to the consolidated financial statements, are essential to understanding our reported results of operations and financial condition. Certain of these accounting policies require critical accounting estimates that involve complex and subjective judgments and the use of assumptions, some of which may be for matters that are inherently uncertain and susceptible to change. Such critical accounting estimates could change from period to period and have a material impact on our financial condition, changes in financial condition or results of operations. Critical accounting estimates could also involve estimates where management could have reasonably used another estimate in the current accounting period. Actual results may differ from these estimates if conditions or underlying circumstances were to change.

We review the selection of these policies and the application of these critical accounting estimates with our Audit Committee. We have identified the following significant accounting policies that involve critical accounting estimates. The impact and any associated risks related to these policies on our business operations is discussed throughout “Item 5: Operating and Financial Review and Prospects” where such policies affect our reported and expected financial results.

Fair Value Estimates
Certain of our financial assets and liabilities are carried at fair value, including trading assets and liabilities, derivatives held for nontrading purposes, securities available for sale and investments held by designated investment companies. In addition, nonmarketable equity investments and investments in venture capital companies, in which the Group does not have a controlling financial interest or significant influence, are carried at historical cost net of declines in fair value below cost that are deemed to be other than temporary. Loans held for sale are carried at the lower of cost or market (LOCOM).

Fair value is defined as the price at which an asset or liability could be exchanged in a current transaction between knowledgeable unrelated willing parties, other than in a forced or liquidation sale. Since the fair value determined might differ from actual net realizable values, the fair value estimates are considered critical accounting estimates for our Corporate Banking & Securities Corporate Division, which trades certain over-the-counter derivatives, some of which may have long terms or complex structures that are valued using financial models. Fair value estimates are also critical for our Corporate Investments Group Division, which holds investments that are not actively traded.

Methods of Determining Fair Value
Quoted market prices in active markets are the most reliable measure of fair value. The majority of our securities carried at fair value are based on quoted market prices. However, quoted market prices for certain instruments, investments and activities, such as loans held for sale, non-exchange traded contracts and venture capital companies and nonmarketable equity securities may not be available.

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When quoted market prices are not available, values for financial assets and liabilities are determined based upon discounted cash flow analysis, comparison to similar observable market transactions, or the use of financial models. Discounted cash flow analysis is dependent upon estimated future cash flows and the discount rate used. Valuation using financial models is dependent upon parameters including time value, yield curve, volatility factors, correlation factors, prepayment speeds, default rates, loss severity, current market prices and transaction prices for underlying financial instruments. The valuation process to price financial instruments at fair value includes making adjustments to prices and financial model outputs to consider factors such as close out costs, liquidity and counterparty credit risk.

Where valuation of financial instruments is subjective due to the lack of observable market prices or inputs, management must apply judgment to make estimates and certain assumptions. For example, if prices or inputs to financial models are used for similar financial instruments, judgment is applied to make appropriate adjustments for differences in credit risk, liquidity or other factors. Where fair value is not based upon observable market prices or inputs we defer any trade date profit or loss.

Internal Controls Over Fair Value
To ensure the accuracy of our valuations, we have established certain internal control procedures over the valuation process. The price and parameter input verification process is a primary control over the front office valuation of financial instruments, which is performed either through independent pricing, independent price verification or alternative procedures.

Independent pricingoccurs where the prices or parameter inputs are sourced directly from the market. This is the preferred method of valuation control and Controlling performs checks on the ongoing data quality including automated checks for stale and missing prices.

Where prices and parameters are input by the front office, Controlling performsindependent price verificationof these inputs against available independent market sources.

The majority of the Group’s trading portfolio (including securities and derivatives) and available for sale portfolio are subject to independent pricing or independent price verification procedures.

Where prices or parameter inputs are not observable the appropriateness of fair value is subject toalternative procedures. Such procedures include assessing the valuations against appropriate proxy instruments, performing sensitivity analysis and considering other benchmarks. These procedures require the application of management judgment.

Other valuation controls include review and analysis of daily profit and loss, validation of valuation through close out profit and loss and Value-at-Risk back-testing. For further discussion on our Value-at-Risk Analysis, see “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Market Risk – Value-at-Risk Analysis.” Where fair value is based on financial models, the assumptions and techniques within the models are independently validated by a specialist group within Group Market Risk Management.

Allowance for Loan Losses
We maintain an allowance for loan losses that represents our estimate of probable losses that have occurred in our loan portfolio. Determining the allowance for loan losses requires significant management judgments and assumptions. The components of the allowance for loan losses are a specific loss component and an inherent loss component consisting of the country risk allowance, the smaller-balance standardized homogeneous loan loss allowance and the other inherent loss allowance. We believe that the accounting estimate related to the allowance for loan losses is a critical accounting estimate because the underlying assumptions used for both the specific and inherent loss components of the allowance can change from period to period. Such changes may materially affect our results of operations. The estimate for the allowance for loan losses is a critical accounting estimate for our Corporate Banking & Securities and Private & Business Clients Corporate Divisions.

The specific loss component is the allowance for losses on loans for which management believes that it is probable that we will be unable to collect all of the principal and interest due under the loan agreement. This component comprises the largest portion of our allowance and requires consideration of various underlying factors which include, but are not limited to, the financial strength of our custom-

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ers, the present value of expected future cash flows, including cash flows that may result from foreclosure less costs for obtaining and selling the collateral, or the market price of the loan. We regularly re-evaluate all credit exposures that have already been specifically provided for, as well as all credit exposures that appear on our watchlist. Our assumptions are either validated or revised accordingly based on our re-evaluation.

Some of the underlying factors used in determining the inherent loss component, include, but are not limited to, historical loss experience and political, economic and other relevant factors. We determine our country risk allowance based on historical loss experience and current market data affecting a country’s financial condition. Our smaller-balance standardized homogeneous portfolio is evaluated for inherent loss on a collective basis and an allowance is established based on analyses of historical loss experience for each product type according to criteria such as past due status and collateral recovery values. The other inherent loss allowance represents our estimate of losses inherent in the portfolio that have not yet been individually identified and reflects the imprecisions and uncertainties in estimating our loan loss allowances.

Significant changes in any of these factors could materially affect our provision for loan losses. For example, if our current assumptions about expected future cash flows used in determining the specific loss component differ from actual results, we may need to make additional provisions for loan losses. In addition, the forecasted financial strength of any given customer may change due to various circumstances, such as future changes in the global economy or new information becoming available as to financial strength that may not have existed at the date of our estimates. This new information may require us to adjust our current estimates and make additional provisions for loan losses.

Our provision for loan losses totaled€ 374 million,€ 372 million and€ 1.1 billion for the years ended December 31, 2005, 2004 and 2003, respectively.

For further discussion on our allowance for loan losses, see “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Risk Management – Credit Loss Experience and Allowance for Loan Losses” and Notes [7] and [8] to the consolidated financial statements.

Impairment of Assets other than Loans
Certain assets, including equity method and other direct investments (including venture capital companies and nonmarketable equity securities), securities available for sale, goodwill and other intangible assets, are subject to impairment review. We record impairment charges when we believe an asset has experienced an other-than-temporary decline in fair value, or its cost may not be recoverable. Based on our impairment reviews related to these assets, we recorded total impairment charges of€ 26 million in 2005,€ 135 million in 2004 and€ 1.5 billion in 2003. Future impairment charges may be required if triggering events occur, such as adverse market conditions, suggesting deterioration in an asset’s recoverability or fair value. Assessment of timing of when such declines become other than temporary and/or the amount of such impairment is a matter of significant judgment.

Equity method investments, other equity interests and securities available for sale are evaluated for impairment on a quarterly basis, or more frequently if events or changes in circumstances indicate that these investments are impaired. For example, indications that these investments are impaired could include specific conditions in an industry or geographical area or specific information regarding the financial condition of the company, such as a downgrade in credit rating. If information becomes available after we make our evaluation, we may be required to recognize an other-than-temporary impairment in the future. Because the estimate for other-than-temporary impairment could change from period to period based upon future events that may or may not occur, we consider this to be a critical accounting estimate. Our impairment reviews for equity method investments, other equity interests and securities available for sale resulted in impairment charges of€ 13 million in 2005,€ 96 million in 2004 and€ 1.3 billion in 2003. For additional information on securities available for sale, see Note [5] to the consolidated financial statements and for equity method investments and other equity interests, see Note [6] to the consolidated financial statements.

Goodwill and other intangible assets are tested for impairment on an annual basis, or more frequently if events or changes in circumstances, such as an adverse change in business climate, indicate that these assets may be impaired. The fair value determination used in the impairment assess-

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ment requires estimates based on quoted market prices, prices of comparable businesses, present value or other valuation techniques, or a combination thereof, necessitating management to make subjective judgments and assumptions. Because these estimates and assumptions could result in significant differences to the amounts reported if underlying circumstances were to change, we consider this estimate to be critical. As of December 31, 2005 and 2004, goodwill had a carrying amount of€ 7.0 billion and€ 6.4 billion, respectively, and other intangible assets had a carrying amount of€ 1.2 billion and€ 1.1 billion, respectively. Evaluation of impairment of these assets is a significant estimate for multiple divisions. In 2005, no impairment charge was deemed necessary. In 2004, an impairment charge of€ 19 million was recorded related to intangible assets in Asset and Wealth Management Corporate Division following the termination of certain investment agreements. In 2003, a goodwill impairment loss of€ 114 million related to the Private Equity reporting unit was recorded following decisions relating to the private equity fee-based business including the transfer of certain businesses to the Asset and Wealth Management Corporate Division. For further discussion on goodwill and other intangible assets, see Note [12] to the consolidated financial statements.

Deferred Tax Assets Valuation Allowance
We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating loss carryforwards and tax credits. At December 31, 2005 and December 31, 2004 our consolidated gross deferred tax assets were€ 13.0 billion and€ 20.1 billion, respectively, and our consolidated gross deferred tax liabilities were€ 10.4 billion and€ 17.7 billion, respectively. Amounts for 2004 have been restated to conform to current year presentation, see Note [25] to the consolidated financial statements. A valuation allowance is maintained for deferred tax assets that we estimate are more likely than not to be unrealizable based on available evidence at the time the estimate is made. Determining the valuation allowance requires significant management judgments and assumptions. In determining the valuation allowance, we use historical and forecasted future operating results, based upon approved business plans, including a review of the eligible carryforward periods, tax planning opportunities and other relevant considerations. Each quarter, we reevaluate our estimate related to the valuation allowance, including our assumptions about future profitability. At December 31, 2005 and December 31, 2004 our valuation allowance was€ 955 million and€ 888 million, respectively.

We believe that the accounting estimate related to the valuation allowance is a critical accounting estimate because the underlying assumptions can change from period to period. For example, tax law changes or variances in future projected operating performance could result in a change in the valuation allowance. If we were not able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets valuation allowance would be charged to income tax expense in the period such determination was made.

As a result of reviews of the factors discussed above related to the adequacy of the valuation allowance, our income tax expense for the years ended December 31 included a credit of€ 9 million for 2005, a credit of€ 7 million for 2004 and a charge of approximately€ 99 million for 2003. The credit in 2005 was due mainly to an increase in expected realization of operating loss carryforwards and tax credits available to reduce future tax expense.

For further discussion on our deferred taxes and valuation allowance, see Note [25] to the consolidated financial statements.

Legal, Regulatory and Tax Contingencies
The use of estimates is important in determining provisions for potential losses that may arise from litigation and regulatory proceedings and tax audits. We estimate and provide for potential losses that may arise out of litigation and regulatory proceedings and tax audits to the extent that such losses are probable and can be estimated, in accordance with SFAS No. 5, “Accounting for Contingencies.” Significant judgment is required in making these estimates and our final liabilities may ultimately be materially different.

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Our total liability in respect of litigation and regulatory proceedings is determined on a case-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case, our experience and the experience of others in similar cases, and the opinions and views of legal counsel. Given the inherent difficulty of predicting the outcome of our litigation matters, particularly in cases in which claimants seek substantial or indeterminate damages, we cannot estimate losses or ranges of losses for cases where there is only a reasonable possibility that a loss may have been incurred. See “Item 8: Financial Information – Legal Proceedings” and Note [34] to our consolidated financial statements for information on our judicial, regulatory and arbitration proceedings.

Effects of 1999/2000 German Tax Reform Legislation and Accounting for Income Taxes

You should note in reviewing our results of operations that the financial accounting treatment under U.S. GAAP for income tax rate changes resulted in a negative impact on our results of operations in 2005, 2004, 2003 2002 and 2001. These impacts totaled an expense of€ 544 million in 2005,€ 120 million in 2004,€ 215 million in 2003,€ 2.8 billion in 2002 and€ 995 million in 2001. We therefore recommend that you also consider our net income for the years 2001 through 2005, excluding the effect of the impact of changes in income tax rates when you compare these years to one another and to earlier and future periods.

Two important tax law changes occurred in 1999 and 2000 that affected and will continue to affect our net income. In 1999, the German government reduced the corporate income tax rate on retained profits from 45% to 40%. In October 2000, the German government enacted comprehensive tax reform legislation.

The comprehensive tax reform legislation in 2000 contained two major changes relevant to our corporate taxation:

– The corporate income tax rate declined, beginning on January 1, 2001, to 25% for all corporate profits. Until the end of 2000, the rates were 40% for retained profits and 30% for distributed profits.

– The tax rate applicable to capital gains on the sale of equity securities eligible under the legislation was, beginning on January 1, 2002, reduced to zero. Until that date, the tax rate that applied to capital gains on these sales was the same as the tax rate applicable to ordinary income.

The following is a description of the accounting treatment for the 1999/2000 income tax rate changes and their effects on our results of operations.

U.S. GAAP requires us to record all unrealized gains on available for sale securities, net of the related deferred tax provisions, in other comprehensive income. The deferred tax provisions are based on the excess of the fair value of these securities over our tax basis in them. At the end of each reporting period, we record deferred tax provisions and related deferred taxes payable based on the change in the unrealized gain for that period using the effective income tax rate we expect will apply in the period we expect to realize the gain. Since both the unrealized gains and the related deferred tax provision are recorded in other comprehensive income, neither the unrealized gains nor the deferred tax provision affects net income in that period.

U.S. GAAP also requires that, in a period that includes the date on which new tax rates are enacted, companies must adjust all of the deferred tax assets and liabilities they have recorded. These adjustments to deferred tax assets and liabilities reflect the new effective tax rates that will apply in the periods in which the temporary differences that led to the creation of the deferred items are expected to be reversed. The changes in tax law we describe above required us to make these types of adjustments in 1999 and 2000. Because our available for sale securities included an extensive portfolio of eligible equity securities that had appreciated substantially in value, we had a significant amount of related deferred tax liabilities. These deferred tax liabilities were substantially reduced as a result of this 2000 legislation. The elimination of the German tax on capital gains on sales of eligible equity securities was responsible for the majority of a€ 9.3 billion income tax benefit we recognized in 2000.

Our industrial holdings represent most of the eligible equity securities. We acquired many of these industrial holdings, most of which we classify as available for sale securities under U.S. GAAP, many

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years ago, and most of them have appreciated in value considerably over that time. Since we intend to sell these industrial holdings in the most tax-efficient and commercially prudent manner possible, the estimated effective tax rate we applied to these unrealized gains when the new tax rate changes were enacted was essentially zero. As a result, most of the reductions in deferred tax liabilities associated with unrealized gains on our eligible equity securities related to our industrial holdings.

Although we recorded the deferred tax provisions directly to other comprehensive income for unrealized gains on available for sale securities, U.S. GAAP nevertheless required that this adjustment to the related deferred tax liabilities for a change in expected effective income tax rates be recorded as an adjustment of income tax expense in the period the tax rate change is enacted.

The adjustments to deferred tax liabilities related to eligible equity securities, however, did not result in an adjustment to the deferred tax provisions that had accumulated in other comprehensive income. These accumulated provisions remain in other comprehensive income until the related securities are sold, and they are then recognized as tax expense in the period of the sale. As such, certain possible effects of our accounting for income tax rate changes related to our eligible equity securities on our results of operations are as follows:

– When we sell each eligible equity security, we recognize tax expense in the period of its sale equal to that investment security’s share of the deferred tax provisions that had accumulated in other comprehensive income on the tax rate change dates. The amount we had accumulated in other comprehensive income related to our eligible equity securities was approximately€ 2.1 billion on December 31, 2005 and€ 2.7 billion on December 31, 2004.

– This means that, regardless of the size of the realized gains, if any, on subsequent sales of these eligible equity securities, there will be significant income tax expense in the periods of the sales. This expense will offset part or all of that gain or add to any loss when calculating net income.

– Although we recognized in 2000 a significant deferred tax benefit as a result of the tax rate changes related to eligible equity securities and will record significant deferred tax expense in the years these securities are sold, realized gains on sales of these securities in the years 2001 through 2005 have not resulted in any taxes actually payable in cash. In other words, all of the deferred tax benefit and expense amounts were noncash items. In addition, when we reverse the related deferred tax provisions through the income tax expense line item, there will be no effect on our total shareholders’ equity. This is because the deferred tax provisions, which we accumulate in other comprehensive income, and retained earnings, where the income tax expense will have its effect, are both components of shareholders’ equity.

The following table presents the level as of year-end of unrealized gains and related effects in available for sale equity securities of DB Investor, which held most of our portfolio of industrial holdings and which reflects both the significant reductions in market prices since the effective date of the tax rate change and dispositions of industrial holdings. Since the deferred tax amount relating to the securities not sold has been frozen based on the level of market prices in 1999 and 2000, the deferred tax amount relating to the tax rate changes in Germany currently exceeds the amount of related unrealized gains of the available for sale equity securities of DB Investor.

in€ bn.	2005			2004			2003			2002			2001
Market value		4.1			5.4			6.3			5.3			14.1
Cost		2.2			4.0			4.6			5.0			5.7
Unrealized gains in other comprehensive income		1.9			1.4			1.7			0.3			8.4
Less: deferred tax relating to 1999 and 2000 tax rate changes in Germany		2.1			2.7			2.8			2.9			5.5
Other comprehensive income (loss), net		(0.2	)		(1.3	)		(1.1	)		(2.6	)		2.9

As a consequence, the accounting for income tax rate changes related to eligible equity securities may result in significant impacts on our results of operations in periods in which we sell these securities. This effect is illustrated in the years 2001 through 2005, when we sold portions of our eligible equity securities. The gains resulting from most of these sales were not subject to tax. We reversed the deferred taxes which had accumulated in other comprehensive income, through December 31, 2000, in

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respect of these securities. We recognized these reversals as tax expense of€ 544 million in 2005,€ 120 million in 2004,€ 215 million in 2003,€ 2.8 billion in 2002 and€ 995 million in 2001.

Neither the release of the deferred tax liability with an impact on the income statement nor the reversal of the offset amount in other comprehensive income with an impact on the income statement has an economic effect. They do not affect the bank’s tax position vis-à-vis the tax authorities. The initial release did not lead to a tax refund from the tax authorities and likewise, the sale and the reversal of the offset amount will not create a tax liability to the tax authorities. The only tax payable is on 5% of any gain as a result of the 2004 Tax Reform Act which was enacted in December 2003. Under the Act, effective starting in 2004, corporations effectively became subject to tax on 5% of capital gains from the disposal of foreign and domestic shareholdings irrespective of holding percentage and holding period; losses from a shareholding disposal continue to be non-tax deductible.

Neither the initial release of the deferred tax liability nor the unrealized gains and losses from securities available for sale is included in regulatory core capital or in the calculation of our adjusted return on equity. The entire procedure is a U.S. GAAP specific accounting requirement. We believe that the economic effects of the tax rate changes are not appropriately reflected in the individual periods up to and including the period of the sale.

Operating Results

You should read the following discussion and analysis in conjunction with the consolidated financial statements.

Executive Summary
The world economy proved to be quite robust in 2005, growing by 4.5%. GDP growth was 3.5% in the United States, almost 10% in China and 2.5% in Japan. In the European Union the economy grew by 1.5%, however Germany, against a backdrop of weak consumer spending, lagged significantly behind the other countries with a growth rate of only 0.9%. The capital markets developed better than expected in 2005 and confidence in the international financial markets increased. The Nikkei Index and the DAX gained 40% and 27%, respectively. The Dow Jones, with a loss of 0.6%, did not reach these levels, partly reflecting continued interest rate increases by the Federal Reserve. Thanks to our strong global presence, especially in corporate and investment banking and our investment management businesses, we took advantage of the generally favorable economic and market environment. We generated higher revenues in most business areas which, combined with some expense growth and a similar level of loan loss provisions, resulted in significant bottom-line profit growth.

Income before income tax expense increased from€ 4.0 billion in 2004 to€ 6.1 billion, including restructuring charges of€ 767 million related to the Business Realignment Program (similar charges in 2004 amounted to€ 400 million). We reported a pre-tax return on average active equity of 24% in 2005 – a substantial improvement over 16% in 2004 (pre-tax return on average total shareholders’ equity was 22% and 15%, respectively, for these years). Net income for 2005 increased 43% to€ 3.5 billion compared to€ 2.5 billion in 2004, and diluted earnings per share grew 53% to€ 6.95.

Compared to 2004, total net revenues excluding the provision for loan losses increased by€ 3.7 billion, or 17%, to€ 25.6 billion. Revenues grew in all major categories. Net interest and trading revenues were up€ 819 million, or 16%, and€ 1.2 billion, or 20%, respectively. This growth was primarily attributable to our Sales & Trading businesses, which achieved total revenues (net interest, trading, fee and other revenues) of€ 10.6 billion, up 21% from 2004 to a new record level. Our business model, which emphasizes high-value ‘intellectual capital’ products and customized solutions, performed strongly – in both the good and challenging market conditions in 2005. Commission and fee revenues improved by€ 582 million to€ 10.1 billion in 2005, driven by strong results in both our origination/advisory and investment management businesses. Also contributing to higher revenues in 2005 was an increase of€ 821 million in gains on sales from our portfolio of securities available for sale, mainly reflecting gains from the further reduction of our stake in DaimlerChrysler AG.

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Our total noninterest expenses were€ 19.2 billion compared to€ 17.5 billion in 2004. Noninterest expenses reflected restructuring expenses of€ 767 million in 2005 and€ 400 million in 2004, increased provisions in 2005 related to legal exposures for legacy issues, and€ 203 million in 2005 related to grundbesitz-invest, an open-end property fund sponsored and managed by a German subsidiary of ours. Declines in noninterest expenses due to headcount reductions and other additional measures were offset by higher performance-related bonuses, in line with strong business results, as well as by investments in growth businesses.

In 2005 the provision for loan losses was€ 374 million compared to€ 372 million in 2004. The level in 2005 partly reflects growth in our consumer lending business, consistent with our stated strategy. At the end of 2005, problem loans were€ 3.9 billion, down 20% from€ 4.8 billion at the end of 2004, reflecting the quality of our loan book, tight credit risk management, the positive results of workout processes and the overall benign credit environment.

Financial Results
The following table presents our condensed consolidated statement of income for 2005, 2004 and 2003.

								2005 increase					2004 increase
								(decrease) from 2004					(decrease) from 2003
in€ m.	2005		2004		2003			in€			in %		in€			in %
Net interest revenues		6,001		5,182		5,847			819			16		(665	)		(11	)
Provision for loan losses		374		372		1,113			2			1		(741	)		(67	)
Net interest revenues after provision for loan losses		5,627		4,810		4,734			817			17		76			2
Commissions and fee revenues		10,089		9,506		9,332			582			6		174			2
Trading revenues, net		7,429		6,186		5,611			1,243			20		575			10
Net gains on securities available for sale		1,055		235		20			821			N/M		215			N/M
Net income (loss) from equity method investments		418		388		(422	)		30			8		810			N/M
Other noninterest revenues		648		421		880			227			54		(459	)		(52	)
Total noninterest revenues		19,639		16,736		15,421			2,903			17		1,315			9
Total net revenues		25,266		21,546		20,155			3,719			17		1,391			7
Compensation and benefits		10,993		10,222		10,495			771			8		(273	)		(3	)
Goodwill impairment/impairment of intangibles		–		19		114			(19	)		N/M		(95	)		(83	)
Restructuring activities		767		400		(29	)		367			92		429			N/M
Other noninterest expenses		7,394		6,876		6,819			518			8		57			1
Total noninterest expenses		19,154		17,517		17,399			1,637			9		118			1
Income before income tax expense and cumulative effect of accounting changes		6,112		4,029		2,756			2,083			52		1,273			46
Income tax expense		2,039		1,437		1,327			602			42		110			8
Reversal of 1999/2000 credits for tax rate changes		544		120		215			424			N/M		(95	)		(44	)
Income before cumulative effect of accounting changes, net of tax		3,529		2,472		1,214			1,056			43		1,258			104
Cumulative effect of accounting changes, net of tax		–		–		151			–			–		(151	)		N/M
Net income		3,529		2,472		1,365			1,056			43		1,107			81

N/M – Not meaningful

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Our net income included the effects of reversing income tax credits related to 1999 and 2000 tax law changes, as described in “Effects of 1999/2000 German Tax Reform Legislation and Accounting for Income Taxes” and the cumulative effect of accounting changes as described in Note [2] to our consolidated financial statements. The following table shows our net income excluding these effects.

	2005		Per share		Per share		2004		Per share		Per share		2003			Per share			Per share
in€ m. (except per share amounts)			(basic)		(diluted)				(basic)		(diluted)					(basic)			(diluted)
Net income		3,529		7.62		6.95		2,472		5.02		4.53		1,365			2.44			2.31
Add (deduct):
Reversal of 1999/2000 credits for tax rate changes		544		1.18		1.07		120		0.24		0.23		215			0.39			0.36
Cumulative effect of accounting changes, net of tax		–		–		–		–		–		–		(151	)		(0.27	)		(0.25	)
Net income before reversal of 1999/2000 credits for tax rate changes and cumulative effect of accounting changes, net of tax		4,073		8.80		8.02		2,592		5.26		4.76		1,429			2.56			2.42

Net income above included pre-tax gains of€ 750 million in 2005,€ 140 million in 2004 and€ 222 million in 2003 on sales of securities that generated the reversal of the 1999/2000 credits for tax rate changes.

Net Interest Revenues
The following table sets forth data related to our net interest revenues.

										2005 increase					2004 increase
										(decrease)					(decrease)
										from 2004					from 2003
in€ m. (except percentages)	2005			2004			2003			in€		in %			in€			in %
Total interest revenues		41,708			28,023			27,583			13,685		49			440			2
Total interest expenses		35,707			22,841			21,736			12,866		56			1,105			5
Net interest revenues		6,001			5,182			5,847			819		16			(665	)		(11	)
Average interest-earning assets1		866,750			751,557			736,046			115,193		15			15,511			2
Average interest-bearing liabilities1		809,321			695,094			683,127			114,227		16			11,967			2
Gross interest yield2		4.81	%		3.73	%		3.75	%	1.08 ppt			29		(0.02) ppt				(1	)
Gross interest rate paid3		4.41	%		3.29	%		3.18	%	1.12 ppt			34		0.11 ppt				3
Net interest spread4		0.40	%		0.44	%		0.57	%	(0.04) ppt			(9	)	(0.13) ppt				(23	)
Net interest margin5		0.69	%		0.69	%		0.79	%		–		–		(0.10) ppt				(13	)

ppt – Percentage points
1	Average balances for each year are calculated based upon month-end balances.
2	Gross interest yield is the average interest rate earned on our average interest-earning assets.
3	Gross interest rate paid is the average interest rate paid on our average interest-bearing liabilities.
4	Net interest spread is the difference between the average interest rate earned on average interest-earning assets and the average interest rate paid on average interest-bearing liabilities.
5	Net interest margin is net interest revenues expressed as a percentage of average interest-earning assets.

Net interest revenues in 2005 were€ 6.0 billion, an increase of€ 819 million from 2004. Average interest-bearing volumes of assets and liabilities each increased by approximately€ 115 billion, the overall net interest spread narrowed by 4 basis points and our net interest margin stood at 69 basis points in both years. Much of the increase in net interest revenues was related to our trading activities. Factors in this increase include a€ 49 billion increase in interest-earning trading assets outstanding (mainly in non-German offices) and the effect of a larger increase in noninterest-bearing trading liabilities than noninterest bearing trading assets. Interest revenues from loans remained nearly unchanged as strong competition held down interest yields and our average loans outstanding changed little year-to-year, though lending picked up later in the year primarily in our retail and wealth management businesses. Our overall funding costs rose by 112 basis points due primarily to the higher rates in the U.S. as the Federal Reserve continued its policy of rate increases.

     The development of our net interest revenues is also influenced to a significant extent by the accounting treatment of some of our derivatives transactions. We enter into nontrading derivative transac-

54

tions as economic hedges of the interest rate risks of our nontrading assets and liabilities. Some of these derivatives qualify as hedges for accounting purposes while others do not. When derivative transactions qualify as hedges for accounting purposes, the interest arising from the derivatives appear in interest revenues and expense, where they offset the interest flows from the assets and liabilities they are intended to hedge. When derivatives do not qualify for hedge accounting treatment, the interest flows that arose from the derivatives during any period all appear in trading revenues for that period.

Trading revenues, net
The following table sets forth data related to our trading revenues.

								2005 increase (decrease)				2004 increase (decrease)
								from 2004				from 2003
in€ m. (except percentages)	2005		2004		2003			in€		in %		in€			in %
CIB – Sales & Trading (equity)		3,273		2,192		2,491			1,081		49		(298	)		(12	)
CIB – Sales & Trading (debt and other products)		3,725		3,666		3,481			59		2		185			5
Other trading revenues		431		328		(361	)		103		31		689			N/M
Total trading revenues, net		7,429		6,186		5,611			1,243		20		575			10

N/M – Not meaningful

Trading revenues from CIB – Sales & Trading (equity) increased€ 1.1 billion, mainly driven by substantial growth in our equity derivatives business and to a lesser extent greater results from our proprietary activity.

The increase in other trading revenues was mainly due to higher mark-to-market results from credit default swaps used to hedge our investment-grade loan exposure, to a loss of€ 13 million in 2005 from a loss of€ 231 million in 2004. This development was partly offset because mark-to-market gains related to AWM’s guaranteed-value mutual funds business were reflected in the 2004 results but not in 2005 following its deconsolidation pursuant to the adoption of FIN 46(R).

Our trading and risk management businesses include significant activities in interest rate instruments and related derivatives. Under U.S. GAAP, interest revenues earned from trading assets (e.g., coupon and dividend income), and the costs of funding net trading positions are part of net interest revenues. Our trading activities can periodically shift revenues between trading revenues and interest revenues, depending on a variety of factors, including risk management strategies. In order to provide a more business-focused commentary, we discuss the combined net interest and trading revenues by group division and by product within the Corporate and Investment Bank, rather than by type of revenues generated.

55

     The following table sets forth data relating to our combined net interest and trading revenues by group division and product within Corporate and Investment Bank.

										2005 increase (decrease)						2004 increase (decrease)
										from 2004						from 2003
in€ m.	2005			2004			2003			in€			in %			in€			in %
Net interest revenues		6,001			5,182			5,847			819			16			(665	)		(11	)
Trading revenues, net		7,429			6,186			5,611			1,243			20			575			10
Total net interest and trading revenues		13,430			11,368			11,458			2,062			18			(90	)		(1	)
Breakdown by Group Division/CIB product1:
Sales & Trading (equity)		2,465			1,594			2,288			871			55			(694	)		(30	)
Sales & Trading (debt and other products)		6,433			5,368			5,369			1,065			20			(1	)		—
Total Sales & Trading		8,899			6,963			7,658			1,936			28			(695	)		(9	)
Loan products2		766			698			659			68			10			40			6
Transaction services		913			828			830			85			10			(2	)		—
Remaining products3		(20	)		(135	)		(222	)		115			85			88			39
Total Corporate and Investment Bank		10,558			8,354			8,924			2,204			26			(570	)		(6	)
Private Clients and Asset Management		2,818			2,923			2,814			(105	)		(4	)		109			4
Corporate Investments		37			118			(10	)		(81	)		(69	)		128			N/M
Consolidation & Adjustments		17			(26	)		(270	)		43			N/M			243			90
Total net interest and trading revenues		13,430			11,368			11,458			2,062			18			(90	)		(1	)

N/M – Not meaningful
1	Note that this breakdown reflects net interest and trading revenues only. For a discussion of the group divisions’ total revenues by product please refer to “Results of Operations by Segment”.
2	Includes the traditional net interest spread on loans as well as the results of credit default swaps used to hedge our investment-grade loan exposure.
3	Includes origination, advisory and other products.

Corporate and Investment Bank (CIB). The significant increase in combined net interest and trading revenues from sales and trading products of€ 1.9 billion to€ 8.9 billion reflected our results in commodity, credit, equity and interest rate derivatives and emerging markets. Strong gains from the proprietary business additionally contributed to this development. In loan products, net interest and trading revenues were higher by€ 68 million due to lower trading losses on credit risk hedge positions. This was partly offset by a decrease in net interest revenues from our corporate loan book reflecting lower interest margins. The increase of€ 85 million in transaction services was due to higher interest revenues from Cash Management products and from Trust and Securities Services. Net interest and trading revenues from remaining products were€ 115 million higher than in 2004 mainly due to foreign currency effects on certain corporate liabilities and lower goodwill funding costs.

Private Clients and Asset Management (PCAM). Combined net interest and trading revenues were€ 2.8 billion in 2005, a decrease of€ 105 million compared to 2004. Net interest and trading revenues in 2004 included€ 155 million attributable to the aforementioned deconsolidation of AWM’s guaranteed-value mutual funds business. This deconsolidation impact was partly offset by higher net interest revenues in 2005 resulting from increased loan volumes in the retail and wealth management business.

Corporate Investments (CI). The decrease of€ 81 million to€ 37 million included lower dividend income from our downsized industrial holdings portfolio.

Provision for Loan Losses
Our provision for loan losses reflects charges to and releases from the allowance we carry for credit losses on loans. The allowance consists of a specific loss component, which relates to specific loans, and an inherent loss component. The inherent loss component consists of a country risk allowance, an allowance for smaller-balance standardized homogeneous loans and an inherent loss component to cover losses in our loan portfolio that have not yet been individually identified, and reflects the imprecisions and uncertainties in estimating our loan loss allowance.

56

Our provision for loan losses in 2005 was€ 374 million, nearly unchanged from the prior year (€ 372 million), reflecting tight credit risk management, positive results of workout processes as well as the overall benign credit environment. Exposure in our smaller-balance standardized homogeneous loan portfolio accounted for 98% of our total loan loss provision in 2005.

For further information on the provision for loan losses see “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Credit Loss Experience and Allowance for Loan Losses”.

Noninterest Revenues, Excluding Trading Revenues

								2005 increase (decrease)				2004 increase (decrease)
								from 2004				from 2003
in€ m.	2005		2004		2003			in€		in %		in€			in %
Commissions and fee revenues1		10,089		9,506		9,332			582		6		174			2
Net gains on securities available for sale		1,055		235		20			821		N/M		215			N/M
Net income (loss) from equity method investments		418		388		(422	)		30		8		810			N/M
Other noninterest revenues		648		421		880			227		54		(459	)		(52	)
Total noninterest revenues, excluding trading revenues		12,210		10,550		9,810			1,660		16		740			8

N/M – Not meaningful
1 Includes	2005	2004	2003	in€			in %			in€			in %
Commissions and fees from fiduciary activities:
Commissions for administration	396	281	240		115			41			41			17
Commissions for assets under management	3,009	2,847	2,968		163			6			(121	)		(4	)
Commissions for other securities business	151	83	65		67			81			18			28
Total	3,556	3,211	3,273		345			11			(62	)		(2	)
Commissions, broker’s fees, markups on securities underwriting and other securities activities:
Underwriting and advisory fees	2,059	1,793	1,638		266			15			155			9
Brokerage fees	1,998	1,918	1,926		80			4			(8	)		—
Total	4,057	3,711	3,564		346			9			147			4
Fees for other customer services	2,476	2,584	2,495		(108	)		(4	)		89			4
Total commissions and fee revenues	10,089	9,506	9,332		582			6			174			2

Commissions and Fee Revenues. Total 2005 commissions and fee revenues were€ 10.1 billion, an increase of€ 582 million, or 6%, compared with 2004. The increase of€ 345 million in commissions and fees from fiduciary activities mainly resulted from higher assets under management in our mutual funds business and higher performance fees in AM’s Real Estate business. Underwriting and advisory fees increased by€ 266 million, mainly attributable to improved results from Origination (equity) and Advisory in CIB. The decrease of€ 108 million in fees for other customer services was driven by higher sales of insurance products in 2004, due largely to changes in German tax legislation.

Net Gains on Securities Available for Sale. Results in 2005 included€ 666 million from gains on sales of DaimlerChrysler AG shares in our industrial holdings portfolio. Additionally, the gains from the disposal of our interest in Südzucker AG and from the partial disposal of HCL Technologies Ltd. contributed to the 2005 profit. In 2004, results included several disposal gains of which the most significant was a€ 118 million net gain related to sales of DaimlerChrysler AG shares.

Net Income (Loss) from Equity Method Investments. The key contributors to net income from equity method investments in 2005 and in 2004 were structured transactions in CIB’s sales & trading areas as well as CI’s equity method investments. Both years also include income related to real estate investments in AWM.

Other Noninterest Revenues. Total other noninterest revenues increased by€ 227 million in 2005 compared to 2004. The improvement primarily arose because 2004 included provisions for the beneficial interest of the investors in AWM’s guaranteed value mutual funds business. Also contributing to the increase was higher income from other investments in CI and in AWM’s real estate business. These positive factors were partly offset by lower returns from loans held for sale subsequent to interest rate increases, predominantly in the U.S.

57

Noninterest Expenses
The following table sets forth information on our noninterest expenses.

								2005 increase (decrease)					2004 increase (decrease)
								from 2004					from 2003
in€ m.	2005		2004		2003			in€			in %		in€			in %
Compensation and benefits		10,993		10,222		10,495			771			8		(273	)		(3	)
Other noninterest expenses1		7,394		6,876		6,819			518			8		57			1
Goodwill impairment/impairment of intangibles		–		19		114			(19	)		N/M		(95	)		(83	)
Restructuring activities		767		400		(29	)		366			92		429			N/M
Total noninterest expenses		19,154		17,517		17,399			1,637			9		118			1

N/M – Not meaningful
1 Includes:	2005	2004	2003	in€			in %			in€			in %
Net occupancy expense of premises	1,014	1,258	1,251		(244	)		(19	)		7			1
Furniture and equipment	169	178	193		(9	)		(5	)		(15	)		(8	)
IT costs	1,539	1,726	1,913		(187	)		(11	)		(187	)		(10	)
Agency and other professional service fees	895	824	836		72			9			(12	)		(1	)
Communication and data services	599	599	626		–			–			(27	)		(4	)
Other expenses	3,178	2,291	2,000		886			39			291			15
Total other noninterest expenses	7,394	6,876	6,819		518			8			57			1

Compensation and Benefits. The increase of€ 771 million in 2005 compared to 2004 reflected several partly offsetting factors:

– Performance-related compensation increased in 2005 driven by improved operating results across all of our businesses.

– Severance payments of€ 51 million in 2005 decreased by€ 231 million compared to 2004, with almost 60% of the decline attributable to CB&S.

– Salaries and benefits showed net decreases reflecting headcount reductions related to the BRP and sales of non-core businesses, partly offset by the effects of headcount increases in selected growth businesses.

Other Noninterest Expenses. Total other noninterest expenses increased by€ 518 million in 2005. The increase of€ 886 million in the category “Other expenses” was mainly attributable to two factors: higher provisions for legal exposures, including provisions related to legacy issues included in Consolidation & Adjustments, and provisions of€ 203 million related to grundbesitz-invest, an open-end property fund sponsored and managed by a German subsidiary of ours. In December 2005, the issuance and redemption of fund share units was temporarily suspended pending an extraordinary revaluation of assets. The provisions of€ 203 million represented the estimated costs of direct and indirect compensation to certain share unit holders. The direct compensation would be paid to certain investors who, taking into account the purchase price of their share units and earnings distributions received, would incur a loss due to the revaluation of the properties. Other noninterest expenses also increased due to volume-driven expense increases for payment and clearing services. Declines in net occupancy and IT costs were a modest offset to the increased expenses. Net occupancy expenses decreased in 2005 primarily because 2004 included costs related to the elimination of excess space and sublease losses. Both net occupancy and IT costs also decreased because of ongoing cost containment efforts.

Goodwill Impairment/Impairment of Intangibles. The previous year included an impairment loss of€ 19 million in Asset and Wealth Management following the termination of certain investment management agreements in the UK.

Restructuring Activities. During 2005 we continued our BRP which included restructuring charges of€ 767 million in 2005 and€ 400 million in 2004. For further information on restructuring activities see Note [28] to our consolidated financial statements.

Income Tax Expense
Income tax expense was€ 2.6 billion in 2005 compared to€ 1.6 billion in 2004, primarily attributable to the increase of operating income and an increase of the reversal, required under U.S. GAAP, of 1999/2000 credits for tax rate changes due to sales of equity securities that are exempt from German income taxes. The reversal of 1999/2000 credits for German tax rate changes was€ 544 million in 2005 and€ 120 million 2004. The actual effective tax rates were 42% in 2005 and 39% in 2004. Ex-

58

cluding the effect of the reversal, our effective tax rates were 33% in 2005 and 36% in 2004, with the lower effective tax rate in 2005 mainly due to greater tax-exempt capital gains.

Results of Operations by Segment (2005 vs. 2004)

The following is a discussion of the results of our business segments. See Note [27] to the consolidated financial statements for information regarding

– our organizational structure;

– effects of significant acquisitions and divestitures on segmental results;

– changes in the format of our segment disclosure;

– a discussion of the framework of our management reporting systems;

– consolidating and other adjustments to the total results of operations of our business segments;

– definitions of non-GAAP financial measures that are used with respect to each segment, and

– the rationale for excluding items in deriving the measures.

The criterion for segmentation into divisions is our organizational structure as it existed at December 31, 2005. For further discussion of our business segments, see “Item 4: Information on the Company” and Note [27] to the consolidated financial statements. Segment results were prepared in accordance with our management reporting systems.

	Corporate and			Private Clients			Corporate			Total			Consolidation &			Total
2005	Investment			and Asset			Investments			Management			Adjustments			Consolidated
in€ m. (except percentages)	Bank			Management						Reporting
Net revenues2		15,918			8,594			1,229			25,741			(102	)		25,640
Provision for loan losses		32			342			–			374			–			374
Provision for off-balance sheet positions		(22	)		(2	)		–			(24	)		–			(24	)
Total provision for credit losses		10			340			(1	)		350
Operating cost base1		11,120			6,342			181			17,642
Policyholder benefits and claims		–			49			–			49			3			52
Minority interest		37			30			(2	)		66			(11	)		55
Restructuring activities		418			347			2			767			–			767
Goodwill impairment/impairment of intangibles		–			–			–			–			–			–
Total noninterest expenses3		11,575			6,768			181			18,524			654			19,178
Income (loss) before income taxes4		4,333			1,485			1,049			6,867			(756	)		6,112
Add (deduct):
Net (gains) from businesses sold/held for sale		–			(90	)		–			(90	)
Significant equity pick-ups/net (gains) from investments		–			–			(156	)		(156	)
Net (gains) on securities available for sale/industrial holdings including hedging		–			–			(801	)		(801	)
Net (gains) on the sale of premises		–			–			(57	)		(57	)
Restructuring activities		418			347			2			767
Goodwill impairment/impairment of intangibles		–			–			–			–
Underlying pre-tax profit		4,751			1,742			37			6,531
Cost/income ratio in %		73			79			15			72			N/M			75
Underlying cost/income ratio in %		70			75			84			72
Assets5		881,643			123,785			15,025			984,318			7,843			992,161
Risk-weighted positions (BIS risk positions)		167,742			74,074			7,448			249,264			1,938			251,202
Average active equity6		14,385			6,700			3,047			24,132			998			25,130
Return on average active equity in %		30			22			34			28			N/M			24
Underlying return on average active equity in %		33			26			1			27

N/M – Not meaningful
1     Includes:
Severance payments	17	22	–	38	13	51

2	Net interest revenues and noninterest revenues.
3	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
4	Before cumulative effect of accounting changes.
5	The sum of corporate divisions does not necessarily equal the total of the corresponding group division because of consolidation items between corporate divisions, which are to be eliminated on the group division level. The same approach holds true for the sum of group divisions compared to Total Management Reporting.
6	See Note [27] to the consolidated financial statements for a description of how average active equity is allocated to the divisions.

59

2004	Corporate and			Private Clients			Corporate			Total			Consolidation &			Total
	Investment			and Asset			Investments			Management			Adjustments			Consolidated
in€ m. (except percentages)	Bank			Management						Reporting
Net revenues2		13,414			8,023			621			22,058			(140	)		21,918
Provision for loan losses		89			264			19			372			–			372
Provision for off-balance sheet positions		(65	)		(1	)		–			(65	)		–			(65	)
Total provision for credit losses		24			263			19			307
Operating cost base1		10,327			6,206			414			16,948
Policyholder benefits and claims		–			50			–			50			210			260
Minority interest		5			1			(1	)		4			(1	)		3
Restructuring activities		299			98			3			400			–			400
Goodwill impairment/impairment of intangibles		–			19			–			19			–			19
Total noninterest expenses3		10,631			6,373			416			17,420			162			17,582
Income (loss) before income taxes4		2,759			1,386			186			4,331			(302	)		4,029
Add (deduct):
Net (gains) from businesses sold/held for sale		(31	)		(8	)		(38	)		(76	)
Significant equity pick-ups/net (gains) from investments		–			–			(148	)		(148	)
Net (gains) on securities available for sale/industrial holdings including hedging		–			–			(176	)		(176	)
Net (gains) on the sale of premises		–			–			(20	)		(20	)
Restructuring activities		299			98			3			400
Goodwill impairment/impairment of intangibles		–			19			–			19
Underlying pre-tax profit (loss)		3,027			1,496			(194	)		4,329
Cost/income ratio in %		79			79			67			79			N/M			80
Underlying cost/income ratio in %		77			78			174			79
Assets5		729,872			113,818			16,442			832,933			7,135			840,068
Risk-weighted positions (BIS risk positions)		139,124			65,677			10,242			215,044			1,742			216,787
Average active equity6		12,860			6,715			3,933			23,507			1,271			24,778
Return on average active equity in %		21			21			5			18			N/M			16
Underlying return on average active equity in %		24			22			(5	)		18
N/M – Not meaningful
1 Includes:
Severance payments		170			101			1			272			10			282

2	Net interest revenues and noninterest revenues.
3	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
4	Before cumulative effect of accounting changes.
5	The sum of corporate divisions does not necessarily equal the total of the corresponding group division because of consolidation items between corporate divisions, which are to be eliminated on the group division level. The same approach holds true for the sum of group divisions compared to Total Management Reporting.
6	See Note [27] to the consolidated financial statements for a description of how average active equity is allocated to the divisions.

60

		Corporate and			Private Clients			Corporate			Total			Consolidation			Total
	2003	Investment			and Asset			Investments			Management			& Adjustments			Consolidated
	in€ m. (except percentages)	Bank			Management						Reporting
	Net revenues2		14,294			8,199			(920	)		21,572			(305	)		21,268
	Provision for loan losses		752			324			36			1,113			–			1,113
	Provision for off-balance sheet positions		(45	)		(3	)		(2	)		(50	)		–			(50	)
	Total provision for credit losses		708			321			35			1,063
	Operating cost base1		10,060			6,683			681			17,424
	Policyholder benefits and claims		–			21			–			21			89			110
	Minority interest		13			15			(31	)		(3	)		–			(3	)
	Restructuring activities		(29	)		(1	)		–			(29	)		–			(29	)
	Goodwill impairment		–			–			114			114			–			114
	Total noninterest expenses3		10,045			6,718			764			17,526			(78	)		17,449
	Income (loss) before income taxes4		3,541			1,160			(1,719	)		2,983			(226	)		2,756
	Add (deduct):
	Net (gains) losses from businesses sold/held for sale		(583	)		(51	)		141			(494	)
	Significant equity pick-ups/net losses from investments		–			–			938			938
	Net losses on securities available for sale/industrial holdings including hedging		–			–			184			184
	Net losses on the sale of premises		–			–			107			107
	Restructuring activities		(29	)		(1	)		–			(29	)
	Goodwill impairment		–			–			114			114
	Underlying pre-tax profit (loss)		2,929			1,108			(236	)		3,801
	Cost/income ratio in %		70			82			N/M			81			N/M			82
	Underlying cost/income ratio in %		73			82			152			78
	Assets5		681,722			124,606			18,987			795,818			7,796			803,614
	Risk-weighted positions (BIS risk positions)		137,615			63,414			13,019			214,048			1,625			215,672
	Average active equity6		14,186			7,225			4,900			26,311			1,063			27,374
	Return on average active equity in %		25			16			(35	)		11			N/M			10
	Underlying return on average active equity in %		21			15			(5	)		14
N/M – Not meaningful
1	Includes:
	Severance payments		260			395			20			675			27			702

2	Net interest revenues and noninterest revenues.
3	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
4	Before cumulative effect of accounting changes.
5	The sum of corporate divisions does not necessarily equal the total of the corresponding group division because of consolidation items between corporate divisions, which are to be eliminated on the group division level. The same approach holds true for the sum of group divisions compared to Total Management Reporting.
6	See Note [27] to the consolidated financial statements for a description of how average active equity is allocated to the divisions.

61

Group Divisions

Corporate and Investment Bank Group Division
The following table sets forth the results of our Corporate and Investment Bank Group Division for the years ended December 31, 2005, 2004 and 2003, in accordance with our management reporting systems.

in€ m. (except percentages)	2005			2004			2003
Net revenues:
Sales & Trading (equity)		3,312			2,489			3,119
Sales & Trading (debt and other products)		7,336			6,299			6,081
Origination (equity)		647			499			485
Origination (debt)		1,017			916			806
Advisory		604			488			465
Loan products		1,256			1,139			1,187
Transaction services		1,971			1,863			1,915
Other		(225	)		(277	)		236
Total net revenues		15,918			13,414			14,294
Therein: Net interest and trading revenues		10,558			8,354			8,924
Provision for credit losses:
Provision for loan losses		32			89			752
Provision for off-balance sheet positions		(22	)		(65	)		(45	)
Total provision for credit losses		10			24			708
Noninterest expenses1:
Operating cost base		11,120			10,327			10,060
Minority interest		37			5			13
Restructuring activities		418			299			(29	)
Goodwill impairment		–			–			–
Total noninterest expenses1		11,575			10,631			10,045
Therein: Severance payments		17			170			260
Income before income taxes		4,333			2,759			3,541
Add (deduct):
Net (gains) from businesses sold/held for sale		–			(31	)		(583	)
Restructuring activities		418			299			(29	)
Goodwill impairment		–			–			–
Underlying pre-tax profit		4,751			3,027			2,929
Cost/income ratio in %		73%			79%			70%
Underlying cost/income ratio in %		70%			77%			73%
Assets		881,643			729,872			681,722
Risk-weighted positions (BIS risk positions)		167,742			139,124			137,615
Average active equity2		14,385			12,860			14,186
Return on average active equity in %		30%			21%			25%
Underlying return on average active equity in %		33%			24%			21%

1	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
2	See Note [27] to the consolidated financial statements for a description of how average active equity is allocated to the divisions.

The following paragraphs discuss the contribution of the individual corporate divisions to the overall results of the Corporate and Investment Bank Group Division.

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Corporate Banking & Securities Corporate Division
The following table sets forth the results of our Corporate Banking & Securities Corporate Division for the years ended December 31, 2005, 2004 and 2003, in accordance with our management reporting systems.

in€ m. (except percentages)	2005			2004			2003
Net revenues:
Sales & Trading (equity)		3,312			2,489			3,119
Sales & Trading (debt and other products)		7,336			6,299			6,081
Origination (equity)		647			499			485
Origination (debt)		1,017			916			806
Advisory		604			488			465
Loan products		1,256			1,139			1,187
Other		(225	)		(308	)		(347	)
Total net revenues		13,947			11,520			11,796
Provision for credit losses:
Provision for loan losses		25			79			751
Provision for off-balance sheet positions		3			(66	)		8
Total provision for credit losses		28			14			759
Noninterest expenses1:
Operating cost base		9,675			8,752			8,317
Minority interest		37			5			13
Restructuring activities		331			272			(23	)
Goodwill impairment		–			–			–
Total noninterest expenses1		10,043			9,028			8,307
Therein: Severance payments		18			154			194
Income before income taxes		3,877			2,478			2,730
Add (deduct):
Net (gains) losses from businesses sold/held for sale		–			–			–
Restructuring activities		331			272			(23	)
Goodwill impairment		–			–			–
Underlying pre-tax profit		4,207			2,750			2,707
Cost/income ratio in %		72%			78%			70%
Underlying cost/income ratio in %		69%			76%			71%
Assets		871,941			720,557			693,794
Risk-weighted positions (BIS risk positions)		155,467			128,066			127,807
Average active equity2		13,070			11,479			12,785
Return on average active equity in %		30%			22%			21%
Underlying return on average active equity in %		32%			24%			21%

1	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
2	See Note [27] to the consolidated financial statements for a description of how average active equity is allocated to the divisions.

Comparison between 2005 and 2004
Income before income taxesincreased by€ 1.4 billion to€ 3.9 billion for the year ended December 31, 2005. The improvement was driven by revenue growth of 21%, spread across most business units, together with continued tight cost management, with the increase of 11% in noninterest expenses driven by performance-related compensation. Underlying pre-tax profit, at€ 4.2 billion, increased by€ 1.5 billion compared to€ 2.8 billion in 2004.

Net revenuesof€ 13.9 billion in 2005 were€ 2.4 billion higher than net revenues of€ 11.5 billion in 2004.

Sales & Trading (debt and other products) revenues were a record€ 7.3 billion in 2005 and increased by€ 1.0 billion compared to 2004. Sales & Trading (equity) revenues were€ 3.3 billion,€ 823 million higher than 2004.

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Improved earnings in our Debt and Equity franchises reflected sustained leadership in high-value structured products in commodity, credit, equity and interest rate derivatives, emerging markets and securitized products. Customer demand for these products remained robust throughout the year. Equity derivatives in particular showed substantial growth, benefiting from synergies arising from closer integration with our institutional fixed income sales force.

Margin compression remained a significant factor in the performance of more mature ‘flow’ businesses such as foreign exchange, money markets and cash equities. Despite this compression, we nonetheless succeeded in making modest earnings gains in most of these businesses by growing market share. In cash equities, however, difficult conditions in program trading marginally reduced overall performance versus 2004.

Market conditions presented a number of attractive proprietary trading opportunities throughout the year. While remaining committed to a customer-centric business model, we took selective advantage of these opportunities, and together with the re-engineering of the equities proprietary trading unit at the beginning of the year, generated strong gains versus 2004.

Revenues from Origination and Advisory were€ 2.3 billion,€ 366 million higher than in 2004. Origination (equity) increased market share in both the U.S. and Europe, and regained the no. 1 position in European equity/equity-linked issuance as measured by fees according to Dealogic. In Origination (debt), high-yield issuance rose to the global no.1 position in the fee league table in 2005 according to Dealogic, and we acted as bookrunner on the three largest leveraged buyouts of 2005 in the North American market. In Advisory, the mergers and acquisitions environment continued to gain momentum throughout the year and we improved our fee league table position in 2005 as a result of market share gains in the U.S. and Europe. We ranked no. 8 globally as an M&A advisor, as measured by fees according to Dealogic, compared to no. 10 in 2004. In Europe, we advised on ten of the twenty largest transactions announced in 2005 (source: Thomson Financial).

Revenues from Loan Products were€ 1.3 billion,€ 118 million higher than in 2004. The main driver was an increase in mark-to-market gains on credit default swaps used to hedge the bank’s investment-grade loan exposure. While credit spreads tended to tighten, reflecting the continuing overall benign credit environment, the credit spreads that particularly impacted CIB’s hedge portfolio widened.

The provision for credit lossesremained low at€ 28 million in 2005, compared to€ 14 million in 2004, reflecting the continued benign credit environment and tight credit discipline.

Noninterest expensesin 2005 were€ 10.0 billion, an increase of€ 1.0 billion compared to€ 9.0 billion in 2004, driven by an increase in performance-related compensation consistent with improved operating results. Also contributing to the increase were charges of€ 331 million for restructuring activities related to the Business Realignment Program. In 2004, similar charges amounted to€ 272 million.

Thecost income ratioimproved by 6 percentage points in 2005 to 72%, resulting from the increased revenues and continued tight cost management. After adjusting for the restructuring activities, the underlying cost income ratio improved by 7 percentage points from 76% to 69%.

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Global Transaction Banking Corporate Division
The following table sets forth the results of our Global Transaction Banking Corporate Division for the years ended December 31, 2005, 2004 and 2003, in accordance with our management reporting systems.

in€ m. (except percentages)	2005			2004			2003
Net revenues:
Transaction services		1,971			1,863			1,915
Other		–			31			583
Total net revenues		1,971			1,894			2,498
Provision for credit losses:
Provision for loan losses		7			9			2
Provision for off-balance sheet positions		(25	)		1			(53	)
Total provision for credit losses		(18	)		11			(51	)
Noninterest expenses1:
Operating cost base		1,445			1,576			1,744
Minority interest		–			–			–
Restructuring activities		87			28			(6	)
Goodwill impairment		–			–			–
Total noninterest expenses1		1,532			1,603			1,738
Therein: Severance payments		(1	)		16			66
Income before income taxes		457			280			811
Add (deduct):
Net (gains) from businesses sold/held for sale		–			(31	)		(583	)
Restructuring activities		87			28			(6	)
Goodwill impairment		–			–			–
Underlying pre-tax profit		544			277			222
Cost/income ratio in %		78%			85%			70%
Underlying cost/income ratio in %		73%			85%			91%
Assets		17,966			16,636			16,329
Risk-weighted positions (BIS risk positions)		12,275			11,058			9,808
Average active equity2		1,315			1,381			1,401
Return on average active equity in %		35%			20%			58%
Underlying return on average active equity in %		41%			20%			16%

1	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
2	See Note [27] to the consolidated financial statements for a description of how average active equity is allocated to the divisions.

Comparison between 2005 and 2004
Income before income taxesincreased by€ 176 million to€ 457 million for the year ended December 31, 2005.

Net revenuesincreased by 4% to almost€ 2 billion in 2005. Trust and Securities Services improved its revenues significantly through new business and expanded its lead as the no. 1 trustee for U.S. asset-backed securities and mortgage-backed securities. Cash Management earned higher interest revenues across all customer segments while Trade Finance increased its revenues due to Structured Export Finance deals in Europe and sales of interest and currency risk products. Net revenues in 2004 included a gain of€ 55 million following the sale of a substantial part of our Global Securities Services (GSS) business to State Street Corporation in 2003 and a charge of€ 24 million, representing GTB’s share of the loss on the sale of DB Payments. Excluding the net gains on sales, net revenues increased in 2005 by€ 108 million, or 6%, compared to 2004.

The provision for credit lossesamounted to a net release of€ 18 million in 2005, compared to a charge of€ 11 million for 2004 reflecting the continued benign credit environment and tight credit discipline.

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Noninterest expensesof€ 1.5 billion decreased by€ 71 million from 2004, although charges for restructuring activities, which represent GTB’s share of the Business Realignment Program, increased by€ 59 million from€ 28 million in 2004 to€ 87 million in 2005. The savings in noninterest expenses reflected ongoing gains in cost efficiency and the fact that 2004 expenses included some costs related to the sold GSS business, partly offset by higher performance-related compensation in 2005 in line with improved operating results.

The cost income ratioof 78% was 7 percentage points lower than in 2004. After adjusting for the net gains on sales and the restructuring activities, the underlying cost income ratio improved by 12 percentage points from 85% to 73%, reflecting the aforementioned improvements in revenues and noninterest expenses.

Private Clients and Asset Management Group Division
The following table sets forth the results of our Private Clients and Asset Management Group Division for the years ended December 31, 2005, 2004 and 2003, in accordance with our management reporting systems.

in€ m. (except where indicated)	2005			2004			2003
Net revenues:
Portfolio/fund management		2,718			2,526			2,615
Brokerage		1,847			1,657			1,588
Loans/deposits		2,415			2,359			2,330
Payments, account & remaining financial services		857			915			823
Other		757			565			843
Total net revenues		8,594			8,023			8,199
Therein: Net interest and trading revenues		2,818			2,923			2,814
Provision for credit losses:
Provision for loan losses		342			264			324
Provision for off-balance sheet positions		(2	)		(1	)		(3	)
Total provision for credit losses		340			263			321
Noninterest expenses1:
Operating cost base		6,342			6,206			6,683
Policyholder benefits and claims		49			50			21
Minority interest		30			1			15
Restructuring activities		347			98			(1	)
Goodwill impairment/impairment of intangibles		–			19			–
Total noninterest expenses1		6,768			6,373			6,718
Therein: Severance payments		22			101			395
Income before income taxes		1,485			1,386			1,160
Add (deduct):
Net (gains) losses from businesses sold/held for sale		(90	)		(8	)		(51	)
Restructuring activities		347			98			(1	)
Goodwill impairment/impairment of intangibles		–			19			–
Underlying pre-tax profit		1,742			1,496			1,108
Cost/income ratio in %		79%			79%			82%
Underlying cost/income ratio in %		75%			78%			82%
Assets		123,785			113,818			124,606
Risk-weighted positions (BIS risk positions)		74,074			65,677			63,414
Average active equity2		6,700			6,715			7,225
Return on average active equity in %		22%			21%			16%
Underlying return on average active equity in %		26%			22%			15%
Invested assets (in€ bn.)3		867			828			865

1	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
2	See Note [27] for a description of how average active equity is allocated to the divisions.
3	We define invested assets as (a) assets we hold on behalf of customers for investment purposes and/or (b) client assets that are managed by us. We manage invested assets on a discretionary or advisory basis, or these assets are deposited with us.

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The following paragraphs discuss the contribution of the individual corporate divisions to the overall results of Private Clients and Asset Management Group Division.

Asset and Wealth Management Corporate Division
The following table sets forth the results of our Asset and Wealth Management Corporate Division for the years ended December 31, 2005, 2004 and 2003, in accordance with our management reporting systems.

in€ m. (except where indicated)	2005			2004			2003
Net revenues:
Portfolio/fund management (AM)		2,199			2,040			2,195
Portfolio/fund management (PWM)		303			300			281
Total portfolio/fund management		2,501			2,339			2,476
Brokerage		769			667			651
Loans/deposits		165			133			128
Payments, account & remaining financial services		15			18			12
Other		431			332			557
Total net revenues		3,881			3,488			3,825
Provision for credit losses:
Provision for loan losses		–			(6	)		2
Provision for off-balance sheet positions		–			–			(3	)
Total provision for credit losses		–			(6	)		(1	)
Noninterest expenses1:
Operating cost base		2,984			2,923			3,090
Policyholder benefits and claims		49			50			21
Minority interest		30			1			13
Restructuring activities		220			88			–
Goodwill impairment/impairment of intangibles		–			19			–
Total noninterest expenses1		3,284			3,080			3,124
Therein: Severance payments		4			51			78
Income before income taxes		597			414			702
Add (deduct):
Net (gains) losses from businesses sold/held for sale		(81	)		(32	)		(55	)
Restructuring activities		220			88			–
Goodwill impairment/impairment of intangibles		–			19			–
Underlying pre-tax profit		736			489			647
Cost/income ratio in %		85%			88%			82%
Underlying cost/income ratio in %		80%			86%			82%
Assets		37,269			34,945			48,138
Risk-weighted positions (BIS risk positions)		13,811			11,424			12,170
Average active equity2		4,993			5,034			5,694
Return on average active equity in %		12%			8%			12%
Underlying return on average active equity in %		15%			10%			11%
Invested assets (in€ bn.)3		704			679			715

AM – Asset Management PWM – Private Wealth Management
1	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
2	See Note [27] to the consolidated financial statements for a description of how average active equity is allocated to the divisions.
3	We define invested assets as (a) assets we hold on behalf of customers for investment purposes and/or (b) client assets that are managed by us. We manage invested assets on a discretionary or advisory basis, or these assets are deposited with us.

Comparison between 2005 and 2004
Income before income taxeswas€ 597 million in 2005,€ 183 million higher than in 2004. The current year included charges of€ 220 million for restructuring activities and net gains of€ 81 million from the sale of businesses. In 2004, income before income taxes included charges of€ 88 million for restruc-

67

turing activities, gains of€ 32 million from the sale of businesses and an impairment loss of€ 19 million related to intangible assets. Excluding these items, income before income taxes would have increased€ 247 million from€ 489 million in 2004 to€ 736 million in 2005.

Net revenueswere€ 3.9 billion in 2005, an increase of€ 392 million, or 11%, compared to 2004. This was a record year for net revenues of the Asset and Wealth Management Corporate Division with growth in all major product areas.

Portfolio/fund management revenues of€ 2.2 billion in our Asset Management Business Division increased by€ 159 million, or 8%, from 2004. This improvement mainly reflected higher levels of invested assets, particularly in Germany and the rest of Continental Europe, as well as higher performance fees in the Real Estate and Hedge Fund businesses. Partly offsetting these results was a decline in revenues for the division attributable to the sale of a substantial part of our UK- and Philadelphia-based Asset Management businesses to Aberdeen Asset Management PLC in 2005.

Portfolio/fund management revenues of€ 303 million in our Private Wealth Management Business Division were slightly ahead of 2004, even though the previous year included operating revenues of€ 27 million generated by Scudder Private Investment Counsel (PIC) business, which was sold in the fourth quarter 2004. Excluding this deconsolidation effect, the 11% increase in revenues was mainly attributable to the successful gathering of new assets, performance improvements in the client portfolios and higher performance fees.

Brokerage revenues of€ 769 million increased€ 102 million, or 15%, primarily due to strong customer demand for high-value products as well as higher transaction-based revenues as a result of improved market conditions. Brokerage revenues also benefited from net inflows of invested assets.

Revenues related to loans/deposits of€ 165 million increased by€ 32 million, or 24%, driven by higher volumes, particularly in our margin loan business.

Revenues from other products of€ 431 million were€ 99 million, or 30%, greater than in 2004 due to higher gains from the sale of investments, mainly in the Real Estate business, and an increase of€ 49 million in net gains from the sale of businesses. Such gains totaled€ 81 million in 2005 (UK-AM,€ 68 million; PIC,€ 13 million) and€ 32 million in 2004 (Australia-AM and PIC).

Noninterest expenseswere€ 3.3 billion in 2005, an increase of€ 204 million, or 7%, from 2004. Most of the increase was due to restructuring charges, which increased from€ 88 million in 2004 to€ 220 million in 2005. The remaining increase in noninterest expenses was primarily driven by higher performance-related compensation. Partly offsetting these increases were lower severance payments and the effect of an intangible asset impairment loss of€ 19 million in 2004.

The cost/income ratiowas 85% in 2005, an improvement of 3 percentage points compared to 88% in 2004. Excluding restructuring charges, gains from the sale of businesses and the 2004 intangible asset impairment loss, the cost/income ratio decreased by 6 percentage points from 86% in 2004 to 80% in 2005. This improvement was mainly driven by the aforementioned revenue growth with noninterest expenses increasing at a lower rate.

Invested assetsincreased by€ 25 billion to€ 704 billion in 2005. Our Private Wealth Management Business Division gathered net new assets of€ 11 billion across all major regions. Invested Assets in our Asset Management Business Division were essentially unchanged at€ 536 billion at the end of 2005. Invested assets attributable to the sold UK- and Philadelphia-based Asset Management businesses amounted to€ 77 billion at date of sale in 2005. Excluding the invested assets of the sold businesses, invested assets in Asset Management grew from€ 458 billion in 2004 to€ 535 billion in 2005. The increase of€ 77 billion or 17% was due equally to market appreciation and foreign exchange rate developments, as well as net new assets of€ 14 billion. In Germany, our mutual fund company DWS achieved record net inflows of€ 9 billion in Germany and record funds under management of€ 110 billion at year-end 2005. DWS continues to be the market leader in Germany with a 24% market share (as measured by the German Investment Association, BVI) and it remains one of the leading retail asset managers in Europe by size and investment performance. In 2005, DWS was awarded the Standard & Poor’s Fund Award for the best-performing mutual fund company in Germany for the eleventh consecutive year.

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Private & Business Clients Corporate Division
The following table sets forth the results of our Private & Business Clients Corporate Division for the years ended December 31, 2005, 2004 and 2003, in accordance with our management reporting systems.

in€ m. (except where indicated)	2005			2004			2003
Net revenues:
Portfolio/fund management		216			187			139
Brokerage		1,078			991			937
Loans/deposits		2,251			2,226			2,202
Payments, account & remaining financial services		842			898			811
Other		326			233			286
Total net revenues		4,713			4,534			4,374
Provision for credit losses:
Provision for loan losses		342			270			322
Provision for off-balance sheet positions		(2	)		(1	)		(1	)
Total provision for credit losses		340			269			322
Noninterest expenses1:
Operating cost base		3,358			3,283			3,593
Policyholder benefits and claims		–			–			–
Minority interest		–			–			2
Restructuring activities		127			10			(1	)
Goodwill impairment / impairment of intangibles		–			–			–
Total noninterest expenses1		3,485			3,293			3,594
Therein: Severance payments		17			50			317
Income before income taxes		888			972			458
Add (deduct):
Net (gains) losses from businesses sold/held for sale		(9	)		24			4
Restructuring activities		127			10			(1	)
Goodwill impairment/impairment of intangibles		–			–			–
Underlying pre-tax profit		1,006			1,006			461
Cost/income ratio in %		74%			73%			82%
Underlying cost/income ratio in %		71%			72%			82%
Assets		86,554			78,930			78,477
Risk-weighted positions (BIS risk positions)		60,263			54,253			51,244
Average active equity2		1,707			1,681			1,531
Return on average active equity in %		52%			58%			30%
Underlying return on average active equity in %		59%			60%			30%
Invested assets (in€ bn.)3		163			150			150
Loan volume (in€ bn.)		74			69			66
Deposit volume (in€ bn.)		66			63			64

1	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
2	See Note [27] to the consolidated financial statements for a description of how average active equity is allocated to the divisions.
3	We define invested assets as (a) assets we hold on behalf of customers for investment purposes and/or (b) client assets that are managed by us. We manage invested assets on a discretionary or advisory basis, or these assets are deposited with us.

69

Comparison between 2005 and 2004
Income before income taxesof€ 888 million in 2005 was€ 84 million lower than in 2004, largely due to an increase in restructuring charges of€ 117 million to€ 127 million in 2005. Both years included results from the sale of businesses. A loss of€ 24 million in 2004 was related to the disposal of DB Payments. In 2005, the sale of the private banking business in the Netherlands resulted in a gain of€ 9 million. Excluding restructuring activities and results from the sale of businesses, income before income taxes of€ 1 billion matched the record level of 2004, as revenue growth offset higher noninterest expenses and an increased provision for credit losses.

Net revenuesof€ 4.7 billion increased by€ 179 million or 4% compared to 2004 despite modest GDP growth in Germany and Italy, PBC’s core markets, as well as exceptional market conditions for insurance brokerage in Germany in 2004 following changes in tax legislation.

Portfolio/fund management revenues and brokerage revenues were the key drivers of the growth in 2005. These revenues increased by€ 29 million and€ 87 million, respectively. The improvements reflected successful placements of investment products, such as the Kompass Life Funds and other innovative investment products, as well as higher transaction-based flow revenues.

Loans/deposits revenues increased by€ 24 million, driven by higher loan volumes reflecting PBC’s strategy of growing consumer lending. Revenues attributable to deposits decreased due to margin pressure in a very competitive environment, especially in Germany.

Payments, account and remaining financial services revenues decreased by€ 56 million, due to the aforementioned increase from tax legislation on insurance brokerage in 2004, in part offset by higher revenues from payment services in 2005.

Revenues from other products of€ 326 million in 2005 increased by€ 93 million compared to 2004, primarily due to improved results from asset and liability management activities as well as the effect from the sale of businesses described above.

Provision for credit lossesincreased by€ 71 million, or 26%, to€ 340 million in 2005 reflecting the growth in consumer lending and lower values realized on real estate collateral supporting distressed loans, especially in Germany.

Noninterest expensesof€ 3.5 billion were€ 191 million higher than in 2004, primarily due to the€ 117 million increase in restructuring charges. Excluding restructuring charges, the rise in costs was due to investments in growing the business, including the launch of branch banking in India, the extension of the branch network in Poland, as well as the expansion of the sales forces in Germany, Italy and Spain.

The cost/income ratioincreased slightly by 1 percentage point to 74% in 2005, driven by the aforementioned higher restructuring charges. Excluding restructuring charges and the impact of business disposal results, the cost/income ratio improved from 72% in 2004 to 71% in 2005.

Invested assetsof€ 163 billion at the end of 2005 grew by€ 13 billion or 9%. The increase was attributable to both market appreciation and net inflows.

70

Corporate Investments Group Division
The following table sets forth the results of our Corporate Investments Group Division for the years ended December 31, 2005, 2004 and 2003, in accordance with our management reporting systems.

in€ m. (except percentages)	2005			2004			2003
Net revenues		1,229			621			(920	)
Therein: Net interest and trading revenues		37			118			(10	)
Provision for credit losses:
Provision for loan losses		–			19			36
Provision for off-balance sheet positions		–			–			(2	)
Total provision for credit losses		(1	)		19			35
Noninterest expenses1:
Operating cost base		181			414			681
Minority interest		(2	)		(1	)		(31	)
Restructuring activities		2			3			–
Goodwill impairment/impairment of intangibles		–			–			114
Total noninterest expenses1		181			416			764
Therein: Severance payments		–			1			20
Income (loss) before income taxes		1,049			186			(1,719	)
Add (deduct):
Net (gains) losses from businesses sold/held for sale		–			(38	)		141
Significant equity pick-ups/net (gains) losses from investments		(156	)		(148	)		938
Net (gains) losses on securities available for sale/industrial holdings including hedging		(801	)		(176	)		184
Net (gains) losses on sale of premises		(57	)		(20	)		107
Restructuring activities		2			3			–
Goodwill impairment/impairment of intangibles		–			–			114
Underlying pre-tax profit (loss)		37			(194	)		(236	)
Cost/income ratio in %		15%			67%			N/M
Underlying cost/income ratio in %		84%			174%			152%
Assets		15,025			16,442			18,987
Risk-weighted positions (BIS risk positions)		7,448			10,242			13,019
Average active equity2		3,047			3,933			4,900
Return on average active equity in %		34%			5%			(35)%
Underlying return on average active equity in %		1%			(5)%			(5)%

N/M – Not meaningful
1	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
2	See Note [27] to the consolidated financial statements for a description of how average active equity is allocated to the divisions.

Comparison between 2005 and 2004
Our Corporate Investments Group Division reported an income before income taxes of€ 1.0 billion in 2005 compared to an income before income taxes of€ 186 million in 2004.

Net revenueswere€ 1.2 billion in 2005, an increase of€ 609 million compared to 2004. Net revenues in 2005 included net gains of€ 801 million on sales of securities available for sale and from our industrial holdings portfolio. The largest gains, totaling€ 666 million, resulted from sales which further reduced our investment in DaimlerChrysler AG from 10.4% to 4.4%. The sale of our stake in Südzucker AG, the partial sale of HCL Technologies Ltd., and the sale of some smaller investments also contributed to the overall net gains on securities available for sale and our industrial holdings portfolio in 2005. Net revenues in 2004 included net gains of€ 176 million on sales of securities available for sale and from our industrial holdings portfolio. The largest transaction was the reduction of our investment in DaimlerChrysler AG from 11.8% to 10.4%, which resulted in a net gain of€ 118 million. The reduction of our investment in DEUTZ AG from 10.5% to 4.5% and the sale of our investments in Fresenius AG and Motor-Columbus AG also contributed to the overall net gains on securities available for sale and our industrial holdings portfolio in 2004.

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Net revenues in 2005 also included net gains of€ 57 million from the disposal of premises and net gains of€ 156 million from significant equity method and other investments, including a€ 44 million gain from the reduction of our stake in EUROHYPO AG.

In 2004, net revenues included net gains of€ 38 million from sold businesses related to our remaining North American commercial and consumer finance business. Net revenues in 2004 also reflected net gains of€ 20 million from the disposal of premises and net gains of€ 148 million from significant equity method and other investments, including a€ 52 million gain from the sale of our 49% stake in DSI Financial Solutions Pte Ltd.

Excluding these items, the remaining variance between net revenues in 2005 and 2004 was mainly attributable to lower dividend income from our reduced industrial holdings portfolio and revenues subsequent to the sale of businesses.

Total noninterest expenses decreased in 2005 to€ 181 million from€ 416 million in 2004. The savings primarily resulted from a reduction in vacant office space costs, which amounted to€ 173 million in 2004 compared to€ 14 million in 2005. Noninterest expenses in 2005 also decreased as a result of business sales in prior periods.

At year-end 2005, the alternative assets portfolio of the Corporate Investments Group Division had a carrying value of€ 1.4 billion, of which 36% was private equity direct investments, 26% was real estate investments and 38% was private equity indirect and other investments. This compares to a value at year-end 2004 of€ 1.6 billion. We continue to monitor portfolio values on a quarterly basis to determine if valuation adjustments, including potential impairments, are necessary.

Consolidation & Adjustments
For a discussion of consolidation and other adjustments to our business segment results see Note [27] to the consolidated financial statements.

Comparison between 2004 and 2003

Overall operating results
Income before income tax expense and the cumulative effect of accounting changes increased from€ 2.8 billion in 2003 to€ 4.0 billion in 2004. The results for 2004 include restructuring expenses of€ 400 million related to the Business Realignment Program that was launched in the fourth quarter of 2004. Net income for 2004 increased by 81% to€ 2.5 billion from€ 1.4 billion in 2003, and basic earnings per share increased 106% to€ 5.02.

Total net revenues excluding the provision for loan losses increased by€ 650 million, or 3%, to€ 21.9 billion. The major positive year-over-year revenue variances were in returns from equity method investments, trading revenues (excluding equity-related), net gains from sales of investments and premises, and underwriting and advisory fee revenues. Significant negative factors included reduced net interest revenues and net gains on businesses sold, lower revenues from equity-related trading, and the negative effect of exchange rate movements on non-euro-denominated revenues.

Total noninterest expenses were€ 17.5 billion in 2004 and€ 17.4 billion in 2003. Each year included restructuring and severance payments totaling approximately€ 680 million. Headcount reductions and other cost-saving measures, as well as a favorable impact on expenses of the aforementioned exchange rate movements, were offset by increased performance-related bonuses due to the improved results in 2004.

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Total net revenues
The main component of the aforementioned net€ 650 million increase in total net revenues was an improvement of€ 810 million in net gain (loss) from equity method investments. Revenues in this category were a net gain of€ 388 million in 2004 compared to a net loss of€ 422 million in 2003. The net gain in 2004 was almost equally attributable to results from CIB structured transactions and CI’s private equity and other investments. The loss in 2003 was due to the write-off of our remaining investment in Gerling. Trading revenues from Sales & Trading (debt and other products) increased, mainly on our high-value, structured products such as interest rate derivatives, credit derivatives, and distressed debt. Other trading revenues advanced mainly because 2003 included losses from hedges of our industrial holdings portfolio and mark-to-market results related to AWM’s guaranteed value mutual funds business improved in 2004. Net interest revenues before the provision for loan losses declined by€ 665 million. The average volume of loans outstanding decreased by€ 21 billion, or 13%, to€ 144 billion due primarily to soft demand in the corporate loan book, including the German MidCap business. An additional negative factor in the year-on-year revenue comparison was the fact that revenues in 2003 included a gain of€ 583 million from the sale of substantial parts of our Global Securities Services business. A decrease in results from Sales & Trading (equity) was driven by lower returns from proprietary trading activities.

Provision for Loan Losses
Provisions for loan losses were€ 372 million in 2004, a decline of 67% from€ 1.1 billion in 2003, due to improvements in the overall credit environment, increased rigor in our risk management activities and releases related to previously impaired loans.

Total noninterest expenses
As noted above, total noninterest expenses increased by less than 1%, though there were a number of significant offsetting items. The Business Realignment Program announced in late 2004 generated€ 400 million in restructuring charges. Severance payments of€ 282 million in 2004 were€ 420 million below 2003 severance amounts, with most of the decline in PBC. Performance-related bonuses were up due to increased results but salaries and IT costs declined due to headcount reductions, entity deconsolidation and outsourcing effects.

Income tax expense
Income tax expense was€ 1.6 billion in 2004, nearly unchanged from 2003. Each year includes the effect of German tax law changes enacted in prior years, which arose as equity securities were sold, and amounted to€ 120 million in 2004 and€ 215 million in 2003. Excluding the effect of the tax law changes, the effective tax rates were 36% in 2004 and 43% in 2003 with the higher rate in 2003 due to greater non-deductible write-downs of equity method investments.

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Results of Operation by Segment (2004 vs. 2003)
Corporate and Investment Bank Group Division
Income before income taxes was€ 2.8 billion in 2004 and€ 3.5 billion in 2003, a decline of€ 782 million, or 22%. The Corporate Banking & Securities Corporate Division decreased by€ 251 million to€ 2.5 billion and the Global Transaction Banking Corporate Division declined by€ 531 million to€ 280 million. The major variances were:

– in CB&S, a decline of€ 630 million in Sales & Trading (equity) revenues, mainly from a sharp drop in revenues from proprietary trading activities,

– in CB&S, an increase of€ 721 million in noninterest expenses, with€ 295 million related to restructuring and much of the remaining increase due to performance-related compensation,

– in CB&S, a decline of€ 746 million in the provision for credit losses due to the improved credit environment witnessed throughout the year and enhanced credit discipline, and releases related to previously impaired loans,

– in CB&S, an increase of€ 218 million from Sales & Trading (debt and other products) to€ 6.3 billion, mainly on returns from structured products, and

– in GTB, a decline of€ 552 million in net gains from businesses sold/held for sale, mainly due to the sale of substantial parts of our Global Securities Services business.

Private Clients and Asset Management Group Division
Income before income taxes was€ 1.4 billion in 2004 and€ 1.2 billion in 2003, an increase of€ 226 million, or 19%. An increase of€ 514 million in the Private & Business Clients Corporate Division more than offset a decline of€ 288 million in the Asset and Wealth Management Corporate Division. The major variances were:

– in P&BC, a€ 160 million increase in net revenues mainly on greater sales of investment and insurance products,

– in P&BC, a decrease of€ 301 million in noninterest expenses, due mainly to a comparative decline of€ 267 million in severance costs, and

– in AWM, a decline of€ 225 million in revenues from other products, due mainly to the gain on sale of real estate private equity assets in 2003 and lower comparative results on the sale of businesses.

Corporate Investments Group Division
Income before income taxes was€ 186 million in 2004 compared to a loss before income taxes of€ 1.7 billion in 2003, an improvement of€ 1.9 billion. The major variances were:

– an increase of€ 1.5 billion in net revenues, mainly due to an improvement of€ 1.1 billion in revenues related to significant equity method and other investments, with 2003 including losses of€ 938 million, of which€ 490 million was the write-off of Gerling-Konzern Versicherungs-Beteiligungs-AG, and

– a decline of€ 348 million in noninterest expenses, primarily due to the positive effect of selling businesses, including Tele Columbus and parts of our remaining North American commercial and consumer finance business.

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Liquidity and Capital Resources

Liquidity and capital are managed by Group Treasury. At the group level and on a consolidated basis this is the responsibility of Corporate Treasury, whereby regional treasuries manage liquidity and capital locally in each region. The allocation of financial resources (capital, liquidity, balance sheet limits) in general and capital in particular favors business portfolios with the highest positive impact on our profitability and shareholder value. As a result, Corporate Treasury periodically reallocates available capital among business portfolios.

Corporate Treasury develops and implements our capital strategy including the issuance and repurchases of shares. We are committed to maintain our sound capitalization. Overall capital demand and supply are constantly monitored and adjusted, if necessary, to meet the need for capital from various perspectives. These include book equity based on U.S. GAAP accounting standards, regulatory capital based on BIS and economic risk driving the capital usage of the business portfolios, commonly called economic capital. Our target for the BIS Tier I capital ratio is to stay within an 8-9% target range.

Milestones in capital management in 2005 were the completion of the third share buy-back program and the start of a fourth program. Under the third program, which was completed in April 2005, 45.5 million shares were repurchased. Based on the authority to buy back up to 10% of total shares issued, which was granted at the 2005 Annual General Meeting and expires at the end of October 2006, the fourth buy-back program was launched in July 2005. The program serves equity-based compensation programs and allows us to return excess capital to shareholders. Buy-backs were mainly funded from surplus capital and current earnings. As of December 31, 2005, 16.1 million shares (approximately 2.9% of our share capital) were repurchased under the fourth program. In total, 35.5 million shares were repurchased in 2005 under our share buy-back programs.

In 2005, we issued€ 0.9 billion hybrid Tier I capital. Total outstanding hybrid Tier I capital as of December 31, 2005 amounted to€ 3.6 billion.

While the funding plan and liquidity risk at the group level are managed centrally, the issuance of liability products in accordance with the funding plan and all other measures related to the mitigation of liquidity risk are executed by our regional treasuries. Group Treasury controls the demand for liquidity through limits on unsecured funding and caps on daily maximum cash outflows. Furthermore, investor concentration and liability roll-off reports are prepared to analyze the sources of funds and to identify trends within our refinancing base. This information allows for adjustments with respect to our funding strategy. In total, Treasury issued approximately€ 15 billion of capital market instruments in various currencies and regions in 2005.

Treasury applies stress testing to all local liquidity profiles to quantify the potential effects of developments unfavorable to our funding capability. The stress testing covers expected cash flows and the salability of trading assets under various adverse scenarios including systemic shocks as well as unfavorable rating changes.

The allocation and re-allocation of resources such as capital, the determination of the appropriate limits for unsecured funding as well as other resource issues are framed by the Asset and Liability management process. The Group Asset and Liability Committee (Group ALCO), on which all corporate divisions and Group Treasury are represented, has the responsibility to balance group-wide business needs with resource availability. In particular, the Group ALCO makes proposals to our Management Board with respect to decisions on financial resources, including the allocation of capital and liquidity to the divisions.

Most of our subsidiaries are subject to legal and regulatory capital requirements as well as minimum liquidity thresholds. Local ALCOs attend to those needs under the stewardship of regional treasuries. Furthermore they safeguard compliance with requirements such as restrictions on dividends allowable for remittance to Deutsche Bank AG or on the ability of our subsidiaries to make loans or advances to the parent bank. See “Item 4: Information on the Company-Regulation and Supervision.” In developing, implementing and testing our liquidity and capital strategy, we take such legal and regulatory requirements into account and seek to ensure that the attendant requirements are not likely to have a material impact on our ability to meet our expected cash obligations. In our opinion, our working capital is sufficient for our present requirements.

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For a detailed discussion of our liquidity risk management, see “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Risk Management – Liquidity Risk.”

Pension Plans

We have a global policy for determining the significant assumptions and estimates that are applied to our pension and other employee benefit plans. These assumptions and estimates are measurable against market factors, or equivalents where market factors are not available. As stated in Note [24] to our consolidated financial statements, “Pension and Other Employee Benefit Plans”, below are the significant assumptions and estimates related to our pension plans.

The discount rate is determined on the basis of yields to maturity of AA-rated corporate bond indices of the same currency, similar duration of the liability, and representing sufficient depth of market. Alternatively, benchmark government bonds are used for countries where sufficient depth of AA-corporate bond markets is not available. In cases of significant differences between the published bond duration and the calculated duration of the obligation, an adjustment is made equal to this difference multiplied by the slope of the yield curve. No such adjustment was made in the Eurozone, the UK and the U.S. The resulting discount rate is then rounded to the nearest multiple of 10 basis points. At December 31, 2005, the average discount rate used to measure our pension obligations (Projected Benefit Obligation (PBO) and Accumulated Benefit Obligation (ABO)) was 4.3 %. In determining our pension expense for the year ended December 31, 2005, an average discount rate of 5.0% (i.e., the December 31, 2004 rate) was applied. The respective average discount rates for the Defined Benefit Postretirement Plans were 5.4% as of December 31, 2005 and 5.7% for determining the expected expense for 2005.

The expected return on our defined benefit pension plans’ assets is calculated by applying a risk premium, which reflected the inherent risks associated with each relevant asset category, over a risk-free return. Using this so-called “building block” approach globally ensures that we have a consistent framework in place. In addition, it allows sufficient flexibility for changes that must be made to reflect specific local conditions. The average expected return on plan assets for the net periodic benefit expense for 2005 (NPBC 2005) was 5.0%. The determination of the expected return on plan assets for 2006 was based on the actual asset allocation as of the measurement date. The ten-year government fixed interest bond yield for the country in which each plan is located was used as the basis for the risk-free return, taking into account the duration of the bonds held compared to the ten-year benchmark. The additional return for debt securities was calculated by reference to the mix of debt securities in each plan. For cash, we estimated the expected return to be equivalent to the market yield on three-month treasury instruments for the applicable country. The average expected return for the 2006 NPBC is 4.4%.

The long term price inflation assumption is set by reference to region-specific consensus indices (published in October) adjusted where necessary to extend the duration. Salary increases are expressed as a percentage over this base inflation assumption. Other assumptions, such as mortality tables, were set by us in consultation with our local actuaries.

We made contributions of€ 521 million and€ 310 million to our defined benefit pension plans for the fiscal years 2005 and 2004, respectively. These contributions were funded with cash from operations and were recorded as a component of prepaid pension benefit cost (€ 1,365 million at December 31, 2005 and€ 1,094 million at December 31, 2004) in our consolidated balance sheet.

The contributions were determined by considering several factors (e.g., ratio of fair value of plan assets to respective Projected Benefit Obligations, funding requirements in accordance with the Employee Retirement Income Security Act of 1974 (ERISA)). No minimum ERISA contributions were required for our U.S. pension plan.

Our funding policy is to ensure a proper coverage of the PBO by plan assets for our funded plans. Any obligation for our unfunded plans was accrued for accordingly and is funded when paid to the beneficiaries.

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Our principle is to finance pension plans using external financing vehicles (e.g., trusts, insured arrangements) unless circumstances justify an exception, for example, where it would not comply with legislation or be tax-inefficient. The goal is to maintain a financing level within a range of 90% to 110% of the obligation and to spread the deficit or surplus over 5 years (i.e., to return to the target level of 100%).

The net periodic benefit expense for the year ended 2005 was determined by external local actuaries and based on certain estimates and market-related assumptions as of January 1, 2005 (e.g., discount rates, expected return on plan assets, etc.). The current service element was subsequently revised for the effects of curtailments in the UK, Japan and Germany. This process was reviewed by our independent global actuary.

The downward market trends in discount rates and the expected return on assets will result in an increase in the P/L charge in 2006. We anticipate an increase in expenses of approximately 7% for our Defined Benefit Plans (2005 NPBC:€ 301 million) and approximately 25% for our Defined Postretirement Schemes (2005 NPPBC:€ 16 million) in the U.S. and the UK.

The unrecognized actuarial gains on the plan assets and the losses on the PBO for our funded pension schemes amounted to a total of€ 1,058 million as of December 31, 2005. Following the corridor approach we generally amortize, as part of the net periodic benefit cost, the excess of the corridor (10% of the higher of Projected Benefit Obligation (PBO) or the Fair Value of Plan Assets) over the average future service periods (approximately 12 years). The loss amortized for our Defined Benefit Pension Plans was€ 40 million for fiscal year 2005 and€ 61 million for fiscal year 2004. The losses amortized for the Defined Postretirement Pension Plans were€ 1 million for fiscal year 2005. The amortization period for these losses is the average remaining life expectancy of approximately 9 years.

In 2006, we will record expenses of€ 69 million for the Defined Benefit Pension Plans and€ 3 million for the Defined Benefit Postretirement Plans.

Our goal is to match the maturity profiles of the assets and liabilities and to reduce the future volatility of pension expense and funding status of the plans, reducing the exposure to the equity market. This has been achieved over a period of time with a reduction of the portfolio’s equity exposure to 17% in 2004. Our pension plan investment strategy is unchanged since 2004. Due to this strategy, the expected return on assets was based on the following allocation.

	Target allocation			Percentage of plan assets
	Dec 31, 2006			Dec 31, 2005			Dec 31, 2004
Asset category:
Equity securities		15	%		17	%		17	%
Debt securities		75	%		71	%		73	%
Real Estate and other		10	%		12	%		10	%
Total		100	%		100	%		100	%

The asset allocation of each of our pension plans is reviewed regularly.

Given this strategy, it is expected that the earnings volatility from the assets will be reduced and that earnings variations on the assets will be offset by compensating movements in the obligation. Deviations between the expected return and the actual return are usual and sometimes material (for example, our expected return on plan assets for fiscal year 2005 was€ 391 million, whereas the actual return was€ 1.3 billion). For fiscal year 2005, this deviation was nearly compensated for by the decline in the discount rate. There is no material discretionary funding expected at this point in time because the funded status of our Defined Benefit Schemes is positive.

Our primary investment objective is to have a low volatility of the funded status and downside protection. Within this, the goal is to achieve the highest return consistent with a defined risk tolerance, in order to ensure that pension costs are not a competitive disadvantage.

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Off-balance Sheet Arrangements with Unconsolidated Entities

We carry out certain business activities via arrangements with unconsolidated entities. We may provide financial support or otherwise be exposed to risks of loss as a result of these arrangements, typically through guarantees that we provide or subordinated retained interests that we hold. The purposes, risks, and effects of these arrangements are described below. Also, see Note [30] to the consolidated financial statements for disclosure of total outstanding guarantees and lending-related commitments entered into in the normal course of business which give rise to off-balance sheet credit risk.

We provide financial support related to off-balance sheet activities chiefly in connection with asset securitizations, commercial paper programs, commercial real estate leasing vehicles and guaranteed value mutual funds that we manage and that we do not consolidate. With the adoption of FIN 46 and FIN 46(R), some of the vehicles related to these activities have been consolidated and some remain unconsolidated. See Note [2] to the consolidated financial statements for further information regarding the adoption of FIN 46 and FIN 46(R). We are addressing only the unconsolidated portion of these activities in this section. See Note [9] to the consolidated financial statements for financial information regarding both the consolidated and unconsolidated portions of these activities.

We may provide financial support in connection with asset securitizations by retaining a subordinated interest in the assets being securitized. In an asset securitization, we sell financial assets to a securitization vehicle that funds its purchase by issuing debt (asset-backed securities) to investors. We have no control over the securitization vehicle after the sale, and our creditors and we have no claim on the assets that we have sold. Similarly, the investors and the securitization vehicle have no recourse to our other assets if the loans go into default. Asset-backed securities are attractive to investors in what is a deep and liquid market that lowers borrowing costs and increases credit availability to businesses and to consumers.

The securitization vehicles we use in these transactions pose limited liquidity risks since the payments to investors are directly tied to the payments received from the vehicles’ assets and are unaffected by changes in our own credit rating or financial situation. A sudden drop in investor demand for asset-backed securities could cause us to restrict our lending thereafter for the types of loans we typically securitize, but we are not dependent on securitizations as a source of funding and such a market shift would not pose any significant additional liquidity risk not already considered in our risk analyses. To the extent we hold senior or subordinated debt issued by a securitization vehicle we have credit risk that is considered as part of our credit risk assessments or market valuations. Note [9] to the consolidated financial statements provides additional information regarding the extent of our retained interests in securitizations and the volume of our asset securitization activities.

Commercial paper programs represent a way for third parties to securitize their financial assets. In commercial paper programs, we do not securitize any of our own financial assets, but act as administrative agent. As administrative agent, we facilitate the sale of loans, other receivables, or securities from various third parties to an unconsolidated special purpose entity. We may also facilitate the transfer of the loans and securities that represent collateral provided by the third parties in return for loans granted by the unconsolidated entity. The entity then issues collateralized commercial paper to the market. In these situations, the commercial paper issuer is restricted from purchasing assets from or making loans to us. Rating agencies typically rate such commercial paper in the highest short-term category because of the collateral and credit support normally provided by a financial institution.

Unlike securitization vehicles, commercial paper programs do pose liquidity risk since the commercial paper issued is short-term whereas the issuer’s assets are longer term. We take on this risk whenever we provide a liquidity support facility to the issuer. In 2003, a methodology to incorporate these contingent liabilities in our liquidity risk framework (including stress testing) was developed and approved by the Group Asset and Liability Committee.

We may also guarantee the assets of the issuer as part of the facility, giving us secondary credit risk with the first loss taken by the third parties who sold their assets to the entity.

We sponsor commercial real estate leasing vehicles and closed-end funds where third party investors essentially provide senior financing for the purchase of commercial real estate, which is leased to

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other third parties. We typically provide subordinated financing, which exposes us to real estate market risk, and we receive fees for our administrative services.

In the case of guaranteed value mutual funds managed by ourselves, the value of the mutual funds units is being guaranteed. These mutual funds are investment vehicles that were established to provide returns to investors in the vehicles.

The extent of the financial support we provide for certain of the arrangements described above is disclosed in Note [9] to the consolidated financial statements in the disclosure of the Group’s maximum exposure to loss as a result of its involvement with unconsolidated variable interest entities in which the Group holds a significant variable interest. The risks from these arrangements are included in our overall assessments of credit, liquidity and market risks.

Tabular Disclosure of Contractual Obligations

The table below shows the cash payment requirements from specified contractual obligations outstanding as of December 31, 2005.

Contractual obligations	Payment due by period
	Total		Less than		1-3 years		3-5 years		More than
in€ m.			1 year						5 years
Long-term debt obligations		113,554		14,877		22,782		27,681		48,214
Capital (finance) lease obligations		964		109		318		93		444
Operating lease obligations		3,125		484		839		618		1,184
Purchase obligations		2,944		548		1,106		769		521
Long-term deposits		28,256		–		8,028		6,156		14,072
Other long-term liabilities		5,869		927		2,025		758		2,159
Total		154,712		16,945		35,098		36,075		66,594

Operating lease obligations exclude the benefit on noncancelable sublease rentals of€ 388 million. Purchase obligations reflect minimum payments due under long-term real-estate-related obligations, and long-term outsourcing agreements. Long-term deposits exclude contracts with a remaining maturity of less than one year. Other long-term liabilities consist primarily of obligations to purchase common shares, and insurance policy reserves which are classified in the “More than 5 years” column since the obligations are long term in nature and actual payment dates cannot be specifically determined. See the following notes to the consolidated financial statements for further information: Note [11] regarding lease obligations, Note [15] regarding deposits, Note [17] regarding long-term debt and Note [18] regarding obligation to purchase common shares.

Research and Development, Patents and Licenses

Not applicable.

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Recently Adopted Accounting Pronouncements

FSP FAS 109-2
In December 2004, the FASB issued Staff Position No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP FAS 109-2”). The Act, which was signed into law in the U.S. on October 22, 2004, provides for, among other things, a reduced rate of U.S. tax on dividends received from foreign subsidiaries of U.S. taxpayers. FSP FAS 109-2 provides additional time beyond the financial reporting period of the enactment to evaluate the effects of this provision of the Act for purposes of applying SFAS No. 109, “Accounting for Income Taxes.” We do not intend to repatriate any earnings from foreign subsidiaries in accordance with the provisions of the Act and thus FSP FAS 109-2 did not have an impact on our consolidated financial statements.

SOP 03-3
In December 2003, the American Institute of Certified Public Accountants issued Statement of Position 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer” (“SOP 03-3”). SOP 03-3 addresses the accounting for differences between contractual and expected cash flows for loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. The SOP prohibits the creation of an allowance for loan losses in the initial accounting for all loans within its scope. The SOP also limits the income that can be recognized and specifies the accounting for future changes in expected cash flows on the acquired loans or securities. SOP 03-3 is effective for loans or debt securities acquired in fiscal years beginning after December 15, 2004. The adoption did not have a material impact on our consolidated financial statements.

New Accounting Pronouncements

SFAS 155
In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments” (“SFAS 155”). SFAS 155 allows any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” to be carried at fair value in its entirety, with changes in fair value recognized in earnings. In addition, SFAS 155 requires that beneficial interests in securitized financial assets be analyzed to determine whether they are freestanding derivatives or contain an embedded derivative. SFAS 155 also eliminates a prior restriction on the types of passive derivatives that a qualifying special purpose entity is permitted to hold. SFAS 155 is applicable to new or modified financial instruments in fiscal years beginning after September 15, 2006, though the provisions related to fair value accounting for hybrid financial instruments can also be applied to existing instruments. Early adoption, as of the beginning of an entity’s fiscal year, is also permitted, provided interim financial statements have not yet been issued. We are currently evaluating the potential impact, if any, that the adoption of SFAS 155 will have on our consolidated financial statements.

EITF 05-5
In June 2005, the FASB ratified the consensus reached in EITF Issue No. 05-5, “Accounting for Early Retirement or Postemployment Programs with Specific Features (Such As Terms Specified in Altersteilzeit Early Retirement Arrangements)” (“EITF 05-5”). EITF 05-5 addresses the timing of recognition of salaries, bonuses and additional pension contributions associated with certain early retirement arrangements typical in Germany (as well as similar programs). The EITF also specifies the accounting for government subsidies related to these arrangements. EITF 05-5 is effective in fiscal years beginning after December 15, 2005. The adoption of EITF 05-5 is not expected to have a material impact on our consolidated financial statements.

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SFAS 154
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20 and FASB Statement No. 3” (“SFAS 154”). SFAS 154 replaces APB Opinion No. 20, “Accounting Changes” (“APB 20”) and FASB Statement No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. APB 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS 154 requires retrospective application to prior periods’ financial statements for voluntary changes in accounting principle and for changes required by new accounting pronouncements that do not include specific transition provisions, unless such application is impracticable. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The impact of SFAS 154 will depend on the accounting change, if any, in a future period.

EITF 03-1, FSP EITF 03-1-1 and FSP FAS 115-1 and FAS 124-1
In March 2004, the FASB ratified the consensus reached in EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF 03-1”). The decisions established a common approach to evaluating other-than-temporary impairment for equity securities accounted for at cost, and debt and equity securities available for sale. In September 2004, the FASB issued a final FASB Staff Position, No. EITF 03-1-1 (“FSP EITF 03-1-1”), which delayed the effective date for the measurement and recognition guidance included in EITF 03-1. The disclosure requirements under EITF 03-1 were effective beginning December 31, 2004.

In June 2005, the FASB decided not to provide additional guidance on the meaning of other-than-temporary impairment, but directed its staff to issue FSP FAS 115-1 and FAS 124-1. The final FSP FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” was issued in November 2005 and nullified certain provisions of EITF 03-1. FSP FAS 115-1 and FAS 124-1 require reference to existing accounting guidance when assessing whether impairment is other-than-temporary.

FSP EITF 03-1-1, and hence the delay of the effective date for the measurement and recognition guidance included in EITF 03-1, was superseded with the final issuance of FSP FAS 115-1 and FAS 124-1, which is effective for fiscal years beginning after December 15, 2005. The adoption of FSP FAS 115-1 and FAS 124-1 is not expected to have a material impact on our consolidated financial statements.

SFAS 123 (Revised 2004)
In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R) replaces SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. The new standard requires companies to recognize compensation cost relating to share-based payment transactions in their financial statements. That cost is to be measured based on the fair value of the equity or liability instruments issued. Starting January 1, 2003, we accounted for our share-based compensation awards under the fair value method prescribed under SFAS 123. The method was applied prospectively for all employee awards granted, modified or settled after January 1, 2003. Currently, we use a Black-Scholes option pricing model to estimate the fair value of stock options granted to employees and expect to continue to use this option valuation model upon the adoption of SFAS 123(R). SFAS 123(R) also includes some changes regarding the timing of expense recognition, the treatment of forfeitures and the re-measurement of liability classified awards at their current fair value. SFAS 123(R) indicates that it is effective for reporting periods beginning after June 15, 2005.

In March 2005, the SEC released Staff Accounting Bulletin No. 107, “Share-Based Payment “(“SAB 107”), which provides interpretive guidance related to the interaction between SFAS 123(R) and certain SEC rules and regulations. It also provides the SEC staff’s views regarding valuation of share-based payment arrangements. In April 2005, the SEC amended the compliance dates for SFAS 123(R), to allow companies to implement the standard at the beginning of their next fiscal year, instead of the next

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reporting period beginning after June 15, 2005. Accordingly, the Group adopted SFAS 123(R) effective January 1, 2006. For transition purposes, the Group elected the modified prospective application method. Under this application method, FAS 123(R) applies to new awards and to awards modified, repurchased, or cancelled after the required effective date.

Upon adoption in 2006, the Group recognized a gain of€ 42 million, net of taxes, as a cumulative effect of a change in accounting principle. This effect relates to an adjustment of accrued compensation costs, which under SFAS 123(R) are required to be based on the estimated number of share-based payment awards to vest, with consideration of expected forfeitures. Under SFAS 123, the Group had accounted for forfeitures on an actual basis, and therefore had reversed compensation expense in the period an award was forfeited. Compensation expense for future awards granted in relation to annual bonuses, but which include a vesting period, will no longer be recognized in the applicable performance year as part of compensation earned for that year.

Prior to the adoption of SFAS 123(R), the Group had recognized compensation cost for all awards granted as a retention incentive over the vesting period. With the adoption of SFAS 123(R), the Group will be accelerating the expense accrual for future grants which, due to early retirement provisions, are determined to include a nominal, but nonsubstantive service period. For existing awards, the accounting remains unchanged.

If compensation expense for such awards had previously been recognized on an accelerated basis, the additional compensation expense recognized for the years ended December 31, 2005, 2004 and 2003 would have been€ 101 million,€ 177 million and€ 130 million, respectively.

On November 10, 2005, the FASB released the final FASB Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards” (“FSP FAS 123(R)-3”), which provides a practical transition election related to the calculation of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of FAS 123(R) (that is, the additional paid-in-capital (APIC) pool). The Group is in the process of evaluating the alternatives made available by the FSP to calculate its APIC pool.

IFRS

Regulations regarding IFRS
In accordance with EU and German regulations, we will adopt International Financial Reporting Standards (IFRS) in our consolidated financial statements filed with the EU and German regulatory authorities for fiscal years starting January 1, 2007 (with 2006 comparative figures).

We will also adopt IFRS as our basis of reporting in SEC filings. Financial statements prepared according to IFRS are accepted in SEC filings provided a reconciliation between U.S. GAAP and IFRS net income and shareholders’ equity is disclosed as supplemental information.

IFRS Project
We commenced preparations for the conversion to IFRS in 2004. A dedicated project team was assembled and separate work streams were established to handle the various aspects of the conversion. The objective of the project is to ensure a structured and well-considered approach to implementation. The project involves all business areas and group functions.

The project began with the identification of the differences between U.S. GAAP and IFRS to determine the key financial, business and system impacts. Accounting decisions were made where IFRS offers accounting choices. In addition, technical guidance was provided to business areas and group functions to ensure accurate and consistent application. This is in the process of being documented in an accounting and reporting manual.

In 2005, we made the key changes to required accounting and reporting procedures, and consolidation systems. Other system changes have been identified and will be implemented in 2006 to further automate the IFRS requirements.

The project is designed to ensure readiness for adoption of IFRS by all relevant parties and includes providing the necessary education.

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The project is advancing according to plan and is being monitored via normal project controls and change management.

The main risks and uncertainties relate to financial and process impacts due to changing accounting standards. However, developments of both IASB and FASB standards are being closely monitored. In addition, we participate actively in the due process of standards development.

Main differences between IFRS and U.S. GAAP
Although IFRS and U.S. GAAP are similar in many ways and the IASB and FASB are committed to convergence, currently several differences remain for financial institutions, with the major differences relating to financial instrument classification and measurement, financial instrument recognition and derecognition, as well as consolidation assessments. However, future rule changes could have an impact on our opening IFRS balance sheet and thus the difference between U.S. GAAP and IFRS earnings or balance sheet amounts cannot be estimated at this time.

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Item 6: Directors, Senior Management and Employees

Directors and Senior Management

In accordance with the German Stock Corporation Act(Aktiengesetz), we have a Management Board(Vorstand)and a Supervisory Board(Aufsichtsrat). The German Stock Corporation Act prohibits simultaneous membership on both the Management Board and the Supervisory Board. The members of the Management Board are the executive officers of our company. The Management Board is responsible for managing our company and representing us in dealings with third parties. The Supervisory Board oversees the Management Board and appoints and removes its members and determines their salaries and other compensation components, including pension benefits.

The Supervisory Board may not make management decisions. However, German law and our Articles of Association(Satzung)require the Management Board to obtain the consent of the Supervisory Board for certain actions. The most important of these actions are:

– Granting general powers of attorney(Generalvollmachten). A general power of attorney authorizes its holder to represent the company in substantially all legal matters without limitation to the affairs of a specific office;

– Acquisition and disposal (including transactions carried out by a subsidiary) of real estate when the value of the object exceeds 1% of our regulatory banking capital(haftendes Eigenkapital);

– Granting loans and acquiring participations if the German Banking Act requires approval by the Supervisory Board. In particular, the German Banking Act requires the approval of the Supervisory Board if we grant a loan (to the extent legally permissible) to a member of the Management Board or the Supervisory Board or one of our employees who holds a procuration(Prokura)or general power of attorney; and

– Acquisition and disposal (including transactions carried out by a subsidiary) of other participations, insofar as the object involves more than 2% of our regulatory banking capital; the Supervisory Board must be informed without delay of any acquisition or disposal of such participations involving more than 1% of our regulatory banking capital.

The Management Board must submit regular reports to the Supervisory Board on our current operations and future business planning. The Supervisory Board may also request special reports from the Management Board at any time.

Supervisory Board and Management Board
In carrying out their duties, members of both the Management Board and Supervisory Board must exercise the standard of care of a prudent and diligent business person, and they are liable to us for damages if they fail to do so. Both boards are required to take into account a broad range of considerations in their decisions, including our interests and those of our shareholders, employees and creditors. The Management Board is required to ensure that shareholders are treated on an equal basis and receive equal information. The Management Board is also required to ensure appropriate risk management within our operations and to establish an internal monitoring system.

As a general rule under German law, a shareholder has no direct recourse against the members of the Management Board or the Supervisory Board in the event that they are believed to have breached a duty to us. Apart from insolvency or other special circumstances, only we have the right to claim damages from members of either board. We may waive this right or settle these claims only if at least three years have passed since the alleged breach and if the shareholders approve the waiver or settlement at the shareholders’ meeting with a simple majority of the votes cast, and provided that opposing shareholders do not hold, in the aggregate, one tenth or more of our share capital and do not have their opposition formally noted in the minutes maintained by a German notary.

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Supervisory Board
Our Articles of Association require our Supervisory Board to have twenty members. In the event that the number of members on our Supervisory Board falls below twenty, the Supervisory Board maintains its authority to pass resolutions so long as at least ten members remain on the board. If the number of members remains below twenty, upon application to a competent court, the court may appoint replacement members to serve on the board until official appointments are made.

The German Co-Determination Act of 1976(Mitbestimmungsgesetz)requires that the shareholders elect half of the members of the supervisory board of large German companies, such as Deutsche Bank, and that employees in Germany elect the other half. None of the current members of either of our boards were selected pursuant to any arrangement or understandings with major shareholders, customers or others.

Each member of the Supervisory Board generally serves for a fixed term of approximately five years. For the election of shareholder representatives, the shareholders’ meeting may establish that the terms of office of up to five members may begin or end on differing dates. Pursuant to German law, the term expires at the latest at the end of the Annual General Meeting that approves and ratifies such member’s actions in the fourth fiscal year after the year in which the Supervisory Board member was elected. Supervisory Board members may also be re-elected. The shareholders may, by a majority of the votes cast in a shareholders’ meeting, remove any member of the Supervisory Board they have elected in a shareholders’ meeting. The employees may remove any member they have elected by a vote of three-quarters of the employee votes cast.

The members of the Supervisory Board elect the chairperson and the deputy chairperson of the Supervisory Board. Traditionally, the chairperson is a representative of the shareholders, and the deputy chairperson is a representative of the employees. At least half of the members of the Supervisory Board must be present at a meeting or must have submitted their vote in writing to constitute a quorum. In general, approval by a simple majority of the members of the Supervisory Board present and voting is required to pass a resolution. In the case of a deadlock, the resolution is put to a second vote. In the case of a second deadlock, the chairperson casts the deciding vote.

The following table shows information on the current members of our Supervisory Board. The members representing our shareholders were elected at the Annual General Meeting on June 10, 2003, and the members representing our employees were elected on May 8, 2003. The information includes their ages as of December 31, 2005, the years in which they were first elected or appointed, the years when their terms expire, their principal occupation and their membership on other companies’ supervisory boards, other nonexecutive boards and other positions.

Member	Principal occupation	Supervisory board memberships
		and other directorships
Dr. Rolf-E. Breuer Age: 68 First elected: 2002 Term expires: 2008	Chairman of the Supervisory Board	Supervisory board memberships: Bertelsmann AG (until May 2005); Deutsche Börse AG (chairman, until October 2005); E.ON AG; Compagnie de Saint-Gobain S.A.(until June 2005); Kreditanstalt für Wiederaufbau (until April 2005); Landwirtschaftliche Rentenbank   Other experience: President of the Association of German Banks (until March 2005); Member of the Administrative Council of the German Financial Supervisory Authority (until March 2005)
Dr. Karl-Gerhard Eick Age: 51 Appointed by the court: 2004 Term expires: 2008	Deputy Chairman of the board of managing directors of Deutsche Telekom AG, Bonn	Supervisory board memberships: DeTe Immobilien Deutsche Telekom Immobilien und Service GmbH; T-Mobile International AG; T-Online International AG; T-Systems Enterprise Services GmbH; T-Systems Business Services GmbH (since December 2005); GMG Generalmietgesellschaft mbH (chairman); Sireo Real Estate Asset Management GmbH (chairman); FC Bayern München AG

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Member	Principal occupation	Supervisory board memberships
		and other directorships
Heidrun Förster* Age: 58 First elected: 1993 Term expires: 2008	Deputy Chairperson of the Supervisory Board; Chairperson of the staff council of Deutsche Bank Privat- und Geschäftskunden AG, Berlin
Ulrich Hartmann Age: 67 First elected: 2003 Term expires: 2008	Chairman of the supervisory board of E.ON AG, Düsseldorf	Supervisory board memberships: Deutsche Lufthansa AG; Hochtief AG; IKB Deutsche Industriebank AG (chairman); Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft   Other nonexecutive directorships: ARCELOR; Henkel KGaA (member of the shareholders’ committee)
Sabine Horn* Age: 44 First elected: 1998 Term expires: 2008	Deutsche Bank AG Assistant Vice President
Rolf Hunck* Age: 60 First elected: 2003 Term expires: 2008	Deutsche Bank AG	Supervisory board memberships: Deutsche Bank Trust AG; Fibula Finanz AG; HCI Capital AG since January 2005   Other nonexecutive directorships: Kühne-Stiftung, Switzerland
Sir Peter Job Age: 64 Appointed by the court: 2001 Term expires: 2008		Supervisory board memberships: Bertelsmann AG (until May 2005) Other nonexecutive directorships: Schroders Plc; Tibco Software Inc.; Instinet Inc. (until December 2005); Shell Transport and Trading Plc (until July 2005); Royal Dutch Shell (since July 2005)
Prof. Dr. Henning Kagermann Age: 58 First elected: 2000 Term expires: 2008	Chairman and CEO of SAP AG, Walldorf	Supervisory board memberships: DaimlerChrysler Services AG; Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft
Ulrich Kaufmann* Age: 59 First elected: 1988 Term expires: 2008	Chairman of the staff council of Deutsche Bank AG, Düsseldorf
Peter Kazmierczak* Age: 47 First elected: 2002 Term expires: 2008	Chairperson of the staff council of Deutsche Bank AG, Essen
Prof. Dr. Paul Kirchhof Age: 62 Appointed by the court: 2004 Term expires: 2008	Professor, Ruprecht-Karls-University, Heidelberg	Supervisory board memberships: Allianz Lebensversicherungs-AG
Henriette Mark* Age: 48 First elected: 2003 Term expires: 2008	Chairperson of the staff council of Deutsche Bank AG, Munich and Southern Bavaria
Margret Mönig-Raane* Age: 57 First elected: 1996 Term expires: 2008	Vice President of the Unified Services Union, Berlin	Supervisory board memberships: KarstadtQuelle-AG (since 2005)   Other nonexecutive directorships: BHW Holding AG (member of the advisory board); Kreditanstalt für Wiederaufbau (KfW) (administrative council)
Prof. Dr. jur. Dr.-Ing. E. h. Heinrich von Pierer Age: 64 First elected: 2005 Term expires: 2008	Chairman of the supervisory board of Siemens AG, Munich	Supervisory board memberships: Hochtief AG; Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft; ThyssenKrupp AG; Volkswagen AG; Bayer AG (until April 2005)
Gabriele Platscher* Age: 48 First elected: 2003 Term expires: 2008	Deutsche Bank Privat- und Geschäftskunden AG	Supervisory board memberships:Deutsche Bank Privat- und Geschäftskunden Aktiengesellschaft; BVV Versicherungsverein des Bankgewerbes a.G.

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Member	Principal occupation	Supervisory board memberships
		and other directorships
Karin Ruck* Age: 40 First elected: 2003 Term expires: 2008	Deutsche Bank AG	Supervisory board memberships: Deutsche Bank Privat- und Geschäftskunden AG
Tilman Todenhöfer Age: 62 Appointed by the court: 2001 Term expires: 2008	Managing Partner of Robert Bosch Industrietreuhand KG, Stuttgart	Supervisory board memberships: Robert Bosch GmbH; Robert Bosch Int. Beteiligungen AG (president of the board of administration); Carl Zeiss AG (chairman); Schott AG (chairman)
Dipl.-Ing. Dr.-Ing. E. h. Jürgen Weber Age: 64 First elected: 2003 Term expires: 2008	Chairman of the supervisory board of Deutsche Lufthansa AG, Cologne	Supervisory board memberships: Allianz Lebensversicherungs-AG; Bayer AG; Deutsche Post AG; Thomas Cook AG (chairman, until October 2005); Voith AG; LP Holding GmbH (chairman); Tetra Laval Group
Dipl.-Ing. Albrecht Woeste Age: 70 First elected: 1993 Term expires: 2008	Chairman of the Shareholders’ Committee of Henkel KGaA Düsseldorf	Supervisory board memberships: Henkel KGaA (chairman); Allianz Lebensversicherungs-AG   Other nonexecutive directorships: IKB Deutsche Industriebank (member of the advisory board, until September 2005); R. Woeste & Co. GmbH & Co KG (chairman of the advisory board)
Leo Wunderlich* Age: 56 First elected: 2003 Term expires: 2008	Chairman of the staff council of Deutsche Bank

* Employee-elected member of the Supervisory Board.

Dr. rer. oec. Karl-Hermann Baumann was a member of the Supervisory Board until May 18, 2005. Prof. Dr. jur. Dr.-Ing. E. h. Heinrich von Pierer was elected to the Supervisory Board for the remainder of the term of office. Klaus Funk was a member of the Supervisory Board until February 1, 2006. Peter Kazmierczak, who was first elected in 2002 and resigned in 2003, followed him as his substitute for the remainder of the term of office.

The Supervisory Board has the authority to establish, and appoint its members to standing committees. The Supervisory Board may delegate certain of its powers to these committees. Our Supervisory Board has established the following four standing committees:

– TheChairman’s Committeeis responsible for deciding the terms of the service contracts and other contractual arrangements between us and members of our Management Board. In particular, the Chairman’s Committee determines salaries and other compensation components, including pension benefits, for the Management Board. Moreover, the Chairman’s Committee is responsible for the statutorily required approval of certain contracts between us and members of the Supervisory Board and Management Board, the approval of ancillary activities of members of the Management Board, including the acceptance of mandates at other companies, and the handling of other contractual business with active and former members of the Management Board pursuant to Section 112 of the Stock Corporation Act. It also prepares the Supervisory Board decisions with respect to corporate governance. The current members of the Chairman’s Committee are Dr. Rolf-E. Breuer (Chairman), Heidrun Förster, Ulrich Hartmann and Ulrich Kaufmann. The Chairman’s Committee held 4 meetings in 2005.

– TheAudit Committeemandates the independent auditors that the Annual General Meeting elects. In particular, the Audit Committee sets the compensation of the independent auditors and may determine priorities for the audit. The Audit Committee reviews our interim reports, as well as our financial statements, taking into account the results of the audits, discusses the reports on the limited reviews of the quarterly financial statements with the auditor and other reviews that the independent auditors have performed. It discusses changes of accounting or auditing practices and is also responsible for the handling of complaints regarding accounting, internal accounting controls and auditing matters. Additionally, engagements of the auditors to perform non-audit services are required to be approved pursuant to policies and procedures adopted by the Audit Committee, as described further in “Item 16C: Principal Accountant Fees and Services.” The current members of the Audit

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	Committee are Dr. Karl-Gerhard Eick (Chairman), Dr. Rolf-E. Breuer, Heidrun Förster, Sabine Horn, Rolf Hunck and Sir Peter Job. The Audit Committee held 5 meetings in 2005.
–	TheRisk Committeehas delegated authority to approve the extension of credit where applicable law or our Articles of Association require the approval of the Supervisory Board. The Risk Committee is only authorized to approve investments in other companies of between 2% and 3% of our regulatory banking capital. Investments above this threshold must be approved by the Supervisory Board as a body, not just by the Committee. In addition, the Management Board provides the Risk Committee with information on market, legal, operational and reputational risks, credit exposures and related circumstances which are of special importance due to the risks or liabilities attached to them or for any other reason. The current members of the Risk Committee are Dr. Rolf-E. Breuer (Chairman), Sir Peter Job and Prof. Henning Kagermann. The current deputy members are Prof. Dr. jur. Dr.-Ing E. h. Heinrich von Pierer and Tilman Todenhöfer. The Risk Committee held 6 meetings in 2005.
–	TheMediation Committeeis responsible for making proposals to the Supervisory Board on the appointment or dismissal of members of the Management Board in those cases where the Supervisory Board is unable to reach a two-thirds majority decision with respect to the appointment or dismissal. In voting on such proposals, members of the Management Board are dismissed or appointed by a simple majority of the votes cast. The current members of the Mediation Committee are Dr. Rolf-E. Breuer (Chairman), Heidrun Förster, Ulrich Hartmann and Henriette Mark. The Mediation Committee did not hold any meetings in 2005.

The business address of the members of the Supervisory Board is the same as our business address, Taunusanlage 12, 60325 Frankfurt am Main, Germany.

Our common shares are listed on a number of stock exchanges including the New York Stock Exchange. The corporate governance rules of the New York Stock Exchange applicable to foreign private issuers such as us require that we disclose the significant ways in which our corporate governance practices differ from those applicable to U.S. domestic companies under the New York Stock Exchange’s listing standards. This disclosure is available on our internet website at:
http://www.deutsche-bank.de/ir/pdfs/CorpGov_Comparison_NYSE_Rules.pdf.

Management Board
Our Articles of Association require the Management Board to have at least three members. Our Management Board currently has four members. The Supervisory Board appoints the chairman of the Management Board.

The Supervisory Board appoints the members of the Management Board for a maximum term of five years and supervises them. They may be re-appointed or have their term extended for one or more terms of up to a maximum of five years each. The Supervisory Board may remove a member of the Management Board prior to the expiration of his or her term for good cause.

Pursuant to our Articles of Association, two members of the Management Board, or one member of the Management Board together with a holder of procuration(Prokurist), may represent us for legal purposes. AProkuristis an attorney-in-fact who holds a legally defined power under German law, which cannot be restricted with respect to third parties. However, pursuant to German law, the Management Board itself must resolve on certain matters as a body. In particular, it may not delegate strategic planning, coordinating or controlling responsibilities to individual members of the Management Board.

Other responsibilities of the Management Board are:

– Appointing key personnel;

– Making decisions regarding significant credit exposures or other risks which have not been delegated to individual risk management units in accordance with the terms of reference(Geschäftsordnung)for the Management Board and terms of reference for our Group Risk Committee;

– Calling shareholders’ meetings;

– Filing petitions to set aside shareholders’ resolutions;

– Preparing and executing shareholders’ resolutions; and

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– Reporting to the Supervisory Board.

According to German law, our Supervisory Board represents us in dealings with members of the Management Board. Therefore, no member of the Management Board may enter into any agreement with us without the prior consent of our Supervisory Board.

The following paragraphs show information on the current members of the Management Board. The information includes their ages as of December 31, 2005, the year in which they were appointed and the year in which their term expires, their current positions or area of responsibility and the positions they have held with us and with other companies in the last five years. The business address of the members of our Management Board is the same as our business address, Taunusanlage 12, 60325 Frankfurt am Main, Germany.

Dr. Josef Ackermann
Age: 57
First Appointed: 1996
Term Expires: 2010
Dr. Josef Ackermann joined Deutsche Bank as a member of the Management Board in 1996. On May 22, 2002, Dr. Ackermann was appointed Spokesman of the Management Board and Chairman of our Group Executive Committee. On February 1, 2006, he was appointed Chairman of the Management Board.

Before taking over his responsibilities at Deutsche Bank, Dr. Ackermann worked for Credit Suisse. Between 1993 and 1996 he served as President of its Executive Board, following his appointment to that board in 1990. Dr. Ackermann began his career at Credit Suisse in 1977, where he held a variety of positions in Corporate Banking, Foreign Exchange/Money Markets and Treasury, Investment Banking and Multinational Services. He worked in London and New York, as well as at several locations in Switzerland. While at Credit Suisse, Dr. Ackermann was also a lecturer in economics at the University of St. Gallen in Switzerland.

Dr. Ackermann’s educational history includes studies in economics and social sciences. He received his doctorate degree (Dr.oec.) at the University of St. Gallen.

Dr. Ackermann engages in the following principal business activities outside our company: He is a member of the supervisory boards of Bayer AG, Deutsche Lufthansa AG, Linde AG and Siemens AG (second deputy chairman).

In February 2003, the Düsseldorf Public Prosecutor filed charges against Dr. Ackermann and other former members of the Supervisory Board and of the Board of Managing Directors of Mannesmann AG with the Düsseldorf District Court. The complaint contained allegations of a breach of trust in connection with payments to former members of the Board of Managing Directors and other managers of Mannesmann following the takeover of Mannesmann by Vodafone in spring 2000. The trial took place in the first half of 2004 and ended with the acquittal of Dr. Ackermann and all the other defendants. The Düsseldorf Public Prosecutor filed notice of appeal with the Federal Supreme Court (Bundesgerichtshof). On December 21, 2005, the Federal Supreme Court ordered a retrial with the District Court in Düsseldorf. When the new trial will begin is not yet known. Our Supervisory Board repeatedly has declared that it supports Dr. Ackermann in his defense. On February 1, 2006, it expressed once again its unrestricted trust in Dr. Ackermann.

Dr. Clemens Börsig
Age: 57
First Appointed: 2001
Term Expires: 2010
Dr. Clemens Börsig joined our Management Board in January 2001. He has worked with us since 1999, when he joined us as our Chief Financial Officer. He is also our Chief Risk Officer and responsible for our corporate governance.

From 1997 to 1999, Dr. Börsig worked for RWE AG, in Essen, Germany, as a member of the management board and as chief financial officer. Prior to this position, he was employed by Robert Bosch GmbH in Stuttgart, Germany, where he was hired in 1985 as the head of Corporate Planning and Con-

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trolling. In 1990, he was appointed to the management board at Bosch. From 1977 to 1985, Dr. Börsig held a number of positions at Mannesmann Group in Düsseldorf, Germany, including head of Corporate Planning at Mannesmann-Kienzle GmbH and chief financial and administrative officer at Mannesmann-Tally. From 1973 to 1977, he was an assistant professor at the Universities of Mannheim and Munich.

Dr. Börsig’s educational history includes studies in business administration and mathematics. He graduated with a Ph.D. in Business Administration from the University of Mannheim.

Dr. Börsig engages in the following principal business activities outside our company: He is a supervisory board member at Heidelberger Druckmaschinen AG and also holds a nonexecutive directorship at Foreign & Colonial Eurotrust Plc. He was deputy chairman of the supervisory board of EUROHYPO AG until May 2005.

Dr. Tessen von Heydebreck
Age: 60
First Appointed: 1994
Term Expires: 2007
Dr. Tessen von Heydebreck joined our Management Board in 1994. From 1994 to 1996, he was a deputy member of the Management Board. Dr. von Heydebreck is our Chief Administrative Officer.

Dr. von Heydebreck’s career with us began in 1974 with positions in Hamburg and Bremen, Germany. In 1977, Dr. von Heydebreck moved to our former head office in Düsseldorf, where he served as executive assistant to a member of the Management Board. From 1981 to 1983, he was a member of the management in our branch in Emden, Germany. He served as regional head in Bremen, Germany, from 1983 to 1990 and as regional head in Hamburg, Germany, from 1990 to 1994.

Dr. von Heydebreck studied law at Göttingen University and the University of Freiburg. After passing the First and the Second State Examinations in law, he completed a doctorate in law at Göttingen University.

Dr. von Heydebreck engages in the following principal business activities outside our company: He is a supervisory board member at BASF AG, Dürr AG and BVV Versicherungsverein des Bankgewerbes a.G.

Hermann-Josef Lamberti
Age: 49
First Appointed: 1999
Term Expires: 2009
Hermann-Josef Lamberti joined our Management Board in 1999. He joined us in 1998 as an executive vice president. Mr. Lamberti is our Chief Operating Officer.

Prior to joining Deutsche Bank, Hermann-Josef Lamberti worked at IBM for 14 years. He began his career at the company in 1985, where he concentrated on controlling and internal application development. He was soon entrusted with management positions in the company’s German branches specializing in the banking and insurance industries. In 1993, he was appointed General Manager of Personal Software Division at IBM Europe in Paris, where he was the head of software sales for Europe, the Middle East and Africa. In 1995, Hermann-Josef Lamberti moved to IBM in the U.S., where he was Vice President for Marketing and Brand Management with responsibility for IBM’s global mainframes sales. He returned to Germany in 1997 to take up the position of Chairman of the Senior Management of IBM Germany in Stuttgart.

Hermann-Josef Lamberti studied business administration in Cologne and Dublin before commencing his professional career in the financial sector. He graduated with a master’s degree in Business Administration in 1982. He subsequently worked for Touche Ross in Toronto, where he was involved in Auditing and Consulting. He also worked in the Foreign Exchange department at Chemical Bank in Frankfurt.

Mr. Lamberti engages in the following principal business activities outside our company: He is a member of the supervisory board or similar bodies of Schering AG, Deutsche Börse AG (since October 2005), Fiat S.p.A. and Carl Zeiss AG.

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Board Practices of the Management Board

Our Management Board has adopted terms of reference for the conduct of its affairs. These terms of reference have been presented to the Supervisory Board for information. The Supervisory Board intends to issue new terms of reference for the Management Board. The current terms of reference provide that in addition to the joint overall responsibility of the Management Board as a Group, the individual responsibilities of the members of the Management Board are determined by our business allocation plan. The terms of reference stipulate that, notwithstanding the functional responsibilities of the operating committees of our Group divisions and of the functional committees, the members of the Management Board each have an individual responsibility for the divisions or functions to which they are assigned, as well as for those committees of which they are members and the subsidiaries allocated to those divisions.

In addition to managing our company, some of the members of our Management Board also supervise and advise our affiliated companies. As permitted by German law, some of the members also serve as members of the supervisory boards of other companies. Also, to assist us in avoiding conflicts of interest, the members of our Management Board have generally undertaken not to assume chairmanships of supervisory boards of companies outside our consolidated group.

Section 161 of the German Stock Corporation Act (Aktiengesetz) requires that the management board and supervisory board of any German exchange-listed company declare annually that the recommendations of the Government Commission on the German Corporate Governance Code have been adopted by the company or which recommendations have not been so adopted. These recommendations go beyond the requirements of German law. The Declaration of Conformity of our Management Board and Supervisory Board dated October 27, 2005 is available on our Internet website at http://www.deutsche-bank.com/corporate-governance.

Group Executive Committee

The Group Executive Committee, established in 2002, is a body that is not required by the Stock Corporation Act. It comprises the members of the Management Board, the Business Heads of our Group Divisions, CIB and PCAM, and the head of the management of our regions. The Group Executive Committee serves as a tool to coordinate our businesses and regions through the following activities:

– Provision of ongoing information to the Management Board on business developments and particular transactions;

– Regular review of our business segments;

– Consultation with and furnishing advice to the Management Board on strategic decisions; and

– Preparation of decisions to be made by the Management Board.

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Compensation

Supervisory Board
The compensation of Supervisory Board members is set forth in our Articles of Association, which our shareholders amend from time to time at their annual meetings. Such compensation provisions were last amended at our Annual General Meeting on June 10, 2003.

For 2005, the following compensation policies apply. The compensation generally consists of a fixed remuneration of€ 30,000 per year (plus value-added tax (Umsatzsteuer)) and a dividend-based bonus of€ 1,000 per year for every full or fractional€ 0.05 increment by which the dividend we distribute to our shareholders exceeds€ 0.15 per share. We increase both the fixed remuneration and the dividend-based bonus of each Supervisory Board member by 25% for each committee on which the Supervisory Board member sits, except that for the chair of a committee the rate of increment is 50% and if the committee chairman is not identical with the Supervisory Board chairperson the rate of increment is 75%. These amounts are based on the premise that the respective committee has met during the financial year. We pay the chairperson three times the total compensation of a regular member, and we pay the deputy chairperson one and a half times the total compensation of a regular member. The members of the Supervisory Board also receive an annual remuneration linked to our long-term success; this remuneration varies in size depending on how the ratio between the total return on our shares – based on share price development, dividend and capital actions – and the average total return of shares of a group of peer companies currently consisting of Citigroup Inc., Credit Suisse Group, J. P. Morgan Chase & Co., Merrill Lynch & Co. Inc. and UBS AG, has developed in the three financial years immediately preceding the year for which the remuneration is paid. If the ratio lies between –10% and +10% each member receives an amount of€ 15,000; if our shares outperform the peer group by 10% to 20%, the payment increases to€ 25,000; and in case of a more than 20% higher performance it rises to€ 40,000. The members of the Supervisory Board receive a meeting fee of€ 1,000 for each meeting of the Supervisory Board and its committees in which they take part. In addition, in our interest, the members of the Supervisory Board will be included in any financial liability insurance policy held in an appropriate amount by us, with the corresponding premiums being paid by us.

We also reimburse members of the Supervisory Board for all cash expenses and any value-added tax(Umsatzsteuer)they incur in connection with their roles as members of the Supervisory Board. Employee-elected members of the Supervisory Board also continue to receive their employee benefits. For Supervisory Board members who served on the board for only part of the year, we pay a fraction of their total compensation based on the number of months they served, rounding up or down to whole months.

We compensate our Supervisory Board members after the end of each fiscal year. In January 2006, we paid each Supervisory Board member the fixed portion of their remuneration for their services in 2005 and their meeting fees. The remuneration linked to our long-term success was defined to be zero. In addition, we will pay each of them for their services in 2005 a dividend-based bonus after the Annual General Meeting in June 2006. The following table shows the individual remuneration of the members of the Supervisory Board for their services in 2005 (excluding value-added tax), assuming that the Annual General Meeting in June 2006 approves the envisaged dividend of€ 2.50 per share.

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Members of the Supervisory Board	Compensation for fiscal year 2005
in€	Fixed		Variable		Meeting fee		Total
Dr. Rolf-E. Breuer		127,500		199,750		19,000		346,250
Heidrun Förster		60,000		94,000		13,000		167,000
Dr. Karl-Hermann Baumann1		25,000		39,167		6,000		70,167
Dr. Karl-Gerhard Eick		46,250		72,458		8,000		126,708
Klaus Funk2		30,000		47,000		4,000		81,000
Ulrich Hartmann		40,625		63,646		9,000		113,271
Sabine Horn		37,500		58,750		9,000		105,250
Rolf Hunck		37,500		58,750		9,000		105,250
Sir Peter Job		41,875		65,604		13,000		120,479
Prof. Dr. Henning Kagermann		37,500		58,750		8,000		104,250
Ulrich Kaufmann		37,500		58,750		8,000		104,250
Prof. Dr. Paul Kirchhof		30,000		47,000		4,000		81,000
Henriette Mark		30,000		47,000		4,000		81,000
Margret Mönig-Raane		30,000		47,000		4,000		81,000
Prof. Dr. jur. Dr.-Ing. E. h. Heinrich von Pierer3		21,875		34,271		6,000		62,146
Gabriele Platscher		30,000		47,000		4,000		81,000
Karin Ruck		30,000		47,000		4,000		81,000
Tilman Todenhöfer		34,375		53,854		8,000		96,229
Dipl.-Ing. Dr.-Ing. E. h. Jürgen Weber		30,000		47,000		4,000		81,000
Dipl.-Ing. Albrecht Woeste		30,000		47,000		4,000		81,000
Leo Wunderlich		30,000		47,000		4,000		81,000
Total		817,500		1,280,750		152,000		2,250,250

1	Member until May 18, 2005.
2	Member until February 1, 2006.
3	New member since May 18, 2005.

As mentioned above, most of the employee-elected members of the Supervisory Board are employed by us. In addition, Dr. Breuer was formerly employed by us. The aggregate compensation we and our consolidated subsidiaries paid to such members as a group during the year ended December 31, 2005 for their services as employees or status as former employees (including retirement, pension and deferred compensation) was€ 2,255,326.

During 2005 we set aside€ 0.1 million for pension, retirement or similar benefits for the members of the Supervisory Board who are employed by us.

Management Board
The Chairman’s Committee of the Supervisory Board has functional responsibility for determining the structure and size of the compensation of the members of the Management Board. In particular, the Chairman’s Committee determines salaries and other compensation elements for the Management Board.

We have entered into service agreements with members of our Management Board. These agreements established the following principal elements of compensation:

Salary. The members of the Management Board receive a salary which is disbursed in monthly installments. It is determined on the basis of an analysis of salaries paid to executive directors at a selected group of comparable international companies.

Cash Bonus.As part of the variable compensation we pay annual cash bonuses to members of our Management Board primarily based on achievement of the planned return on equity of the Group.

Mid-Term-Incentive (“MTI”).As further part of the variable compensation we grant a performance-based mid-term-incentive which reflects, for a rolling two year period, the ratio between our total shareholder return and the corresponding average figure for a peer group. The mid-term-incentive payment consists of a cash component (1/3) and equity-based awards (2/3) which contain long-term risk elements under the DB Global Partnership Plan.

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The aggregate remuneration, including performance-based compensation, earned by the members of our Management Board for the year ended December 31, 2005 was€ 28,716,909. This aggregate remuneration was comprised of the following.

in€	2005
Salary		3,550,000
Bonuses, mid-term-incentive (cash and equity-based)		24,560,000
Other remuneration1		606,909
Total remuneration		28,716,909

¹ Insurance premiums, payments in kind and taxes.

The members of our Management Board received as part of the mid-term-incentive share-based awards, the ultimate value of which to the members of the Management Board will depend on the price of Deutsche Bank shares. The units of each portion of this share-based compensation are described below.

DB Equity Units.In February 2006, we awarded an aggregate of 93,290 deferred share awards to members of our Management Board. These shares are scheduled to be delivered on August 1, 2009.

For further information on the terms of our DB Global Partnership Plan, pursuant to which DB Equity Units are issued, see Note [20] to the consolidated financial statements.

Pursuant to the service contracts concluded with each member of our Management Board, the board members are entitled to receive certain transitional payments when they leave the Management Board. Such payments are based on the total compensation previously earned (salary, bonuses, and MTIs) and the remaining term of the contract, where applicable. If the member of the Management Board leaves in connection with a change of control and the remaining term is less than three years, a term of three years will be assumed. The amounts will generally be paid as a lump sum.

Our board members as of December 31, 2005 received the following remuneration for the year 2005.

Members of the Management	Annual cash compensation				Equity-based MTI		Total
Board							Compensation
					Value of
					share-based
in€	Salary		Cash bonus/cash MTI		awards1
Dr. Josef Ackermann		1,150,000		7,233,750		3,516,250		11,900,000
Dr. Clemens Börsig		800,000		3,273,750		1,576,250		5,650,000
Dr. Tessen v. Heydebreck		800,000		2,903,750		1,576,250		5,280,000
Hermann-Josef Lamberti		800,000		2,903,750		1,576,250		5,280,000

¹ The number of DB Equity Units granted to each member was determined by dividing such euro amounts by€ 88.38, the closing price of our shares on January 31, 2006. The number of DB Equity Units granted to each member was as follows: Dr. Josef Ackermann 39,786, Dr. Clemens Börsig 17,835, Dr. Tessen v. Heydebreck 17,835, and Hermann-Josef Lamberti 17,835.

In addition to the above amounts that we paid to members of the Management Board in 2005, we paid former members of the Management Board or their surviving dependents an aggregate of€ 17,318,339 in 2005. During 2005 we set aside€ 1,369,417 for pension, retirement or similar benefits for our Management Board.

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Employees

As of December 31, 2005, we employed a total of 63,427 staff members as compared to 65,417 as of December 31, 2004 and 67,682 as of December 31, 2003. We calculate our employee figures on a full-time equivalent basis, meaning we include proportionate numbers of part-time employees.

The following table shows our numbers of full-time equivalent employees as of December 31, 2005, 2004, and 2003.

Employees1	Dec 31, 2005		Dec 31, 2004		Dec 31, 2003
Germany		26,336		27,093		29,878
Europe (outside Germany)2		18,444		19,538		19,403
Asia-Pacific		7,169		6,458		5,976
North America3		11,134		11,954		11,920
South America		345		374		504
Total employees		63,427		65,417		67,682

1	Full-time equivalent employees.
2	Includes a small number of employees in Africa.
3	Primarily the United States.

The number of our employees decreased by 1,990 to 63,427 during the year. In the course of implementing the global BRP, we completed approximately 5,900 employee departures and notifications as of December 31, 2005 out of the announced 6,400. This reduction was offset by some of our growth initiatives in other parts of our businesses.

The proportion of employees working in Germany as a percentage of our total staff remained essentially the same at 41.5%.

The following charts show the relative proportions of employees in the Group Divisions and Infrastructure/Regional Management as of December 31, 2005, 2004 and 2003. Since January 1, 2005, the Group implemented structural changes associated with the BRP. As a result, the business support areas formerly reported as part of our group divisions and our Corporate Center were centralized into one infrastructure group. Information for prior periods is presented on the same basis as that for 2005.

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Labor Relations
In Germany, labor unions and employers’ associations generally negotiate collective bargaining agreements on salaries and benefits for employees below the management level. Many companies in Germany, including ourselves and our material German subsidiaries, are members of employers’ associations and are bound by collective bargaining agreements.

Each year, our employers’ association, theArbeitgeberverband des privaten Bankgewerbes e.V., ordinarily renegotiates the collective bargaining agreements that cover many of our employees. The current agreement reached in July 2004 (after only 3 sessions of intensive bargaining) terminates on May 31, 2006. The agreement includes no pay raise from June until August 2004, a 2.0% pay raise from September 1, 2004 to August 31, 2005 and another 1.6% pay raise from September 1, 2005. Additionally, unions and employers agreed on a so-called “hardship clause”, which allows making the collective bargaining agreement more responsive to the needs of the individual company (e. g., reduced benefits when the economic situation is difficult). Further aspects of the agreement relate to an increasing part of total compensation being agreed for flexibility according to performance criteria and on corporate results. Furthermore, an initiative to raise the quota of apprentices in the banking sector was agreed as well as several improvements in the master tariff agreement – including an extension of regulations governing work on Saturdays, part-time retirement arrangements, early retirement and employment protection.

Our employers’ association negotiates with the following unions:

– ver.di (Vereinigte Dienstleistungsgewerkschaft), a union formed in July 2001 resulting from the merger of five unions, including the former bank unionsDeutsche Angestellten GewerkschaftandGewerkschaft Handel, Banken und Versicherungen

– Deutscher Bankangestellten Verband (DBV)

– Deutscher Handels-und Industrieangestellten Verband (DHV)

German law prohibits us from asking our employees whether they are members of labor unions. Therefore, we do not know how many of our employees are members of unions. Approximately 15 to 20% of the employees in the German banking industry are organized into unions. We estimate that less than 15% of our employees in Germany are unionized. On a worldwide basis, we estimate that approximately 15% of our employees belong to labor unions.

Share Ownership

Management Board
As of February 28, 2006, the current members of our Management Board held the following numbers of our shares, DB Equity Units and Performance Options.

Members of the Management Board	Number of shares			Number of		Number of
				DB Equity Units		Performance Options
Dr. Josef Ackermann		150,431			191,272		32,662
Dr. Clemens Börsig		18,607	1		86,749		63,684
Dr. Tessen von Heydebreck		26,257			86,749		38,019
Hermann-Josef Lamberti		43,272			86,749		30,698
Total		238,567			451,519		165,063

¹ Excluding 150 Deutsche Bank shares, pooled in a family held partnership, in which Dr. Clemens Börsig has an interest of 25%.

The current members of our Management Board held an aggregate of 238,567 of our shares on February 28, 2006, amounting to approximately 0.05% of our shares issued on that date.

The table below shows information regarding the 451,519 DB Equity Units held by the current members of our Management Board as of February 28, 2006.

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Numbers of DB Equity Units	Vesting Date	Delivery Date
95,853	February 1, 2005	August 1, 2006
23,963	August 1, 2006	August 1, 2006
79,759	February 1, 2006	August 1, 2007
19,940	August 1, 2007	August 1, 2007
110,970	February 1, 2007	August 1, 2008
27,743	August 1, 2008	August 1, 2008
74,632	February 1, 2008	August 1, 2009
18,658	August 1, 2009	August 1, 2009

The table below shows information regarding the 165,063 Performance Options held by the current members of our Management Board as of February 28, 2006. All Performance Options were granted under the DB Global Partnership Plan. Each Performance Option is accompanied by a Partnership Appreciation Right.

Number of	Strike Price in€		Vesting Date	Expiration Date
Performance Options
15,645		89.96	February 1, 2004	February 1, 2008
15,645		89.96	February 1, 2005	February 1, 2008
15,645		89.96	February 1, 2006	February 1, 2008
26,900		47.53	February 1, 2005	February 1, 2009
14,642		76.61	February 1, 2006	February 1, 2010
38,293		76.61	February 1, 2007	February 1, 2010
38,293		76.61	February 1, 2008	February 1, 2010

For more information on DB Equity Units, Performance Options and Partnership Appreciation Rights, all of which are granted under the DB Global Partnership Plan, see Note [20] to the consolidated financial statements.

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Supervisory Board
As of February 28, 2006, the current members of our Supervisory Board held the following numbers of our shares, share grants under our employee share plans and options on our shares.

Members of the Supervisory Board	Number of Shares		Number of Share Grants		Number of Options
Dr. Rolf-E. Breuer		36,264		–		57,310
Dr. Karl-Gerhard Eick		–		–		–
Heidrun Förster		430		10		100
Ulrich Hartmann		–		–		–
Sabine Horn		45		10		100
Rolf Hunck		134		10,930		986
Sir Peter Job		–		–		–
Prof. Dr. Henning Kagermann		–		–		–
Ulrich Kaufmann		65		10		200
Peter Kazmierczak		10		10		–
Prof. Dr. Paul Kirchhof		–		–		–
Henriette Mark		348		10		100
Margret Mönig-Raane		–		–		–
Prof. Dr. jur. Dr.-Ing. E. h. Heinrich von Pierer		295		–		–
Gabriele Platscher		709		10		100
Karin Ruck		78		8		120
Tilman Todenhöfer		–		–		–
Dipl.-Ing. Dr.-Ing. E. h. Jürgen Weber		–		–		–
Dipl.-Ing. Albrecht Woeste		–		–		–
Leo Wunderlich		682		10		200
Total		39,060		11,008		59,216

As of February 28, 2006, the members of the Supervisory Board held 39,060 shares, amounting to less than 0.01% of our shares issued on that date.

Some of the Supervisory Board members who are or were formerly employees received grants under our employee share plans entitling them to receive shares at specified future dates or granting them options to acquire shares at future dates. For a description of our employee share plans, please refer to Note [20] of the consolidated financial statements. Shares that have been delivered to such employees as a result of grants under the plans (including following the exercise of options granted thereunder), and that have not been disposed by them, are shown in the “Number of Shares” column in the table above, as are shares otherwise acquired by them. Shares granted under the plans that have not yet been delivered to such employees are shown in the “Number of Share Grants” column.

The share grants to Rolf Hunck include 10,920 shares granted under the Restricted Equity Units Plan as part of his compensation as an employee, which are scheduled to be delivered to him in portions in August 2007, 2008, 2009 and 2010. The other grants reflected in the table were made to employee members of our Supervisory Board under the DB Global Share Plan 2005, and are scheduled to be delivered on November 1, 2006.

Dr. Rolf-E. Breuer holds a total of 57,310 Performance Options granted under the DB Global Partnership Plan as compensation during his prior service as Spokesman of our Management Board, and Rolf Hunck holds a total of 726 such options granted to him as part of his compensation as an employee. These options, which have all vested, have a strike price of€ 89.96 and an expiration date of February 1, 2008. Each Performance Option is accompanied by a Partnership Appreciation Right. The other options reflected in the table were acquired via the voluntary participation of employee members of our Supervisory Board in the DB Global Share Plan. DB Global Share Plan options issued in 2001 generally have a strike price of€ 87.66 and an expiration date of November 13, 2007; those issued in 2002 generally have a strike price of€ 55.39 and an expiration date of November 13, 2008; those issued in 2003 generally have a strike price of€ 75.24 and an expiration date of December 11, 2009. All options have vested and are with respect to our ordinary shares.

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Since October 30, 2004, the amended German law on directors’ dealings (Section 15a of the German Securities Trading Act (Wertpapierhandelsgesetz)) requires persons discharging managerial responsibilities within an issuer of financial instruments, and persons closely associated with them, to disclose their personal transactions in shares of such issuer and financial instruments based on them, especially derivatives, to the issuer and to the BaFin.

In accordance with our policy and German law, we have disclosed directors’ dealings in our shares and financial instruments based on them, especially derivatives, in a document available on our Internet website at http://www.deutsche-bank.com/corporate-governance.

Employee Share Programs
For a description of our employee share programs, please refer to Note [20] to the consolidated financial statements.

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Item 7: Major Shareholders and Related Party Transactions

Major Shareholders

On December 31, 2005, our issued share capital amounted to€ 1,419,610,291 divided into 554,535,270 no par value ordinary registered shares.

On December 31, 2005, we had 411,593 registered shareholders. The majority of our shareholders are retail investors in Germany.

The following charts show our share distribution and the composition of our shareholders on December 31, 2005:

^* Including Deutsche Bank employees and pensioners

On February 28, 2006, a total of 60,231,593 of our shares were registered in the names of 1,592 shareholders resident in the United States. These shares represented 11.7% of our share capital on that date. On December 31, 2004, a total of 53,523,292 of our shares were registered in the names of 946 holders of record resident in the United States. These shares represented 9.84% of our share capital on that date.

The German Securities Trading Act(Wertpapierhandelsgesetz)requires investors in publicly-traded corporations whose investments reach certain thresholds to notify both the corporation and the BaFin of such change within seven days. The minimum disclosure threshold is 5% of the corporation’s outstanding voting share capital.

We are not aware of any single investor holding 5% or more of our shares as of February 28, 2006.

We are neither directly nor indirectly owned nor controlled by any other corporation, by any foreign government or by any other natural or legal person severally or jointly.

Pursuant to German law and our Articles of Association, to the extent that we may have major shareholders at any time, we may not give them different voting rights from any of the other shareholders holding the same class of shares.

We are aware of no arrangements the operation of which may at a subsequent date result in a change in control of our company.

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Related Party Transactions

We have business relationships with a number of the companies in which we own significant equity interests. We also have business relationships with a number of companies where members of our Management Board also hold positions on boards of directors. Our business relationships with these companies cover many of the financial services we provide to our clients generally.

We believe that we conduct all of our business with these companies on terms equivalent to those that would exist if we did not have equity holdings in them or management members in common, and that we have conducted business with these companies on that basis in 2005 and prior years. None of these transactions is or was material to us.

Among our business with related party companies in 2005 there have been and currently are loans, guarantees and commitments. All of these lending-related credit exposures (excluding derivatives), which totaled€ 3.0 billion (of which€ 1.1 billion related to our equity method investment in EUROHYPO AG) as of January 31, 2006,

– were made in the ordinary course of business,

– were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and

– did not involve more than the normal risk of collectibility or present other unfavorable features.

We have not conducted material business with parties that fall outside of the definition of related parties, but with whom we or our related parties have a relationship that enables the parties to negotiate terms of material transactions that may not be available from other, more clearly independent, parties on an arm’s-length basis.

EUROHYPO
EUROHYPO AG (“EUROHYPO”) resulted from a merger of our mortgage bank subsidiary EUROHYPO Europäische Hypothekenbank der Deutschen Bank AG (“Eurohypo Old”) with the mortgage bank subsidiaries of Dresdner Bank AG and Commerzbank AG in 2002. Subsequently, our German commercial real estate financing division, Dresdner Bank AG’s U.S.-based real estate investment banking team, and part of our London-based real estate business were transferred to EUROHYPO. After these transactions, we owned 37.72% of the outstanding share capital of EUROHYPO. In November 2005, we entered into a sale and purchase agreement to sell our entire 37.72% stake in EUROHYPO AG to Commerzbank AG for a total consideration of€ 2.6 billion. In December 2005, the first tranche of this transaction with a total value of€ 0.7 billion was completed, reducing our stake to 27.99%. The remaining tranche of the transaction is expected to be completed in the first quarter of 2006.

We account for our investment in EUROHYPO under the equity method and as such recognize in our income statement our proportional share of the after-tax earnings or losses of EUROHYPO as reported applying U.S. GAAP.

Since the general shareholders meeting of EUROHYPO on May 25, 2005, one member of the supervisory board of EUROHYPO is an employee of Deutsche Bank. One additional member of the supervisory board of EUROHYPO who is an employee of Deutsche Bank resigned from the EUROHYPO board as of that date. Two members of the Management Board of EUROHYPO, including the Spokesman, were members of the management board of Eurohypo Old prior to the merger.

Besides our equity stake, which had a book value of€ 1.9 billion at December 31, 2005, we provide EUROHYPO with loans and commitments. Total loans and commitments (including derivative lines) as of December 31, 2005 were€ 3.6 billion, of which€ 1.7 billion were utilized at that date.

We, Commerzbank AG and Dresdner Bank AG each granted EUROHYPO financial guarantees to protect EUROHYPO against losses resulting from loans each contributed to the new entity up to a fixed maximum amount for the period until December 31, 2006. The maximum amount of the financial guarantees of Commerzbank AG and Dresdner Bank AG were utilized by the end of 2003. By the end of 2005, EUROHYPO had made claims in respect of the full amount of our financial guarantee, which had an initial maximum amount of€ 283 million, but we are currently engaged in discussions with EUROHYPO as to whether the preconditions for drawing had been satisfied with respect to almost all of

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these claims. If such preconditions were not satisfied, the portion of the guarantee relating to such claims would be reinstated and available for drawing until December 31, 2006. Furthermore, we held fixed income securities issued by EUROHYPO, classified as securities available for sale, in the amount of€ 572 million as of December 31, 2005.

Xchanging etb GmbH
Based on agreements reached in May 2004, we transferred our stake in etb to Xchanging etb GmbH (formerly Zweite Xchanging GmbH), which is located in Germany, and received in turn a 49% nonvoting capital stake in Xchanging etb GmbH. The remaining 51% is owned by Xchanging HoldCo No 3 Ltd (UK), a 100% subsidiary of Xchanging B.V. (NL) (‘Xchanging’). Founded in 1998, Xchanging is an internationally positioned business process outsourcer and back office services provider, with locations in the UK, France, Germany, the United States and Asia. etb is in general a provider of security settlement services we founded in 1999. The change of control was realized at May 31/June 1, 2004 when Xchanging took over management control and full operational responsibility for etb.

One of the four executive directors of Xchanging etb GmbH is an employee of Deutsche Bank Group (a supervisory board does not yet exist at Xchanging etb GmbH). Additionally, one member of the supervisory board of etb is an employee of ours. Furthermore, two members of the management board of etb were members of the management board of etb prior to the change of control when it was our wholly-owned subsidiary.

The arrangements with etb (under the control of Xchanging) include a 12-year service agreement. This agreement is aimed at reducing our costs for the agreed security settlement services while maintaining control over services provided as well as the desired quality and performance. It also ensures significant investments of Xchanging in order to enhance processes and etb’s service delivery platform for additional new clients. In return for the services received, we provide services such as Global Technology and Operations Services and Corporate Real Estate Services to etb, as we did before the transfer. The volume of services received from etb in 2005 amounted to€ 125 million while the volume of services provided to etb in 2005 amounted to€ 46 million. We account for our investment in Xchanging etb GmbH under the equity method.

In July 2005 we sold a 5% stake in Xchanging etb GmbH to one of the larger clients of etb. Due to our decision to sell the Global Custody business line to State Street Bank in 2003 and further due to internal restructuring activities, we reduced the commitment to receive etb services by€ 19 million from 2006 on in December 2005. In accordance with our contractual obligations, we compensated etb for the service volume reduction by a one-time payment.

grundbesitz-invest
In 2005, grundbesitz-invest (“Grundbesitz”), an open-end property fund sponsored and managed by a subsidiary of ours, temporarily suspended the issuance and redemption of its share units pending an extraordinary revaluation of its real estate assets. The suspension was deemed necessary to protect unit holders and to ensure equal treatment for current and potential investors. In light of the extraordinary nature of the temporary closure, we are committed to compensate certain unit holders for any loss in value due to the revaluation, including by direct payments to certain unit holders who, taking into account the purchase price of their share units and earnings distributions received, would incur a loss due to the revaluation of the properties, and by other indirect compensation. Grundbesitz re-opened for issuance and redemption on March 3, 2006. We committed to support Grundbesitz’s liquidity upon its re-opening by various means, which may include offering to purchase its units from time to time, at prevailing redemption prices. At the end of the first quarter 2006, we will evaluate whether we must consolidate Grundbesitz based on the extent of our exposure to it at that time. For the year ended December 31, 2005, we recorded provisions of€ 203 million representing the estimated direct and indirect compensation costs mentioned above.

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Related Party Nonaccrual Loans
Aside from our other shareholdings, we hold acquired equity interests in some of our clients arising from our efforts to protect our then-outstanding lending exposures to them.

The table below shows information on loans to related party companies that we have classified as nonaccrual as of December 31, 2005. As such, these nonaccrual loans may exhibit more than normal risk of collectibility or present other unfavorable features. The amounts outstanding disclosed for January 31, 2006 aggregate to€ 42 million, down€ 19 million or 31% from February 28, 2005. We hold a significant portion of the outstanding equity interests in customers B, D, E and Radio Movil Digital Americas, Inc. noted below and account for these equity interests in our financial statements using the equity method of accounting (as described in Note [1] to the consolidated financial statements). Our participating interests in customers A and C are 10% or more of their voting rights.

	Amount outstanding		Largest amount outstanding		Nature of the loan and transaction in which incurred
	as of January 31, 2006		January 1, 2005
in€ m.			to January 31, 2006
Customer A		18		33	Comprised of a real estate finance loan bearing interest at 6.27% per annum and guarantees which were honored after the company filed for liquidation bearing no interest. The amounts are payable on demand and interest accrual has been stopped.
Customer B		0		8	Former sale and leaseback transaction bearing interest at 5.2% per annum, for which we have demanded repayment and stopped accruing interest.
Customer C		0		1	Cash loan payable on demand, bearing interest at 8% per annum, for which interest accrual has been stopped.
Customer D		3		3	Long term refinancing of non-recourse lease, bearing interest at 6.9% per annum, maturing June 2019, for which interest accrual has been stopped.
Customer E		4		4	Lease refinancing of movable property bearing interest at 2.25% per annum for which interest accrual has been stopped.
Radio Movil Digital Americas, Inc.		16		17	Cash loan payable on demand, bearing interest at 12% per annum, for which interest accrual has been stopped.

We have not disclosed the names of the customers referred to by letters above because we have concluded that such disclosure would conflict with applicable privacy laws, such as customer confidentiality and data protection laws, and such customers have not waived application of these privacy laws. A legal opinion regarding such privacy laws is filed as Exhibit 14.1 hereto.

Interests of Experts and Counsel

Not required because this document is filed as an annual report.

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Item 8: Financial Information

Consolidated Statements and Other Financial Information

Consolidated Financial Statements
See “Item 18: Financial Statements” and our consolidated financial statements beginning on page F-4.

Legal Proceedings
IPO Allocation Litigation:Deutsche Bank Securities Inc. (“DBSI”), our U.S. broker-dealer subsidiary, and its predecessor firms, along with numerous other securities firms, have been named as defendants in over 80 putative class action lawsuits pending in the United States District Court for the Southern District of New York. These lawsuits allege violations of securities and antitrust laws in connection with the allocation of shares in a large number of initial public offerings (“IPOs”) by issuers, officers and directors of issuers, and underwriters of those securities. DBSI is named in these suits as an underwriter. The securities cases allege material misstatements and omissions in registration statements and prospectuses for the IPOs and market manipulation with respect to aftermarket trading in the IPO securities. Among the allegations are that the underwriters tied the receipt of allocations of IPO shares to required aftermarket purchases by customers and to the payment of undisclosed compensation to the underwriters in the form of commissions on securities trades, and that the underwriters caused misleading analyst reports to be issued. The antitrust claims allege an illegal conspiracy to affect the stock price based on similar allegations that the underwriters required aftermarket purchases and undisclosed commissions in exchange for allocation of IPO stocks. In the securities cases, the motions to dismiss the complaints of DBSI and others were denied on February 13, 2003. Plaintiffs’ motion to certify six “test” cases as class actions in the securities cases was granted on October 13, 2004, and DBSI and other defendants appealed that decision to the Court of Appeals for the Second Circuit. Discovery in the securities cases is underway. In the putative antitrust class action, the defendants’ motion to dismiss the complaint was granted on November 3, 2003. On September 28, 2005, the Court of Appeals for the Second Circuit vacated the ruling and remanded the case to the lower court for consideration of alternate grounds for dismissal. Defendants have moved for reconsideration by the Second Circuit.

Enron Litigation. Deutsche Bank AG and certain of its affiliates are collectively involved in more than 20 lawsuits arising out of their banking relationship with Enron Corp., its subsidiaries and certain Enron-related entities (“Enron”). These lawsuits include a series of purported class actions brought on behalf of shareholders of Enron, including the lead action captioned Newby v. Enron Corp. The consolidated complaint filed in Newby named as defendants, among others, Deutsche Bank AG, several other investment banking firms, a number of law firms, Enron’s former accountants and affiliated entities and individuals and other individual defendants, including present and former officers and directors of Enron, and it purported to allege claims against Deutsche Bank AG under federal securities laws. On December 20, 2002, the Court dismissed all of the claims alleged in the Newby action against Deutsche Bank AG. Plaintiffs in Newby filed a first amended consolidated complaint on May 14, 2003 and reasserted claims against Deutsche Bank AG under federal securities laws and also added similar claims against its subsidiaries DBSI and Deutsche Bank Trust Company Americas (“DBTCA”). On March 29, 2004, the Court dismissed in part the claims alleged in the Newby action against the Deutsche Bank entities. Specifically, the Court dismissed the fraud claims, but did not dismiss the non-fraud claims. On July 26, 2005, the Court granted plaintiffs’ motion for reconsideration of the partial dismissal of the Deutsche Bank entities that had been dismissed on March 29, 2004. Plaintiffs’ motion to certify a class of shareholders in Newby is pending.

Also, an adversary proceeding has been brought by Enron in the bankruptcy court against, among others, Deutsche Bank AG and certain of its affiliates. In this adversary proceeding, Enron seeks damages from the Deutsche Bank entities, as well as the other defendants, for alleged aiding and abetting breaches of fiduciary duty by Enron insiders, aiding and abetting fraud and unlawful civil conspiracy,

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and also seeks return of alleged fraudulent conveyances and preferences and equitable subordination of their claims in the Enron bankruptcy. The Deutsche Bank entities’ motion to partially dismiss the adversary complaint is pending.

In addition to Newby and the adversary proceeding described above, there are third-party actions brought by Arthur Andersen in Enron-related cases asserting contribution claims against Deutsche Bank AG, DBSI and many other defendants, and individual and putative class actions brought in various courts by Enron investors and creditors alleging federal and state law claims against the same entities named by Arthur Andersen, as well as DBTCA.

WorldCom Litigation. Deutsche Bank AG and DBSI were defendants in more than 40 actions filed in federal and state courts arising out of alleged material misstatements and omissions in the financial statements of WorldCom Inc. DBSI was a member of the syndicate that underwrote WorldCom’s May 2000 and May 2001 bond offerings, which are among the bond offerings at issue in the actions. Deutsche Bank AG, London branch was a member of the syndicate that underwrote the sterling and euro tranches of the May 2001 bond offering. Plaintiffs were alleged purchasers of these and other WorldCom debt securities. The defendants in the various actions included certain WorldCom directors and officers, WorldCom’s auditor and members of the underwriting syndicates for the debt offerings. Plaintiffs alleged that the offering documents contained material misstatements and/or omissions regarding WorldCom’s financial condition. The claims against DBSI and Deutsche Bank AG were made under federal and state statutes (including securities laws), and under various common law doctrines. The largest of the actions against Deutsche Bank AG and DBSI was a class action litigation in the U.S. District Court in the Southern District of New York, in which the class plaintiffs are the holders of a significant majority of the bonds at issue. On March 10, 2005, Deutsche Bank AG and DBSI reached a settlement agreement, subject to court approval, resolving the class action claims asserted against them, for a payment of approximately U.S.$ 325 million. The settlement of the class action claims did not resolve the individual actions brought by investors who chose to opt out of the federal class action. The financial effects of the class action settlement are reflected in our 2004 consolidated financial statements. All but three of the individual actions have been resolved.

Tax-Related Products.Deutsche Bank AG, along with certain affiliates and employees (collectively referred to as “Deutsche Bank”), have collectively been named as defendants in more than 75 legal proceedings brought by investors in various tax-oriented transactions. Deutsche Bank provided financial products and services to these investors, who were advised by various accounting, legal and financial advisory professionals. The investors claimed tax benefits as a result of these transactions, and the United States Internal Revenue Service has rejected those claims. In these legal proceedings, the investors allege that, together with Deutsche Bank, the professional advisors improperly misled the investors into believing that the claimed tax benefits would be upheld by the Internal Revenue Service. The legal proceedings are pending in numerous state and federal courts and in arbitration, and claims against Deutsche Bank are alleged under both U.S. state and federal law. Many of the claims against Deutsche Bank are asserted by individual investors, while others are asserted on behalf of a putative investor class. No litigation class has been certified as against Deutsche Bank. The legal proceedings are currently at various pre-trial stages, including discovery.

The United States Department of Justice (“DOJ”) is also conducting a criminal investigation of tax-oriented transactions that were executed from approximately 1997 through 2001. In connection with that investigation, DOJ has sought various documents and other information from Deutsche Bank and has been investigating the actions of various individuals and entities, including Deutsche Bank, in such transactions. In the latter half of 2005, DOJ brought criminal charges against numerous individuals based on their participation in certain tax-oriented transactions while employed by entities other than Deutsche Bank. In the latter half of 2005, DOJ also entered into a Deferred Prosecution Agreement with an accounting firm (the “Accounting Firm”), pursuant to which DOJ agreed to defer prosecution of a criminal charge against the Accounting Firm based on its participation in certain tax-oriented transactions provided that the Accounting Firm satisfied the terms of the Deferred Prosecution Agreement. On February 14, 2006, DOJ announced that it had entered into a Deferred Prosecution Agreement with a financial institution (the “Financial Institution”), pursuant to which DOJ agreed to defer prosecution of a criminal charge against the Financial Institution based on its role in providing financial products and

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services in connection with certain tax-oriented transactions provided that the Financial Institution satisfied the terms of the Deferred Prosecution Agreement. Deutsche Bank provided similar financial products and services in certain tax-oriented transactions that are the same or similar to the tax-oriented transactions that are the subject of the above-referenced criminal charges. Deutsche Bank also provided financial products and services in additional tax-oriented transactions as well. DOJ’s criminal investigation is on-going.

In the Matter of KPMG LLP Certain Auditor Independence Issues.On November 20, 2003, the SEC requested us to produce certain documents in connection with an ongoing investigation of certain auditor independence issues relating to KPMG LLP. We are cooperating with the SEC in its inquiry. KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (KPMG DTG), a KPMG LLP affiliate, is our auditor. Aspects of this investigation appear to involve certain tax-oriented transactions among those at issue in the tax-related litigation described above, where Deutsche Bank provided financial products and services and a KPMG LLP affiliate advised the investors. During all relevant periods, including the present, KPMG DTG has confirmed to us that KPMG DTG was and is “independent” from us under applicable accounting and SEC regulations.

Kirch Litigation. In May 2002, Dr. Leo Kirch personally and as an assignee initiated legal action against Dr. Breuer and Deutsche Bank AG alleging that a statement made by Dr. Breuer (then the Spokesman of Deutsche Bank’s Management Board) in an interview with Bloomberg television on February 4, 2002 regarding the Kirch Group was in breach of laws and financially damaging to Kirch. On January 24, 2006 the German Federal Supreme Court sustained the action for the declaratory judgment only in respect of the claims assigned by the PrintBeteiligungs GmbH. Such action does not require a proof of any loss caused by the statement made in the interview. PrintBeteiligungs GmbH is the only company of the Kirch Group which was a borrower of Deutsche Bank. Claims by Kirch personally and by the group holding company, TaurusHolding GmbH & Co. KG, were dismissed. To be awarded a judgment for damages against Deutsche Bank AG, Dr. Kirch would have to file a new lawsuit; in such proceedings he would have to prove that the statement caused financial damages to PrintBeteiligungs GmbH and the amount thereof.

In 2003 Dr. Kirch instituted legal action in the Supreme Court of the State of New York in which he seeks the award of compensatory and punitive damages based upon Dr. Breuer’s interview. Upon referral to the U.S. District Court for the Southern District of New York, the case was dismissed on September 24, 2004. Dr. Kirch appealed this decision. The hearing before the U.S. Court of Appeals for the Second Circuit took place on October 21, 2005.

On December 31, 2005 the KGL Pool GmbH filed a lawsuit against Deutsche Bank and Dr. Breuer. The lawsuit is based on alleged claims assigned from various subsidiaries of the former Kirch Group. The KGL Pool GmbH is also a plaintiff in the above mentioned case in the USA and seeks a declaratory judgment to the effect that Deutsche Bank AG and Dr. Breuer are jointly and severally liable for damages as a result of the interview statement and the behavior of Deutsche Bank in respect of several subsidiaries of the Kirch Group.

Philipp Holzmann AG.Philipp Holzmann AG (“Holzmann”) is a major German construction firm which filed for insolvency in March 2002. We had been a major creditor bank and holder of an equity interest of Holzmann for many decades, and, from April 1997 until April 2000, a former member of our Management Board was the Chairman of its Supervisory Board. When Holzmann had become insolvent at the end of 1999, a consortium of banks led by us participated in late 1999 and early 2000 in a restructuring of Holzmann that included the banks’ extension of a credit facility, participation in a capital increase and exchange of debt into convertible bonds. In March 2002, Holzmann and several of its subsidiaries, including in particular imbau Industrielles Bauen GmbH (“imbau”), filed for insolvency. As a result of this insolvency, the administrators for Holzmann and for imbau and a group of bondholders have informed us they are asserting claims against us because of our role as lender to the Holzmann group prior to and after the restructuring and as leader of the consortium of banks which supported the restructuring. The purported claims include claims that amounts repaid to the banks constituted voidable preferences that should be returned to the insolvent entities and claims of lender liability resulting from the banks’ support for an allegedly infeasible restructuring. Although we are in ongoing discussions, we cannot exclude that some of the parties may file lawsuits against us. To date, the administra-

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tor for imbau filed a lawsuit against us in August 2004 alleging that payments received by us in respect of a loan made to imbau in 1997 and 1998 and in connection with a real estate transaction that was part of the restructuring constituted voidable preferences that should be returned to the insolvent entity. Several bondholders filed a lawsuit against us in December 2005 seeking damages because of our allegedly unlawful support of Holzmann’s 1999/2000 restructuring. Additionally, Gebema N.V. filed a lawsuit in 2000 seeking damages against us alleging deficiencies in the offering documents based on which Gebema N.V. had invested in equity and convertible bonds of Holzmann in 1998.

Parmalat Litigation. Following the bankruptcy of the Italian company Parmalat, the Special Administrator of Parmalat, Mr. Enrico Bondi, is suing Deutsche Bank for damages totaling€ 2.2 billion for facilitating the insolvency offense of delaying the filing of a petition in insolvency allegedly committed by Parmalat’s former management and supervisory board. There are two separate complaints and they allege that by managing and/or underwriting the issuance of Parmalat bonds in 2003 and entering into certain derivative transactions, Deutsche Bank assisted Parmalat by providing liquidity in order to enable Parmalat to meet its short term liabilities/obligations. It is alleged that Deutsche Bank knowingly helped Parmalat to continue its business for several months until December 2003, despite being aware of the true financial situation of the company. Parmalat reserves the right to increase the amount of damages sought. The damages currently requested are, it is claimed, equal to the loss creditors of Parmalat incurred in the second half of 2003.

Also in connection with the Parmalat insolvency, Mr. Bondi has already brought two claw-back actions for a total of€ 177 million against Deutsche Bank SpA.

General. Due to the nature of our business, we and our subsidiaries are involved in litigation, arbitration and regulatory proceedings in Germany and in a number of jurisdictions outside Germany, including the United States, arising in the ordinary course of our businesses. Such matters are subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. Although the final resolution of any such matters could have a material effect on our consolidated operating results for a particular reporting period, we believe that it should not materially affect our consolidated financial position.

Dividend Policy
We generally pay dividends each year, and expect to continue to do so in the near future. However, we may not pay dividends in the future at rates we have paid them in previous years. If we are not profitable, we may not pay dividends at all.

Under German law, our dividends are based on the results of Deutsche Bank AG as prepared in accordance with German accounting rules. Our Management Board, which prepares the annual financial statements of Deutsche Bank AG on an unconsolidated basis, and our Supervisory Board, which reviews them, first allocate part of Deutsche Bank’s annual surplus (if any) to our statutory reserves and to any losses carried forward, as it is legally required to do. For treasury shares a reserve in the amount of their value recorded on the asset side must be set up from the annual surplus or from other revenue reserves. They then allocate the remainder between other revenue reserves (or retained earnings) and balance sheet profit (or distributable profit). They may allocate up to one-half of this remainder to other revenue reserves, and must allocate at least one-half to balance sheet profit. We then distribute the full amount of the balance sheet profit of Deutsche Bank AG if the shareholders’ meeting resolves so. The shareholders’ meeting may resolve a non-cash distribution instead of or in addition to a cash dividend. However, we are not legally required to distribute our balance sheet profit to our shareholders to the extent that we have issued participatory rights (Genussrechte) or granted a silent participation (stille Gesellschaft) that accord their holders the right to a portion of our distributable profit.

We declare dividends at the Annual General Meeting and pay them once a year. If we issue a new class of shares, our Articles of Association permit us to declare a different dividend entitlement for the new class of shares.

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Significant Changes

On March 9, 2006, we announced that, due to new information that emerged since the release of our 2005 preliminary, unaudited earnings on February 2, 2006, we increased our legal provisions for 2005. The adjustment mainly relates to certain tax-oriented transactions executed with U.S. counterparties from approximately 1997 to 2001. The net increase in legal provisions reduced the previously announced net income by€ 250 million. Most of this adjustment is treated as not deductible for income tax purposes.

As described in “Item 7: Major Shareholders and Related Party Transactions – Related Party Transactions – grundbesitz-invest”, we committed to provide compensation to certain investors in the Grundbesitz fund, as well as certain liquidity support in connection with its reopening on March 3, 2006.

Otherwise, there have been no significant changes subsequent to December 31, 2005.

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Item 9: The Offer and Listing

Offer and Listing Details

Our share capital consists of ordinary shares issued in registered form without par value. Under German law, no par value shares are deemed to have a “nominal” value equal to the total amount of share capital divided by the number of shares. Our shares have a nominal value of€ 2.56 per share.

The principal trading market for our shares is the Frankfurt Stock Exchange. We maintain a share register in Frankfurt am Main and, for purpose of the trading our shares on the New York Stock Exchange, a share register in New York.

All shares on German stock exchanges trade in euro. The following table sets forth, for the calendar periods indicated, high, low and period-end prices and average daily trading volumes for our shares as reported by the Frankfurt Stock Exchange and the high, low and period-end quotation for the DAX^®(Deutscher Aktienindex)index, the principal German share index. All quotations are based on intraday prices. The DAX is a continuously updated, capital-weighted performance index of 30 major German companies. The DAX includes shares selected on the basis of stock exchange turnover and market capitalization. Adjustments to the DAX are made for capital changes, subscription rights and dividends, as well as for changes in the available free float.

	Our shares								DAX®-Index
	Price per share						Average daily
	High		Low		Period end		trading		High		Low		Period end
	(in€)		(in€)		(in€)		volume
							(in thousands
							of shares)
Monthly 2006:
February		94.95		86.14		92.45		4,174.07		5,916.80		5,598.05		5,796.04
January		88.79		81.17		88.38		3,762.63		5,697.01		5,290.49		5,674.15
Monthly 2005:
December		85.00		80.15		81.90		3,398.00		5,469.96		5,208.49		5,408.26
November		84.97		77.59		83.13		3,488.20		5,241.00		4,891.62		5,193.40
October		79.62		74.06		78.13		3,891.74		5,138.02		4,762.75		4,929.07
September		78.50		70.20		77.82		4,320.63		5,061.84		4,816.67		5,044.12
Quarterly 2005:
Fourth Quarter		85.00		74.06		81.90		3,591.02		5,469.96		4,762.75		5,408.26
Third Quarter		78.50		63.00		77.82		3,855.17		5,061.84		4,444.94		5,044.12
Second Quarter		68.52		60.90		64.71		3,781.06		4,637.34		4,157.51		4,586.28
First Quarter		69.90		63.35		66.55		3,603.63		4,435.31		4,160.83		4,348.77
Quarterly 2004:
Fourth Quarter		66.33		56.96		65.32		3,461.01		4,272.18		3,838.98		4,256.08
Third Quarter		65.35		52.37		57.87		3,831.65		4,101.52		3,618.58		3,892.90
Second Quarter		73.08		63.02		64.58		4,105.99		4,156.89		3,710.02		4,052.73
First Quarter		77.77		62.20		67.65		4,874.38		4,175.48		3,692.40		3,856.70
Annual:
2005		85.00		60.90		81.90		3,709.96		5,469.96		4,157.51		5,408.26
2004		77.77		52.37		65.32		4,066.27		4,272.18		3,618.58		4,256.08
2003		66.04		32.97		65.70		4,923.58		3,996.28		2,188.75		3,965.16
2002		82.65		35.60		43.90		4,703.89		5,467.31		2,519.30		2,892.63
2001		105.64		43.20		79.40		3,656.06		6,795.14		3,539.18		5,160.10

Note: All data is based on Orderbuchstatistik (Xetra).

On February 28, 2006, the closing quotation of our shares on the Frankfurt Stock Exchange within the Xetra system (which we describe below) was€ 92.45 per share and the closing quotation of the DAX-Index was 5,796.04. Our shares represented 7.68% of the DAX-Index on that date.

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Since October 3, 2001 our shares have also traded on the New York Stock Exchange, trading under the symbol “DB”. The following table shows, for the periods indicated, high, low and period-end prices and average daily trading volumes for our shares as reported on the New York Stock Exchange Composite Tape.

	Our shares
	Price per share						Average daily
	High		Low		Period end		trading
	(in U.S.$)		(in U.S.$)		(in U.S.$)		volume
							(in number of
							shares)
Monthly 2006:
February		113.30		103.32		110.75		120,021
January		107.73		97.18		107.43		130,115
Monthly 2005:
December		100.41		96.18		96.87		112,171
November		99.44		93.15		97.42		113,648
October		95.00		88.87		93.60		111,676
September		96.25		87.50		93.52		134,838
Quarterly 2005:
Fourth Quarter		100.41		88.87		96.87		112,498
Third Quarter		96.25		76.30		93.52		104,159
Second Quarter		88.27		76.16		77.90		81,886
First Quarter		93.41		82.67		86.20		75,033
Quarterly 2004:
Fourth Quarter		89.35		72.92		89.01		80,633
Third Quarter		79.07		64.70		71.94		81,423
Second Quarter		87.55		76.10		79.11		79,389
First Quarter		94.99		77.60		83.48		117,032
Annual:
2005		100.41		76.16		96.87		93,537
2004		94.99		64.70		89.01		89,483
2003		82.62		36.44		82.21		96,537
2002		74.00		35.26		45.43		54,047
2001 (beginning October 3, 2001)		70.28		51.90		70.15		50,744

Our shares were also traded over-the-counter in the United States in the form of American Depositary Receipts until September 28, 2001, when our ADR Program was terminated. In 2001 through September 28, 2001, the high, low and period-end prices of our American Depositary Receipts on the U.S. over-the-counter market were $ 98.00, $ 42.00 and $ 54.25, respectively.

For a discussion of the possible effects of fluctuations in the exchange rate between the euro and the U.S. dollar on the price of our shares, see “Item 3: Key Information – Exchange Rate and Currency Information.”

You should not rely on our past share performance as a guide to our future share performance.

Plan of Distribution

Not required because this document is filed as an annual report.

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Markets

As described above, the principal trading market for our shares is the Frankfurt Stock Exchange. Our shares are also traded on the New York Stock Exchange and on the seven other German stock exchanges (Berlin, Bremen, Düsseldorf, Hamburg, Hannover, Munich and Stuttgart), as well as on the Amsterdam, Brussels, London, Luxembourg, Paris, Tokyo, Vienna and Swiss stock exchanges. Standardized options on our shares trade on the German-Swiss Stock Exchange(Eurex), which is jointly owned and operated by Deutsche Börse AG and the Swiss Stock Exchange. Standardized options on our shares are also traded on the Paris stock exchange(Marché à Terme International de France) and the Amsterdam stock exchange(European Option Exchange).

We review our listings on a regular basis. The Management Board has decided to pursue the delisting on certain stock exchanges other than Germany and New York in order to benefit from the integration of the financial markets.

Frankfurt Stock Exchange
Deutsche Börse AG operates the Frankfurt Stock Exchange, the most significant of the eight German stock exchanges. The Frankfurt Stock Exchange, including Xetra (as described below), accounted for more than 95.70% of the total turnover in exchange-traded shares in Germany in 2005 (including 90.09% of the total turnover which is accounted for by Xetra in 2005). According to the World Federation of Exchanges, Deutsche Börse AG was the sixth largest stock exchange in the world in 2005 measured by total value of share trading (including investment funds), after the New York Stock Exchange, NASDAQ, London, Tokyo and Euronext.

As of December 31, 2005, the shares of 6,823 companies traded on the various market segments of the Frankfurt Stock Exchange. Of these, 835 were German companies and 5,988 were non-German companies.

The prices of actively-traded securities, including our shares, are continuously quoted on the Frankfurt Stock Exchange floor between 9:00 a.m. and 8:00 p.m., Central European time, each business day. Most securities listed on the Frankfurt Stock Exchange are traded on the auction market. Securities also trade in interbank dealer markets, both on and off the Frankfurt Stock Exchange. The price of securities on the Frankfurt Stock Exchange is determined by open outcry and noted by publicly commissioned stockbrokers. These publicly commissioned stockbrokers are members of the exchange but do not, as a rule, deal with the public.

The Frankfurt Stock Exchange publishes a daily official list of its quotations(Amtliches Kursblatt)for all traded securities. The list is available on the Internet at http://www.deutsche-boerse.com under the heading: “Market Data & Analytics – Trading Statistics + Analyses – Spot Market Statistics – Order Book Statistics”.

Our shares trade on Xetra (Exchange Electronic Trading) in addition to trading on the auction market. Xetra is an electronic exchange trading platform operated by Deutsche Börse AG. Xetra is integrated into the Frankfurt Stock Exchange and is subject to its rules and regulations. Xetra is available daily between 9:00 a.m. and 5:30 p.m. Central European time to brokers and banks that have been admitted to Xetra by the Frankfurt Stock Exchange. Private investors are permitted to trade on Xetra through their banks or brokers.

Transactions on the Frankfurt Stock Exchange (including transactions through the Xetra system) are settled on the second business day following the transaction. Transactions off the Frankfurt Stock Exchange are also generally settled on the second business day following the transaction, although parties may agree on a different settlement time. Transactions off the Frankfurt Stock Exchange may occur in the case of large trades or if one of the parties is not German. The standard terms and conditions under which German banks generally conduct their business with customers require the banks to execute customer buy and sell orders for listed securities on a stock exchange unless the customer specifies otherwise.

The Frankfurt Stock Exchange can suspend trading if orderly trading is temporarily endangered or if necessary to protect the public interest. The BaFin monitors trading activities on the Frankfurt Stock Exchange and the other German stock exchanges.

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Selling Shareholders

Not required because this document is filed as an annual report.

Dilution

Not required because this document is filed as an annual report.

Expenses of the Issue

Not required because this document is filed as an annual report.

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Item 10: Additional Information

Share Capital

Not required because this document is filed as an annual report.

Memorandum and Articles of Association

For information regarding our Articles of Association, please refer to the discussion under the corresponding section of our Annual Report on Form 20-F for the year ended December 31, 2003, which discussion we hereby incorporate by reference into this document.

Material Contracts

In the usual course of our business, we enter into numerous contracts with various other entities. We have not, however, entered into any material contracts outside the ordinary course of our business within the past two years.

Exchange Controls

As in other member states of the European Union, regulations issued by the competent European Union authorities to comply with United Nations Resolutions have caused freeze orders on assets of certain legal and natural persons designated in such regulations. Currently, these European Union regulations relate to persons of or in Burma/Myanmar, Côte d’Ivoire, the Democratic Republic of Congo (Zaire), Iraq, Liberia, Sudan, former Yugoslavia/Serbia, Zimbabwe, persons of or in connection with the Al-Qaida network or the Taliban and certain other persons and entities with a view to combat international terrorism.

With some exceptions, corporations or individuals residing in Germany are required to report to the Bundesbank any payment received from, or made to or for the account of, a nonresident corporation or individual that exceeds€ 12,500 (or the equivalent in a foreign currency). This reporting requirement is for statistical purposes.

Subject to the above-mentioned exceptions, there are currently no German laws, decrees or regulations that would prevent the transfer of capital or remittance of dividends or other payments to our shareholders who are not residents or citizens of Germany.

There are also no restrictions under German law or our Articles of Association concerning the right of nonresident or foreign shareholders to hold our shares or to exercise any applicable voting rights.

Taxation

The following is a summary of the material German and United States federal income tax consequences of the ownership and disposition of shares for a resident of the United States for purposes of the income tax convention between the United States and Germany (the “Treaty”) who is fully eligible for benefits under the Treaty. A U.S. resident will generally be entitled to Treaty benefits if it is:

– the beneficial owner of shares (and of the dividends paid with respect the shares);

– an individual resident of the United States, a U.S. corporation, or a partnership, estate or trust to the extent its income is subject to taxation in the United States in its hands or in the hands of its partners or beneficiaries;

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– not also a resident of Germany for German tax purposes; and

– not subject to an “anti-treaty shopping” article that applies in limited circumstances.

The Treaty benefits discussed below generally are not available to shareholders who hold shares in connection with the conduct of business through a permanent establishment, or the performance of personal services through a fixed base, in Germany. The summary does not discuss the treatment of those shareholders.

The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any particular shareholder, including tax considerations that arise from rules of general application or that are generally assumed to be known by shareholders. In particular, the summary deals only with shareholders that will hold shares as capital assets and does not address the tax treatment of shareholders that are subject to special rules, such as fiduciaries of pension, profit-sharing or other employee benefit plans, banks, insurance companies, dealers in securities or currencies, persons that hold shares as a position in a straddle, conversion transaction, synthetic security or other integrated financial transaction, persons that elect mark-to-market treatment, persons that own, directly or indirectly, ten percent or more of our voting stock and persons whose “functional currency” is not the U.S. dollar. The summary is based on laws, treaties and regulatory interpretations in effect on the date hereof, all of which are subject to change.

Shareholders should consult their own advisors regarding the tax consequences of the ownership and disposition of shares in light of their particular circumstances, including the effect of any state, local, or other national laws.

Taxation of Dividends
Dividends that we pay are subject to German withholding tax at an aggregate rate of 21.1% (consisting of a 20% withholding tax and a 1.1% surcharge). Under the Treaty, a U.S. resident will be entitled to receive a refund from the German tax authorities of 6.1 in respect of a declared dividend of 100. For example, for a declared dividend of 100, a U.S. resident initially will receive 78.9, may claim a refund from the German tax authorities of 6.1 and, therefore, receive a total cash payment of 85 (i.e., 85% of the declared dividend). For U.S. tax purposes, a U.S. resident will be deemed to have received total dividends of 100.

The German rules provide that a dividend received by corporations, and half of the dividend received by individuals, will be exempt from German tax. Beginning in 2004, 5% of such dividends received by corporations from both domestic and foreign shareholdings is treated as non-deductible expense for corporation tax purposes. These rules apply regardless of whether a shareholder is a tax resident of Germany or a nonresident, if the shares form part of the assets of a permanent establishment or fixed base that the nonresident maintains in Germany. In any event, German withholding tax will be levied on the full amount of the cash dividend paid to a U.S. resident as described above.

The gross amount of dividends that a U.S. resident receives (including amounts withheld in respect of German withholding tax) generally will be subject to U.S. federal income taxation as foreign source dividend income, and will not be eligible for the dividends received deduction generally allowed to U.S. corporations. German withholding tax at the 15% rate provided under the Treaty will be treated as a foreign income tax that, subject to generally applicable limitations under U.S. tax law, is eligible for credit against a U.S. resident’s U.S. federal income tax liability or, at its election, may be deducted in computing taxable income. Thus, for a declared dividend of 100, a U.S. resident will be deemed to have paid German taxes of 15. A U.S. resident cannot claim credits for German taxes that would have been refunded to it if it had filed a claim for refund. Foreign tax credits will not be allowed for withholding taxes imposed in respect of certain short-term or hedged positions in securities. U.S. tax authorities have indicated an intention to use existing law and to issue new regulations to limit the creditability of foreign withholding taxes in certain situations, including where the burden of foreign taxes is separated inappropriately from the related foreign income. A U.S. resident should consult its tax advisor if it has questions about whether such rules may affect its ability to utilize foreign tax credits.

Subject to certain exceptions our dividends received by an individual before January 1, 2009 will be subject to U.S taxation at a maximum rate of 15%. This lower rate applies to our dividends only if the shares in respect of which such dividend is paid have been held by the U.S. resident individual for at

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least 61 days during the 121 day period beginning 60 days before the ex-dividend date. Periods during which a U.S. resident individual hedges a position in its shares or related property may not count for purposes of the holding period test. Our dividends also would not be eligible for the lower rate if a U.S. resident individual elects to take the dividends into account as investment income for purposes of limitations on deductions for investment interest. A U.S. resident individual should consult its own tax advisor regarding the availability of the reduced dividend rate in light of its own particular circumstances.

If a U.S. resident receives a dividend paid in euros, it will recognize income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars. If dividends are converted into U.S. dollars on the date of receipt, a U.S. resident generally should not be required to recognize foreign currency gain or loss in respect of the dividend income but may be required to recognize foreign currency gain or loss on the receipt of a refund in respect of German withholding tax (but not with respect to the portion of the Treaty refund that is treated as an additional dividend) to the extent the U.S. dollar value of the refund differs from the U.S. dollar equivalent of that amount on the date of receipt of the underlying dividend.

Refund Procedures
To claim the refund a U.S. resident must submit (either directly or, as described below, through the Depository Trust Company), within four years from the end of the calendar year in which the dividend is received, a claim for refund to the German tax authorities together with the original bank voucher (or certified copy thereof) issued by the paying entity documenting the tax withheld. Claims for refunds are made on a special German claim for refund form (Form E-USA), which must be filed with the German tax authorities: Bundeszentralamt für Steuern (formerly Bundesamt für Finanzen), 53221 Bonn-Beuel, Germany. The German claim for refund forms may be obtained from the German tax authorities at the same address where the applications are filed, from the Embassy of the Federal Republic of Germany, 4645 Reservoir Road, N.W., Washington, D.C. 20007-1998 or from the Office of International Operations, Internal Revenue Service, 1325 K Street, N.W., Washington, D.C. 20225, Attention: Taxpayer Service Division, Room 900 or can be downloaded from the homepage of the Bundeszentralamt für Steuern (http://www.bzst.bund.de).

A U.S. resident must also submit to the German tax authorities a certification (on IRS Form 6166) with respect to its last filed U.S. federal income tax return. The certification may be obtained from the office of the Director of the Internal Revenue Service Center by filing a request for certification with the Internal Revenue Service, Philadelphia Service Center U.S Residency Certification Request, P.O. Box 16347, Philadelphia, PA 19114-0447. Requests for certification are to be made in writing or by faxing a request and must include the U.S. resident’s name, social security number or employer identification number, tax return form number, the address where the certification should be sent, the name of the country requesting the certification (Germany), and the tax year being certified. Generally, the tax year being certified would most likely reflect the period of the U.S. resident’s last filed tax return. If the U.S. resident desires a “current year” Form 6166, its Form 6166 request must include a penalties of perjury statement, which has been signed by it in the current year under penalties of perjury, certifying that 1) it is a resident of the United States currently, and 2) it will continue to be a resident of the United States for the remainder of the current, taxable year. For the purpose of requesting IRS Form 6166 it must use IRS Form 8802. Requests for certification can include a request to the Internal Revenue Service to send the certification directly to the German tax authorities. This certification is valid for three years.

A simplified refund procedure is available if a U.S. resident holds its shares through banks and brokers participating in the Depository Trust Company. These arrangements have been made on a trial basis and may be amended or revoked at any time in the future. If the U.S. resident’s bank or broker elects to participate in the simplified procedure, the Depository Trust Company will perform administrative functions necessary to claim the Treaty refund for it. In this case, its broker will report to the Depository Trust Company the number of shares that it holds together with the number of shares held by other holders that are also eligible to claim Treaty refunds. The Depository Trust Company will then prepare and file a combined claim for refund with the German tax authorities. The combined claim need not include evidence of a U.S resident’s entitlement to Treaty benefits.

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Under audit procedures that apply for up to four years, the German tax authorities may require banks and brokers to provide evidence regarding the entitlement of their clients to Treaty benefits. In the event of such an audit, brokers must submit to the German tax authorities a list containing names and addresses of the relevant holders of shares, and the official certification on IRS Form 6166 with respect to the last filed United States federal income tax return of those holders. Banks and brokers participating in the Depository Trust Company arrangements may require a U.S. resident to provide documentation evidencing its eligibility for Treaty benefits prior to any audit.

The German tax authorities will issue refunds denominated in euros. In the case of shares held through banks or brokers participating in the Depository Trust Company, the refunds will be issued to the Depository Trust Company, which will convert the refunds to U.S. dollars. The resulting amounts will be paid to banks or brokers for the account of holders.

If a U.S. resident holds its shares through a bank or broker who participates in the Depositary Trust Company that elects to participate in the simplified refund procedure, it could take at least three weeks for it to receive a refund after a combined claim for refund has been filed with the German tax authorities. If a U.S. resident files a claim for refund directly with the German tax authorities, it could take at least eight months for it to receive a refund. The length of time between filing a claim for refund and receipt of that refund is uncertain and we can give no assurances as to when any refund will be received.

Taxation of Capital Gains
Under the Treaty, a U.S resident will not be subject to German capital gains tax in respect of a sale or other disposition of shares. For U.S. federal income tax purposes, gain or loss realized by a U.S. resident on the sale or disposition of shares will be capital gain or loss, and will be long-term capital gain or loss if the shares were held for more than one year. The net amount of long-term capital gain realized by an individual generally is subject to taxation at a current maximum rate of 15% under recently enacted legislation. Any such gain generally would be treated as income arising from sources within the United States; any such loss would generally be allocated against U.S. source income. The ability to offset capital losses against ordinary income is subject to limitations.

German Gift and Inheritance Taxes
Under the current estate, inheritance and gift tax treaty between the United States and Germany (the “Estate Tax Treaty”), a transfer of shares generally will not be subject to German gift or inheritance tax so long as the donor or decedent, and the heir, donee or other beneficiary, was not domiciled in Germany for purposes of the Estate Tax Treaty at the time the gift was made, or at the time of the decedent’s death, and the shares were not held in connection with a permanent establishment or fixed base in Germany.

The Estate Tax Treaty provides a credit against U.S. federal estate and gift tax liability for the amount of inheritance and gift tax paid in Germany, subject to certain limitations, in a case where shares are subject to German inheritance or gift tax and United States federal estate or gift tax.

Other German Taxes
There are presently no German net wealth, transfer, stamp or other similar taxes that would apply to a U.S. resident as a result of the receipt, purchase, ownership or sale of shares.

United States Information Reporting and Backup Withholding
Dividends and payments of the proceeds on a sale of shares, paid within the United States or through certain U.S.-related financial intermediaries are subject to information reporting and may be subject to backup withholding unless the U.S. resident (1) is a corporation or other exempt recipient or (2) provides a taxpayer identification number and certifies (on IRS Form W-9) that no loss of exemption from backup withholding has occurred.

Shareholders that are not U.S. persons generally are not subject to information reporting or backup withholding. However, a non-U.S. person may be required to provide a certification (generally on IRS

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Form W-8BEN) of its non-U.S. status in connection with payments received in the United States or through a U.S.-related financial intermediary.

Dividends and Paying Agents

Not required because this document is filed as an annual report.

Statement by Experts

Not required because this document is filed as an annual report.

Documents on Display

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and other information with the Securities and Exchange Commission. You may inspect and copy these materials, including this document and its exhibits, at the Commission’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, and at the Commission’s regional offices at 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604, and at 233 Broadway, New York, New York, 10279. You may obtain copies of the materials from the Public Reference Room of the Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330. Our Securities and Exchange Commission filings are also available over the Internet at the Securities and Exchange Commission’s website at http://www.sec.gov under File Number 1-15242. In addition, you may visit the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005 to inspect material filed by us.

Subsidiary Information

Not applicable.

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Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk

Risk Management

The wide variety of our businesses requires us to identify, measure, aggregate and manage our risks effectively, and to allocate our capital among our businesses appropriately. We manage risk through a framework of risk principles, organizational structures and risk measurement and monitoring processes that are closely aligned with the activities of our Group Divisions.

Risk Management Principles
The following key principles underpin our approach to risk management:

– Our Management Board provides overall risk management supervision for our consolidated Group as a whole. Our Supervisory Board regularly monitors our risk profile.

– We manage credit, market, liquidity, operational, business and reputational risks in a coordinated manner at all relevant levels within our organization. This also holds true for complex products which we typically manage within our framework established for trading exposures.

– The structure of our risk management function is closely aligned with the structure of our Group Divisions.

– The risk management function is independent of our Group Divisions.

Risk Management Organization
Our Group Chief Risk Officer, who is a member of our Management Board, is responsible for our credit, market, operational and business risk management activities within our consolidated Group. The Group Chief Risk Officer chairs our Group Risk Committee, which is responsible for planning, management and control of the aforementioned risks across our consolidated Group.

The Group Risk Committee has delegated some of its tasks to sub-committees, the most significant being the Group Credit Policy Committee. Among others it reviews credit policies, industry reports and country risk limit applications throughout the Group.

For each of our Group Divisions, risk management units are established with the mandate to:

– Ensure that the business conducted within each division is consistent with the risk appetite the Group Risk Committee has set;

– Formulate and implement risk policies, procedures and methodologies that are appropriate to the businesses within each division;

– Approve credit risk and market risk limits;

– Conduct periodic portfolio reviews to ensure that the portfolio of risks is within acceptable parameters; and

– Develop and implement risk management infrastructures and systems that are appropriate for each division.

Group Treasury is responsible for the management of liquidity risk. Our liquidity risk status as well as policies relating to the identification, measurement and management of liquidity risk are reviewed on a regular basis by our Group Asset and Liability Committee, which is chaired by the Board Member responsible for Treasury.

The Group Reputational Risk Committee (GRRC) is an official sub-committee of both the Group Risk Committee and the Group Compliance Committee, and is co-chaired by the chairmen of these committees. The GRRC reviews and makes final determinations on all reputational risk issues, where escalation of such issues is deemed necessary by senior business and regional management, or required under other Group policies and procedures.

Our controlling, audit and legal departments support our risk management function. They operate independently both of the Group Divisions and of the risk management function. The role of the controlling department is to quantify the risk we assume and ensure the quality and integrity of our risk-related data. Our audit department reviews the compliance of our internal control procedures with internal and

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regulatory standards. Our legal department provides legal advice and support on topics including collateral arrangements and netting.

Categories of Risk
The most important risks we assume are specific banking risks and reputational risks, as well as risks arising from the general business environment.

Specific Banking Risks
Our risk management processes distinguish among four kinds of specific banking risks: credit risk, market risk, liquidity risk and operational risk.

– Credit riskarises from all transactions that give rise to actual, contingent or potential claims against any counterparty, obligor or borrower (which we refer to collectively as “counterparties”). This is the largest single risk we face. We distinguish among three kinds of credit risk:

– Default riskis the risk that counterparties fail to meet contractual payment obligations.

– Country riskis the risk that we may suffer a loss, in any given country, due to any of the following reasons: a possible deterioration of economic conditions, political and social upheaval, nationalization and expropriation of assets, government repudiation of indebtedness, exchange controls and disruptive currency depreciation or devaluation. Country Risk includes transfer risk which arises when debtors are unable to meet their obligations owing to an inability to transfer assets to nonresidents due to direct sovereign intervention.

– Settlement riskis the risk that the settlement or clearance of transactions will fail. It arises whenever the exchange of cash, securities and/or other assets is not simultaneous.

– Market riskarises from the uncertainty concerning changes in market prices and rates (including interest rates, equity prices, foreign exchange rates and commodity prices), the correlations among them and their levels of volatility.

– Liquidity riskis the risk arising from our potential inability to meet all payment obligations when they come due.

– Operational riskis the potential for incurring losses in relation to employees, contractual specifications and documentation, technology, infrastructure failure and disasters, projects, external influences and customer relationships. This definition includes legal and regulatory risk, but excludes business risk.

Reputational Risk
Within our risk management processes, we define reputational risk as the threat that publicity concerning a transaction, counterparty or business practice involving a client will negatively impact the public’s trust in our organization.

Business Risk
Business risk describes the risk we assume due to potential changes in general business conditions, such as our market environment, client behavior and technological progress. This can affect our earnings if we fail to adjust quickly to these changing conditions.

Insurance Specific Risk
We are not engaged in any activities that result in insurance specific risk material to the Group.

Risk Management Tools
We use a comprehensive range of quantitative tools and metrics for monitoring and managing risks. Some of these tools are common to a number of risk categories, while others are tailored to the particular features of specific risk categories.

As a matter of policy, we continually assess the appropriateness and the reliability of our quantitative tools and metrics in light of our changing risk environment. The following are the most important quantitative tools and metrics we currently use to measure, manage and report our risk:

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– Expected Loss.We use expected loss as a measure of the default, transfer, and settlement risk elements of our credit risk. Expected loss is a measurement of the loss we can expect within a one-year period on our credit exposure, based on our historical loss experience. When calculating expected loss, we take into account credit risk ratings, collateral, maturities and statistical averaging procedures to reflect the risk characteristics of our different types of exposures and facilities. All parameter assumptions are based on statistical averages of our internal default and loss history as well as external benchmarks. We use expected loss as a tool of our risk management process and as part of our management reporting systems. We also consider the applicable results of the expected loss calculations when establishing the other inherent loss allowance included in our financial statements. Applicable results in this context are those that are used to estimate losses inherent in loans and contingent liabilities that are not already considered in the specific loss component of our allowance or our allowance for smaller-balance standardized homogeneous loans.

– Economic Capital.Economic capital measures the amount of capital we need to absorb very severe unexpected losses arising from our exposures. “Very severe” in this context means that economic capital is set at a level to cover with a probability of 99.98% the aggregated unexpected losses within one year. We calculate economic capital for the default risk, transfer risk and settlement risk elements of credit risk, for market risk, for operational risk and for general business risk. We use economic capital to show an aggregated view of our risk position from individual business lines up to our consolidated Group level. We also use economic capital (as well as goodwill and other nonamortizing intangibles) in order to allocate our book capital among our businesses. This enables us to assess each business unit’s risk-adjusted profitability, which is a key metric in managing our financial resources in order to optimize the value generated for our shareholders. In addition, we consider economic capital, in particular for credit risk, when we measure the risk-adjusted profitability of our client relationships.

– Value-at-Risk.We use the value-at-risk approach to derive quantitative measures for our trading book market risks under normal market conditions. Our value-at-risk figures play a role in both internal and external (regulatory) reporting. For a given portfolio, value-at-risk measures the potential future loss (in terms of market value) that, under normal market conditions, will not be exceeded with a defined confidence level in a defined period. The value-at-risk for a total portfolio represents a measure of our diversified market risk (aggregated using pre-determined correlations) in that portfolio.

– Stress Testing.We supplement our analysis of market risk with stress testing. We perform stress tests because value-at-risk calculations are based on relatively recent historical data and only purport to estimate risk up to a defined confidence level. Therefore, they only reflect possible losses under relatively normal market conditions. Stress tests help us determine the effects of potentially extreme market developments on the value of our market risk sensitive exposures. We use stress testing to determine the amount of economic capital we need to allocate to cover our market risk exposure under extreme market conditions.

– Regulatory Risk Reporting.German banking regulators assess our capacity to assume risk in several ways, which are described in more detail in “Item 4: Information on the Company – Regulation and Supervision” and Note [22] of the consolidated financial statements.

Credit Risk
Credit risk makes up the largest part of our risk exposures. We measure and manage our credit risk following the below principles:

– In all our Group Divisions consistent standards are applied in the respective credit decision processes.

– The approval of credit limits for counterparties and the management of our individual credit exposures must fit within our portfolio guidelines and our credit strategies, and each decision also involves a risk-versus-return analysis.

– Every extension of credit or material change to a credit facility (such as its tenor, collateral structure or major covenants) to any counterparty requires credit approval at the appropriate authority level.

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– We assign credit approval authorities to individuals according to their qualifications, experience and training, and we review these periodically.

– We measure and consolidate all our credit exposures to each obligor on a global consolidated basis that applies across our consolidated Group. We define an “obligor” as a group of individual borrowers that are linked to one another by any of a number of criteria we have established, including capital ownership, voting rights, demonstrable control, other indication of group affiliation; or are jointly and severally liable for all or significant portions of the credit we have extended.

Credit Risk Ratings
A primary element of the credit approval process is a detailed risk assessment of every credit exposure associated with an obligor. Our risk assessment procedures consider both the creditworthiness of the counterparty and the risks related to the specific type of credit facility or exposure. This risk assessment not only affects the structuring of the transaction and the outcome of the credit decision, but also influences the level of decision-making authority required to extend or materially change the credit and the monitoring procedures we apply to the ongoing exposure.

We have our own in-house assessment methodologies, scorecards and rating scale for evaluating the creditworthiness of our counterparties. Our granular 26-grade rating scale, which is calibrated on a probability of default measure based upon a statistical analysis of historical defaults in our portfolio, enables us to compare our internal ratings with common market practice and ensures comparability between different sub-portfolios of our institution. While we generally rate all our credit exposures individually, at times we rely on rating averages for measuring risk. When we assign our internal risk ratings, we compare them with external risk ratings assigned to our counterparties by the major international rating agencies, where possible.

Credit Limits
Credit limits set forth maximum credit exposures we are willing to assume over specified periods. They relate to products, conditions of the exposure and other factors. Our credit policies also establish special procedures (including lower approval thresholds and approval from more senior personnel) for exceptional cases when we may assume exposures beyond established limits. These exceptions provide a degree of flexibility for unusual business opportunities, new market trends and other similar factors.

Monitoring Default Risk
We monitor all of our credit exposures on a continuing basis using the risk management tools described above. We also have procedures in place to identify at an early stage credit exposures for which there may be an increased risk of loss. Counterparties, that, on the basis of the application of our risk management tools, demonstrate the likelihood of problems, are identified well in advance so that we can effectively manage the credit exposure and maximize the recovery. The objective of this early warning system is to address potential problems while adequate alternatives for action are still available. This early risk detection is a tenet of our credit culture and is intended to ensure that greater attention is paid to such exposures. In instances where we have identified customers where problems might arise, the respective exposure is placed on a watchlist.

Loan Exposure Management Group
As part of our overall framework of risk management, the Loan Exposure Management Group (LEMG) focuses on managing the credit risk of loans and lending-related commitments within:

– the investment-grade portfolio of our Corporate and Investment Bank Group Division where original maturities are greater than 180 days, and

– the medium-sized German companies’ portfolio where original maturities are greater than 360 days, excluding legacy business booked prior to April 2004.

From 2006 onwards, we have expanded the scope of LEMG to include shorter maturities in both categories and the aforementioned legacy business.

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Acting as a central pricing reference, LEMG provides the respective Corporate and Investment Bank Group Division businesses with an observed or derived capital market rate for loan applications; however, the decision of whether or not the business can enter into the loan remains with Credit Risk Management.

LEMG is concentrating on two primary initiatives within the credit risk framework to further enhance risk management discipline, improve returns and use capital more efficiently:

– to reduce single-name and industry credit risk concentrations within the credit portfolio, and

– to manage credit exposures actively by utilizing techniques including loan sales, securitization via collateralized loan obligations, and single-name and portfolio credit default swaps.

LEMG’s risk reduction activities are of increasing significance as the total notional amount of its hedges increased 35% from€ 25.7 billion as of December 31, 2004, to€ 34.6 billion as of December 31, 2005.

As of year-end 2005, LEMG held credit derivatives with an underlying notional of€ 24.7 billion. This position totaled€ 18.5 billion as of December 31, 2004.

The credit derivatives used for our portfolio management activities are accounted for at fair value and do not qualify for hedge accounting under SFAS 133.

LEMG also mitigated the credit risk of€ 9.7 billion of loans and lending-related commitments as of December 31, 2005, by synthetic collateralized loan obligations supported by financial guarantees for which the first loss piece has been sold. This position totaled€ 7.2 billion as of December 31, 2004. LEMG further mitigated€ 0.2 billion of loans and lending-related commitments as of December 31, 2005, by way of credit-linked notes. Credit mitigation by way of credit-linked notes or synthetic collateralized loan obligations supported by financial guarantees is especially important as it not only addresses the credit risk of the underlying positions but also eliminates the accounting asymmetry issue between the lending positions and credit default swaps, and allows us to manage the risk of illiquid positions.

Credit Exposure
We define our credit exposure as all transactions where losses might occur due to the fact that counterparties may not fulfill their contractual payment obligations. We calculate the gross amount of the exposure without taking into account any collateral, other credit enhancement or credit risk mitigating transactions. In the tables below, we show details about our main credit exposures categories, namely loans, contingent liabilities, over-the-counter (“OTC”) derivatives and tradable assets:

– “Loans” are net loans as reported on our balance sheet but before deduction of our allowance for loan losses.

– “Contingent Liabilities” consist of financial and performance guarantees, standby letters of credit and indemnity agreements.

– “OTC Derivatives” are our credit exposures from over-the-counter derivative transactions that we have entered into. On our balance sheet, these are included in trading assets or, for derivatives qualifying for hedge accounting, in other assets.

– “Tradable Assets” include bonds, loans and other fixed-income products that are in our trading assets as well as in securities available for sale.

Although we consider them in monitoring our credit exposures, the following are not included in the tables below: cash and due from banks, interest-earnings deposits with banks, and accrued interest receivables, amounting to€ 23.5 billion at December 31, 2005 and€ 29.5 billion at December 31, 2004; forward committed repurchase and reverse repurchase agreements, of€ 119.2 billion at December 31, 2005 and€ 99.7 billion at December 31, 2004; and irrevocable lending-related commitments, of€ 132.6 billion at December 31, 2005 and€ 103.7 billion at December 31, 2004. At December 31, 2005, 86% of our lending-related commitments were extended to counterparties rated at the equivalent of investment-grade debt ratings from the major international rating agencies.

The following table breaks down our main credit exposure categories by geographical region. For this table, we have allocated exposures to regions based on the country of domicile of our counterparties, irrespective of any affiliations the counterparties may have with corporate groups domiciled elsewhere.

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Credit risk profile by	Loans				Contingent liabilities				OTC derivatives				Tradable assets				Total
region
	Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
in€ m.	2005		2004		2005		2004		2005		2004		2005		2004		2005		2004
Eastern Europe		2,242		1,568		548		418		750		607		5,569		3,282		9,109		5,875
Western Europe		119,890		112,139		20,452		18,840		33,799		36,486		110,033		88,450		284,174		255,915
Africa		272		288		172		168		548		300		934		1,000		1,926		1,756
Asia-Pacific		11,328		8,258		4,419		2,656		6,507		6,892		50,328		57,680		72,582		75,486
North America		17,760		14,911		9,344		7,469		20,926		15,820		113,780		87,749		161,810		125,949
Central and South America		1,765		1,522		372		326		818		688		8,020		4,607		10,975		7,143
Other1		26		3		2		18		434		874		583		2,258		1,045		3,153
Total		153,283		138,689		35,309		29,895		63,782		61,667		289,247		245,026		541,621		475,277

¹ Includes supranational organizations and other exposures that we have not allocated to a single region.

The following table breaks down our main credit exposure categories according to the industry sectors of our counterparties.

Credit risk profile by	Loans						Contingent liabilities				OTC derivatives				Tradable assets				Total
industry sector
	Dec 31,			Dec 31,			Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
in€ m.	2005			2004			2005		2004		2005		2004		2005		2004		2005		2004
Banks and insurance		7,676			7,787			6,270		4,921		43,914		44,450		77,176		51,406		135,036		108,564
Manufacturing		15,703			13,270			8,996		8,028		2,366		1,837		16,426		15,919		43,491		39,054
Households		62,457			57,076			1,299		1,372		425		285		–		–		64,181		58,733
Public sector		2,629			3,278			515		1,630		4,582		5,838		151,110		140,614		158,836		151,360
Wholesale and retail trade		12,077			10,288			2,531		2,274		496		684		4,143		3,062		19,247		16,308
Commercial real estate activities		13,259			14,102			2,168		313		619		763		1,449		1,755		17,495		16,933
Other		39,482	1		32,888	1		13,530		11,357		11,380		7,810		38,943		32,270		103,335		84,325
Total		153,283			138,689			35,309		29,895		63,782		61,667		289,247		245,026		541,621		475,277

¹ Includes lease financing.

We also classify our credit exposure under two broad headings: corporate credit exposure and consumer credit exposure.

– Our corporate credit exposure consists of all exposures not defined as consumer credit exposure.

– Our consumer credit exposure consists of our smaller-balance standardized homogeneous loans, primarily in Germany, Italy and Spain, which include personal loans, residential and nonresidential mortgage loans, overdrafts and loans to self-employed and small business customers of our private and retail business.

Corporate Credit Exposure
The following table breaks down our main corporate credit exposure categories according to the creditworthiness categories of our counterparties.

This table reflects an increase in our corporate loan book, as well as a continued overall improvement in the credit quality of our lending-related credit exposures. The change in the creditworthiness of our corporate loan book in 2005 compared to 2004 is primarily a consequence of our tight credit discipline and the overall benign credit environment. This is evidenced by the portion of our corporate loan book carrying an investment-grade rating increasing, from 60% at December 31, 2004 to 65% at December 31, 2005.

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Creditworthiness	Loans				Contingent liabilities				OTC derivatives				Tradable assets				Total
category
	Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
in€ m.	2005		2004		2005		2004		2005		2004		2005		2004		2005		2004
AAA–AA		17,086		12,363		3,152		3,209		25,026		27,885		161,181		133,839		206,445		177,296
A		11,940		10,852		9,336		8,045		19,365		18,194		40,155		32,217		80,796		69,308
BBB		26,183		22,794		13,012		10,242		10,065		10,087		24,143		38,264		73,403		81,387
BB		22,036		21,375		7,088		6,058		7,853		4,675		41,564		28,436		78,541		60,544
B		5,067		4,778		2,060		1,707		1,132		649		16,633		8,830		24,892		15,964
CCC and below		3,123		4,107		661		634		341		177		5,571		3,440		9,696		8,358
Total		85,435		76,269		35,309		29,895		63,782		61,667		289,247		245,026		473,773		412,857

Consumer Credit Exposure
The table below presents our total consumer credit exposure, consumer loan delinquencies in terms of loans that are 90 days or more past due, and net credit costs, which are the net provisions charged during the period, after recoveries. Loans 90 days or more past due and net credit costs are both expressed as a percentage of total exposure.

	Total exposure				90 days or more past due				Net credit costs
	(in€ m.)				as a % of total exposure				as a % of total exposure
	Dec 31, 2005		Dec 31, 2004		Dec 31, 2005		Dec 31, 2004		Dec 31, 2005		Dec 31, 2004
Consumer credit exposure Germany:		50,569		47,395		2.04%		2.20%		0.54%		0.42%
Consumer and small business financing		10,955		10,060		2.11%		2.48%		1.38%		1.36%
Mortgage lending		39,614		37,335		2.02%		2.12%		0.31%		0.17%
Consumer credit exposure other Europe		17,279		15,025		1.12%		1.21%		0.37%		0.47%
Total consumer credit exposure		67,848		62,420		1.80%		1.96%		0.50%		0.43%

The volume of our consumer credit exposure rose by€ 5.4 billion, or 8.7%, from 2004 to 2005, driven mainly by the volume growth of our portfolio in Germany (up€ 3.2 billion) and even stronger relative growth in Italy (up€ 1.2 billion) and Spain (up€ 0.9 billion). Total net credit costs increased, from 0.43% of our total exposure in 2004 to 0.50% in 2005. The increase primarily reflects lower values realized on real estate collateral supporting distressed loans, especially in Germany. In Germany, loans delinquent by 90 days or more decreased from 2.20% to 2.04% reflecting overall volume growth. The lower percentage of delinquent loans in other Europe is predominantly a reflection of decreased delinquencies in Italian consumer lending.

Credit Exposure from Derivatives
To reduce our derivatives-related credit risk, we regularly seek the execution of master agreements (such as the International Swap Dealers Association contract for swaps) with our clients. A master agreement allows the offsetting of the obligations arising under all of the derivatives contracts that the agreement covers upon the counterparty’s default, resulting in one single net claim against the counterparty (called “close-out netting”). We also enter into “payment netting” agreements under which we net nonsimultaneous settlement of cash flows, reducing our principal risk. We frequently enter into these agreements in our foreign exchange business.

For internal credit exposure measurement purposes, we only apply netting when we believe it is legally enforceable for the relevant jurisdiction and counterparty. Also, we enter into collateral support agreements to reduce our derivatives-related credit risk. These collateral arrangements generally provide risk mitigation through periodic (usually daily) margining of the covered portfolio or transactions and termination of the master agreement if the counterparty fails to honor a collateral call. As with netting, when we believe the collateral agreement is enforceable we reflect this in our exposure measurement.

As the replacement values of our portfolios fluctuate with movements in market rates and with changes in the transactions in the portfolios, we also estimate the potential future replacement costs of the portfolios over their lifetimes or, in case of collateralized portfolios, over appropriate unwind periods. We measure our potential future exposure against separate limits, which can be a multiple of the

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credit limit. We supplement our potential future exposure analysis with stress tests to estimate the immediate impact of extreme market events on our exposures (such as event risk in our Emerging Markets portfolio).

Treatment of Default Situations under Derivatives
Unlike in the case of our standard loan assets, we generally have more options to manage the credit risk in our OTC derivatives when movement in the current replacement costs of the transactions and the behavior of our counterparty indicate that there is the risk that upcoming payment obligations under the transactions might not be honored. In these situations, we are frequently able to obtain additional collateral or terminate the transactions or the related master agreement.

When our decision to terminate transactions or the related master agreement results in a residual net obligation of the counterparty, we restructure the obligation into a nonderivative claim and manage it through our regular workout process. As a consequence, we do not show any nonperforming derivatives.

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The following table shows the notional amounts and gross market values of OTC and exchange-traded derivative contracts we held for trading and nontrading purposes as of December 31, 2005.

Dec 31, 2005	Notional amount maturity distribution								Positive		Negative			Net
	Within one		> 1 and		After five		Total		market		market			market
in€ m.	year		£ 5 years		years				value		value			value
Interest-rate-related transactions:
OTC products:
FRAs		1,529,590		84,743		1,063		1,615,396		626		(690	)		(64	)
Interest rate swaps (single currency)		5,126,465		6,940,511		5,381,844		17,448,820		219,960		(221,437	)		(1,477	)
Purchased interest rate options		236,073		529,777		626,269		1,392,119		32,440		–			32,440
Written interest rate options		260,296		637,338		626,619		1,524,253		–		(33,963	)		(33,963	)
Other interest rate trades		–		–		–		–		–		–			–
Exchange-traded products:
Interest rate futures		248,395		369,409		499		618,303		–		(1	)		(1	)
Purchased interest rate options		118,171		906		–		119,077		44		–			44
Written interest rate options		39,168		4,621		–		43,789		–		(34	)		(34	)
Sub-total		7,558,158		8,567,305		6,636,294		22,761,757		253,070		(256,125	)		(3,055	)
Currency-related transactions:
OTC products:
Forward exchange trades		440,786		26,812		3,199		470,797		5,936		(6,086	)		(150	)
Cross currency swaps		1,305,607		354,412		226,847		1,886,866		31,952		(32,103	)		(151	)
Purchased foreign currency options		387,766		55,570		9,272		452,608		8,000		–			8,000
Written foreign currency options		380,930		60,038		6,285		447,253		–		(7,911	)		(7,911	)
Exchange-traded products:
Foreign currency futures		4,451		136		–		4,587		–		–			–
Purchased foreign currency options		2,202		182		–		2,384		65		–			65
Written foreign currency options		2,381		–		–		2,381		–		(48	)		(48	)
Sub-total		2,524,123		497,150		245,603		3,266,876		45,953		(46,148	)		(195	)
Equity/index-related transactions:
OTC products:
Equity forward		202		10		–		212		4		(11	)		(7	)
Equity/index swaps		73,797		28,941		10,658		113,396		4,100		(4,989	)		(889	)
Purchased equity/index options		118,711		91,040		15,057		224,808		26,412		–			26,412
Written equity/index options		126,947		112,664		27,865		267,476		–		(33,479	)		(33,479	)
Exchange-traded products:
Equity/index futures		44,392		–		–		44,392		31		–			31
Equity/index purchased options		96,844		42,616		6,150		145,610		10,789		–			10,789
Equity/index written options		89,215		45,285		8,986		143,486		–		(11,517	)		(11,517	)
Sub-total		550,108		320,556		68,716		939,380		41,336		(49,996	)		(8,660	)
Credit derivatives		102,560		1,380,404		520,586		2,003,550		22,745		(22,173	)		572
Other transactions:
OTC products:
Precious metal trades		29,010		27,578		5,318		61,906		4,011		(2,882	)		1,129
Other trades		93,388		119,447		4,449		217,284		22,365		(21,221	)		1,144
Exchange-traded products:
Futures		3,561		3,261		53		6,875		–		–			–
Purchased options		9,692		2,225		301		12,218		1,144		–			1,144
Written options		8,774		1,691		–		10,465		–		(947	)		(947	)
Sub-total		144,425		154,202		10,121		308,748		27,520		(25,050	)		2,470
Total OTC business		10,212,128		10,449,285		7,465,331		28,126,744		378,551		(386,945	)		(8,394	)
Total exchange-traded business		667,246		470,332		15,989		1,153,567		12,073		(12,547	)		(474	)
Total		10,879,374		10,919,617		7,481,320		29,280,311		390,624		(399,492	)		(8,868	)
Positive market values after netting agreements										75,842

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Country Risk
We manage country risk through a number of risk measures and limits, the most important being:

– Total Counterparty Exposure.All credit extended and OTC derivatives exposure to counterparties domiciled in a given country that we view as being at risk due to economic or political events (“country risk event”). It includes nonguaranteed subsidiaries of foreign entities and offshore subsidiaries of local clients.

– Transfer Risk Exposure.Credit risk arising where an otherwise solvent and willing debtor is unable to meet its obligations due to the imposition of governmental or regulatory controls restricting its ability either to obtain foreign exchange or to transfer assets to nonresidents (a “transfer risk event”). It includes all of our credit extended and OTC derivatives exposure from one of our offices in one country to a counterparty in a different country.

– Highly-Stressed Event Risk Scenarios.We use stress testing to measure potential market risk on our trading positions and view these as market risks.

Country Risk Ratings
Our country risk ratings represent a key tool in our management of country risk. They are established by an independent country risk research function within our Credit Risk Management function and include:

– Sovereign Rating.A measure of the probability of the sovereign defaulting on its foreign or local currency obligations, respectively.

– Transfer Risk Rating.A measure of the probability of a “transfer risk event.”

– Event Risk Rating.A measure of the probability of major disruptions in the market risk factors relating to a country.

All sovereign and transfer risk ratings are reviewed, at least annually, by the Group Credit Policy Committee. Our country risk research group also reviews, at least quarterly, our ratings for the major Emerging Markets countries. Ratings for countries that we view as particularly volatile, as well as all event risk ratings, are subject to continuous review.

We also regularly compare our internal risk ratings with the ratings of the major international rating agencies.

Country Risk Limits
We manage our exposure to country risk through a framework of limits. The bank specifically limits and monitors its exposure to Emerging Markets. For this purpose, Emerging Markets are defined as Latin America (including the Caribbean), Asia (excluding Japan), Eastern Europe, the Middle East and Africa. Limits are reviewed at least annually, in conjunction with the review of country risk ratings. Country Risk limits are set by either our Management Board or by our Group Credit Policy Committee, pursuant to delegated authority.

Monitoring Country Risk
We charge our Group Divisions with the responsibility of managing their country risk within the approved limits. The regional units within Credit Risk Management monitor our country risk based on information provided by our controlling function. Our Group Credit Policy Committee also reviews data on transfer risk.

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Country Risk Exposure
The following tables show the development of total Emerging Markets net counterparty exposure (net of collateral), and the utilized Emerging Markets net transfer risk exposure (net of collateral) by region.

Emerging Markets Net Counterparty Exposure	Dec 31, 2005		Dec 31, 2004
in€ m.
Total Net Counterparty Exposure		9,516		7,085
Total Net Counterparty Exposure (excluding OTC Derivatives)		6,838		5,089

Excluding irrevocable commitments and exposures to non-Emerging Markets bank branches.

Emerging Markets Net Transfer Risk Exposure	Dec 31, 2005		Dec 31, 2004
in€ m.
Africa		340		336
Asia (excluding Japan)		1,136		998
Eastern Europe		906		598
Latin America		508		790
Middle East		1,244		877
Total Emerging Markets Net Transfer Risk Exposure		4,134		3,599

Excluding irrevocable commitments and exposures to non-Emerging Markets bank branches.

At December 31, 2005, our net transfer risk exposure to Emerging Markets (excluding irrevocable commitments and exposures to non-Emerging Markets bank branches) amounted to€ 4.1 billion, an increase of 15% or€ 535 million from December 31, 2004. This increase was a result of selective increases in exposure due to improved credit quality in our Emerging Markets target countries.

For a review of our cross border outstandings calculated in accordance with the rules of the Securities and Exchange Commission see “Foreign Outstandings” in our supplemental financial information.

Problem Loans
Our problem loans are comprised of nonaccrual loans, loans 90 days or more past due and still accruing and troubled debt restructurings. All loans where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms are included in our problem loans.

Additionally, as of December 31, 2005, the Group had€ 1 million of lease financing transactions that were nonperforming. This amount is not included in our total problem loans.

The following table presents the components of our December 31, 2005 and December 31, 2004 problem loans.

	Dec 31, 2005						Dec 31, 2004
	Impaired		Non-		Total		Impaired		Non-		Total
	loans1		performing				loans1		performing
			homogeneous						homogeneous
in€ m.			loans						loans
Nonaccrual loans		2,444		1,106		3,550		3,401		1,098		4,499
Loans 90 days or more past due and still accruing		13		189		202		26		221		247
Troubled debt restructurings		119		–		119		89		–		89
Total problem loans		2,576		1,295		3,871		3,516		1,319		4,835

¹ Loans for which we determine that it is probable that we will be unable to collect all principal and interest due according to the contractual terms of the loan agreements.

The€ 964 million decrease in our total problem loans in 2005 was due to€ 1,018 million of gross charge-offs, a€ 101 million increase as a result of exchange rate movements and a€ 48 million net reduction of problem loans. Materially all of the reduction in problem loans took place in our impaired loans

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where gross charge-offs of€ 580 million and net reductions of€ 461 million were only slightly offset by the€ 101 million increase as a result of exchange rate movements. In the homogeneous loan portfolio charge-offs were substantially offset by net increases. Included in the€ 1.3 billion nonperforming smaller-balance standardized homogeneous loans, as of December 31, 2005, are€ 1.2 billion of loans that are 90 days or more past due as well as€ 0.1 billion of loans that are less than 90 days past due but in the judgment of management the accrual of interest should be ceased.

Our commitments to lend additional funds to debtors with problem loans amounted to€ 69 million as of December 31, 2005, a decrease of€ 132 million or 66% compared to December 31, 2004. Of these commitments€ 10 million had been committed to debtors whose loan terms have been modified in a troubled debt restructuring, a reduction of€ 5 million or 35% compared to December 31, 2004.

The following table illustrates our total problem loans split between German and non-German counterparties based on the country of domicile of our counterparty for the last two years.

in€ m.	Dec 31, 2005		Dec 31, 2004
Nonaccrual loans:
German		2,771		3,146
Non-German		779		1,353
Total nonaccrual loans		3,550		4,499
Loans 90 days or more past due and still accruing:
German		198		236
Non-German		4		11
Total loans 90 days or more past due and still accruing		202		247
Troubled debt restructurings:
German		48		71
Non-German		71		18
Total troubled debt restructurings		119		89

Nonaccrual Loans
We place a loan on nonaccrual status if:

– the loan has been in default as to payment of principal or interest for 90 days or more and the loan is neither well secured nor in the process of collection, or

– the accrual of interest should be ceased according to management’s judgment as to collectibility of contractual cash flows.

When a loan is placed on nonaccrual status, any accrued but unpaid interest previously recorded is reversed against current period interest revenue. Cash receipts of interest on nonaccrual loans are recorded as either interest revenue or a reduction of principal according to management’s judgment as to collectibility of principal.

As of December 31, 2005, our nonaccrual loans totaled€ 3.6 billion, a net decrease of€ 0.9 billion or 21%, from 2004. The net decrease in nonaccrual loans was mainly driven by charge-offs.

As of December 31, 2004, our nonaccrual loans totaled€ 4.5 billion, a net decrease of€ 1.5 billion, or 26%, from 2003. The net decrease in nonaccrual loans was mainly driven by charge-offs and net exposure reductions.

Loans Ninety Days or More Past Due and Still Accruing
These are loans in which contractual interest or principal payments are 90 days or more past due but on which we continue to accrue interest. These loans are well secured and in the process of collection.

In 2005, our 90 days or more past due and still accruing interest loans decreased by€ 45 million, or 18% to€ 202 million. This decrease was due to the fact that loans of this category which had to be placed on nonaccrual status or returned to performing status were substituted to a lesser extent by new loans to be allocated to this category.

In 2004, our 90 days or more past due and still accruing interest loans decreased by€ 133 million, or 35% to€ 247 million. This decrease was mainly due to the placing of loans on nonaccrual status and charge-offs.

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Troubled Debt Restructurings
Troubled debt restructurings are loans that we have restructured due to a deterioration in the borrower’s financial position comprising concessions that we would not otherwise consider.

If a borrower performs satisfactorily for one year under a restructured loan, we no longer consider that borrower’s loan to be a troubled debt restructuring, unless at the time of restructuring the new interest rate was lower than the market rate for similar credit risks.

In 2005, the volume of troubled debt restructurings increased by€ 30 million or 34% to€ 119 million as of December 31, 2005. This increase was mainly due to a single restructuring case in Western Europe.

In 2004, the volume of troubled debt restructurings decreased by€ 112 million or 56% to€ 89 million as of December 31, 2004. This decrease was mainly due to the placing of loans on nonaccrual status and a debt for securities swap.

Credit Loss Experience and Allowance for Loan Losses
We establish an allowance for loan losses that represents our estimate of probable losses in our loan portfolio. The responsibility for determining our allowance for loan losses rests with Credit Risk Management. The components of this allowance are:

Specific Loss Component
The specific loss component relates to all loans deemed to be impaired, following an assessment of the counterparty’s ability to repay. A loan is considered to be impaired when we determine that it is probable that we will be unable to collect all interest and principal due in accordance with the terms of the loan agreement. We determine the amount, if any, of the specific provision we should make by taking into account the present value of expected future cash flows, including cash flows that may result from foreclosure less costs for obtaining and selling the collateral, or the market price of the loan.

We regularly re-evaluate all credit exposures that have already been specifically provided for, as well as all credit exposures that appear on our watchlists.

Inherent Loss Component
The inherent loss component relates principally to all other loans we do not consider impaired but which we believe to have incurred some inherent loss on a portfolio basis and is comprised of:

– Country Risk Allowance
We establish a country risk allowance for loan exposures in countries where according to management’s judgment a “transfer risk event” is probable. We determine the percentage rates for our country risk allowance on the basis of historical loss experience and current market data, such as economic, political and other relevant factors affecting a country’s financial condition. In making our decision we focus primarily on the transfer risk ratings that we assign to a country and the amount and type of collateral.

– Smaller-Balance Standardized Homogeneous Loan Loss Allowance
Our smaller-balance standardized homogeneous portfolio includes smaller-balance personal loans, residential and nonresidential mortgage loans, overdrafts, loans to self-employed and small business customers of our private and retail business. These loans are evaluated for inherent loss on a collective basis, based on analyses of historical loss experience from each product type according to criteria such as past due status and collateral recovery values. The resulting allowance encompasses the loss inherent both in performing loans, as well as in nonperforming loans within the smaller-balance standardized homogeneous loan portfolio.

– Other Inherent Loss Allowance
The other inherent loss allowance represents our estimate of losses inherent in our loan book that have not yet been individually identified, and reflects the imprecisions and uncertainties in estimating our loan loss allowances. This estimate of inherent losses excludes those exposures we have already considered when establishing our allowance for smaller-balance standardized homogeneous loans. It incorporates the expected loss results, which we generate as part of our economic capital calculations, outlined above.

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Charge-off Policy
We take charge-offs based on Credit Risk Management’s assessment when we determine that the loans are uncollectible. We generally charge off a loan when all economically sensible means of recovery have been exhausted. Our determination considers information such as the occurrence of significant changes in the borrower’s financial position such that the borrower can no longer pay the obligation, or that the proceeds from collateral will not be sufficient to pay the loan. For our smaller-balance standardized homogeneous loans we generally take charge-offs when a product specific past due status has been reached.

Allowance for Loan Losses
The following table illustrates the components of our allowance for loan losses by industry of the borrower, and the percentage of our total loan portfolio accounted for by those industry classifications, on the dates specified. The breakdown between German and non-German borrowers is based on the country of domicile of our borrowers.

in€ m. (except percentages)	Dec 31, 2005			Dec 31, 2004
German:
Specific loan loss allowance:
Banks and insurance		–	1%		–	1%
Manufacturing		288	4%		271	5%
Households (excluding mortgages)		46	11%		55	11%
Households – mortgages		14	18%		17	19%
Public sector		–	1%		–	1%
Wholesale and retail trade		137	2%		161	3%
Commercial real estate activities		261	7%		345	8%
Other		229	8%		278	9%
Specific German loan loss allowance total		975			1,127
Inherent loss allowance		461			417
German total		1,436	52%		1,544	57%
Non-German:
Specific loan loss allowance		255			527
Inherent loss allowance		237			273
Non-German total		492	48%		800	43%
Total allowance for loan losses		1,928	100%		2,345	100%
Total specific allowance		1,230			1,654
Total inherent loss allowance		698			691
Total allowance for loan losses		1,928			2,345

Movements in the Allowance for Loan Losses
We record increases to our allowance for loan losses as an expense on our Consolidated Statement of Income. If we determine that we no longer require allowances we have previously established, we decrease our allowance and record the amount as a reduction of the provision on our Consolidated Statement of Income. Charge-offs reduce our allowance while recoveries increase the allowance without affecting the Consolidated Statement of Income.

The following table sets forth a breakdown of the movements in our allowance for loan losses for the periods specified.

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in€ m. (except percentages)	2005		2004
Allowance at beginning of year		2,345		3,281
Charge-offs:
German:
Banks and insurance		1		3
Manufacturing		61		80
Households (excluding mortgages)		216		185
Households – mortgages		36		39
Public sector		–		–
Wholesale and retail trade		54		78
Commercial real estate activities		112		106
Lease financing		3		–
Other		162		231
German total		645		722
Non-German:
Excluding lease financing		373		672
Lease financing only		–		–
Non-German total		373		672
Total charge-offs		1,018		1,394
Recoveries:
German:
Banks and insurance		1		1
Manufacturing		11		12
Households (excluding mortgages)		41		37
Households – mortgages		–		–
Public sector		–		–
Wholesale and retail trade		10		12
Commercial real estate activities		4		3
Lease financing		–		–
Other		42		37
German total		109		102
Non-German:
Excluding lease financing		61		50
Lease financing only		–		–
Non-German total		61		50
Total recoveries		170		152
Net charge-offs		848		1,242
Provision for loan losses		374		372
Other changes (currency translation and allowance related to acquisitions/divestitures)		57		(66	)
Allowance at end of year		1,928		2,345
Percentage of total net charge-offs to average loans for the year		0.58%		0.86%

Our allowance for loan losses as of December 31, 2005 was€ 1.9 billion, an 18% decrease from the€ 2.3 billion reported at the end of 2004. The reduction in our allowance was principally due to charge-offs exceeding our net provisions.

Our gross charge-offs amounted to€ 1.0 billion in 2005, a decrease of€ 377 million, or 27%, from 2004. Of the charge-offs for 2005,€ 580 million were related to our corporate credit exposure, mainly driven by our German and American portfolios, and€ 437 million were related to our consumer credit exposure.

Our provision for loan losses in 2005 was€ 374 million, nearly unchanged from the prior year (€ 372 million), reflecting tight credit risk management, positive results of workout processes as well as the overall benign credit environment. This amount was composed of both net specific and inherent

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loan loss provisions. In 2005, our total loan loss provision was principally driven by our smaller-balance standardized homogeneous loan portfolio.

Our specific loan loss allowance was€ 1.2 billion as of December 31, 2005, a decrease of€ 424 million, or 26% from 2004. The change in our allowance is comprised of net charge-offs of€ 518 million and a net specific loan loss provision of€ 52 million, which includes a€ 72 million net release for non-German clients and a€ 42 million increase from currency translation. The provision was 61% lower than in the previous year. Notably, the specific loan loss allowance is the largest component of our total allowance for loan losses.

Our inherent loan loss allowance totaled€ 698 million as of December 31, 2005, slightly above the level at the end of 2004 (€ 691 million). Movements in this component include€ 365 million net provision being offset by€ 330 million net charge-offs for our smaller-balance standardized homogeneous loan portfolio, and a€ 23 million net reduction in our other inherent loss allowance.

Our allowance for loan losses as of December 31, 2004 was€ 2.3 billion, 29% lower than the€ 3.3 billion at the end of 2003. The decrease in our allowance balance was principally due to charge-offs exceeding our net provisions.

Our gross charge-offs amounted to€ 1.4 billion in 2004, a decrease of€ 500 million, or 26%, from 2003 charge-offs. Of the charge-offs for 2004,€ 945 million were related to our corporate credit exposure, mainly driven by our American and German portfolios, and€ 449 million were related to our consumer credit exposure.

Our provision for loan losses in 2004 was€ 372 million, a decrease of€ 741 million or 67% from the prior year, reflecting the improved credit environment witnessed throughout the year, supported by some significant releases, and a continuation of our strict credit discipline. This amount was composed of both net specific and inherent loan loss provisions. In 2004, 73% of our provision related to our smaller-balance standardized homogeneous loan portfolio.

Our specific loan loss allowance was€ 1.7 billion as of December 31, 2004, a decrease of€ 817 million, or a 33% reduction from 2003. The change in our allowance includes a net specific loan loss provision of€ 134 million, which includes a€ 18 million net release for non-German clients. The provision was 85% lower than the previous year and was more than offset by net charge-offs of€ 889 million. Notably, the specific loan loss allowance is the largest component of our total allowance for loan losses.

Our inherent loan loss allowance totaled€ 691 million as of December 31, 2004, a decrease of€ 119 million, or 15%, from the level at the end of 2003. A major driver of the net reduction was€ 353 million net charge-offs in our smaller-balance standardized homogeneous loan portfolio, offset by€ 270 million net provision. Furthermore, in 2004 we recorded a net reduction of€ 35 million in our other inherent loss allowance.

For a description of the factors which influenced additions to the allowance in earlier years, see page S-8 of the supplemental financial information, which is incorporated by reference herein.

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Non-German Component of the Allowance for Loan Losses
The following table presents an analysis of the changes in the non-German component of the allowance for loan losses. As of December 31, 2005, 26% of our total allowance was attributable to international clients.

in€ m.	2005			2004
Allowance at beginning of year		800			1,466
Charge-offs		373			672
Recoveries		61			50
Net charge-offs		312			622
Provision for loan losses		(53	)		25
Other changes (currency translation and allowance related to acquisitions/divestitures)		57			(69	)
Allowance at end of year		492			800

Allowance for off-balance sheet positions
The following table shows the activity in the Group’s allowance for off-balance sheet positions, which comprises contingent liabilities and lending-related commitments.

in€ m.	2005			2004
Allowance at beginning of year		345			416
Provision for off-balance sheet positions		(24	)		(65	)
Other changes (currency translation and allowance related to acquisitions/divestitures)		8			(6	)
Allowance at end of year		329			345

Settlement Risk
Our trading activities may give rise to risk at the time of settlement of those trades. Settlement risk is the risk of loss due to the failure of a counterparty to honor its obligations to deliver cash, securities or other assets as contractually agreed.

For many types of transactions, we mitigate settlement risk by closing the transaction through a clearing agent, which effectively acts as a stakeholder for both parties, only settling the trade once both parties have fulfilled their sides of the bargain.

Where no such settlement system exists, as is commonly the case with foreign exchange trades, the simultaneous commencement of the payment and the delivery parts of the transaction is common practice between trading partners (free settlement). In these cases, we may seek to mitigate our settlement risk through the execution of bilateral payment netting agreements. We are also an active participant in industry initiatives to reduce settlement risks. Acceptance of settlement risk on free settlement trades requires approval from our credit risk personnel, either in the form of pre-approved settlement risk limits, or through transaction-specific approvals. We do not aggregate settlement risk limits with other credit exposures for credit approval purposes, but we take the aggregate exposure into account when we consider whether a given settlement risk would be acceptable.

Market Risk
Substantially all of our businesses are subject to the risk that market prices and rates will move and result in profits or losses for us. We distinguish among four types of market risk:

– Interest rate risk;

– Equity price risk;

– Foreign exchange risk; and

– Commodity price risk.

The interest rate and equity price risks consist of two components each. The general risk describes value changes due to general market movements, while the specific risk has issuer-related causes.

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Market Risk Management Framework
We assume market risk in both our trading and our nontrading activities. We assume risk by making markets and taking positions in debt, equity, foreign exchange, other securities and commodities as well as in equivalent derivatives.

We use a combination of risk sensitivities, value-at-risk, stress testing and economic capital metrics to manage market risks and establish limits. Economic capital is the metric we use to describe and aggregate all our market risks, both in trading and nontrading portfolios. Value-at-risk is a common metric we use in the management of our trading market risks.

Our Management Board and Group Risk Committee, supported by Group Market Risk Management, which is part of our independent risk management function, set a Group-wide value-at-risk limit for the market risks in the trading book. Group Market Risk Management sub-allocates this overall limit to our Group Divisions. Below that, limits are allocated to specific business lines and trading portfolio groups and geographical regions.

Our value-at-risk disclosure for the trading businesses is based on our own internal value-at-risk model. In October 1998, the German Banking Supervisory Authority (now the BaFin) approved our internal value-at-risk model for calculating the market risk capital for our general and specific market risks. Since then the model has been periodically reviewed and approval has been maintained.

Our value-at-risk disclosure is intended to ensure consistency of market risk reporting for internal risk management, for external disclosure and for regulatory purposes. The overall value-at-risk limit for our Corporate and Investment Bank Group Division was€ 90 million throughout the year 2005 and the overall value-at-risk limit for our consolidated Group trading positions was€ 92 million (with a 99% confidence level, as described below, and a one-day holding period).

Specifics of Market Risk Reporting under German Banking Regulations
German banking regulations stipulate specific rules for market risk reporting, which concern in particular the consolidation of entities, the calculation of the overall market risk position, as well as the determination of which assets are trading assets and which are nontrading assets:

– Consolidation.For German regulatory purposes we do not consolidate entities other than banking institutions, financial services institutions, financial enterprises, bank service enterprises and, since 2005, certain fund management companies. However, we do consolidate a number of these companies under U.S. GAAP. These companies mainly include variable interest entities.

– Overall Market Risk Position.We do not include in our market risk disclosure the foreign exchange risk arising from currency positions that German banking regulations permit us to exclude from market risk reporting. These are currency positions which are fully deducted from, or covered by, equity capital recognized for regulatory reporting as well as participating interests, including shares in affiliated companies that we record in foreign currency and value at historical cost (structural currency positions). Our largest structural currency positions arise from our investments in entities located in the United States.

– Definition of Trading Assets and Nontrading Assets.The regulatory definition of trading book and banking book assets generally parallels the definition of trading and nontrading assets under U.S. GAAP. However, due to specific differences between the regulatory and accounting framework, certain assets are classified as trading book for market risk reporting purposes even though they are nontrading assets under U.S. GAAP. Conversely, we also have assets that are assigned to the banking book even though they are trading assets under U.S. GAAP.

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Value-at-Risk Analysis
The value-at-risk approach derives a quantitative measure for our trading book market risks under normal market conditions, estimating the potential future loss (in terms of market value) that will not be exceeded in a defined period of time and with a defined confidence level. The value-at-risk measure enables us to apply a constant and uniform measure across all of our trading businesses and products. It also facilitates comparisons of our market risk estimates both over time and against our daily trading results.

We calculate value-at-risk for both internal and regulatory reporting using a 99% confidence level, in accordance with BIS rules. For internal reporting, we use a holding period of one day. For regulatory reporting, the holding period is ten days.

We believe that our value-at-risk model takes into account all material risk factors assuming normal market conditions. Examples of these factors are interest rates, equity prices, foreign exchange rates and commodity prices, as well as their implied volatilities. The model incorporates both linear and, especially for derivatives, nonlinear effects of the risk factors on the portfolio value. The statistical parameters required for the value-at-risk calculation are based on a 261 trading day history (corresponding to at least one calendar year of trading days) with equal weighting being given to each observation. We generally calculate value-at-risk using the Monte Carlo simulation technique and assuming that changes in risk factors follow a normal or logarithmic normal distribution. However, we still utilize a variance-covariance approach to calculate specific interest rate risk for some portfolios, such as in our credit trading and securitization businesses.

To determine our aggregated value-at-risk, we use historically observed correlations between the different general market risk factors. However, when aggregating general and specific market risks, we assume that there is zero correlation between them.

Back-Testing
We use back-testing in our trading units to verify the predictive power of the value-at-risk calculations. In back-testing, we compare actual income as well as hypothetical daily profits and losses under the buy-and-hold assumption (in accordance with German regulatory requirements) with the estimates from our value-at-risk model.

A committee consisting of risk managers, risk controllers and business area controllers meets on a quarterly basis to discuss back-testing results of the Group as a whole and of individual businesses. The committee analyzes performance fluctuations and assesses the predictive power of our value-at-risk model, which in turn allows us to improve the risk estimation process.

Stress Testing and Economic Capital
While value-at-risk, calculated on a daily basis, supplies forecasts for potential large losses under normal market conditions, we also perform stress tests in which we value our trading portfolios under extreme market scenarios not covered by the confidence interval of our value-at-risk model.

The quantification of market risk under extreme stress scenarios forms the basis of our assessment of the economic capital that we estimate is needed to cover the market risk in all of our positions. Underlying risk factors applicable to the different products are stressed, meaning that we assume a sudden change, according to pre-defined scenarios. We derive the stress scenarios from historic worst case scenarios adjusted for structural changes in current markets.

For example, we calculate country-specific event risk scenarios for all Emerging Markets and assess these event risk results daily. A specialist committee reviews the country risk ratings and scenario loss limits monthly. Ad hoc reviews take place as required.

In addition to the country-specific event risk scenarios for Emerging Markets, we also run regular market stress scenarios on the positions of every major portfolio. This is done weekly for the trading portfolios and monthly for the nontrading portfolios.

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Our stress test scenarios include:

– Price and volatility risks for interest rates, equity prices, foreign exchange and commodity prices for industrialized countries. This covers both trading and nontrading securities and investments, as well as trading book derivatives portfolios and includes many basis risks.

– Emerging Markets’ risks, including equity price declines, increases in interest rates and currency devaluations.

– Credit spread risks for bonds, credit derivatives and traded loans of both industrialized and Emerging Markets countries.

– Underwriting risks in debt and equity capital markets for industrialized countries.

We calculate economic capital by aggregating losses from those stress scenarios using correlations that reflect stressed market conditions (rather than the normal market correlations used in the value-at-risk model).

Our economic capital usage for market risk arising from the trading units totaled€ 1.6 billion at both year-end 2005 and 2004.

Limitations of Our Proprietary Risk Models
Although we believe that our proprietary market risk models are of a high standard, we are committed to their ongoing development and allocate substantial resources to reviewing and improving them.

Our stress testing results and economic capital estimations are necessarily limited by the number of stress tests executed and that not all downside scenarios can be predicted and simulated. While the risk managers have used their best judgment to define worst case scenarios based upon the knowledge of past extreme market moves, it is possible for our market risk positions to lose more value than even our economic capital estimates.

Our value-at-risk analyses should also be viewed in the context of the limitations of the methodology we use and are therefore not maximum amounts that we can lose on our market risk positions.

The limitations of the value-at-risk methodology include the following:

– The use of historical data as a proxy for estimating future events may not capture all potential events, particularly those that are extreme in nature.

– The assumption that changes in risk factors follow a normal or logarithmic normal distribution. This may not be the case in reality and may lead to an underestimation of the probability of extreme market movements.

– The use of a holding period of one day (or ten days for regulatory value-at-risk calculations) assumes that all positions can be liquidated or hedged in that period of time. This assumption does not fully capture the market risk arising during periods of illiquidity, when liquidation or hedging in that period of time may not be possible. This is particularly the case for the use of a one-day holding period.

– The use of a 99% confidence level does not take account of, nor makes any statement about, any losses that might occur beyond this level of confidence.

– We calculate value-at-risk at the close of business on each trading day. We do not subject intra-day exposures to intra-day value-at-risk calculations.

– Value-at-risk does not capture all of the complex effects of the risk factors on the value of positions and portfolios and could, therefore, underestimate potential losses. For example, the way sensitivities are represented in our value-at-risk model may only be exact for small changes in market parameters.

The aggregate value-at-risk estimates for our trading market risk are conservative risk estimates when measured against our back-testing procedures (as shown by the number of hypothetical buy-and-hold portfolio losses against the predicted value-at-risk). However, we acknowledge the limitations in the value-at-risk methodology by supplementing the value-at-risk limits with other position and sensitivity limit structures, as well as with stress testing, both on individual portfolios and on a consolidated basis.

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Value-at-Risk of the Trading Units of Our Corporate and Investment Bank Group Division
The following table shows the value-at-risk (with a 99% confidence level and a one-day holding period) of the trading units of our Corporate and Investment Bank Group Division. Our trading market risk outside of these units is immaterial. “Diversification effect” reflects the fact that the total value-at-risk on a given day will be lower than the sum of the values-at-risk relating to the individual risk classes. Simply adding the value-at-risk figures of the individual risk classes to arrive at an aggregate value-at-risk would imply the assumption that the losses in all risk categories occur simultaneously.

Value-at-risk of	Total				Diversification						Interest rate				Equity price				Foreign				Commodity
Trading Units					effect						risk				risk				exchange risk				price risk
in€ m.	2005		2004		2005			2004			2005		2004		2005		2004		2005		2004		2005		2004
Average		65.8		71.6		(37.5	)		(38.4	)		52.8		61.7		33.3		30.8		10.3		10.6		7.0		7.0
Maximum		79.2		97.9		(47.4	)		(61.5	)		61.6		91.1		43.1		45.1		18.2		25.9		11.3		10.8
Minimum		57.8		54.5		(29.4	)		(28.1	)		41.9		39.7		22.9		19.9		5.5		2.9		3.5		3.8
Year-end		69.8		66.3		(40.9	)		(39.8	)		55.3		41.1		32.8		42.6		12.9		17.2		9.6		5.1

The following graph shows the daily aggregate value-at-risk of our trading units in 2005, including diversification effects, and actual income of the trading units throughout the year.

While we have taken selective trading opportunities and risks throughout the year, our value-at-risk for the trading units remained within a relatively narrow band between€ 57.8 million and€ 79.2 million. The higher value-at-risk levels were mainly driven by above-average interest rate risk exposures and/or above-average equity positions. The average value-at-risk in 2005 was€ 65.8 million, which is 8% below the 2004 average of€ 71.6 million.

Our trading units achieved a positive actual income for over 93% of the trading days in both 2005 and 2004. On no trading day in either year did they incur an actual loss that exceeded the value-at-risk estimate for that day.

In our regulatory back-testing in 2005 we observed one outlier, that is, a hypothetical buy-and-hold loss that exceeded our value-at-risk estimate for the trading units as a whole. This is below the two to three outliers a year that are statistically expected when using a 99% confidence level value-at-risk model. The outlier occurred in April, when the actual daily loss was€ 52 million driven by exceptionally high levels of volatility both in corporate bond and equity markets.

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The following histogram illustrates the distribution of actual daily income of our trading units in 2005. The histogram displays the number of trading days on which we reached each level of trading income shown on the horizontal axis in millions of euro.

*	99th percentile of actual daily income distribution.
**	Average value-at-risk (confidence level 99%; one-day holding period).

In addition to our back-testing, the comparison of the distribution of actual daily income with the average value-at-risk also enables us to ascertain the reasonableness of our value-at-risk estimate. The histogram shows that the distribution of our trading units’ actual daily income produces a 99th percentile of€ 67.8 million around the average daily income level of€ 44.0 million, which is close to the average value-at-risk estimate of€ 65.8 million.

Market Risk in Our Nontrading Portfolios
The market risk in our nontrading portfolios, as measured by economic capital (€ 1.4 billion at year end 2005), has significantly decreased in 2005 and is now, unlike in previous years, less than the market risk in our trading portfolios.

Management of Our Nontrading Portfolios
To ensure a coordinated investment strategy, a consistent risk management process and appropriate portfolio diversification, our Group Corporate Investments/Alternative Assets Governance Committee supervises all of our nontrading asset portfolio. Our Global Head of Group Market Risk Management is also the Chief Risk Officer for Corporate Investments and alternative assets and is a member of the committee. The committee defines investment strategies, determines risk-adjusted return requirements, sets limits and allocates economic capital among the alternative assets classes. It approves policies, procedures and methodologies for managing alternative assets risk and receives monthly portfolio reports showing performance, estimated market values, economic capital estimates and risk profiles of the portfolios. The committee also oversees the portfolio of industrial holdings and other corporate investments held in our Corporate Investments Group Division.

Assessment of Market Risk in Our Nontrading Portfolios
Unlike for our trading portfolios we do not use value-at-risk as the primary metric to assess the market risk in our nontrading portfolios due to the nature of these positions as well as the lack of transparency of some of the pricing. Rather we assess the market risk in our nontrading portfolios through the use of stress testing procedures that are particular to each risk class and which consider, among other factors, large historically observed market moves as well as the liquidity of each asset class. This as-

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sessment forms the basis of our economic capital estimates which enable us to actively monitor and manage the nontrading market risk positions using a methodology which is consistent with that used for the trading market risk positions. As an example, for our industrial holdings we apply individual price shocks between 24% and 37%, which are based on historically observed market moves. In addition, we consider value reductions between 10% and 15% to reflect liquidity constraints. For private equity exposures, all our positions are stressed using our standard credit risk economic capital model as well as market price shocks up to 100%, depending on the individual asset. See also section “Risk Management Tools – Economic Capital” and “Market Risk – Stress Testing and Economic Capital”.

Nontrading Market Risk by Risk Class
The biggest market risks in our nontrading portfolios are equity and real estate price risks. The vast majority of the interest rate and foreign exchange risks arising from our nontrading asset and liability positions has been transferred through internal hedges to our Global Markets Business Division within our Corporate and Investment Bank Group Division and is thus managed on the basis of value-at-risk as reflected in our trading value-at-risk numbers.

Nontrading Market Risk by Group Division
There is nontrading market risk held and managed in each of our Group Divisions. The nontrading market risk in our Corporate Investments Group Division remains the biggest in the Group and is incurred through private equity investments, industrial holdings and other corporate investments. Our Private Clients and Asset Management Group Division primarily assumes nontrading market risk through its proprietary investments in real estate and mutual funds, which support the client asset management businesses. In our Corporate and Investment Bank Group Division, which has the smallest amount of nontrading market risk, the most significant part arises from a few strategic investments.

Carrying Value and Economic Capital Usage for Our Nontrading Portfolios
The table below shows the carrying values and economic capital usages separately for our major industrial holdings, other corporate investments and alternative assets.

Nontrading Portfolios	Carrying Value				Economic Capital Usage
in€ bn.	Dec 31, 2005		Dec 31, 2004		Dec 31, 2005			Dec 31, 2004
Major Industrial Holdings		4.1		5.5		0.3			1.2
Other Corporate Investments		4.2		5.2		0.5			1.8
Alternative Assets:		2.5		2.6		0.7			0.9
Private Equity		1.1		1.1		0.4			0.6
Real Estate		1.1		1.3		0.2			0.2
Hedge Funds		0.4		0.2		0.0	1		0.1
Total		10.9		13.3		1.4			3.9

¹ There is a small economic capital usage of€ 39 million.

Our economic capital usage for these nontrading asset portfolios totaled€ 1.4 billion at year-end 2005, which is€ 2.4 billion, or 63%, below our economic capital usage at year-end 2004. This decrease primarily reflects the continued decrease of our industrial holdings portfolio as well as the reduced risk from other corporate investments.

– Major Industrial Holdings.The decrease in economic capital usage for our major industrial holdings was primarily driven by the reduction of our shareholding in DaimlerChrysler AG from 10.4% at year-end 2004 to 4.4% at year-end 2005. Our economic capital usage of€ 0.3 billion at year-end 2005 was mainly due to the residual shareholding in DaimlerChrysler AG, while the economic capital usage for our other industrial holdings was comparatively small due to our unrealized gains associated with these holdings.

– Other Corporate Investments.The decrease in the economic capital usage for our other corporate investments was largely due to the sale of a 9.73% shareholding in EUROHYPO AG to Commerzbank AG in 2005 and the agreement with Commerzbank AG to also purchase our residual share-

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holding of 27.99% in 2006. The economic capital usage of€ 0.5 billion for our other corporate investments at year-end 2005 was driven by our mutual fund investments, our holding in Atradius N.V., which has lower risk than last year because of the committed partial sale that was agreed in December 2005, and a few other corporate investments.

–

Alternative Assets.Our alternative assets include direct investments in private equity (including venture capital, mezzanine debt and leveraged buy-out funds), real estate principal investments (including mezzanine debt), and hedge funds. The portfolio is well diversified and continues to be dominated by private equity and real estate investments. The decrease in our economic capital usage for alternative assets was mainly due to the lower risks incurred through our private equity investments.

In our total economic capital figures no diversification benefits between the different asset categories (e.g., between industrial holdings, private equity, real estate, etc.) are taken into account.

Major Industrial Holdings
The following table shows the total shares of capital and market values of our major industrial holdings which were directly and/or indirectly attributable to us at year-end 2005, and the corresponding holdings at year-end 2004. Our Corporate Investments Group Division currently plans to continue selling most of its publicly listed holdings over the next few years, subject to the legal environment and market conditions.

Major industrial holdings		Share of capital (in %)				Market value (in€ m.)
Name	Country of domicile	Dec 31, 2005		Dec 31, 2004		Dec 31, 2005		Dec 31, 2004
DaimlerChrysler AG	Germany		4.4		10.4		1,930		3,706
Allianz AG	Germany		2.4		2.5		1,234		935
Linde AG	Germany		10.0		10.0		785		544
Fiat S.p.A.	Italy		0.8		1.0		73		59
Other	N/M		N/M		N/M		122		246
Total							4,144		5,490

N/M – Not meaningful

Liquidity Risk
Liquidity Risk Management safeguards the ability of the bank to meet all payment obligations when they come due. Our liquidity risk management framework has been instrumental in maintaining adequate liquidity and a healthy funding profile during the year 2005.

Liquidity Risk Management Framework
Group Treasury is responsible for the management of liquidity risk. Our liquidity risk management framework is designed to identify, measure and manage the liquidity risk position. The underlying policies are reviewed on a regular basis by the Group Asset and Liability Committee and finally approved by the Board Member responsible for Group Treasury. The policies define the methodology which is applied to the Group.

Our liquidity risk management approach starts at the intraday level (operational liquidity) managing the daily payment queue, forecasting cash flows and our access to Central Banks. It then covers tactical liquidity risk management dealing with the access to unsecured funding sources and the liquidity characteristics of our asset inventory (Asset Liquidity). Finally, the strategic perspective comprises the maturity profile of all assets and liabilities (Funding Matrix) on our balance sheet and our Issuance Strategy.

We have developed a cash flow based reporting tool (Lima System) which provides daily liquidity risk information to global and regional management.

Our liquidity position is subject to stress testing and scenario analysis to evaluate the impact of sudden stress events. The scenarios are either based on historic events, case studies of liquidity crises or models using hypothetical events.

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Short-term Liquidity
Our reporting tool tracks cash flows on a daily basis over an eighteen months horizon. This scheme allows management to assess our short-term liquidity position in any location, region and globally on a by-currency, by-product, and by-division basis. The system captures all of our cash flows from transactions on our balance sheet, as well as liquidity risks resulting from off-balance sheet transactions. We model products that have no specific contractual maturities using statistical methods to capture the actual behavior of their cash flows. Liquidity outflow limits (MCO Limits), which have been set to limit cumulative global and regional net cash outflows, are monitored on a daily basis and ensure our access to liquidity.

Unsecured Funding
Unsecured funding is a finite resource. Total unsecured funding represents the amount of external liabilities, which we take from the market irrespective of instrument, currency or tenor. Unsecured funding is measured on a regional basis by currency and aggregated to a global utilization report. The Group Asset and Liability Committee has set limits by business divisions to protect our access to unsecured funding at attractive levels.

Asset Liquidity
The Asset Liquidity component tracks the volume and booking location within our consolidated inventory of unencumbered, liquid assets which we can use to raise funds either in the repurchase agreement markets or by selling the assets. Securities inventories include a wide variety of different securities. In a first step, we segregate illiquid and liquid securities in each inventory. Subsequently we assign liquidity values to different classes of liquid securities.

The liquidity of these assets is an important element in protecting us against short-term liquidity squeezes. In addition, we continue to keep a portfolio of highly liquid securities in major currencies around the world to supply collateral for cash needs associated with clearing activities in euro, U.S. dollar and other major currencies. As a result of various efficiency initiatives in security settlement systems, we were able to reduce this dedicated portfolio to€ 20.2 billion.

Funding Diversification
Diversification of our funding profile in terms of investor types, regions, products and instruments is an important element of our liquidity risk management framework. Our core funding resources, such as retail, small/mid-cap and fiduciary deposits as well as long-term capital markets funding, form the cornerstone of our liability profile. Customer deposits, funds from institutional investors and interbank funding are additional sources of funding. We use interbank deposits primarily to fund liquid assets.

The following chart shows the composition of our external unsecured liabilities as of December 31, 2005 and December 31, 2004, both in euro billion and as a percentage of our total unsecured liabilities. Total external unsecured liabilities were€ 462 billion at December 31, 2005. The increase of€ 77 billion reflects the overall positive market environment in 2005 resulting in higher liquidity in the market, which we were able to tap.

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*	In 2005, we have refined our allocation of liabilities to funding sources to better reflect our funding profile. For comparison purposes, we have adjusted our 2004 figures accordingly.
**	Refers to deposits by small and medium-sized German corporates.
***	Commercial Paper/Certificates of Deposit.

Funding Matrix
We have mapped all funding relevant assets and liabilities into time buckets corresponding to their maturities to compile a maturity profile (Funding Matrix). Given that trading assets are typically more liquid than their contractual maturities suggest, we have divided them into liquid assets (assigned to the time bucket one year) and illiquid assets (assigned to time buckets two to five years). We have taken assets and liabilities from the retail bank that show a behavior of being renewed or prolonged regardless of capital market conditions (mortgage loans and retail deposits) and assigned them to time buckets reflecting the expected prolongation. Wholesale banking products are included with their contractual maturities.

The Funding Matrix identifies the excess or shortfall of assets over liabilities in each time bucket and thus allows us to identify and manage open liquidity exposures. The Funding Matrix is a key input parameter for our annual capital market issuance plan, which upon approval of the Group Asset and Liability Committee establishes issuing targets for securities by tenor, volume and instrument.

The Funding Matrix indicates that at year-end 2005 we were structurally long funded.

Stress Testing and Scenario Analysis
We employ stress testing and scenario analysis to evaluate the impact of sudden stress events on our liquidity position. The scenarios are either based on historic events (such as the stock market crash of 1987, the U.S. liquidity crunch of 1990 and the terrorist attacks of September 11, 2001) or modeled using hypothetical events. The latter include internal scenarios such as operational risk events, a rating downgrade of the bank by 1 and 3 notches respectively as well as external scenarios such as a market risk event, Emerging Markets crises and systemic shock. Under each of these scenarios we assume that all maturing loans to customers will need to be rolled over and require funding whereas rollover of liabilities will be partially impaired resulting in a funding gap. We then model the steps we would take to counterbalance the resulting net shortfall in funding needs. Action steps would include selling assets, switching from unsecured to secured funding and adjusting the price we would pay for liabilities (gap closure).

This analysis is fully integrated within the existing liquidity risk management framework. We track contractual cash flows per currency and product over an eight-week horizon (the most critical time span in a liquidity crisis) and apply the relevant stress case to each product. Asset Liquidity complements the analysis.

Our stress testing analysis provides guidance as to our ability to generate sufficient liquidity under critical conditions and is a valuable input parameter when defining our target liquidity risk position. The

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analysis is performed monthly. The following report is illustrative for our stress testing results as of December 31, 2005. For each scenario, the table shows what our maximum funding gap would be over an eight-week horizon after occurrence of the triggering event. We analyze whether the risk to our liquidity would be immediate and whether it would improve or worsen over time. We determine how much liquidity we believe we would have been able to generate at the time to close the gap.

Scenario	Funding gap1		Liquidity impact	Gap closure2
	(in€ bn.)			(in€ bn.)
Market risk		4.0	Gradually increasing		131.9
Emerging markets		22.3	Gradually increasing		131.9
Systemic shock		15.4	Immediate, duration 2 weeks		86.7
DB downgrade to A1/P1 (short term) and A1/A+ (long term)		23.1	Gradually increasing		131.9
Operational risk		14.5	Immediate, duration 2 weeks		131.9
DB downgrade to A2/P2 (short term) and A3/A- (long term)		100.0	Gradually increasing		131.9

1	Funding gap after assumed partially impaired rollover of liabilities.
2	Maximum liquidity generation based on counterbalancing and asset liquidity opportunities.

With the increasing importance of liquidity management in the financial industry, we consider it important to contribute to financial stability by regularly addressing central banks, supervisors, rating agencies, and market participants on liquidity risk-related topics. We participate in a number of working groups regarding liquidity and participate in efforts to create industry-wide standards that are appropriate to evaluate and manage liquidity risk at financial institutions.

In addition to our internal liquidity management systems, the liquidity exposure of German banks is regulated by the German Banking Act and regulations issued by the BaFin. For a further description of these regulations, see “Item 4: Information on the Company – Regulation and Supervision – Regulation and Supervision in Germany – Principal Laws and Regulators – Liquidity Requirements.” We are in compliance with all applicable liquidity regulations.

Operational Risk
EU institutions (Commissions, Parliament and Council) have approved changes to two directives to incorporate the new capital adequacy framework broadly known as “Basel II”. The EU member states are currently transforming the re-cast EU directives into national regulation. Discussions between the banking industry and the regulators are continuing with regard to specific issues as well as interpretation of Basel II, the EU directives and national regulation. On the basis of this discussion we define operational risk as the potential for incurring losses in relation to employees, contractual specifications and documentation, technology, infrastructure failure and disasters, projects, external influences and customer relationships. This definition includes legal and regulatory risk, but excludes business risk.

Organizational Set-up
Operational Risk Management is an independent risk management function within Deutsche Bank. The Chief Risk Officer for Credit and Operational Risk with Group-wide responsibility reports directly to the Group Chief Risk Officer. The Global Head of Operational Risk Management reports to the Chief Risk Officer for Credit and Operational Risk and both are represented on the Group Risk Committee. The Operational Risk Management Committee is a permanent sub-committee of the Group Risk Committee and is composed of the Operational Risk Management team. It is our main decision making committee for all operational risk management matters and approves group standards for identification, measurement, assessment, reporting and monitoring of operational risk.

Operational Risk Management is responsible for defining the operational risk framework and related policies while the responsibility for implementing the framework as well as the day-to-day operational risk management lies with our Business Divisions. Based on this business partnership model we ensure a close monitoring and high awareness for operational risk. Operational Risk Management is structured into regional and functional teams. The regional teams ensure consistent implementation of the overall operational risk management framework and pro-active management of operational risks

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and the functional teams focus on the development and implementation of the operational risk management toolset and reporting, the Advanced Measurement Approach (AMA) methodology under Basel II, monitoring regulatory requirements, value-added analysis and the setting of loss thresholds.

Managing Our Operational Risk
We manage operational risk based on a Group-wide consistent framework that enables us to determine our operational risk profile in comparison to the risk appetite of the bank and to define risk mitigating measures and priorities.

In order to efficiently manage the operational risk we use four different approaches:

– We perform bottom-up operational risk ''self-assessments’’ resulting in a specific operational risk profile for the business lines highlighting the areas with high risk potential.

– We collect losses arising from operational risk events in our “db-Incident Reporting System” database.

– We capture and monitor operational risk indicators in our tool “db-Score” returning early warning signals.

– We capture action points resulting from ''self-assessments’’ or risk indicators in “db-Track”. Within “db-Track” we monitor the progress of the operational risk action points on an ongoing basis.

In 2005, we implemented an enhanced methodology for calculating economic capital for operational risk as part of our Basel II preparation for the Advanced Measurement Approach (AMA). We use this model for internal economic capital calculation and allocation.

Based on the organizational set-up, the systems in place to identify and manage the operational risk and the support of control functions responsible for specific operational risk types (e.g., Compliance, Business Continuity Management) we seek to optimize operational risk. Future operational risks – identified through forward-looking analysis – are managed via mitigation strategies such as the development of back-up systems and emergency plans. Where appropriate, we purchase insurance against operational risks.

Overall Risk Position
The table below shows the overall risk position of the Group at year-end 2005 and 2004 as measured by the economic capital calculated for credit, market, business and operational risk; it does not include liquidity risk.

Economic capital usage in€ m.	Dec 31, 2005			Dec 31, 2004
Credit risk		7,125			5,971
Market risk:		3,042			5,476
Trading market risk		1,595			1,581
Nontrading market risk		1,447			3,895
Diversification benefit across credit and market risk		(563	)		(870	)
Sub-total credit and market risk		9,604			10,577
Business risk		411			381
Operational risk		2,270			2,243
Total economic capital usage		12,285			13,201

To determine our overall (nonregulatory) risk position, we generally add the individual economic capital estimates for the various types of risk. However, when aggregating credit and market risk, we consider the diversification benefit across these risk types, which we estimate as€ 563 million as of December 31, 2005 and€ 870 million as of December 31, 2004. The diversification benefit across all risk types has not yet been calculated.

On December 31, 2005, our economic capital usage totaled€ 12.3 billion, which is€ 0.9 billion or 7% below the€ 13.2 billion economic capital usage as of December 31, 2004.

The reduction in total market risk economic capital was caused by the decrease in nontrading market risk, which was primarily driven by the reduction of our shareholding in DaimlerChrysler AG from 10.4% at year-end 2004 to 4.4% at year-end 2005, as well as the reduced risk from other corporate

145

investments. The reduction in risk from other corporate investments was mainly due to the sale of a 9.73% shareholding in EUROHYPO AG to Commerzbank AG in 2005 and the agreement with Commerzbank AG to also buy our residual shareholding of 27.99% in 2006.

The increase in credit risk economic capital is a reflection of volume growth in our lending book, principally in our Private & Business Clients and Corporate Banking & Securities Corporate Divisions, as well as higher credit risk relating to our trading inventory. In 2005, we implemented an enhanced methodology for name-specific risk for a significant portion of our trading inventory, which contributed€ 0.3 billion to the increase. Furthermore, foreign exchange effects also contributed to the overall increase in credit risk economic capital.

The allocation of economic capital may change from time to time to reflect refinements in our risk measurement methodology.

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Item 12: Description of Securities other than Equity Securities

Not required because this document is filed as an annual report.

147

PART II

Item 13: Defaults, Dividend Arrearages
and Delinquencies

Not applicable.

Item 14: Material Modifications to the Rights of
Security Holders and Use of Proceeds

Not applicable.

Item 15: Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2005.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. As such, disclosure controls and procedures or systems for internal control over financial reporting may not prevent all error and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Based upon the evaluation referred to above, our Chief Executive Officer and Chief Financial Officer concluded, subject to the limitations noted above, that the design and operation of our disclosure controls and procedures were effective as of December 31, 2005.

There was no change in our internal control over financial reporting identified in connection with the evaluation referred to above that occurred during the year ended December 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16A: Audit Committee Financial Expert

Our Supervisory Board has determined that Dr. Rolf-E. Breuer and Dr. Karl-Gerhard Eick, who are members of its Audit Committee, are “audit committee financial experts”, as such term is defined by the regulations of the Securities and Exchange Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. For a description of their experience, please see “Item 6: Directors, Senior Management and Employees – Supervisory Board.” The audit committee financial experts mentioned

148

above are “independent” of us, as defined in Rule 10A-3 under the U.S. Securities Exchange Act of 1934, which is the definition to which we, as a foreign private issuer the common shares of which are listed on the New York Stock Exchange, are subject.

Item 16B: Code of Ethics

In response to Section 406 of the Sarbanes-Oxley Act of 2002, we have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is available on our Internet website at http://www.deutsche-bank.com/corporate-governance. There have been no amendments or waivers to this code of ethics since its adoption. Information regarding any future amendments or waivers will be published on the aforementioned website.

Item 16C: Principal Accountant Fees and Services

In accordance with German law, our principal accountants are appointed by our Annual General Meeting based on a recommendation of our Supervisory Board. The Audit Committee of our Supervisory Board prepares the board’s recommendation on the selection of the principal accountants. Subsequent to the principal accountants’ appointment, the Audit Committee awards the contract and in its sole authority approves the terms and scope of the audit and all audit engagement fees as well as monitors the principal accountants’ independence. At our 2004 and 2005 Annual General Meetings, our shareholders appointed KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, which had been our principal accountants for a number of years, as our principal accountants for the 2004 and 2005 fiscal years, respectively.

The table set forth below contains the aggregate fees billed for each of the last two fiscal years by our principal accountants in each of the following categories: (i) Audit Fees, which are fees for professional services for the audit of our annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years, (ii) Audit-Related Fees, which are fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported as Audit Fees, (iii) Tax Fees, which are fees for professional services rendered for tax compliance, tax consulting and tax planning, and (iv) All Other Fees, which are fees for products and services other than Audit Fees, Audit- Related Fees and Tax Fees. These amounts exclude expenses and VAT.

Fee category in€ m.	2005		2004
Audit Fees		42		40
Audit-Related Fees		9		6
Tax Fees		8		15
All Other Fees		–		–
Total Fees		59		61

Our Audit-Related Fees included fees for accounting advisory, due diligence relating to actual or contemplated acquisitions and dispositions, attestation engagements and other agreed-upon procedure engagements. Our Tax Fees included fees for services relating to the preparation and review of tax returns and related compliance assistance and advice, tax consultation and advice relating to Group tax planning strategies and initiatives and assistance with assessing compliance with tax regulations. Our Other Fees were incurred for project-related advisory services.

United States law and regulations, and our own policies, generally require all engagements of our principal accountants be pre-approved by our Audit Committee or pursuant to policies and procedures adopted by it. Our Audit Committee has adopted the following policies and procedures for consideration and approval of requests to engage our principal accountants to perform non-audited services.

149

Engagement requests must in the first instance be submitted to our Group Finance Committee, whose members consist of our Chief Financial Officer and senior members of our Controlling and Tax departments. If the request relates to services that would impair the independence of our principal accountants, the request must be rejected. Our Audit Committee has given its pre-approval for specified assurance, financial advisory and tax services, provided the expected fees for any such service do not exceed€ 1 million. If the engagement request relates to such specified pre-approved services, it may be approved by the Group Finance Committee, which must thereafter report such approval to the Audit Committee. If the engagement request relates neither to prohibited non-audit services nor to pre-approved non-audit services, it must be forwarded by the Group Finance Committee to the Audit Committee for consideration. In addition, to facilitate the consideration of engagement requests between its meetings, the Audit Committee has delegated approval authority to several of its members who are “independent” as defined by the Securities and Exchange Commission and the New York Stock Exchange. Such members are required to report any approvals made by them to the Audit Committee at its next meeting.

Additionally, United States law and regulations permit the pre-approval requirement to be waived with respect to engagements for non-audit services aggregating no more than five percent of the total amount of revenues we paid to our principal accountants, if such engagements were not recognized by us at the time of engagement and were promptly brought to the attention of our Audit Committee or a designated member thereof and approved prior to the completion of the audit. In each of 2004 and 2005, the percentage of the total amount of revenue we paid to our principal accountants represented by non-audit services in each category that were subject to such a waiver was less than 5%.

Item 16D: Exemptions from the Listing Standards for Audit Committees

Our common shares are listed on the New York Stock Exchange, the corporate governance rules of which require a foreign private issuer such as us to have an audit committee that satisfies the requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934. These requirements include a requirement that the audit committee be composed of members that are “independent” of the issuer, as defined in the Rule, subject to certain exemptions, including an exemption for employees who are not executive officers of the issuer if the employees are elected or named to the board of directors or audit committee pursuant to the issuer’s governing law or documents, an employee collective bargaining or similar agreement or other home country legal or listing requirements. The German Co-Determination Act of 1976 (Mitbestimmungsgesetz) requires that the shareholders elect half of the members of the supervisory board of large German companies, such as us, and that employees in Germany elect the other half. Employee-elected members are typically themselves employees or representatives of labor unions representing employees. Pursuant to law and practice, committees of the Supervisory Board are typically composed of both shareholder- and employee-elected members. Of the current members of our Audit Committee, three – Heidrun Förster, Sabine Horn and Rolf Hunck – are current employees of Deutsche Bank who have been elected as Supervisory Board members by the employees. None of them is an executive officer. Accordingly, their service on the Audit Committee is permissible pursuant to the exemption from the independence requirements provided for by paragraph (b)(1)(iv)(C) of the Rule. We do not believe the reliance on such exemption would materially adversely affect the ability of the Audit Committee to act independently and to satisfy the other requirements of the Rule.

150

Item 16E: Purchases of Equity Securities by the
Issuer and Affiliated Purchasers

In 2005, we repurchased an aggregate of 35,502,988 of our ordinary shares pursuant to two publicly announced share buy-back programs. The first program was announced on June 30, 2004 and was completed by April 20, 2005. Pursuant to this program, a total of 45,513,988 shares were repurchased (26,152,000 in 2004 and 19,361,988 in 2005) at an average price of€ 62.32, for a total aggregate consideration of€ 2.84 billion. The second program, pursuant to which up to 54,832,129 shares may be repurchased through October 31, 2006, was announced on July 28, 2005. As of December 31, 2005, we had purchased a total of 16,141,000 shares pursuant to this program at an average price of€ 80.40, for a total consideration of€ 1.30 billion. This program is still in progress. In 2005, 13.3 million of the shares acquired under the two programs were used in connection with our share-based employee compensation plans and the remainder is held in treasury.

In addition to these share buy-back programs, pursuant to shareholder authorizations approved at our 2004 and 2005 Annual General Meetings, we are authorized to buy and sell, for the purpose of securities trading, our ordinary shares through October 31, 2006, provided that the net number of shares we have acquired for this purpose and held at the close of any trading day may not exceed 5% of our share capital on that day. The gross volume of these securities trading transactions is often large, and even the net amount of such repurchases or sales may, in a given month, be large, though over longer periods of time such transactions tend to offset and are in any event constrained by the 5% of share capital limit. These securities trading transactions consist predominantly of transactions on major non-U.S. securities exchanges. We also enter into derivative contracts with respect to our shares. See Notes [18] and [30] of our consolidated financial statements.

The following table sets forth, for each month in 2005 and for the year as a whole, the total gross number of our shares repurchased by us and our affiliated purchasers (pursuant to both the share buy-back programs noted above and the securities trading activities described above), the total gross number of shares sold, the net number of shares purchased or sold, the average price paid per share (based on the gross shares repurchased), the number of shares that were purchased as part of the two publicly announced share buy-back programs mentioned above and the maximum number of shares that at that date remained eligible for purchase under such programs.

Issuer Purchases of Equity Securities in 2005

Month	Total number of		Total number of		Net number of			Average price		Number of shares		Maximum number
	shares purchased		shares sold		shares purchased			paid per share		purchased as part		of shares that
					or (sold)			(in€)		of publicly		may yet be
										announced plans		purchased under
										or programs		plans or programs
January		30,748,979		26,532,592		4,216,387			65.66		4,499,000		14,862,988
February		41,873,910		47,536,786		(5,662,876	)		66.63		6,619,000		8,243,988
March		57,392,640		52,037,768		5,354,872			66.92		4,955,000		3,288,988
April		31,904,529		28,738,574		3,165,955			66.18		3,288,988		–
May		147,078,963		147,539,136		(460,173	)		62.22		–		54,832,129
June		30,503,702		30,488,437		15,265			64.52		–		54,832,129
July		23,322,601		19,908,993		3,413,608			69.41		100,000		54,732,129
August		30,840,382		32,659,642		(1,819,260	)		70.68		1,651,000		53,081,129
September		84,378,055		83,302,580		1,075,475			75.41		794,000		52,287,129
October		30,707,718		29,149,265		1,558,453			77.49		1,113,000		51,174,129
November		41,897,378		37,917,823		3,979,555			80.71		5,339,000		45,835,129
December		73,040,858		65,485,098		7,555,760			82.15		7,144,000		38,691,129
Total 2005		623,689,715		601,296,694		22,393,021			70.23		35,502,988		38,691,129

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At December 31, 2004, our issued share capital consisted of 543,854,246 ordinary shares, of which 517,269,673 were outstanding and 26,584,573 were held by us in treasury. At December 31, 2005, our issued share capital consisted of 554,535,270 ordinary shares, of which 505,557,676 were outstanding and 48,977,594 were held by us in treasury. During the year, 10,681,024 shares were issued upon the exercise of options granted under two employee stock option plans. On January 24, 2006, the Management Board decided to cancel 40,000,000 shares held in treasury, which became legally effective on February 15, 2006.

152

PART III

Item 17: Financial Statements

Not applicable.

Item 18: Financial Statements

See our consolidated financial statements beginning on page F-4, which we incorporate by reference into this document.

Item 19: Exhibits

We have filed the following documents as exhibits to this document.

Exhibit	Description of Exhibit
Number
1.1	English translation of the Articles of Association of Deutsche Bank AG.
2.1	The total amount of long-term debt securities of us or our subsidiaries authorized under any instrument does not exceed 10 percent of the total assets of our Group on a consolidated basis. We hereby agree to furnish to the Commission, upon its request, a copy of any instrument defining the rights of holders of long-term debt of us or of our subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
4.1	English Translation of Form of Service Agreement of Members of the Management Board of Deutsche Bank AG, furnished as Exhibit 4.1 to our 2004 Annual Report on Form 20-F and incorporated by reference herein.
4.2	Individual Terms of Service Agreements of Members of the Management Board of Deutsche Bank AG.
4.3	Global Partnership Plan – Equity Units Plan Rules, furnished as Exhibit 4.3 to our 2004 Annual Report on Form 20-F and incorporated by reference herein.
4.4	Global Partnership Plan – Performance Options and Partnership Appreciation Rights Plan Rules furnished, as Exhibit 4.4 to our 2004 Annual Report on Form 20-F and incorporated by reference herein.
8.1	List of Subsidiaries.
12.1	Principal Executive Officer Certifications Required by 17 C.F.R. 240.13a-14(a).
12.2	Principal Financial Officer Certifications Required by 17 C.F.R. 240.13a-14(a).
13.1	Chief Executive Officer Certification Required by 18 U.S.C. Section 1350.
13.2	Chief Financial Officer Certification Required by 18 U.S.C. Section 1350.
14.1	Legal Opinion regarding confidentiality of related party customers.
15.1	Consent of KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft.

153

Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this annual report on its behalf.

Date: March 23, 2006

Deutsche Bank Aktiengesellschaft
 

/s/     DR. JOSEF ACKERMANN

Dr. Josef Ackermann 

Chairman of the Management Board 

/s/     DR. CLEMENS BÖRSIG

Dr. Clemens Börsig 

Member of the Management Board
Chief Financial Officer 

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Deutsche Bank Aktiengesellschaft

Index to Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm		F-3
Consolidated Financial Statements:
Consolidated Statement of Income for the years ended December 31, 2005, December 31, 2004 and December 31, 2003.		F-4
Consolidated Statement of Comprehensive Income for the years ended December 31, 2005, December 31, 2004 and December 31, 2003.		F-5
Consolidated Balance Sheet at December 31, 2005 and December 31, 2004.		F-6
Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2005, December 31, 2004 and December 31, 2003.		F-7
Consolidated Statement of Cash Flows for the years ended December 31, 2005, December 31, 2004 and December 31, 2003.		F-8
Notes to the Consolidated Financial Statements.		F-9
[1] Significant Accounting Policies		9
[2] Cumulative Effect of Accounting Changes		18
[3] Acquisitions and Dispositions		19
[4] Trading Assets and Trading Liabilities		20
[5] Securities Available for Sale		20
[6] Other Investments		23
[7] Loans		25
[8] Allowances for Credit Losses		27
[9] Asset Securitizations and Variable Interest Entities		27
[10] Assets Pledged and Received as Collateral		31
[11] Premises and Equipment, Net		32
[12] Goodwill and Other Intangible Assets, Net		33
[13] Assets Held for Sale		35
[14] Other Assets and Other Liabilities		35
[15] Deposits		36
[16] Other Short-term Borrowings		36
[17] Long-term Debt		37
[18] Obligation to Purchase Common Shares		38
[19] Mandatorily Redeemable Shares and Minority Interests in Limited Life Entities		38
[20] Common Shares and Share-Based Compensation Plans		38
[21] Asset Restrictions and Dividends		47
[22] Regulatory Capital		47
[23] Interest Revenues and Interest Expense		50
[24] Pension and Other Employee Benefit Plans		50
[25] Income Taxes		55

F-1

	Page
[26] Earnings Per Common Share		57
[27] Business Segments and Related Information		58
[28] Restructuring Activities		69
[29] International Operations		71
[30] Derivative Financial Instruments and Financial Instruments with Off-Balance Sheet Risk		72
[31] Concentrations of Credit Risk		75
[32] Fair Value of Financial Instruments		76
[33] Condensed Deutsche Bank AG (Parent Company Only) Financial Statements		78
[34] Litigation		81
[35] Terrorist Attacks in the United States		83
[36] Condensed Consolidating Financial Information		83

F-2

Report of Independent Registered Public Accounting Firm

The Supervisory Board of
Deutsche Bank Aktiengesellschaft

We have audited the accompanying consolidated balance sheets of Deutsche Bank Aktiengesellschaft and subsidiaries (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Deutsche Bank Aktiengesellschaft and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

As discussed in Note [2] to the consolidated financial statements, the Company adopted FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” and Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” during 2003.

KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

Frankfurt am Main (Germany)
March 9, 2006

F-3

Consolidated Statement of Income

in€ m., except per share data	2005		2004		2003
Net interest revenues:
Interest revenues		41,708		28,023		27,583
Interest expense		35,707		22,841		21,736
Net interest revenues		6,001		5,182		5,847
Provision for loan losses		374		372		1,113
Net interest revenues after provision for loan losses		5,627		4,810		4,734
Noninterest revenues:
Commissions and fees from fiduciary activities		3,556		3,211		3,273
Commissions, broker’s fees, markups on securities underwriting and other securities activities		4,057		3,711		3,564
Fees for other customer services		2,476		2,584		2,495
Trading revenues, net		7,429		6,186		5,611
Net gains on securities available for sale		1,055		235		20
Net income (loss) from equity method investments		418		388		(422	)
Other revenues		648		421		880
Total noninterest revenues		19,639		16,736		15,421
Noninterest expenses:
Compensation and benefits		10,993		10,222		10,495
Net occupancy expense of premises		1,014		1,258		1,251
Furniture and equipment		169		178		193
IT costs		1,539		1,726		1,913
Agency and other professional service fees		895		824		836
Communication and data services		599		599		626
Other expenses		3,178		2,291		2,000
Goodwill impairment/impairment of intangibles		–		19		114
Restructuring activities		767		400		(29	)
Total noninterest expenses		19,154		17,517		17,399
Income before income tax expense and cumulative effect of accounting changes		6,112		4,029		2,756
Income tax expense		2,039		1,437		1,327
Reversal of 1999/2000 credits for tax rate changes		544		120		215
Income before cumulative effect of accounting changes, net of tax		3,529		2,472		1,214
Cumulative effect of accounting changes, net of tax		–		–		151
Net income		3,529		2,472		1,365
Earnings per common share (in€):
Basic:
Income before cumulative effect of accounting changes, net of tax		7.62		5.02		2.17
Cumulative effect of accounting changes, net of tax		–		–		0.27
Net income		7.62		5.02		2.44
Diluted:
Income before cumulative effect of accounting changes, net of tax		6.95		4.53		2.06
Cumulative effect of accounting changes, net of tax		–		–		0.25
Net income		6.95		4.53		2.31
Cash dividends declared per common share		1.70		1.50		1.30

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-4

Consolidated Statement of Comprehensive Income

in€ m.	2005			2004			2003
Net income		3,529			2,472			1,365
Other comprehensive income:
Reversal of 1999/2000 credits for tax rate changes		544			120			215
Unrealized gains (losses) on securities available for sale:
Unrealized net gains arising during the year, net of tax and other1		1,742			12			1,619
Net reclassification adjustment for realized net (gains) losses, net of applicable tax and other2		(1,004	)		(189	)		162
Unrealized net gains (losses) on derivatives hedging variability of cash flows, net of tax3		(28	)		40			(4	)
Minimum pension liability, net of tax4		(7	)		(1	)		8
Foreign currency translation:
Unrealized net gains (losses) arising during the year, net of tax5		1,054			(719	)		(936	)
Net reclassification adjustment for realized net gains, net of tax6		(1	)		–			(54	)
Total other comprehensive income (loss)		2,300			(737	)		1,010
Comprehensive income		5,829			1,735			2,375

1	Amounts are net of income tax expense of€ 80 million,€ 131 million and€ 38 million for the years ended December 31, 2005, 2004 and 2003, respectively, and adjustments to insurance policyholder liabilities and deferred acquisition costs of€ 16 million,€ 19 million and€ 4 million for the years ended December 31, 2005, 2004 and 2003, respectively.
2	Amounts are net of applicable income tax expense of€ 70 million,€ 40 million and€ 41 million for the years ended December 31, 2005, 2004 and 2003, respectively, and adjustments to insurance policyholder liabilities and deferred acquisition costs of€ 12 million,€ 6 million and€ (10) million for the years ended December 31, 2005, 2004 and 2003, respectively.
3	Amounts are net of an income tax expense (benefit) of€ (19) million and€ 7 million for the years ended December 31, 2005 and 2004, respectively, and an income tax benefit of less than€ 1 million for the year ended December 31, 2003.
4	Amounts are net of income tax expense (benefit) of€ (5) million,€ (1) million and€ 3 million for the years ended December 31, 2005, 2004 and 2003, respectively.
5	Amounts are net of an income tax expense (benefit) of€ (36) million,€ 53 million and€ 70 million for the years ended December 31, 2005, 2004 and 2003, respectively.
6	Amounts are net of an income tax expense of less than€ 1 million for the year ended December 31, 2005 and an income tax expense (benefit) of € 4 million and€ (5) million for the years ended December 31, 2004 and 2003, respectively.

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-5

Consolidated Balance Sheet

in€ m. (except nominal value)	Dec 31, 2005			Dec 31, 2004
Assets:
Cash and due from banks		6,571			7,579
Interest-earning deposits with banks		11,963			18,089
Central bank funds sold and securities purchased under resale agreements		130,993			123,921
Securities borrowed		101,125			65,630
Trading assets
of which€ 84 billion and€ 77 billion were pledged to creditors and can be sold or repledged at December 31, 2005 and 2004, respectively		448,393			373,147
Securities available for sale
of which€ 21 million and€ 18 million were pledged to creditors and can be sold or repledged at December 31, 2005 and 2004, respectively		21,675			20,335
Other investments		7,382			7,936
Loans, net		151,355			136,344
Premises and equipment, net		5,079			5,225
Goodwill		7,045			6,378
Other intangible assets, net		1,198			1,069
Other assets		99,382			74,415
Total assets		992,161			840,068
Liabilities:
Deposits		380,787			320,796
Trading liabilities		194,347			169,606
Central bank funds purchased and securities sold under repurchase agreements		143,524			105,292
Securities loaned		24,581			12,881
Other short-term borrowings		20,549			20,118
Other liabilities		81,377			75,543
Long-term debt		113,554			106,870
Obligation to purchase common shares		3,506			3,058
Total liabilities		962,225			814,164
Commitments and contingent liabilities (Notes [11], [30], [34])
Shareholders’ equity:
Common shares, no par value, nominal value of€ 2.56 Issued: 2005, 554.5 million shares; 2004, 543.9 million shares		1,420			1,392
Additional paid-in capital		11,672			11,147
Retained earnings		22,628			19,814
Common shares in treasury, at cost:
2005, 49.0 million shares; 2004, 26.6 million shares		(3,368	)		(1,573	)
Equity classified as obligation to purchase common shares		(3,506	)		(3,058	)
Share awards		2,121			1,513
Accumulated other comprehensive income (loss):
Deferred tax on unrealized net gains on securities available for sale relating to 1999 and 2000 tax rate changes in Germany		(2,164	)		(2,708	)
Unrealized net gains on securities available for sale, net of applicable tax and other		2,498			1,760
Unrealized net gains on derivatives hedging variability of cash flows, net of tax		9			37
Minimum pension liability, net of tax		(8	)		(1	)
Foreign currency translation, net of tax		(1,366	)		(2,419	)
Total accumulated other comprehensive loss		(1,031	)		(3,331	)
Total shareholders’ equity		29,936			25,904
Total liabilities and shareholders’ equity		992,161			840,068

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-6

Consolidated Statement of Changes in Shareholders’ Equity

in€ m.	2005			2004			2003
Common shares:
Balance, beginning of year		1,392			1,490			1,592
Common shares issued under employee benefit plans		28			–			–
Retirement of common shares		–			(98	)		(102	)
Balance, end of year		1,420			1,392			1,490
Additional paid-in capital:
Balance, beginning of year		11,147			11,147			11,199
Common shares issued under employee benefit plans		411			–			–
Net losses on treasury shares sold		–			–			(36	)
Tax benefits related to employee benefit plans		110			–			–
Other		4			–			(16	)
Balance, end of year		11,672			11,147			11,147
Retained earnings:
Balance, beginning of year		19,814			20,486			22,087
Net income		3,529			2,472			1,365
Cash dividends declared and paid		(868	)		(828	)		(756	)
Dividend related to equity classified as obligation to purchase common shares		117			96			–
Net gains (losses) on treasury shares sold		46			66			(386	)
Retirement of common shares		–			(2,472	)		(1,801	)
Other		(10	)		(6	)		(23	)
Balance, end of year		22,628			19,814			20,486
Common shares in treasury, at cost:
Balance, beginning of year		(1,573	)		(971	)		(1,960	)
Purchases of shares		(43,803	)		(34,471	)		(25,464	)
Sale of shares		41,598			30,798			23,903
Retirement of shares		–			2,570			1,903
Treasury shares distributed under employee benefit plans		410			501			647
Balance, end of year		(3,368	)		(1,573	)		(971	)
Equity classified as obligation to purchase common shares:
Balance, beginning of year		(3,058	)		(2,310	)		(278	)
Additions		(814	)		(1,241	)		(2,911	)
Deductions		366			493			879
Balance, end of year		(3,506	)		(3,058	)		(2,310	)
Share awards – common shares issuable:
Balance, beginning of year		2,965			2,196			1,955
Deferred share awards granted, net		901			1,270			888
Deferred shares distributed		(410	)		(501	)		(647	)
Balance, end of year		3,456			2,965			2,196
Share awards – deferred compensation:
Balance, beginning of year		(1,452	)		(1,242	)		(1,000	)
Deferred share awards granted, net		(901	)		(1,270	)		(888	)
Amortization of deferred compensation, net		1,018			1,060			646
Balance, end of year		(1,335	)		(1,452	)		(1,242	)
Accumulated other comprehensive income (loss):
Balance, beginning of year		(3,331	)		(2,594	)		(3,604	)
Reversal of 1999/2000 credits for tax rate changes		544			120			215
Change in unrealized net gains on securities available for sale, net of applicable tax and other		738			(177	)		1,781
Change in unrealized net gains/losses on derivatives hedging variability of cash flows, net of tax		(28	)		40			(4	)
Change in minimum pension liability, net of tax		(7	)		(1	)		8
Foreign currency translation, net of tax		1,053			(719	)		(990	)
Balance, end of year		(1,031	)		(3,331	)		(2,594	)
Total shareholders’ equity, end of year		29,936			25,904			28,202

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-7

Consolidated Statement of Cash Flows

in€ m.	2005			2004			2003
Cash flows from operating activities:
Net income		3,529			2,472			1,365
Adjustments to reconcile net income to net cash used in operating activities:
Provision for loan losses		374			372			1,113
Restructuring activities		145			230			(29	)
Gain on sale of securities available for sale, other investments, loans and other		(1,494	)		(476	)		(201	)
Deferred income taxes, net		964			838			269
Impairment, depreciation and other amortization and accretion		1,474			1,776			3,072
Cumulative effect of accounting changes, net of tax		–			–			(151	)
Share of net income from equity method investments		(333	)		(282	)		(42	)
Net change in:
Trading assets		(75,606	)		(42,461	)		(37,624	)
Other assets		(26,908	)		(15,566	)		(7,452	)
Trading liabilities		24,740			16,380			22,719
Other liabilities		10,699			7,538			10,830
Other, net		(1,544	)		1,082			47
Net cash used in operating activities		(63,960	)		(28,097	)		(6,084	)
Cash flows from investing activities:
Net change in:
Interest-earning deposits with banks		5,885			(4,573	)		11,305
Central bank funds sold and securities purchased under resale agreements		(7,072	)		(11,679	)		5,378
Securities borrowed		(35,495	)		7,166			(35,226	)
Loans		(18,068	)		2,908			22,610
Proceeds from:
Sale of securities available for sale		11,673			21,145			13,620
Maturities of securities available for sale		2,815			3,560			7,511
Sale of other investments		1,868			2,081			2,068
Sale of loans		10,440			10,463			6,882
Sale of premises and equipment		274			451			2,628
Purchase of:
Securities available for sale		(13,981	)		(25,201	)		(19,942	)
Other investments		(1,602	)		(1,200	)		(2,141	)
Loans		(5,985	)		(4,950	)		(9,030	)
Premises and equipment		(701	)		(792	)		(991	)
Net cash received (paid) for business combinations/divestitures		211			(223	)		2,469
Other, net		99			116			327
Net cash (used in) provided by investing activities		(49,639	)		(728	)		7,468
Cash flows from financing activities:
Net change in:
Deposits		60,040			21,493			(24,158	)
Securities loaned and central bank funds purchased and securities sold under repurchase agreements		49,932			923			17,751
Other short-term borrowings		452			3,399			(4,303	)
Issuances of long-term debt		44,574			34,463			43,191
Repayments and extinguishments of long-term debt		(39,817	)		(25,773	)		(32,366	)
Common shares issued under employee benefit plans		439			–			–
Purchases of treasury shares		(43,803	)		(34,471	)		(25,464	)
Sale of treasury shares		41,640			30,850			23,389
Cash dividends paid		(868	)		(828	)		(756	)
Other, net		(485	)		12			(37	)
Net cash provided by (used in) financing activities		112,104			30,068			(2,753	)
Net effect of exchange rate changes on cash and due from banks		487			(300	)		(974	)
Net increase (decrease) in cash and due from banks		(1,008	)		943			(2,343	)
Cash and due from banks, beginning of the year		7,579			6,636			8,979
Cash and due from banks, end of the year		6,571			7,579			6,636
Interest paid		35,246			22,411			22,612
Income taxes paid, net		962			199			911

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-8

Notes to the Consolidated Financial Statements

[1] Significant Accounting Policies

Deutsche Bank Aktiengesellschaft (“Deutsche Bank” or the “Parent”) is a stock corporation organized under the laws of the Federal Republic of Germany. Deutsche Bank together with all entities in which Deutsche Bank has a controlling financial interest (the “Group”) is a global provider of a full range of corporate and investment banking, private clients and asset management products and services. For a discussion of the Group’s business segment information, see Note [27].

The accompanying consolidated financial statements are stated in euros and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions regarding the fair valuation of certain financial assets and liabilities, the allowance for loan losses, the impairment of assets other than loans, the valuation allowance for deferred tax assets, legal, regulatory and tax contingencies, as well as other matters. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from management’s estimates.

Certain reclassifications and adjustments have been made to the prior year financial statements. These include the reclassification of certain brokerage margin accounts from deposits to other liabilities, and adjustments to previously disclosed amounts of pledged trading assets that can be sold or re-pledged and to certain derivatives that are disclosed as financial guarantees. These reclassifications and adjustments did not result in a change in previously reported net income, shareholders’ equity or total assets.

The following is a description of the significant accounting policies of the Group.

Principles of Consolidation

The consolidated financial statements include Deutsche Bank together with all entities in which Deutsche Bank has a controlling financial interest. The Group consolidates entities in which it has a majority voting interest when the entity is controlled through substantive voting equity interests and the equity investors bear the residual economic risks of the entity. The Group also consolidates those entities that do not meet these criteria when the Group absorbs a majority of the entity’s expected losses, or if no party absorbs a majority of the expected losses, when the Group receives a majority of the entity’s expected residual returns.

Notwithstanding the above, certain securitization vehicles (commonly known as qualifying special purpose entities) are not consolidated if they are distinct from and not controlled by the entities that transferred the assets into the vehicle, and their activities are legally prescribed, significantly limited from inception, and meet certain restrictions regarding the assets they can hold and the circumstances in which those assets can be sold.

For consolidated guaranteed value mutual funds, in which the Group has only minor equity interests, the obligation to pass the net revenues of these funds to the investors is reported in other liabilities, with a corresponding charge to other revenues.

All material intercompany transactions and balances have been eliminated. Issuances of a subsidiary’s stock to third parties are treated as capital transactions.

Revenue Recognition

Revenue is recognized when it is realized or realizable, and earned. This concept is applied to the key revenue generating activities of the Group as follows:

Net interest revenues –Interest from interest-bearing assets and liabilities is recognized on an accrual basis over the life of the asset or liability based on the constant effective yield reflected in the

F-9

terms of the contract and any related net deferred fees, premiums, discounts or debt issuance costs. See the “Loans” section of this footnote for more specific information regarding interest from loans.

Valuation of assets and liabilities –Certain assets and liabilities are required to be revalued each period end and the offset to the change in the carrying amount is recognized as revenue. These include assets and liabilities held for trading purposes, certain derivatives held for nontrading purposes, loans held for sale, and investments accounted for under the equity method. In addition, assets are revalued to recognize impairment losses within revenues when certain criteria are met. See the discussions in the “Trading Assets and Liabilities, and Securities Available for Sale”, “Derivatives”, “Other Investments”, “Allowances for Credit Losses”, “Loans Held for Sale”, and “Impairment” sections of this footnote for more detailed explanations of the valuation methods used and the methods for determining impairment losses for the various types of assets involved.

Fees and commissions –Revenue from the various services the Group performs are recognized when the following criteria are met: persuasive evidence of an arrangement exists, the services have been rendered, the fee or commission is fixed or determinable, and collectibility is reasonably assured. Incentive fee revenues from investment advisory services are recognized at the end of the contract period when the incentive contingencies have been resolved.

Sales of assets –Gains and losses from sales of assets result primarily from sales of financial assets in monetary exchanges, which include sales of trading assets, securities available for sale, other investments, and loans. In addition, the Group records revenue from sales of nonfinancial assets such as real estate, subsidiaries and other assets.

To the extent assets are exchanged for beneficial or ownership interests in those same assets, the exchange is not considered a sale and no gain or loss is recorded. Otherwise, gains and losses on exchanges of financial assets that are held at fair value, and gains on financial assets not held at fair value, are recorded when the Group has surrendered control of those financial assets. Gains on exchanges of nonfinancial assets are recorded once the sale has been closed or consummated, except when the Group maintains certain types of continuing involvement with the asset sold, in which case the gains are deferred. Losses from pending sales of nonfinancial assets and financial assets not held at fair value are recognized once the asset is deemed held for sale.

Gains and losses from monetary exchanges are calculated as the difference between the book value of the assets given up and the fair value of the proceeds received and liabilities incurred. Gains or losses from nonmonetary exchanges are calculated as the difference between the book value of the assets given up and the fair value of the assets given up and liabilities incurred as part of the transaction, except that the fair value of the assets received is used if it is more readily determinable.

Multiple-deliverable arrangements –In circumstances where the Group contracts to provide multiple products, services or rights to a counterparty, an evaluation is made as to whether separate revenue recognition events have occurred. This evaluation considers the stand-alone value of items already delivered, the verifiability of the fair value of items not yet delivered and, if there is a right of return on delivered items, the probability of delivery of remaining undelivered items.

If it is determined that separation is appropriate, the consideration received is allocated based on the relative fair value of each item, unless there is no objective and reliable evidence of the fair value of the delivered item or an individual item is required to be recognized at fair value according to other U.S. GAAP requirements, in which case the residual method is used.

Foreign Currency Translation

Assets and liabilities denominated in currencies other than an entity’s functional currency are translated into its functional currency using the period-end exchange rates, and the resulting transaction gains and losses are reported in trading revenues. Foreign currency revenues, expenses, gains, and losses are recorded at the exchange rate at the dates recognized.

Gains and losses resulting from translating the financial statements of net investments in foreign operations into the reporting currency of the parent entity are reported, net of any hedge and tax effects, in accumulated other comprehensive income within shareholders’ equity. Revenues, expenses, gains and losses are translated at the exchange rates at the dates on which those elements are recog-

F-10

nized, either individually or by using an appropriately weighted average exchange rate for the period. Assets and liabilities are translated at the period end rate.

Reverse Repurchase and Repurchase Agreements

Securities purchased under resale agreements (“reverse repurchase agreements”) and securities sold under agreements to repurchase (“repurchase agreements”) are treated as collateralized financings and are carried at the amount of cash disbursed and received, respectively. The party disbursing the cash takes possession of the securities serving as collateral for the financing and having a market value equal to or in excess of the principal amount loaned. Securities purchased under resale agreements consist primarily of OECD country sovereign bonds or sovereign guaranteed bonds. Securities owned and pledged as collateral under repurchase agreements in which the counterparty has the right by contract or custom to sell or repledge the collateral are disclosed on the Consolidated Balance Sheet.

The Group monitors the fair value of the securities received or delivered. For securities purchased under resale agreements, the Group requests additional securities or the return of a portion of the cash disbursed when appropriate in response to a decline in the market value of the securities received. Similarly, the return of excess securities or additional cash is requested when appropriate in response to an increase in the market value of securities sold under repurchase agreements. The Group offsets reverse repurchase and repurchase agreements with the same counterparty under master netting agreements when they have the same maturity date and meet certain other criteria regarding settlement and transfer mechanisms. Interest earned on reverse repurchase agreements and interest incurred on repurchase agreements are reported as interest revenues and interest expense, respectively.

Securities Borrowed and Securities Loaned

Securities borrowed and securities loaned are recorded at the amount of cash advanced or received. Securities borrowed transactions generally require the Group to deposit cash with the securities lender. In a securities loaned transaction, the Group generally receives either cash collateral, in an amount equal to or in excess of the market value of securities loaned, or securities. If the securities received may be sold or repledged, they are accounted for as trading assets and a corresponding liability to return the security is recorded. The Group monitors the fair value of securities borrowed and securities loaned and additional collateral is obtained, if necessary. Fees received or paid are reported in interest revenues and interest expense, respectively. Securities owned and pledged as collateral under securities lending agreements in which the counterparty has the right by contract or custom to sell or repledge the collateral are disclosed on the Consolidated Balance Sheet.

Trading Assets and Liabilities, and Securities Available for Sale

The Group designates debt and marketable equity securities as either held for trading purposes or available for sale at the date of acquisition.

Trading assets and trading liabilities are carried at their fair values and related realized and unrealized gains and losses are included in trading revenues.

Securities available for sale are carried at fair value with the changes in fair value reported in accumulated other comprehensive income within shareholders’ equity unless the security is subject to a fair value hedge, in which case changes in fair value resulting from the risk being hedged are recorded in other revenues. The amounts reported in other comprehensive income are net of deferred income taxes and adjustments to insurance policyholder liabilities and deferred acquisition costs.

Declines in fair value of securities available for sale below their amortized cost that are deemed to be other than temporary and realized gains and losses are reported in the Consolidated Statement of Income in net gains on securities available for sale. The amortization of premiums and accretion of discounts are recorded in net interest revenues. Generally, the weighted-average cost method is used to determine the cost of securities sold.

Fair value is based on quoted market prices, price quotes from brokers or dealers, or estimates based upon discounted expected cash flows.

F-11

Derivatives

All freestanding contracts that are considered derivatives for accounting purposes are carried at fair value in the balance sheet regardless of whether they are held for trading or nontrading purposes. Derivative features embedded in other contracts that meet certain criteria are also measured at fair value. Fair values for derivatives are based on quoted market prices, discounted cash flow analysis, comparison to similar observable market transactions, or pricing models that take into account current market and contractual prices of the underlying instruments as well as time value and yield curve or volatility factors underlying the positions. Fair values also take into account expected market risks, modeling risks, administrative costs and credit considerations. Derivative assets and liabilities arising from contracts with the same counterparty that are covered by qualifying and legally enforceable master netting agreements are reported on a net basis.

The Group enters into various contracts for trading purposes, including swaps, futures contracts, forward commitments, options and other similar types of contracts and commitments based on interest and foreign exchange rates, equity and commodity prices, and credit risk. The Group also makes commitments to originate mortgage loans that will be held for sale. Such positions are considered derivatives and are carried at their fair values as either trading assets or trading liabilities, and related gains and losses are included in trading revenues. At the inception of a derivative transaction, trading profit or loss is recognized if the fair value of the derivative is obtained from a quoted market price, supported by comparison to observable prices of other current market transactions or supported by other observable data used in the valuation technique. When the fair value of a derivative is not based upon observable market data, the Group defers any trade date profit or loss. This deferral is recognized when the transaction becomes observable, the Group enters into an offsetting transaction that substantially eliminates the derivative’s risk, or using a rational method such as over the life of the transaction.

Derivative features embedded in other nontrading contracts are measured separately at fair value when they are not clearly and closely related to the host contract and meet the definition of a derivative. Unless designated as a hedge, changes in the fair value of such an embedded derivative are reported in trading revenues. The carrying amount is reported on the Consolidated Balance Sheet with the host contract.

Certain derivatives entered into for nontrading purposes, which do not qualify for hedge accounting, that are otherwise effective in offsetting the effect of transactions on noninterest revenues and expenses are recorded in other assets or other liabilities with changes in fair value recorded in the same noninterest revenues and expense captions affected by the transaction being offset. The changes in fair value of all other derivatives not qualifying for hedge accounting are recorded in trading revenues.

For accounting purposes there are three possible types of hedges, each of which is accounted for differently: (1) hedges of the changes in fair value of assets, liabilities or firm commitments (fair value hedges), (2) hedges of the variability of future cash flows from forecasted transactions and floating rate assets and liabilities (cash flow hedges), and (3) hedges of the translation adjustments resulting from translating the financial statements of net investments in foreign operations into the reporting currency of the parent. Hedge accounting, as described in the following paragraphs, is applied for each of these types of hedges, if the hedge is properly documented at inception and the hedge is highly effective in offsetting changes in fair value, variability of cash flows, or the translation effects of net investments in foreign operations. Hedge effectiveness is assessed at inception and throughout the term of each hedging relationship, and it is not the Group’s policy to assume no ineffectiveness for hedges, regardless of the existence of matching terms for the derivative and hedged item.

For hedges of changes in fair value, the changes in the fair value of the hedged asset or liability due to the risk being hedged are recognized in earnings along with changes in the entire fair value of the derivative. When hedging interest rate risk, for both the derivative and the hedged item any interest accrued or paid is reported in interest revenue or expense and the unrealized gains and losses from the fair value adjustments are reported in other revenues. When hedging the foreign exchange risk in an available-for-sale security, the fair value adjustments related to the foreign exchange exposures are also recorded in other revenues. Hedge ineffectiveness is reported in other revenues and is measured

F-12

as the net effect of the fair value adjustments made to the derivative and the hedged item arising from changes in the market rate or price related to the risk being hedged.

If a hedge of changes in fair value is canceled because the derivative is terminated or dedesignated, any remaining interest rate-related fair value adjustment made to the carrying amount of a hedged debt instrument is amortized to interest revenue or expense over the remaining life of the hedged item. For other types of fair value adjustments and whenever a hedged asset or liability is sold or terminated, any basis adjustments are included in the calculation of the gain or loss on sale or termination.

For hedges of the variability of cash flows, there is no special accounting for the hedged item and the derivative is carried at fair value with changes in value reported initially in other comprehensive income to the extent the hedge is effective. These amounts initially recorded in other comprehensive income are subsequently reclassified into earnings in the same periods during which the forecasted transaction affects earnings. Thus, for hedges of interest rate risk the amounts are amortized into interest revenues or expense along with the interest accruals on the hedged transaction. When hedging the foreign exchange risk in an available-for-sale security, the amounts resulting from foreign exchange risk are included in the calculation of the gain or loss on sale once the hedged security is sold. Hedge ineffectiveness is recorded in other revenues and is usually measured as the difference between the changes in fair value of the actual hedging derivative and a hypothetically perfect hedge.

When hedges of the variability of cash flows due to interest rate risk are canceled, amounts remaining in accumulated other comprehensive income are amortized to interest revenues or expense over the original life of the hedge. For cancellations of other types of hedges of the variability of cash flows, the related amounts accumulated in other comprehensive income are reclassified into earnings either in the same income statement caption and period as the forecasted transaction, or in other revenues when it is no longer probable that the forecasted transaction will occur.

For hedges of the translation adjustments resulting from translating the financial statements of net investments in foreign operations into the reporting currency of the parent, the portion of the change in fair value of the derivative due to changes in the spot foreign exchange rate is recorded as a foreign currency translation adjustment in other comprehensive income to the extent the hedge is effective; and the remainder is recorded as other revenues.

Hedging derivatives are reported as other assets and other liabilities and any derivative dedesignated as a hedging derivative is transferred to trading assets and liabilities and marked to market with changes in fair value recognized in trading revenues. For any hedging derivative that is terminated, the difference between the derivative’s carrying amount and the cash paid or received is recognized as other revenues.

Other Investments

Other investments include investments accounted for under the equity method, holdings of designated consolidated investment companies, and other nonmarketable equity interests and investments in venture capital companies.

The equity method of accounting is applied to investments when the Group does not have a controlling financial interest, but has the ability to significantly influence operating and financial policies of the investee. Generally, this is when the Group has an investment between 20% and 50% of the voting stock or in-substance common stock of a corporation or 3% or more of limited partnership or limited liability corporation interests. Other factors that are considered in determining whether the Group has significant influence include representation on the board of directors (supervisory board in the case of German stock corporations) and material intercompany transactions. The existence of these factors could require the application of the equity method of accounting for a particular investment even though the investment is less than 20% of the voting stock.

Under equity method accounting, the pro-rata share of the investee’s net income or loss, on a U.S. GAAP basis, as well as disposition gains and losses and charges for other-than-temporary impairments, are included in net income from equity method investments. Equity method losses in excess of the Group’s carrying amount of the investment in the enterprise are charged against other assets held by the Group related to the investee. If those other assets are written down to zero, a determina-

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tion is made whether to report additional losses based on the Group’s obligation to fund such losses. The difference between the Group’s cost and its proportional underlying equity in net assets of the investee at the date of investment (“equity method goodwill”) is subject to impairment reviews in conjunction with the reviews of the overall investment.

Investments held by designated investment companies that are consolidated are included in other investments, as they are primarily nonmarketable equity securities, and are carried at fair value with changes in fair value recorded in other revenues.

Other nonmarketable equity investments and investments in venture capital companies, in which the Group does not have a controlling financial interest or significant influence, are included in other investments and carried at historical cost, net of declines in fair value below cost that are deemed to be other than temporary. Gains and losses upon sale or impairment are included in other revenues.

Loans

Loans are presented on the balance sheet at their outstanding unpaid principal balances net of charge-offs, unamortized premiums or discounts, net deferred fees or costs on originated loans and the allowance for loan losses. Interest revenues are accrued on the unpaid principal balance. Net deferred fees or costs and premiums or discounts are recorded as an adjustment of the yield (interest revenues) over the contractual lives of the related loans. Loan commitment fees related to those commitments that are not accounted for as derivatives are recognized in fees for other customer services over the life of the commitment. Loan commitments that are accounted for as derivatives are carried at fair value.

Loans are placed on nonaccrual status if either the loan has been in default as to payment of principal or interest for 90 days or more and the loan is neither well secured nor in the process of collection; or the loan is not yet 90 days past due, but in the judgment of management the accrual of interest should be ceased before 90 days because it is probable that all contractual payments of interest and principal will not be collected. When a loan is placed on nonaccrual status, any accrued but unpaid interest previously recorded is reversed against current period interest revenues. Cash receipts of interest on nonaccrual loans are recorded as either interest revenues or a reduction of principal according to management’s judgment as to the collectibility of principal. Accrual of interest is resumed only once the loan is current as to all contractual payments due and the loan is not impaired.

Leasing Transactions

Lease financing transactions, which include direct financing and leveraged leases, in which a Group entity is the lessor are classified as loans. Unearned income is amortized to interest revenues over the lease term using the interest method. Capital leases in which a Group entity is the lessee are capitalized as assets and reported in premises and equipment.

Allowances for Credit Losses

The allowances for credit losses represent management’s estimate of probable losses that have occurred in the loan portfolio and off-balance sheet positions which comprises contingent liabilities and lending-related commitments as of the date of the consolidated financial statements. The allowance for loan losses is reported as a reduction of loans and the allowance for off-balance sheet positions is reported in other liabilities.

To allow management to determine the appropriate level of the allowance for loan losses, all significant counterparty relationships are reviewed periodically, as are loans under special supervision, such as impaired loans. Smaller-balance standardized homogeneous loans are collectively evaluated for impairment. This review encompasses current information and events related to the counterparty, such as past due status and collateral recovery values, as well as industry, geographic, economic, political, and other environmental factors. This process results in an allowance for loan losses which consists of a specific loss component and an inherent loss component.

The specific loss component represents the allowance for impaired loans. Impaired loans represent loans for which, based on current information and events, management believes it is probable that the Group will not be able to collect all principal and interest amounts due in accordance with the contractual terms of the loan agreement. The specific loss component of the allowance is measured by the

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excess of the recorded investment in the loan, including accrued interest, over either the present value of expected future cash flows, including cash flows that may result from foreclosure less costs for obtaining and selling the collateral, or the market price of the loan. Impaired loans are generally placed on nonaccrual status.

The inherent loss component is principally for all other loans not deemed to be impaired, but that, on a portfolio basis, are believed to have some inherent loss which is probable of having occurred and is reasonably estimable. The inherent loss component consists of a country risk allowance for transfer and currency convertibility risks for loan exposures in countries where there are serious doubts about the ability of counterparties to comply with the repayment terms due to the economic or political situation prevailing in the respective country of domicile; a smaller-balance standardized homogeneous loan loss allowance for loans to individuals and small business customers of the private and retail business, and an other inherent loss allowance. The other inherent loss allowance represents an estimate of losses inherent in the portfolio that have not yet been individually identified and reflects the imprecisions and uncertainties in estimating the loan loss allowance. This estimate of inherent losses excludes those exposures that have already been considered when establishing the allowance for smaller-balance standardized homogeneous loans.

Amounts determined to be uncollectible are charged to the allowance. Subsequent recoveries, if any, are credited to the allowance. The provision for loan losses, which is charged to income, is the amount necessary to adjust the allowance to the level determined through the process described above.

The allowance for off-balance sheet positions, which is established through charges to other expenses, is determined using the same measurement techniques as the allowance for loan losses.

Loans Held for Sale

Loans held for sale are accounted for at the lower of cost or market on an individual basis and are reported as other assets. Origination fees and direct costs are deferred until the related loans are sold and are included in the determination of the gains or losses upon sale, which are reported in other revenues. Valuation adjustments related to loans held for sale are reported in other assets and other revenues, and are not included in the allowance for loan losses nor the provision for loan losses.

Asset Securitizations

When the Group transfers financial assets to securitization vehicles, it may retain one or more subordinated tranches, cash reserve accounts, or in some cases, servicing rights or interest-only strips, all of which are retained interests in the securitized assets. The amount of the gain or loss on transfers accounted for as sales depends in part on the previous carrying amounts of the financial assets involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair values at the date of transfer. Retained interests other than servicing rights are classified as trading assets, securities available for sale or other assets depending on the nature of the retained interest and management intent. Servicing rights are classified in intangible assets, carried at the lower of the allocated basis or current fair value and amortized in proportion to and over the period of net servicing revenue.

To obtain fair values, quoted market prices are used if available. However, for securities representing retained interests from securitizations of financial assets, quotes are often not available, so the Group generally estimates fair value based on the present value of future expected cash flows using management’s best estimates of the key assumptions (loan losses, prepayment speeds, forward yield curves, and discount rates) commensurate with the risks involved. Interest revenues on retained interests are recognized using the effective yield method.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is generally computed using the straight-line method over the estimated useful lives of the assets. The range of estimated useful lives is 25 to 50 years for premises and 3 to 10 years for furniture and equipment. Leasehold improvements are depreciated on a straight-line basis over the shorter of the term of the

F-15

lease or the estimated useful life of the improvement, which generally ranges from 3 to 15 years. Depreciation of premises is included in net occupancy expense of premises, while depreciation of equipment is included in furniture and equipment expense and IT costs, as applicable. Maintenance and repairs are charged to expense and improvements are capitalized. Gains and losses on dispositions are reflected in other revenues.

Leased properties meeting certain criteria are capitalized as assets in premises and equipment and depreciated over the terms of the leases. For properties subject to operating leases, rental expense and rental income are recognized on a straight-line basis over the lease term, which commences when the lessee controls the physical use of the property. Lease incentives are treated as a reduction of rental expense and are also recognized over the lease term on a straight-line basis.

Eligible costs related to software developed or obtained for internal use are capitalized and depreciated using the straight-line method over a period of 3 to 5 years. Eligible costs include external direct costs for materials and services, as well as payroll and payroll-related costs for employees directly associated with an internal-use software project. Overhead, as well as costs incurred during planning or after the software are ready for use, is expensed as incurred.

Goodwill and Other Intangible Assets

Goodwill, which represents the excess of the cost of an acquired entity over the fair value of net assets acquired at the date of acquisition, is tested for impairment annually, or more frequently if events or changes in circumstances, such as an adverse change in business climate, indicate that the goodwill may be impaired. Mortgage and other loan servicing rights are carried at the lower of cost or current fair value and amortized in proportion to and over the estimated period of net servicing revenue. Other intangible assets that have a finite useful life are amortized over a period of 3 to 15 years; other intangible assets that have an indefinite useful life, primarily investment management agreements related to retail mutual funds, are not amortized. These assets are tested for impairment and their useful lives are reaffirmed at least annually.

Obligation to Purchase Common Shares

Forward purchases of equity shares of a consolidated Group company are reported as obligation to purchase common shares if the number of shares is fixed and physical settlement is required. At inception the obligation is recorded at the fair value of the shares, which is equal to the present value of the settlement amount of the forward. For forward purchases of Deutsche Bank shares, a corresponding charge is made to shareholders’ equity and reported as equity classified as obligation to purchase common shares. For forward purchases of minority interest shares, a corresponding reduction to other liabilities is made.

The liability is accounted for on an accrual basis if the purchase price for the shares is fixed, and interest costs on the liability are reported as interest expense. Deutsche Bank common shares subject to such contracts are not considered to be outstanding for purposes of earnings per share calculations. Upon settlement of such forward purchases the liability is extinguished whereas the charge to equity remains but is reclassified to common shares in treasury.

Prior to July 1, 2003, written put options on equity shares of a consolidated Group company that met certain settlement criteria were also reported as obligation to purchase common shares. Beginning July 1, 2003, such written put options are reported as derivatives.

Impairment

Securities available for sale, equity method and direct investments (including investments in venture capital companies and nonmarketable equity securities), and unguaranteed lease residuals are subject to impairment reviews. An impairment charge is recorded if a decline in fair value below the asset’s amortized cost or carrying value, depending on the nature of the asset, is deemed to be other than temporary.

Other intangible assets with finite useful lives and premises and equipment are also subject to impairment reviews if a change in circumstances indicates that the carrying amount of an asset may not be recoverable. If estimated undiscounted cash flows relating to an asset held and used are less than

F-16

its carrying amount, an impairment charge is recorded to the extent the fair value of the asset is less than its carrying amount. For an asset to be disposed of by sale, a loss is recorded based on the lower of the asset’s carrying value or fair value less cost to sell. An asset to be disposed of other than by sale is considered held and used and accounted for as such until it is disposed of.

Goodwill and other intangible assets which are not amortized are tested for impairment at least annually and an impairment charge is recorded to the extent the fair market value of the asset is less than its carrying amount.

Expense Recognition

Direct and incremental costs related to underwriting and advisory services and origination of loans are deferred and recognized together with the related revenue. Loan origination costs are netted against loan origination fees and are amortized to interest revenue over the contractual life of the related loans. Other operating costs, including advertising costs, are recognized as incurred.

Income Taxes

The Group recognizes the current and deferred tax consequences of all transactions that have been recognized in the consolidated financial statements using the provisions of the appropriate jurisdictions’ tax laws. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating loss carry-forwards and tax credits. The amount of deferred tax assets is reduced by a valuation allowance, if necessary, to the amount that, based on available evidence, management believes will more likely than not be realized.

Deferred tax liabilities and assets are adjusted for the effect of changes in tax laws and rates in the period that includes the enactment date.

Share-Based Compensation

Effective as of January 1, 2003, the Group adopted the fair-value-based method prospectively for all employee awards granted, modified or settled after January 1, 2003. Under the fair-value-based method, compensation cost is measured at the grant date based on the fair value of the share-based award. The fair values of stock option awards are estimated using a Black-Scholes option pricing model. For share awards, the fair value is the quoted market price of the share reduced by the present value of the expected dividends that will not be received by the employee and adjusted for the effect, if any, of restrictions beyond the vesting date. Prior to January 1, 2003, the Group accounted for its share awards under the intrinsic-value-based method of accounting. Under this method, compensation expense is the excess, if any, of the quoted market price of the shares at grant date or other measurement date over the amount an employee must pay, if any, to acquire the shares.

The following table illustrates what the effect on net income and earnings per common share would have been if the Group had applied the fair value method to all share-based awards.

in€ m.	2005			2004			2003
Net income, as reported		3,529			2,472			1,365
Add: Share-based compensation expense included in reported net income, net of related tax effects		595			696			433
Deduct: Share-based compensation expense determined under fair value method for all awards, net of related tax effects		(589	)		(698	)		(346	)
Pro forma net income		3,535			2,470			1,452
Earnings per share:
Basic – as reported	€	7.62		€	5.02		€	2.44
Basic – pro forma	€	7.63		€	5.02		€	2.60
Diluted – as reported	€	6.95		€	4.53		€	2.31
Diluted – pro forma	€	6.96		€	4.53		€	2.46

The Group records its obligations under outstanding deferred share awards and stock option awards in shareholders’ equity as share awards – common shares issuable. The related deferred compensation

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is also included in shareholders’ equity. These items are classified in shareholders’ equity based on the Group’s intent to settle these awards with its common shares. Compensation expense is recorded on a straight-line basis over the period in which employees perform services to which the awards relate. Compensation expense is reversed in the period an award is forfeited. Compensation expense for share-based awards payable in cash is remeasured based on the underlying share price changes and the related obligations are included in other liabilities until paid.

See Note [20] for additional information on specific award provisions and the fair values and significant assumptions used to estimate the fair values of options.

Comprehensive Income

Comprehensive income is defined as the change in equity of an entity excluding transactions with shareholders such as the issuance of common or preferred shares, payment of dividends and purchase of treasury shares. Comprehensive income has two major components: net income, as reported in the Consolidated Statement of Income, and other comprehensive income as reported in the Consolidated Statement of Comprehensive Income. Other comprehensive income includes such items as unrealized gains and losses from translating net investments in foreign operations net of related hedge effects, unrealized gains and losses from changes in fair value of securities available for sale, net of deferred income taxes and the related adjustments to insurance policyholder liabilities and deferred acquisition costs, minimum pension liability, and the effective portions of realized and unrealized gains and losses from derivatives used as cash flow hedges, less amounts reclassified to earnings in combination with the hedged items. Comprehensive income does not include changes in the fair value of nonmarketable equity securities, traditional credit products and other assets generally carried at cost.

Statement of Cash Flows

For purposes of the Consolidated Statement of Cash Flows, the Group’s cash and cash equivalents are cash and due from banks.

[2] Cumulative Effect of Accounting Changes

SFAS 150

Effective July 1, 2003, the Group adopted SFAS No. 150, “Accounting for Certain Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”). SFAS 150 requires that an entity classify as liabilities (or assets in some circumstances) certain financial instruments with characteristics of both liabilities and equity. SFAS 150 applies to certain freestanding financial instruments that embody an obligation for the entity and that may require the entity to issue shares, or redeem or repurchase its shares.

SFAS 150 changed the accounting for outstanding forward purchases of approximately 52 million Deutsche Bank common shares with a weighted-average strike price of€ 56.17 which were entered into to satisfy obligations under employee share-based compensation awards. The Group recognized an after-tax gain of€ 11 million, net of€ 5 million tax expense, as a cumulative effect of a change in accounting principle as these contracts were adjusted to fair value upon adoption of SFAS 150. The contracts were then amended effective July 1, 2003, to allow for physical settlement only. This resulted in a charge to shareholders’ equity of€ 2.9 billion and the establishment of a corresponding liability classified as obligation to purchase common shares. Settlements of the forward contracts during 2003 reduced the obligation to purchase common shares to€ 2.3 billion at December 31, 2003. Since July 1, 2003, the costs of these contracts have been recorded as interest expense instead of as a direct reduction of shareholders’ equity.

The accounting for physically settled forward contracts reduces shareholders’ equity, which effectively results in the shares being accounted for as if retired or in treasury even though the shares are still outstanding. As such, SFAS 150 also requires that the number of outstanding shares associated with physically settled forward purchase contracts be removed from the denominator in computing basic and diluted earnings per share (EPS). The number of weighted average shares deemed no

F-18

longer outstanding for EPS purposes for the year ended December 31, 2003, related to the forward purchase contracts described above was 23 million shares.

FIN 46 and FIN 46(R) (Revised December 2003)

FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) was issued in January 2003. FIN 46 requires a company to consolidate entities as the primary beneficiary if the equity investment at risk is not sufficient for the entity to finance its activities without additional subordinated financial support from other parties or if the equity investors lack essential characteristics of a controlling financial interest. Securitization vehicles that are qualifying special purpose entities are excluded from the new rule and remain unconsolidated.

The Interpretation was effective immediately for entities established after January 31, 2003, and for interests obtained in variable interest entities after that date. For variable interest entities created before February 1, 2003, FIN 46 was originally effective for the Group on July 1, 2003. In October 2003, the FASB deferred the effective date so that, for the Group, application could be deferred for some or all such variable interest entities until December 31, 2003, pending resolution of various matters and the issuance of clarifying guidance. At July 1, 2003, the Group elected not to apply FIN 46 to a limited number of variable interest entities created before February 1, 2003, which it believed might not require consolidation at December 31, 2003. The Group applied FIN 46 to substantially all other variable interest entities as of July 1, 2003. Consequently, the Group recorded a€ 140 million gain as a cumulative effect of a change in accounting principle and total assets increased by€ 18 billion. Effective December 31, 2003, the Group fully adopted FIN 46. There was no significant effect from the application of FIN 46 to those variable interest entities for which adoption occurred after July 1, 2003.

Certain entities were deconsolidated as a result of applying FIN 46, primarily investment vehicles and trusts associated with trust preferred securities that the Group sponsors where the investors bear the economic risks. The gain from the application of FIN 46 primarily represents the reversal of the impact on earnings of securities held by the investment vehicles that were deconsolidated.

Effective March 31, 2004, the Group adopted the revised version of FIN 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51” (“FIN 46(R)”). The FASB modified FIN 46 to address certain technical corrections and implementation issues that had arisen. As a result of the adoption, total assets decreased by€ 12.5 billion due to the deconsolidation of certain guaranteed value mutual funds. The adoption did not result in a cumulative effect of a change in accounting principle, however certain offsetting revenues and charges, chiefly trading revenues, net interest revenues and charges against other revenues, are no longer reported in the consolidated statement of income beginning April 1, 2004 due to the deconsolidations.

[3] Acquisitions and Dispositions

For the years ended December 31, 2005, 2004 and 2003, the Group recorded net gains on dispositions (excluding results from businesses/subsidiaries held for sale) of€ 108 million,€ 95 million and€ 513 million, respectively. The acquisitions and disposals that occurred in these years had no significant impact on the Group’s total assets.

For a discussion of the Group’s most significant acquisitions and dispositions for the years ended December 31, 2005 and 2004 see Note [27] Business Segments and Related Information.

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[4] Trading Assets and Trading Liabilities

The components of these accounts are as follows.

in€ m.	Dec 31, 2005		Dec 31, 2004
Trading assets:
Bonds and other fixed-income securities		260,469		224,536
Equity shares and other variable-yield securities		99,479		73,176
Positive market values from derivative financial instruments1		75,354		67,173
Other trading assets		13,091		8,262
Total trading assets		448,393		373,147
Trading liabilities:
Bonds and other fixed-income securities		81,294		77,080
Equity shares and other variable-yield securities		28,473		20,567
Negative market values from derivative financial instruments1		84,580		71,959
Total trading liabilities		194,347		169,606

¹ Derivatives under master netting agreements are shown net.

[5] Securities Available for Sale

The fair value, amortized cost and gross unrealized holding gains and losses for the Group’s securities available for sale follow.

	Dec 31, 2005
	Fair value		Gross unrealized holding					Amortized cost
in€ m.			gains		losses
Debt securities:
German government		3,251		19		(18	)		3,250
U.S. Treasury and U.S. government agencies		1,721		1		(19	)		1,739
U.S. local (municipal) governments		1		–		–			1
Other foreign governments		3,024		37		(11	)		2,998
Corporates		7,127		177		(8	)		6,958
Other asset-backed securities		2		–		–			2
Mortgage backed securities, including obligations of U.S. federal agencies		97		2		–			95
Other debt securities		1,073		–		–			1,073
Total debt securities		16,296		236		(56	)		16,116
Equity securities:
Equity shares		4,894		2,303		(2	)		2,593
Investment certificates and mutual funds		403		33		(4	)		374
Other equity securities		82		46		–			36
Total equity securities		5,379		2,382		(6	)		3,003
Total securities available for sale		21,675		2,618		(62	)		19,119

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	Dec 31, 2004
	Fair value		Gross unrealized holding					Amortized cost
in€ m.			gains		losses
Debt securities:
German government		3,128		66		(16	)		3,078
U.S. Treasury and U.S. government agencies		1,460		–		(2	)		1,462
U.S. local (municipal) governments		1		–		–			1
Other foreign governments		3,297		41		(100	)		3,356
Corporates		4,993		176		(9	)		4,826
Other asset-backed securities		6		–		–			6
Mortgage backed securities, including obligations of U.S. federal agencies		41		2		–			39
Other debt securities		770		1		–			769
Total debt securities		13,696		286		(127	)		13,537
Equity securities:
Equity shares		6,010		1,579		(1	)		4,432
Investment certificates and mutual funds		549		23		(6	)		532
Other equity securities		80		29		–			51
Total equity securities		6,639		1,631		(7	)		5,015
Total securities available for sale		20,335		1,917		(134	)		18,552

	Dec 31, 2003
	Fair value		Gross unrealized holding					Amortized cost
in€ m.			gains		losses
Debt securities:
German government		2,802		52		(23	)		2,773
U.S. Treasury and U.S. government agencies		150		–		(1	)		151
U.S. local (municipal) governments		2		–		–			2
Other foreign governments		3,294		26		(105	)		3,373
Corporates		5,646		173		(45	)		5,518
Other asset-backed securities		1,679		–		–			1,679
Mortgage backed securities, including obligations of U.S. federal agencies		2,708		1		–			2,707
Other debt securities		532		–		–			532
Total debt securities		16,813		252		(174	)		16,735
Equity securities:
Equity shares		6,866		1,868		(8	)		5,006
Investment certificates and mutual funds		951		29		(10	)		932
Other equity securities		1		–		–			1
Total equity securities		7,818		1,897		(18	)		5,939
Total securities available for sale		24,631		2,149		(192	)		22,674

At December 31, 2005, there were no securities of an individual issuer that exceeded 10% of the Group’s total shareholders’ equity.

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The components of net gains on securities available for sale as reported in the Consolidated Statement of Income follow.

in€ m.	2005			2004			2003
Debt securities – gross realized gains		120			58			106
Debt securities – gross realized losses1		(14	)		(61	)		(35	)
Equity securities – gross realized gains		957			244			488
Equity securities – gross realized losses2		(8	)		(6	)		(539	)
Total net gains on securities available for sale		1,055			235			20

1	Includes€ 1 million,€ 20 million and€ 7 million of write-downs for other-than-temporary impairment for the years ended December 31, 2005, 2004 and 2003, respectively.
2	Includes€ 1 million,€ 2 million and€ 479 million of write-downs for other-than-temporary impairment for the years ended December 31, 2005, 2004 and 2003, respectively.

The following table shows the fair value, remaining maturities, approximate weighted-average yields (based on amortized cost) and total amortized cost by maturity distribution of the debt security components of the Group’s securities available for sale at December 31, 2005.

	Up to one year					More than one year					More than five years					More than ten years					Total
						and up to five years					and up to ten years
in€ m.	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
German government		93		2.91	%		93		3.06	%		383		3.21	%		2,682		6.00	%		3,251		5.51	%
U.S. Treasury and U.S. government agencies		1,695		1.12	%		–		–			–		–			26		1.91	%		1,721		1.13	%
U.S. local (municipal) governments		1		5.38	%		–		–			–		–			–		–			1		5.38	%
Other foreign governments		525		6.51	%		548		3.83	%		855		5.75	%		1,096		5.29	%		3,024		5.36	%
Corporates		2,297		3.46	%		882		4.22	%		953		3.32	%		2,995		6.05	%		7,127		4.61	%
Other asset-backed securities		–		–			2		1.76	%		–		–			–		–			2		1.76	%
Mortgage-backed securities, principally obligations of U.S. federal agencies		13		3.15	%		4		0.02	%		–		–			80		8.30	%		97		7.29	%
Other debt securities		51		2.39	%		997		5.92	%		16		6.73	%		9		2.40	%		1,073		5.73	%
Total fair value		4,675		2.92	%		2,526		4.76	%		2,207		4.28	%		6,888		5.91	%		16,296		4.65	%
Total amortized cost		4,691					2,508					2,143					6,775					16,116

The following tables show the Group’s gross unrealized losses on securities available for sale and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2005 and 2004, respectively:

F-22

December 31, 2005	Less than 12 months					12 months or longer					Total
	Fair value		Unrealized			Fair value		Unrealized			Fair value		Unrealized
in€ m.			losses					losses					losses
Debt securities:
German government		732		(4	)		1,974		(14	)		2,706		(18	)
U.S. Treasury and U.S. government agencies		1,336		(19	)		–		–			1,336		(19	)
Other foreign governments		647		(3	)		974		(8	)		1,621		(11	)
Corporates		579		(8	)		–		–			579		(8	)
Mortgage-backed securities		–		–			7		–			7		–
Total debt securities		3,294		(34	)		2,955		(22	)		6,249		(56	)
Equity securities:
Equity shares		21		(2	)		–		–			21		(2	)
Investment certificates and mutual funds		37		(3	)		19		(1	)		56		(4	)
Total equity securities		58		(5	)		19		(1	)		77		(6	)
Total temporarily impaired securities		3,352		(39	)		2,974		(23	)		6,326		(62	)

December 31, 2004	Less than 12 months					12 months or longer					Total
	Fair value		Unrealized			Fair value		Unrealized			Fair value		Unrealized
in€ m.			losses					losses					losses
Debt securities:
German government		–		–			1,798		(16	)		1,798		(16	)
U.S. Treasury and U.S. government agencies		83		(1	)		–		(1	)		83		(2	)
Other foreign governments		625		(1	)		846		(99	)		1,471		(100	)
Corporates		292		(3	)		32		(6	)		324		(9	)
Total debt securities		1,000		(5	)		2,676		(122	)		3,676		(127	)
Equity securities:
Equity shares		14		(1	)		–		–			14		(1	)
Investment certificates and mutual funds		26		(2	)		45		(4	)		71		(6	)
Total equity securities		40		(3	)		45		(4	)		85		(7	)
Total temporarily impaired securities		1,040		(8	)		2,721		(126	)		3,761		(134	)

The unrealized losses on investments in debt securities were primarily interest rate related. Since the Group has the intent and ability to hold these investments until a market price recovery or maturity, they are not considered other-than-temporarily impaired. The unrealized losses on investments in equity securities are attributable primarily to general market fluctuations rather than to specific adverse conditions. Based on this and our intent and ability to hold the securities until the market price recovers, these investments are not considered other-than-temporarily impaired.

[6] Other Investments

The following table summarizes the composition of other investments.

in€ m.	Dec 31, 2005		Dec 31, 2004
Equity method investments		5,006		5,462
Investments held by designated investment companies		160		213
Other equity interests		2,216		2,261
Total other investments		7,382		7,936

Equity Method Investments

The Group’s pro-rata share of the investees’ income or loss determined on a U.S. GAAP basis were profits of€ 333 million,€ 282 million and€ 42 million for the years ended December 31, 2005, 2004

F-23

and 2003, respectively. In addition, write-offs for other-than-temporary impairments of€ 1 million,€ 16 million and€ 617 million for the years ended December 31, 2005, 2004 and 2003, respectively, were included in net income (loss) from equity method investments.

Loans to equity method investees, trading assets related to these investees as well as debt securities available for sale issued by these investees amounted to€ 2.8 billion and€ 3.7 billion at December 31, 2005 and 2004, respectively. At December 31, 2005, loans totaling€ 23 million to three equity method investees were on nonaccrual status. At December 31, 2004, loans totaling€ 26 million to three equity method investees were on nonaccrual status. The Group issued a financial guarantee to EUROHYPO AG protecting it against losses on loans contributed by the Group when EUROHYPO AG was created in 2002. By the end of 2005, EUROHYPO had made claims in respect of the full amount of the financial guarantee, which had an initial maximum amount of€ 283 million, but we are currently engaged in discussions with EUROHYPO as to whether the preconditions for drawing had been satisfied with respect to almost all of these claims. If such preconditions were not satisfied, the portion of the guarantee relating to such claims would be reinstated and available for drawing until December 31, 2006.

At December 31, 2005, the following investees were significant, representing 75% of the carrying value of equity method investments.

Significant Equity Method Investments

Investment	Ownership
Atradius N.V., Amsterdam1		33.89	%
Deutsche Interhotel Holding GmbH & Co. KG, Berlin		45.51	%
DWS Euro-Bonds (Long), Luxembourg		21.97	%
EUROHYPO AG, Eschborn		27.99	%
Fondo Piramide Globale, Milan		42.45	%
RREEF America REIT III, Inc., Chicago		17.61	%
Santorini Investments Limited Partnership, Edinburgh2		51.00	%
Silver Creek Long/Short Limited, George Town		26.80	%
Silver Creek Low Vol. Strategies Ltd., George Town		31.97	%
Spark Infrastructure Group, Sydney		9.49	%
SphinX Limited, George Town		47.98	%
The Topiary Select Trust I, George Town		21.76	%
UFG Limited, Douglas		40.00	%

1	Formerly, Gerling NCM Credit and Finance AG, Köln.
2	The Group does not have a controlling financial interest in this investee.

In 2005, part of the Group’s investment in EUROHYPO AG was sold, resulting in a gain of€ 44 million and a reduction in our stake from 37.72% to 27.99%. The remaining tranche is expected to be sold in the first quarter of 2006. Furthermore, the Group’s investment in Atradius N.V. is expected to be partially sold in the first quarter of 2006, reducing our stake from 33.89% to 12.73%.

Investments Held by Designated Investment Companies

The underlying investment holdings of the Group’s designated investment companies are carried at fair value, and totaled€ 160 million and€ 213 million at December 31, 2005 and 2004, respectively.

Other Equity Interests

Other equity interests totaling€ 2.2 billion and€ 2.3 billion at December 31, 2005 and 2004, respectively, include investments in which the Group does not have significant influence, including certain venture capital companies and nonmarketable equity securities. The write-offs for other-than-temporary impairments of these investments amounted to
€ 10 million,€ 58 million and€ 214 million for the years ended December 31, 2005, 2004 and 2003, respectively.

F-24

At December 31, 2005, the aggregate carrying amount for all equity securities accounted for under the cost method of accounting was€ 1.6 billion. There were no unrealized loss positions at December 31, 2005.

[7] Loans

The following table summarizes the composition of loans.

in€ m.	Dec 31, 2005			Dec 31, 2004
German:
Banks and insurance		1,769			2,047
Manufacturing		6,620			7,364
Households (excluding mortgages)		16,157			14,761
Households – mortgages		27,039			26,175
Public sector		1,462			1,474
Wholesale and retail trade		3,394			3,742
Commercial real estate activities		10,625			11,100
Lease financing		1,001			820
Other		11,508			11,586
Total German		79,575			79,069
Non-German:
Banks and insurance		5,907			5,740
Manufacturing		9,083			5,906
Households (excluding mortgages)		10,245			7,023
Households – mortgages		9,016			9,117
Public sector		1,167			1,804
Wholesale and retail trade		8,683			6,546
Commercial real estate activities		2,634			3,004
Lease financing		1,810			1,726
Other		25,143			18,830
Total Non-German		73,688			59,696
Gross loans		153,263			138,765
(Deferred expense)/unearned income		(20	)		76
Loans less (deferred expense)/unearned income		153,283			138,689
Less: Allowance for loan losses		1,928			2,345
Total loans, net		151,355			136,344

The “other” category included no single industry group with aggregate borrowings from the Group in excess of 10 percent of the total loan portfolio at December 31, 2005.

The aggregate amount of gains on sales of loans amounted to€ 63 million at December 31, 2005 and€ 10 million at December 31, 2004 respectively.

Certain related third parties have obtained loans from the Group on various occasions. All such loans have been made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties. There were€ 2,470 million and€ 2,954 million of loans to related parties (including loans to equity method investees) outstanding at December 31, 2005 and 2004, respectively.

Nonaccrual loans as of December 31, 2005 and 2004 were€ 3.6 billion and€ 4.5 billion, respectively. Loans 90 days or more past due and still accruing interest totaled€ 202 million and€ 247 million as of December 31, 2005 and 2004, respectively.

Additionally, as of December 31, 2005, the Group had€ 1 million of lease financing transactions that were nonperforming.

F-25

Impaired Loans

This table sets forth information about the Group’s impaired loans.

in€ m.	Dec 31, 2005		Dec 31, 2004		Dec 31, 2003
Total impaired loans1		2,576		3,516		5,255
Allowance for impaired loans under SFAS 1142		1,230		1,654		2,471
Average balance of impaired loans during the year		3,189		4,474		6,712
Interest income recognized on impaired loans during the year		57		65		70

1	Included in these amounts are€ 2.0 billion,€ 2.8 billion and€ 4.1 billion as of December 31, 2005, 2004 and 2003, respectively, that require an allowance. The remaining impaired loans do not require an allowance because the present value of expected future cash flows, the fair value of the underlying collateral or the market price of the loan exceeds the recorded investment in these loans.
2	The allowance for impaired loans under SFAS 114 is included in the Group’s allowance for loan losses.

Loans or Debt Securities Acquired in a Transfer

In accordance with the new requirements of Statement of Position 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer” (“SOP 03-3”), the following table sets forth information about the Group’s loans acquired by completion of a transfer for which it is probable, at acquisition, that we will be unable to collect all contractually required payments receivable.

in€ m.	Loans
Loans acquired during the year:
Contractually required payments receivable at acquisition		1,932
Cash flows expected to be collected at acquisition		554
Fair value of loans at acquisition		526
Accretable yield for loans acquired:
Balance at beginning of year		–
Additions		27
Accretion		(6	)
Disposals		–
Reclassifications from (to) nonaccretable difference		–
Balance at end of year		21
Loans acquired during the year:
Outstanding balance, beginning of year		–
Outstanding balance, end of year		776
Carrying amount, beginning of year		–
Carrying amount, end of year		233

None of the loans in the above table were considered nonaccrual or required allowances. Furthermore, there were no debt securities acquired in 2005 relevant to the SOP 03-3 disclosure requirements.

F-26

[8] Allowances for Credit Losses

The allowances for credit losses consist of an allowance for loan losses and an allowance for off-balance sheet positions.

The following table shows the activity in the Group’s allowance for loan losses.

in€ m.	2005			2004			2003
Allowance at beginning of year		2,345			3,281			4,317
Provision for loan losses		374			372			1,113
Net charge-offs:
Charge-offs		(1,018	)		(1,394	)		(1,894	)
Recoveries		170			152			167
Total net charge-offs		(848	)		(1,242	)		(1,727	)
Allowance related to acquisitions/divestitures		–			3			(105	)
Foreign currency translation		57			(69	)		(317	)
Allowance at end of year		1,928			2,345			3,281

The following table shows the activity in the Group’s allowance for off-balance sheet positions, which comprises contingent liabilities and lending-related commitments.

in€ m.	2005			2004			2003
Allowance at beginning of year		345			416			485
Provision for off-balance sheet positions		(24	)		(65	)		(50	)
Allowance related to acquisitions/divestitures		–			–			1
Foreign currency translation		8			(6	)		(20	)
Allowance at end of year		329			345			416

[9] Asset Securitizations and Variable Interest Entities

Asset Securitizations

The Group accounts for transfers of financial assets to securitization vehicles as sales when certain criteria are met; otherwise they are accounted for as secured borrowings. Beneficial interests in the securitization vehicles, primarily in the form of debt instruments, are sold to investors and the proceeds are used to pay the Group for the assets transferred. The cash flows collected from the financial assets transferred to the securitization vehicles are then used to repay the beneficial interests. The third party investors and the securitization vehicles generally have no recourse to the Group’s other assets in cases where the issuers of the financial assets fail to perform under the original terms of those assets. The Group may retain interests in the assets created in the securitization vehicles.

For the years ended December 31, 2005, 2004 and 2003, the Group recognized€ 177 million,€ 219 million and
€ 146 million, respectively, of gains on securitizations primarily related to residential and commercial mortgage loans.

The following table summarizes certain cash flows received from and paid to securitization vehicles during 2005, 2004 and 2003.

F-27

	Residential						Commercial						Commercial loans,
	mortgage loans						mortgage loans						excluding mortgages
in€ m.	2005		2004		2003		2005		2004		2003		2005		2004		2003
Proceeds from new securitizations		11,765		10,709		2,284		11,044		5,113		3,130		–		–		–
Proceeds from collections reinvested in new securitization receivables		–		–		–		–		–		–		–		439		1,157
Servicing fees received		4		4		5		–		–		–		–		–		1
Cash flows received on retained interests		4		67		51		–		5		31		–		6		13
Other cash flows received from (paid to) securitization vehicles		–		–		–		–		–		–		–		–		–

Prior to the year ended December 31, 2003, the Group had securitization activities related to marine and recreational vehicle loans. During 2002 and 2003, these commercial and consumer finance businesses were sold.

At December 31, 2005, the weighted-average key assumptions used in determining the fair value of retained interests, including servicing rights, and the impact of adverse changes in those assumptions on carrying amount/fair value are as follows.

	Residential			Commercial			Commercial loans,
in€ m. (except percentages)	mortgage loans			mortgage loans			excluding mortgages
Carrying amount/fair value of retained interests		415			512			--
Prepayment speed (current assumed)		37.07	%		0.00	%		--
Impact on fair value of 10% adverse change		(12	)		–			–
Impact on fair value of 20% adverse change		(23	)		–			–
Default rate (current assumed)		3.16	%		2.00	%		--
Impact on fair value of 10% adverse change		(18	)		(7	)		–
Impact on fair value of 20% adverse change		(35	)		(8	)		–
Discount factor (current assumed)		10.77	%		4.30	%		--
Impact on fair value of 10% adverse change		(14	)		(11	)		–
Impact on fair value of 20% adverse change		(24	)		(21	)		–

These sensitivities are hypothetical and should be viewed with caution. As the figures indicate, changes in fair value based on a 10 percent variation in assumptions generally should not be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumptions; in reality, changes in one factor may result in changes in another (for example, increases in market interest rates may result in lower prepayments and increased credit losses), which might affect the sensitivities. The key assumptions used in measuring the initial retained interests resulting from securitizations completed in 2005 were not significantly different from the current assumptions in the above table.

The key assumptions used in measuring the initial retained interests resulting from securitizations completed in 2004 and 2003 were not significantly different from the key assumptions used in determining the fair value of retained interests, including servicing rights, at December 31, 2004 and 2003, respectively. The weighted-average assumptions used at December 31, 2004 and 2003 were as follows.

	Residential				Commercial				Commercial loans,
	mortgage loans				mortgage loans				excluding mortgages
in %	2004		2003		2004		2003		2004		2003
Prepayment speed		28.11		22.56		0.00		0.00		1.37		1.81
Default rate		4.72		6.97		1.77		1.57		0.26		0.30
Discount factor		13.46		15.63		5.20		0.78		7.51		8.35

F-28

The following table presents information about securitized loans, including delinquencies (loans which are 90 days or more past due) and credit losses, net of recoveries, for the years ended December 31, 2005 and 2004.

	Residential				Commercial				Commercial loans,
	mortgage loans				mortgage loans				excluding mortgages
in€ m.	2005		2004		2005		2004		2005		2004
Total principal amount of loans		10,362		6,656		2,455		950		–		750
Principal amount of loans 90 days or more past due		422		128		–		–		–		15
Net credit losses		36		20		–		–		–		1

The table excludes securitized loans that the Group continues to service but otherwise has no continuing involvement.

In July 2003, the Group sold U.S. and European-domiciled private equity investments with a carrying value of
€ 361 million as well as€ 80 million in liquid investments to a securitization vehicle that was a qualifying special purpose entity. The securitization vehicle issued€ 174 million of debt to unaffiliated third parties and the Group received cash proceeds of€ 102 million and retained debt and equity interests initially valued at€ 306 million. The Group recognized a
€ 7 million loss on the sale of assets to the securitization vehicle. The Group received cash flows from retained interests of
€ 1 million each during 2005 and 2004 and€ 2 million during 2003.

The valuation of the Group’s retained interests at December 31, 2005 and December 31, 2004 were based on the fair values of the underlying investments in the securitization vehicle. These fair values were determined by the servicer of the securitization vehicle. The servicer is a Group-related entity. In determining fair value, the servicer utilizes the valuations of the underlying investments as provided by the general partners of those respective investments. The value of securities and other financial instruments are provided by these general partners on a fair value basis of accounting. The servicer may rely upon any valuations provided to it by the general partners of the investments, but is not bound by such valuations. At December 31, 2005 and 2004, respectively, the Group’s retained interests were valued at€ 354 million and€ 267 million.

The private equity investments held by the securitization vehicles are subject to€ 39 million funding commitments under their limited partnership agreements. These commitments are automatically funded by the securitization vehicle via the liquid investments.

To hedge its interest rate and currency risk, the securitization vehicle entered into a total rate of return swap with the Group. The Group also provided a liquidity facility to meet€ 178 million of servicing, administration, and interest expenses and€ 9 million to meet any funding commitments.

Variable Interest Entities

In the normal course of business, the Group becomes involved with variable interest entities primarily through the following types of transactions: asset securitizations, structured finance, commercial paper programs, mutual funds, and commercial real estate leasing and closed-end funds. The Group’s involvement includes transferring assets to the entities, entering into derivative contracts with them, providing credit enhancement and liquidity facilities, providing investment management and administrative services, and holding ownership or other investment interests in the entities.

The table below shows the aggregated assets (before consolidating eliminations) of variable interest entities consolidated by type of asset and entity as of December 31, 2005 and December 31, 2004.

F-29

	Commercial paper programs				Guaranteed value mutual				Asset securitization
					funds
in€ m.	2005		2004		2005		2004		2005		2004
Interest-earning deposits with banks		147		238		117		96		404		404
Trading assets		1		–		469		491		12,832		9,424
Securities		–		–		–		–		–		–
Loans, net		749		1,060		–		–		–		–
Other		–		–		6		35		3		3
Total assets		897		1,298		592		622		13,239		9,831
	Structured finance and other				Commercial real estate leasing
					vehicles and closed-end funds
in€ m.	2005		2004		2005		2004
Interest-earning deposits with banks		5,646		546		34		57
Trading assets		3,180		1,476		–		–
Securities		1,429		39		–		–
Loans, net		2,289		6,689		204		255
Other		1,529		5,495		542		736
Total assets		14,073		14,245		780		1,048

Substantially all of the consolidated assets of the variable interest entities act as collateral for related consolidated liabilities. The holders of these liabilities have no recourse to the Group, except to the extent the Group guarantees the value of the mutual fund units that investors purchase. The fair value of these guarantees was not significant as of December 31, 2005 and 2004. The mutual funds that the Group manages are investment vehicles that were established to provide returns to investors in the vehicles.

The commercial paper programs give clients access to liquidity in the commercial paper market. As an administrative agent for the commercial paper programs, the Group facilitates the sale of loans, other receivables, or securities from various third parties to a commercial paper entity, which then issues collateralized commercial paper to the market. The Group provides liquidity facilities to the commercial paper vehicles, but these facilities create only limited credit exposure since the Group is not required to provide funding if the assets of the vehicle are in default. In 2004, conduits with total assets of€ 5.8 billion were restructured and accordingly deconsolidated.

For asset securitization, the Group may retain a subordinated interest in the assets the Group securitizes or may purchase interest in the assets securitized by independent third parties. For structured finance and other products, the Group structures VIEs to meet various needs of our clients. For the commercial real estate leasing vehicles and closed-end funds, third party investors essentially provide financing for the purchase of commercial real estate or other assets which are leased to other third parties.

The Group formed fifteen statutory business trusts of which the Group owns all of the common securities. These trusts exist for the sole purpose of issuing cumulative and noncumulative trust preferred securities and investing the proceeds thereof in an equivalent amount of various subordinated debentures issued by the Group. Effective July 1, 2003, the Group deconsolidated these trusts as a result of the application of FIN 46. Subsequent to the application of FIN 46, the subordinated debentures amounting to€ 4.8 billion are included in the long term debt.

As of December 31, 2005 and December 31, 2004 the aggregated total assets of significant variable interest entities where the Group holds a significant variable interest, but does not consolidate, and the Group’s maximum exposure to loss as a result of its involvement with these entities are as follows.

F-30

	Aggregated total assets				Maximum exposure to loss
in€ m.	2005		2004		2005		2004
Commercial paper programs		24,666		17,296		26,082		20,305
Commercial real estate leasing vehicles and real estate investment entities		812		1,004		62		92
Structured finance and other		6,363		3,807		1,227		582
Guaranteed value mutual funds		7,664		5,856		7,572		5,856

The Group provides liquidity facilities and, to a lesser extent, guarantees to the commercial paper programs that it has a significant interest in. The Group’s maximum exposure to loss from these programs is equivalent to the contract amount of its liquidity facilities since the Group cannot be obligated to fund the liquidity facilities and guarantees at the same time. The liquidity facilities create only limited credit exposure since the Group is not required to provide funding if the assets of the vehicle are in default.

For the commercial real estate leasing vehicles and real estate investment entities, the Group’s maximum exposure to loss results primarily from investments held in these vehicles. For structured finance and other vehicles, the Group’s maximum exposure to loss results primarily from the risk associated with the Group’s purchased and retained interests in the vehicles. The maximum exposure to loss related to the significant non-consolidated guaranteed value mutual funds results from the above mentioned guarantees.

[10] Assets Pledged and Received as Collateral

The carrying value of the Group’s assets pledged (primarily for borrowings, deposits, and securities loaned) as collateral where the secured party does not have the right by contract or custom to sell or repledge the Group’s assets are as follows.

in€ m.	Dec 31, 2005		Dec 31, 2004
Trading assets		31,135		26,557
Securities available for sale		10		8
Loans		11,532		10,433
Premises and equipment		632		636
Total		43,309		37,634

At December 31, 2005 and 2004, the Group has received collateral with a fair value of€ 407 billion and€ 298 billion, respectively, arising from securities purchased under reverse repurchase agreements, securities borrowed, derivatives transactions, customer margin loans and other transactions, which the Group as the secured party has the right to sell or repledge. At December 31, 2005 and 2004,€ 316 billion and€ 218 billion, respectively, related to collateral that the Group has received and sold or repledged primarily to cover short sales, securities loaned and securities sold under repurchase agreements. These amounts exclude the impact of netting.

F - 31

[11] Premises and Equipment, Net

An analysis of premises and equipment, including assets under capital leases, follows.

in€ m.	Dec 31, 2005		Dec 31, 2004
Land		980		1,036
Buildings		3,389		3,576
Leasehold improvements		1,339		1,211
Furniture and equipment		2,404		2,344
Purchased software		326		347
Self-developed software		369		331
Construction-in-progress		96		144
Total		8,903		8,989
Less: Accumulated depreciation		3,824		3,764
Premises and equipment, net1		5,079		5,225

¹ Amounts at December 31, 2005 and 2004 included€ 1.7 billion and€ 1.8 billion, respectively, of net book value of premises and equipment held for investment purposes.

The Group is lessee under lease agreements covering real property and equipment. The future minimum lease payments, excluding executory costs, required under the Group’s capital leases at December 31, 2005, were as follows.

in€ m.
2006	109
2007	120
2008	198
2009	46
2010	47
2011 and later	444
Total future minimum lease payments	964
Less: Amount representing interest	339
Present value of minimum lease payments	625

At December 31, 2005, the total minimum sublease rentals to be received in the future under subleases are€ 459 million. Contingent rental income incurred during the year ended December 31, 2005, was€ 2 million.

The future minimum lease payments, excluding executory costs, required under the Group’s operating leases at December 31, 2005, were as follows.

in€ m.
2006	484
2007	429
2008	410
2009	330
2010	288
2011 and later	1,184
Total future minimum lease payments	3,125
Less: Minimum sublease rentals	388
Net minimum lease payments	2,737

F-32

The following shows the net rental expense for all operating leases.

in€ m.	2005		2004		2003
Gross rental expense		620		857		760
Less: Sublease rental income		37		116		61
Net rental expense		583		741		699

[12] Goodwill and Other Intangible Assets, Net

Goodwill impairment exists if the net book value of a reporting unit exceeds its estimated fair value. The Group’s reporting units are generally consistent with the Group’s business segment level, or one level below. The Group performs its annual impairment review during the fourth quarter of each year. There was no goodwill impairment in 2005, 2004 and 2003 resulting from the annual impairment review.

In 2005 no impairment loss was recorded. In 2004, an impairment loss of€ 19 million relating to other intangible assets (investment management agreements) was recorded in the Asset and Wealth Management Corporate Division following the termination of such agreements. The impairment loss was determined based on a discounted cash flow model and is included in the line item Goodwill impairment/impairment of intangibles on the Consolidated Statement of Income.

In 2003, a goodwill impairment loss of€ 114 million related to the Private Equity reporting unit was recorded following decisions relating to the private equity fee-based business including the transfer of certain businesses to the Group’s Asset and Wealth Management Corporate Division. The fair value of the business remaining in the Private Equity reporting unit was calculated using the discounted cash flow model.

Other Intangible Assets

An analysis of acquired other intangible assets follows.

	Dec 31, 2005						Dec 31, 2004
	Gross		Accumulated		Net		Gross		Accumulated		Net
	carrying		amortization		carrying		carrying		amortization		carrying
in€ m.	amount				amount		amount				amount
Amortized intangible assets:
Customer contracts		68		17		51		59		11		48
Investment management agreements		27		6		21		41		19		22
Mortgage servicing rights		93		25		68		68		3		65
Other customer-related		118		54		64		79		21		58
Other		19		11		8		17		9		8
Total amortized intangible assets		325		113		212		264		63		201
Unamortized intangible assets:
Retail investment management agreements						978						848
Other						8						–
Loan servicing rights						–						20
Total other intangible assets						1,198						1,069

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For the years ended December 31, 2005 and 2004, the aggregate amortization expense for other intangible assets was€ 46 million and€ 24 million, respectively. The estimated aggregate amortization expense for each of the succeeding five fiscal years is as follows.

in€ m.
2006	33
2007	30
2008	28
2009	26
2010	24

For the year ended December 31, 2005, the Group acquired the following other intangible assets.

	Additions in current year		Weighted-average
in€ m.			amortization period
Amortized intangible assets:
Mortgage servicing rights		16	10 years
Other customer-related		16	5 years
Investment management agreements		1	3 years
Total amortized intangible assets		33	7 years
Other unamortized intangible assets		8	Indefinite
Total other intangible assets		41

Goodwill

The changes in the carrying amount of goodwill by business segment for the years ended December 31, 2005 and 2004 are as follows.

	Corporate			Global			Asset and			Private &			Corporate		Total
	Banking &			Transaction			Wealth			Business			Investments
in€ m.	Securities			Banking			Management			Clients
Balance as of January 1, 2004		3,161			428			2,823			234			89		6,735
Purchase accounting adjustments		–			–			(20	)		–			–		(20	)
Transfers		6			–			(6	)		–			–		–
Goodwill acquired during the year		27			36			60			4			–		127
Impairment losses		–			–			–			–			–		–
Goodwill related to dispositions		–			–			(11	)		–			–		(11	)
Effects from exchange rate fluctuations		(243	)		(28	)		(178	)		(4	)		–		(453	)
Balance as of December 31, 2004		2,951			436			2,668			234			89		6,378
Purchase accounting adjustments		–			–			–			–			–		–
Transfers		–			–			–			–			–		–
Goodwill acquired during the year		20			–			4			–			–		24
Impairment losses		–			–			–			–			–		–
Goodwill related to dispositions		–			–			(110	)		–			–		(110	)
Effects from exchange rate fluctuations and other		412			49			275	1		6			11		753
Balance as of December 31, 2005		3,383			485			2,837			240			100		7,045

¹ Includes€ 27 million of reduction in goodwill related to a prior year’s acquisition.

In 2005, the main addition to goodwill is related to Bender Menkul Degerler A.S., which contributed€ 20 million to goodwill. Dispositions in 2005 primarily related to the sale of a substantial part of our UK- and Philadelphia-based Asset Management business.

The additions to goodwill of€ 127 million for the year ended December 31, 2004 are mainly due to the acquisitions of the remaining 1.5% third party holding in DWS Holding & Service GmbH, Dresdner Bank’s German domestic custody business and Berkshire Mortgage Finance L.P.’s origination and servicing business, which contributed€ 57 million,
€ 36 million and€ 26 million, respectively.

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[13] Assets Held for Sale

At December 31, 2005, the Group held one subsidiary for sale in the Corporate Investments segment. The net assets were written down to the lower of their carrying value or fair value less cost to sell resulting in a loss of€ 7 million.

In 2004, the Group signed several contracts to sell real estate in the Asset and Wealth Management and the Corporate Investments segments. The net assets were written down to the lower of their carrying value or fair value less cost to sell resulting in a loss of€ 29 million.

During 2003, the Group decided to sell subsidiaries and investments in the Corporate Investments, Global Transaction Banking, Private & Business Clients and Asset and Wealth Management segments. The net assets for these subsidiaries and investments were written down to the lower of their carrying value or fair value less cost to sell resulting in a loss of€ 32 million.

[14] Other Assets and Other Liabilities

The following are the components of other assets and other liabilities.

in€ m.	Dec 31, 2005		Dec 31, 2004
Other assets:
Brokerage and securities related receivables
Cash/margin receivables		23,157		17,287
Receivables from prime brokerage		15,282		12,575
Pending securities transactions past settlement date		10,619		8,984
Security spot transactions1		117		–
Total brokerage and securities related receivables		49,175		38,846
Loans held for sale, net		25,453		8,194
Other assets related to insurance business		1,149		6,733
Due from customers on acceptances		93		74
Accrued interest receivable		5,000		3,854
Tax assets		5,903		6,003
Other		12,609		10,711
Total other assets		99,382		74,415

in€ m.	Dec 31, 2005		Dec 31, 2004
Other liabilities:
Brokerage and securities related payables
Cash/margin payables		16,259		11,919
Payables from prime brokerage		16,898		14,062
Pending securities transactions past settlement date		9,371		9,562
Security spot transactions1		–		1,813
Total brokerage and securities related payables		42,528		37,356
Insurance policy claims and reserves		1,940		7,935
Acceptances outstanding		93		74
Accrued interest payable		4,684		4,223
Accrued expenses		9,584		7,204
Tax liabilities		7,215		6,677
Other		15,333		12,074
Total other liabilities		81,377		75,543

¹ Receivables and payables from security spot transactions are shown net.

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[15] Deposits

The components of deposits are as follows.

in€ m.	Dec 31, 2005		Dec 31, 2004
German offices:
Noninterest-bearing demand deposits		22,642		20,851
Interest-bearing deposits
Demand deposits		29,482		31,252
Certificates of deposit		266		247
Savings deposits		23,870		22,572
Other time deposits		37,894		34,505
Total interest-bearing deposits		91,512		88,576
Total deposits in German offices		114,154		109,427
Non-German offices:
Noninterest-bearing demand deposits		7,363		6,423
Interest-bearing deposits
Demand deposits		74,575		64,957
Certificates of deposit		39,069		19,056
Savings deposits		9,124		6,314
Other time deposits		136,502		114,619
Total interest-bearing deposits		259,270		204,946
Total deposits in non-German offices		266,633		211,369
Total deposits		380,787		320,796

Related party deposits amounted to€ 1.0 billion and€ 1.9 billion at December 31, 2005 and 2004, respectively.

The following table summarizes the maturities of time deposits with a remaining term of more than one year as of December 31, 2005.

By remaining maturities	Due in		Due in		Due in		Due in		Due after
in€ m.	2007		2008		2009		2010		2010
Certificates of deposits		1,555		283		953		136		1,175
Other time deposits		2,118		2,632		2,624		1,586		10,473

[16] Other Short-term Borrowings

Short-term borrowings are borrowed funds generally with an original maturity of one year or less. Components of other short-term borrowings include.

in€ m.	Dec 31, 2005		Dec 31, 2004
Commercial paper		13,398		9,980
Other		7,151		10,138
Total		20,549		20,118

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[17] Long-term Debt

The Group issues fixed and floating rate long-term debt denominated in various currencies, approximately half of which is denominated in euros.

The following table is a summary of the Group’s long-term debt.

By remaining maturities	Due in		Due in		Due in		Due in		Due in		Due after		Dec 31, 2005		Dec 31, 2004
in€ m.	2006		2007		2008		2009		2010		2010		total		total
Senior debt:
Bonds and notes:
Fixed rate		7,149		5,635		4,607		9,033		5,586		22,888		54,898		53,834
Floating rate		6,659		5,470		5,573		4,930		4,510		14,643		41,785		39,463
Subordinated debt:
Bonds and notes:
Fixed rate		1,069		683		320		1,364		–		6,394		9,830		9,505
Floating rate		–		401		93		1,678		580		4,289		7,041		4,068
Total		14,877		12,189		10,593		17,005		10,676		48,214		113,554		106,870

Based solely on the contractual terms of the debt issues, the following table represents the range of interest rates payable on this debt for the periods specified.

	Dec 31, 2005		Dec 31, 2004
Senior debt:
Bonds and notes:
Fixed rate1		0.00% – 31.72%		0.00% – 50.00%
Floating rate1		0.00% – 29.99%		0.00% – 18.83%
Subordinated debt:
Bonds and notes:
Fixed rate		0.81% – 10.50%		0.81% – 10.50%
Floating rate		0.91% – 7.65%		0.74% – 8.00%

¹ The lower and higher end of the range of interest rates relate to some transactions where the contractual rates are shown excluding the effect of embedded derivatives.

Fixed rate debt outstanding at December 31, 2005 matures at various dates through 2050. The weighted-average interest rates on fixed rate debt at December 31, 2005 and 2004 were 4.70% and 5.57%, respectively. Floating rate debt outstanding at December 31, 2005 matures at various dates through 2055 excluding€ 2.1 billion with undefined maturities. The weighted-average interest rates on floating rate debt at December 31, 2005 and 2004 were 3.93% and 2.84%, respectively. The weighted-average interest rates for total long-term debt were 4.38% and 4.36% at December 31, 2005 and 2004, respectively. Interest rates of pure certificates on various indices issued by Deutsche Bank are mainly zero and are excluded from the calculation of the weighted-average rates in order to reflect the rates on traditional long-term products. Interest rates on related derivatives are not included in the calculation of the weighted-average interest rates.

The Group enters into various transactions related to the debt it issues. This debt may be traded for market-making purposes or held for a period of time. Purchases of the debt are accounted for as extinguishments; however, the resulting net gains (losses) during 2005 and 2004 were insignificant.

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[18] Obligation to Purchase Common Shares

As of December 31, 2005 and 2004, the obligation to purchase common shares amounted to€ 3.5 billion and€ 3.1 billion, respectively. The obligation represented forward purchase contracts covering approximately 62.4 million (2004: 56.1 million) Deutsche Bank common shares with a weighted-average strike price of€ 56.23 (2004:€ 54.52) entered into to satisfy obligations under employee share-based compensation awards. Contracts covering 10.2 million shares (2004: 0.4 million) mature in less than one year. The remaining contracts covering 52.2 million shares (2004: 55.7 million) have maturities between one and five years.

[19] Mandatorily Redeemable Shares and Minority Interests in Limited Life Entities

Other liabilities included€ 84 million and€ 93 million, representing the settlement amount as of December 31, 2005 and 2004, respectively, for minority interests in limited life subsidiaries and mutual funds. These entities have termination dates between 2102 and 2105.

Included in long-term debt and short-term borrowings were€ 3,537 million and€ 3,545 million related to mandatorily redeemable shares at December 31, 2005 and 2004, respectively. The amount to be paid if settlement was at December 31, 2005 and 2004 was€ 3,539 million and€ 3,548 million, respectively. These mandatorily redeemable shares (excluding€ 1.8 billion with undefined maturities) are due between 2012 and 2033. The majority of interest paid on the redeemable shares is at fixed rates between 3.46% – 6.24% with the remainder paid at variable rates, which are based on LIBOR or the tax-adjusted U.S. dollar swap rate.

[20] Common Shares and Share-Based Compensation Plans

Deutsche Bank’s share capital consists of common shares issued in registered form without par value. Under German law, they represent equal stakes in the subscribed capital. Thus, a “nominal” value can be derived from the total amount of share capital divided by the number of shares. Therefore, the shares have a nominal value of€ 2.56.

Common share activity was as follows.

Number of shares	2005			2004			2003
Common shares outstanding, beginning of year		517,269,673			565,077,163			585,446,954
Shares issued under employee benefit plans		10,681,024			–			–
Shares retired		–			(38,000,000	)		(40,000,000	)
Shares purchased for treasury		(623,689,715	)		(536,383,830	)		(464,939,509	)
Shares sold or distributed from treasury		601,296,694			526,576,340			484,569,718
Common shares outstanding, end of year		505,557,676			517,269,673			565,077,163

Shares purchased for treasury consist of shares held for a period of time by the Group as well as any shares purchased with the intention of being resold in the short term. In addition, beginning in 2002, the Group launched share buy-back programs. Shares acquired under these programs are deemed to be retired or used for share-based compensation. The 2002 program was completed in April 2003 resulting in the retirement of 40 million shares. The second program was completed in June 2004 and resulted in the retirement of 38 million shares. The third buy-back was completed in April 2005. In July 2005, the fourth program was started. On January 24, 2006, the Management Board decided to cancel 40 million of the shares held in treasury, which became legally effective on February 15, 2006. All such transactions were recorded in shareholders’ equity and no revenues and expenses were recorded in connection with these activities.

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Authorized and Conditional Capital

Deutsche Bank’s share capital may be increased by issuing new shares for cash and in some circumstances for noncash consideration. At December 31, 2005, Deutsche Bank had authorized but unissued capital of€ 554,000,000 which may be issued at various dates through April 30, 2009 as follows.

Authorized capital	Expiration date
€ 128,000,0001	April 30, 2006
€ 100,000,000	April 30, 2007
€ 128,000,0001	April 30, 2008
€ 198,000,000	April 30, 2009

¹ Capital increase may be affected for noncash contributions with the intent of acquiring a company or holdings in companies.

Deutsche Bank also had conditional capital of€ 197,654,915. Conditional capital includes various instruments that may potentially be converted into common shares.

The Annual General Meeting on June 2, 2004 authorized the Management Board to issue once or more than once, bearer or registered participatory notes with bearer warrants and/or convertible participatory notes, bonds with warrants, and/or convertible bonds on or before April 30, 2009. For this purpose share capital was increased conditionally by up to
€ 150,000,000.

Under the DB Global Partnership Plan,€ 51,200,000 of conditional capital was available for option rights available for grant until May 10, 2003 and€ 64,000,000 for option rights available for grant until May 20, 2005. 16,105,126 option rights were granted and not exercised at December 31, 2005. Therefore, capital can still be increased by€ 41,229,123 under this plan. Also, the Management Board was authorized at the Annual General Meeting on May 17, 2001 to issue, with the consent of the Supervisory Board, up to 12,000,000 option rights on Deutsche Bank shares on or before December 31, 2003, of which 2,510,075 option rights were granted and not exercised at December 31, 2005. Therefore, capital still can be increased by€ 6,425,792 under the DB Global Share Plan. For this purpose there was a conditional capital of
€ 10,000,000. These plans are described below.

Share-Based Compensation

Effective January 1, 2003, the Group adopted the fair-value-based method under SFAS 123 prospectively for all employee awards granted, modified or settled after January 1, 2003, excluding those related to the 2002 performance year. Prior to this the Group applied the intrinsic-value-based provisions of APB 25. Compensation expense for share-based awards is included in compensation and benefits on the Consolidated Statement of Income. See Note [1] for a discussion on the Group’s accounting for share-based compensation.

In accordance with the requirements of SFAS 123, the pro forma disclosures relating to net income and earnings per common share as if the Group had always applied the fair-value-based method are provided in Note [1].

The Group’s share-based compensation plans currently used for granting new awards are summarized in the table below. These plans, and those plans no longer used for granting new awards, are described in more detail in the text that follows.

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Plan name	Eligibility	Vesting period*	Expense		Equity or		Performance
			treatment		Equity Units		Options/
							Partnership
							Appreciation
							Rights
Share-based compensation plans
Restricted Equity Units Plan	Select executives	4.5 years		3		X
DB Global Partnership Plan
DB Equity Units
as bonus grants	Select executives	2 years		2		X
as retention grants	Select executives	3.5 years		3		X
Performance Options	Select executives1	4 years		2				X
Partnership Appreciation Rights	Select executives1	4 years		2				X
DB Share Scheme
as bonus grants	Select employees	3 years		2		X
as retention grants	Select employees	3 years		3		X
DB Key Employee Equity Plan
(DB KEEP)	Select executives	5 years		3		X
DB Global Share Plan (since 2004)	All employees4	1 year		3		X

*	Approximate period after which all portions of the award are no longer subject to the plan specific forfeiture provisions.
1	Performance options and partnership appreciation rights are granted as a unit.
2	The value is recognized during the applicable performance year as part of compensation expense (until performance year 2004, since 2005 performance year is to be amortized over the requisite service period in accordance with SFAS 123(R)).
3	The value is recognized on a straight-line basis over the vesting period as part of compensation expense.
4	A participant must have been working for the Group for at least one year and have had an active employment contract in order to participate.

Share-Based Compensation Plans Currently Used for Granting New Awards

Restricted Equity Units Plan
Under the Restricted Equity Units Plan, the Group grants various employees deferred share awards as retention incentive which provides the right to receive common shares of the Group at specified future dates. The expense related to Restricted Equity Units awarded is recognized on a straight-line basis over the vesting period, which is generally four to five years.

The Group also grants to the same group of employees exceptional awards as a component of the Restricted Equity Units as an additional retention incentive that is forfeited if the participant terminates employment prior to the end of the vesting period. Compensation expense for these awards is recognized on a straight-line basis over the vesting period.

DB Global Partnership Plan

DB Equity Units. DB Equity Units are deferred share awards, each of which entitles the holder to one of the Group’s common shares approximately three and a half years from the date of the grant. For award years up to and including 2005, the Group awarded initial awards of DB Equity Units in relation to annual bonuses that were forfeited if a participant terminates employment under certain circumstances within the first two years following the grant. Compensation expense for these awards was recognized in the applicable performance year as part of compensation expense for that year.

From 2006, all initial awards of DB Equity Units granted are amortized over the requisite service period in accordance with the requirements of SFAS 123(R). Recipients of these DB Equity Units are also granted exceptional awards of DB Equity Units as retention incentive that is forfeited if the participant terminates employment prior to the end of the vesting period. Compensation expense for these awards is recognized on a straight-line basis over the vesting period, which is approximately three and a half years.

Performance Options.Performance options are rights to purchase the Group’s common shares. Performance Options were granted with an exercise price equal to 120% of the reference price. The reference price is set at the higher of the fair market value of the Group’s common shares on the date of grant or an average of the fair market value of the Group’s common shares for the ten trading days on the Frankfurt Stock Exchange up to and including the date of the grant.

Performance Options are subject to a minimum vesting period of two years. In general, one-third of the options become exercisable at each of the second, third and fourth anniversaries of the grant date. However, if the Group’s common shares trade at more than 130% of the reference price for 35 con-

F-40

secutive trading days, the Performance Options become exercisable on the later of the end of the 35-day trading period or the second anniversary of the award date. This condition was fulfilled for the Performance Options granted in February 2003 and therefore, all these options became exercisable in February 2005 rather than in three equal tranches.

Under certain circumstances, if a participant terminates employment prior to the vesting date, Performance Option awards will be forfeited. All options not previously exercised or forfeited expire on the sixth anniversary of the grant date.

There were no options awarded for either the 2005 or 2004 performance year. Compensation expense for options awarded for the 2003 performance year was recognized in 2003 in accordance with the fair-value-based method.

Partnership Appreciation Rights.Partnership Appreciation Rights (“PARs”) are rights to receive a cash award in an amount equal to 20% of the reference price for Performance Options described above. The vesting of PARs will occur at the same time and to the same extent as the vesting of Performance Options. PARs are automatically exercised at the same time and in the same proportion as the exercise of the Performance Options.

There were no PARs awarded for either the 2005 or 2004 performance year. No compensation expense was recognized for the year ended December 31, 2003 as the PARs represent a right to a cash award only with the exercise of Performance Options. This effectively reduces the exercise price of any Performance Option exercised to the reference price described above and is factored into the calculation of the fair value of the option.

DB Share Scheme

Under the DB Share Scheme, the Group grants various employees deferred share awards which provide the right to receive common shares of the Group at a specified future date. Compensation expense for awards granted in relation to annual bonuses was recognized in the applicable performance year as part of compensation earned for that year until performance year 2004. From performance years 2005 and onwards, DB Share Scheme bonus awards are amortized over the requisite service period in accordance with the requirement of SFAS 123(R). Awards granted as retention incentive are expensed on a straight-line basis over the vesting period, which is generally three years.

DB Key Employee Equity Plan

Under the DB Key Employee Equity Plan (“DB KEEP”), the Group grants selected executives deferred share awards which provide the right to receive common shares of the Group at a specified future date. The awards are granted as retention incentive to various employees and are expensed on a straight-line basis over the vesting period as compensation expense. The vesting period is generally five years.

DB Global Share Plan (Since 2004)

The DB Global Share Plan is an all employee program which awards eligible employees ten shares of the Group’s common shares as part of their annual compensation. A participant must have been working for the Group for at least one year and have had an active employment contract in order to participate. The number of shares granted to part-time employees and those in various categories of extended leave was on a pro rata basis. Compensation expense related to the DB Global Share Plan is recognized on a straight line basis over the vesting period of one year from the date of grant. Awards vest on November 1 of the year following grant and are forfeited if the participant terminates employment prior to vesting. As of December 31, 2005, the DB Global Share Plan granted in 2004 had fully vested.

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Share-Based Compensation Plans No Longer Used for Granting New Awards

DB Global Share Plan (2003 & 2002)
Share Purchases.In 2003 and 2002, eligible employees could purchase up to 20 shares and eligible retirees could purchase up to 10 shares of the Group’s common shares. German employees and retirees were eligible to purchase these shares at discount. The participant was fully vested and received all dividend rights for the shares purchased. At the date of purchase, the Group recognized as compensation expense the difference between the quoted market price of a common share at that date and the price paid by the participant.

Performance Options.In 2003 and 2002, employee participants received for each common share purchased five options. Each option entitled the participant to purchase one of the Group’s common shares. Options vest approximately two years after the date of grant and expire after six years. Options may be exercised at a strike price equal to 120% of the reference price. The reference price was set at the higher of the fair market value of the Group’s common shares on the date of grant or an average of the fair market value of the Group’s common shares for the ten trading days on the Frankfurt Stock Exchange up to and including the date of grant.

Generally, a participant must have been working for the Group for at least one year and have had an active employment contract in order to participate. Options are forfeited upon termination of employment. Participants who retire or become permanently disabled prior to vesting may still exercise their rights during the exercise period.

Compensation expense for options awarded for the 2003 performance year is recognized over the vesting period in accordance with the fair-value-based method.

Global Equity Plan

During 1998, 1999 and 2000, certain key employees of the Group participated in the Global Equity Plan (“GEP”) and were eligible to purchase convertible bonds in 1,000 DM denominations at par. On October 16, 2001, the Management Board gave approval to buy out the outstanding awards at a fixed price.

Compensation expense was recorded using variable plan accounting over the vesting period for awards to participants who did not accept the buy-out offer in 2001. In June 2003, the remaining bonds were redeemed at their nominal value since specific performance criteria for conversion were not met. The Group released€ 3 million to earnings related to amounts previously accrued for the GEP.

In addition, in connection with the buy-out offer in 2001, the Board authorized a special payment to 93 participants in 2003. These participants could not take part in the buy-out offer due to the conditions of the authorization in 2001. The cash payments, which totaled€ 9 million in connection with these bonds, were not included in share-based compensation expense.

Stock Appreciation Rights Plans

The Group has granted stock appreciation rights plans (“SARs”) which provide eligible employees of the Group the right to receive cash equal to the appreciation of the Group’s common shares over an established strike price. The stock appreciation rights granted can be exercised approximately three years from the date of grant. Stock appreciation rights expire approximately six years from the date of grant.

Compensation expense on SARs, calculated as the excess of the current market price of the Group’s common shares over the strike price, is recorded using variable plan accounting. The expense related to a portion of the awards was recognized in the performance year if it relates to annual bonuses earned as part of compensation, while remaining awards were expensed over the vesting periods.

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db Share Plan

Prior to the adoption of the DB Global Share Plan, certain employees were eligible to purchase up to 60 shares of the Group’s common shares at a discount under the db Share Plan. In addition, for each share purchased, employee participants received one option which entitled them to purchase one share. Options vested over a period of approximately three years beginning on the date of grant. Following the vesting period, options could be exercised if specific performance criteria were met. The exercise price was determined by applying a performance dependent discount to the average quoted price of a common share on the Frankfurt Stock Exchange on the five trading days before the exercise period started.

At the date of purchase of the common shares, the Group recognized as compensation expense the difference between the quoted market price of a common share at that date and the price paid by the participant. Compensation expense for the options was recognized using variable plan accounting over the vesting period, and based upon an estimated exercise price for the applicable three-year period and the current market price of the Group’s common shares.

All remaining db Share Plan options expired unexercised in 2003 because the specific performance criteria were not met. In 2003, the Group released€ 20 million to earnings related to amounts previously accrued for the options.

Other Plans

The Group has other local share-based compensation plans, none of which, individually or in the aggregate are material to the consolidated financial statements.

Compensation Expense

The Group recognized compensation expense related to its significant share-based compensation plans, described above, as follows.

in€ m.	2005		2004		2003
DB Global Partnership Plan1		3		11		8
DB Global Share Plan2		40		15		3
DB Share Scheme/Restricted Equity Units Plan/DB KEEP		875		997		773
Global Equity Plan		–		–		(3	)
Stock Appreciation Rights Plans3		31		81		(13	)
db Share Plan		–		–		(20	)
Total		949		1,104		748

1	Compensation expense for the years ended December 31, 2004 and 2003 included€ 6.6 million and€ 5.9 million, respectively, related to DB Equity Units granted in February 2005 and February 2004, respectively. No amounts were expensed in 2005 in relation to DB Equity units granted in February 2006.
2	Compensation expense for the years ended December 31, 2005 and 2004 included€ 7.8 million and€ 6.6 million, respectively, in relation to the DB Global Share Plan 2005 and DB Global Share Plan 2004.
3	For the years ended December 31, 2005, 2004 and 2003, net (gains) losses of€ (138) million,€ 81 million and€ (13) million, respectively, from non-trading equity derivatives, used to offset fluctuations in employee share-based compensation expense, were included.

F-43

The following is a summary of the activity in the Group’s current compensation plans involving share and option awards for the years ended December 31, 2005, 2004 and 2003 (amounts in thousands of shares, except exercise prices).

	DB Global Partnership Plan
	DB Equity Units1			Performance Options2			Weighted-average
							exercise price
Balance at December 31, 2002		408			11,764			€  89.96
Granted		122			14,615			€  47.53
Issued		–			–			–
Forfeited		(3	)		(490	)		€  58.58
Balance at December 31, 2003		527			25,889			€  66.60
Granted		127			115			€  76.61
Issued		(324	)		–			–
Forfeited		–			(152	)		€  89.96
Balance at December 31, 2004		330			25,852			€  66.51
Granted		139			–			€  66.51
Issued		(179	)		–			–
Exercised		–			(9,679	)		€  47.53
Forfeited		–			(68	)		€  89.96
Balance at December 31, 2005		290			16,105			€  77.82
Weighted-average remaining contractual life at:
December 31, 2005				2 years 4 months
December 31, 2004				3 years 7 months

1	The weighted-average grant-date fair value per share of deferred share awards granted in 2005, 2004 and 2003 was€ 59.68,€ 58.11, and€ 38.62 respectively.
2	The weighted-average grant-date fair value per option, including the PAR, granted during 2004 and 2003 was€ 13.02 and€ 11.97 respectively. Performance Options and PARs granted in 2004 and 2003 related to the 2003 and 2002 performance year, respectively.

Each Global Partnership Plan option was accompanied by a Partnership Appreciation Right entitling the holder to 20% of the reference price upon exercise of the related option. Approximately 14.1 million options under the DB Global Partnership Plan, which have an exercise price of€ 47.53 per share, became exercisable in early 2005. As of December 31, 2005, approximately 9.7 million of these Global Partnership Plan options and PARs had been exercised.

In addition, a further 11.4 million options became exercisable in February 2006 as the price of the Group’s common shares exceeded the exercise price of€ 89.96.

In February 2006, approximately 80,000 DB Equity Units as initial awards and 20,000 units as exceptional awards were granted at a weighted-average grant date fair value per DB Equity Unit of€ 74.99.

There were no Performance Options or PARs awarded in relation to the 2005 and 2004 performance year.

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The following table details the distribution of options outstanding for the DB Global Partnership Plan and for the DB Global Share Plan (2003 & 2002) (reported under plans no longer used for granting new awards) as of year ended 2005.

Range of exercise	Options outstanding						Options exercisable
prices
	Options		Weighted-		Weighted-average		Options		Weighted-
	outstanding		average		remaining		exercisable		average
			exercise price1		contractual life				exercise price1
	in thousands				(in years)		in thousands
€  40.00 – 59.99		5,364		€  48.69		2.9		5,364		€  48.69
€  60.00 – 79.99		1,670		€  75.33		3.0		1,555		€  75.24
€  80.00 – 99.99		11,581		€  89.93		2.1		–		N/A

N/A – Not applicable

¹ The weighted-average exercise price does not include the effect of the PARs for the DB Global Partnership Plan.

The following is a summary of the activity in the Group’s compensation plans involving share awards (DB Share Scheme, DB Key Employee Equity Plan, Restricted Equity Units Plan and DB Global Share Plan (Since 2004)) for the years ended December 31, 2005, 2004 and 2003 broken into three categories. Expense for bonus awards was recognized in the applicable performance year (until 2004 performance year). Expense for retention awards and DB Global Share Plan (Since 2004) is recognized over the vesting period.

	Bonus awards1			Retention awards2			Global Share			Total
							Plan
in thousands of shares							(Since 2004)3
Balance at December 31, 2002		6,089			19,599			–			25,688
Granted		1,036			26,823			–			27,859
Issued		(4,439	)		(3,210	)		–			(7,649	)
Forfeited		(228	)		(1,749	)		–			(1,977	)
Balance at December 31, 2003		2,458			41,463			–			43,921
Granted		2,169			21,848			594			24,611
Issued		(2,832	)		(4,938	)		–			(7,770	)
Forfeited		(231	)		(3,091	)		–			(3,322	)
Balance at December 31, 2004		1,564			55,282			594			57,440
Granted		1,559			15,983			534			18,076
Issued		(1,345	)		(4,614	)		(551	)		(6,510	)
Forfeited		(126	)		(3,351	)		(43	)		(3,520	)
Balance at December 31, 2005		1,652			63,300			534			65,486

1	The weighted-average grant-date fair values per share of deferred share awards granted during 2005, 2004 and 2003 were€ 61.44,€ 61.11 and€ 39.61, respectively.
2	The weighted-average grant-date fair values per share of deferred share awards granted during 2005, 2004 and 2003 were€ 59.68,€ 57.71 and€ 34.62, respectively. For the outstanding balance at year-end 2005, the weighted-average grant-date fair value per share was€ 51.74 and approximately € 1.98 billion were expensed by year-end 2005.
3	The weighted-average grant-date fair value per share of deferred share awards granted during 2005 was€ 75.93. For the outstanding balance at year-end 2005, the weighted-average grant-date fair value per share was€ 75.93 and approximately€ 7.8 million were expensed by year-end 2005.

In addition to the amounts shown in the table above, the Group granted the following equity awards in February 2006:

(a) Approximately 0.8 million shares under the DB Share Scheme with a fair value of€ 77.28 per share were awarded.

(b) Approximately 10.0 million shares under the Restricted Equity Units Plan with an average fair value of€ 72.79 were awarded as retention awards.

F-45

The following is a summary of the Group’s share-based compensation plans (for which there will be no future awards) for the years ended December 31, 2005, 2004 and 2003.

Global

Stock

db Share Plan

DB Global Share Plan

Equity Plan

Appreciation

(2003 & 2002)

Rights Plans

Convertible

SARs2

Shares

Options

Shares

Performance

Weighted-

bonds1

Options3

average

exercise

in thousands of equivalent shares

price

Balance at December 31, 2002

272

16,346

N/A

1,853

N/A

2,235

€   57.90

Granted

–

–

–

–

–

1,691

€   75.24

Issued

–

–

–

–

396

–

–

Convertible bonds redeemed

(269

)

–

–

–

–

–

–

Forfeited

(3

)

(175

)

–

(14

)

–

(81

)

€   57.00

Expired

–

–

–

(1,839

)

–

–

–

Balance at December 31, 2003

–

16,171

N/A

–

N/A

3,845

€   65.54

Granted

–

–

–

–

–

–

–

Issued

–

–

–

–

–

–

–

Exercised

–

(387

)

–

–

–

–

–

Forfeited

–

–

–

–

–

(260

)

€   64.02

Expired

–

(451

)

–

–

–

–

–

Balance at December 31, 2004

–

15,333

N/A

–

N/A

3,585

€   65.64

Granted

–

–

–

–

–

–

–

Issued

–

–

–

–

–

–

–

Exercised

–

(7,911

)

–

–

–

(1,002

)

€   55.39

Forfeited

–

(7

)

–

–

–

(73

)

€   64.13

Expired

–

(308

)

–

–

–

–

–

Balance at December 31, 2005

–

7,107

N/A

–

N/A

2,510

€   69.77

Weighted-average remaining contractual life at:

December 31, 2005

3 years 6 months

December 31, 2004

4 years 4 months

N/A – Not applicable. Participant was fully vested for shares purchased under the db Share Plan.
1	Convertible bonds were included in long-term debt on the Consolidated Balance Sheet.
2	SARs were granted at various strike prices. In October 2001, 16,223,276 SARs with a strike price of€ 98 vesting in 2004 and expiring in 2007 were replaced by 10,328,417 rights at a strike price of€ 67. The weighted-average strike price of the outstanding SARs at December 31, 2005 is€ 69.79 with an average remaining life of 1 year.
3	The weighted-average grant-date fair value per option granted during 2003 was€ 9.71.

Fair Value of Share Options Assumptions

No options were granted in 2005 and 2004.

The fair value of share options granted in 2003 was estimated at the grant date using a Black-Scholes option pricing model. The information for 2003 is used in accounting for share options under the fair-value-based method which the Group adopted prospectively effective January 1, 2003.

F-46

The weighted-average fair value per option and the significant assumptions used to estimate the fair values of options were.

	Dec 31, 20051		Dec 31, 20041		Dec 31, 2003
Weighted-average fair value per option		N/A		N/A		€  9.92
Risk free interest rate		N/A		N/A		3.52	%
Expected lives (in years)		N/A		N/A		4.0
Dividend yield		N/A		N/A		1.97	%
Volatility		N/A		N/A		26.65	%

N/A – Not applicable
1	No options were granted in 2005 and 2004.

[21] Asset Restrictions and Dividends

The European Central Bank sets 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, and the issuance of bonds. Liabilities to European Monetary Union national central banks and to other European Monetary Union banking institutions that are themselves subject to the minimum reserve requirements are not included in this calculation. Since January 1, 1999, the European Central Bank has set the minimum reserve rate at 2%. For deposits with a term to maturity or a notice period of more than two years, bonds with a term to maturity of more than two years and repurchase transactions, the minimum reserve rate has been set at 0%. Each institution is required to deposit its minimum reserve with the national central bank of its home country.

Cash and due from banks includes reserve balances that the Group is required to maintain with certain central banks. These required reserves were€ 442 million and€ 424 million at December 31, 2005 and 2004, respectively.

Under German law, dividends are based on the results of Deutsche Bank AG as prepared in accordance with German accounting rules. The Management Board, which prepares the annual financial statements of Deutsche Bank AG on an unconsolidated basis, and the Supervisory Board, which reviews them, first allocate part of Deutsche Bank’s annual surplus (if any) to the statutory reserves and to any losses carried forward, as it is legally required to do. For own shares (i.e., treasury shares) a reserve in the amount of their value recorded on the asset side must be set up from the annual surplus or from other revenue reserves. Then they allocate the remainder between other revenue reserves (or retained earnings) and balance sheet profit (or distributable profit). They may allocate up to one-half of this remainder to other revenue reserves, and must allocate at least one-half to balance sheet profit. The Group then distributes the amount of the balance sheet profit of Deutsche Bank AG if the Annual General Meeting resolves so.

Certain other subsidiaries are subject to various regulatory and other restrictions that may limit cash dividends and certain advances to Deutsche Bank.

[22] Regulatory Capital

The regulatory capital adequacy guidelines applicable to the Group are set forth by the Basel Committee on Banking Supervision, the secretariat of which is provided by the Bank for International Settlements (“BIS”) and by European Council directives, as implemented into German law. The German Federal Financial Supervisory Authority(Bundesanstalt für Finanzdienstleistungsaufsicht, referred to as BaFin)in cooperation with the Deutsche Bundesbank supervises our compliance with such guidelines. Effective December 31, 2001 the BaFin permitted the Group to calculate its BIS capital adequacy ratios on the basis of the consolidated financial statements prepared in accordance with U.S. GAAP.

The BIS capital ratio is the principal measure of capital adequacy for internationally active banks. This ratio compares a bank’s regulatory capital with its counterparty risks and market price risks (which

F-47

the Group refers to collectively as the “risk position”). Counterparty risk is measured for asset and off-balance sheet exposures according to broad categories of relative credit risk. The Group’s market risk component is a multiple of its value-at-risk figure, which is calculated for regulatory purposes based on the Group’s internal models. These models were approved by the BaFin for use in determining the Group’s market risk equivalent component of its risk position. A bank’s regulatory capital is divided into three tiers (core or Tier I capital, supplementary or Tier II capital, and Tier III capital). Core or Tier I capital consists primarily of share capital (except for cumulative preference shares), additional paid-in capital, retained earnings and hybrid capital components, such as noncumulative trust preferred securities and equity contributed on silent partnership interests(stille Beteiligungen), less intangible assets (principally goodwill) and the impact from the tax law changes (as described below). Supplementary or Tier II capital consists primarily of cumulative preference shares, profit participation rights(Genussrechte), cumulative trust preferred securities, long-term subordinated debt, unrealized gains on listed securities and other inherent loss allowance. Tier III capital consists mainly of certain short-term subordinated liabilities and it may only cover market price risk. Banks may also use Tier I and Tier II capital that is in excess of the minimum required to cover counterparty risk (excess Tier I and Tier II capital) in order to cover market price risk. The minimum BIS total capital ratio (Tier I + Tier II + Tier III) is 8% of the risk position. The minimum BIS core capital ratio (Tier I) is 4% of the risk-weighted positions and 2.29% of the market risk equivalent. The minimum core capital ratio for the total risk position therefore depends on the weighted-average of risk-weighted positions and market risk equivalent. Under BIS guidelines, the amount of subordinated debt that may be included as Tier II capital is limited to 50% of Tier I capital. Total Tier II capital is limited to 100% of Tier I capital. Tier III capital is limited to 250% of the Tier I capital not required to cover counterparty risk.

The effect of the 1999/ 2000 German Tax Reform Legislation on securities available for sale is treated differently for the regulatory capital calculation and financial accounting. For financial accounting purposes, deferred tax provisions for unrealized gains on securities available for sale are recorded directly to other comprehensive income whereas the adjustment to the related deferred tax liabilities for a change in expected effective income tax rates is recorded as an adjustment of income tax expense in current period earnings. The positive impact from the above on retained earnings of the Group from the two important German tax law changes in 1999 and 2000 amounts to approximately€ 2.2 billion and
€ 2.7 billion as of December 31, 2005 and 2004, respectively. For the purpose of calculating the regulatory capital, unrealized gains on securities available for sale (including the aforementioned positive impacts from the tax law changes on retained earnings) are excluded from Tier I capital.

The following table presents the Group’s capital adequacy.

in€ m. (except percentages)	Dec 31, 2005			Dec 31, 2004
Risk-weighted positions		240,696			206,718
Market risk equivalent1		10,506			10,069
Risk position		251,202			216,787
Core capital (Tier I)		21,898			18,727
Supplementary capital (Tier II)		11,988			9,885
Available Tier III capital		–			–
Total regulatory capital		33,886			28,612
Core capital ratio (Tier I)		8.7	%		8.6	%
Capital ratio (Tier I + II + III)		13.5	%		13.2	%

¹ A multiple of the Group’s value-at-risk, calculated with a probability level of 99% and a ten-day holding period.

In 2005, the Group’s risk position increased by€ 34.4 billion to€ 251.2 billion on December 31, 2005.

BIS rules and the German Banking Act require the Group to cover its market price risk as of December 31, 2005, with€ 840 million of regulatory capital (Tier I + II + III). The Group met this requirement entirely with Tier I and Tier II capital.

The Group’s U.S. GAAP-based total regulatory capital was€ 33.9 billion on December 31, 2005, and core capital (Tier I) was€ 21.9 billion, compared to€ 28.6 billion and€ 18.7 billion on December

F-48

31, 2004. The Group’s supplementary capital (Tier II) of€ 12.0 billion on December 31, 2005, amounted to 55% of core capital.

The Group’s capital ratio was 13.5% on December 31, 2005, significantly higher than the 8% minimum required by the BIS guidelines. The core capital ratio was 8.7% in relation to the total risk position (including market risk equivalent).

Failure to meet minimum capital requirements can initiate certain mandates, and possibly additional discretionary actions by the BaFin and other regulators that, if undertaken, could have a direct material effect on the consolidated financial statements of the Group.

The components of core and supplementary capital for the Group of companies consolidated for regulatory purposes are as follows at December 31, 2005, according to BIS.

Core capital(in€ m.)	Dec 31, 2005
Common shares		1,420
Additional paid-in capital		11,672
Retained earnings, common shares in treasury, equity classified as obligation to purchase common shares, share awards, foreign currency translation		16,508
Minority interests		622
Noncumulative trust preferred securities		3,587
Other (equity contributed on silent partnership interests)		–
Items deducted (principally goodwill and tax effect of available for sale securities)		(11,911	)
Total core capital		21,898

Supplementary capital(in€ m.)	Dec 31, 2005
Unrealized gains on listed securities (45% eligible)		1,182
Other inherent loss allowance		435
Cumulative preferred securities		1,178
Subordinated liabilities, if eligible according to BIS		9,193
Total supplementary capital		11,988

The group of companies consolidated for regulatory purposes includes all subsidiaries in the meaning of the German Banking Act that are classified as credit institutions, financial services institutions and financial enterprises or bank services enterprises. It does not include insurance companies or companies outside the finance sector.

F-49

[23] Interest Revenues and Interest Expense

The following are the components of interest revenues and interest expense.

in€ m.	2005		2004		2003
Interest revenues:
Interest-earning deposits with banks		987		797		902
Central bank funds sold and securities purchased under resale agreements		9,884		4,647		4,857
Securities borrowed		4,442		1,668		1,429
Interest income on securities available for sale and other investments		602		509		588
Dividend income on securities available for sale and other investments		264		300		386
Loans		6,909		6,896		7,649
Trading assets		17,048		12,596		11,286
Other		1,572		610		486
Total interest revenues		41,708		28,023		27,583
Interest expense:
Interest-bearing deposits
Domestic		1,994		1,953		1,918
Foreign		8,268		5,174		4,662
Trading liabilities		8,179		6,866		5,667
Central bank funds purchased and securities sold under repurchase agreements		11,785		4,627		4,595
Securities loaned		929		556		430
Other short-term borrowings		1,023		467		598
Long-term debt		3,529		3,198		3,766
Trust preferred securities		–		–		100
Total interest expense		35,707		22,841		21,736
Net interest revenues		6,001		5,182		5,847

[24] Pension and Other Employee Benefit Plans

The Group provides retirement arrangements covering the majority of its subsidiaries and employees. The majority of beneficiaries of the retirement arrangements are located in Germany. The value of a participant’s accrued pension benefit is based primarily on each employee’s remuneration and length of service.

Our plans are generally funded.

The following amounts were contributed to the defined benefit pension plans.

	Contributions to pension plans
in€ m.	2005		2004
Germany/Luxembourg		200		159
United Kingdom		202		126
United States		97		1
Others		22		24
Total		521		310

F-50

Thereof, the Group made extraordinary contributions as initial or discretionary funding.

	Initial/discretionary contributions to pension plans
in€ m.	2005		2004
Germany/Luxembourg		200		101
United Kingdom		98		8
United States		97		1
Others		5		15
Total		400		125

The Group also sponsors a number of defined contribution plans covering employees of certain subsidiaries. The assets of all the Group’s defined contribution plans are held in independently administered funds. Contributions are generally determined as a percentage of salary.

In addition, the Group’s affiliates maintain unfunded contributory defined benefit postretirement health care plans to a number of retired employees who are located in the United States and the United Kingdom. These plans pay stated percentages of eligible medical and dental expenses of retirees after a stated deductible has been met. The Group funds these plans on a cash basis as benefits are due.

In 2005, the Group has adopted a December 31 measurement date for all plans, whereas for 2004 the plans in the UK and U.S. used an early measurement date of September 30. The change in measurement date did not have a material impact on the 2005 consolidated results.

All plans are valued using the projected unit credit method. The recognition of actuarial gains and losses is applied by using the 10% “corridor” approach.

The following table provides a reconciliation of the changes in the Group’s plans’ benefit obligation and fair value of assets over the two-year period ended December 31, 2005 and a statement of the funded status as of December 31 for each year.

	Pension benefits						Postretirement benefits
in€ m.	2005			2004			2005			2004
Change in benefit obligation:
Benefit obligation at beginning of year		7,592			6,920			138			148
Service cost		265			244			6			7
Interest cost		391			384			9			9
Plan amendments		(54	)		–			–			–
Acquisitions/divestitures		–			(103	)		–			–
Actuarial loss (gain)		1,148			499			28			(1	)
Benefits paid		(355	)		(320	)		(11	)		(12	)
Curtailment/settlement/other1		60			50			–			–
Foreign currency exchange rate changes		174			(82	)		21			(13	)
Benefit obligation at end of year		9,221			7,592			191			138
Change in plan assets:
Fair value of plan assets at beginning of year		7,643			6,801			–			–
Actual return on plan assets		1,319			768			–			–
Employer contributions		521			310			11			12
Benefits paid		(334	)		(119	)		(11	)		(12	)
Curtailment/settlement/other1		2			(35	)		–			–
Foreign currency exchange rate changes		172			(82	)		–			–
Fair value of plan assets at end of year		9,323			7,643			–			--
Funded status:		102			51			(191	)		(138	)
Unrecognized net actuarial loss (gain)		1,058			870			40			10
Unrecognized prior service cost (benefit)		(60	)		(8	)		6			7
Net amount recognized at end of year		1,100			913			(145	)		(121	)

¹ Includes beginning balance of first time application of smaller schemes.

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The following amounts were recognized in the Consolidated Balance Sheet.

	Pension benefits						Postretirement benefits
in€ m.	2005			2004			2005			2004
Prepaid pension costs		1,365			1,094			–			–
Accrued benefit costs		(265	)		(181	)		(145	)		(121	)
Net amount recognized at end of year		1,100			913			(145	)		(121	)
Additional minimum liability		13			1			–			–
Intangible asset		–			–			–			–
Accumulated other comprehensive income		(13	)		(1	)		–			–

The accumulated benefit obligation for all defined benefit pension plans was€ 8.6 billion and€ 7.1 billion at December 31, 2005 and 2004, respectively.

The following table shows the information for funded defined benefit pension plans with an accumulated benefit obligation in excess of the fair value of plan assets.

in€ m.	Dec 31, 2005		Dec 31, 2004
Projected benefit obligation		122		70
Accumulated benefit obligation		106		57
Fair value of plan assets		68		30

The information for funded defined benefit pension plans with a projected benefit obligation in excess of the fair value of plan assets is shown in the following table.

in€ m.	Dec 31, 2005		Dec 31, 2004
Projected benefit obligation		339		239
Accumulated benefit obligation		292		203
Fair value of plan assets		267		185

The accumulated postretirement benefit obligation exceeds plan assets for all of the company’s postretirement benefit plans as they are unfunded.

The Group’s pension plan weighted-average asset allocations at December 31, 2005 and 2004, by asset category are as follows.

	Target allocation			Percentage of plan assets
	Dec 31, 2006			Dec 31, 2005			Dec 31, 2004
Asset category:
Equity securities		15	%		17	%		17	%
Debt securities		75	%		71	%		73	%
Real Estate and other		10	%		12	%		10	%
Total		100	%		100	%		100	%

The Group’s pension plan investment strategy is to match the maturity profiles of the assets and liabilities in order to reduce the future volatility of pension expense and funding status of the plans. This has involved the rebalancing of the investment portfolios to reduce the exposure to equity securities as well as increase the amount and duration of the fixed income portfolio. During 2005 the shares of the main asset classes remained broadly unchanged. During 2004, a reduction of the average equity share of the portfolios to 17% was achieved. The asset allocation of each of the Group’s funded pension plans is reviewed regularly.

Plan Assets include derivatives totaling to€ 315 million. In addition there are€ 3 million of securities issued by the Group included in the plan assets.

The Group expects to contribute approximately€ 300 million to its defined benefit pension plans in 2006, representing expected service costs in 2006.

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The table below reflects the total benefits expected to be paid from both the plan assets and from the Company’s assets, including both the Company’s share of the benefit cost and the participants’ share of the cost, which is funded by participant contributions to the plan.

Expected benefits to be paid from the plan assets and direct payments from the company to participants total.

in€ m.	Pension benefits		Postretirement benefits1
2006		315		10
2007		328		11
2008		341		12
2009		358		12
2010		374		13
2011 – 2015		2,207		62

¹ Net of expected reimbursements from Medicare for prescription drug benefits of approximately€ 2 million each year.

Benefits expense recognized in the consolidated statement of income for the years ended December 31, 2005, 2004 and 2003, included the following components.

	Pension benefits									Postretirement benefits
in€ m.	2005			2004			2003			2005		2004		2003
Service cost		265			244			279			6		7		8
Interest cost		391			384			375			9		9		9
Expected return on plan assets		(391	)		(388	)		(409	)		–		–		–
Actuarial loss (gain) recognized		40			61			66			1		–		–
Settlement/curtailment		(4	)		5			(7	)		–		–		–
Amortization of unrecognized transition obligation (asset)		–			17			(9	)		–		–		–
Total defined benefit plans		301			323			295			16		16		17
Defined contribution plans		138			151			167			–		–		–
Net periodic benefit expense		439			474			462			16		16		17

SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination of Benefits” events occurred in the United States, United Kingdom, Germany and Japan during 2005 resulting in a net credit of€4 million.

The following actuarial assumptions were calculated on a weighted-average basis and reflect the local economic conditions for each country’s respective defined benefit and postretirement benefit plans.

	Pension benefits									Postretirement benefits
	2005			2004			2003			2005			2004			2003
Discount rate in determining expense		5.0	%		5.5	%		5.4	%		5.7	%		5.9	%		6.0	%
Discount rate in determining benefit obligations at year-end		4.3	%		5.0	%		5.5	%		5.4	%		5.7	%		5.9	%
Rate of increase in future compensation levels for determining expense		3.3	%		3.3	%		3.5	%		N/A			N/A			N/A
Rate of increase in future compensation levels for determining benefit obligations at year-end		3.3	%		3.3	%		3.3	%		N/A			N/A			N/A
Expected long-term rate of return on assets		5.0	%		5.6	%		5.6	%		N/A			N/A			N/A

N/A – Not applicable

The expected return on the Group’s defined benefit pension plans’ assets is calculated by applying a risk premium which reflects the inherent risks associated with each relevant asset category over a risk-free return. Using this so-called “building block” approach globally ensures that the Group has a consis-

F-53

tent framework in place. In addition, it allows sufficient flexibility to allow for changes that need to be built in to reflect local specific conditions. The determination of the expected return on plan assets for 2006 was based on the actual asset allocation as of the measurement date. The ten-year government fixed interest bond yield for the country in which each plan is located was used as the basis for the risk-free return taking into account the duration of the bonds held compared to the ten-year benchmark. The additional return for debt securities was calculated by reference to the mix of debt securities in each plan. For cash, the Group estimated the expected return to be equivalent to the market yield on three-month treasury instruments for the applicable country.

The discount rate was set based on yields to maturity on AA-rated corporate bond indices of the same currency and similar duration to the liability, and representing sufficient depth of market to be a reliable indicator. Benchmark government bonds were used for countries where sufficient depth of AA corporate bond markets is not available. In cases of significant difference between the published bond duration and the calculated duration of the obligation, an adjustment was made equal to this difference multiplied by the slope of the yield curve. No such adjustment was required in the Eurozone, the UK or in the U.S. The resulting discount rate was rounded to the nearest multiple of 10 basis points.

In determining postretirement benefits expense, an annual weighted-average rate of increase of 10.8% in the per capita cost of covered health care benefits was assumed for 2006. The rate is assumed to decrease gradually to 5.0% by 2011 and remain at that level thereafter.

Assumed health care cost trend rates have an effect on the amounts reported for the retiree health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects on the Group’s retiree health care plans.

	One-percentage point increase				One-percentage point decrease
in€ m.	2005		2004		2005			2004
Effect on total of service and interest cost components		2		2		(2	)		(2	)
Effect on accumulated postretirement benefit obligation		29		22		(25	)		(19	)

In May 2004, the FASB issued Staff Position 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“FSP 106-2”), which superseded FSP 106-1 issued in January 2004. The Act, signed into law in the U.S. on December 8, 2003, introduces a prescription drug benefit as well as a subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to benefits provided under the Act. FSP 106-2, which is effective for the reporting period beginning after June 15, 2004, provides authoritative guidance on the accounting for the effects of the Act and disclosure guidance related to the federal subsidy provided by the Act.

In 2004, the Group determined that the effects of the Act were not a significant event requiring an interim remeasurement under SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” Consequently, as permitted by FSP 106-2, net periodic postretirement benefit cost for 2004 does not reflect the effects of the Act. The effect of the Act on the accumulated postretirement benefit obligation (“APBO”) for the postretirement benefit plan was measured at the year-end measurement date (September 30, 2004). This resulted in a reduction of the APBO of approximately€ 36 million.

In 2005, the measurement of the effect of the Act on the APBO and net periodic postretirement benefit cost (NPPBC) resulted in an additional reduction of€ 2 million in respect to the APBO and in a reduction of the NPPBC of
€ 5 million, respectively.

F-54

[25] Income Taxes

The components of income taxes (benefits) follow.

in€ m.	2005		2004			2003
Domestic		425		(201	)		305
Foreign		1,194		920			968
Current taxes		1,619		719			1,273
Domestic		502		572			37
Foreign		462		266			232
Deferred taxes		964		838			269
Total		2,583		1,557			1,542

The following is an analysis of the difference between the amount that would result from applying the German statutory income tax rate to income before tax and the Group’s actual income tax expense.

in€ m.	2005			2004			2003
Expected tax expense at German statutory income tax rate of 39.2% (39.2% for 2004 and 40.5% for 2003)		2,396			1,579			1,116
Reversal of 1999/2000 credits for tax rate changes		544			120			215
Effect of changes of German tax law		–			–			154
Domestic tax rate differential on dividend distribution		–			14			1
Tax-exempt gains on securities and other income		(627	)		(330	)		(637	)
Foreign tax-rate differential		(288	)		(126	)		(298	)
Change in valuation allowance		(9	)		(7	)		99
Nondeductible expenses		566			312			647
Goodwill impairment		–			–			46
Tax credit related to domestic dividend received		–			–			(1	)
Tax rate differential on (income) loss on equity method investments		(99	)		(80	)		171
Other		100			75			29
Actual income tax expense		2,583			1,557			1,542

The domestic tax rate including corporate tax, solidarity surcharge, and trade tax used for calculating deferred tax assets and liabilities as of December 31, 2005, 2004 and 2003 was 39.2%. For the year 2003 only, the corporate income tax rate was temporarily increased by 1.5% to 26.5% which increased the statutory income tax rate to 40.5%. The applicable statutory income tax rate for temporary differences that reversed after 2003 reverted to 39.2%.

For the years ended December 31, 2005, 2004 and 2003, due to actual sales of equity securities on which there was accumulated deferred tax provision in other comprehensive income, it was necessary to reverse those provisions as income tax expense. This treatment led to income tax expense of€ 544 million,€ 120 million and€ 215 million, respectively. This adjustment does not result in actual tax payments and has no net effect on shareholders’ equity.

The remaining accumulated deferred tax amounts recorded within other comprehensive income will be reversed as income tax expense in the periods that the related securities are sold. At December 31, 2005 and 2004, the amount of these deferred taxes accumulated within other comprehensive income that will reverse in a future period as tax expense when the securities are sold is approximately€ 2.1 billion and€ 2.7 billion, respectively.

The enactment of the German Act for the reduction of Tax Allowances and Exemptions (StVergAbG) in May 2003 provided a minimum taxation for trade tax purposes which resulted in a catch-up tax expense of€ 107 million. In December 2003, the German Federal Government modified the taxation of capital gains and dividends with the 2004 Tax Reform Act by treating 5% of any tax-exempt

F - 55

dividend and tax-exempt capital gains as non-tax deductible for corporation tax purposes. The new rules applicable from 2004 resulted in an additional deferred tax expense of€ 47 million in 2003.

The tax effects of each type of temporary difference and carry-forward that give rise to significant portions of deferred income tax assets and liabilities are the following.

in€ m.	Dec 31, 2005			Dec 31, 20041
Deferred income tax assets:
Trading activities		9,512			16,497
Net operating loss carry-forwards and tax credits		1,608			1,940
Property and equipment, net		207			402
Other assets		1,136			463
Allowance for loan losses		66			106
Other provisions		459			698
Total deferred income tax assets		12,988			20,106
Valuation allowance		(955	)		(888	)
Deferred tax assets after valuation allowance		12,033			19,218
Deferred income tax liabilities:
Trading activities		10,132			17,198
Property and equipment, net		125			412
Securities valuation		105			140
Other liabilities		68			–
Total deferred income tax liabilities		10,430			17,750
Net deferred income tax assets		1,603			1,468

¹ Prior year amounts have been restated to conform to current year presentation.

Included in other assets and other liabilities at December 31, 2005 and 2004 are deferred tax assets of€ 4.2 billion and€ 3.7 billion and deferred tax liabilities of€ 2.6 billion and€ 2.2 billion, respectively.

Certain foreign branches and companies in the Group have deferred tax assets related to net operating loss carry-forwards and tax credits available to reduce future tax expense. The net operating loss carry-forwards at December 31, 2005 were€ 4.1 billion of which€ 2.4 billion have no expiration date and€ 1.7 billion expire at various dates extending to 2025. Tax credits were€ 203 million of which€ 0.3 million will expire in 2006 and€ 202 million have other expiration dates. The Group has established a valuation allowance where it is more likely than not that the deferred tax assets relating to these losses and credits will not be realized.

The Group is under continuous examinations by the tax authorities in various countries. In 2005 a tax audit in the UK covering fiscal years until 2002 was settled without material impact on the Group’s income tax expenses. Tax reserves have been established, which we believe to be adequate in relation to the potential for additional assessments.

The Group did not provide income taxes or foreign withholding taxes on€ 8.7 billion of cumulative earnings of foreign subsidiaries as of December 31, 2005 because these earnings are intended to be indefinitely reinvested in those operations. It is not practicable to estimate the amount of unrecognized deferred tax liabilities for these undistributed earnings. The American Jobs Creation Act of 2004 was signed into law by the President of the United States on October 22, 2004 and provides, in part a reduced rate of U.S. tax on certain dividends received from foreign subsidiaries of U.S. taxpayers. The Group does not intend to repatriate any earnings from foreign subsidiaries in accordance with the provisions of the Act and thus the Act will not have an impact on our consolidated financial statements.

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[26] Earnings Per Common Share

Basic earnings per common share amounts are computed by dividing net income by the average number of common shares outstanding during the year. The average number of common shares outstanding is defined as the average number of common shares issued, reduced by the average number of shares in treasury and by the average number of shares that will be acquired under physically settled forward purchase contracts and increased by undistributed vested shares awarded under deferred share plans.

Diluted earnings per share assumes the conversion into common shares of outstanding securities or other contracts to issue common stock, such as share options, convertible debt, unvested deferred share awards and certain forward contracts.

The following table sets forth the computation of basic and diluted earnings per share.

in€ m.	2005		2004			2003
Income before cumulative effect of accounting changes, net of tax		3,529		2,472			1,214
Cumulative effect of accounting changes, net of tax		–		–			151
Numerator for basic earnings per share – net income		3,529		2,472			1,365
Effect of dilutive securities:
Forwards		–		(65	)		–
Convertible debt		6		4			–
Numerator for diluted earnings per share – net income applicable to common shareholders after assumed conversions		3,535		2,411			1,365
Number of shares in m.
Denominator for basic earnings per share – weighted-average shares outstanding		462.9		492.6			559.3
Effect of dilutive securities:
Forwards		12.9		9.3			10.4
Employee stock compensation options		2.9		4.9			0.7
Convertible debt		2.1		1.9			–
Deferred shares		27.8		23.0			19.1
Other (including trading options)		–		–			0.2
Dilutive potential common shares		45.7		39.1			30.4
Denominator for diluted earnings per share – adjusted weighted-average shares after assumed conversions		508.6		531.7			589.7

The diluted EPS computations do not include the anti-dilutive effect of the following potential common shares.

Number of shares in m.	2005		2004		2003
Forward purchase contracts		71.7		10.0		–
Forward sale contracts		–		–		3.1
Put options sold		–		1.5		–
Call options sold		–		–		1.3
Stock compensation awards		11.6		13.6		15.5
Convertible debt		–		0.2		–

F - 57

in€	2005		2004		2003
Basic earnings per share:
Income before cumulative effect of accounting changes, net of tax		7.62		5.02		2.17
Cumulative effect of accounting changes, net of tax		–		–		0.27
Net income		7.62		5.02		2.44
Diluted earnings per share:
Income before cumulative effect of accounting changes, net of tax		6.95		4.53		2.06
Cumulative effect of accounting changes, net of tax		–		–		0.25
Net income		6.95		4.53		2.31

[27] Business Segments and Related Information

The Group’s segment reporting follows the organizational structure as reflected in its internal management reporting systems, which are the basis for assessing the financial performance of the business segments and for allocating resources to the business segments.

Organizational Structure

In order to best serve the Group’s clients and manage its investments, Deutsche Bank is organized into three Group Divisions, which are further sub-divided into corporate divisions. In the first quarter 2005, the Group implemented structural changes associated with the Business Realignment Program. Most of the revisions related to organizational changes below the corporate division level. Since January 1, 2005, the business support areas formerly reported as part of CIB, PCAM and CI were centralized into one infrastructure group (which also covers the Corporate Center functions). As a group-internal service provider, the infrastructure group acts on a non-profit basis and allocates its total noninterest expenses to the recipients of the services (i.e. the corporate divisions) as part of their noncompensation expenses. The Group also created a regional management function that covers regional responsibilities worldwide. As of December 31, 2005, the Group Divisions were:

The Corporate and Investment Bank (CIB), which combines the Group’s corporate banking and securities activities (including sales and trading and corporate finance activities), with the Group’s transaction banking activities. CIB serves corporate and institutional clients, ranging from medium-sized enterprises to multinational corporations, banks and sovereign organizations.

Private Clients and Asset Management (PCAM), which combines the Group’s asset management, private wealth management and private and business client activities. Within PCAM, we manage these activities in two global corporate divisions: Asset and Wealth Management (AWM) and Private & Business Clients (PBC).

– AWM is comprised of the two business divisions Asset Management (AM), which focuses on managing assets on behalf of institutional clients and providing mutual funds and other retail investment vehicles, and Private Wealth Management (PWM), which focuses on the specific needs of demanding high net worth clients, their families and selected institutions. 

– PBC serves retail and affluent clients as well as small corporate customers with the full range of retail banking products.

Corporate Investments (CI), which manages the majority of the bank’s alternative assets portfolio and certain other debt and equity positions.

Prior periods have been restated to conform to the current year’s presentation.

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Impact of Acquisitions and Divestitures During 2005 and 2004

The effects of significant acquisitions and divestitures on segmental results are described below:

– In December 2005, the Group completed the sale of a substantial part of its UK- and Philadelphia-based Asset Management business, which had been managed under the Private Clients and Asset Management Group Division, to Aberdeen Asset Management PLC. Excluded from the sale was the Philadelphia-based High Yield business, which remains an integral part of Asset and Wealth Management’s global platform.

– In November 2005, the Group and Commerzbank AG entered into a sale and purchase agreement for the Group’s 37.72% stake in EUROHYPO AG, which was included in Corporate Investments. In December 2005, the first part of this transaction was completed, reducing the Group’s stake to 27.99%.

– In September 2005, the Group sold its Private Banking business in the Netherlands to Theodoor Gilissen Bankiers N.V., which had been included in the corporate division Private & Business Clients.

– In May 2005, the Group increased its ownership of the Turkish mid-size brokerage firm Bender Menkul Degerler Anonim Sirketi (“Bender Securities”) from 40% to 100%. This business was included in the corporate division Corporate Banking & Securities.

– In January 2005, the Group acquired asset manager Wilhelm von Finck AG as it continues to expand its Private Wealth Management franchises in Germany. Wilhelm von Finck AG continues to operate under its own name and offers specific investment solutions for large scale private and family wealth portfolios.

– In December 2004, the Group completed the integration of Dresdner Bank’s former institutional custody business in Germany. This business was included in the corporate division Global Transaction Banking.

– In November 2004, the Group signed an agreement with Legg Mason for the sale of a selected portion of PWMs private client unit of Scudder, Scudder Private Investment Counsel (PIC). Under this agreement, Legg Mason will assume all investment advisory agreements and retain the staff from New York, Philadelphia, Chicago and Cincinnati Scudder PIC offices. This transaction closed December 31, 2004.

– In November 2004, the Group completed the acquisition of the remaining minority interests in DWS Holding & Service GmbH.

– In October 2004, the Group completed the acquisition of substantially all of the origination and servicing assets of Berkshire Mortgage Finance L.P., a U.S. commercial mortgage bank specializing in financing for multifamily properties. This business was included in the corporate division Corporate Banking & Securities.

– In September 2004, the Group merged three Australian trusts – Deutsche Diversified Trust, Deutsche Office Trust and Deutsche Industrial Trust – into a new trust, DB RREEF Trust. The merger created Australia’s fourth largest listed property trust. In connection with this transaction the Group transferred its Australian fiduciary real estate trust management and property management business into a subsidiary, renamed DB RREEF Holdings. The Group subsequently sold a 50% interest in DB RREEF Holdings and recognized a net gain of€ 18 million within the Group’s Asset and Wealth Management Corporate Division.

– Effective July 2004, the Group sold its wholly-owned subsidiary DB Payment Projektgesellschaft to the Betriebscenter fuer Banken Deutschland GmbH & Co. KG (BCB), a 100% subsidiary of Deutsche Postbank AG. Since then BCB provides payment transaction services to the Group for its German domestic and parts of its foreign payment transactions. Prior to the sale, DB Payment Projektgesellschaft had been managed within the infrastructure groups of the Private Client and Asset Management Group Division. The loss on sale was partly recognized within the Private & Business Clients Division and partly within Global Transaction Banking.

– In June 2004, the Group’s wholly-owned subsidiary european transaction bank ag (etb), which had been managed within the infrastructure groups of the Private Clients and Asset Management Group Division, was deconsolidated in the course of entering into a securities processing partnership with Xchanging Holdings, which assumes operational management of securities, funds and derivatives

F - 59

– processing. The etb was transferred to Xchanging etb GmbH (formerly Zweite Xchanging GmbH), an equity method investment under the Infrastructure service group.

– In the first quarter of 2004, the Group completed the sale of its interest in the operations of maxblue Americas, which had been included in Corporate Investments, to Banco do Brazil.

– In January, 2004 the Group completed the purchase of a 40% stake in United Financial Group (UFG). Deutsche Bank and Moscow-based UFG cooperate on research, sales and trading of Russian equities and Russian corporate finance business. This business was included in the corporate division Corporate Banking & Securities.

Definitions of Financial Measures Used in the Format of Segment Disclosure

In the segmental results of operations, the following terms with the following meanings are used with respect to each segment:

– Operating cost base: Noninterest expenses less provision for off-balance sheet positions (reclassified to provision for credit losses), policyholder benefits and claims, minority interest, restructuring activities, goodwill impairment/impairment of intangibles and provisions related to grundbesitz-invest in 2005.

– Underlying pre-tax profit: Income before income taxes less restructuring activities, goodwill impairment/impairment of intangibles, provisions related to grundbesitz-invest in 2005 and specific revenue items as referred to in the table for such segment.

– Underlying cost/income ratio in %: Operating cost base as a percentage of total net revenues excluding the revenue items excluded from the corresponding underlying pre-tax profit figure, net of policyholder benefits and claims.Cost/income ratio in %, which is defined as total noninterest expenses less provision for off-balance sheet positions, as a percentage of total net revenues, is also provided.

– Average active equity: The portion of adjusted average total shareholders’ equity that has been allocated to a segment pursuant to the capital allocation framework. The overriding objective of this framework is to allocate adjusted average total shareholders’ equity based on the respective goodwill and other intangible assets with indefinite lifetimes as well as the economic capital of each segment. In 2005, the measurement of operational risk has been further refined as part of the bank’s Basel II preparation for the Advanced Measurement Approach. This refinement resulted in no material change in the operational risk economic capital for the Group but a higher allocation of operational risk economic capital to CB&S and reductions in other segments. In determining the total amount of average active equity to be allocated, average total shareholders’ equity is adjusted to exclude average unrealized net gains on securities available for sale, net of applicable tax effects, and the effect of the expected dividend payments to our shareholders.

– Underlying return on average active equity in %: Underlying pre-tax profit as a percentage of average active equity. Return on average active equity in %, which is defined as income before income taxes as a percentage of average active equity, is also provided. These returns, which are based on average active equity, should not be compared to those of other companies without considering the differences in the calculation of such ratios.

Management uses these measures as part of its internal reporting system because it believes that such measures provide it with a more useful indication of the financial performance of the business segments. The Group discloses such measures to provide investors and analysts with further insight into how management operates the Group’s businesses and to enable them to better understand the Group’s results. The Group has excluded the following items in deriving the above measures for the following reasons.

– Net gains (losses) from businesses sold/held for sale: Gains or losses are excluded from the calculations of underlying results because they do not represent results of the Group’s continuing businesses.

– Net gains (losses) on securities available for sale/industrial holdings (including hedging): Net gains or losses related to several financial holdings investments and to the Group’s portfolio of shareholdings in publicly-listed industrial companies, most of which the Group has held for over 20 years and which the Group is reducing over time. Because these investments do not relate to the Group’s

F - 60

	customer-driven businesses, the Group excludes all revenues (positive and negative) related to these investments from its underlying results, except for dividend income from the investments, which the Group does not exclude as funding costs associated with the investments are also not excluded.
–	Significant equity pick-ups/net gains and losses from investments: This item includes significant net gains/ losses from equity method investments and other significant investments. They are excluded in the calculation of underlying results since they reflect results that are not related to the Group’s customer-driven businesses.
–	Net gains (losses) on the sale of premises: This item includes net gains or losses on the sale of premises used for banking purposes. Net losses in 2003 related to the divestiture of non-core activities pursuant to the Group’s transformation strategy.
–	Policyholder benefits and claims: For internal steering purposes, policyholder benefits and claims are reclassified from noninterest expenses to noninterest revenues so as to consider them together with insurance revenues, to which they are related. The reclassification does not affect the calculation of underlying pre-tax profits.
–	Provision for off-balance sheet positions: Provision for off-balance sheet positions is reclassified from noninterest expenses to provision for credit losses because provision for off-balance sheet positions and provision for loan losses are managed together. This reclassification does not affect the calculation of underlying pre-tax profit.
–	Restructuring activities, Goodwill/intangible impairment and provisions related to grundbesitz-invest in 2005 are excluded from the calculation of operating cost base and thus underlying pre-tax profit because these items are not considered part of the day-to-day business operations and therefore not indicative of trends.
–	Minority interest: Minority interest represents the net share of minority shareholders in revenues, provision for loan losses, noninterest expenses and income tax expenses. This net component is reported as a noninterest expense item. This item is not considered to be an operating expense, but as a minority shareholder’s portion of net income. Accordingly, such item is excluded in the determination of the operating cost base. Minority interest is reflected in the calculation of underlying pre-tax profit as a separate item.
–	Adjustments to calculate average active equity: The items excluded from average total shareholders’ equity to calculate average active equity result primarily from the portfolio of shareholdings in publicly-listed industrial companies. The Group has held most of its larger participations for over 20 years, and is reducing these holdings over time. Gains and losses on these securities are realized only when the Group sells them. Accordingly, the adjustments the Group makes to average total shareholders’ equity to derive the average active equity are to exclude unrealized net gains or losses on securities available for sale, net of applicable tax effects. In addition, the Group adjusts its average total shareholders’ equity for the effect of the expected dividend payments to our shareholders.

Framework of the Group’s Management Reporting Systems

Business segment results are determined based on the Group’s internal management reporting process, which reflects the way management views its businesses, and are not necessarily prepared in accordance with the Group’s U.S. GAAP consolidated financial statements. This internal management reporting process may be different than the processes used by other financial institutions and therefore should be considered in making any comparisons with those institutions. Since the Group’s business activities are diverse in nature and its operations are integrated, certain estimates and judgments have been made to apportion revenue and expense items among the business segments.

The management reporting systems follow the “matched transfer pricing concept” in which the Group’s external net interest revenues are allocated to the business segments based on the assumption that all positions are funded or invested via the money and capital markets. Therefore, to create comparability with competitors who have legally independent units with their own equity funding, the Group allocates among the business segments the notional interest credit on its consolidated capital

F - 61

resulting from a method for allocating funding costs. This credit is allocated in proportion to each business segment’s allocated average active equity, and is included in the segment’s net interest revenues.

The Group’s average active equity is allocated to the business segments and to Consolidation & Adjustments in proportion to their economic risk exposures, which comprise economic capital, goodwill and other unamortized intangible assets. The total amount to be allocated is the higher of the Group’s overall economic risk exposure or regulatory capital demand. This demand for regulatory capital is derived by assuming a BIS tier 1 ratio of 8.5%, which represents the mid-point of the Group’s tier 1 target range. If the Group’s average active equity exceeds the higher of the overall economic risk exposure or the regulatory capital demand, this surplus is assigned to Consolidation & Adjustments.

Revenues from transactions between the business segments are allocated on a mutually agreed basis. Internal service providers (including the Corporate Center), which operate on a nonprofit basis, allocate their noninterest expenses to the recipient of the service. The allocation criteria are generally contractually agreed and are either determined based upon “price per unit” (for areas with countable services) or “fixed price” or “agreed percentages” (for all areas without countable services).

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Segmental Results of Operations

The following tables present the results of the business segments for the years ended December 31, 2005, 2004 and 2003.

	2005	Corporate and Investment Bank									Private Clients and Asset Management									Corporate			Total
		Corporate			Global			Total			Asset and			Private &			Total			Invest-			Manage-
		Banking &			Trans-						Wealth			Business						ments			ment
		Securities			action						Manage-			Clients									Reporting
	in€ m. (except percentages)				Banking						ment
	Net revenues1		13,947			1,971			15,918			3,881			4,713			8,594			1,229			25,741
	Provision for loan losses		25			7			32			–			342			342			–			374
	Provision for off-balance sheet positions		3			(25	)		(22	)		–			(2	)		(2	)		–			(24	)
	Total provision for credit losses		28			(18	)		10			–			340			340			(1	)		350
	Operating cost base2		9,675			1,445			11,120			2,984			3,358			6,342			181			17,642
	Policyholder benefits and claims		–			–			–			49			–			49			–			49
	Minority interest		37			–			37			30			–			30			(2	)		66
	Restructuring activities		331			87			418			220			127			347			2			767
	Goodwill impairment/impairment of intangibles		–			–			–			–			–			–			–			–
	Total noninterest expenses4		10,043			1,532			11,575			3,284			3,485			6,768			181			18,524
	Income before income taxes5		3,877			457			4,333			597			888			1,485			1,049			6,867
	Add (deduct):
	Net (gains) from businesses sold/held for sale		–			–			–			(81	)		(9	)		(90	)		–			(90	)
	Significant equity pick-ups/net (gains) from investments		–			–			–			–			–			–			(156	)		(156	)
	Net (gains) on securities available for sale/industrial holdings including hedging		–			–			–			–			–			–			(801	)		(801	)
	Net (gains) on the sale of premises		–			–			–			–			–			–			(57	)		(57	)
	Restructuring activities		331			87			418			220			127			347			2			767
	Goodwill impairment/ impairment of intangibles		–			–			–			–			–			–			–			–
	Underlying pre-tax profit		4,207			544			4,751			736			1,006			1,742			37			6,531
	Cost/income ratio in %		72			78			73			85			74			79			15			72
	Underlying cost/income ratio in %		69			73			70			80			71			75			84			72
	Assets3, 6		871,941			17,966			881,643			37,269			86,554			123,785			15,025			984,318
	Expenditures for additions to long-lived assets		289			5			295			71			86			157			2			454
	Risk-weighted positions (BIS risk positions)		155,467			12,275			167,742			13,811			60,263			74,074			7,448			249,264
	Average active equity7		13,070			1,315			14,385			4,993			1,707			6,700			3,047			24,132
	Return on average active equity in %		30			35			30			12			52			22			34			28
	Underlying return on average active equity in %		32			41			33			15			59			26			1			27
1	Includes:
	Net interest revenues		2,537			725			3,262			118			2,517			2,635			69			5,966
	Net revenues from external customers		14,129			1,931			16,060			4,096			4,335			8,431			1,175			25,666
	Net intersegment revenues		(182	)		40			(142	)		(215	)		378			163			54			75
	Net income from equity method investments		171			1			171			43			3			46			199			417
2	Includes:
	Depreciation, depletion and amortization		58			22			80			39			74			113			11			204
	Severance payments		18			(1	)		17			4			17			22			–			38
3	Includes:
	Equity method investments		1,765			38			1,803			483			40			523			2,577			4,903

4	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
5	Before cumulative effect of accounting changes.
6	The sum of corporate divisions does not necessarily equal the total of the corresponding group division because of consolidation items between corporate divisions, which are to be eliminated on group division level. The same approach holds true for the sum of group divisions compared to Total Management Reporting.
7	For management reporting purposes goodwill and other intangible assets with indefinite lives are explicitly assigned to the respective divisions. Average active equity is first allocated to divisions according to goodwill and intangible assets, remaining average active equity is allocated to the divisions in proportion to the economic capital calculated for them.

F-63

	2004	Corporate and Investment Bank									Private Clients and Asset Management									Corporate			Total
		Corporate			Global			Total			Asset and			Private &			Total			Invest-			Manage-
		Banking &			Trans-						Wealth			Business						ments			ment
		Securities			action						Manage-			Clients									Reporting
	in€ m. (except percentages)				Banking						ment
	Net revenues1		11,520			1,894			13,414			3,488			4,534			8,023			621			22,058
	Provision for loan losses		79			9			89			(6	)		270			264			19			372
	Provision for off-balance sheet positions		(66	)		1			(65	)		–			(1	)		(1	)		–			(65	)
	Total provision for credit losses		14			11			24			(6	)		269			263			19			307
	Operating cost base2		8,752			1,576			10,327			2,923			3,283			6,206			414			16,948
	Policyholder benefits and claims		–			–			–			50			–			50			–			50
	Minority interest		5			–			5			1			–			1			(1	)		4
	Restructuring activities		272			28			299			88			10			98			3			400
	Goodwill impairment		–			–			–			19			–			19			–			19
	Total noninterest expenses4		9,028			1,603			10,631			3,080			3,293			6,373			416			17,420
	Income before income taxes5		2,478			280			2,759			414			972			1,386			186			4,331
	Add (deduct):
	Net (gains) losses from businesses sold/held for sale		–			(31	)		(31	)		(32	)		24			(8	)		(38	)		(76	)
	Significant equity pick-ups/net (gains) from investments		–			–			–			–			–			–			(148	)		(148	)
	Net (gains) on securities available for sale/industrial holdings including hedging		–			–			–			–			–			–			(176	)		(176	)
	Net (gains) on the sale of premises		–			–			–			–			–			–			(20	)		(20	)
	Restructuring activities		272			28			299			88			10			98			3			400
	Goodwill impairment/ impairment of intangibles		–			–			–			19			–			19			–			19
	Underlying pre-tax profit (loss)		2,750			277			3,027			489			1,006			1,496			(194	)		4,329
	Cost/income ratio in %		78			85			79			88			73			79			67			79
	Underlying cost/income ratio in %		76			85			77			86			72			78			174			79
	Assets3, 6		720,557			16,636			729,872			34,945			78,930			113,818			16,442			832,933
	Expenditures for additions to long-lived assets		62			65			127			17			70			87			2			216
	Risk-weighted positions (BIS risk positions)		128,066			11,058			139,124			11,424			54,253			65,677			10,242			215,044
	Average active equity7		11,479			1,381			12,860			5,034			1,681			6,715			3,933			23,507
	Return on average active equity in %		22			20			21			8			58			21			5			18
	Underlying return on average active equity in %		24			20			24			10			60			22			(5	)		18
1	Includes:
	Net interest revenues		1,902			628			2,529			216			2,416			2,632			105			5,267
	Net revenues from external customers		11,516			1,981			13,497			3,733			4,201			7,934			527			21,958
	Net intersegment revenues		4			(87	)		(83	)		(245	)		334			89			94			100
	Net income (loss) from equity method investments		156			1			157			65			3			68			160			386
2	Includes:
	Depreciation, depletion and amortization		81			24			105			44			90			135			30			269
	Severance payments		154			16			170			51			50			101			1			272
3	Includes:
	Equity method investments		1,546			38			1,584			434			33			466			3,298			5,348

4	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
5	Before cumulative effect of accounting changes.
6	The sum of corporate divisions does not necessarily equal the total of the corresponding group division because of consolidation items between corporate divisions, which are to be eliminated on group division level. The same approach holds true for the sum of group divisions compared to Total Management Reporting.
7	For management reporting purposes goodwill and other intangible assets with indefinite lives are explicitly assigned to the respective divisions. Average active equity is first allocated to divisions according to goodwill and intangible assets, remaining average active equity is allocated to the divisions in proportion to the economic capital calculated for them.

F-64

	2003	Corporate and Investment Bank									Private Clients and Asset Management									Corporate			Total
		Corporate			Global			Total			Asset and			Private &			Total			Invest-			Manage-
		Banking &			Trans-						Wealth			Business						ments			ment
		Securities			action						Manage-			Clients									Reporting
	in€ m. (except percentages)				Banking						ment
	Net revenues1		11,796			2,498			14,294			3,825			4,374			8,199			(920	)		21,572
	Provision for loan losses		751			2			752			2			322			324			36			1,113
	Provision for off-balance sheet positions		8			(53	)		(45	)		(3	)		(1	)		(3	)		(2	)		(50	)
	Total provision for credit losses		759			(51	)		708			(1	)		322			321			35			1,063
	Operating cost base2		8,317			1,744			10,060			3,090			3,593			6,683			681			17,424
	Policyholder benefits and claims		–			–			–			21			–			21			–			21
	Minority interest		13			–			13			13			2			15			(31	)		(3	)
	Restructuring activities		(23	)		(6	)		(29	)		–			(1	)		(1	)		–			(29	)
	Goodwill impairment		–			–			–			–			–			–			114			114
	Total noninterest expenses4		8,307			1,738			10,045			3,124			3,594			6,718			764			17,526
	Income (loss) before income taxes5		2,730			811			3,541			702			458			1,160			(1,719	)		2,983
	Add (deduct):
	Net (gains) from businesses sold/held for sale		–			(583	)		(583	)		(55	)		4			(51	)		141			(494	)
	Significant equity pick-ups/net losses from investments		–			–			–			–			–			–			938			938
	Net losses on securities available for sale/industrial holdings including hedging		–			–			–			–			–			–			184			184
	Net losses on the sale of premises		–			–			–			–			–			–			107			107
	Restructuring activities		(23	)		(6	)		(29	)		–			(1	)		(1	)		–			(29	)
	Goodwill impairment/ impairment of intangibles		–			–			–			–			–			–			114			114
	Underlying pre-tax profit (loss)		2,707			222			2,929			647			461			1,108			(236	)		3,801
	Cost/income ratio in %		70			70			70			82			82			82			N/M			81
	Underlying cost/income ratio in %		71			91			73			82			82			82			152			78
	Assets3, 6		693,794			16,329			681,722			48,138			78,477			124,606			18,987			795,818
	Expenditures for additions to long-lived assets		79			9			88			25			35			60			141			289
	Risk-weighted positions (BIS risk positions)		127,807			9,808			137,615			12,170			51,244			63,414			13,019			214,048
	Average active equity7		12,785			1,401			14,186			5,694			1,531			7,225			4,900			26,311
	Return on average active equity in %		21			58			25			12			30			16			(35	)		11
	Underlying return on average active equity in %		21			16			21			11			30			15			(5	)		14
N/M — Not meaningful
1	Includes:
	Net interest revenues		2,586			663			3,249			277			2,378			2,656			138			6,043
	Net revenues from external customers		11,686			2,630			14,316			4,037			4,081			8,117			(967	)		21,466
	Net intersegment revenues		110			(133	)		(23	)		(212	)		294			82			47			106
	Net income (loss) from equity method investments		163			(1	)		163			166			–			166			(757	)		(428	)
2	Includes:
	Depreciation, depletion and amortization		107			23			130			51			94			144			65			340
	Severance payments		194			66			260			78			317			395			20			675
3	Includes:
	Equity method investments		1,889			37			1,927			380			30			410			3,511			5,848

4	Excludes provision for off-balance sheet positions (reclassified to provision for credit losses).
5	Before cumulative effect of accounting changes.
6	The sum of corporate divisions does not necessarily equal the total of the corresponding group division because of consolidation items between corporate divisions, which are to be eliminated on group division level. The same approach holds true for the sum of group divisions compared to Total Management Reporting.
7	For management reporting purposes goodwill and other intangible assets with indefinite lives are explicitly assigned to the respective divisions. Average active equity is first allocated to divisions according to goodwill and intangible assets, remaining average active equity is allocated to the divisions in proportion to the economic capital calculated for them.

F-65

The following tables present the net revenue components of the Corporate and Investment Bank Group Division and the Private Clients and Asset Management Group Division for the years ended December 31, 2005, 2004 and 2003, respectively.

	Corporate and Investment Bank
in€ m.		2005			2004			2003
Sales & Trading (equity)			3,312			2,489			3,119
Sales & Trading (debt and other products)			7,336			6,299			6,081
Total Sales & Trading			10,648			8,787			9,200
Origination (equity)			647			499			485
Origination (debt)			1,017			916			806
Total Origination			1,664			1,414			1,291
Advisory			604			488			465
Loan products			1,256			1,139			1,187
Transaction services			1,971			1,863			1,915
Other			(225	)		(277	)		236
Total			15,918			13,414			14,294

	Private Clients and Asset Management
in€ m.		2005		2004		2003
Portfolio/fund management			2,718		2,526		2,615
Brokerage			1,847		1,657		1,588
Loan/deposit products			2,415		2,359		2,330
Payments, account & remaining financial services			857		915		823
Other			757		565		843
Total			8,594		8,023		8,199

Reconciliation of Segmental Results of Operations to Consolidated Results of Operations
According to U.S. GAAP

The following table provides a reconciliation of the total results of operations and total assets of the Group’s business segments under management reporting systems to the consolidated financial statements prepared in accordance with U.S. GAAP for the years ended December 31, 2005, 2004 and 2003.

	2005									2004									2003
	Total			Consoli-			Total			Total			Consoli-			Total			Total			Consoli-			Total
	Manage-			dation &			Consoli-			Manage-			dation &			Consoli-			Manage-			dation &			Consoli-
	ment			Adjust-			dated			ment			Adjust-			dated			ment			Adjust-			dated
in€ m.	Reporting			ments						Reporting			ments						Reporting			ments
Net revenues1		25,741			(102	)		25,640			22,058			(140	)		21,918			21,572			(305	)		21,268
Provision for loan losses		374			–			374			372			–			372			1,113			–			1,113
Provision for off-balance sheet positions		(24	)		–			(24	)		(65	)		–			(65	)		(50	)		–			(50	)
Total provision for credit losses		350									307									1,063
Noninterest expenses2		18,524			654			19,178			17,420			162			17,582			17,526			(78	)		17,449
Income (loss) before income taxes3		6,867			(756	)		6,112			4,331			(302	)		4,029			2,983			(226	)		2,756
Assets		984,318			7,843			992,161			832,933			7,135			840,068			795,818			7,796			803,614
Risk-weighted positions (BIS risk positions)		249,264			1,938			251,202			215,044			1,742			216,787			214,048			1,625			215,672
Average active equity		24,132			998			25,130			23,507			1,271			24,778			26,311			1,063			27,374

1	Net interest revenues and noninterest revenues.
2	Excludes provision for off-balance sheet positions.
3	Before cumulative effect of accounting changes.

F-66

The two primary components recorded in Consolidation & Adjustments are differences in accounting methods used for management reporting versus U.S. GAAP as well as results and balances from activities outside the management responsibility of the business segments.

Loss before income taxeswas€ 756 million in 2005,€ 302 million in 2004 and€ 226 million in 2003.

Net revenuesincluded the following items:

– Adjustments related to positions which are marked to market for management reporting purposes and accounted for on an accrual basis under U.S. GAAP were approximately€ (100) million in 2005,€ (150) million in 2004 and€ (200) million in 2003.

– Trading results from the Group’s own shares are reflected in the Corporate Banking & Securities Corporate Division. The elimination of such results under U.S. GAAP resulted in credits of approximately€ 15 million in 2005,€ 45 million in 2004 and€ 200 million in 2003 within Consolidation & Adjustments.

– Debits related to the elimination of Group-internal rental income were€ (41) million in 2005,€ (101) million in 2004 and€ (106) million in 2003.

– Insurance premiums attributable to the Group’s reinsurance subsidiary were not material in 2005 with a corresponding decline in policyholder benefits and claims (see noninterest expenses). Such insurance premiums amounted to€ 91 million in 2004 and to€ 79 million in 2003.

– Interest income on tax refunds from ongoing audits of prior period tax returns was€ 38 million in 2005 and€ 131 million in 2004.

– The remainder of net revenues in each year was due to other corporate items outside the management responsibility of the business segments, such as net funding expenses for non-divisionalized assets/liabilities and results from hedging capital of certain foreign subsidiaries.

Provisions for loan losses and provision for off-balance sheet positionsincluded no material items in each of the reported years.

Noninterest expensesreflected the following items:

– 2005 included net additions of approximately€ 500 million to provisions for legal exposures related to legacy events and provisions of€ 203 million related to grundbesitz-invest, an open-end property fund sponsored and managed by a German subsidiary of the Group.

– Credits related to the elimination of Group-internal rental expenses were€ 41 million in 2005,€ 101 million in 2004 and€ 106 million in 2003.

– Policyholder benefits and claims were not material in 2005,€ 210 million in 2004, and€ 89 million in 2003. The decrease in 2005 was in part corresponding to the lower insurance premiums described above and also reflected charges in 2004 associated with the settlement agreement of the WorldCom litigation. The increase in 2004 compared to 2003 was due to newly established provisions, including charges associated with the settlement agreement of the WorldCom litigation partly offset by releases for certain other self-insured risks.

– The remainder of noninterest expenses in each year was attributable to other corporate items outside the management responsibility of the business segments.

Assets and risk-weighted positionsreflect corporate assets outside of the management responsibility of the business segments such as deferred tax assets and central clearing accounts.

Average active equityassigned to Consolidation & Adjustments reflects the residual amount of equity that is not allocated to the segments as described under “Framework of the Group’s Management Reporting Systems” within this Footnote.

F-67

Total Net Revenues (before Provision for Loan Losses) by Geographical Location

The following table presents total net revenues (before provision for loan losses) by geographical location.

in€ m.	2005			20041			20031
Germany:
CIB		2,437			2,363			2,558
PCAM		4,606			4,393			4,309
Total Germany		7,043			6,756			6,867
Rest of Europe:
CIB		6,145			4,514			5,019
PCAM		2,539			2,171			2,169
Total Rest of Europe2		8,684			6,685			7,188
North America (primarily U.S.):
CIB		4,996			4,437			4,669
PCAM		1,182			1,196			1,468
Total North America		6,177			5,634			6,136
South America:
CIB		233			70			139
PCAM		–			1			1
Total South America		233			71			141
Asia-Pacific:
CIB		2,107			2,029			1,908
PCAM		267			262			253
Total Asia-Pacific3		2,374			2,291			2,161
Corporate Investments		1,229			621			(920	)
Consolidation & Adjustments		(102	)		(140	)		(305	)
Consolidated net revenues4		25,640			21,918			21,268

1	Restated to conform to the 2005 management structure.
2	The United Kingdom accounted for over one-half of these revenues in 2005, 2004 and 2003. Rest of Europe also includes the Group’s African operations.
3	Asia-Pacific also includes the Middle East.
4	Consolidated total net revenues comprise interest revenues, interest expenses and total noninterest revenues (including net commission and fee revenues). Revenues are attributed to countries based on the location in which the Group’s booking office is located. The location of a transaction on our books is sometimes different from the location of the headquarters or other offices of a customer and different from the location of our personnel who entered into or facilitated the transaction. Where we record a transaction involving our staff and customers and other third parties in different locations frequently depends on other considerations, such as the nature of the transaction, regulatory considerations and transaction processing considerations.

F-68

[28] Restructuring Activities

Restructuring plans are recorded in conjunction with acquisitions as well as business realignments. Severance includes employee termination benefits related to the involuntary termination of employees. Such costs include obligations resulting from severance agreements, termination of employment contracts and early-retirement agreements. Other costs primarily include amounts for lease terminations and related costs.

The following table presents the activity in the Group’s restructuring programs for the years ended December 31, 2005, 2004, and 2003.

2004/2005 plans

2002 plans

Total

Business Realignment Program

Group restructuring

Scudder restructuring

CIB restructuring

in€ m.

Severance

Other

Severance

Other

Severance

Other

Severance

Other

Balance at Dec 31, 2002

–

–

30

12

14

3

128

19

206

Utilization

–

–

30

11

9

3

99

9

161

Releases

–

–

–

–

4

–

21

8

33

1

Effects from exchange rate fluctuations

–

–

–

(1

)

(1

)

–

(8

)

(2

)

(12

)

Balance at Dec 31, 2003

–

–

–

–

–

–

–

–

–

Additions

400

–

–

–

–

–

–

–

400

Utilization

170

–

–

–

–

–

–

–

170

Effects from exchange rate fluctuations

–

–

–

–

–

–

–

–

–

Balance at Dec 31, 2004

230

–

–

–

–

–

–

–

230

Additions

799

29

–

–

–

–

–

–

828

Utilization

800

25

–

–

–

–

–

–

825

Releases

61

–

–

–

–

–

–

–

61

Effects from exchange rate fluctuations

12

–

–

–

–

–

–

–

12

Balance at Dec 31, 2005

180

4

–

–

–

–

–

–

184

¹ Scudder restructuring reserve releases of€ 4 million were recorded against goodwill.€ 29 million related to the CIB restructuring was released against net income.

2004/2005 Plans
Business Realignment Program (“BRP”)

The BRP covers a series of initiatives aimed at revenue growth and cost efficiency. The BRP program as announced in 2004 (together with additional measures in the fourth quarter 2004) was aimed at a reduction of approximately 6,400 full-time equivalent headcount (FTE). In 2004, these measures affected 1,600 staff, of which 1,200 related to restructuring measures and 400 to additional measures in the fourth quarter 2004. The BRP measures affected approximately 4,300 staff in 2005. A majority of the reduction occurred in the infrastructure units and a further significant portion of this reduction arose in the CIB and PCAM Group Divisions as we integrated coverage and product units. The transfer of jobs to more cost-effective locations will result in additional headcount of approximately 1,200. This results in an expected net reduction in our headcount from original BRP measures of approximately 5,200 FTE. Additional BRP-related initiatives identified during 2005, especially with regard to the sale of our UK- and Philadelphia-based Asset Management business, resulted in further headcount reduction.

The Group recorded net restructuring expenses of€ 767 million in 2005 and€ 400 million in 2004. The 2005 restructuring expenses consisted of€ 668 million related to severance payments,€ 131 million related to stock compensation awards, and€ 29 million related to excess office space and other measures, which were partly offset by the release of€ 61 million of unutilized 2005 and 2004 reserves. The 2005 expenses were attributable to CIB (€ 418 million), PCAM (€ 347 million) and CI (€ 2 million). Approximately€ 190 million of the 2005 restructuring expenses were recorded for the aforementioned additional BRP-related initiatives.

F-69

All actions contemplated in the plan recorded in 2005 are expected to be completed by the end of the first quarter 2006. In addition, it is expected that expenses will be recorded in 2006 as further BRP-related actions are taken, both for originally planned and newly identified initiatives.

2002 Plans
Group Restructuring

The Group recorded a pre-tax charge of€ 340 million in the first quarter of 2002 related to restructuring activities affecting PCAM (€ 246 million), CIB (€ 93 million) and CI (€ 1 million). These restructuring plans affected approximately 2,100 staff and included a broad range of measures primarily to streamline the Group’s branch network in Germany, as well as its infrastructure. The plan was completed during the year ended December 31, 2003.

Scudder Restructuring

During 2002, the Group recorded a restructuring liability of€ 86 million related to restructuring activities in connection with the acquisition of Zurich Scudder Investments, Inc. Of this amount, approximately€ 83 million of severance and other termination-related costs and€ 3 million for other costs, primarily related to lease terminations, were recognized as a liability assumed as of the acquisition date and charged directly to goodwill. This restructuring plan affected approximately 1,000 Scudder staff. Reserves of€ 4 million were released against goodwill in 2003. The plan was completed during the year ended December 31, 2003.

CIB Restructuring

In the second quarter of 2002, the Group recorded a restructuring liability of€ 265 million related to the CIB Group Division. The plan affected approximately 2,000 staff, across all levels of the Group. The restructuring resulted from detailed business reviews and reflected the Group’s outlook for the markets in which it operates. It related to banking coverage, execution and relationship management processes; custody; trade finance and other transaction banking activities; and the related technology, settlement, real estate and other support functions. Due primarily to lower than planned affected headcount, the restructuring program was completed at lower than anticipated costs. Therefore,
€ 21 million of staff-related reserves and€ 8 million of infrastructure-related reserves were released during 2003. The plan was completed during the year ended December 31, 2003.

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[29] International Operations

The following table presents asset and income statement information by major geographic area. The information presented has been classified based primarily on the location of the Group’s office in which the assets and transactions are recorded. However, due to the highly integrated nature of the Group’s operations, estimates and assumptions have been made to allocate items, especially consolidation items, between regions.

2005	Total assets			Total gross			Total gross			Income			Net income
in€ m.				revenues1			expenses1			before taxes
International operations:
Europe (excluding Germany)2		428,819			22,426			19,631			2,795			1,867
North America (primarily U.S.)		283,431			21,193			20,308			885			413
South America		3,153			474			303			171			129
Asia-Pacific3		68,095			4,408			3,967			441			228
Total international		783,498			48,501			44,209			4,292			2,637
Domestic operations (Germany)		208,663			12,846			11,026			1,820			892
Total		992,161			61,347			55,235			6,112			3,529
International as a percentage of total above		79	%		79	%		80	%		70	%		75	%

1	Total gross revenues comprise interest revenues and total noninterest revenues (including net commissions and fee revenues). Total gross expenses comprise interest expense, provision for loan losses and total noninterest expenses.
2	Includes balance sheet and income statement data from Africa, which were not material in 2005.
3	Asia-Pacific also includes the Middle East.

2004	Total assets			Total gross			Total gross			Income			Net income
in€ m.				revenues1			expenses1			before taxes
International operations:
Europe (excluding Germany)2		346,273			16,430			15,424			1,006			511
North America (primarily U.S.)		212,945			12,547			11,570			977			627
South America		2,867			532			440			92			87
Asia-Pacific3		71,928			4,016			3,418			598			262
Total international		634,013			33,525			30,852			2,673			1,487
Domestic operations (Germany)		206,055			11,234			9,878			1,356			985
Total		840,068			44,759			40,730			4,029			2,472
International as a percentage of total above		75	%		75	%		76	%		66	%		60	%

1	Total gross revenues comprise interest revenues and total noninterest revenues (including net commissions and fee revenues). Total gross expenses comprise interest expense, provision for loan losses and total noninterest expenses.
2	Includes balance sheet and income statement data from Africa, which were not material in 2004.
3	Asia-Pacific also includes the Middle East.

2003	Total assets			Total gross			Total gross			Income			Net income
in€ m.				revenues1			expenses1			before taxes2
International operations:
Europe (excluding Germany)3		327,835			17,674			15,954			1,720			837
North America (primarily U.S.)		221,048			10,156			9,853			303			233
South America		1,277			575			575			–			–
Asia-Pacific4		60,101			3,389			2,877			512			357
Total international		610,261			31,794			29,259			2,535			1,427
Domestic operations (Germany)		193,353			11,210			10,989			221			(62	)
Total		803,614			43,004			40,248			2,756			1,365
International as a percentage of total above		76	%		74	%		73	%		92	%		105	%

1	Total gross revenues comprise interest revenues and total noninterest revenues (including net commissions and fee revenues). Total gross expenses comprise interest expense, provision for loan losses and total noninterest expenses.
2	Before cumulative effect of accounting changes.
3	Includes balance sheet and income statement data from Africa, which were not material in 2003.
4	Asia-Pacific also includes the Middle East.

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[30] Derivative Financial Instruments and Financial Instruments with Off-Balance Sheet Risk

In the normal course of business, the Group enters into a variety of derivative transactions for both trading and nontrading purposes. The Group’s objectives in using derivative instruments are to meet customers’ needs, to manage the Group’s exposure to risks and to generate revenues through trading activities. Derivative contracts used by the Group in both trading and nontrading activities include swaps, futures, forwards, options and other similar types of contracts based on interest rates, foreign exchange rates, credit risk and the prices of equities and commodities (or related indices).

Derivatives Held or Issued for Trading Purposes

The Group trades derivative instruments on behalf of customers and for its own positions. The Group transacts derivative contracts to address customer demands both as a market maker in the wholesale markets and in structuring tailored derivatives for customers. The Group also takes proprietary positions for its own accounts. Trading derivative products include swaps, options, forwards and futures and a variety of structured derivatives which are based on interest rates, equities, credit, foreign exchange and commodities.

Derivatives Held or Issued for Nontrading Purposes

Derivatives held or issued for nontrading purposes primarily consist of interest rate swaps used to manage interest rate risk. Through the use of these derivatives, the Group is able to modify the volatility and interest rate characteristics of its nontrading interest-earning assets and interest-bearing liabilities. The Group is subject to risk from interest rate fluctuations to the extent that there is a gap between the amount of interest-earning assets and the amount of interest-bearing liabilities that mature or reprice in specified periods. The Group actively manages this interest rate risk through, among other things, the use of derivative contracts. Utilization of derivative financial instruments is modified from time to time within prescribed limits in response to changing market conditions, as well as changes in the characteristics and mix of the related assets and liabilities.

The Group also uses cross-currency interest rate swaps to hedge both foreign currency and interest rate risks from securities available for sale.

For these hedges, the Group applies either fair value or cash flow hedge accounting when cost beneficial. When hedging only interest rate risk, fair value hedge accounting is applied for hedges of assets or liabilities with fixed interest rates, and cash flow hedge accounting is applied for hedges of floating interest rates. When hedging both foreign currency and interest rate risks, cash flow hedge accounting is applied when all functional-currency-equivalent cash flows have been fixed; otherwise fair value hedge accounting is applied.

For the years ended December 31, 2005, 2004 and 2003, net hedge ineffectiveness from fair value hedges, which is based on changes in fair value resulting from changes in the market price or rate related to the risk being hedged, and amounts excluded from the assessment of hedge effectiveness resulted in a loss of€ 61 million, a loss of€ 100 million and a loss of€ 82 million, respectively. As of December 31, 2005, the longest term cash flow hedge outstanding, excluding hedges of existing variable rate instruments, matures in 2015.

Derivatives entered into for nontrading purposes that do not qualify for hedge accounting are also classified as trading assets and liabilities. These include interest rate swaps, credit derivatives, foreign exchange forwards and cross currency interest rate swaps used to economically hedge interest, credit and foreign exchange risk, but for which it is not cost beneficial to apply hedge accounting.

Net (gains) losses of€ (138) million,€ 81 million and€ (13) million from nontrading equity derivatives used to offset fluctuations in employee share-based compensation expense were included in compensation and benefits for the years ended December 31, 2005, 2004 and 2003, respectively.

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Derivative Financial Instruments Indexed to Our Own Shares

The Group enters into contracts indexed to Deutsche Bank common shares to acquire shares to satisfy employee share-based compensation awards, and for trading purposes.

At December 31, 2005, the Group had outstanding call options to purchase approximately 2.0 million shares at a weighted-average strike price of€ 67.00 per share related to employee share-based compensation awards. The options must be net-cash settled and they mature in less than five years. The fair value of these options amounted to€ 33.0 million at December 31, 2005. A€ 1 decrease in the price of Deutsche Bank common shares would have reduced the fair value of these options by€ 2.3 million.

Related to trading activities, the following derivative contracts that are indexed to Deutsche Bank common shares are outstanding at December 31, 2005.

Type of contract	Settlement	Maturity	Number of issuer’s		Weighted-average		Effect of decrease			Fair value of
	alternative		shares to which		strike price		of share price by€ 1			contract asset
			contracts are		(in€ )		(€ in thousands)			(liability)
			indexed							(€ in thousands)
Purchased options	Net-cash	Up to 3 months		12,890,858		83.93		(1,853	)		12,565
		> 3 months – 1 year		19,701,915		45.20		(609	)		81,972
		> 1 year – 5 years		18,702,559		39.96		(357	)		63,876
Sold options	Net-cash	Up to 3 months		12,502,524		83.75		(8,859	)		(41,273	)
		> 3 months – 1 year		14,412,456		61.04		770			(95,852	)
		> 1 year – 5 years		7,954,714		67.24		1,923			(93,319	)
Forward purchases	Net-cash	Up to 3 months		1,200,000		84.82		(1,200	)		(3,600	)
		> 3 months – 1 year		1,000,428		82.83		(1,000	)		6,650
	Deutsche Bank choice	Up to 3 months		44,000,000		81.00		(44,000	)		(56,673	)
	Net-cash/	> 3 months – 1 year		27,687,500		73.90		(27,688	)		211,513
	physical1
Forward sales	Net-cash	Up to 3 months		80,532		81.90		81			(5,835	)
		> 3 months – 1 year		1,959,360		81.90		1,959			251
	Counterparty choice	> 3 months – 1 year		10,215,286		70.82		10,215			(85,696	)
	Net-cash/	> 1 year – 5 years		52,142,600		53.37		52,143			(1,222,495	)
	physical1

¹ Fair values do not differ significantly relating to settlement alternatives.

The above contracts related to trading activities are accounted for as trading assets and liabilities and are thus carried at fair value with changes in fair value recorded in earnings.

Financial Instruments with Off-Balance Sheet Risk

The Group utilizes various lending-related commitments in order to meet the financing needs of its customers. The contractual amount of these commitments is the maximum amount at risk for the Group if the customer fails to meet its obligations. The Group may require collateral to mitigate the credit risk of these commitments. The type and terms of such collateral are determined on an individual basis. Off-balance sheet credit risk amounts are determined without consideration of the value of any related collateral and reflect the total potential loss on undrawn commitments. The table below summarizes the Group’s lending-related commitments.

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in€ m.	Dec 31, 2005		Dec 31, 2004
Irrevocable commitments to extend credit
For book claims and bills of exchange		130,492		101,982
For guarantees and letters of credit		1,209		1,064
Placement and underwriting commitments		896		643
Total irrevocable commitments to extend credit		132,597		103,689
Revocable commitments to extend credit		22,344		20,640
Total commitments to extend credit		154,941		124,329
Commitments to enter into reverse repurchase agreements		85,660		58,585
Commitments to enter into repurchase agreements		33,563		41,125

As of December 31, 2005 and 2004, the Group had commitments to contribute capital to equity method and other investments totaling€ 279 million and€ 324 million, respectively.

The Group also enters regularly into various guarantee and indemnification agreements in the normal course of business. Probable losses under these agreements are provided for as part of other liabilities. The principal guarantees and indemnifications that the Group enters into are the following:

– Financial guarantees, standby letters of credit and performance guarantees, including indemnification for the effect of income taxes that may have to be paid by counterparties on certain transactions entered into with the Group, with a carrying amount of€ 573 million and€ 592 million and with maximum potential payments of€ 31.6 billion and
€ 26.9 billion as of December 31, 2005 and 2004, respectively, generally require the Group to make payments to the guaranteed party based on another’s failure to meet its obligations or to perform under an obligating agreement. Most of these guarantees (€ 20.5 billion) mature within five years, for€ 2.8 billion the duration is more than five years and
€ 8.3 billion have revolving terms. These guarantees are collateralized with cash, securities and other collateral of
€ 9.4 billion and€ 11.8 billion as of December 31, 2005 and 2004, respectively.

– The Group offers clients a certain investment fund product with a market value guarantee feature. Such market value guarantees represent assurances under which, for example, initial investment values or, in the case of subsequent higher fund net asset values, those higher values, are guaranteed at levels as defined under the relevant agreements. As of December 31, 2005 and 2004, the maximum potential amount of future payments of the market value guarantees was€ 14.7 billion and€ 13.8 billion, respectively, which represents the total value guaranteed under the respective agreements. The value of those investment fund products as of December 31, 2005 and December 31, 2004 was
€ 15.0 billion and€ 14.0 billion, respectively.

– Certain written put options require the Group to purchase specified assets at an agreed price at the election of the holder of the option. Put options which permit cash settlement and do not require the holder of the option to own the underlying asset are not considered guarantees as described in FIN 45. The carrying amount and maximum potential payments of written puts that are considered guarantees, as of December 31, 2005, was€ 2.5 billion and€ 20.8 billion, respectively. The carrying amount and maximum potential payments of such written puts as of December 31, 2004 was€ 1.4 billion and€ 14.5 billion, respectively. Of the December 31, 2005 maximum potential payments,€ 6.6 billion mature within one year,€ 12.2 billion mature in more than one up to five years and€ 2.0 billion mature in more than five years.

– As of December 31, 2005, credit derivatives that are considered to be guarantees under FIN 45 had a carrying and maximum potential payment amount of€ 300 million and€ 1.5 billion, respectively. All of them mature in more than one and up to five years. Typically the Group does not receive collateral for these contracts. As of December 31, 2004, the carrying amount and maximum potential payments of credit derivatives with positive market values was€ 486 million and€ 2.2 billion, respectively. As of December 31, 2005 and 2004, the Group had no guarantees of this type with negative market values. Certain credit derivatives which permit cash settlement and do not require the buyer of credit protection to own the reference asset are not considered to be guarantees as described in FIN 45.

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[31] Concentrations of Credit Risk

The Group is exposed to credit risk arising from all transactions that give rise to actual, contingent or potential claims against a counterparty. Significant concentrations of credit risk exist where we have material exposures to a number of counterparties with similar economic characteristics, or who are engaged in comparable activities, where these similarities may cause their ability to meet contractual obligations to be affected in the same manner by changes in economic or industry conditions. A concentration of credit risk may also exist at an individual counterparty level.

In order to monitor and manage credit risks, we use a comprehensive range of quantitative tools and metrics. Credit limits relating to counterparties, countries, products and other factors set the maximum credit exposures we are willing to assume over specified periods. Our credit policies also establish procedures (including lower approval thresholds and approval from more senior personnel) for exceptional cases when we may assume exposures beyond established limits.

Our largest concentrations of credit risk are in Western Europe and North America, with a significant share in tradable assets of the public sector. For loans, we have significant concentration in Western Europe, principally in our home market Germany, which includes most of our mortgage lending business. There is further industry concentration in Banking and Insurance, mainly from tradable assets and investment-grade OTC derivatives.

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[32] Fair Value of Financial Instruments

SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” (“SFAS 107”) requires the disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Quoted market prices, when available, are used as the measure of fair value. In cases where quoted market prices are not available, fair values are based on present value estimates or other valuation techniques. These derived fair values are significantly affected by assumptions used, principally the timing of future cash flows and the discount rate. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values would not necessarily be realized in an immediate sale or settlement of the instrument. The disclosure requirements of SFAS 107 exclude certain financial instruments and all nonfinancial instruments (e.g., franchise value of businesses). Accordingly, the aggregate fair value amounts presented do not represent management’s estimation of the underlying value of the Group.

The following are the estimated fair values of the Group’s financial instruments recognized on the Consolidated Balance Sheet, followed by a general description of the methods and assumptions used to estimate such fair values.

	Carrying amount					Fair value
in€ m.		Dec 31, 2005		Dec 31, 2004		Dec 31, 2005		Dec 31, 2004
Financial assets:
Cash and due from banks			6,571		7,579		6,571		7,579
Interest-earning deposits with banks			11,963		18,089		11,968		18,100
Central bank funds sold and securities purchased under resale agreements and securities borrowed			232,118		189,551		232,094		189,610
Trading assets			448,393		373,147		448,393		373,147
Securities available for sale			21,675		20,335		21,675		20,335
Other investments			2,329		2,358		2,408		2,364
Loans (excluding leases), net			148,549		133,801		150,904		136,311
Other financial assets			86,493		67,830		86,707		67,992
Financial liabilities:
Noninterest-bearing deposits			30,005		27,274		30,005		27,274
Interest-bearing deposits			350,782		293,522		350,746		293,367
Trading liabilities			194,347		169,606		194,347		169,606
Central bank funds purchased and securities sold under repurchase agreements and securities loaned			168,105		118,173		168,078		118,178
Other short-term borrowings			20,549		20,118		20,538		20,115
Other financial liabilities			67,670		69,271		67,537		69,223
Long-term debt			113,554		106,870		113,803		106,602

Methods and Assumptions

For short-term financial instruments, defined as those with remaining maturities of 90 days or less, the carrying amounts were considered to be a reasonable estimate of fair value. The following instruments were predominantly short-term.

Assets	Liabilities
Cash and due from banks	Interest-bearing deposits
Central bank funds sold and securities purchased under	Central bank funds purchased and securities sold under
resale agreements and securities borrowed	repurchase agreements and securities loaned
Interest-earning deposits with banks	Other short-term borrowings
Other financial assets	Other financial liabilities

For those components of the above-listed financial instruments with remaining maturities greater than 90 days, fair value was determined by discounting contractual cash flows using rates which could be

F-76

earned for assets with similar remaining maturities and, in the case of liabilities, rates at which the liabilities with similar remaining maturities could be issued as of the balance sheet date.

Trading assets (including derivatives), trading liabilities and securities available for sale are carried at their fair values.

For short-term loans and variable rate loans which reprice within 90 days, the carrying value was considered to be a reasonable estimate of fair value. For those loans for which quoted market prices were available, fair value was based on such prices. For other types of loans, fair value was estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. In addition, the specific loss component of the allowance for loan losses, including recoverable amounts of collateral, was considered in the fair value determination of loans. Other investments consist primarily of investments in equity instruments (excluding, in accordance with SFAS 107, investments accounted for under the equity method).

Other financial assets consisted primarily of cash/margin receivables, receivables from prime brokerage, pending securities transactions past settlement date and loans held for sale, net.

Noninterest-bearing deposits do not have defined maturities. Fair value represents the amount payable on demand as of the balance sheet date.

Other financial liabilities consisted primarily of cash/margin payables, payables from prime brokerage, pending securities transactions past settlement date and accrued expenses.

The fair value of long-term debt was estimated by using market quotes, as well as discounting the remaining contractual cash flows using a rate at which the Group could issue debt with a similar remaining maturity as of the balance sheet date.

The fair value of commitments to extend credit was estimated by using market quotes. On this basis, at December 31, 2005, the fair value of commitments to extend credit approximated the allowance for these commitments of€ 135 million.

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[33] Condensed Deutsche Bank AG (Parent Company Only) Financial Statements

Condensed Statement of Income

in€ m.	2005			2004			2003
Interest revenues, excluding dividends from subsidiaries		27,034			17,921			18,080
Dividends received from subsidiaries:
Banks		877			1,172			898
Nonbanks		1,738			1,211			1,930
Interest expense		26,716			18,639			17,732
Net interest and dividend revenues		2,933			1,665			3,176
Provision for loan losses		128			92			525
Net interest and dividend revenues after provision for loan losses		2,805			1,573			2,651
Noninterest revenues:
Commissions and fees		3,052			2,901			2,864
Trading revenues, net		7,452			6,803			4,940
Other revenues		66			153			(35	)
Total noninterest revenues		10,570			9,857			7,769
Noninterest expenses:
Compensation and benefits		5,696			5,074			5,414
Other expenses		4,302			3,533			3,513
Services provided to affiliates, net		(347	)		(234	)		(29	)
Total noninterest expenses		9,651			8,373			8,898
Income before income taxes and equity in undistributed income of subsidiaries and affiliates		3,724			3,057			1,522
Income tax expense (benefit)		756			721			(333	)
Income before cumulative effect of accounting changes		2,968			2,336			1,855
Cumulative effect of accounting changes, net of tax		–			–			140
Income before equity in undistributed income of subsidiaries and affiliates		2,968			2,336			1,995
Equity in undistributed income (loss) of subsidiaries and affiliates		561			136			(630	)
Net income		3,529			2,472			1,365

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Condensed Balance Sheet

in€ m.	Dec 31, 2005		Dec 31, 2004
Assets:
Cash and due from banks:
Bank subsidiaries		278		203
Other		1,963		3,586
Interest-earning deposits with banks:
Bank subsidiaries		44,761		37,803
Other		7,233		12,070
Securities borrowed and central bank funds sold and securities purchased under resale agreements:
Bank subsidiaries		998		3,043
Nonbank subsidiaries		94,395		65,530
Other		99,851		81,746
Trading assets:
Bank subsidiaries		5,003		4,601
Nonbank subsidiaries		7,022		5,673
Other		327,519		278,802
Securities available for sale		6,434		4,720
Other investments		3,484		3,551
Investment in subsidiaries:
Bank subsidiaries		8,069		7,749
Nonbank subsidiaries		35,289		32,624
Loans, net:
Bank subsidiaries		4,090		3,993
Nonbank subsidiaries		117,654		91,746
Other		55,221		46,673
Other assets:
Bank subsidiaries		3,529		3,085
Nonbank subsidiaries		7,861		7,552
Other		66,732		47,244
Total assets		897,386		741,994
Liabilities and shareholders’ equity:
Deposits:
Bank subsidiaries		70,539		61,357
Nonbank subsidiaries		80,177		61,888
Other		275,942		223,237
Trading liabilities:
Bank subsidiaries		4,140		2,554
Nonbank subsidiaries		9,310		4,970
Other		144,274		118,172
Securities loaned and central bank funds purchased and securities sold under repurchase agreements:
Bank subsidiaries		8,729		11,044
Nonbank subsidiaries		32,152		19,607
Other		82,853		55,472
Other short-term borrowings:
Bank subsidiaries		309		1,453
Nonbank subsidiaries		258		1,085
Other		7,757		7,101
Other liabilities:
Bank subsidiaries		1,277		952
Nonbank subsidiaries		4,946		15,114
Other		49,136		36,561
Long-term debt		95,651		95,523
Total liabilities		867,450		716,090
Total shareholders’ equity		29,936		25,904
Total liabilities and shareholders’ equity		897,386		741,994

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Condensed Statement of Cash Flows

in€ m.	2005			2004			2003
Cash flows from operating activities:
Net income		3,529			2,472			1,365
Adjustments to reconcile net income to net cash used in operating activities:
Provision for loan losses		128			92			(2,226	)
Restructuring activities		164			147			–
Equity in undistributed (income) loss of subsidiaries		(682	)		(136	)		490
Deferred income taxes, net		84			735			94
Impairment, depreciation and other amortization and accretion		117			283			1,473
Share of net loss (income) from equity method investments		(44	)		(79	)		15
Gains on securities available for sale, other investments, loans and other		(174	)		(204	)		(157	)
Cumulative effect of accounting changes, net of tax		–			–			(139	)
Other, net		–			–			7
Net change in:
Trading assets		(50,835	)		(42,457	)		(10,378	)
Other assets		(18,486	)		(12,515	)		(7,105	)
Trading liabilities		32,028			10,777			9,249
Other liabilities		4,282			13,014			12,915
Other, net		(1,570	)		(306	)		(648	)
Net cash (used in) provided by operating activities		(31,459	)		(28,177	)		4,955
Cash flows from investing activities:
Net change in:
Interest-earning deposits with banks		(2,121	)		2,198			8,125
Securities borrowed and central bank funds sold and securities purchased under resale agreements		(44,924	)		(12,181	)		(22,506	)
Loans		(21,272	)		4,092			(1,585	)
Investment in subsidiaries		(117	)		1,565			(2,326	)
Proceeds from:
Sale of securities available for sale		521			987			1,738
Maturities of securities available for sale		2,463			2,967			3,622
Sale of other investments, loans and other		1,249			3,057			4,235
Purchase of:
Securities available for sale		(4,394	)		(2,874	)		(5,902	)
Other investments and loans		(4,090	)		(2,032	)		(1,249	)
Premises and equipment		(126	)		(209	)		(284	)
Other, net		(260	)		56			84
Net cash used in investing activities		(73,071	)		(2,374	)		(16,048	)
Cash flows from financing activities:
Net change in:
Deposits		71,054			22,622			(3,464	)
Securities loaned and central bank funds purchased and securities sold under repurchase agreements		37,610			922			13,591
Other short-term borrowings		(1,316	)		3,519			2,946
Issuances of long-term debt		31,091			30,385			22,701
Repayments and extinguishment of long-term debt		(32,612	)		(21,781	)		(23,742	)
Issuances of common shares		439			–			–
Purchases of treasury shares		(43,803	)		(34,471	)		(25,464	)
Sale of treasury shares		41,640			30,850			23,389
Cash dividends paid		(868	)		(828	)		(756	)
Other, net		(376	)		12			(30	)
Net cash provided by financing activities		102,859			31,230			9,171
Net effect of exchange rate changes on cash and due from banks		123			(67	)		(288	)
Net increase (decrease) in cash and due from banks		(1,548	)		612			(2,210	)
Cash and due from banks, beginning of the year		3,789			3,177			5,387
Cash and due from banks, end of the year		2,241			3,789			3,177
Interest paid		26,632			18,156			18,057
Income taxes paid, net		466			(35	)		(18	)

F-80

The following table is a summary of the Parent Company’s long-term debt.

By remaining maturities	Due in		Due in		Due in		Due in		Due in		Due after		Dec 31, 2005		Dec 31, 2004
in€ m.	2006		2007		2008		2009		2010		2010		total		total
Senior debt:
Bonds and notes:
Fixed rate		5,423		5,710		4,295		8,584		5,599		16,758		46,369		51,130
Floating rate		6,474		5,266		4,259		4,920		3,827		10,598		35,344		33,666
Subordinated debt:
Bonds and notes:
Fixed rate		930		258		–		1,166		–		5,377		7,731		7,832
Floating rate		–		85		–		1,497		580		4,045		6,207		2,895
Total		12,827		11,319		8,554		16,167		10,006		36,778		95,651		95,523

[34] Litigation

Enron Litigation.Deutsche Bank AG and certain of its affiliates are collectively involved in more than 20 lawsuits arising out of their banking relationship with Enron Corp., its subsidiaries and certain Enron-related entities (“Enron”). These lawsuits include a series of purported class actions brought on behalf of shareholders of Enron, including the lead action captioned Newby v. Enron Corp. The consolidated complaint filed in Newby named as defendants, among others, Deutsche Bank AG, several other investment banking firms, a number of law firms, Enron’s former accountants and affiliated entities and individuals and other individual defendants, including present and former officers and directors of Enron, and it purported to allege claims against Deutsche Bank AG under federal securities laws. On December 20, 2002, the Court dismissed all of the claims alleged in the Newby action against Deutsche Bank AG. Plaintiffs in Newby filed a first amended consolidated complaint on May 14, 2003 and reasserted claims against Deutsche Bank AG under federal securities laws and also added similar claims against its subsidiaries Deutsche Bank Securities Inc. (“DBSI”) and Deutsche Bank Trust Company Americas (“DBTCA”). On March 29, 2004, the Court dismissed in part the claims alleged in the Newby action against the Deutsche Bank entities. Specifically, the Court dismissed the fraud claims, but did not dismiss the non-fraud claims. On July 26, 2005, the Court granted plaintiffs’ motion for reconsideration of the partial dismissal of claims against the Deutsche Bank entities, and reinstated the fraud claims against the Deutsche Bank entities that had been dismissed on March 29, 2004. Plaintiffs’ motion to certify a class of shareholders in Newby is being briefed.

Also, an adversary proceeding has been brought by Enron in the bankruptcy court against, among others, Deutsche Bank AG and certain of its affiliates. In this adversary proceeding, Enron seeks damages from the Deutsche Bank entities, as well as the other defendants, for alleged aiding and abetting breaches of fiduciary duty by Enron insiders, aiding and abetting fraud and unlawful civil conspiracy, and also seeks return of alleged fraudulent conveyances and preferences and equitable subordination of their claims in the Enron bankruptcy. The Deutsche Bank entities’ motion to partially dismiss the adversary complaint is pending.

In addition to Newby and the adversary proceeding described above, there are third-party actions brought by Arthur Andersen in Enron-related cases asserting contribution claims against Deutsche Bank AG, DBSI and many other defendants, and individual and putative class actions brought in various courts by Enron investors and creditors alleging federal and state law claims against the same entities named by Arthur Andersen, as well as DBTCA.

Tax-Related Products.Deutsche Bank AG, along with certain affiliates and employees (collectively referred to as “Deutsche Bank”), have collectively been named as defendants in more than 75 legal proceedings brought by investors in various tax-oriented transactions. Deutsche Bank provided financial products and services to these investors, who were advised by various accounting, legal and financial advisory professionals. The investors claimed tax benefits as a result of these transactions, and the United States Internal Revenue Service has rejected those claims. In these legal proceedings, the

F-81

investors allege that, together with Deutsche Bank, the professional advisors improperly misled the investors into believing that the claimed tax benefits would be upheld by the Internal Revenue Service. The legal proceedings are pending in numerous state and federal courts and in arbitration, and claims against Deutsche Bank are alleged under both U.S. state and federal law. Many of the claims against Deutsche Bank are asserted by individual investors, while others are asserted on behalf of a putative investor class. No litigation class has been certified as against Deutsche Bank. The legal proceedings are currently at various pre-trial stages, including discovery.

The United States Department of Justice (“DOJ”) is also conducting a criminal investigation of tax-oriented transactions that were executed from approximately 1997 through 2001. In connection with that investigation, DOJ has sought various documents and other information from Deutsche Bank and has been investigating the actions of various individuals and entities, including Deutsche Bank, in such transactions. In the latter half of 2005, DOJ brought criminal charges against numerous individuals based on their participation in certain tax-oriented transactions while employed by entities other than Deutsche Bank. In the latter half of 2005, DOJ also entered into a Deferred Prosecution Agreement with an accounting firm (the “Accounting Firm”), pursuant to which DOJ agreed to defer prosecution of a criminal charge against the Accounting Firm based on its participation in certain tax-oriented transactions provided that the Accounting Firm satisfied the terms of the Deferred Prosecution Agreement. On February 14, 2006, DOJ announced that it had entered into a Deferred Prosecution Agreement with a financial institution (the “Financial Institution”), pursuant to which DOJ agreed to defer prosecution of a criminal charge against the Financial Institution based on its role in providing financial products and services in connection with certain tax-oriented transactions provided that the Financial Institution satisfied the terms of the Deferred Prosecution Agreement. Deutsche Bank provided similar financial products and services in certain tax-oriented transactions that are the same or similar to the tax-oriented transactions that are the subject of the above-referenced criminal charges. Deutsche Bank also provided financial products and services in additional tax-oriented transactions as well. DOJ’s criminal investigation is on-going.

Philipp Holzmann AG. Philipp Holzmann AG (“Holzmann”) is a major German construction firm which filed for insolvency in March 2002. Deutsche Bank had been a major creditor bank and holder of an equity interest of Holzmann for many decades, and, from April 1997 until April 2000, a former member of Deutsche Bank AG’s Management Board was the Chairman of its Supervisory Board. When Holzmann had become insolvent at the end of 1999, a consortium of banks led by Deutsche Bank participated in late 1999 and early 2000 in a restructuring of Holzmann that included the banks’ extension of a credit facility, participation in a capital increase and exchange of debt into convertible bonds. In March 2002, Holzmann and several of its subsidiaries, including in particular imbau Industrielles Bauen GmbH (“imbau”), filed for insolvency. As a result of this insolvency, the administrators for Holzmann and for imbau and a group of bondholders have informed Deutsche Bank they are asserting claims against it because of its role as lender to the Holzmann group prior to and after the restructuring and as leader of the consortium of banks which supported the restructuring. The purported claims include claims that amounts repaid to the banks constituted voidable preferences that should be returned to the insolvent entities and claims of lender liability resulting from the banks’ support for an allegedly infeasible restructuring. Although Deutsche Bank is in ongoing discussions, it cannot exclude that some of the parties may file lawsuits against it. To date, the administrator for imbau filed a lawsuit against Deutsche Bank in August 2004 alleging that payments received by Deutsche Bank in respect of a loan made to imbau in 1997 and 1998 and in connection with a real estate transaction that was part of the restructuring constituted voidable preferences that should be returned to the insolvent entity. Several bondholders filed a lawsuit against Deutsche Bank in December 2005 seeking damages because of its allegedly unlawful support of Holzmann’s 1999/2000 restructuring. Additionally, Gebema N.V. filed a lawsuit in 2000 seeking damages against Deutsche Bank alleging deficiencies in the offering documents based on which Gebema N.V. had invested in equity and convertible bonds of Holzmann in 1998.

General.Due to the nature of its business, the Group is involved in litigation, arbitration and regulatory proceedings in Germany and in a number of jurisdictions outside Germany, including the United States, arising in the ordinary course of business. Such matters are subject to many uncertainties, and

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the outcome of individual matters is not predictable with assurance. Although the final resolution of any such matters could have a material effect on the Group’s consolidated operating results for a particular reporting period, the Group believes that it should not materially affect its consolidated financial position.

[35] Terrorist Attacks in the United States

As a result of the terrorist attacks in the United States on September 11, 2001, several of the Group’s office buildings as well as a leased property were severely damaged or destroyed. Costs incurred by the Group as a result of the terrorist attacks include, but are not limited to, write-offs of fixed assets, expenses incurred to replace fixed assets that were damaged, relocation expenses, and expenses incurred to secure and maintain the damaged properties. The Group made claims for these costs through its insurance policies.

During 2003, the Group reached a settlement with two of its four insurers. As of December 31, 2005, the Group has partially settled with the other two insurers, including a tri-party agreement in which the Lower Manhattan Development Corporation (LMDC) purchased the land at 130 Liberty Street in 2004 for U.S.$ 90 million and will pay for the demolition of the building on the property, subject to a demolition cap agreement that establishes an amount above which costs will be borne by the two insurers. The remaining claims with these two insurers were directed to a binding arbitration process for resolution. Certain aspects of those claims have been determined by the arbitration panel, and are the subject of pending appeals to the New York State Supreme Court. The remaining aspects are still before the arbitration panel for decision.

As of December 31, 2005, the Group received payments from the four insurers and the LMDC totaling U.S.$ 893 million. These proceeds for the settled portions of its claims exceeded the total amount of the net receivable on the balance sheet for asset write-offs, environmental, consulting, and other costs. The net insurance reimbursements and proceeds of the sale of the property at 130 Liberty Street resulted in a benefit of€ 39 million and€ 51 million for the years ended December 31, 2005 and 2004, respectively. No losses were recorded by the Group for the year ended December 31, 2003.

[36] Condensed Consolidating Financial Information

On June 4, 1999, Deutsche Bank, acting through a subsidiary, acquired all outstanding shares of Deutsche Bank Trust Corporation (formerly Bankers Trust Corporation), a bank holding company headquartered in New York. Deutsche Bank conducts some of its activities in the United States through Deutsche Bank Trust Corporation and its subsidiaries (“DBTC”).

On July 10, 2002, Deutsche Bank issued full and unconditional guarantees of DBTC’s outstanding SEC-registered obligations. DBTC is a wholly-owned subsidiary of Deutsche Bank. Set forth below is condensed consolidating financial information regarding the Parent, DBTC and other subsidiaries of Deutsche Bank on a combined basis.

F-83

Condensed Consolidating Statement of Income

2005	Parent		DBTC			Other		Consolidating			Deutsche
						subsidiaries		entries			Bank AG
in€ m.											consolidated
Net interest revenues:
Interest revenues, including dividends from subsidiaries		29,649		1,858			32,151		(21,950	)		41,708
Interest expense		26,716		1,154			25,094		(17,257	)		35,707
Net interest and dividend revenues		2,933		704			7,057		(4,693	)		6,001
Provision for loan losses		128		(68	)		362		(48	)		374
Net interest and dividend revenues after provision for loan losses		2,805		772			6,695		(4,645	)		5,627
Noninterest revenues:
Commissions and fees		3,052		565			6,472		–			10,089
Trading revenues, net		7,452		(321	)		335		(37	)		7,429
Net gains (losses) on securities available for sale		83		2			950		20			1,055
Other revenues		544		644			365		(487	)		1,066
Total noninterest revenues		11,131		890			8,122		(504	)		19,639
Noninterest expenses:
Compensation and benefits		5,696		441			4,930		(74	)		10,993
Other expenses		3,955		1,004			3,631		(429	)		8,161
Total noninterest expenses		9,651		1,445			8,561		(503	)		19,154
Income before income tax expense and cumulative effect of accounting changes		4,285		217			6,256		(4,646	)		6,112
Income tax expense		756		77			1,663		87			2,583
Income before cumulative effect of accounting changes, net of tax		3,529		140			4,593		(4,733	)		3,529
Cumulative effect of accounting changes, net of tax		–		–			–		–			–
Net income		3,529		140			4,593		(4,733	)		3,529

F-84

2004	Parent			DBTC			Other			Consolidating			Deutsche
							subsidiaries			entries			Bank AG
in€ m.													consolidated
Net interest revenues:
Interest revenues, including dividends from subsidiaries		20,304			990			20,602			(13,873	)		28,023
Interest expense		18,639			528			13,775			(10,101	)		22,841
Net interest and dividend revenues		1,665			462			6,827			(3,772	)		5,182
Provision for loan losses		92			10			276			(6	)		372
Net interest and dividend revenues after provision for loan losses		1,573			452			6,551			(3,766	)		4,810
Noninterest revenues:
Commissions and fees		2,901			545			6,060			–			9,506
Trading revenues, net		6,803			(105	)		(503	)		(9	)		6,186
Net gains (losses) on securities available for sale		(20	)		1			250			4			235
Other revenues		309			802			(238	)		(64	)		809
Total noninterest revenues		9,993			1,243			5,569			(69	)		16,736
Noninterest expenses:
Compensation and benefits		5,074			426			4,783			(61	)		10,222
Other expenses		3,299			830			3,387			(221	)		7,295
Total noninterest expenses		8,373			1,256			8,170			(282	)		17,517
Income before income tax expense and cumulative effect of accounting changes		3,193			439			3,950			(3,553	)		4,029
Income tax expense		721			157			428			251			1,557
Income before cumulative effect of accounting changes, net of tax		2,472			282			3,522			(3,804	)		2,472
Cumulative effect of accounting changes, net of tax		–			–			–			–			–
Net income		2,472			282			3,522			(3,804	)		2,472

F-85

2003	Parent			DBTC			Other		Consolidating			Deutsche
							subsidiaries		entries			Bank AG
in€ m.												consolidated
Net interest revenues:
Interest revenues, including dividends from subsidiaries		20,908			807			18,184		(12,316	)		27,583
Interest expense		17,732			508			11,800		(8,304	)		21,736
Net interest and dividend revenues		3,176			299			6,384		(4,012	)		5,847
Provision for loan losses		525			232			371		(15	)		1,113
Net interest and dividend revenues after provision for loan losses		2,651			67			6,013		(3,997	)		4,734
Noninterest revenues:
Commissions and fees		2,864			663			5,805		–			9,332
Trading revenues, net		4,940			67			497		107			5,611
Net gains (losses) on securities available for sale		(67	)		(3	)		105		(15	)		20
Other revenues		(598	)		747			1,104		(795	)		458
Total noninterest revenues		7,139			1,474			7,511		(703	)		15,421
Noninterest expenses:
Compensation and benefits		5,414			461			4,598		22			10,495
Other expenses		3,484			745			2,975		(300	)		6,904
Total noninterest expenses		8,898			1,206			7,573		(278	)		17,399
Income before income tax expense and cumulative effect of accounting changes		892			335			5,951		(4,422	)		2,756
Income tax expense (benefit)		(333	)		121			1,013		741			1,542
Income before cumulative effect of accounting changes, net of tax		1,225			214			4,938		(5,163	)		1,214
Cumulative effect of accounting changes, net of tax		140			–			11		–			151
Net income		1,365			214			4,949		(5,163	)		1,365

F-86

Condensed Consolidating Balance Sheet

Dec 31, 2005	Parent		DBTC		Other		Consolidating			Deutsche
					subsidiaries		entries			Bank AG
in€ m.										consolidated
Assets:
Cash and due from banks		2,241		2,176		4,942		(2,788	)		6,571
Interest-earning deposits with banks		51,994		4,351		166,224		(210,606	)		11,963
Securities borrowed and central bank funds sold and securities purchased under resale agreements		195,244		8,411		175,996		(147,533	)		232,118
Trading assets		339,544		6,887		117,791		(15,829	)		448,393
Securities available for sale		6,434		1,523		23,525		(9,807	)		21,675
Other investments		46,842		3,044		20,804		(63,308	)		7,382
Loans, net		176,965		19,127		151,139		(195,876	)		151,355
Other assets		78,122		2,926		57,687		(26,031	)		112,704
Total assets		897,386		48,445		718,108		(671,778	)		992,161
Liabilities:
Deposits		426,658		12,853		154,725		(213,449	)		380,787
Trading liabilities		157,724		1,209		50,506		(15,092	)		194,347
Securities loaned and central bank funds purchased and securities sold under repurchase agreements		123,734		4,598		187,515		(147,742	)		168,105
Other short-term borrowings		8,324		13,682		118,498		(119,955	)		20,549
Other liabilities		55,359		4,113		51,941		(26,530	)		84,883
Long-term debt		95,651		8,320		95,852		(86,269	)		113,554
Total liabilities		867,450		44,775		659,037		(609,037	)		962,225
Total shareholders’ equity		29,936		3,670		59,071		(62,741	)		29,936
Total liabilities and shareholders’ equity		897,386		48,445		718,108		(671,778	)		992,161

F-87

Dec 31, 2004	Parent		DBTC		Other		Consolidating			Deutsche
					subsidiaries		entries			Bank AG
in€ m.										consolidated
Assets:
Cash and due from banks		3,789		2,031		3,498		(1,739	)		7,579
Interest-earning deposits with banks		49,873		3,526		133,505		(168,815	)		18,089
Securities borrowed and central bank funds sold and securities purchased under resale agreements		150,319		7,872		146,336		(114,976	)		189,551
Trading assets		289,076		3,156		101,330		(20,415	)		373,147
Securities available for sale		4,720		1,279		20,021		(5,685	)		20,335
Other investments		43,924		2,553		25,356		(63,897	)		7,936
Loans, net		142,412		17,225		146,066		(169,359	)		136,344
Other assets		57,881		2,618		62,285		(35,697	)		87,087
Total assets		741,994		40,260		638,397		(580,583	)		840,068
Liabilities:
Deposits		346,482		10,175		135,372		(171,233	)		320,796
Trading liabilities		125,696		1,055		61,777		(18,922	)		169,606
Securities loaned and central bank funds purchased and securities sold under repurchase agreements		86,123		4,712		142,643		(115,305	)		118,173
Other short-term borrowings		9,639		10,264		94,171		(93,956	)		20,118
Other liabilities		52,627		3,362		59,618		(37,006	)		78,601
Long-term debt		95,523		7,589		85,424		(81,666	)		106,870
Total liabilities		716,090		37,157		579,005		(518,088	)		814,164
Total shareholders’ equity		25,904		3,103		59,392		(62,495	)		25,904
Total liabilities and shareholders’ equity		741,994		40,260		638,397		(580,583	)		840,068

F-88

Condensed Consolidating Statement of Cash Flows

2005	Parent			DBTC			Other1			Deutsche
							subsidiaries			Bank AG
in€ m.										consolidated
Net cash used in operating activities		(31,459	)		(2,964	)		(29,537	)		(63,960	)
Cash flows from investing activities:
Net change in:
Interest-earning deposits with banks		(2,121	)		(320	)		8,326			5,885
Securities borrowed and central bank funds sold and securities purchased under resale agreements		(44,924	)		589			1,768			(42,567	)
Loans		(21,272	)		632			2,572			(18,068	)
Investment in subsidiaries		(117	)		–			117			–
Proceeds from:
Sale of securities available for sale		521			583			10,569			11,673
Maturities of securities available for sale		2,463			1,003			(651	)		2,815
Sale of other investments, loans and other		1,249			–			11,333			12,582
Purchase of:
Securities available for sale		(4,394	)		(1,658	)		(7,929	)		(13,981	)
Other investments		(819	)		–			(783	)		(1,602	)
Loans		(3,271	)		–			(2,714	)		(5,985	)
Premises and equipment		(126	)		(26	)		(549	)		(701	)
Net cash paid for business combinations/divestitures		(175	)		–			386			211
Other, net		(85	)		(15	)		199			99
Net cash (used in) provided by investing activities		(73,071	)		788			22,644			(49,639	)
Cash flows from financing activities:
Net change in:
Deposits		71,054			1,220			(12,234	)		60,040
Securities loaned and central bank funds purchased and securities sold under repurchase agreements		37,610			(788	)		13,110			49,932
Other short-term borrowings		(1,316	)		1,947			(179	)		452
Issuances of long-term debt		31,091			–			13,483			44,574
Repayments and extinguishments of long-term debt		(32,612	)		(417	)		(6,788	)		(39,817	)
Issuances of common shares		439			–			–			439
Purchases of treasury shares		(43,803	)		–			–			(43,803	)
Sale of treasury shares		41,640			–			–			41,640
Cash dividends paid		(868	)		–			–			(868	)
Other, net		(376	)		68			(177	)		(485	)
Net cash provided by financing activities		102,859			2,030			7,215			112,104
Net effect of exchange rate changes on cash and due from banks		123			–			364			487
Net increase (decrease) in cash and due from banks		(1,548	)		(146	)		686			(1,008	)
Cash and due from banks, beginning of year		3,789			2,322			1,468			7,579
Cash and due from banks, end of year		2,241			2,176			2,154			6,571
Interest paid		26,632			1,343			7,271			35,246
Income taxes paid, net		466			4			492			962

¹ This column includes amounts for other subsidiaries and intercompany cash flows.

F-89

2004	Parent			DBTC			Other1			Deutsche
							subsidiaries			Bank AG
in€ m.										consolidated
Net cash (used in) provided by operating activities		(28,177	)		6,263			(6,183	)		(28,097	)
Cash flows from investing activities:
Net change in:
Interest-earning deposits with banks		2,198			158			(6,929	)		(4,573	)
Securities borrowed and central bank funds sold and securities purchased under resale agreements		(12,181	)		(2,528	)		10,196			(4,513	)
Loans		4,092			(1,882	)		698			2,908
Investment in subsidiaries		1,565			–			(1,565	)		–
Proceeds from:
Sale of securities available for sale		987			4			20,154			21,145
Maturities of securities available for sale		2,967			302			291			3,560
Sale of other investments, loans and other		3,057			–			9,938			12,995
Purchase of:
Securities available for sale		(2,874	)		(1,408	)		(20,919	)		(25,201	)
Other investments		(2,032	)		–			832			(1,200	)
Loans		–			–			(4,950	)		(4,950	)
Premises and equipment		(209	)		(54	)		(529	)		(792	)
Net cash paid for business combinations/divestitures		–			–			(223	)		(223	)
Other, net		56			844			(784	)		116
Net cash (used in) provided by investing activities		(2,374	)		(4,564	)		6,210			(728	)
Cash flows from financing activities:
Net change in:
Deposits		22,622			–			(1,129	)		21,493
Securities loaned and central bank funds purchased and securities sold under repurchase agreements		922			(370	)		371			923
Other short-term borrowings		3,519			107			(227	)		3,399
Issuances of long-term debt		30,385			–			4,078			34,463
Repayments and extinguishments of long-term debt		(21,781	)		(72	)		(3,920	)		(25,773	)
Purchases of treasury shares		(34,471	)		–			–			(34,471	)
Sale of treasury shares		30,850			–			–			30,850
Cash dividends paid		(828	)		(830	)		830			(828	)
Other, net		12			(7	)		7			12
Net cash provided by (used in) financing activities		31,230			(1,172	)		10			30,068
Net effect of exchange rate changes on cash and due from banks		(67	)		–			(233	)		(300	)
Net increase (decrease) in cash and due from banks		612			527			(196	)		943
Cash and due from banks, beginning of year		3,177			1,504			1,955			6,636
Cash and due from banks, end of year		3,789			2,031			1,759			7,579
Interest paid		18,156			516			3,739			22,411
Income taxes paid, net		(35	)		1			233			199

¹ This column includes amounts for other subsidiaries and intercompany cash flows.

F-90

2003	Parent			DBTC			Other1			Deutsche
							subsidiaries			Bank AG
in€ m.										consolidated
Net cash provided by (used in) operating activities		4,955			(2,997	)		(8,042	)		(6,084	)
Cash flows from investing activities:
Net change in:
Interest-earning deposits with banks		8,125			(156	)		3,336			11,305
Securities borrowed and central bank funds sold and securities purchased under resale agreements		(22,506	)		4,301			(11,643	)		(29,848	)
Loans		(1,585	)		(985	)		25,180			22,610
Investment in subsidiaries		(2,326	)		–			2,326			–
Proceeds from:
Sale of securities available for sale		1,738			2			11,880			13,620
Maturities of securities available for sale		3,622			13			3,876			7,511
Sale of other investments, loans and other		4,235			–			7,343			11,578
Purchase of:
Securities available for sale		(5,902	)		(10	)		(14,030	)		(19,942	)
Other investments		(1,249	)		–			(892	)		(2,141	)
Loans		–			–			(9,030	)		(9,030	)
Premises and equipment		(284	)		(37	)		(670	)		(991	)
Net cash received for business combinations/divestitures		–			–			2,469			2,469
Other, net		84			(237	)		480			327
Net cash provided by (used in) investing activities		(16,048	)		2,891			20,625			7,468
Cash flows from financing activities:
Net change in:
Deposits		(3,464	)		(3,312	)		(17,382	)		(24,158	)
Securities loaned and central bank funds purchased and securities sold under repurchase agreements		13,591			1,247			2,913			17,751
Other short-term borrowings		2,946			(67	)		(7,182	)		(4,303	)
Issuances of long-term debt		22,701			3,141			17,349			43,191
Repayments and extinguishments of long-term debt		(23,742	)		(927	)		(7,697	)		(32,366	)
Purchases of treasury shares		(25,464	)		–			–			(25,464	)
Sale of treasury shares		23,389			–			–			23,389
Cash dividends paid		(756	)		–			–			(756	)
Other, net		(30	)		(46	)		39			(37	)
Net cash provided by (used in) financing activities		9,171			36			(11,960	)		(2,753	)
Net effect of exchange rate changes on cash and due from banks		(288	)		–			(686	)		(974	)
Net (decrease) in cash and due from banks		(2,210	)		(70	)		(63	)		(2,343	)
Cash and due from banks, beginning of year		5,387			1,686			1,906			8,979
Cash and due from banks, end of year		3,177			1,616			1,843			6,636
Interest paid		18,057			707			3,848			22,612
Income taxes paid, net		(18	)		6			923			911

¹ This column includes amounts for other subsidiaries and intercompany cash flows.

F-91

Supplemental Financial Information

(Unaudited)

Financial Condition

The following table presents the Group’s average balance sheet and net interest revenues for the periods specified. The average balances for 2005 are calculated based upon month-end balances. For 2004 and 2003 average balances are calculated based upon month-end balances for December of the preceding year and for each month of the year except January. The allocations of the assets and liabilities between German and non-German offices are based on the location of the Group’s entity on the books of which it carries the asset or liability. Categories of loans include nonaccrual loans.

Average balance sheet and	2005									2004								2003
net interest revenues		Average			Interest		Average			Average			Interest		Average			Average			Interest		Average
		balance					yield/			balance					yield/			balance					yield/
in€ m. (except percentages)							rate								rate								rate
Assets:
Interest-earning deposits with banks:
In German offices			4,686			141		3.01	%		3,402			89		2.62	%		6,606			164		2.48	%
In non-German offices			16,920			846		5.00	%		18,538			708		3.82	%		14,044			738		5.26	%
Total interest-earning deposits with banks			21,606			987		4.57	%		21,940			797		3.63	%		20,650			902		4.37	%
Central bank funds sold and securities purchased under resale agreements:
In German offices			20,762			462		2.23	%		17,620			372		2.11	%		18,185			456		2.51	%
In non-German offices			142,760			9,422		6.60	%		121,215			4,275		3.53	%		130,185			4,401		3.38	%
Total central bank funds sold and securities purchased under resale agreements			163,522			9,884		6.04	%		138,835			4,647		3.35	%		148,370			4,857		3.27	%
Securities borrowed:
In German offices			399			7		1.68	%		64			2		2.94	%		160			3		1.89	%
In non-German offices			108,018			4,435		4.11	%		91,388			1,666		1.82	%		78,112			1,426		1.83	%
Total securities borrowed			108,417			4,442		4.10	%		91,452			1,668		1.82	%		78,272			1,429		1.83	%
Trading assets:
In German offices			54,512			2,065		3.79	%		49,044			1,900		3.87	%		30,346			1,408		4.64	%
In non-German offices			291,644			14,983		5.14	%		248,091			10,696		4.31	%		237,981			9,878		4.15	%
Total trading assets			346,156			17,048		4.93	%		297,135			12,596		4.24	%		268,327			11,286		4.21	%
Securities available for sale and other investments:
In German offices			13,402			353		2.63	%		14,887			385		2.59	%		16,706			547		3.27	%
In non-German offices			19,148			513		2.68	%		16,633			424		2.55	%		16,494			427		2.59	%
Total securities available for sale and other investments			32,550			866		2.66	%		31,520			809		2.57	%		33,200			974		2.93	%
Loans:
In German offices			82,256			3,897		4.74	%		83,390			3,958		4.75	%		90,540			4,338		4.79	%
In non-German offices			63,893			3,012		4.71	%		61,091			2,938		4.81	%		75,168			3,311		4.41	%
Total loans			146,149			6,909		4.73	%		144,481			6,896		4.77	%		165,708			7,649		4.62	%
Total other interest-earning assets			48,350			1,572		3.25	%		26,194			610		2.33	%		21,519			486		2.26	%
Total interest-earning assets			866,750			41,708		4.81	%		751,557			28,023		3.73	%		736,046			27,583		3.75	%
Cash and due from banks			7,853								9,013								8,853
Noninterest-earning trading assets:
In German offices			31,181								26,709								25,779
In non-German offices			41,653								38,847								43,685
All other assets			54,100								60,557								64,562
Allowance for loan losses			(2,199	)							(2,830	)							(3,742	)
Total assets			999,338								883,853								875,183
% of assets attributable to non-German offices			78	%							76	%							77	%

S-1

Average balance sheet and	2005									2004								2003
net interest revenues		Average			Interest		Average			Average			Interest		Average			Average			Interest		Average
		balance					yield/			balance					yield/			balance					yield/
in€ m. (except percentages)							rate								rate								rate
Liabilities and shareholders’ equity:
Interest-bearing deposits:
In German offices:
Time deposits			34,823			983		2.82	%		33,621			1,058		3.14	%		36,177			912		2.52	%
Savings deposits			23,674			463		1.96	%		22,773			436		1.92	%		24,203			528		2.18	%
Demand deposits			32,917			548		1.67	%		29,062			459		1.58	%		29,393			478		1.63	%
Total in German offices			91,414			1,994		2.18	%		85,456			1,953		2.29	%		89,773			1,918		2.14	%
In non-German offices:
Time deposits			189,605			6,665		3.52	%		159,360			3,523		2.21	%		142,113			2,969		2.09	%
Savings deposits			7,259			138		1.90	%		6,571			104		1.59	%		6,632			77		1.16	%
Demand deposits			72,330			1,465		2.03	%		66,796			1,547		2.32	%		64,969			1,616		2.49	%
Total in non-German offices			269,194			8,268		3.07	%		232,727			5,174		2.22	%		213,714			4,662		2.18	%
Total interest-bearing deposits			360,608			10,262		2.85	%		318,183			7,127		2.24	%		303,487			6,580		2.17	%
Trading liabilities:
In German offices			27,133			1,147		4.23	%		22,011			1,099		4.99	%		18,593			772		4.15	%
In non-German offices			84,646			7,032		8.31	%		82,497			5,767		6.99	%		69,468			4,895		7.05	%
Total trading liabilities			111,779			8,179		7.32	%		104,508			6,866		6.57	%		88,061			5,667		6.44	%
Central bank funds purchased and securities sold under repurchase agreements:
In German offices			17,522			394		2.25	%		12,639			288		2.28	%		14,835			331		2.23	%
In non-German offices			156,014			11,391		7.30	%		122,077			4,339		3.55	%		135,791			4,264		3.14	%
Total central bank funds purchased and securities sold under repurchase agreements			173,536			11,785		6.79	%		134,716			4,627		3.43	%		150,626			4,595		3.05	%
Securities loaned:
In German offices			1,073			2		0.20	%		1,028			8		0.77	%		1,354			1		0.07	%
In non-German offices			18,536			927		5.00	%		16,624			548		3.29	%		14,837			429		2.89	%
Total securities loaned			19,609			929		4.74	%		17,652			556		3.15	%		16,191			430		2.65	%
Other short-term borrowings:
In German offices			1,034			25		2.44	%		958			24		2.45	%		957			16		1.62	%
In non-German offices			24,654			998		4.05	%		20,184			443		2.20	%		20,252			582		2.87	%
Total other short-term borrowings			25,688			1,023		3.98	%		21,142			467		2.21	%		21,209			598		2.82	%
Long-term debt1:
In German offices			48,098			1,647		3.42	%		36,002			1,146		3.18	%		31,736			1,338		4.21	%
In non-German offices			70,003			1,882		2.69	%		62,891			2,052		3.26	%		71,817			2,528		3.52	%
Total long-term debt			118,101			3,529		2.99	%		98,893			3,198		3.23	%		103,553			3,866		3.73	%
Total interest-bearing liabilities			809,321			35,707		4.41	%		695,094			22,841		3.29	%		683,127			21,736		3.18	%
Noninterest-bearing deposits:
In German offices			20,943								21,382								20,953
In non-German offices			7,538								10,937								6,958
Noninterest-bearing trading liabilities:
In German offices			29,348								24,139								25,072
In non-German offices			46,178								40,613								38,928
All other noninterest-bearing liabilities			57,809								64,494								71,205
Shareholders’ equity			28,201								27,194								28,940
Total liabilities and shareholders’ equity			999,338								883,853								875,183
% of liabilities attributable to non-German offices			74	%							75	%							75	%
Rate spread			0.40	%							0.44	%							0.57	%
Net interest margin (net interest revenues to total interest-earning assets):
In German offices			0.99	%							1.43	%							1.59	%
In non-German offices			0.62	%							0.48	%							0.57	%
Total			0.69	%							0.69	%							0.79	%

¹ Includes trust preferred securities.

S-2

The following table sets forth changes in net interest revenues on assets and liabilities between the periods specified. It also indicates, for each category of assets and liabilities, how much of the change in net interest revenues arose from changes in the volume of the category of assets or liabilities and how much arose from changes in the interest rate applicable to the category. Changes due to a combination of volume and rate are allocated proportionally.

	2005 over 2004 due to changes in:									2004 over 2003 due to changes in:
	Net			Volume			Rate			Net			Volume			Rate
in€ m.	change									change
Interest revenues:
Interest-earning deposits with banks:
German offices		52			37			15			(75	)		(84	)		9
Non-German offices		138			(66	)		204			(30	)		202			(232	)
Total interest-earning deposits with banks		190			(29	)		219			(105	)		118			(223	)
Central bank funds sold and securities purchased under resale agreements:
German offices		90			69			21			(84	)		(14	)		(70	)
Non-German offices		5,147			872			4,275			(126	)		(311	)		185
Total central bank funds sold and securities purchased under resale agreements		5,237			941			4,296			(210	)		(325	)		115
Securities borrowed:
German offices		5			6			(1	)		(1	)		(2	)		1
Non-German offices		2,769			351			2,418			240			242			(2	)
Total securities borrowed		2,774			357			2,417			239			240			(1	)
Trading assets:
German offices		165			207			(42	)		492			755			(263	)
Non-German offices		4,287			2,050			2,237			818			428			390
Total trading assets		4,452			2,257			2,195			1,310			1,183			127
Securities available for sale and other investments:
German offices		(32	)		(38	)		6			(162	)		(56	)		(106	)
Non-German offices		89			66			23			(3	)		4			(7	)
Total securities available for sale and other investments		57			28			29			(165	)		(52	)		(113	)
Loans:
German offices		(61	)		(54	)		(7	)		(380	)		(340	)		(40	)
Non-German offices		74			133			(59	)		(373	)		(658	)		285
Total loans		13			79			(66	)		(753	)		(998	)		245
Other		962			374			588			124			303			(179	)
Total interest revenues		13,685			4,007			9,678			440			469			(29	)
Interest expense:
Interest-bearing deposits:
German offices		41			132			(91	)		35			(95	)		130
Non-German offices		3,094			901			2,193			512			421			91
Total interest-bearing deposits		3,135			1,033			2,102			547			326			221
Trading liabilities:
German offices		48			232			(184	)		327			156			171
Non-German offices		1,265			154			1,111			872			911			(39	)
Total trading liabilities		1,313			386			927			1,199			1,067			132
Central bank funds purchased and securities sold under repurchase agreements:
German offices		106			110			(4	)		(43	)		(50	)		7
Non-German offices		7,052			1,471			5,581			75			(455	)		530
Total central bank funds purchased and securities sold under repurchase agreements		7,158			1,581			5,577			32			(505	)		537
Securities loaned:
German offices		(6	)		–			(6	)		7			–			7
Non-German offices		379			69			310			119			55			64
Total securities loaned		373			69			304			126			55			71
Other short-term borrowings:
German offices		1			1			–			8			–			8
Non-German offices		555			115			440			(139	)		10			(149	)
Total other short-term borrowings		556			116			440			(131	)		10			(141	)
Long-term debt1:
German offices		501			409			92			(192	)		164			(356	)
Non-German offices		(170	)		216			(386	)		(476	)		(300	)		(176	)
Total long-term debt		331			625			(294	)		(668	)		(136	)		(532	)
Total interest expense		12,866			3,810			9,056			1,105			817			288
Net change in net interest revenues		819			197			622			(665	)		(348	)		(317	)

¹ Includes trust preferred securities.

S-3

Loans Outstanding

The following three tables provide more detailed information on the loan portion of the Group’s credit exposures. The following table shows the Group’s loan portfolio according to the industry sector and location (within or outside Germany) of the borrower.

	Dec 31,			Dec 31,		Dec 31,		Dec 31,		Dec 31,
in€ m.	2005			2004		2003		2002		2001
German:
Banks and insurance		1,769			2,047		3,861		1,600		7,444
Manufacturing		6,620			7,364		8,668		9,388		12,612
Households (excluding mortgages)		16,157			14,761		14,161		13,768		13,509
Households – mortgages		27,039			26,175		25,445		25,226		35,283
Public sector		1,462			1,474		1,388		1,750		20,752
Wholesale and retail trade		3,394			3,742		5,133		4,549		6,559
Commercial real estate activities		10,625			11,100		11,629		15,841		28,311
Lease financing		1,001			820		855		416		436
Other		11,508			11,586		12,736		15,898		22,878
Total German		79,575			79,069		83,876		88,436		147,784
Non-German:
Banks and insurance		5,907			5,740		6,660		9,120		12,465
Manufacturing		9,083			5,906		7,487		13,157		19,490
Households (excluding mortgages)		10,245			7,023		6,915		6,937		7,873
Households – mortgages		9,016			9,117		8,416		7,276		6,503
Public sector		1,167			1,804		921		2,834		2,906
Wholesale and retail trade		8,683			6,546		6,691		9,918		9,200
Commercial real estate activities		2,634			3,004		1,977		2,519		7,306
Lease financing		1,810			1,726		3,138		3,905		3,263
Other		25,143			18,830		22,327		27,768		49,297
Total non-German		73,688			59,696		64,532		83,434		118,303
Gross loans		153,263			138,765		148,408		171,870		266,087
(Deferred expenses)/unearned income		(20	)		76		181		250		664
Total		153,283			138,689		148,227		171,620		265,423

S-4

Loan Maturities and Sensitivity to Changes in Interest Rates

The following table provides an analysis of the maturities of the loans in the Group’s loan portfolio (excluding lease financings) as of December 31, 2005.

Dec 31, 2005	Within one year		After one but			After five years			Total
in€ m.			within five years
German:
Banks and insurance		589		186			994			1,769
Manufacturing		3,998		1,920			702			6,620
Households (excluding mortgages)		3,514		4,722			7,921			16,157
Households – mortgages		1,955		5,540			19,544			27,039
Public sector		962		138			362			1,462
Wholesale and retail trade		2,663		438			293			3,394
Commercial real estate activities		2,370		2,890			5,365			10,625
Other		4,532		3,343			3,633			11,508
Total German		20,583		19,177			38,814			78,574
Non-German:
Banks and insurance		4,797		1,015			95			5,907
Manufacturing		4,059		4,473			551			9,083
Households (excluding mortgages)		5,808		3,288			1,149			10,245
Households – mortgages		277		659			8,080			9,016
Public sector		938		116			113			1,167
Wholesale and retail trade		6,199		2,087			397			8,683
Commercial real estate activities		1,161		859			614			2,634
Other		13,560		8,010			3,573			25,143
Total non-German		36,799		20,507			14,572			71,878
Gross loans		57,382		39,684			53,386			150,452
(Deferred expenses)/unearned income		186		(86	)		(120	)		(20	)
Total		57,196		39,770			53,506			150,472

The following table shows a breakdown of the volumes of the loans in the Group’s loan portfolio (excluding lease financings) on December 31, 2005, that had residual maturities of more than one year from that date that had fixed interest rates and that had floating or adjustable interest rates.

Dec 31, 2005	After one but		After five years		Total
in€ m.	within five years
Fixed rate loans		27,643		40,076		67,719
Floating or adjustable rate loans		12,127		13,430		25,557
Total		39,770		53,506		93,276

S-5

Problem Loans

The following table illustrates total problem loans based on the domicile of the Group’s counterparty (within or outside Germany) for the last five years.

	Dec 31,		Dec 31,		Dec 31,		Dec 31,		Dec 31,
in€ m.	2005		2004		2003		2002		2001
Nonaccrual loans:
German		2,771		3,146		3,448		4,587		6,538
Non-German		779		1,353		2,594		5,511		4,990
Total nonaccrual loans		3,550		4,499		6,042		10,098		11,528
Loans 90 days or more past due and still accruing:
German		198		236		335		439		658
Non-German		4		11		45		70		189
Total loans 90 days or more past due and still accruing		202		247		380		509		847
Troubled debt restructurings:
German		48		71		20		38		57
Non-German		71		18		181		154		222
Total troubled debt restructurings		119		89		201		192		279

The following table shows the approximate effect on interest revenue of nonaccrual loans and troubled debt restructurings. It shows the gross interest income that would have been recorded in 2005 if those loans had been current in accordance with their original terms and had been outstanding throughout 2005 or since their origination, if we only held them for part of 2005. It also shows the amount of interest income on those loans that was included in net income for 2005. The reduction of interest revenue we experienced from the nonperforming other interest bearing assets was immaterial to the Group.

in€ m.	2005
German loans:
Gross amount of interest that would have been recorded at original rate		130
Less interest, net of reversals, recognized in interest revenue		47
Reduction of interest revenue		83
Non-German loans:
Gross amount of interest that would have been recorded at original rate		71
Less interest, net of reversals, recognized in interest revenue		36
Reduction of interest revenue		35
Total reduction of interest revenue		117

S-6

Allowance for Loan Losses

The following table sets forth a breakdown of the movements in the Group’s allowance for loan losses for the periods specified.

in€ m. (except percentages)	2005			2004			2003			2002			2001
Allowance at beginning of year		2,345			3,281			4,317			5,585			6,745
Charge-offs:
German:
Banks and insurance		1			3			3			8			7
Manufacturing		61			80			57			196			280
Households (excluding mortgages)		216			185			169			400			214
Households – mortgages		36			39			30			45			27
Public sector		–			–			–			–			–
Wholesale and retail trade		54			78			41			140			192
Commercial real estate activities		112			106			59			127			209
Lease financing		3			–			–			–			1
Other		162			231			217			567			426
German total		645			722			576			1,483			1,356
Non-German:
Excluding lease financing		373			672			1,318			1,244			697
Lease financing only		–			–			–			1			2
Non-German total		373			672			1,318			1,245			699
Total charge-offs		1,018			1,394			1,894			2,728			2,055
Recoveries:
German:
Banks and insurance		1			1			–			–			–
Manufacturing		11			12			7			4			4
Households (excluding mortgages)		41			37			48			24			15
Households – mortgages		–			–			–			2			2
Public sector		–			–			–			–			–
Wholesale and retail trade		10			12			6			3			1
Commercial real estate activities		4			3			2			3			–
Lease financing		–			–			–			–			–
Other		42			37			36			42			11
German total		109			102			99			78			33
Non-German:
Excluding lease financing		61			50			67			34			34
Lease financing only		–			–			1			–			–
Non-German total		61			50			68			34			34
Total recoveries		170			152			167			112			67
Net charge-offs		848			1,242			1,727			2,616			1,988
Provision for loan losses		374			372			1,113			2,091			1,024
Other changes (currency translation and allowance related to acquisitions/divestitures)		57			(66	)		(422	)		(743	)		(196	)
Allowance at end of year		1,928			2,345			3,281			4,317			5,585
Percentage of total net charge-offs to average loans for the year		0.58	%		0.86	%		1.04	%		1.15	%		0.71	%

S-7

Our provision for loan losses in 2003 was€ 1.1 billion, a decrease of 47% from the prior year, reflecting the overall improved credit quality of our corporate loan book as evidenced by the increase in the portion of our loans carrying an investment-grade rating. This amount was composed of both net specific and inherent loan loss provisions. The provision for the year was primarily due to specific loan loss provisions required against a wide range of industry sectors, the two largest being Utilities and Manufacturing and Engineering.

Our provision for loan losses in 2002 was€ 2.1 billion, an increase of 104% from the prior year. This amount is composed of both net new specific and inherent loan loss provisions. The provision for the year was primarily due to provisions raised to address the downturn in the telecommunication industry and specific loan loss provisions reflecting the deterioration in various industry sectors represented within our German portfolio and the Americas.

Our total provision for loan losses in 2001 was€ 1.0 billion, an increase of 114% from the prior year. This amount was comprised to both new specific and inherent loan loss provisions, reflecting the downturn in the global economy.

For a discussion of the provision for loan losses for the years 2005 and 2004, see “Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk – Credit Loss Exposure and Allowance for Loan Losses”.

The following table sets forth the components of our allowance for loan losses by industry of the borrower, and the percentage of our total loan portfolio accounted for by those industry classifications, on the dates specified. The breakdown between German and non-German borrowers is based on the location of the borrowers.

in€ m. (except percentages)	Dec 31, 2005				Dec 31, 2004				Dec 31, 2003				Dec 31, 2002				Dec 31, 2001
German:
Specific loan loss allowance:
Banks and insurance		–	1	%		–	1	%		38	3	%		37	1	%		7	3	%
Manufacturing		288	4	%		271	5	%		338	6	%		317	5	%		427	5	%
Households (excluding mortgages)		46	11	%		55	11	%		68	10	%		121	8	%		102	5	%
Households – mortgages		14	18	%		17	19	%		17	17	%		5	15	%		73	13	%
Public sector		–	1	%		–	1	%		–	1	%		–	1	%		–	8	%
Wholesale and retail trade		137	2	%		161	3	%		154	3	%		130	3	%		187	2	%
Commercial real estate activities		261	7	%		345	8	%		350	8	%		287	9	%		643	11	%
Other		229	8	%		278	9	%		378	9	%		479	9	%		606	9	%
Specific German total		975				1,127				1,343				1,376				2,045
Inherent loss allowance		461				417				472				495				1,098
German total		1,436	52	%		1,544	57	%		1,815	57	%		1,871	51	%		3,143	56	%
Non-German:
Specific loan loss allowance		255				527				1,128				1,768				1,675
Inherent loss allowance		237				273				338				678				767
Non-German total		492	48	%		800	43	%		1,466	43	%		2,446	49	%		2,442	44	%
Total allowance for loan losses		1,928	100	%		2,345	100	%		3,281	100	%		4,317	100	%		5,585	100	%
Total specific allowance		1,230				1,654				2,471				3,144				3,720
Total inherent loss allowance		698				691				810				1,173				1,865
Total allowance for loan losses		1,928				2,345				3,281				4,317				5,585

S-8

The following table presents an analysis of the changes in the international component of the allowance for loan losses. As of December 31, 2005, 26% of the Group’s total allowance was attributable to international clients.

in€ m.	2005			2004			2003			2002			2001
Allowance at beginning of year		800			1,466			2,446			2,441			2,475
Charge-offs		373			672			1,318			1,245			699
Recoveries		61			50			68			34			34
Net charge-offs		312			622			1,250			1,211			665
Provision for loan losses		(53	)		25			590			1,500			710
Other changes (currency translation and allowance related to acquisitions/divestitures)		57			(69	)		(320	)		(284	)		(79	)
Allowance at end of year		492			800			1,466			2,446			2,441

S-9

Foreign Outstandings

The following tables list only those countries for which the cross-border outstandings exceeded 0.75% of the Group’s total assets at December 31, 2005, 2004 and 2003. At December 31, 2005, there were no outstandings that exceeded 0.75% of total assets in any country currently facing debt restructurings or liquidity problems that the Group expects would materially impact the country’s ability to service its obligations.

Dec 31, 2005	Banks and		Governments		Other1		Commit-		Net local		Total		Percent
	other		and official				ments		country
	financial		institutions						claim
in€ m.	institutions
United States		11,633		11,235		137,498		13,828		129,747		303,941		30.63	%
Italy		5,703		15,530		21,353		1,027		3,374		46,987		4.74	%
France		2,836		8,611		21,105		4,469		–		37,021		3.73	%
Japan		1,888		10,467		10,776		85		1,726		24,942		2.51	%
Netherlands		3,479		4,261		11,652		4,307		–		23,699		2.39	%
Spain		2,571		4,251		9,520		1,108		2,130		19,580		1.97	%
Great Britain		2,936		3,185		8,608		1,701		–		16,430		1.66	%
Luxembourg		4,938		2,514		6,382		2,333		–		16,167		1.63	%
Cayman Islands		253		207		9,755		481		–		10,696		1.08	%
Ireland		1,194		1,158		4,690		1,180		2		8,224		0.83	%
Belgium		1,923		1,398		4,243		424		–		7,988		0.81	%
Switzerland		776		402		5,234		1,434		–		7,846		0.79	%
Canada		240		2,050		4,392		945		–		7,627		0.77	%

¹ Other includes commercial and industrial, insurance and other loans.

Dec 31, 2004	Banks and		Governments		Other1		Commit-		Net local		Total		Percent
	other		and official				ments		country
	financial		institutions						claim
in€ m.	institutions
United States		7,445		6,697		122,679		8,052		59,213		204,086		24.30	%
France		2,195		8,249		19,779		3,701		42		33,966		4.04	%
Italy		4,103		11,780		12,989		688		1,324		30,884		3.68	%
Japan		1,452		7,673		8,034		126		12,486		29,771		3.54	%
Netherlands		3,067		2,833		8,836		4,228		–		18,964		2.26	%
Great Britain		2,148		2,313		6,100		1,277		–		11,838		1.41	%
Spain		3,168		3,341		4,806		257		–		11,572		1.38	%
Cayman Islands		339		70		10,269		354		–		11,032		1.31	%
Luxembourg		3,336		326		4,783		782		–		9,227		1.10	%
Switzerland		1,453		279		4,223		1,212		–		7,167		0.85	%

¹ Other includes commercial and industrial, insurance and other loans.

Dec 31, 2003	Banks and		Governments		Other1		Commit-		Net local		Total		Percent
	other		and official				ments		country
	financial		institutions						claim
in€ m.	institutions
United States		9,467		5,532		92,654		3,117		13,140		123,910		15.42	%
Japan		1,374		11,928		28,401		186		21,176		63,065		7.85	%
Italy		2,835		9,369		13,171		1,351		–		26,726		3.33	%
Netherlands		2,620		4,136		10,454		5,688		1		22,899		2.85	%
France		2,521		4,557		13,197		1,875		90		22,240		2.77	%
Great Britain		3,508		2,195		5,480		6,329		874		18,386		2.29	%
Spain		1,823		2,059		7,124		151		3,099		14,256		1.77	%
Switzerland		958		1,247		5,323		2,749		–		10,277		1.28	%
Cayman Islands		197		70		8,126		783		–		9,176		1.14	%
Canada		466		1,052		4,490		736		65		6,809		0.85	%
Luxembourg		1,004		133		5,226		199		–		6,562		0.82	%

¹ Other includes commercial and industrial, insurance and other loans.

S-10

Deposits

The following table provides an analysis of the maturities of deposits in the amount of U.S. $100,000 or more in domestic offices as of December 31, 2005.

Dec 31, 2005	Within three		After three		After six months		After one year		Total
	months		months but		but within
in€ m.			within six months		one year
Offices in Germany:
Certificates of deposits		–		–		169		97		266
Other time deposits		27,333		859		530		4,724		33,446
Total		27,333		859		699		4,821		33,712

The amount of time certificates of deposits and other time deposits in the amount of U.S. $100,000 or more issued by foreign offices was€ 172.5 billion at December 31, 2005.

Total deposits by foreign depositors in German offices amounted to€ 27.2 billion,€ 21.8 billion and€ 17.5 billion at December 31, 2005, 2004 and 2003, respectively.

Short-term Borrowings

Short-term borrowings are borrowings with an original maturity of one year or less. The following table sets forth certain information relating to the categories of the Group’s short-term borrowings. The Group calculated the average balances for 2005 based upon month-end balances and for 2004 and 2003 based upon month-end balances for December of the preceding year and for each month of the year except January.

in€ m. (except percentages)	Dec 31, 2005			Dec 31, 2004			Dec 31, 2003
Central bank funds purchased and securities sold under repurchase agreements:
Year-end balance		143,524			105,292			102,433
Average balance		173,536			134,716			150,626
Maximum balance at any month-end		215,219			165,305			191,744
Weighted-average interest rate during the year		6.79	%		3.43	%		3.05	%
Weighted-average interest rate on year-end balance		3.17	%		2.86	%		2.37	%
Securities loaned:
Year-end balance		24,581			12,881			14,817
Average balance		19,609			17,652			16,191
Maximum balance at any month-end		25,684			23,131			31,347
Weighted-average interest rate during the year		4.74	%		3.15	%		2.65	%
Weighted-average interest rate on year-end balance		4.31	%		3.17	%		1.28	%
Commercial Paper:
Year-end balance		13,398			9,980			13,150
Average balance		12,984			9,503			10,901
Maximum balance at any month-end		15,558			16,838			18,207
Weighted-average interest rate during the year		3.34	%		2.09	%		2.35	%
Weighted-average interest rate on year-end balance		3.47	%		1.92	%		2.80	%
Other:
Year-end balance		7,151			10,138			9,140
Average balance		12,704			11,639			10,308
Maximum balance at any month-end		15,489			18,606			13,752
Weighted-average interest rate during the year		4.64	%		2.31	%		3.31	%
Weighted-average interest rate on year-end balance		3.41	%		3.06	%		1.58	%

S-11

Reconciliation of income before income taxes to underlying pre-tax profit

in€ m.	2005			2004
Reported income before income taxes		6,112			4,029
Add (deduct):
Net (gains) on securities available for sale/industrial holdings including hedging		(801	)		(176	)
Significant equity pick-ups/net (gains)/losses from Investments		(156	)		(148	)
Net (gains)/losses from businesses sold/held for sale		(90	)		(76	)
Net (gains)/losses on the sale of premises		(57	)		(20	)
Restructuring activities		767			400
Goodwill impairment/impairment of intangibles		–			19
Provision for real estate fund investor compensation		203			–
Underlying pre tax profit		5,978			4,028

Reconciliation of income before income taxes to pre-tax income according to target definition

in€ m.	2005
Reported income before income taxes		6,112
Add (deduct):
Restructuring activities (Business Realignment Program-related)		767
Substantial gains from industrial holdings		(666	)
Income before income taxes (target definition)		6,212

Reconciliation of average total shareholders equity to average active equity

in€ m.	2005			2004
Average total shareholders’ equity		28,201			27,194
Add (deduct):
Average unrealized net gains on securities available for sale, net of tax and average deferred taxes relating to 1999 and 2000 tax rate		(2,023	)		(1,601	)
Average dividends		(1,048	)		(815	)
Average active equity		25,130			24,778

Related ratios

	2005			2004
Pre-tax return on average shareholders’ equity		21.7	%		14.8	%
Underlying pre-tax return on average active equity		23.8	%		16.3	%
Pre-tax return on average active equity (target definition)		24.7	%		–

S-12