SEC Form 20-F - Deutsche Bank Annual Report 2012

Deutsche Bank
Annual Report 2010 on Form 20-F
Item 8: Financial Information 121
have to pay under its suggested structure. In respect of the credit default element of the Swap, the City claims
future reimbursement of any amount it would have to pay under Swap on the occurrence of any credit event or
on the occurrence of an early redemption of the credit default element. In the event that the Court does not
grant the above damages, the City claims € 88.8 million in respect of alleged “hidden” fees embedded into the
Swap and not less than € 150 million as general compensation for damages arising from the Swap. The claims
are made jointly and severally against each of the Banks. A first hearing is scheduled for March 9, 2011.
In March 2010, at the Milan Prosecutor’s request, the Milan criminal court approved the criminal indictment of
each of the Banks and certain of their employees (including two current employees of Deutsche Bank). The
indictments are for alleged criminal offences relating to the Transaction, in particular fraud against a public
authority. The Milan Prosecutor some time ago seized certain assets of the Banks in anticipation of such a trial,
including € 25.1 million in cash from Deutsche Bank. The Milan Prosecutor considers this sum to be equivalent
to Deutsche Bank’s proceeds from the alleged fraud, and it is subject to confiscation (and could be increased
or reduced) should the judge so decide following the trial. The trial is now underway. It is not possible at this
stage to estimate when a verdict will be reached.
KOSPI Index Unwind. Following the decline of the Korea Composite Stock Price Index 200 (“KOSPI 200”) in
the closing auction on November 11, 2010 by approximately 2.7 %, the Korean Financial Supervisory Service
(“FSS”) commenced an investigation and expressed concerns that the fall in the KOSPI 200 was attributable to
a sale by Deutsche Bank AG (“Deutsche Bank”) of a basket of stocks, worth approximately € 1.6 billion, that
was held as part of an index arbitrage position on the KOSPI 200. On February 23, 2011, the Korean Financial
Services Commission, which oversees the work of the FSS, reviewed the FSS’ findings and recommendations
and resolved to take the following action: (i) to file a criminal complaint to the Korean Prosecutor’s Office for
alleged market manipulation against five employees of the Deutsche Bank Group and Deutsche Bank’s
subsidiary Deutsche Securities Korea Co. (“DSK”) for vicarious liability; and (ii) to impose a suspension of six
months, commencing April 1, 2011, of DSK’s business for proprietary trading of cash equities and listed
derivatives and DMA (direct market access) cash equities trading, and the requirement that DSK suspends the
employment of one named employee for six months. There is an exemption to the business suspension to
permit DSK to continue acting as liquidity provider for existing derivatives linked securities. The Korean
Prosecutor’s Office will now undertake its own investigation to determine whether to indict DSK and/or the
relevant employees.
Dividend Policy
We generally pay dividends each year. However, we may not pay dividends in the future at rates we have paid
them in previous years. In particular, the dividend proposed for 2010 is € 0.75, compared to dividends paid of
€ 0.75 for 2009 and € 0.50 for 2008. If we are not profitable, we may not pay dividends at all. If we fail to meet
the capital adequacy requirements or the liquidity requirements under the Banking Act, the BaFin may suspend
or limit the payment of dividends. See “Item 4: Information on the Company – Regulation and Supervision –
Regulation and Supervision in Germany”.
Under German law, our dividends are based on the unconsolidated 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