entire - Deutsche Bank Annual Report 2012

Deutsche Bank 01 – Management Report 34
Financial Report 2010 Operating and Financial Review
Commercial Real Estate Business: Our Commercial Real Estate business takes positions in commercial
mortgage whole loans which are originated and either held with the intent to sell, syndicate, securitize or otherwise
distribute to third party investors, or held on an amortized cost basis. The following is a summary of our
exposure to commercial mortgage whole loans as of December 31, 2010 and December 31, 2009. This excludes
our portfolio of secondary market commercial mortgage-backed securities which are actively traded and priced.
Commercial Real Estate whole loans
in € m. Dec 31, 2010 Dec 31, 2009
Loans held on a fair value basis, net of risk reduction 1 2,265 1,806
Loans reclassified in accordance with the amendments to IAS 39 2 4,941 6,453
Loans related to asset sales 3 2,186 2,083
Other loans classified as loans and receivables 4 15,814 –
1 Risk reduction trades represent a series of derivative or other transactions entered into in order to mitigate risk on specific whole loans. Fair value of risk reduction
amounted to € 689 million as of December 31, 2010 and € 1.0 billion as of December 31, 2009.
2 Carrying value.
3 Carrying value of vendor financing on loans sold since January 1, 2008.
4 Carrying value of loans acquired from Postbank.
Leveraged Finance Business: The following is a summary of our exposures to leveraged loan and other financing
commitments arising from the activities of our Leveraged Finance business as of December 31, 2010 and
December 31, 2009. These activities include private equity transactions and other buyout arrangements. The
table excludes loans transacted prior to January 1, 2007, which were undertaken prior to the disruption in the
leveraged finance markets, and loans that have been classified as held to maturity since inception.
Leveraged Finance
in € m. Dec 31, 2010 Dec 31, 2009
Loans held on a fair value basis 2,263 505
thereof: loans entered into since January 1, 2008 2,230 385
Loans reclassified in accordance with the amendments to IAS 39 1 1,367 6,152
Loans related to asset sales 2 5,863 5,804
1 Carrying value. The significant decrease in carrying value since December 2009 is mainly due to the restructuring of loans with Actavis Group hF, as described in
Note 17 “Equity Method Investments”.
2 Carrying value of vendor financing on loans sold since January 1, 2008.
Special Purpose Entities
We engage in various business activities with certain entities, referred to as special purpose entities (SPEs),
which are designed to achieve a specific business purpose. The principal uses of SPEs are to provide clients
with access to specific portfolios of assets and risk and to provide market liquidity for clients through securitizing
financial assets. SPEs may be established as corporations, trusts or partnerships.
We may or may not consolidate SPEs that we have set up or sponsored or with which we have a contractual
relationship. We will consolidate an SPE when we have the power to govern its financial and operating policies,
generally accompanying a shareholding, either directly or indirectly, of more than half the voting rights. If the
activities of the SPEs are narrowly defined or it is not evident who controls the financial and operating policies
of the SPE we will consider other factors to determine whether we have the majority of the risks and rewards.
We reassess our treatment of SPEs for consolidation when there is a change in the SPE’s arrangements or the
substance of the relationship between us and an SPE changes. For further detail on our accounting policies
regarding consolidation and reassessment of consolidation of SPEs please refer to Note 01 “Significant
Accounting Policies” in our consolidated financial statements.