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REPORT OF THE SUPERVISORY BOARD

In 2016, the Supervisory Board, and Presidential Committee appointed by it, advised and supervised the members of the Board of Management in accordance with legal requirements and the provisions of the Articles of Association. Decisions on the transactions presented for their approval were also made.

COOPERATION WITH BOARD OF MANAGEMENT

The Board of Management reported regularly, promptly and extensively in verbal and written form to the Supervisory Board regarding the position and performance of the Company and the Group regarding day-to-day business. Furthermore, the Board of Management informed the Supervisory Board on a regular basis concerning the business policy including the strategic and organisational direction of DZ PRIVATBANK. The commercial position of the Company, the corporate planning and strategy, as well as key financial data and risk management, including all supervisory tests required in regulations, were highlighted in the reporting.

A major focus of the work of the Supervisory Board was to help the Bank implement its subsidiary growth strategy as a centre of expertise and provider of solutions to the cooperative banking group in private banking, fund services business and loans in all currencies. The many years of enhanced cooperation with the partner cooperative banks in Germany, supported by the extensive presence of the ten German sites also forms a solid basis for joint market share expansion. The Supervisory Board welcomes and supports the adjustment of personnel structures in the business segments as well as the development of sustainable solutions in order to meet the increasing demands of end customers, business partners and cooperative banks in a financial environment which is undergoing considerable change. By focusing even more closely on our customers, the personal and conscientious support offered to the various stakeholders is set to become more efficient and dynamic in the future.

The Supervisory Board had intensive discussions with the Board of Management regarding the ongoing challenges in the market and interest rate environment, and their effects on the performance and profitability of the Bank. The European Central Bank's extremely relaxed monetary policy and geopolitical trouble spots continued to influence capital markets and investor behaviour during 2016. Uncertainty amongst customers remained high and was reflected in above-average liquidity levels and reduced inclination to invest in more promising forms of investment. Pressure on margins and costs continued to be considerable due to intensive competition in the German core market and also to regulatory requirements.

The Supervisory Board attached major importance to the measures to optimise group structure and increase productivity. Decisions regarding resizing of the foreign sites were the core issue in 2016. The wholly-owned subsidiary company, Europäische Genossenschaftsbank S.A., Luxembourg, was merged with DZ PRIVATBANK S.A., and the banking activities of DZ PRIVATBANK Singapore Ltd., Singapore were terminated as at the end of 2016. In future, DZ PRIVATBANK will enable cooperative banking group clients who wish to access the Singapore financial market to do so through a cooperation agreement with a local private banking operator. In 2016, discussions in Zurich on closer cooperation with a Swiss private bank ended without any concrete results. The focus of DZ PRIVATBANK (Schweiz) AG in 2017 will therefore be on continuing the independent restructuring and improving profitability. This will entail reducing complexity, modulating the offer of services and increasing the degree of standardisation. The offer of Swiss private banking solutions along with the corresponding local advisory expertise will in future remain an important component of the spectrum of services offered by DZ PRIVATBANK to high net worth private and corporate customers.

DRAWING UP OF THE ANNUAL FINANCIAL STATEMENTS

The Presidential Committee and the Supervisory Board held detailed discussions on the annual financial statements and the operations report for the 2016 financial year. The audit report of Ernst & Young S.A. was also available.The representatives of the auditor were present at the Presidential Committee meeting at which the annual financial statements were discussed. They reported in detail to the Presidential Committee on the results of the audit and were available to give additional explanations and opinions. The auditor issued an unqualified audit report.

The Supervisory Board did not raise any objections to the annual financial statements drawn up by the Board of Management for the 2016 financial year and endorsed the auditor's report.

Operating profits remained around the previous year's level. Profits were, however, negatively affected by one-off factors. These included, in particular, provisions for increased liability risks in the depositary function, a significant collective general valuation adjustment for future as yet unquantifiable risks, and a provision for the Luxembourg guarantee systems. It is proposed that an unchanged dividend of EUR 0.5 per share compared with the previous year be distributed to shareholders.

The Supervisory Board expressed its thanks to the Board of Management and all the employees of DZ PRIVATBANK S.‚ÄČA. for their work in 2016.

Luxembourg, 17 February 2017

DZ PRIVATBANK S.A.
Lars Hille
Chairman of the Supervisory Board