DL GB 1996 Ar 987703647 Lo

Consolidated Consolidated
statement of income balance sheet
1996 1995 1994 Dec. 31, 1996 Dec. 31, 1995

Note millions of DM millions of DM millions of DM Assets Note millions of DM millions of DM
Net revenue (1) 63,075 66,135 63,814 Noncurrent assets

Intangible assets (14) 1,429 796
Increase in inve n to ries and other own capitalized costs (2) 3,454 3,320 3,704 Pro p e rt y, plant and equipment (15) 134,588 133,755
Financial assets (16) 8,282 4,664
Total operating performance 66,529 69,455 67,518
144,299 139,215
Other operating income (3) 3,905 2,138 1,921
Current assets
Goods and services purchased (4) (10,224) (9,506) (9,285) Inve n to ries, materials and supplies (17) 2,098 2,305
Receivables (18) 7,465 6,852
Personnel costs (5) (18,777) (18,502) (18,157) Other assets (19) 1,018 853
Marketable securities (20) 4 –
Depreciation and amortization (6) (17,653) (15,377) (14,589) Liquid assets (21) 17,852 10,008
Other operating expenses (7) (9,455) (9,685) (8,268) 28,437 20,018
Financial income (expense) net (8) (7,714) (8,211) (7,927) Prepaid expenses, deferred charges and deferred taxation (22) 1,589 1,014
Results from ordinary business activities 6,611 10,312 11,213 174,325 160,247
Extraordinary income (losses) (9) (2,475) (1,264) (357)

Shareholders’ equity and liabilities
Special charge relating to other Post entities (10) – – (2,320)
Shareholders’ equity (23)
Taxes, Levy to the Federal Republic of Germany (11) (2,215) (3,778) (4,945) Capital stock (24) 13,719 10,000
Additional paid-in capital (25) 27,869 11,292
Income after ta xe s 1,921 5,270 3,591 Retained earnings (deficit) (26) 2,171 2,144
Unappropriated net income 1,647 1,291
(Income) losses applicable to minority shareholders (12) (163) 2 4 Minority inte re st (27) 1,193 5
Net income (13) 1,758 5,272 3,595 46,599 24,732
Unappropriated net income carried forward from previous year 91 – Accruals

Pensions and similar obligations (28) 6,293 6,029
Transfer to retained earnings (202) (3,981) Other accruals (29) 8,637 6,964
Unappropriated net income (unappropriated net income 14,930 12,993

of Deutsche Telekom AG) 1,647 1,291
Liabilities (30)
Earnings per share in DM (1994 pro forma earnings per share) 0.83 2.60 1.77 Debt 99,888 110,387
O th e r 12,115 11,646
112,003 122,033
D e fe rred income 793 489
174,325 160,247
54 Consolidated financial statements 55 Consolidated financial statements

Consolidated
noncurrent assets
Acquisition or construction cost Depreciation, amortization and write-downs Net carrying amount
Jan. 1, Translation Changes in the Additions Disposals Reclassi- Dec. 31, Jan. 1, Translation Changes in the Additions Disposals Reclassi- Write-ups Dec. 31, Dec. 31, 1996 Dec. 31, 1995
1996 adjustment composition of fications 1996 1996 adjustment composition of fications 1996
the Deutsche the Deutsche
millions of DM Telekom group Telekom group
Intangible assets
Concessions, industrial and similar rights

and assets, and licenses in such rights
and assets 1,228 (1) 111 357 50 178 1,823 480 0 24 456 29 8 0 939 884 748
Goodwill
from individual company financial statements 1 (0) (0) 0 0 0 1 0 0 0 0 0 0 0 0 1 1
arising from consolidation 90 (52) 557 5 0 6 606 49 (7) 47 60 0 1 0 150 456 41
Advance payments 6 0 0 91 0 (9) 88 0 0 0 0 0 0 0 0 88 6
1,325 (53) 668 453 50 175 2,518 529 (7) 71 516 29 9 0 1,089 1,429 796
Property, plant and equipment
Land and equivalent rights, and buildings

including buildings on land owned
by third parties 38,012 (3) 437 916 111 315 39,566 1,298 (1) 35 1,317 12 (11) 0 2,626 36,940 36,714
Technical equipment and machinery 101,936 (27) 2,437 9,026 1,671 3,336 115,037 12,984 (9) 484 14,556 718 10 0 27,307 87,730 88,952
Other equipment, plant and office
equipment 4,402 (2) 133 1,200 340 386 5,779 1,081 (1) 50 1,264 235 (7) 0 2,152 3,627 3,321
Advance payments and construction in progress 4,768 (1) 344 5,440 54 (4,206) 6,291 0 0 0 0 0 0 0 0 6,291 4,768
149,118 (33) 3,351 16,582 2,176 (169) 166,673 15,363 (11) 569 17,137 965 (8) 0 32,085 134,588 133,755
Financial assets
Investments in unconsolidated subsidiaries 0 0 0 0 0 12 12 0 0 0 12 0 0 0 12 0 0

Loans to unconsolidated subsidiaries 1 0 0 0 0 (1) 0 0 0 0 0 0 0 0 0 0 1
Investments in associated companies 2,112 79 (1,015) 2,173 414 46 2,981 92 10 0 224 0 (1) 0 325 2,656 2,020
Other investments in related companies 802 0 0 2,907 80 (12) 3,617 3 0 0 0 3 0 0 0 3,617 799
Long-term loans to associated and related
companies 117 0 0 129 36 (61) 149 3 0 0 0 2 0 0 1 148 114
Other investments in noncurrent securities 12 0 1 327 3 0 337 0 0 0 0 0 0 0 0 337 12
Other long-term loans 1,718 0 4 34 241 10 1,525 0 0 2 0 0 0 (1) 1 1,524 1,718
4,762 79 (1,010) 5,570 774 (6) 8,621 98 10 2 236 5 (1) (1) 339 8,282 4,664
155,205 (7) 3,009 22,605 3,000 0 177,812 15,990 (8) 642 17,889 999 0 (1) 33,513 144,299 139,215

Consolidated Consolidated statement
statement of cash flows of shareholders’ equity
Note 1996 1995 1994 Shares Capital Additional Retained earnings Unappro- Minority Total
millions of DM millions of DM millions of DM issued and stock paid-in Difference Treasury O th e r Total p ri a ted net i n te re st
outstanding nominal capital f ro m stock retained income
Net income 1,758 5,272 3,595 value currency earnings
Income (losses) applicable to minority shareholders 163 (2) (4) millions of DM (in thousands) translation (deficit)
Income after ta xe s 1,921 5,270 3,591
Balance at Jan. 1, 19951 ) 2,000,000 10,000 10,976 (134) (1,512) (1,646) 2 19,332
Depreciation and amortization 17,653 15,377 14,589
Income tax expense 1,385 614 64 Retained levy 316 316
Net inte re st expense 7,270 8,197 7,848 Net income 3,981 3,981 1,291 (2) 5,270
Net losses from the disposition of noncurrent assets 1,026 1,337 940 Difference from currency
Accruals for personnel re st ru c t u ring measures 1,388 785 349 translation (191) (191) (191)
Changes in pension accruals 264 185 162 Capital contributions 5 5
Special charge relating to other Post entities – – 2,320
Other noncash income and expense 134 207 439 Balance at Dec. 31, 1995 2,000,000 10,000 11,292 (325) 2,469 2,144 1,291 5 24,732
Increase/decrease in trade accounts receivable (298) (815) 404
Increase/decrease in inve n to ri e s 283 234 126 Changes in the
Increase/decrease in trade accounts payable (164) (351) (826) composition of the
Increase/decrease in other current assets and liabilities 1,544 627 1,142 Deutsche Telekom group 1,144 1,144
Income taxes paid (2,166) (32) (58) Dividends for 1995 (1,200) (10) (1,210)
Dividends received 152 8 – Share issued from
Cash generated from operations 30,392 31,643 31,090 retained earnings 30,000 150 (150) (150) –
Proceeds from
I n te re st paid (8,773) (8,804) (7,509) share offe ri n g 713,700 3,569 16,577 20,146
I n te re st received 640 848 533 Transfer to reserve for
Net cash provided by operating activities (31) 22,259 23,687 24,114 treasury stock 2 (2) – –
Net income 202 202 1,556 163 1,921
Capital expenditures (16,885) (14,574) (19,253) Difference from currency
Purchase of subsidiaries and affiliates, net of cash acquired (5,221) (1,980) (771) translation (25) (25) (109) (134)
Proceeds from sale of noncurrent assets 656 390 421
Net change in short - te rm investments (4,037) 2,843 (9,342) Balance at Dec. 31, 1996 2,743,700 13,719 27,869 (350) 2 2,519 2,171 1,647 1,193 46,599
O th e r 162 – –
Net cash used for investing activities (32) (25,325) (13,321) (28,945)
1)
Change in short - te rm borrowing (128) (954) 471 The development of the consolidated statement of shareholders’ equity from Jan.1, 1994 to Dec. 31, 1994 is shown in note (23).
Issuance of long-term debt 101 – 17,275
Repayments of medium and long-term debt (12,035) (14,280) (6,679)
Dividends (1,210) – –
Proceeds from share offe ri n g 20,146 – –
Net cash provided by (used for) financing activities (33) 6,874 (15,234) 11,067
Effect of foreign exchange rate changes on cash

and cash equivalents – (89) –
Net increase (decrease) in cash and cash equivalents 3,808 (4,957) 6,236
Cash and cash equivalents, at beginning of year 3,508 8,465 2,229

Cash and cash equivalents, at end of year 7,316 3,508 8,465
Liquid assets as shown in the balance sheet

Cash and cash equivalents, Dec. 31, 7,316 3,508 8,465
Te mp o ra ry cash investments, Dec. 31, 10,536 6,500 9,342
O th e r – – 1
Total 17,852 10,008 17,808

Notes to the consolidated
financial statements
Summary of accounting
policies
Description of business and relationship Summary of significant accounting principles

with the Federal Republic of Germany The annual financial statements and the management cable accounting regulations and the related elective provi-
Deutsche Telekom group (Deutsche Telekom) is a full-service 1995. The new company, Deutsche Telekom AG was regis- report of the Deutsche Telekom group have been prepared sions of Postreform II which varied from those under Post-
telecommunications group whose major lines of business tered with the Commercial Registry of the Bonn District in accordance with the requirements of the German Com- reform I, together with certain changes in accounting
include providing public fixed-network voice telephony, Court (Amtsgericht – HRB 6794) on January 2, 1995. mercial Code (Handelsgesetzbuch – HGB) and German policies effected in 1995, the opening balance sheet on a
mobile communications services, cable transmission Stock Corporation Law (Aktiengesetz – AktG). non-consolidated basis of Deutsche Telekom AG did not
services, leased lines, text and data services, on-line services, In November 1996 Deutsche Telekom AG made an initial fully carry forward the book values of Deutsche Bundespost
corporate network design and supply, and network manage- public offering increasing the number of shares issued and The listing of its shares on the New York Stock Exchange TELEKOM’s financial statements. Key items include:
ment services within the German market and in certain inter- outstanding as well as the number of shareholders. The and the related requirement for Deutsche Telekom to file
national markets. Deutsche Telekom also provides broad- Federal Republic of Germany (the Federal Republic), formerly with the U.S. Securities and Exchange Commission (SEC) – Revaluation of fixed assets
casting services for television and radio stations, supplies the sole shareholder of Deutsche Telekom AG, did not partici- an annual report on Form 20-F, have led the Company to – Recognition of special charges to other Post entities
and services telecommunications terminal equipment and pate in the capital increase and its shareholding fell to prepare its consolidated financial statements, to the extent – Accrual for indirect pensions
publishes telephone directories. approximately 74 % of the shares outstanding. The Federal possible, in conformity with international financial reporting – Accrual for deficits of the Civil Service Health Insurance
Republic administers its shareholding and exercises its rights norms. The SEC rules for annual reports allow the Company Fund (Postbeamtenkrankenkasse)
Deutsche Telekom’s principal business is providing telecom- as a shareholder through a public law entity, the Bundesan- to prepare financial statements in accordance with German – Capitalization of interest during the construction period
munications services, comprising more than 90 % of total stalt für Post und Telekommunikation Deutsche Bundespost GAAP (principally laid down in the HGB), but require a for property, plant and equipment
operating revenues, operating profits and identifiable (the Federal Institute). The Federal Institute is subject to reconciliation of net income and shareholders’ equity to – Capitalization of leased assets and
assets. Deutsche Telekom’s business is conducted pre- supervision by the Federal Ministry of Posts and Telecom- amounts determined in accordance with U.S. GAAP. The – Deferred taxes
dominantly in Germany and is, therefore, within a single munications (BMPT), which also at present acts as the Company provides uniform financial reporting to the extent
geographic area for reporting purposes. None of Deutsche federal telecommunications regulatory authority. The Federal possible, by using accounting policies where options exist Accordingly, and due to the significance of Deutsche
Telekom’s customers account for 10 % or more of total Republic and various government departments and agen- under German GAAP, to conform to U.S. GAAP. This also Telekom AG in relation to the consolidated group, the con-
consolidated operating revenues. For these reasons, no cies are collectively the largest customer of Deutsche Telekom. serves to minimize differences between results reported in solidated financial statements of Deutsche Telekom for
segment reporting section has been included. Charges for services provided to the Federal Republic and the reconciliation of German GAAP and U.S. GAAP. 1996 and 1995 are not comparable to the consolidated
such departments and agencies are based on Deutsche financial statements of Deutsche Bundespost TELEKOM
As part of Postreform II (second reform of German posts and Telekom’s commercial pricing policies. Services provided to The contents of these consolidated financial statements dif- for 1994. For comparison purposes consolidated financial
telecommunications), Deutsche Bundespost TELEKOM, any one department or a gency do not represent a significant fer from financial statements prepared in accordance with statements for 1994 were derived from audited financial
which operated as a public enterprise until the end of 1994, component of Deutsche Telekom’s net revenues. U.S. GAAP only in those instances where the accounting statements of Deutsche Bundespost TELEKOM for 1994
was transformed into a stock corporation at the beginning of and disclosure requirements of the HGBc a n n ot be con- and are prepared on a consistent basis with those from
formed to U.S. GAAP. These diffe re n c e sbetween German 1996 and 1995.
GAAP and U.S. GAAP are shown in the reconciliation.
Monopoly rights The consolidated balance sheet and the consolidated state-
Deutsche Telekom essentially has the exclusive right to pro- mission lines in Germany, which may be used to provide Whereas the HGB requires only one year of comparative ment of income are prepared in accordance with the classifi-
vide public fixed-network voice telephony services in Ger- public telecommunications services other than public fixed- figures for the statement of income, the SEC requires the cation requirements of § 298 HGB, in combination with
many until December 31, 1997. On that date, the provision network voice telephony. Previously Deutsche Telekom had two previous years. The SEC also requires three years of § 266 and § 275 HGB. The income statement is prepared
of these services will be fully liberalized in accordance with an exclusive right to build and operate such networks, sub- cash flow statements and statements of shareholders’ using the total cost method. All amounts shown, except per
EU regulations and the Telecommunications Act (TKG), and ject to certain exceptions. The Company has been subject to equity. Upon the transformation of the Deutsche Bundes- share amounts, are in millions of Deutsche Marks (DM).
the Company will face competition in this area. Since August competition for several years in a number of areas, primarily post TELEKOM into a stock corporation, Deutsche Telekom Certain items have been combined in order to enhance the
1, 1996 competitors of Deutsche Telekom have been able mobile communications services, data transmission and the was first legally required by German law to prepare and pub- informative value and understanding of the consolidated
to freely obtain licenses to build and operate telecommuni- supply of terminal equipment. lish consolidated financial statements and a group manage- financial statements. These items are shown separately in
cations transmission lines including broadband cable trans- ment report. For purposes of this report, the income state- the notes. The consolidated accounts also include a consoli-
ment for 1994 was derived from the audited consolidated dated statement of cash flows and consolidated statement
financial statements for 1994 of the former Deutsche of shareholders’ equity. In conformity with international prac-
Bundespost TELEKOM. These consolidated financial state- tice, reporting begins with the income statement, and the
ments, which were not published, but prepared on the basis statement of cash flows and the statement of shareholders’
of regulations for consolidated financial statements under equity precede the notes.
the German Commercial Code and taking applicable provi-
sions of the Postreform I into consideration, received an The consolidated financial statements are prepared in ac-
unqualified audit opinion. cordance with uniform accounting and valuation principles.
The accounting policies used in the consolidated financial
Certain provisions of Postreform II (which came into effect statements differ from those used in the parent company’s
on January 1, 1995) affected the preparation of Deutsche unconsolidated financial statements. Such differences,
Telekom AG’s financial statements and consequently the applied to conform with U.S. GAAP, include the following:
consolidated financial statements. As a result of the appli-

– Property, plant and equipment leased under contracts for – Accruals for the internal costs of preparing annual Nineteen (Dec. 31, 1995: 5) subsidiaries were not included Thirteen (Dec. 31, 1995: 11) associated companies which
which the risks and rewards of ownership have been financial statements are not recorded. because they were not material to the net worth, financial have little or no effect on the net worth, financial position
assumed are capitalized. Scheduled depreciation is – Investment grants received are recorded as reductions of position and results of the Deutsche Telekom group. These and results of the Deutsche Telekom group were classified
recorded over the useful economic life of the asset or over the acquisition costs of assets. subsidiaries accounted for less than 1 % of consolidated as other investments in related companies at acqu i s i t i o ncost
the term of the lease. The present value of payment obliga- revenue. less applicable write-downs.
tions resulting from future lease payments are included as The unconsolidated financial statements of Deutsche The full list of investment holdings, which is available upon
liabilities. Telekom AG, which have an unqualified audit opinion from In accordance with § 311 paragraph 1 HGB, 46 (Dec. 31, request, is filed with the Commercial Registry of the Bonn
– Interest incurred during the construction period for C&L TREUARBEIT DEUTSCHE REVISION Aktiengesell- 1995: 33) companies over which Deutsche Telekom exer- District Court (HRB 6794).
constructed assets has been capitalized. schaft Wirtschaftsprüfungsgesellschaft, Frankfurt am Main, cises significant influence have been classified as associated
– Direct pension obligations are measured in accordance are published in the Federal Gazette (Bundesanzeiger) and companies and are accounted for using the equity method.
with SFAS No. 87, using valuation methods consistent with filed under HRB 6794 with the Commercial Registry of the
those used for indirect pension obligations in the uncon- Bonn District Court. This annual report and the Annual
solidated financial statements of Deutsche Telekom AG. Report on Form 20-F, filed with the SEC due to Deutsche Principal subsidiaries and associated companies
Telekom’s listing on the NYSE, are available upon request
from Deutsche Telekom AG. Deutsche Telekom Shareholders’ Revenue Income after taxes Employees
share equity
Name and Dec. 31, 1996 Dec. 31, 1996 1996 1996 1996
Consolidated group registered office (%) millions of DM millions of DM millions of DM (Annual average)
The consolidated financial statements are comprised of the The most significant subsidiary consolidated for the first
accounts of Deutsche Telekom AG (in 1994 the financial time is MATAV Magyar Távközlési Rt, Budapest, Hungary, Subsidiaries
statements of its legal predecessor Deutsche Bundespost which in prior years was included using the equity method. DeTe Immobilien Deutsche Telekom
TELEKOM) and its subsidiaries. The changes in the composition of the Deutsche Telekom Immobilien und Service GmbH, Münster 100.00 101 7,072 41 10,503
group have had the following effects: DeTeMobil Deutsche Telekom
The subsidiaries, associated companies and other related MobilNet GmbH, Bonn 100.00 2,317 5,413 67 4,860
companies have been included in the consolidated financial Effects on the consolidated statement of income (in billions MATAV Magyar Távközlési Rt,
statements in accordance with the following criteria: of DM): Budapest, Hungary1, 2 67.35 1,714 1,938 269 20,014
DeTeSystem Deutsche Telekom
– Subsidiaries are companies in which Deutsche Telekom Revenue 1.9 Systemlösungen GmbH, Frankfurt/Main 100.00 19 1,735 (13) 1,005
directly or indirectly has majority voting rights or manage- Goods and services purchased 0.5 DeTeMedien Deutsche Telekom
ment control. Personnel costs 0.3 Medien GmbH, Frankfurt/Main 100.00 51 677 104 432
Other expenses 0.9 DeTeLine Deutsche Telekom
– Associated companies are companies in which Deutsche Telekommunikationsnetze GmbH,
Telekom directly or indirectly holds between 20 % and Income after ta xe s 0.2 Berlin, Rastatt 100.00 7 329 12 558
50 % of the voting rights and exercises a significant influ- DeTeKabel Service Deutsche Telekom Kabel
ence. Such companies are generally included in the con- Effects on the consolidated balance sheet (in billions of DM): Service Gesellschaft mbH, Bonn1, 3 99.78 84 206 25 393
solidated financial statements using the equity method. Associated companies
Assets Shareholders’ equity Atlas S.A., Brussels, Belgium1 50.00 1,011 1,091 (510) 3,660
– Companies in which Deutsche Telekom holds less than and liabilities TRI Technology Resources Industries
20 % of the voting rights are carried in the consolidated Noncurrent assets 2.9 Shareholders’ equity 1.2 Berhad, Kuala Lumpur, Malaysia1 21.00 1,147 980 158 4,016
financial statements at the lower of acquisition cost or Current assets 0.6 Accruals 0.1 Satelindo PT Satelit Palapa Indonesia,
market value and classified as other investments in related Liabilities 2.2 Jakarta, Indonesia4 25.00 908 420 20 928
companies. Isla Communications Co., Inc.
3.5 3.5 Metro Manila, Philippines5 10.42 168 38 (51) 1,025
The consolidated financial statements include the individual Asiacom Philippines, Inc.
company financial statements of the parent company, Metro Manila, Philippines 49.88 103 1 (29) –
Deutsche Telekom AG, as well as 42 (Dec. 31, 1995: 46) Other companies
domestic and 40 (Dec. 31, 1995: 11) foreign subsidiaries, in Sprint Corporation,
which Deutsche Telekom AG has a direct or indirect control- Westwood, Kansas, U.S.A. 1 10.00 13,247 21,119 1,779 48,133
ling interest. 1
Consolidated subgroup financial statements
2
Held through MagyarCom, Cayman Islands (Deutsche Telekom AG share: 50 %)
3
Formerly TKS Telepost Kabel-Servicegesellschaft mbH, Bonn
4
Held through DeTeMobil Deutsche Telekom MobilNet GmbH, Bonn
5
Held directly by Deutsche Telekom AG, additional indirect holding through Asiacom (share: 28.87 %)

Consolidation principles Accounting and valuation
Capital consolidation is performed following the book The consolidated balance sheets include deferred taxes Net revenues consist of goods and services sold in connec- Earnings per share for each period are calculated by divid-
value method under German GAAP. Under this method, the from the effects of consolidation, provided the tax expense tion with the ordinary business activities of Deutsche ing net income by the weighted average number of ordinary
purchase consideration for an acquisition is allocated to the is expected to reverse in later years except where the effects Telekom. Net revenues are recorded net of VAT and sales- bearer shares outstanding during that period after giving ret-
assets and liabilities acquired based on their fair values. of consolidation relate to the parent company during the related reductions. Revenues due from foreign carriers for roactive effect to the ten-to-one stock split and the issuance
Any resulting excess of the purchase consideration over the periods prior to the end of 1995, when it was essentially international incoming calls are included in revenues in the of shares by way of an increase in capital stock from
parent’s interest in the fair value of net assets acquired is exempt from taxation. period in which the calls occur. Revenues from other operat- retained earnings on July 31, 1996. Pro forma earnings per
capitalized as goodwill. Negative goodwill from capital con- ing activities are recognized in the period when earned by share are presented for 1994 based on the assumption that
solidation is included under other accruals. The investments in associated companies included at the delivery of goods or the rendering of services. all shares issued upon the incorporation of Deutsche
equity are accounted for using the book value method by Telekom AG, as adjusted for the stock split, were outstand-
Profits or losses generated by subsidiaries during their applying Deutsche Telekom’s uniform principles of valuation. Research and development costs are expensed as incurred. ing during all periods presented.
period of affiliation with the group are included in retained This method is similar to the method described above for
earnings (deficit). The unappropriated net income reported consolidated subsidiaries. The principles used for full con- Pension costs for defined benefit plans are actuarially Purchased intangible assets are valued at acquisition cost
in the consolidated financial statements represents the solidation are also applied in treating the differences result- computed using the projected unit credit method which is and are amortized on a straight-line basis over their esti-
unappropriated net income of Deutsche Telekom AG. ing from the initial consolidation. It was not necessary to consistent with SFAS No. 87, Employers' Accounting for mated useful lives. Acquired goodwill, including goodwill
Accordingly, the effects of consolidation and the net income eliminate intercompany profits and losses with associated Pensions, and include current service cost, interest cost, resulting from capital consolidation, is amortized on a
of subsidiaries are included in retained earnings (deficit). companies, as they were insignificant. return on plan assets and amortization of actuarial gains/ straight-line basis over its useful life.
losses and prior service costs. Prior service cost is amort-
Revenue, income and expenses as well as receivables and Joint ventures are included in the consolidated financial ized over the future service period of employees active at the As permitted by Postreform II, property, plant and equip-
liabilities between the consolidated companies are elimi- statements using the equity method. date of the plan amendment. Unrecognized gains and ment transferred to Deutsche Telekom AG on January 1, 1995
nated. Intercompany profits and losses and income effects losses exceeding 10 % of the greater of the projected bene- were recorded in the opening balance sheet of Deutsche
from the consolidation of intercompany debt are elimi- fit obligation or the market-related value of the plan assets Telekom AG at fair market values at that date. However, due
nated in the consolidated financial statements. are amortized over the average expected service period of to the short period of time between the acquisition dates
active employees who are to receive benefits under the plan. and January 1, 1995, property, plant and equipment ac-
quired during 1993 and 1994 were valued at their remaining
Foreign currency translation The Company is required to make contributions to a pension book value. The remaining useful lives and the depreciation
In the individual company financial statements, foreign cur- into DM is performed using middle rates on the balance fund for current and former civil servant employees in an- methods applicable to these assets were not changed. The
rency receivables, cash in banks and liabilities are translated sheet date. Gains and losses resulting from translation are nual amounts established by Postreform II rather than by an- fair market values shown in the opening balance sheet have
at the exchange rate applicable on the transaction date. recorded, without affecting net income, directly to retained nual actuarial valuations. The amounts currently due in each been carried forward as the acquisition costs.
Unrealized foreign currency losses due to exchange rate earnings (deficit). period are recognized as an expense in that period. The
fluctuations through the balance sheet date are recognized pension costs are accrued in the balance sheet in accor- Other property, plant and equipment is valued at acquisition
in the income statement while unrealized foreign currency The income statements of foreign subsidiaries are translated dance with SFAS No. 87, whereby the accrual is increased or construction cost, less scheduled depreciation. Construc-
gains are not recognized. Where foreign currency items at the average annual exchange rate. by the expense recognized and decreased by payments tion costs include directly allocable costs, an appropriate
have been hedged by forward exchange contracts, they are made during the year. allocation of material and production overhead and interest
valued at the corresponding hedge rate. The exchange rates of certain significant currencies are as accruing during construction. However, general administra-
In the consolidated financial statements, the translation of all follows: Advertising costs are charged to expenses as incurred. tion expenses are not capitalized.
balance sheets of foreign subsidiaries from foreign currencies
Income tax expense includes current payable taxes on Nonscheduled depreciation is provided when an impair-
Ave ra ge annual rate Rate at balance sheet date income as well as deferred income taxes. Deferred income ment of the value of assets occurs. In order to increase the
1996 1995 1994 Dec. 31, 1996 Dec. 31, 1995 taxes are recorded for the expected future tax effects attrib- informative value of financial statements, accelerated depre-
DM DM DM DM DM utable to temporary differences in the balance sheets pre- ciation recorded in the individual company financial state-
pared for tax reporting and for financial reporting purposes, ments to increase tax-deductions has not been recognized
100 Belgian Francs (BEF) 4.8592 4.8605 4.8530 4.8540 4.8686 except for the effects of those differences that are not ex- in the consolidated financial statements.
100 Swiss Francs (CHF) 121.8850 121.2550 118.7120 115.0000 124.5400 pected to reverse in the foreseeable future. Such differences
1 ECU (XEU) 1.8837 1.8669 1.9245 1.9270 1.8393 may arise at the individual taxable entity level as well as in
100 French Francs (FRF) 29.4070 29.7130 29.2380 29.6380 29.2530 consolidation.
1 Pound Sterling (GBP) 2.3478 2.2610 2.4816 2.6267 2.1350
100 Hungarian Forints (HUF) 0.9862 1.1481 1.5388 0.9419 1.0397 Deferred taxes on temporary differences relating to Deutsche
100 Indonesian Rupies (IDR) 0.0646 0.0638 0.0751 0.0658 0.0626 Telekom AG have not been included in the consolidated
100 Japanese Yen (JPY) 1.3838 1.5309 1.5870 1.3408 1.3908 financial statements for periods prior to January 1, 1996 as
100 Singapore Dollars (SGD) 106.7900 100.8800 106.0200 110.1700 101.6100 Deutsche Telekom AG was not taxable prior to January 1,
100 Malaysian Ringgit (MYR) 59.5745 59.1960 61.7900 61.5762 61.0016 1995 and benefited from an essentially complete exemption
1 US-Dollar (USD) 1.5037 1.4261 1.6119 1.5548 1.4345 from tax in 1995.

Notes to the
consolidated statement
of income
Depreciation of noncurrent assets is carried out using the Receivables and other assets are shown at their nominal (1) Net revenue
straight-line method over the following useful lives: value. Known individual risks are accounted for through
appropriate individual valuation adjustments, and general Revenue was generated in the following areas of business: 1996 1995 1994
Years credit risks through general valuation adjustments of receiv- millions of DM millions of DM millions of DM
Intangible assets 3 to 4 ables. Low-interest and non-interest bearing items with more Fixed-network telephony services 44,537 50,443 47,912
Goodwill 5 to 12 than one year remaining to maturity are discounted. Leased lines 1,211 1,305 1,232
Buildings Text and data services 3,237 2,807 3,389
Office and residential buildings 50 Marketable securities are stated at the lower of cost or Supply and service of telecommunications equipment 4,134 4,007 4,071
Telecommunications buildings and towers 25 to 30 market value at the balance sheet date. Other services 1,217 827 742
Workshop buildings, outdoor installations and facilities 10 Mobile communications services 3,719 3,115 2,765
Telephone facilities and terminal equipment 5 to 10 Pensions and annuity obligations are calculated in accor- Cable transmission and broadcasting services 3,104 3,631 3,703
Data communication equipment, telephone network and ISDN dance with the internationally accepted Projected Unit International activities (MATAV) 1,916 – –
switching equipment, transmission equipment, radio transmission Credit Method, which is consistent with SFAS No. 87.
equipment and technical equipment for broadband 63,075 66,135 63,814
distribution networks 5 to 20 Provisions for taxes and other accruals including those
Broadband distribution networks, outside plant for loss contingencies and environmental liabilities are Revenue by geographic area:
networks and cable conduit lines 15 to 20 recorded using best estimates. Domestic 59,031 64,043 61,613
Telecommunications power facilities and other 3 to 10 Deferred taxes are calculated for the expected tax effects of International 4,044 2,092 2,201
Other equipment, plant and office equipment 3 to 20 temporary differences between the balance sheets pre-
pared for financial reporting and tax reporting purposes, as 63,075 66,135 63,814
Additions to real estate property are depreciated beginning well as for the temporary differences arising from consolida-
in the month the building is placed into service. For assets tion entries. Deferred taxes are netted and either a net Breakdown of international revenues:
other than buildings acquired in the first half of a year, a full deferred tax asset or net deferred tax liability is recorded. For European Union (excluding Germany) 1,085 901 877
year of depreciation is provided in the year of acquisition purposes of computing deferred taxes, Deutsche Telekom Rest of Europe 2,267 430 341
and, for those assets acquired in the second half of the year, uses the German income tax rate for undistributed earnings North America 243 271 512
a half year of depreciation is provided. for domestic companies and the respective local tax rate for Latin America 70 71 86
foreign companies. Other 379 419 385
Items with a low acquisition cost are expensed in the year of
their purchase. As required by German GAAP, accruals for the costs of 4,044 2,092 2,201
maintenance performed within the first three months follow-
Maintenance and repairs are charged to expenses when ing the period end have been accrued at each period end. Fixed-network telephony services includes revenues from The decrease in net revenue in 1996 as compared with
incurred. domestic and international traffic. Other services include 1995 resulted from the Company’s decision to reduce its
Liabilities are recorded at their repayment amount. In in- revenue from services ancillary to the basic telephone tariffs for certain services in response to the imposition of
Upon sale or disposal of noncurrent assets, the related cost stances where the repayment amount of a liability is greater services of Deutsche Telekom such as telephone directory VAT on its monopoly services effective January 1, 1996. By
and accumulated depreciation are removed from the than the principal amount, the difference is recorded as an publishing, advertising and for the first time in 1996 revenue assuming that the tariff change implemented in response
balance sheet, and a gain or loss is recognized for the differ- asset and recognized as an adjustment to interest expense from rental activities. to the VAT had been effective January 1, 1995 and holding
ence between the proceeds from the sale and the net carry- over the term of the liability. International revenue is derived from fixed-network inter- all other factors constant, consolidated revenue would
ing amount of the assets. national incoming traffic and internationally generated reve- have increased by 5.9 % from DM59.6 billion in 1995 to
Unrealized losses relating to derivative financial instruments, nues from other business areas. DM 63.1 billion in 1996.
Financial assets are valued at the lower of cost or market including swaps, forward exchange contracts and options
value. Low-interest or non-interest bearing loan receivables are recognized when incurred whereas unrealized gains are
are recorded at net present value. deferred until realized. (2) Increase in inventories and other own capitalized costs
Raw materials and supplies, and merchandise purchased The preparation of consolidated financial statements 1996 1995 1994
and held for resale are valued at acquisition cost, while work requires the Company to make estimates and assumptions millions of DM millions of DM millions of DM
in process and finished goods are stated at production that affect the reported carrying amounts of assets and Increase in inventories of finished products and
cost (directly allocable costs plus an appropriate allocation liabilities and disclosure of contingent assets and liabilities work in process 51 45 225
of material and production overhead). The carrying amount at the date of the financial statements, and the amounts of Own capitalized costs 3,403 3,275 3,479
of inventories at the balance sheet date is reduced to the revenues and expenses recognized during the reporting
lower of cost or market value at the balance sheet date. To period. Actual results could differ from those estimates. 3,454 3,320 3,704
the extent that inventory values are impaired, obsolescence
provisions are made. Own capitalized costs comprise mainly construction costs. period of DM 407 million (1995: DM 509 million,
They include interest incurred during the construction 1994: DM 378 million).

(3) Other operating income (5) Personnel costs/Average number of employees
1996 1995 1994 1996 1995 1994
millions of DM millions of DM millions of DM millions of DM millions of DM millions of DM
Refund of value-added tax (§ 15a UStG) 1,516 – – Wages and salaries:
Other value-added tax refunds 662 – – Civil servants 6,576 6,872 6,760
Reversal of accruals 678 907 212 Non-civil servants 6,634 6,325 6,339
Cost reimbursements 294 247 611
Insurance compensation 152 126 139 13,210 13,197 13,099
Foreign currency transaction gains 68 84 37
Other income 535 774 922 Social security contributions and expenses for pension plans and benefits:
Social security costs 1,331 1,255 1,188
3,905 2,138 1,921 Civil servant pension and retiree healthcare costs 2,900 2,900 2,539
Non-civil servant pension costs 693 609 550
Deutsche Telekom AG received a refund of VAT in accor- progress and inventory purchased prior to January 1, 1996 Pension and retiree healthcare costs 3,593 3,509 3,089
dance with § 15a Umsatzsteuergesetz (Value-Added Tax was booked as expense in the year paid. Since January 1, Active civil servant healthcare costs 625 518 673
Act) of DM 1,516 million in 1996. The Company recognized 1996, the date on which the Company became fully subject Other employee benefits 18 23 108
depreciation of DM 1,305 million on nondeductible VAT to VAT, the VAT paid in prior years with respect to such as-
capitalized during tax-free periods. sets has been booked as operating income at the time such 5,567 5,305 5,058
In 1996 the Company recognized a one-time VAT refund of assets were placed into service.
DM 662 million which relates to assets purchased before 18,777 18,502 18,157
January 1, 1996 and placed into service during 1996. As a Of the total amount of other operating income, DM 703 mil-
result of a 1996 agreement with the German tax authorities lion (1995: DM 933 million, 1994: DM 771 million) relate to
as to the recovery of VAT paid, VAT paid on construction in estimates made in other financial years. Number of employees (average for the year) 1996 1995 1994
Number Number Number
(4) Goods and services purchased Civil servants 110,269 117,138 119,311
Salaried employees 44,884 45,246 49,624
1996 1995 1994 Wage earners 52,616 57,368 62,359
millions of DM millions of DM millions of DM Deutsche Telekom1) 207,769 219,752 231,294
Goods purchased 2,317 1,883 1,845
Services purchased 7,907 7,623 7,440 Changes in the composition of the Deutsche Telekom group (MATAV and others) 20,040 – –
of which: domestic network access charges 1,019 581 299 Trainees/student interns 9,003 11,968 16,420
of which: international network access charges 2,730 2,766 3,216
of which: other services 4,158 4,276 3,925 236,812 231,720 247,714
10,224 9,506 9,285 1)

Before changes in the composition of the Deutsche Telekom group
Repairs and maintenance expense amounts to DM 1,154 equipment, payroll processing and miscellaneous sales Pension cost amounts to DM 3,593 million (1995: DM 3,509 Since 1995 these payments are made in accordance with
million (1995: DM 1,363 million, 1994: DM 1,368 million) services performed by Deutsche Post AG. In 1994 such million, 1994: DM 2,806 million). Civil servant pension and the provisions of Postreform II.
and is included in other services. In 1996 and 1995 other services were billed under flat rate cost reimbursement retiree healthcare costs in 1994 relate to amounts paid In 1996 personnel costs include DM 337 million relating to
services also included costs relating to the maintenance of agreements and classified as other operating expenses. directly to retired civil servants under the pension arrange- MATAV.
Deutsche Telekom's fleet of vehicles, other machinery and ments applicable at that time.

(6) Depreciation and amortization (8) Financial income (expense) net
1996 1995 1994 1996 1995 1994
millions of DM millions of DM millions of DM millions of DM millions of DM millions of DM
Amortization of intangible assets 516 349 261 Dividend income from investments 123 49 44
Depreciation on property, plant and equipment 17,137 15,028 14,328 Loss related to companies accounted for under the
equity method (including amortization of goodwill) (556) (190) (121)
17,653 15,377 14,589
Income (loss) related to subsidiary, associated and related companies (433) (141) (77)
The increase of depreciation and amortization of nondeductible VAT capitalized prior to 1996.
DM 2,276 million is mainly attributable to the investment Nonscheduled depreciation of DM 83 million has been Income from debt securities and long-term loan receivables 122 130 1
activity associated with the digitalization of the networks, recognized for the impairment of satellite equipment. Interest and similar income 467 988 533
and depreciation of DM 1,305 million in 1996 on the Interest and similar expense (7,858) (9,185) (8,381)
Net interest expense (7,269) (8,067) (7,847)

(7) Other operating expenses
Write-downs on financial assets (12) (3) (3)
1996 1995 1994
millions of DM millions of DM millions of DM (7,714) (8,211) (7,927)
Marketing expenses 1,593 935 539
Rental and leasing expenses 1,159 1,252 1,062 Income from debt securities and long-term loan receivables nonscheduled, relate to loans made to unconsolidated
Losses on disposition of noncurrent assets 1,066 1,390 964 consists primarily of interest on receivables from Deutsche subsidiaries.
Legal and consulting fees 803 630 410 Post AG. The write-downs on financial assets, which were
Losses on accounts receivable and provision for doubtful accounts 709 593 669
Other employee-related costs 490 726 261
Litigation and other risk provisions 425 637 51 (9) Extraordinary income (losses)
Travel expenses 414 415 391 This item represents personnel restructuring measures of
Administrative expenses 306 256 208 DM 1,758 million (1995: DM 1,264 million, 1994: DM 357
Foreign currency transaction losses 182 115 30 million) as well as share offering costs of DM 717 million.
Reimbursements 91 100 1,103
Nondeductible value-added taxes paid 35 972 665
Other expenses 2,182 1,664 1,915 (10) Special charge relating to other Post entities
In accordance with Article 1 Postreform I (Postverfassungs- of those entities. This charge amounted to DM 2,320 million
9,455 9,685 8,268 gesetz) specifically § 37 paragraph 3, Deutsche Bundespost in 1994. As of January 1, 1995, pursuant to Postreform II,
TELEKOM was obligated through December 31, 1994 to Deutsche Telekom is not required to incur any further
The increase in marketing expenses is mainly due to consu- Expenses relating to nondeductible VAT have not been in- incur special charges to Deutsche Bundespost POSTBANK charges under these arrangements.
mer incentive programs initiated in 1996 and sales provisions. curred to any significant extent after 1995. Prior to Deutsche and Deutsche Bundespost POSTDIENST to cover the losses
The losses on disposition of noncurrent assets are mainly Telekom AG’s services becoming fully subject to VAT in
due to the continuing digitalization of Deutsche Telekom’s 1996, a large part of VAT paid by Deutsche Telekom AG to
network. Other employee-related costs include approxi- its suppliers was not recoverable.
mately DM 206 million for services provided by the Federal
Institute under provisions of a contract for the year 1996. Of the total amount of other operating expenses,
Reimbursements include charges from Deutsche Post AG DM 1,071 million relates to estimates made in other financial
for postal services and from Deutsche Postbank AG for years.
banking services.

(11) Taxes, Levy to the Federal Republic of Germany The differences in 1995 and 1994 between the effective in- loss carryforwards amounting to DM 494 million
come tax rate and the German corporate and trade income (1995: DM 702 million). Substantially all of the net operating
1996 1995 1994 tax rate are primarily attributable to the income earned by loss carryforwards have an unlimited carry forward period
millions of DM millions of DM millions of DM Deutsche Telekom AG, which was exempt from income taxes under German tax law.
prior to 1996. Income taxes in 1995 include DM 524 million
Income taxes 1,385 614 64 of taxes resulting from the proposed dividend of DM 1.1 bil- Levy to the Federal Republic of Germany
Other taxes 830 66 (283) lion from 1995 earnings. The levy to the Federal Republic of Germany which, pursu-
Levy to the Federal Republic of Germany – 3,098 5,164 ant to Postreform II, was payable for the last time in 1995,
Deferred tax assets and liabilities result primarily from the resulted from § 63 paragraphs 1 to 4 of Article 1 of Post-
2,215 3,778 4,945 elimination of intercompany profits and from temporary reform I and regulations under the German Budget Acts
differences between income determined under German (Haushaltsgesetze). The components of the levy due as a
Income taxes Significant differences between actual tax expense of GAAP and under applicable tax law. result of revenues earned in eastern Germany have been
DM 1,385 million for 1996 and the expected corporate retained and have been recorded, as required by each
1996 1995 1994 income tax expense (computed using 45 %, the statutory At December 31, 1996 Deutsche Telekom had corporate annual German Budget Act, as an increase in additional
millions of DM millions of DM millions of DM corporate income tax rate for undistributed earnings) are income tax net operating loss carryforwards amounting to paid-in capital of DM 316 million and DM 716 million in
as follows: approximately DM 1,003 million (1995: DM 1,041 million). 1995 and 1994, respectively.
Current income ta xe s 2,042 582 65 Deutsche Telekom also had trade income tax net operating
D e fe rred income taxes (657) 32 (1) 1996
millions of DM
1,385 614 64 (12) (Income) losses applicable to minority shareholders
Expected corp o ra te income tax at The income applicable to minority shareholders includes 1994: DM 3.7 million) in losses. The gains in 1996 relate
Commencing January 1, 1995 the Company became sub- the tax rate applicable for DM 173.3 million (1995: DM 0.5 million, 1994: DM 0.1 mil- mainly to MATAV.
ject to normal corporate taxation in Germany, although it retained earnings 1,487 lion) in gains and DM 10.5 million (1995: DM 2.2 million,
benefited from an essentially complete exemption from tax Increase (decrease) in corp o ra te
in 1995. The combined statutory income tax rate, currently income tax due to:
approximately 57 %, includes corporate income taxes at a Nondeductible items (45) (13) Net income
rate of 45 % for undistributed earnings, trade income taxes Trade income taxes 676 The consolidated net income of DM 1,758 million was
at an average German national rate, and the solidarity Taxation on foreign operations (120) generated primarily by Deutsche Telekom AG.
surcharge of 7.5 % on corporate income tax (Solidaritäts- Utilization of net operating
zuschlag). When earnings are distributed, the corporate loss carry fo rwa rd s (31)
income tax imposed on such earnings is reduced to 30 %. Tax credit on dividends (315)
Corporate income tax refunds resulting from dividends Te mp o ra ry differences and loss
are reflected in the period for which the dividend is paid. carryforwards for which deferred
Taxable income was earned primarily in Germany. taxes are not recorded (190)
O th e r (77)
Income taxes 1,385
Effective income tax rate 42 %

Notes to the
consolidated balance
sheet
(14) Intangible assets (16) Financial assets

The increase in concessions, industrial and similar rights This acquisition was approved, as is required by § 52 AktG,
Dec. 31, 1996 Dec. 31, 1995 and assets and licenses in such rights and assets is mainly Dec. 31, 1996 Dec. 31, 1995 during the Deutsche Telekom special shareholders’ meeting
Net carrying Net carrying attributable to the consolidation of MATAV for the first time. Net carrying Net carrying held on November 14, 1996. At the time of preparation of
amount amount The increase in goodwill arising from capital consolidation amount amount the financial statements, the required registration in the
millions of DM millions of DM also relates to MATAV. millions of DM millions of DM Commercial Register had not taken place, but Deutsche
The increase in advance payments is mainly due to pay- Telekom expects that, after the translation of the agreement
Concessions, industrial and similar ments for network control and administration software and Loans to unconsolidated subsidiaries – 1 has been filed with the Commercial Registry, the required
rights and assets and licenses in customer administration software which is being developed. Investments in associated companies 2,656 2,020 registration will take place. Although the acquisition is not
such rights and assets 884 748 Other investments in related companies 3,617 799 officially registered, the stake in Sprint is shown as an invest-
Goodwill The development of intangible assets is shown in the table Long-term loans to associated and ment in related companies. In connection with the purchase
from individual company financial statements 1 1 of consolidated noncurrent assets. related companies 148 114 of the Sprint shares, the Company has contractually agreed
arising from capital consolidation 456 41 Other investments in noncurrent not to dispose of its stake before the end of 2001.
Advance payments 88 6 securities 337 12
Other long-term loans 1,524 1,718 Long term loans include 9 loans to associated and related
1,429 796 companies.
8,282 4,664
Other investments in noncurrent securities include federal
(15) Property, plant and equipment the extent recoverable under German tax law (§ 15a Umsatz- Additions to investments in associated companies of bonds, other debt securities, bonds of Deutsche Bundes-
steuergesetz) beginning January 1, 1996. As at the balance DM 2,173 million include DM 900 million related to the post and bonds of Deutsche Bundesbahn. Deutsche
Dec. 31, 1996 Dec. 31, 1995 sheet date capitalized VAT, after reduction of scheduled acquisition of shares in TRI Technology Resources Indus- Telekom AG has also invested in investment funds which
Net carrying Net carrying depreciation of DM 1.3 billion, amounted to DM 3.9 billion. tries Berhad, Kuala Lumpur, DM 661 million to the capital are included under this item at their acquisition cost of
amount amount Other operating income includes the DM 1.5 billion refunds increase of Atlas S.A., as well as DM 306 million for the DM 327 million.
millions of DM millions of DM of VAT. acquisition of shares in RADIOMOBIL a.s., Prague. This amount
also includes the acquisition of shares in the Philippine com- Other long-term loans include a loan to Deutsche Post AG,
Land and equivalent rights and buildings The development of property, plant and equipment is shown panies, Isla Communications Company Inc. and Asiacom loans for construction of hostels and other buildings as well
including buildings on land owned by in the table of consolidated noncurrent assets. Philippines Inc., totaling DM 120 million. as loans to employees.
third parties 36,940 36,714
Technical equipment and machinery 87,730 88,952 Leasing These additions were offset by changes in the composition The development of financial assets is shown in the table of
Other equipment, plant and office Minimum lease payments under leases expiring subsequent of the Deutsche Telekom group amounting to DM 1,015 mil- consolidated noncurrent assets.
equipment 3,627 3,321 to December 31, 1996 are shown below (millions of DM): lion. This amount relates mainly to the full consolidation of
Advance payments and construction MATAV in the group financial statements. The full list of investment holdings is filed with the Commer-
in progress 6,291 4,768 Year Capital leases Operating The increase in other investments in related companies of cial Registry of the Bonn District Court.
leases DM 2,595 million relates primarily to the acquisition of 10 %
134,588 133,755 of the shares in Sprint Corporation, Westwood, the third larg- Significant investments in associated companies are shown
1997 83 1,120 est long distance telecommunications provider in the United below:
The increase in property, plant and equipment amounts to 1998 84 1,106 States.
DM 16,582 million in 1996. The increase relates mainly to 1999 86 1,100
Deutsche Telekom AG. Capital expenditure in 1996 and 2000 86 1,099 Dec. 31, 1996 Dec. 31, 1995
1995 relates primarily to the digitalization of the switching 2001 90 1,099 Name Percentage Carrying Net difference Percentage Carrying Net difference
and transmission equipment. after 2001 1,778 491 owned amount between carrying owned amount between carrying
value and equity value and equity
In addition, the net carrying amount of property, plant and Total minimum lease payments 2,207 6,015 in net assets in net assets
equipment increased by DM 2,782 million due to changes (in %) millions of DM millions of DM (in %) millions of DM millions of DM
in the composition of the Deutsche Telekom group. This I mp u ted inte re st (1,103)
change results mainly from the inclusion of MATAV. Satelindo 25.00 904 684 25.00 934 732
Present value of net minimum TRI 21.00 811 595 – – –
Prior to January 1, 1996, Deutsche Telekom’s monopoly lease payments 1,104 Atlas S. A. 50.00 420 18 – – –
services were not subject to VAT. Accordingly, the Company Asiacom 49.88 88 39 – – –
was not able to reclaim, in the normal manner, the full Capital leases are primarily for office buildings and have ISLACOM 10.42 22 6 – – –
amount of VAT paid on goods and services purchased. terms of up to 25 years. MATAV (MagyarCom) 67.35 – – 50.00 1,024 –
Instead, the Company was allowed to immediately reclaim Other 411 143 62 10
20 % of the VAT paid on goods and services purchased.
The VAT paid on capitalized items has been capitalized to 2,656 1,485 2,020 742

(17) Inventories, materials and supplies (20) Marketable securities
Raw materials and supplies include data communication Telekom purchased these shares from DG-Bank on Novem-
Dec. 31, 1996 Dec. 31, 1995 equipment and telecommunications cable as well as spare Dec. 31, 1996 Dec. 31, 1995 ber 15, 1996 at a cost of DM 5 per share, DM 118.5 million
millions of DM millions of DM parts and components which are intended for capital im- millions of DM millions of DM in total. These shares represented 0.86 % of total capital
provements. stock.
Raw materials and supplies 648 875 Treasury shares 2 –
Work in process 892 841 Inventories of telecommunications terminal equipment held Other securities 2 – Deutsche Telekom employees purchased 3,918,642 shares
Finished goods 527 587 both for resale and leasing are included under finished goods. at a price of DM 16.80 and 19,320,590 shares at a price of
Advance payments 31 2 4 – DM 28, representing total consideration of DM 65.8 million
Advance payments are comprised mainly of payments and DM 541 million respectively from the Company. The ex-
2,098 2,305 which have been received for telecommunications terminal In connection with the Company’s global offering, Deutsche cess of the proceeds over the nominal value, DM 490.6 mil-
equipment. Telekom also introduced an Employee Stock Purchase Plan. lion is recorded as additional paid-in capital. The remaining
DG-Bank Deutsche Genossenschaftsbank, Frankfurt am 460,768 shares not purchased by employees have been in-
Main underwrote the related capital increase of 23,700,000 cluded in marketable securities and valued at their acquisi-
(18) Receivables bearer shares, each with a nominal value of DM 5. In accor- tion cost of DM 2.3 million (DM 5 per share). These shares
The allowance for doubtful accounts and changes therein dance with § 71 paragraph 1 No. 2 AktG, Deutsche represent 0.02 % of capital stock.
Dec. 31, 1996 Dec. 31, 1995 are in millions of DM as follows:
millions of DM millions of DM
1996 1995 1994 (21) Liquid assets
Trade accounts receivable 7,368 6,820 January 1, 989 858 623 Cash and cash equivalents with original maturity of less than
Receivables from Charged to costs Dec. 31, 1996 Dec. 31, 1995 3 months consist primarily of fixed-term bank deposits,
unconsolidated subsidiaries 5 0 and expenses 319 157 366 millions of DM millions of DM checking account balances, deposits at the Bundesbank
Receivables from associated Amounts written off (45) (2) (11) and Deutsche Postbank AG and petty cash. Temporary cash
and related companies 92 32 Released (25) (24) (120) Checks 2 2 investments consist of fixed-term bank deposits.
Petty cash and deposits
7,465 6,852 December 31, 1,238 989 858 at the Bundesbank 24 18
Deposits at Deutsche Postbank AG 2,899 1,903
Trade accounts receivable relate primarily to the billing of The Company directly wrote off accounts receivable balan- Cash in banks 14,927 8,085
telecommunications services. ces of DM390 million in 1996 (Dec. 31, 1995: DM436 mil-
lion). 17,852 10,008
All receivables are due within one year with the exception of
DM 39 million.
Dec. 31, 1996 Dec. 31, 1995
millions of DM millions of DM
(19) Other assets
Other assets amounting to DM 1,003 million are due within Cash and cash equivalents
Dec. 31, 1996 Dec. 31, 1995 one year. Of the balance at December 31, 1996, DM 173 mil- (original maturity less than 3 months) 7,316 3,508
millions of DM millions of DM lion first became legally due after the balance sheet date. Te mp o ra ry cash investments
(original maturity longer than 3 months) 10,536 6,500
Tax receivables 356 147
Receivables from employees 122 114 17,852 10,008
Accrued inte re st 90 142
Receivables from
reimbursements 47 128 (22) Prepaid expenses, deferred charges and deferred
Loans receivable 16 – (22) taxation
Miscellaneous 387 322 Prepaid expenses and deferred charges of DM 1,589 million over the terms of the related liabilities. In addition, a deferred
(Dec. 31, 1995: DM 1,014 million) primarily relate to tax asset of DM 549 million has been included. In the
1,018 853 prepaid personnel costs of DM 776 million (Dec. 31, 1995: previous year a deferred tax liability of DM 108 million was
DM 673 million) at Deutsche Telekom AG. Also included are included under other accruals.
discounts on loans of DM 228 million (Dec. 31, 1995:
DM 283 million) which are amortized on a straight-line basis

(23) Shareholders’ equity (24) Capital stock
Prior to January 1, 1995, the total capital represented the was formed on January 1, 1995, the date on which Deutsche The capital stock of Deutsche Telekom AG represents the par value of DM 5, were issued. The Federal Republic fore-
investment of the Federal Republic in the net assets of Bundespost TELEKOM was transformed into a corporation capital stock of the consolidated group. Deutsche Telekom went its pre-emptive rights and did not participate in this
Deutsche Bundespost TELEKOM. A schedule reflecting the under German Law. AG is authorized by its Articles of Incorporation to increase capital increase. As a result, in accordance with Article 5
development of the consolidated stockholders’ equity of its capital stock by up to DM 5,000 million. Following its paragraph 1 of the Articles of Incorporation Deutsche
Deutsche Telekom AG in accordance with commercial and The following table shows the development of the capital of initial public offering the Company can increase its capital Telekom AG’s capital stock totaled DM 13,719 million at
stock corporation law can only be prepared from the date of Deutsche Bundespost TELEKOM in 1994 as well as the rec- stock by a further DM1,431.5 million through January 2, December 31, 1996, representing 2,743.7 million bearer
incorporation of Deutsche Telekom. Deutsche Telekom AG onciliation to the capital of Deutsche Telekom at January 1, 2000. shares with a nominal value of DM 5 each. Following deduc-
1995: tion of treasury stock held by the Company, capital stock
On July 1, 1996, a capital increase was approved by the with dividend entitlement amounted to DM 13,716 million.
Retained Earnings shareholders’ meeting. This involved the issue of 30 million
Total Capital Capital Additional Difference Other Total Unappro- Minority bearer shares to the Federal Republic as the sole share- The Federal Institute informed Deutsche Telekom AG in a
stock paid-in from retained priated net interest holder, at a par value of DM 5 per share. At December 31, letter dated July 10, 1995, making specific reference to
nominal capital currency earnings income 1996, the Federal Republic held a total of 2,030 million § 20 paragraph 4 AktG, that the Federal Republic holds a
millions of DM value translation Deutsche Telekom shares each with a par value of DM 5. majority interest in Deutsche Telekom AG pursuant to
Through the initial public offering of Deutsche Telekom AG § 16 paragraph 1 AktG.
Balance at Jan. 1, 1994 15,159 15,159 shares an additional 713.7 million new shares, each with a
Net income 3,595 3,595
Losses applicable to
minority shareholders (4) (4) (25) Additional paid-in capital
Difference from currency translation (134) (134) The additional paid-in capital of Deutsche Telekom AG In 1995, DM 316 million was transferred to the additional
Retained levy 716 716 represents the additional paid-in capital of the consolidated paid-in capital of Deutsche Telekom AG pursuant to
Balance at Dec. 31, 1994 19,332 19,332 group. § 272 paragraph 2 No. 4 HGB. This transfer was made in
Transformation into a stock accordance with § 32 paragraph 1 of the Haushaltsgesetz
corporation – (19,332) 10,000 10,976 (134) (1,512) (1,646) – 2 In accordance with § 272 paragraph 2 No. 1 HGB, the pro- 1995 (German Budget Act), which required Deutsche
Balance after transformation ceeds of the share issue in excess of capital stock totaling Telekom AG to use the levy payable to the Federal Republic
into a stock corporation DM 16,577 million was recorded as additional paid-in capi- arising from operating revenue generated in eastern
at Jan. 1, 1995 19,332 – 10,000 10,976 (134) (1,512) (1,646) – 2 tal. Germany to increase shareholders’ equity.
The allocation of assets, liabilities and operations to earnings; DM 134 million was recorded as a cumulative loss
Deutsche Bundespost TELEKOM and the subsequent trans- in the foreign currency translation account and DM 1,512 (26) Retained earnings (deficit)
fer as of January 1, 1995 to Deutsche Telekom AG were million was recorded as a deficit in the other retained In addition to the transfers from Deutsche Telekom AG’s net includes the cumulative effects of consolidation entries,
accounted for as transfers between entities under common earnings account. On November 9, 1995, at a special income for the year, retained earnings (deficit) include the while translation adjustments are recorded in a separate
control using the “as if” pooling method. In exchange for the shareholders’ meeting, a ten-for-one stock split was consolidated group’s share of the consolidated subsidiaries’ component of retained earnings.
transfer of assets and liabilities, the Federal Republic re- declared with the effect that Deutsche Telekom had 2 billion net income or losses, provided they were generated by such
ceived 200 million bearer shares with a par value of DM 50. bearer shares, par value of DM 5 each outstanding at subsidiaries since being included in the consolidated group, Retained earnings (deficit) were reduced by DM 150 million
The net assets of Deutsche Telekom AG at incorporation December 31, 1995. All applicable share and per share as well as a reserve for treasury shares held by the Company as a result of the shares issued from Company reserves.
were DM 20,976 million, of which DM 10,000 million was data has been adjusted for the stock split. Under the Articles in accordance with § 272 paragraph 4 HGB. This item also
credited as capital stock in accordance with §5 paragraph 1 of Incorporation, the Board of Management is authorized
of the Articles of Incorporation and DM 10,976 million was to increase the capital stock of the Company by a further
credited as additional paid-in capital pursuant to § 272 para- DM 5 billion, to a maximum of DM 15 billion, by issuing (27) Minority interest
graph 2 No. 1 HGB. The consolidated net asset value was new shares with a par value of DM 5 for cash or noncash Minority interest represents the minority shareholders’ iaries, and relates primarily to MATAV which was consoli-
reduced by DM 1,646 million, primarily due to the elimina- consideration through January 2, 2000. proportionate share of the equity of the consolidated subsid- dated for the first time in 1996.
tion of intercompany profits resulting from the transfer of
mobile phone services from the parent company to a sub- The development of consolidated stockholders’ equity for
sidiary. This amount was charged directly against retained the years 1995 and 1996 is presented in a separate table.

(28) Pensions and similar obligations 1996 1995 1994
millions of DM millions of DM millions of DM
Non-civil servant pension plans The corresponding pension accruals measured in
The pension obligations of Deutsche Telekom for non-civil accordance with § 6a of the Income Tax Law (EStG) is Service cost 214 217 152
servants are provided for by a range of defined benefit plans. DM 5,532 million (Dec. 31, 1995: DM 5,497 million). I n te re st cost on projected benefit obligation 464 448 452
These pensions include direct obligations of Deutsche Actual return on plan assets 15 (56) (54)
Telekom and indirect pension commitments made to em- The VAP benefits, which supplement national social security Net periodic pension cost 693 609 550
ployees through the VAP, as well as obligations under Article retirement benefits up to the level specified in the pension
131 of the Basic Law (Grundgesetz – GG) as shown in the benefit formula, are generally calculated on the basis of the Civil servant retirement arrangement on unpaid leave). Under Postreform II, the Federal Republic
following table: level of employee compensation during specific periods of Deutsche Telekom AG maintains a special pension fund ( Un- compensates the special pension fund for differences
employment, but are limited to the difference between the terstützungskasse) for its civil servants. Deutsche Telekom AG between the ongoing payment obligations of the special
Dec. 31, 1996 Dec. 31, 1995 amount determined by the benefit formula and social secur- is required to assist in funding the German Government’s pension fund, on the one hand, and amounts received from
millions of DM millions of DM ity benefits. Benefits relating to other direct pension plans pension and healthcare obligations to Deutsche Telekom Deutsche Telekom AG and returns on assets, on the other
Pension obligations are generally determined on the basis of salary levels and AG’s current and former civil servant staff and their surviving hand, and guarantees that the special pension fund is
– Direct 208 123 years of service. dependents. Deutsche Telekom AG is legally obligated to always in a position to fulfil the obligations it has assumed.
– Indirect 6,045 5,866 make annual contributions to the special pension fund of The Federal Republic cannot require reimbursement from
Obligations under Article 131 GG 40 40 The VAP is funded by Deutsche Telekom, Deutsche Post AG DM 2.9 billion for the years 1995 through 1999, and in Deutsche Telekom AG for amounts paid by it to the special
and Deutsche Postbank AG and certain other governmental subsequent years, annual contri b u t i o n sequal to 33 % of the fund.
6,293 6,029 entities that also provide benefits to current and former gross salaries of active civil servants (including civil servants
employees through the VAP. Annual funding for each of the
These pension obligations are fully accrued net of the VAP participating enterprises is set at a percentage of the net
assets. personnel costs for active employees covered by the plan. (29) Other accruals
The pension obligation and the plan assets relating to DM 1,646 million has been provided for in the calculation of
The amount of the accrual was determined using actuarial retirees have been calculated in total, and allocated using an Dec. 31, 1996 Dec. 31, 1995 corporation tax.
principles that are consistent with U.S. GAAP (SFAS No. 87) index which the Company believes reflects the share of millions of DM millions of DM
and using the assumptions shown in the following table: the ultimate obligation of Deutsche Telekom for that group When Postreform II came into effect, the Civil Service Health
of employees. This index (41 %) is based on the historical Ta xe s Insurance Fund was closed to new members. Due to the
1996 1995 1994 share of compensation of Deutsche Telekom for the Current ta xe s 971 596 ageing of the group of people insured, there is an expected
Discount rate 6.5 % 7.0 % 7.0 % employee group in comparison with the total of such com- D e fe rred taxes – 108 shortfall between the fund’s sources of regular income and
Projected salary increase 3.0 % 3.0 % 3.0 % pensation. 971 704 benefits paid. Deutsche Telekom AG has accrued the actu-
Expected return on assets 6.4 % 7.0 % 7.0 % arially determined present value of this future deficit.
Projected pension increase 2.0 % 2.5 % 2.5 % Accruals other than ta xe s
E mp l oyee benefits Deutsche Telekom has, due to future competition, an-
Dec. 31, 1996 Dec. 31, 1995 Civil Service Health Insurance Fund 1,356 1,483 nounced its intention to reduce its workforce by approxi-
millions of DM millions of DM Personnel re st ru c t u ri n g 1,977 785 mately 60,000 to 170,000 full-time equivalent employees by
Actuarial present value of benefits: Other obligations 768 627 the end of the year 2000 (excluding employees of subsidiar-
Vested 6,189 6,342 4,101 2,895 ies first consolidated after January 1, 1995) through natural
Nonvested 766 195 Litigation risks 767 713 attrition, early retirement and other programs. The planned
Accumulated benefit obligation 6,955 6,537 Outstanding invoices 737 721 reductions include an estimated 38,300 non-civil servants
Effect of projected future salary increases 513 595 Unearned telephone charge expected to leave under voluntary separation agreements. In
Projected benefit obligation 7,468 7,132 units 459 352 1996 approximately 3,000 (1995: 4,200) civil servants and
Plan assets at fair value (669) (793) Environmental remediation 413 448 3,800 (1995: 10,400) non-civil servants accepted the
Projected benefit obligation in excess of plan assets 6,799 6,339 D e fe rred maintenance 98 151 Company’s offer for early retirement and severance. While
Unrecognized net gains (losses) (506) (310) O th e r 1,091 980 the early retirement program for civil servants and natural
Accrual for pensions 6,293 6,029 7,666 6,260 attrition do not result in incremental costs for Deutsche
Telekom AG, in 1996 the other instruments led to
The VAP plan assets consist principally of fixed-interest Net periodic pension cost is summarized as follows: 8,637 6,964 DM 1,758 million in costs recorded as extraordinary losses.
bonds, valued at the lower of acquisition cost or market Unpaid restructuring costs amounting to DM 1,977 million
value, and cash in banks. The increase in provisions for taxes is primarily due to the are included in accruals and DM 114 million are included in
fully taxable status of Deutsche Telekom, effective January 1, other accounts payable.
1996. The income tax effect of the proposed dividend of

The table below sets forth the expense recognized, pay- payments in respect of these staff reduction measures for (30) Liabilities
ments made, and the related accruals/payables for future the years 1995 and 1996:
Dec. 31,1996 Dec. 31, 1995
1996 1995 Total of which due Total of which due
millions of DM millions of DM within in one to after five within in one to after five
millions of DM one year five years years one year five years years
Accruals/payables, beginning of period 857 349
Debt
Expense recognized 1 ) 1,758 1,264
Payments made 2 ) (524) (756) Bonds and debentures 87,089 9,526 37,862 39,701 96,386 9,412 36,933 50,041
Commercial paper 2 2
Accruals/payables, end of period 2,091 857 Liabilities to banks 12,797 3,223 4,343 5,231 14,001 1,765 6,215 6,021
1)
This includes additions to accruals/payables in 1996: DM 1,403 million, 1995: DM 857 million. 99,888 12,751 42,205 44,932 110,387 11,177 43,148 56,062
2)
This includes payments against accruals/payables in 1996: DM 169 million, 1995: DM 349 million.
Other
Accruals for environmental remediation of DM 413 million Other accruals include a difference of DM 8 million at
(Dec. 31, 1995: DM 448 million) were established for site December 31, 1996 arising from the capital consolidation. Advances received 178 176 2 143 143
clean-up costs and asbestos removal costs. There are no Trade accounts payable 4,460 4,175 285 4,359 4,325 34
material contingencies as a result of these risks. Deutsche Liabilities on bills accepted
Telekom expects to incur these costs over the next 3 to 5 and drawn 4 3 1
years. Liabilities to unconsolidated
subsidiaries 15 15
Liabilities to other companies in
which an equity interest is held 368 368 104 104
Other liabilities 7,090 4,672 291 2,127 7,040 4,825 282 1,933
of which: from taxes (839) (839) (266) (266)
of which: from social security (129) (129) (59) (59)
12,115 9,409 579 2,127 11,646 9,397 316 1,933
Total liabilities 112,003 22,160 42,784 47,059 122,033 20,574 43,464 57,995
Bonds and debentures consist primarily of bonds issued by

Deutsche Bundespost.
Breakdown of bonds and debentures (millions of DM) is as
follows:
effective interest rate up to 6 % up to 7 % up to 8 % up to 9 % over 9% Total
Due in
1997 – 8,489 1,000 – 37 9,526
1998 – 7,199 – – – 7,199
1999 150 3,500 6,802 – 1 10,453
2000 2,100 – 637 637 6,420 9,794
2001 2,050 – – 7,250 1,116 10,416
after 2001 24 11,400 18,275 10,000 2 39,701
4,324 30,588 26,714 17,887 7,576 87,089

Notes to the
consolidated statement
of cash flows
Liabilities to banks due in the next 5 years and thereafter are Other liabilities The consolidated statement of cash flows has been pre- the date of purchase are considered cash equivalents
as follows (in millions of DM): pared in conformity with International Accounting Standard for cash flow reporting purposes. These cash and cash
Dec. 31, 1996 Dec. 31, 1995 No. 7, Cash Flow Statements. Liquid assets and short-term equivalents increased by DM 3,808 million in 1996 to
due in Amounts millions of DM millions of DM investments with original maturities of less than 3 months at DM 7,316 million at December 31, 1996.
1997 3,223
1998 1,979 I n te re st 2,856 3,813
1999 685 Loan notes 1,357 1,589 (31) Net cash provided by operating activities
2000 655 Rental and leasing obligations 1,068 751 Net cash provided by operating activities decreased in 1996 This is primarily attributable to higher noncash charges in-
2001 1,024 Liabilities to employees 362 371 by only DM 1,428 million to DM 22,259 million despite a cluding depreciation expense and increases in accruals.
after 2001 5,231 O th e r 1,447 516 decrease of DM 3,349 million in net income.
12,797 7,090 7,040
(32) Net cash used for investing activities
The average effective interest rate of total debt is for: Other liabilities includes taxes of DM 839 million (Dec. 31, Net cash used for investing activities increased to possible to finance these investments, totaling DM 22,106
1995: DM 266 million) and social security liabilities of DM 25,325 million in 1996 as a result of an increased level million, from cash provided by operating activities. The in-
Bonds and debentures 7.46 % p. a. (1995: 7.19 % p. a.) DM 129 million (Dec. 31, 1995: DM 59 million). of capital expenditure in network and particularly in financial crease of DM 4,037 million in short-term investments and
Liabilities to banks 7.17 % p. a. (1995: 7.01 % p. a.) investments (including investments in Sprint, TRI Technol- marketable securities represents the temporary investment
Liabilities include borrowings of DM 747 million in foreign ogy Resources Industries Berhad as well as the capital of the proceeds of the share offering.
At December 31, 1996 Deutsche Telekom had reached currencies. increase effected by Atlas S.A.). As in previous years, it was
agreements with a number of banks pursuant to which it can
draw on short-term revolving credit facilities up to DM 8.0 bil- Liabilities in the amount of DM 262 million (Dec. 31, 1995:
lion at interest rates ranging from 5.5 % to 6.0 % or at the DM 175 million) payable by subsidiary companies to banks (33) Net cash provided by (used for) financing activities
daily interbank rate plus 0.25 %. At December 31, 1996 and third parties are collateralized. Deutsche Telekom AG The increase in cash provided by financing activities of DM20,146 million. This positive impact is partly offset by
these credit lines had been drawn upon to only a limited has provided no collateral against its liabilities. In accor- DM 22,108 million to DM 6,874 million in 1996 is primarily the net repayment of debt of DM 12,062 million and the first-
extent. dance with Po st re fo rm II (§ 2 paragraph 4 Po st UmwG), the attributable to the inclusion of the proceeds of the time dividend payment to the Federal Republic in respect of
Federal Republic is guarantor of all Deutsche Telekom AG’s Company’s global offering in November 1996 amounting to the financial year 1995.
During 1996, financial liabilities with a nominal value of liabilities which were outstanding at January 1, 1995.
DM 1.2 billion were repaid ahead of schedule.
The Company’s debt was raised principally to finance the
development of the telecommunications network in eastern
Germany.

Other information
(34) Guarantees and commitments, and other financial (35) Financial instruments
(34) obligations
Fair value action between willing parties, other than in a forced or
Guarantees and commitments reduction in the present value of DM 4.5 billion in compari- The fair value of a financial instrument is the amount at liquidation sale. The following is a summary of the estimated
son to the previous year resulted from the payment of which the instrument could be exchanged in a current trans- fair value of Deutsche Telekom’s financial instruments:
Dec. 31, 1996 DM 2.9 billion in 1996 and the separation of civil servants
millions of DM under the personnel reduction measures. Dec. 31, 1996 Dec. 31, 1995
Fair value Net carrying amount Fair value Net carrying amount
Guarantees 302 As part of the MagyarCom joint venture agreement, Ameri te ch millions of DM millions of DM millions of DM millions of DM
Collateral granted against liabilities Corporation has the option during the term of agreement to
of nonconsolidated companies 27 sell certain of its shares in the joint venture to Deutsche A s s et s
Liabilities arising from warranty Telekom. The exercise price of the put option is the fair mar- Other investments in noncurrent securities 356 337 12 12
agreements 4 ket value of the corresponding MATAV shares plus a $60 mil- Receivables 7,465 7,465 6,852 6,852
lion control premium; provided that, until March 31, 1998, Liquid assets 17,852 17,852 10,008 10,008
333 the exercise price is subject to a floor equal to $210 per
share plus the $60 million control premium, plus accrued Liabilities
Other financial obligations interest from the date of the original share purchase. Should Bonds and debentures 94,959 87,089 101,135 96,386
the option be exercised, the minimum range of total Liabilities to banks 12,799 12,799 14,001 14,001
Dec. 31, 1996 payments required would be between $270 million and O th e r 12,115 12,115 11,646 11,646
millions of DM $465 million plus interest. The possible commitment arising
from this option is not included in purchase commitments D e ri va t i ve financial instruments1 )
Present value of payments to for interests in other companies of DM 579 million shown in I n te re st rate swaps 52 2 123 –
special pension fund 25,300 the table above. Foreign currency forward exchange contracts 13 – 30 –
Obligations under rental and lease Forward rate agreements – – 1 –
agreements 6,015 Deutsche Telekom is a party to a number of lawsuits and S wa pt i o n s – – (2) (2)
Purchase commitments for capital other proceedings arising out of the general conduct of its
projects in progress 4,851 business, including proceedings under laws and regulations 1)
Purchase commitments for interests in related to environmental and other matters. Litigation costs Non-bracketed amounts represent assets, bracketed amounts represent liabilities
other companies 579 have been accrued for the costs of litigation and for any
Contingent obligations arising from probable losses. The Company does not believe that any Fair values were determined as follows:
Public Law 7 additional costs will have a material adverse effect on its
net worth, financial position and results. The fair value of other investments in noncurrent securities is gains and losses of open contracts. The estimated fair val-
36,752 based on quoted market prices for those instruments or sim- ues of derivatives used to hedge or modify the Company’s
ilar instruments. The net carrying amounts of trade accounts risk will vary substantially with future changes in interest
The present value of payments required to be made by receivable approximate their fair values, due to the short rates or with fluctuations in foreign exchange rates. These
Deutsche Telekom AG, in accordance with Postreform II, period to maturity. The net carrying amounts of liquid assets fair values should not be viewed in isolation, but rather in
to the special pension fund for civil servants amounted to also reflect reasonable estimates of fair value due to the rela- relation to the fair values of the underlying hedged transac-
DM 25.3 billion at December 31, 1996, of which DM 10.0 bil- tively short period to maturity of the instruments. tions and the overall reduction in the Company’s exposure to
lion relates to future years of service of the active civil adverse fluctuations in interest and foreign exchange rates.
servants. Upon the withdrawal of the last civil servant from The fair value of debt which is publicly traded, primarily
active service the requirement for Deutsche Telekom to bonds and debentures, is estimated based on quoted mar- The fair values of investments in associated and related
contribute to the civil servant pension fund expires. The ket prices at year end. The book values of commercial companies which have carrying values of DM 6,850 million
paper, liabilities to banks, and other liabilities approximate and DM 2,934 million at December 31, 1996 and 1995,
their fair values. respectively, were not practicably determinable because
they are not publicly traded or cannot be sold due to con-
The fair value of off-balance sheet financial instruments tractual restrictions at this point in time. Due to the unique
generally reflects the estimated amount the Company would nature of the individual other financial guarantees, estima-
receive or pay to terminate the contracts at the reporting tion of their fair values is not practicable. It is not practicable
date, thereby taking into account the current unrealized to estimate a fair value for the put option held by Ameritech
Corporation because the shares of MATAV are not publicly
traded.

Derivative financial instruments Amounts payable and receivable on interest rate swaps and (36) Information on the Board of Management and the
In the normal course of business, Deutsche Telekom is forward rate agreements are accrued and recognized as an (36) Supervisory Board of Deutsche Telekom AG
exposed to risks relating to changes in interest rates and adjustment to net interest expense. Gains and losses on for- Remuneration was paid to members of the Supervisory paid to former members of the Board of Management of
foreign exchange rates. To manage exposure to such risks, ward foreign exchange contracts offset gains and losses Board of Deutsche Telekom AG in 1996 in the amount of Deutsche Telekom AG and their surviving dependents
the Company uses certain types of derivative financial in- resulting from the underlying transactions. Gains and losses DM 561,500, inclusive of meeting expenses of DM 34,750. amounts to DM 670,029.
struments. Interest rate swaps, forward rate agreements and on contracts that hedge specific foreign currency commit- Provided that the 1996 financial statements of Deutsche Pension accruals totaling DM 6,683,968 have been estab-
swaptions are entered into with the aim of synthetically alter- ments are deferred and included in the measurement of the Telekom AG are approved in their current form, the remuner- lished for this group of persons at December 31, 1996. Pen-
ing the Company’s exposure to interest rate risk and seek to related foreign currency transaction. Premiums paid or ation of the Board of Management of Deutsche Telekom AG sion obligations to such persons for which no reserve had to
reduce its overall costs of finance. The foreign currency received on options are included in the basis of the underly- will amount to DM 10,353,208. The remuneration to be be established amounted to DM 3,038,959 at that date.
swap contracts outstanding at December 31, 1996 and ing transactions.
1995 were principally established to hedge dollar commit-
ments related to acquisitions. The derivative financial instru- The following is a summary of the contract or notional princi- (37) Proposal for appropriation of net income
ments are subject to internal controls. pal amounts outstanding at December 31, 1996 and 1995: (37) of Deutsche Telekom AG
The income statement of Deutsche Telekom AG reflects net payment of a dividend of DM 1,645,943,539 from unappro-
Dec. 31, 1996 Dec. 31, 1995 income of DM 1,556,245,388. Following inclusion of the priated net income of DM 1,647,409,853. This represents a
Notional amount Notional amount unappropriated net income from 1995, this gives rise to total dividend of DM 0.60 per share with nominal value of DM 5
Maturity millions of DM Maturity millions of DM unappropriated net income of DM 1,647,409,853. The on the capital stock of DM 13,716,196,160. The remaining
Supervisory Board and the Board of Management propose, balance of DM 1,466,314 will be carried forward as part of
I n te re st rate swaps 1997–2001 5,850 1998–2000 2,500 subject to the approval of the shareholders’ meeting, the unappropriated net income.
Foreign currency forward exchange contracts 1997 250 1996 1,404
Forward rate agreements – – 1996 500
S wa pt i o n s – – 1996 500
The terms of the interest rate swaps provide for Deutsche age of 4.1 % at December 31, 1995) at the instrument strike
Telekom to receive interest at fixed rates (weighted average date and an agreed-upon reference rate. The swaptions sold
of 4.3 % and 6.0 % at December 31, 1996 and 1995, all had three month terms with the underlying interest rate
respectively) and pay interest at variable rates (generally swaps all having a three-year term. The swaptions expired
based on the six-month LIBOR rate). Amounts received and unexercised by the holders during 1996.
paid under interest rate swaps, which are dependent on
the notional amounts and the contractual interest rates, are The notional amounts of the derivative financial instruments
settled either annually or semi-annually. do not necessarily represent amounts exchanged by the par-
ties and, therefore are not a direct measure of the exposure
The forward foreign exchange contracts fix amounts the of the Company through its use of derivatives. The amounts
Company is required to pay in the future in DM for a contrac- exchanged are calculated by reference to the notional
tually fixed amount of foreign currencies, generally US dollars. amounts and by the other terms of the derivatives, such as
The forward rate agreements generally require the Company interest rates, exchange rates or other indices.
to pay (or receive) an amount for the excess (or shortfall) of
the difference in the specified interest rate (weighted aver-

Reconciliation
to U.S. GAAP
Due to the listing on the New York Stock Exchange, Deutsche to comply with U.S. GAAP, further adjustments are required (g) Employee share purchase plans – Under German GAAP, deferred taxes have not been recog-
Telekom AG is required to submit, in addition to its local in order to meet the requirements of U.S. accounting law Employees who participated in an employee share purchase nized for those temporary differences which are not
financial statements, annual financial statements in the for- and of Form 20-F. These adjustments refer to those cases plan bought shares at a discount of approximately 40 %. expected to reverse in the foreseeable future. Under U.S.
mat of Form 20-F to the SEC. This procedure is in accor- where application of U.S. GAAP is not permissible under Under German GAAP, the proceeds of the offering were GAAP, deferred taxes are generally recognized for all
dance with the foreign integrated disclosure system for for- German GAAP. The reconcilation to U.S. GAAP explains how recorded net of such discounts. Under U.S. GAAP, the temporary differences.
eign companies listed on the stock exchange. In addition to the corresponding values of the German consolidated finan- discount is treated as compensation expense.
the adjustments which have already been made in the con- cial statements after U.S. GAAP adjustments comply with On July 1, 1996, the shareholders’ meeting declared a divi-
solidated balance sheet and statement of income in order U.S. reporting requirements. Employees could also participate in a financed share pur- dend distribution out of income earned during 1995. Under
chase plan. In connection with this plan Deutsche Telekom German GAAP, the income tax effect of this distribution was
agreed to pay a bank for its services on a monthly basis recorded as current income tax in 1995. Under U.S. GAAP,
(38) Significant differences between German and United through December 31, 2001. Under German GAAP, the the estimated tax effects of expected distributions from
(38) States generally accepted accounting principles costs of this plan are recognized as they are paid. Under 1995 earnings have been recorded as deferred tax expense
Certain property, plant and equipment on hand as of (c) Levy to the Federal Republic of Germany U.S. GAAP, the costs are fully recognized in 1996. in 1995.
December 31, 1992 have been valued at fair values rather In accordance with German GAAP, Deutsche Telekom has
than at historical cost less depreciation, which is required by recorded a direct contribution to additional paid-in capital (h) Unrealized gains on marketable securities Deferred taxes are also provided for the income tax effects
U.S. GAAP. The Company has not been able to quantify the for the portion of the levy payable to the Federal Republic Under German GAAP, marketable debt and equity securities of differences between U.S. GAAP and German GAAP.
effect of the difference in accounting treatment because, of Germany relating to revenues from services generated in are generally carried at historical cost. Under U.S. GAAP, Deferred taxes are measured based on enacted tax law and
prior to January 1, 1993, the predecessor company did not eastern Germany. Under U.S. GAAP, the amount retained marketable debt and equity securities, other than invest- reduced by a valuation allowance when, in the opinion of the
maintain sufficiently detailed historical cost records. The fair would not be recognized as an expense in the income ments accounted for by the equity method, are categorized management, it is more likely than not that some portion or
market values recorded in the opening balance sheet of statement. as either trading, available for sale, or held to maturity. all of the deferred tax assets will not be realized.
Deutsche Telekom AG at January 1, 1995 have been carried Securities classified as trading or available for sale are
forward as the acquisition costs. (d) Maintenance accruals reported at fair value at the balance sheet date. Unrealized The following table shows the differences between income
As required by German GAAP, the costs of maintenance per- gains and losses on trading securities are recorded in net tax expense determined in accordance with U.S. GAAP and
(a) Personnel restructuring formed within the first three months following the year end, income while unrealized gains and losses on securities German GAAP:
Under German GAAP, the estimated costs of employee sep- have been accrued at each period end. Under U.S. GAAP, categorized as available for sale are recorded, net of income
arations have been accrued on the basis of the Company’s the cost of maintenance is recognized in the periods in- tax, in shareholders’ equity. millions of DM 1996 1995 1994
announced intention to reduce its workforce. Under U.S. curred.
GAAP, these costs are accrued in the period that the em- (i) Other differences Current income taxes (524) 524 –
ployee accepts the offer of termination. The Company has (e) Value-added tax Other differences consist primarily of the miscellaneous D e fe rred taxes from the
agreed pursuant to its collective bargaining agreements with As of December 31, 1996 Deutsche Telekom had nonde- valuation differences that are not individually significant, application of U.S. GAAP 580 (579) (35)
the unions that, prior to January 1, 1998, it will not unilater- ductible capitalized VAT amounting to DM 3,915 million, net including the treatment of derivative financial instruments D e fe rred taxes on U.S. GAAP/
ally terminate the employment of its non-civil servant of depreciation in 1996 of DM 1,305 million, recorded as and unrealized gains on foreign currency receivables and German GA A Pd i fferences (315) (322) (2)
employees due to business reasons. Civil servants may not property, plant and equipment. In addition, in 1996 payables that are not deferred under U.S. GAAP. (259) (377) (37)
be involuntarily terminated under the terms of their condi- Deutsche Telekom recovered DM 1,516 million of VAT previ-
tions of employment. ously paid. German GAAP requires the capitalized VAT to be (j) Income taxes During 1994 legislation was enacted to make Deutsche
depreciated and the VAT recoveries to be recorded as other The determination of income tax expense under German Telekom AG subject to ordinary corporate taxation from
(b) Share offering costs operating income. Under U.S. GAAP the capitalized VAT is GAAP differs from U.S. GAAP as follows: January 1, 1995; however, the Company benefited from an
In 1996, the Company incurred costs in connection with its treated as a long-term receivable rather than property, plant essentially complete exemption from taxation in 1995 and
initial public offering. Such costs are recorded as extraordi- and equipment. Therefore, neither depreciation nor other – Under U.S. GAAP, in contrast to German GAAP, deferred instead was required to pay a final levy to the Federal Repub-
nary expenses in the income statement in accordance with operating income are recognized. tax assets are recognized for the estimated future tax lic in the amount of DM 3.1 billion. Under U.S. GAAP,
German GAAP. Under U.S. GAAP, specific incremental costs effects attributable to tax loss carryforwards. deferred taxes amounting to DM 3,783 million have been
directly attributable to an offering are charged against the (f) Interest rate swaps recognized during 1994 for those temporary differences
proceeds of the offering. Under German GAAP, gains and losses resulting out of the – Under German GAAP, deferred taxes are not recorded that existed when such tax legislation was enacted.
termination of interest rate swaps are recognized in the year for temporary differences which arose during tax free
of termination. Under U.S. GAAP, gains and losses on inter- periods. Under U.S. GAAP, the estimated future tax effects (k) Minority interest
est rate swaps accounted for as hedges are amortized over related to those temporary differences are recognized. Under U.S. GAAP, minority interest is not included in
the remaining outstanding period of the interest rate swap shareholders’ equity.
or the remaining life of the hedged position, whichever is
shorter. During the course of the year, interest rate swap
contracts with a notional amount of DM 2,450 million and
maturities between 1998 and 2000 were terminated result-
ing in a gain of DM 116 million.

Reconciliation of net income from German GAAP to U.S. GAAP: (39) Deferred taxes in accordance with U.S. GAAP:
1996 1995 1994
Note millions of DM millions of DM millions of DM Deferred tax assets and liabilities arising from temporary
differences and net operating losses are as follows:
Net income as reported in the consolidated Dec. 31, 1996 Dec. 31, 1995
financial statements under German GAAP 1,758 5,272 3,595 millions of DM millions of DM
Personnel re st ru c t u ring accrual (a) 960 548 –
Share offering costs (b) 564 – – D e fe rred tax assets in accordance with U.S. GAAP
Levy to the Federal Republic of Germany (c) – 316 716 Current deferred tax assets
Maintenance accruals (d) (56) (181) (12) Net operating loss carryforwa rd s 175 104
Value-added tax (e) (211) – – O th e r 5 –
I n te re st rate swaps (f) (116) – – Noncurrent deferred tax assets
E mp l oyee share purchase plans (g) (73) – – Pro p e rt y, plant and equipment 93 194
Other differences (i) 7 (15) (91) Net operating loss carryforwa rd s 319 432
Income ta xe s (j) (259) (377) (37) Pension accruals 3,455 3,333
Net income in accordance with U.S. GA A Pb e fo re Civil servant health insurance accrual 788 845
effects of the change in tax status 2,574 5,563 4,171 Other accruals 694 –
D e fe rred income taxes recognized as a result of change in tax status (j) – – 3,783 O th e r 66 83
Net income in accordance with U.S. GAAP 2,574 5,563 7,954 D e fe rred tax assets in accordance with U.S. GAAP 5,595 4,991
Reconciliation of shareholders’ equity from D e fe rred tax liabilities in accordance with U.S. GAAP
German GAAP to U.S. GAAP: Current deferred tax liabilities
Dec. 31, 1996 Dec. 31, 1995 Accruals (134) (647)
Note millions of DM millions of DM O th e r (46) –
Noncurrent deferred tax liabilities
Shareholders’ equity in accordance with German GAAP 46,599 24,732 Personnel re st ru c t u ring accrual (191) (127)
O th e r (463) (825)
Accrual for personnel re st ru c t u ring measures (a) 1,508 548 D e fe rred tax liabilities in accordance with U.S. GAAP (834) (1,599)
Maintenance accruals (d) 94 151
Value-added tax (e) (211) – Net current deferred tax asset (liability) – (543)
I n te re st rate swaps (f) (116) – Net noncurrent deferred tax asset 4,761 3,935
E mp l oyee share purchase plans (g) (28) – Valuation allowance (214) –
Unrealized gains on marketable securities (h) 19 – Net deferred tax asset under U.S. GAAP 4,547 3,392
Other differences (i) 31 25
Income ta xe s (j) 3,998 4,024
Minority inte re st (k) (1,193) (5) The following table shows the development of deferred taxes
Shareholders’ equity in accordance with U.S. GAAP 50,701 29,475 from German GAAP to U.S. GAAP:
Dec. 31, 1996 Dec. 31, 1995
Changes in shareholders’ equity in accordance with U.S. GAAP: millions of DM millions of DM
1996 1995 Net deferred taxes under German GAAP 549 (108)
millions of DM millions of DM U.S. GAAP adjustments:
Application of U.S. GAAP 4,737 3,912
Shareholders’ equity, beginning of year 29,475 24,103 U.S./German GAAP differences (739) (412)
Net income in accordance with U.S. GAAP 2,574 5,563
Differences from currency translation (25) (191) Net deferred asset under U.S. GAAP 4,547 3,392
Proceeds from share offering (after share offering costs, net of tax) 19,869 –
Dividends for 1995 (1,200) –
Net change in unrealized gain on marketable securities, net of deferred taxes 8 –
Shareholders’ equity, end of year 50,701 29,475

(40) Additional income statement and balance sheet Balance sheet presentation under U.S. GAAP
(40) information in accordance with U.S. GAAP German GAAP does not require presentation of a classified fied as noncurrent. Summarized balance sheet information
balance sheet. Under U.S. GAAP, all receivables due after measured and classified in accordance with U.S. GAAP is as
Consolidated statement of income ful accounts that would generally be recorded as reductions one year and all liabilities payable after one year are classi- follows:
Certain items in the total cost income statement would be to the original expense lines under U.S. GAAP rather than
classified differently under U.S. GAAP. These items include, separately as income. Dec. 31, 1996 Dec. 31, 1995
in particular, reversals of accruals and allowances for doubt- millions of DM millions of DM
1996 1995 1994 Assets:

millions of DM millions of DM millions of DM Current assets:
Cash and cash equivalents 7,316 3,508
Results from ordinary business activities 4,429 9,493 11,036 Other current assets 20,953 17,171
Special charge relating to other Post entities – – (2,320) 28,269 20,679
Levy to the Federal Republic of Germany – (2,782) (4,448) Noncurrent assets 150,554 144,226
Income before income ta xe s 4,429 6,711 4,268
Income ta xe s (1,665) (991) (101) 178,823 164,905
D e fe rred income taxes recognized as a result of change in tax status – – 3,783
Income before extraordinary losses and income (losses) applicable Shareholders’ equity and liabilities:
to minority shareholders 2,764 5,720 7,950 Current liabilities:
Extraordinary loss (net of income tax of DM 21 million in 1996 Trade accounts payable 10,319 9,881
and DM – million in 1995) (27) (159) – S h o rt - te rm debt and current portion of long-term debt 12,716 11,177
(Income)/losses applicable to minority shareholders (163) 2 4 Accruals 3,553 3,865
Net income in accordance with U.S. GAAP 2,574 5,563 7,954 26,588 24,923
Earnings per share/ADS in accordance with U.S. GAAP (in DM): Long-term liabilities:
B e fo re extraordinary losses 1.23 2.82 3.92 Long-term debt 86,944 98,926
Extraordinary losses (0.01) (0.08) – Other noncurrent liabilities 13,397 11,576
Net income 1.22 2.74 3.92 100,341 110,502
Weighted ave ra ge shares outstanding (in millions) 2,110 2,030 2,030 Minority inte re st 1,193 5
Shareholders’ equity 50,701 29,475
178,823 164,905

Auditors’ Report
(41) Other matters The consolidated financial statements, which we have

Effective January 1, 1996, the Company adopted SFAS No. 121, In 1997 the Financial Accounting Standards Board issued audited in accordance with professional standards, comply
Accounting for the Impairment of Long-Lived Assets and SFAS No. 128, Earnings per Share, which specifies the with the legal provisions. With due regard to the generally
for Long-Lived Assets to Be Disposed Of. This statement computation, presentation, and disclosure requirements for accepted accounting principles the consolidated financial
requires that assets to be disposed of be valued at the lower earnings per share. This standard is required to be adopted statements give a true and fair view of the net worth, finan-
of carrying amount or fair value less cost to sell. Furthermore, in 1997. Deutsche Telekom estimates that there will be no cial position and results of the Group. The management
an entity is required to review long-lived assets and certain effect on reported earnings per share as a result of adopting report of the Group is consistent with the consolidated finan-
identifiable intangibles to be held and used for impairment this standard. cial statements.
whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The In October 1996, the AICPA’s Accounting Standards Execu-
effect of adopting this standard on the financial statements tive Committee issued Statement of Position No. 96-1,
was immaterial. Environmental Remediation Liabilities, which requires adop- Frankfurt am Main, April 7, 1997
tion by the Company on January 1, 1997. The Company
estimates that the effect of adoption will not be material.
C&L TREUARBEIT
DEUTSCHE REVISION
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Bonn, April 4, 1997

Deutsche Telekom AG Dickmann Dr. Kutzenberger
Board of Management Wirtschaftsprüfer Wirtschaftsprüfer
Dr. Ron Sommer Detlev Buchal Dr. Hagen Hultzsch Dr. Heinz Klinkhammer
Dr. Joachim Kröske Dr. Herbert May Erik Jan Nederkoorn Gerd Tenzer

Information for our
shareholders
1996 T-Aktie figures:

Consolidated net income: DM 10.83 per share
Net cash provided by
operating activities: DM 10.55 per share
DVFA/SG earnings: DM 11.13 per share
Dividend proposal: DM 10.60 per share
Shareholders’ equity (Dec. 31): DM 16.55 per share
No. of T-Aktie shares issued (millions) (Dec. 31): 2,743

Return on shareholders’ equity: 6.43 %
Market value (year-end): DM 88.1 bn
Financial dates 1997:

Press conference on the
financial statements: May 13, 1997
Analysts’ meeting: May 14, 1997
Shareholders’ meeting: June 26, 1997
Dividend due date: June 27, 1997
1997 half-yearly report on Group: September 18, 1997
For further information, please refer to the chapter

“The T-Aktie” on page 20/21.
Our “Investor Relations” unit can be contacted at:

Deutsche Telekom AG
Investor Relations
Postfach 20 00
D-53105 Bonn
Fax +49 2 28-1 81-84 05
Deutsche Telekom AG is a member of the
“Deutscher Investor Relations Kreis e.V. (DIRK)”.
98

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Consolidated Consolidated

statement of income balance sheet

1996 1995 1994 Dec. 31, 1996 Dec. 31, 1995

Net revenue (1) 63,075 66,135 63,814 Noncurrent assets

Other operating expenses (7) (9,455) (9,685) (8,268) 28,437 20,018

Extraordinary income (losses) (9) (2,475) (1,264) (357)

Net income (13) 1,758 5,272 3,595 46,599 24,732

Unappropriated net income carried forward from previous year 91 – Accruals

Unappropriated net income (unappropriated net income 14,930 12,993

D e fe rred income 793 489

54 Consolidated financial statements 55 Consolidated financial statements

Concessions, industrial and similar rights

Property, plant and equipment

Land and equivalent rights, and buildings

Investments in unconsolidated subsidiaries 0 0 0 0 0 12 12 0 0 0 12 0 0 0 12 0 0

56 Consolidated financial statements 57 Consolidated financial statements

Effect of foreign exchange rate changes on cash

Cash and cash equivalents, at beginning of year 3,508 8,465 2,229

Liquid assets as shown in the balance sheet

58 Consolidated financial statements 59 Consolidated financial statements

Description of business and relationship Summary of significant accounting principles

60 Consolidated financial statements 61 Consolidated financial statements

62 Consolidated financial statements 63 Consolidated financial statements

64 Consolidated financial statements 65 Consolidated financial statements

66 Consolidated financial statements 67 Consolidated financial statements

10,224 9,506 9,285 1)

68 Consolidated financial statements 69 Consolidated financial statements

Net interest expense (7,269) (8,067) (7,847)

70 Consolidated financial statements 71 Consolidated financial statements

Income taxes 1,385

Effective income tax rate 42 %

72 Consolidated financial statements 73 Consolidated financial statements

(14) Intangible assets (16) Financial assets

74 Consolidated financial statements 75 Consolidated financial statements

76 Consolidated financial statements 77 Consolidated financial statements

78 Consolidated financial statements 79 Consolidated financial statements

80 Consolidated financial statements 81 Consolidated financial statements

12,115 9,409 579 2,127 11,646 9,397 316 1,933

Bonds and debentures consist primarily of bonds issued by

82 Consolidated financial statements 83 Consolidated financial statements

84 Consolidated financial statements 85 Consolidated financial statements

86 Consolidated financial statements 87 Consolidated financial statements

88 Consolidated financial statements 89 Consolidated financial statements

90 Consolidated financial statements 91 Consolidated financial statements

92 Consolidated financial statements 93 Consolidated financial statements

1996 1995 1994 Assets:

94 Consolidated financial statements 95 Consolidated financial statements

(41) Other matters The consolidated financial statements, which we have

Bonn, April 4, 1997

96 Consolidated financial statements 97 Consolidated financial statements

1996 T-Aktie figures:

No. of T-Aktie shares issued (millions) (Dec. 31): 2,743

Financial dates 1997:

For further information, please refer to the chapter

Our “Investor Relations” unit can be contacted at:

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