DWS G-SIFIs Hybrid Bond Fund

Transcription

1 Deutsche Asset Management Deutsche Asset Management S.A. DWS G-SIFIs Hybrid Bond Fund Annual Report 2015/2016 Investment Fund Organized under Luxembourg Law

2 DWS G-SIFIs Hybrid Bond Fund

3 Contents Annual report 2015/2016 for the period from October 1, 2015 through September 30, 2016 General information... 2 Annual report DWS G-SIFIs Hybrid Bond Fund... 4 Investment portfolio for the reporting period Investment portfolio and financial statements... 8 Supplementary information Significant changes Information according to Article 21 of the Law on Alternative Investment Fund Managers as of July 12, Remuneration Disclosure Report of the Réviseur d Entreprises agréé Information for investors in Switzerland

4 General information The fund described in this report is an investment fund (fonds commun de placement) in accordance with Part II of the Luxembourg Law of December 17, 2010 on undertakings for collective investments, as amended, and is considered to be an alternative investment fund ( AIF ) in accordance with the Law of July 12, 2013 on alternative investment fund managers, as amended. Performance The investment return, or performance, of a mutual fund investment is measured by the change in value of the fund s units. The net asset values per unit (= redemption prices) with the addition of intervening distributions, which are, for example, reinvested free of charge within the scope of investment accounts at Deutsche Asset Management S.A., are used as the basis for calculating the value. Past performance is not a guide to future results. The corresponding benchmark if available is also presented in the report. All financial data in this publication is as of September 30, 2016 (unless otherwise specified). Sales prospectuses Fund units are purchased on the basis of the current sales prospectus and management regulations, as well as the key investor information document, in combination with the latest audited annual report and any semiannual report that is more recent than the latest annual report. Issue and redemption prices The current issue and redemption prices and all other information for unitholders may be requested at any time at the registered office of the Management Company and from the paying agents. In addition, the issue and redemption prices are published in every country of distribution through appropriate media (such as the Internet, electronic information systems, newspapers, etc.). Special notice for business investors: Adjustment of share profits due to European Court of Justice (ECJ) ruling in the STEKO Industriemontage GmbH case In the STEKO Industriemontage GmbH case (C-377/07), the European Court of Justice (ECJ) ruled that the provision in the German Corporate Tax Act (Körperschaftsteuergesetz (KStG)) for the transition from the corporate tax imputation system to the half-income procedure in 2001 is unlawful under European law. The prohibition on corporations to have profit reductions in connection with holdings in foreign companies made relevant for tax purposes pursuant to section 8b (3) KStG already applied in 2001 pursuant to section 34 KStG, while it only applied for profit reductions in connection with holdings in domestic companies in In the view of the European Court of Justice, this contravenes the principle of free movement of capital. The transitional provisions in the KStG applied accordingly for fund investments pursuant to the German Capital Investment Companies Act (Gesetz über Kapitalanlagegesellschaften (KAGG)) (sections 40 and 40a in conjunction with section 43 (14)). The ruling may become important, particularly for the purposes of taking profit reductions into account in the calculation of share profits pursuant to section 40a KAGG. The Federal Finance Court (Bundesfinanzhof (BFH)) decided in a judgment dated October 28, 2009, (Ref. I R 27/08) that the STEKO case does in principle have implications for fund investments. In the German Federal Ministry of Finance letter of February 1, 2011, Application of the BFH judgment of October 28, 2009 I R 27/08 to share profits ( STEKO case ), the tax authority sets out the conditions under which in its opinion an adjustment of share profits is possible based on the STEKO case. In view of possible measures based on the STEKO case, we recommend that investors who have shares in business assets consult a tax advisor. The following companies were renamed effective March 17, 2016: Deutsche Asset & Wealth Management Investment GmbH became Deutsche Asset Management Investment GmbH Deutsche Asset & Wealth Management International GmbH became Deutsche Asset Management International GmbH Deutsche Asset & Wealth Management Investment S.A. became Deutsche Asset Management S.A. 2

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6 DWS G-SIFIs Hybrid Bond Fund Investment objective and performance in the reporting period The fund seeks to achieve steady capital appreciation and stable income. To this end, it invests in bonds of G-SIFIs (Global Systemically Important Financial Institutions). These are systemically important financial institutions worldwide that are included in the list published by the Financial Stability Board (FSB)* (31 institutions as of the end of September 2016). Hybrid bonds are equity-like subordinated corporate bonds with sometimes very long maturities or with no limitation on maturity, which can be terminated by the issuer as of a date defined in advance. In terms of their nature, they lie between equities and fixed-interest securities. The investment climate in the reporting period was characterized by historically low interest rates in the industrial countries and pronounced volatility in the capital markets. This volatility was mostly due to the high level of indebtedness worldwide alongside the uncertainty regarding a possible change of direction in interest rates led by the United States. In addition, global economic growth weakened, stemming from the noticeable slowdown in the emerging markets. Furthermore, the uncertainty regarding an imminent Brexit increasingly became the focus of attention from market participants over the course of the year. Against this difficult backdrop, the fund recorded an appreciation of 0.8% per unit (unit class B, BVI method, in Japanese yen) in the fiscal year through the end of September DWS G-SIFIs Hybrid Bond Fund Performance of unit classes (in JPY) Unit class ISIN 1 year 3 years Since inception 1 Class B LU % 10.0% 16.1% Class A LU % 12.0% 20.7% 1 Launched on January 30, 2013 BVI method performance, i.e., excluding the initial sales charge. Past performance is no guide to future results. As of: September 30, 2016 Investment policy in the reporting period The portfolio management perceived major risks to be factors such as the investment environment that is characterized by negative interest rates in the industrial countries and uncertainties regarding the further development of the central banks monetary policies and central bank divergence. While in the United States after eight years of zero-interest policy the U.S. Federal Reserve (Fed) increased the key rate by a quarter percentage point to a corridor of 0.25% % p.a. on December 16, 2015, the European Central Bank and the Bank of Japan continued to maintain their very relaxed monetary policies. The portfolio management saw further significant risks in the uncertainty regarding the effects of the impending withdrawal of the United Kingdom from the European Union ( Brexit ) and the smoldering banking crisis in Italy. In accordance with the fund s concept, the bond fund invested in subordinated bonds of systemically important financial institutions, particularly of banks. These included investment-grade issues (with a rating of BBB and better from the leading rating agencies) and high-yield bonds. With this orientation, the bond fund participated in the overall favorable 4

7 price development with a high level of fluctuations of these bond investments, accompanied by further reductions to already historically low yield levels. This investment segment benefited from increased interest on the part of investors seeking higher yields. However, there were also temporary drops in prices in the financial markets due in part to concerns about slower economic growth in China connected with a drop in the price of commodities and the associated fears of market participants regarding negative effects on the global economy. The moderate interest rate hike by the U.S. Federal Reserve (Fed) in mid-december 2015 did not have any major impact on the bond markets, as this step had been expected by market participants for some time. At the end of the first quarter of 2016, there was then a recovery in the bond markets, especially in Europe. This continued until the end of September 2016, with considerable fluctuations at times. This development was boosted, among other factors, by the European Central Bank s (ECB) lowering of key interest rates to 0% p.a. on March 10, In the second half of June 2016, however, the British vote to withdraw from the European Union ( Brexit ) was responsible for further temporary price losses. The performance of financials was also dampened by the growing investor concern in the summer of 2016 regarding the Italian banking crisis and the possible negative consequences this could have for the European financial system. In view of the uncertainties in the financial markets, the fund was geared toward the shorter term, which had a stabilizing effect on its performance. * As an international organization, the Financial Stability Board (FSB) monitors the global financial system and issues recommendations. Its headquarters are located at the Bank of International Settlements (BIS) in Basel (Switzerland). Its members are institutions of the G-20 group of major industrial and emerging-market countries as well as international bodies such as the World Bank, the European Central Bank and the European Commission. 5

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9 The format used for complete dates in securities descriptions in the investment portfolio is day/month/year. Investment portfolio and financial statements for the reporting period

10 DWS G-SIFIs Hybrid Bond Fund Investment portfolio September 30, 2016 Count/ Quantity/ Purchases/ Sales/ Market price Total market % of Description units/ principal additions disposals value in net currency amount in the reporting period USD assets Securities traded on an exchange Interest-bearing securities % Bank of America Corp. 2004/2019 *... EUR % % Barclays Bank Plc (MTN) 2008/ EUR % % BNP Paribas SA 2008/2049 *... EUR % % BPCE SA (MTN) 2007/2049 *... EUR % % BPCE SA 2009/2049 *... EUR % % Citigroup, Inc. 2004/2019 *... EUR % % Commerzbank AG (MTN) 2011/ EUR % % Credit Suisse AG 2013/2025 *... EUR % % Danske Bank A/S 2013/2023 *... EUR % % Deustsche Bank Contingent Capital Trust IV 2008/ EUR % % Deutsche Postbank Funding Trust IV 2007/2049 *. EUR % % HSBC Holdings Plc 2013/2024 *... EUR % % HT1 Funding GmbH 2006/2049 *... EUR % % JPMorgan Chase Bank NA 2006/2021 *... EUR % % Lloyds Banking Group Plc 2014/2049 *... EUR % % Natixis 2007/2049 *... EUR % % Royal Bank of Scotland Group Plc 2004/ EUR % % Royal Bank of Scotland Group Plc 2005/ EUR % % Royal Bank of Scotland Group Plc 2007/2049 *.. EUR % % UniCredit SpA (MTN) 2008/ EUR % % Bank of America Corp. (MTN) 2006/ GBP % % Barclays Bank Plc 2002/2049 *... GBP % % BNP Paribas SA 2007/2049 *... GBP % % Credit Agricole SA (MTN) 2003/2049 *... GBP % % Danske Bank A/S (MTN) 2006/2049 *... GBP % % Goldman Sachs Group, Inc. (MTN) 2007/ GBP % % HBOS Capital Funding LP 2001/2049 *... GBP % % HSBC Holdings Plc (MTN) 2007/2022 *... GBP % % ING Bank NV (MTN) 2008/2023 *... GBP % % Societe Generale SA 2008/2049 *... GBP % % Standard Chartered Bank (MTN) 2008/ GBP % % ABN Amro Bank NV (MTN) 2012/2022 *... USD % % Bank of America Corp. 2007/ USD % % Credit Suisse AG 2007/2049 *... USD % % Credit Suisse AG 2008/ USD % % Goldman Sachs Group, Inc. 2007/ USD % % ING Bank NV 2013/2023 *... USD % % Royal Bank of Scotland NV 2004/ USD % % SMFG Preferred Capital USD 1 Ltd -Reg- 2006/2049 *... USD % % SMFG Preferred Capital USD 3 Ltd -Reg- 2008/2049 *... USD % % Societe Generale SA (MTN) 2013/2049 *... USD % % UBS AG (MTN) 2012/2022 *... USD % % UBS AG 2013/2023 *... USD % % UniCredit SpA (MTN) -Reg- 2013/2023 *... USD % Securities admitted to or included in organized markets Interest-bearing securities 3.50 % ING Bank NV 2013/2023 *... EUR % % Barclays Bank PLC 2007/2049 *... USD % % Barclays Bank Plc 2012/ USD % % Credit Agricole SA -Reg- 2007/2049 *... USD % % Credit Agricole SA -Reg- 2009/2049 *... USD % % ICICI Bank Ltd -Reg- 2007/2022 *... USD % % JPMorgan Chase & Co. 2008/2049 *... USD % % Royal Bank of Scotland Group Plc 2007/2049 *.. USD % % Societe Generale SA -Reg- 2007/2049 *... USD % % Wells Fargo & Co. 2008/2049 *... USD % Total securities portfolio Derivatives (Minus signs denote short positions) Currency derivatives Receivables/payables Forward currency contracts Forward currency contracts (long) Open positions JPY/EUR million JPY/GBP million JPY/USD million

11 DWS G-SIFIs Hybrid Bond Fund Count/ Quantity/ Purchases/ Sales/ Market price Total market % of Description units/ principal additions disposals value in net currency amount in the reporting period USD assets Cash at bank Demand deposits at Depositary EUR deposits... EUR Deposits in other EU/EEA currencies British pound... GBP Deposits in non-eu/eea currencies. Japanese yen... JPY U.S. dollar.... USD Other assets Interest receivable Total assets ** Other liabilities Liabilities from cost items Liabilities from unit certificate transactions Total liabilities Net assets Negligible rounding errors may have arisen due to the rounding of calculated percentages. Net asset value per unit and Count/ Net asset value per unit number of units outstanding currency in the respective currency.. Net asset value per unit Class A... JPY Class B... JPY Number of units outstanding Class A... Count 94 Class B... Count Market abbreviations Contracting party for forward currency contracts Morgan Stanley and Co. International PLC, State Street Bank London and UBS AG London Exchange rates (indirect quotes) As of September 30, Euro.... EUR = USD 1 British pound... GBP = USD 1 Japanese yen... JPY = USD 1 Notes on valuation The Management Company determines the net asset values per unit and performs the valuation of the assets of the fund. The basic provision of price data and price validation are performed in accordance with the method introduced by the Management Company on the basis of the legal and regulatory requirements or the principles for valuation methods defined in the sales prospectus. If no trading prices are available, prices are determined with the aid of valuation models (derived market values) which are agreed between State Street Bank Luxembourg S.C.A. as external price service provider and the Management Company and which are based as far as possible on market parameters. This procedure is subject to an ongoing monitoring process. The plausibility of price information from third parties is checked through other pricing sources, model calculations or other suitable procedures. Assets reported in this report are not valued at derived market values. Footnotes * Floating interest rate ** Does not include positions with a negative balance, if such exist. 9

12 DWS G-SIFIs Hybrid Bond Fund Transactions completed during the reporting period that no longer appear in the investment portfolio: Purchases and sales of securities, investment fund units and promissory note loans (Schuldscheindarlehen); market classifications are as of the reporting date Description Securities traded on an exchange Count/ units/ currency Purchases/ additions Sales/ disposals Derivatives (option premiums realized in opening transactions, or total options transactions; in the case of warrants, purchases and sales are shown) Forward contracts Value ( 000) Interest-bearing securities 4.31 % ABN Amro Bank NV (MTN) 2006/2049 *...EUR % Bank of America Corp. (MTN) 2007/ EUR % BNP Paribas SA 2008/2049 *...EUR % BPCE SA 2006/2049 *... EUR % LBG Capital No.2 Plc 2009/ EUR % Societe Generale SA 2009/2049 *... EUR % UBS AG (MTN) 2007/2049 *... EUR % UniCredit SpA (MTN) 2013/2025 *... EUR % Barclays Bank Plc 2000/2049 *... GBP % UBS AG (MTN) 2006/2021 *...GBP % Bank of America Corp. 2007/ USD % Bank of America Corp. 2007/ USD % Credit Suisse AG 2010/ USD % Credit Suisse Group Guernsey I Ltd 2011/ USD % Credit Suisse Group Guernsey I Ltd -Reg- 2011/2041 *... USD % HSBC Finance Capital Trust IX 2005/2035 *... USD % Lloyds Banking Group Plc 144A 2009/2049 *... USD % UBS Preferred Funding Trust V 2006/2049 *... USD Forward contracts to sell currencies EUR/JPY USD GBP/JPY USD USD/JPY USD Forward contracts to purchase currencies EUR/JPY USD GBP/JPY USD JPY/USD USD Securities admitted to or included in organized markets Interest-bearing securities % Credit Agricole SA 2009/2049 *... EUR % Deutsche Bank Capital Funding Trust VII -Reg- 2006/2049 *... USD % MUFG Capital Finance 1 Ltd 2006/2049 *... USD

13 DWS G-SIFIs Hybrid Bond Fund Statement of income and expenses (incl. income adjustment) Statement of changes in net assets 2015/2016 for the period from October 1, 2015, through September 30, 2016 I. Income 1. Interest from securities (before withholding tax)... USD Interest from investments of liquid assets (before withholding tax)... USD Deduction for foreign withholding tax... USD Total income... USD II. Expenses 1. Interest on borrowings and negative interest on deposits... USD Management fee... USD thereof: Basic management fee... USD Administration fee... USD Depositary fee... USD Auditing, legal and publication costs... USD Taxe d abonnement... USD Other expenses... USD Total expenses... USD III. Net investment income... USD IV. Sale transactions 1. Realized gains... USD Realized losses... USD Capital gains/losses.... USD V. Realized net gain/loss for the fiscal year USD Net change in unrealized appreciation... USD Net change in unrealized depreciation... USD VI. Net change in unrealized appreciation/depreciation for the fiscal year... USD I. Value of the fund s net assets at the beginning of the fiscal year... USD Interim distribution... USD Net outflows... USD a) Outflows from redemptions... USD Income adjustment... USD Net gain/loss for the fiscal year... USD thereof: Realized net gain/loss for the fiscal year... USD Net change in unrealized appreciation... USD Net change in unrealized depreciation... USD II. Value of the fund s net assets at the end of the fiscal year... USD Summary of the gains/losses for 2015/2016 Realized gains (incl. income adjustment)... USD from: Securities transactions... USD (Forward) currency transactions... USD Realized losses (incl. income adjustment) USD from: Securities transactions... USD (Forward) currency transactions... USD Net change in unrealized appreciation/depreciation USD from: Securities transactions... USD (Forward) currency transactions... USD V. Net gain/loss for the fiscal year... USD Note: The net change in unrealized appreciation (depreciation) is calculated by subtracting the total of all unrealized appreciation (depreciation) at the end of the fiscal year from the total of all appreciation (depreciation) at the beginning of the fiscal year. Total unrealized appreciation (depreciation) includes positive (negative) differences resulting from the comparison of the values recognized for the individual assets as of the reporting date with their respective acquisition costs. Unrealized appreciation/depreciation is shown without income adjustment. BVI total expense ratio (TER) The total expense ratio for the unit classes was: Class A 1.32% p.a., Class B 1.93% p.a. The TER expresses total expenses and fees (excluding transaction costs) as a percentage of a fund s average net assets in relation to the respective unit class for a given fiscal year. Transaction costs Changes in net assets and in the net asset value per unit over the last three years Net assets at the end of the fiscal year USD USD USD Net asset value per unit at the end of the fiscal year 2016 Class A... JPY Class B... JPY Class A... JPY Class B... JPY Class A... JPY Class B... JPY The transaction costs paid in the reporting period amounted to USD The transaction costs include all costs that were reported or settled separately for the account of the fund in the fiscal year and are directly connected to the purchase or sale of assets. Any financial transaction taxes which may have been paid are included in the calculation. Transactions processed for the account of the fund s assets via closely related companies (based on major holdings of the Deutsche Bank Group) The share of transactions conducted for the account of the investment fund s assets via brokers that are closely related companies and persons (share of 5% and above), amounted to 0.00% of all transactions. The total volume was USD

14 DWS G-SIFIs Hybrid Bond Fund Details on the distribution policy * Class A Type As of Currency per share Interim distribution February 22, 2016 JPY 170 Interim distribution August 22, 2016 JPY 100 Class B Type As of Currency per share Interim distribution February 22, 2016 JPY 170 Interim distribution August 22, 2016 JPY 100 * Additional information is provided in the sales prospectus. 12

15 Supplementary information

16 Significant changes in accordance with Article 20 (2d) of the Law of July 12, 2013 on Alternative Investment Fund Managers In accordance with Article 20 (2d) of the Law of July 12, 2013 on Alternative Investment Fund Managers, the Company provides information below on significant changes to the investment undertaking during the reporting period. Relating to the AIF DWS G-SIFIs Hybrid Bond Fund Description of the significant change Potential or expected effect of the significant change on the investor none Date on which the significant change takes effect 14

17 DWS G-SIFIs Hybrid Bond Fund Information according to Article 21 of the Law on Alternative Investment Fund Managers as of July 12, 2013 Details regarding illiquid assets Percentage of assets which are subject to special arrangements arising from their illiquid nature as of the reporting date: 0% Details concerning new regulations for liquidity management During the reporting period no regulatory changes have been enacted for liquidity management. Risk Profile of the AIF: The following risk figures have been calculated in order to assess the main risks as of the reporting date: a) Market Risk The interest rate sensitivity measure DV01 is the change in the Net Asset Value (NAV) of the fund if market interest rates increase uniformly by one basis point (bp). The credit spread sensitivity measure CS01 is the change in the NAV of the fund if credit spreads of reference entities in the port folio increase uniformly by 1 bp. The sensitivity Net Equity Delta is the change in the NAV of the fund if share prices of equity and target fund positions in the portfolio increase uniformly by 1%. The Net Currency Delta is the change in the NAV of the fund if foreign exchange rates increase uniformly by 1%. Data in U.S. dollars DV01 CS01 Net Equity Delta Net Currency Delta The Regulatory limit (200%) and the Market Risk limit (150%) have not been exceeded. b) Counterparty Risk OTC Counterparty Percentage of NAV of the AIF Morgan Stanley & Co. International plc (FEO)., London % Counterparty Risk will possibly be decreased through given securities. Counterparties have the right to reuse collateral granted. c) Liquidity Risk Percentage of the portfolio assets that can be liquidated within the following periods at fair prices and with minimum market disruption. Percentage of NAV of the AIF 1 Day or Less 2-7 Days 8-30 Days Days Days Days More than 365 Days 14.3% 16.0% 67.6% 0.0% 2.1% 0.0% 0.0% Implemented Risk Management Systems Risk Controlling is executed based on internal Risk Management guidelines by a department that is independent from the portfolio management. In particular, Risk Controlling covers continuous Risk Management process for detection, evaluation and monitoring of Market, Liquidity and Counterparty Risks as well as the monitoring of leverage. Additionally, results from reasonable stress test scenarios for Market and Liquidity Risks are used by Risk Controlling and Portfolio Management for estimating the effect on portfolio risk that appear to be due to single investment positions. To measure market risks on a daily basis, a relative Value-at-Risk approach via historical simulation is used. Change of the Maximum Scope for Leverage No changes related to the maximum scope for leverage occurred during the reporting period. Overall Value of Leverage Leverage Minimum Maximum Average Limit Gross Leverage Net Leverage

18 Remuneration Disclosure The Deutsche Asset Management S.A. (the Company) is a subsidiary in the Deutsche Bank (DB) Group. DB s businesses encompass a wide range of products and services incorporating investment, corporate and retail banking as well as asset and wealth management. DB is subject to the EU s Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR) as a credit institution and to the supervision of the European Central Bank (ECB). DB Group (and its legal entities subject to the provisions of AIFMD incl. the Company) ensures compliance with the remuneration requirements under CRD IV and CRR and for the subsidiaries subject to AIFMD, including the Company, compliance with the remuneration requirements under AIFMD. DB is a global organization operating in all regions across the world. DB operates and strongly supports a One Bank approach in relation to compensation to ensure employees are globally governed under the same principles, policy and procedures. This ensures a fully transparent, balanced and equitable approach to compensation. For 2015, the AWM business comprises of Asset Management and Wealth Management (AWM) services offering a wide range of traditional and alternative investment products. The DB legal entities of the AWM business that are impacted by AIFMD are all within the AWM Governance framework. Consequently, Company is subject to three robust and structured governance layers (DB s Group Governance, DB s AWM Divisional Governance and framework of the Company). Governance Structure In accordance with the German two-tier board structure and the German Stock Corporation Act ( deutsches Aktiengesetz ), the Management Board manages DB and is overseen by the Supervisory Board. The Supervisory Board of DB AG has established a Compensation Control Committee which is, inter alia, responsible for monitoring the compensation system of the Group s employees and its appropriateness. The Management Board of DB AG has established the Senior Executive Compensation Committee (SECC) which has, inter alia, the mandate to develop sustainable compensation principles and to prepare recommendations on Total Compensation levels. Furthermore, DB has appointed a Compensation Officer for DB Group who independently monitors the appropriateness of the employee s compensation systems on a regular basis. As part of the governance structure, DB has also established the Group Compensation Oversight Committee (GCOC), consisting of senior representatives from Human Resources, Compliance, Legal and Risk. As a sub-committee of the SECC, the GCOC is responsible for reviewing divisional compensation frameworks and ensuring that the frameworks and practices, alongside the decisions made for the Business Divisions and Infrastructure Functions, comply with the Group s compensation principles and policies and external regulatory requirements. The GCOC confirmed last in January 2016 to the SECC that the sub-divisional and individual allocation processes for all Business Divisions and Infrastructure Functions are in substantial compliance with the prescribed Group compensation framework. This includes the compensation practices applied by the Company. DB has established distinctive Divisional Compensation Committees (DCCs) for its Business Divisions and Infrastructure Functions. The DCCs define Division-specific compensation frameworks and operating principles in line with DB s practices and standards. They also establish Division-specific compensation processes which comply with these frameworks, which are embedded in the year end processes on a global basis. A DCC was also established for the AWM division. The AWM DCC oversees the compensation process within AWM, including the process for the Company and ensures it is in line with DB s practices and standards. In 2015, members of the AWM DCC were the Global Head of AWM, the Global COO of AWM, the Global Head of HR AWM and the Global Reward Advisor for AWM. The AWM DCC reviews regularly, at least annually, the remuneration framework for AWM which 16

19 includes the remuneration principles applying to the Company and assesses if substantial changes or amendments due to irregularities have to be made. Over the course of the last year, no irregularities have been recognized. Compensation Structure All employees of the DB Group and of the Company are subject to our compensation standards and principles as outlined in the Group Compensation Strategy and the Compensation Policy. Both policies are reviewed on an annual basis. As part of the Compensation Strategy, DB Group, including the Company, employs a Total Compensation philosophy, which comprises Fixed Pay and Variable Compensation. Compensation Fixed Pay Variable Compensation Benefits & Pensions Description Fixed Pay is used to compensate employees for their skills, experience and competencies, commensurate with the requirements, size and scope of their role. For the majority of Deutsche Bank employees, Fixed Pay is the primary compensation component, and the share of fixed elements within Total Compensation is far greater than 50%. This is appropriate to many businesses, including AWM, and will continue to be a significant feature of Total Compensation going forward. Variable Compensation is predicated on the industry objective of retaining cost flexibility whilst attracting and retaining the right talent. Variable Compensation also has the advantage of being able to differentiate performance outcomes and drive behaviours through appropriate incentive systems that can also positively influence culture. As a result, Variable Compensation is a key feature of market practice compensation in many business lines in the banking environment globally. Combined with Fixed Pay, this drives Total Compensation outcomes that are cost effective, flexible and aligned to performance. In accordance with the respective local market practice, requirements and demands, benefits (including company pension schemes) are granted that are linked to employment with DB Group, to certain seniority or to certain length of service but that have no direct link to performance. In order to align reward more closely with performance and conduct, DB has assessed its compensation approach over the course of 2015 and, starting 2016, has started putting in place a New Compensation Framework that is designed to align pay more closely with sustainable performance at all levels of the Group by rebalancing fixed and variable remuneration elements and providing for a closer link between Variable Compensation and the Group-wide performance. The New Compensation Framework provides guidance on the target proportion of fixed to variable remuneration elements by seniority and by division or function. In addition, Variable Compensation from 2016 onwards is intended to include two components. The first, the Group component, reflects the Group performance, tying individual Total Compensation more closely to the Group s performance and recognizing the contribution of every single employee to the Group s results. The second, the individual component, is more discretionary and recognizes individual performance in the context of divisional performance, including the performance of the Company. Determination of Variable Compensation and appropriate risk-adjustment DB s Variable Compensation pools are subject to appropriate risk adjustment measures which include ex-ante and ex-post risk adjustments. 17

20 To assess performance in light of Variable Compensation decisions within a considered risk framework that aligns performance with the risk of the business, a number of financial and risk adjusted metrics are used over a multi-year time horizon together with nonfinancial qualitative factors. In order to assess individual performance over a multi-year period and therefore individual allocations, the following key metrics may be utilised for the division AWM (non-exhaustive list): n Financial and risk adjusted performance metrics: revenues, fund performance, assets under management, asset growth/ retention, investment performance, net inflows, cost management and operational performance. n Non-financial qualitative performance metrics: performance rankings, client retention, contribution to franchise, adherence to the DB Values & Beliefs, leadership and diversity standards. Furthermore, DB grants a large proportion of Variable Compensation in elements that are subject to deferred payment or delivery. All deferred awards are subject to performance conditions and forfeiture provisions. These support the alignment of awards with future conduct and performance while also allowing for an appropriate back-testing of the initial performance assessment. For further information on the remuneration system of Deutsche Bank Group, including the compensation strategy, the governance framework and the risk alignment, please refer to the DB Group Compensation Report, which is part of the Financial Report ) 1) 18

21 Compensation for Material Risk Takers In accordance with the requirements of the law of July 12, 2013 about Alternative Investment Fund Managers, as amended, in combination with the relevant guidelines and publications by the European Security and Markets Authority (ESMA) on compensation, the Company has identified employees who have a material impact of the risk profile of the Company (Material Risk Takers). Material Risk Takers are subject to the same deferral matrix with respect of their Variable Compensation as all employees providing that at least 40-60% of the Variable Compensation will be deferred. Additionally, at least 50% of the deferred compensation are granted in Deutsche Bank shares or share-based instruments. For further details on the compensation components please refer to the Compensation Report of Deutsche Bank AG. Total amount of compensation for the Financial Year 2015: Deutsche Asset Management S.A. # of employees (full-time equivalent) on an average basis 136 Total Compensation EUR 12,368,000 Fixed Pay EUR 10,726,000 Variable Compensation EUR 1,642,000 Total Compensation for Senior Management 1) EUR 8,773,445 Total Compensation for other Material Risk Takers 2) EUR 0 Total Compensation for Control Function employees EUR 1,107,196 Fixed Pay refers to the salary granted in Variable Compensation comprises variable compensation elements awarded for the performance in Total Compensation is the sum of Fixed Pay and Variable Compensation. No further employees are in the same remuneration bracket as Senior Management or Material Risk Takers. There were multiple changes to the company structure and the Management Board of the Company during The amount for Total Compensation for Senior Management comprises the Total Compensation for all individuals who spent time during the year 2015 on either the Management Board of Deutsche Asset Management S.A., the Board of Directors of the former DWS Investment S.A. or the Board of Directors of the DB Platinum Advisors S.A. which has been merged with the DWS Investment S.A. 1) Senior Management refers to the Members of the Management Board of the Company, the Members of the Board of Directors of the former DWS Investment S.A. and the Members of the Board of Directors of the DB Platinum Advisors S.A. which has been merged with the DWS Investment S.A. Not all Members of Senior Management receive compensation from Company. The compensation received from other companies of the DB Group is included in the amount of Total Compensation. Members of Senior Management meet the definition of managers, too. Apart from the Members of Senior Management, no further managers have been identified. 2) Apart from the Members of the Senior Management, no further Material Risk Takers have been identified. 19

22 KPMG Luxembourg, Société coopérative Tel: , Avenue John F. Kennedy Fax: L-1855 Luxembourg info@kpmg.lu Internet: REPORT OF THE REVISEUR D ENTREPRISES AGREE To the Unitholders of DWS G-SIFIs Hybrid Bond Fund We have audited the accompanying financial statements of DWS G-SIFIs Hybrid Bond Fund, which comprise the statement of net assets including the statement of investments in securities and other net assets as at September 30, 2016 and the statement of income and expenses and the statement of changes in net assets for the year then ended, and a summary of significant accounting policies and other explanatory information. Responsibility of the Management Board of the Management Company for the financial statements The Management Board of the Management Company is responsible for the preparation and fair presentation of these financial statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements, and for such internal control as the Management Board of the Management Company determines it necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Responsibility of the Réviseur d Entreprises agréé Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the judgement of the Réviseur d Entreprises agréé, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the Réviseur d Entreprises agréé considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Management Board of the Management Company, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG Luxembourg, Société coopérative, a Luxembourg entity and a T.V.A. LU member firm of the KPMG network of independent member firms R.C.S. Luxembourg B affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity 20

23 Opinion In our opinion, the financial statements give a true and fair view of the financial position of DWS G-SIFIs Hybrid Bond Fund as of September 30, 2016 and of the results of its operations and changes in its net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements. Other matter Supplementary information included in the annual report has been reviewed in the context of our mandate but has not been subject to specific audit procedures carried out in accordance with the standards described above. Consequently, we express no opinion on such information. However, we have no observation to make concerning such information in the context of the financial statements taken as a whole. Luxembourg, December 20, 2016 KPMG Luxembourg Société coopérative Cabinet de révision agréé Harald Thönes 21

24 Information for investors in Switzerland The distribution of units of this collective investment scheme (the Units ) in Switzerland will be exclusively made to, and directed at, qualified investors, as defined in the Swiss Collective Investment Schemes Act of 23 June 2006 ( CISA ), as amended, and its implementing ordinance ( CISO ). Accordingly, this collective investment scheme has not been and will not be registered with the Swiss Financial Market Supervisory Authority FINMA. This fund document and/or any other offering materials relating to the Units may be made available in Switzerland solely to qualified investors. 1. Representative and Paying Agents in Switzerland Deutsche Bank (Suisse) SA Place des Bergues 3 CH-1201 Geneva and its branches in Zurich and Lugano. 2. Location where the relevant documents may be obtained The sales prospectus, key investor information document, investment conditions as well as the annual and semi-annual reports may be obtained free of charge from the representative as well as from the paying agent in Switzerland. 3. Place of performance and jurisdiction In respect of the Units distributed in or from Switzerland, the place of performance and jurisdiction is the registered office of the Representative. 22

25 Management Company, Alternative Investment Fund Manager (AIFM), Administration, Registrar and Transfer Agent, Main Distributor Deutsche Asset Management S.A. 2, Boulevard Konrad Adenauer 1115 Luxembourg, Luxembourg Equity capital as of December 31, 2015: EUR million before profit appropriation Supervisory Board of the AIFM Holger Naumann Chairman Deutsche Asset Management Investment GmbH, Frankfurt/Main Nathalie Bausch Deutsche Bank Luxembourg S.A., Luxembourg Reinhard Bellet Deutsche Bank AG, Frankfurt/Main Management Board of the AIFM Dirk Bruckmann (since January 14, 2016) Chairman Deutsche Asset Management Investment GmbH, Frankfurt/Main Manfred Bauer (until December 31, 2015) Deutsche Bank AG, Frankfurt/Main Ralf Rauch Deutsche Asset Management Investment GmbH, Frankfurt/Main Martin Schönefeld Deutsche Asset Management S.A., Luxembourg Barbara Schots Deutsche Asset Management S.A., Luxembourg Auditor KPMG Luxembourg Société coopérative 39, Avenue John F. Kennedy 1855 Luxembourg, Luxembourg Depositary and Sub-Administration State Street Bank Luxembourg S.C.A. 49, Avenue John F. Kennedy 1855 Luxembourg, Luxembourg Sub-Transfer Agent State Street Bank GmbH Brienner Straße Munich, Germany Portfolio Manager Deutsche Asset Management Investment GmbH Mainzer Landstraße Frankfurt/Main, Germany Marzio Hug Deutsche Bank AG, London Stefan Kreuzkamp (since February 1, 2016) Deutsche Asset Management Investment GmbH, Frankfurt/Main Sales, Information and Paying Agent LUXEMBOURG Deutsche Bank Luxembourg S.A. 2, Boulevard Konrad Adenauer 1115 Luxembourg, Luxembourg Dr. Boris N. Liedtke (until December 31, 2015) Deutsche Bank Luxembourg S.A., Luxembourg Frank Krings (since May 10, 2016) Deutsche Bank Luxembourg S.A., Luxembourg Dr. Matthias Liermann Deutsche Asset Management Investment GmbH, Frankfurt/Main Dr. Asoka Wöhrmann (until December 31, 2015) Deutsche Bank AG, Frankfurt/Main As of: October 31, 2016

26 Deutsche Asset Management S.A. 2, Boulevard Konrad Adenauer L-1115 Luxembourg, Luxembourg Tel.: Fax: