DWS G-SIFIs Hybrid Bond Fund

Transcription

1 Deutsche Asset Management Deutsche Asset Management S.A. DWS G-SIFIs Hybrid Bond Fund Annual Report 2016/2017 Investment Fund Organized under Luxembourg Law

2 DWS G-SIFIs Hybrid Bond Fund

3 Contents Annual report 2016/2017 for the period from October 1, 2016 through September 30, 2017 General information... 2 Annual report DWS G-SIFIs Hybrid Bond Fund... 4 Investment portfolio and financial statements 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 Information pursuant to Regulation (EU) 2015/ 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 collec tive 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 subsequently 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, 2017 (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 Industrie montage 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. 2

5 Annual report

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)* (30 institutions; as of: November 21, 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 extremely 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 uncertainties regarding a change of direction in interest rates led by the United States, upcoming elections, as well as an imminent Brexit. On the currency side, the euro traded stronger overall against many currencies. Against this difficult backdrop, the fund recorded an appreciation of 2.4% 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 since inception /30/13* 9/13 9/14 9/15 9/16 9/17 DWS G-SIFIs Hybrid Bond Fund (Unit class B) BVI method performance, i.e., excluding the initial sales charge. Past performance is no guide to future results. As of: September 30, 2017 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 % 4.6% 18.9% Class A LU % 6.5% 24.3% 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, 2017 Investment policy in the reporting period The portfolio management perceived major risks to be the investment environment that is characterized by negative interest rates in the industrial countries, uncertainties regarding the further development of the central banks monetary policies and central bank divergence. In the United States, the U.S. Federal Reserve (Fed) raised the key rate further by three quarters of a percentage point in three steps to a corridor of 1.00% 1.25% p.a. while the European Central Bank (ECB) 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 an imminent withdrawal of the United * launched on January 30, 2013 = 100 Data on Japanese yen basis Kingdom from the European Union ( Brexit ), political uncertainties due, for example, to upcoming elections or referendums, as well as geopolitical risks in relation to North Korea in particular. In accordance with the fund s concept, the bond fund invested in subordinate bonds of systemically important institutions, particularly of banks. These included investmentgrade issues (with a rating of BBB and better from the leading rating agencies) and high-yield bonds. In the international bond markets in the reporting period, there were yield increases overall amid fluctuations and to varying degrees and accompanying price declines. Government bonds in the 4

7 United States and Germany were particularly affected by this. The price declines were due, among other things, to market participants expectations that the central banks could discontinue their quantitative easing and thus apply the brakes to their extremely relaxed monetary policy, especially in view of the higher inflation rates in the euro area in the interim although from a very low base as well as to the robust economy and full employment in the United States. Higher-yielding bonds such as corporate bonds and high-yield bonds, on the other hand, posted price increases with falling yields amid further narrowing of yield spreads relative to government bonds. With its investments in subordinated bonds of systemrelevant banks, the bond fund participated in the overall favorable price development with a high level of fluctuations of these issues, accompanied by further declines in yields at already historically low yield levels. This investment segment profited from increased interest on the part of investors seeking higher yields. Further factors that had a boosting effect were the steeper yield curve at a still very low yield level and the thus improved earnings potential for banks, as well as the pro-european election results in Europe. In addition, in a short maturity segment that was characterized by negative interest rates, the fund benefited form the continued very relaxed monetary policy of the ECB through the DWS G-SIFIS HYBRID BOND FUND Investment focus Bonds* Cash and other assets In % of the fund s net assets (* incl. pro-rata accrued interest) interest-bearing instruments with shorter terms to maturity that were also held in its portfolio. * 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. As of: September 30, 2017 Negligible rounding errors may have arisen compared with the investment portfolio due to the rounding of calculated percentages. 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, 2017 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 % % HSBC Holdings PLC 2013/2024 *... EUR % % HT1 Funding GmbH 2006/2049 *... EUR % % Lloyds Banking Group PLC 2014/2049 *... EUR % % Natixis 2007/2049 *... EUR % % Royal Bank of Scotland Group PLC 2004/2049 *. EUR % % Royal Bank of Scotland Group PLC 2005/2049 *. EUR % % UniCredit SpA (MTN) 2008/ EUR % % Barclays Bank PLC 2008/2049 *... GBP % % BNP Paribas SA 2007/2049 *... 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) 2008/2018 *... GBP % % Bank of America Corp. 2007/ USD % % ING Bank NV 2013/2023 *... USD % % Nordea Bank AB -Reg-2014/2049 *... USD % % Royal Bank of Scotland NV 2004/ USD % % SMFG Preferred Capital USD 3 Ltd -Reg- 2008/2049 *... USD % % Societe Generale SA (MTN) 2013/2049 *... USD % % UBS AG 2013/2023 *... USD % % UniCredit SpA (MTN) -Reg-2013/2023 *... USD % Securities admitted to or included in organized markets Interest-bearing securities % Barclays Bank PLC 2007/2049 *... USD % % Credit Agricole SA -Reg-2009/2049 *... USD % % JPMorgan Chase & Co. 2008/2049 *... USD % % Wells Fargo & Co. 2008/2049 *... USD % Total securities portfolio Derivatives (Minus signs denote short positions) Currency derivatives Receivables/payables Forward currency transactions Forward currency contracts (long) Open positions JPY/EUR Mio JPY/GBP Mio JPY/USD Mio Closed positions JPY/USD Mio 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

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 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 Deutsche Bank AG, Morgan Stanley and Co. International Plc., Nomura International Plc. and Royal Bank of Canada Exchange rates (indirect quotes) As of September 29, 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 currency transactions Value ( 000) Interest-bearing securities % Deutsche Postbank Funding Trust IV 2007/2049 *...EUR % JPMorgan Chase Bank NA 2006/2021 *... EUR % Royal Bank of Scotland Group PLC 2007/2049 *...EUR % Bank of America Corp. (MTN) 2006/ GBP % Barclays Bank PLC 2002/2049 *... GBP % Credit Agricole SA (MTN) 2003/2049 *... GBP % Danske Bank A/S (MTN) 2006/2049 *... GBP % Goldman Sachs Group, Inc. (MTN) 2007/ GBP % ABN Amro Bank NV (MTN) 2012/2022 *...USD % Credit Suisse AG 2007/2049 *...USD % Credit Suisse AG 2008/ USD % Goldman Sachs Group, Inc. 2007/ USD % SMFG Preferred Capital USD 1 Ltd -Reg- 2006/2049 *... USD % Societe Generale 2015/2049 *... USD % UBS AG (MTN) 2012/2022 *...USD Forward currency contracts (short) Forward contracts to sell currencies EUR/JPY USD GBP/JPY USD USD/JPY USD Forward currency contracts (long) 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 3.50 % ING Bank NV 2013/2023 *...EUR % Barclays Bank PLC 2012/ USD % Credit Agricole SA -Reg-2007/2049 *... USD % ICICI Bank Ltd -Reg-2007/2022 *... USD % Royal Bank of Scotland Group PLC 2007/2049 *...USD % Societe Generale SA -Reg-2007/2049 *... USD

13 DWS G-SIFIs Hybrid Bond Fund Statement of income and expenses (incl. income adjustment) Statement of changes in net assets 2016/2017 for the period from October 1, 2016 through September 30, 2017 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 V. Net gain/loss 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 2016/2017 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 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 2017 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 unit Interim distribution February 21, 2017 JPY 100 Interim distribution August 21, 2017 JPY 70 Class B Type as of Currency per unit Interim distribution February 21, 2017 JPY 100 Interim distribution August 21, 2017 JPY 70 * 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 portfolio increase uniformly by 1 bp. The equity sensitivity, the so called Net Equity Delta, is the change in the NAV of the fund if share prices of equity positions in the portfolio increase uniformly by 1%. The currency rates sensitivity, the so called Net Currency Delta, is the change in the NAV of the fund if currency rates increase uniformly by 1%. All amounts in USD DV01 CS01 Net Equity Delta Net Currency Delta -29,310-85, ,267,779 The Regulatory limit (200%) and the Market Risk limit (150%) have not been exceeded. b) Counterparty Risk OTC counterparties with highest market value of OTC derivatives in AIF: OTC Counterparty Percent share in AIF NAV Royal Bank of Canada, London % Counterparty risks may be lowered by provided collaterals. FX forwards on unit class level, if any, were not considered. 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 0% 19% 80% 1% 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 Risk Management System Risk management system is based on IT application Aladdin, an integrated system for portfolio management, trading, risk and compliance, which is provided as an application-service-provider-solution by the provider BlackRock Solutions. This functionality has been used for calculation of risk figures (except liquidity risk) since the 4th quarter 2016 and replaced at that time used application RiskMetrics. As a consequence of migration, Value-at-Risk and stress test results may be slightly influenced by this change. 15

18 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 method Commitment method The limit breach of Gross Exposure was caused by multiple back-to-back FX forwards with different counterparties and was never longer than one week. 16

19 Remuneration Disclosure The Deutsche Asset Management S.A. ( the Company ) is a subsidiary in Deutsche Bank Group ( Deutsche Bank ). The businesses of Deutsche Bank encompass a wide range of products and services incorporating investment, corporate and retail banking as well as asset management in all regions across the world. The institution at the highest level of consolidation of Deutsche Bank Group is Deutsche Bank AG. Deutsche Bank AG is subject to the EU s Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR) as a credit institution and is supervised by the European Central Bank (ECB). Deutsche Bank AG has established a compensation framework applying to the whole Deutsche Bank Group (excluding Postbank), which therefore also applies to the Company. For further information on the remuneration system of Deutsche Bank Group as provided below, please refer to the Deutsche Bank Group Compensation Report, which is part of the Financial Report. 1) Governance Structure Deutsche Bank AG is managed by its Management Board. It is overseen by the Supervisory Board which has established a Compensation Control Committee (CCC). The CCC is, inter alia, responsible for monitoring the compensation system of the Group s employees and its appropriateness. The Management Board of Deutsche Bank AG has established the Senior Executive Compensation Committee (SECC) which has the mandate to develop sustainable compensation principles, to prepare recommendations on Total Compensation levels and to ensure appropriate compensation governance and oversight. Furthermore, a Compensation Officer for Deutsche Bank Group was appointed who independently monitors the appropriateness of the employee s compensation systems on a regular basis. The annual central and independent internal review of the remuneration system concluded its design to be appropriate and no significant irregularities were recognized. Compensation Structure The employees of Deutsche Bank Group and of the Company are subject to the 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, Deutsche Bank Group, including the Company, employs a Total Compensation philosophy, which comprises Fixed Pay and Variable Compensation. In 2016, Deutsche Bank introduced a new compensation framework to align employee compensation even more closely with Deutsche Bank s strategic and business objectives, while reducing complexity at the same time. The new compensation framework also puts a stronger emphasis on Fixed Pay over Variable Compensation and aims to ensure that these components are appropriately balanced. Fixed Pay is used to compensate employees for their skills, experience and competencies, commensurate with the requirements, size and scope of their role. The appropriate level of Fixed Pay is determined with reference to the prevailing market rates for each role, internal comparisons and applicable regulatory requirements. Variable Compensation has the advantage of being able to differentiate between individual performance and drive behaviour through appropriate incentive systems that can positively influence culture. It also allows for flexibility in the cost base. Under the new compensation framework, Variable Compensation generally consists of two elements the Group Component and the Individual Component. In particular, one of the overarching goals of the new compensation framework is to strengthen the link between Variable Compensation and the performance of the Group. To that end, it was decided to align the Group Component directly and comprehensible for the employees to Deutsche Bank s achievements in reaching its strategic targets. To assess progress towards the strategic aspirations, the Management Board of Deutsche Bank AG has decided to utilise four Key Performance Indicators (KPIs) that are significant metrics for the capital, risk, cost and revenue profile: Common Equity Tier 1 (CET1) capital ratio (fully loaded), Leverage ratio, Adjusted cost base (without Postbank and Non-Core Operations Unit) and Post-tax return on tangible equity (RoTE). Depending on eligibility, the Individual Component is delivered either in the form of Individual Variable Compensation or a Recognition Award. Whereas the Group Component links to Group performance, Individual Variable Compensation takes into consideration a number of financial and non-financial factors. These include the applicable divisional performance, the employee s individual performance and conduct, relativities within the employee s peer group and retention considerations. The Recognition Award program is targeted at non-tariff employees at the lower hierarchy levels. It provides the opportunity to acknowledge and reward outstanding contributions made by the target population in a transparent and timely manner. Generally, there are two nomination cycles per year. Under the new compensation framework, there continues to be no guarantee of Variable Compensation in an existing employment relationship. Compensation for 2016 Deutsche Bank has a robust methodology in place, aimed at ensuring that the determination of Variable Compensation reflects the risk-adjusted performance as well as the capital position of Deutsche Bank and its divisions. The total amount of Variable Compensation is primarily driven by (i) Group affordability (i.e. what can Deutsche Bank award in alignment with regulatory requirements) and (ii) Group strategy (what should Deutsche Bank award in order to provide an appropriate compensation while protecting the long-term health of the franchise). For 2016, the Management Board of Deutsche Bank AG decided to only award a limited pool of Variable Compensation given the operating environment. Specifically, the Management Board decided that Deutsche Bank s senior employees (Corporate Titles Vice President, Director and Managing Director ) would only receive a Group Component but no Individual Component. For 2016, the Management Board of Deutsche Bank AG determined a target achievement rate of 50 % with regard to KPIs of the Group Component. 1) The most current Compensation Report is linked on: 17

20 Identification of Material Risk Takers In accordance with the Law as of 17 December 2010 on Undertakings for Collective Investments (as subsequently amended) in conjunction with the guidelines on sound remuneration policies under UCITS published by the European Securities and Markets Authority (ESMA), the Company has identified individuals who have a material impact of the Company s risk profile (Material Risk Takers). At least 40 % of the Variable Compensation for Material Risk Takers is deferred. Additionally, at least 50 % of both, the upfront and the deferred proportion, are granted in Deutsche Bank shares or share-based instruments. All deferred components are subject to a number of performance conditions and forfeiture provisions which ensure an appropriate ex-post risk adjustment. In case the Variable Compensation is lower than EUR 50,000, the Material Risk Takers receive their entire Variable Compensation in cash without any deferral. Aggregate Compensation Information for the Company for 2016 Number of employees on an annual average 136 Total Compensation EUR 10,375,011 Fixed Pay EUR 10,017,020 Variable Compensation EUR 357,991 Total Compensation for Senior Management 1) EUR 894,775 Total Compensation for other Material Risk Takers 2) EUR 0 Total Compensation for Control Function employees 3) EUR 223,641 1) Senior Management refers to the Members of the Management Board of the Company. In case that Members of Senior Management receive their compensation completely or partly from other companies in the Deutsche Bank Group, such compensation is included in the amount of Total Compensation. The above mentioned amount includes EUR 272,417 which was paid by other companies of Deutsche Bank Group. Members of the Management Board 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 and / or individuals in the same remuneration bracket have been identified. 3) In case that Control Function employees receive their compensation completely or partly from other companies in the Deutsche Bank Group, such compensation is included in the amount of Total Compensation. The above mentioned amount includes EUR 17,876 which was paid by other companies of Deutsche Bank Group. 18

21 DWS G-SIFIs Hybrid Bond Fund Information according to Regulation (EU) 2015/2365 on the transparency of securities financing transactions, and the re-use and amending Regulation (EU) No 648/ Certificate in Section A In the reporting period, there were no securities financing transactions according to the above mentioned regulation. 19

22 KPMG Luxembourg, Société coopérative Tel: , Avenue John F. Kennedy Fax: L-1855 Luxembourg info@kpmg.lu Internet: To the Unitholders of DWS G-SIFIs Hybrid Bond Fund 2, Boulevard Konrad Adenauer L-1115 Luxembourg REPORT OF THE REVISEUR D ENTREPRISES AGREE Report on the audit of the financial statements Opinion We have audited the accompanying financial statements of DWS G-SIFIs Hybrid Bond Fund ( the Fund ), which comprise the statement of net assets including the statement of investments in securities and other net assets as at 30 September 2017 and the statement of income and expenses and the statement of changes in net assets for the year then ended, and explanatory information to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view of the financial position of DWS G-SIFIs Hybrid Bond Fund as at 30 September 2017 and of the results of its operations and changes in its net assets for the year then in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the financial statements. Basis for opinion We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession ( Law of 23 July 2016 ) and with International Standards on Auditing ( ISAs ) as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier ( CSSF ). Our responsibilities under those Law and standards are further described in the «Responsibilities of the Réviseur d Entreprises agréé for the audit of the financial statements» section of our report. We are also independent of the Fund in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants ( IESBA Code ) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the financial statements, and have fulfilled our other ethical responsibilities under those ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information The Management Board of the Management Company is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our report of Réviseur d Entreprises agréé thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. 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 In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report this fact. We have nothing to report in this regard. Responsibilities of the Management Board of the Management Company and of those charged with governance 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 and presentation of the financial statements, and for such internal control as the Management Board of the Management Company determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Management Board of the Management Company is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board of the Management Company either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Fund s financial reporting process. Responsibilities of the Réviseur d Entreprises agréé for the audit of the financial statements The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report of Réviseur d Entreprises agréé that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 21

24 Obtain an understanding of internal control relevant to the audit 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 Fund s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management Board of the Management Company. Conclude on the appropriateness of the Management Board of the Management Company use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report of Réviseur d Entreprises agréé to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report of Réviseur d Entreprises agréé. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Luxembourg, 20 December 2017 KPMG Luxembourg Société coopérative Cabinet de révision agréé Harald Thönes 22

25 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 in Switzerland Deutsche Asset Management Switzerland Ltd Hardstrasse 201 CH-8005 Zurich 2. Paying Agent in Switzerland Deutsche Bank (Suisse) SA Place des Bergues 3 CH-1201 Geneva 3. 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 in Switzerland. 4. 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. 23

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27 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, 2016: 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 Asset Management Investment GmbH, Frankfurt/Main Management Board of the AIFM Manfred Bauer (since June 1, 2017) Chairman Deutsche Asset Management S.A., Luxembourg Dirk Bruckmann (until May 31, 2017) Deutsche Asset Management Investment GmbH, Frankfurt/Main Ralf Rauch Deutsche Asset Management Investment GmbH, Frankfurt/Main Martin Schönefeld (until June 30, 2017) 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 Fund Manager Deutsche Asset Management Investment GmbH Mainzer Landstraße Frankfurt/Main, Germany Sales, Information and Paying Agent Yves Dermaux (since July 1, 2017) Deutsche Bank AG, London Marzio Hug (until June 30, 2017) Deutsche Bank AG, London LUXEMBOURG Deutsche Bank Luxembourg S.A. 2, Boulevard Konrad Adenauer 1115 Luxembourg, Luxembourg Stefan Kreuzkamp Deutsche Asset Management Investment GmbH, Frankfurt/Main Frank Krings Deutsche Bank Luxembourg S.A., Luxembourg Dr. Matthias Liermann Deutsche Asset Management Investment GmbH, Frankfurt/Main As of: October 31, 2017

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