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Deutsche Bank Markets Research

North America

United States

Synthetic Equity & Index Strategy

US ETF Trade Alert

Date

9 May 2016

Largest HY ETF sees record outflows

HYG experienced $3.6bn in redemptions in the last 6 days

________________________________________________________________________________________________________________

Deutsche Bank Securities Inc.

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MCI (P) 057/04/2016.

Author

Sebastian Mercado, CFA

Strategist

(+1) 212 250-8690

[email protected]

Team Contacts

Hallie Martin

Strategist

(+1) 212 250-7994

[email protected]

Srineel Jalagani

Strategist

(+1) 212 250-2060

[email protected]

Data as of Friday May 6th, 2016

The outflows from HYG are consistent with an overall reduction of risk appetite across markets The comeback rally which began after Feb 11th, 2016 had added over 15% to Global Equities and almost 12% to HYG through April 28th. However following mix macroeconomic data and concerns over the actual efficacy of recent Central Bank measures, markets have begun to lose confidence and taper their appetite for risk as suggested by our ETF Flow Risk-o-Meter indicator.

Outflows from HYG most likely driven by institutional investors closing tactical positions entered last February HYG received $3.9bn of inflows during the recent rebound rally; however it has lost about $3.6bn in redemptions in the last six days. The high level of institutional ownership of HYG and the size of the redemptions suggest that institutional investors are most certainly behind the recent outflows. In addition, although other ETFs, such as JNK, have also experienced outflows, they have not been anywhere close to the magnitude of HYG’s flows suggesting that HYG’s outflows may be driven mainly by the more unique short-term minded investor group which is probably cashing out positions entered after the rebound and is more likely to be found among HYG owners.

HYG’s Options market also suggests outflows driven by asset allocation decision and not asset class stress During the last December’s HY debt stress episode, both HYG options notional dollar value traded and implied volatility rose significantly reaching daily levels as high as $6.6bn and 17.4%, respectively. On the other hand, during the last few days options market activity for HYG has remained normal with options notional dollar value traded in the range of $400m-$500m, and implied volatility closer to 10%. Therefore we do not see any current signs of bond market stress, but rather signs of normal asset allocation conditions

Relationship between ETF primary market and secondary market activity also supports the asset allocation thesis for recent HYG outflows A low ratio of primary market to secondary market activity for HYG, such as the one observed last December, indicates either a situation of market stress driven by non-asset allocation positioning or very little demand/supply for the asset class; while a high ratio like the current one (~40%) suggests a healthy primary market and flows driven mostly by asset allocation decisions.

HYG passes another liquidity test with flying colors Despite HYG seeing its largest run of outflows on record with $3.6bn exiting the fund in the last six days since April 28th, or more than 40% of the $8.5bn HYG shares traded on-exchange in the last six-day period, we saw very efficient execution with an average of 1.2bps bid/ask price spread, and an average daily premium of 0.22% to NAV. Therefore we reaffirm our stand that HY ETFs do contribute to ease liquidity pressure on HY debt by providing a safety valve or liquidity buffer for the asset class when the underlying market experiences stress, and by providing transparent additional liquidity to access the HY asset class which can be easily transformed in bond liquidity during normal market conditions.

9 May 2016

US ETF Trade Alert


HYG sees record outflows

HYG’s record outflows in perspective

Last week the largest US-listed exchange traded fund focused on USD-

denominated non-investment grade corporate debt, the iShares iBoxx $ High

Yield Corporate Bond ETF (aka HYG), experienced its largest redemptions on

record since the inception of the ETF back in April 2007. In fact, on Thursday

May 5th, HYG recorded a 5 day outflow of over $3billion, and as of the end of

last week a total of $3.6bn in outflows since April 28th (Figure 2). Given the

size of this event and the relevance of ETFs in today’s markets, particularly on

the secondary markets, we have decided to look at this event in more detail in

order to shed some light on what may be driving this move, who may be

behind it, and what implications it may have for the underlying high yield

corporate bond market.

Figure 1: HYG experienced its largest 5-day run of outflows on record

(3,500)

(3,000)

(2,500)

(2,000)

(1,500)

(1,000)

(500)

-

500

1,000

1,500

2,000

5D

Ro

llin

g N

et

Cash

Flo

ws -

$M

M

HYG 5D Net CF

Source: Deutsche Bank, Bloomberg Finance LP

The outflows from HYG are consistent with an overall reduction of risk appetite across markets

Following a challenging start of the year for most risky assets, including HY

debt, investors’ appetite for risk bounced back after markets hit a trough on

February 11th, 2016. Since then until April 28th, 2016 markets experienced a

fairly benign environment for risk which spurred a rally of almost 12% in total

returns for HYG, and over 15% for Global Equities (Figure 2). However

following mix macroeconomic data and concerns over the actual efficacy of

recent Central Bank measures, markets have begun to lose confidence and

taper their appetite for risk. In fact our new risk appetite indicator EFRoM1

suggested that although investors remained on risk-on mode at the end of

April, their level of appetite for risk had decreased relative to March, and

therefore our indicator advocated for a reduction of risk in May and a less

benign environment for risky asset classes.

1 Refer to “US ETF Insights – ETF Flow Risk-o-Meter (EFRoM)” published on May 5th, 2016 for additional

details on the methodology

9 May 2016

US ETF Trade Alert


Figure 2: Total Return Performance for Global Equities

and High Yield Debt YTD as of May 6th, 2016

Figure 3: Recent outflows from HY ETFs are consistent

with the reduction of risk suggested by our EFRoM

indicator

85

90

95

100

105

110

31

-Dec

7-J

an

14

-Jan

21

-Jan

28

-Jan

4-F

eb

11

-Feb

18

-Feb

25

-Feb

3-M

ar

10

-Mar

17

-Mar

24

-Mar

31

-Mar

7-A

pr

14

-Ap

r

21

-Ap

r

28

-Ap

r

5-M

ay

No

rmalize

d L

evel (

10

0)

Global Equities

High Yield Corp Debt

(4.0)

(3.0)

(2.0)

(1.0)

-

1.0

2.0

3.0

4.0

(2.5)

(2.0)

(1.5)

(1.0)

(0.5)

-

0.5

1.0

1.5

2.0

2.5

Ris

k-o

-Mete

r M

oM

Ch

an

ge

Ris

k-o

-Mete

r

MoM Chg [rhs]

ETF Flow Risk-o-meter

AD

DR

ISK

RE

DU

CE

RIS

K

RIS

KO

NR

ISK

OFF

Source: Deutsche Bank, FactSet. Note: Global Equities represented


Outflows are most likely driven by institutional investors closing tactical positions entered last February

During the risk comeback following last February’s trough, HY ETFs listed in

the US captured $7.3bn in inflows through April 28th, 2016 with about 90% of

such inflows concentrated in just two ETFs: HYG and JNK. As a matter of fact,

HYG and JNK captured $3.9bn and $2.7bn, respectively. However, since last

April 28th, HY ETFs have experienced redemptions worth about $4.1bn

through last Friday with HYG experiencing about $3.6bn of outflows compared

to only $0.5bn of outflows for JNK during the same period. Hence, HYG has

not only been the main driver of the outflows in the recent exodus from HY

ETFs, but also it has lost an amount almost equal to the size of the inflows

received during the most recent risk asset rally (Figure 4).

Figure 4: Outflows have affected HY ETFs across the

board, but particularly HYG which has lost most of the

assets attracted since the February rebound

Figure 5: HYG and JNK are very similar, but with some

important differences

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

30-Nov 31-Dec 31-Jan 29-Feb 31-Mar 30-Apr

Ne

t C

um

ula

tive

Cas

h F

low

s in

$M

M

HYG JNK All HY ETFs

Name

iShares iBoxx $ High

Yield Corporate Bond

ETF

SPDR Barclays High

Yield Bond ETF

Ticker HYG JNK

TER 0.50% 0.40%

AUM $M 13,834 12,403

20D ADV $M 1,026 344

5-Day $ 0.01 0.01

5-Day bps 1.2 2.9

Institutional Ownership 76.6% 71.1%

Short Term Inst. Owner.* 16.3% 8.2%

13.3% 4.7%

5D Avg. Borrow Rates 0.46% 0.40%

477 7

Avg. Bid/Ask

Spreads

Short Interest as % of Shrs.

Outstanding

20D Average Options

Volume $MM Source: Deutsche Bank, Bloomberg Finance LP

Source: Deutsche Bank, Bloomberg Finance LP, FactSet. Note: Ownership data as of Q5 2015, Short Term Institutional Ownership determined by Broker and Hedge Fund ownership, other data as of Fri May 6, 2016.

9 May 2016

US ETF Trade Alert


Both funds, HYG and JNK, are very good products which offer similar exposure

to the HY asset class. Both of them have over $12bn in assets under

management, are very liquid and trade very efficiently, and are priced just

10bps apart with a 0.40% and 0.50% expense ratio for JNK and HYG,

respectively. However, despite the similarities, there are some important

differences between these two funds. More specifically, the way these ETFs

are used and by what type of investor they are used can vary significantly. In

fact, frequent readers of our research may recall that HYG is what we call a

Pseudo Futures ETF, while JNK is what we call Cash Management ETF2. In

short, Pseudo Futures ETFs are extremely liquid products which usually trade

more efficiently than its underlying asset class, and offer a liquid short side

that enables the usage of the product as a hedging vehicle, in addition to very

active and liquid ETF options market which adds even more liquidity. Therefore

Pseudo Futures ETFs can be used for Asset Allocation, Cash Management, or

Risk Management functions; while Cash Management ETFs are mostly used

for Asset Allocation or Cash Management functions. As a result, HYG has a

higher percentage of short term or tactical institutional users relative to JNK,

and it is usually the ETF of choice for institutional size trades of tactical or

hedging nature. We believe that these differences in usage between HYG and

JNK are most likely the reason behind the abrupt discrepancy observed in the

outflows of HYG relative to JNK. Although both funds have been affected by

the reduction in risk appetite, JNK’s investors which usually have a longer

investment time horizon have been less moved to exit the asset class

compared to the more short term oriented users of HYG.

HYG’s Options market also suggests outflows driven by asset allocation decision and not asset class stress

ETF options market activity for HYG suggests that the

recent outflows are very unlikely to be driven by asset

class stress. We based our assessment on the fact that

current ETF options market activity is significantly

different to the level of market activity experienced in the

options market for HYG during the most recent stress

episode for the HY asset class recorded last December

when a mutual fund focused on high yield debt

announced it was closing its doors. During the December

episode, both HYG options notional dollar value traded

and implied volatility rose significantly reaching daily

levels as high as $6.6bn and 17.4%, respectively. On the

other hand, during the last few days options market

activity for HYG has remained normal with options

notional dollar value traded in the range of $400m-

$500m, and implied volatility closer to 10%. Therefore

we do not see any current signs of bond market stress,

but rather signs of normal asset allocation conditions

(Figure 6).

2 More details about Pseudo Futures, Cash Management, and Asset Allocation ETF classifications can be

found on “A Stock Picker’s Guide to ETFs” published on June 5th, 2016

Figure 6: ETF Options market activity does not suggest an

stress situation for the Corp HY asset class

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

No

tio

nal V

alu

e T

rad

ed

in

Op

tio

ns

in

$M

M

Imp

lied

Vo

lati

lity

HYG Opt. Volume Notional

HYG Implied Volatility

Source: Deutsche Bank, Bloomberg Finance LP. Implied Volatility based on 3M 100% Moneyness HYG options

9 May 2016

US ETF Trade Alert


Relationship between ETF primary market and secondary market activity also supports the asset allocation thesis for recent HYG outflows

The relationship between secondary market and primary

market activity for ETFs can also help us understand the

drivers behind the flows. A Pseudo Futures ETF such as

HYG usually absorbs most of its demand/supply through

the secondary market or on-exchange volume relying

very little on the primary market, particularly during

situations of market stress when the primary market

becomes less accessible. This ability to expand volume

on situations of stress or high volatility has been

described by us as VIX elasticity of ETF volume in

previous works3. More general, the Volatility elasticity of

ETF volume (VEV) is the sensitivity (or beta) of the ETF’s

volume changes to the changes on its Options implied

volatility (if available). Basically, an ETF with a higher VEV

would command higher volumes during surges in

volatility compared to other ETF with a lower VEV. For

example, HYG registered a daily VEV of 1.9 during 2015,

while JNK registered a VEV of 1.3 during the same period.

These readings suggest that both ETFs have an

expansionary volume behavior under stress, but HYG more than JNK. Such

difference was exhibited during the December stress when only a small

fraction of the HYG secondary market activity (less than 8%) had to be

absorbed by the primary market; while in the case of JNK about half of the

secondary market activity was absorbed by the primary market. Overall, a low

ratio of primary market to secondary market activity for HYG indicates either a

situation of market stress driven by non-asset allocation positioning or very

little demand/supply for the asset class; while a high ratio like the current one

(~40%) suggests a healthy primary market and flows driven mostly by asset

allocation decisions (Figure 7).

HYG passes another liquidity test on record outflows

Due to their growth in recent years with more than $40bn in assets under

management, and more than $1.5bn in on-exchange average daily volume this

year, High Yield ETFs have come under significant scrutiny in the last few

years. Most skeptics of the product have alluded to the fact that these ETFs

pose systemic risk because they invest in an illiquid asset class which, as a

result of new regulation, has become even less liquid; thus suggesting that in a

situation of market stress there could be significant dislocations if there were

to be a massive flight from the asset class. We have not shared this view;

actually, we believe that High Yield ETFs are part of the solution to the asset

class liquidity problem providing a buffer of liquidity or safety valve to

investors during tough market environments. Fortunately, we do not just need

to rely on what could be seen as our own ETF industry positive bias, but rather

on real market experience and publically available data.

3 More details about VIX elasticity of ETF Volume can be found on “A Stock Picker’s Guide to ETFs”

published on June 5th, 2016

Figure 7: Relationship between ETF primary market and

secondary market activity suggests that the recent

outflows are driven by allocation decisions

-

1,000

2,000

3,000

4,000

5,000

6,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

Tra

ded

Valu

me in

$M

M

Ab

so

lute

Net

Cre

ati

on

/Red

em

pti

on

d

ivid

ed

by V

olu

me (5

-Day A

vg

.)

HYG Volume JNK Volume

HYG (lhs) JNK (lhs)


9 May 2016

US ETF Trade Alert


In the last six months we have had two very important liquidity tests for HY

ETFs which cover some of the main scenarios feared by ETF skeptics. The first

scenario involves large redemptions during a situation for HY debt stress, while

the second test involves very large redemptions during a normal situation for

HY debt.

First test: The first test came last December when the asset class went on

stress mode following rising spreads, the closure of a HY Mutual Fund,

and lack of liquidity in the bond market. In the 5-Day period following

December 10th, 2016, HYG traded $14bn in on-exchange ETF shares

volume with only about 9% of that being absorbed by the primary market.

Moreover, the $14bn traded very efficiently at an average of 1.3bps bid/ask

spread, and at an average daily premium of 0.04% to NAV (Figure 8 and

Figure 9).

Second test: The second test is happening. As risk appetite decreases, HY

ETFs have experienced significant outflows. In particular, HYG has seen its

largest run of outflows on record with $3.6bn exiting the fund in the last

six days since April 28th. Unlike the last December episode, this series of

redemptions comes in a moment when the HY market is functioning

normally (HY spreads are still more than 100bps lower than its recent

February highs) and secondary market liquidity is closer to normal

condition levels. Therefore over 40% of the $8.5bn traded on-exchange in

the last six-day period has been efficiently absorbed by the primary market

trading at an average of 1.2bps bid/ask spread, and at an average daily

premium of 0.22% to NAV (Figure 8 and Figure 9).

Figure 8: Recent outflow activity depended significantly

more on the primary bond market compared to last

December’s activity…

Figure 9: …however, ETF pricing remained efficient and

highly resilient, despite the additional primary market

activity

(1,000)

(800)

(600)

(400)

(200)

0

200

400

600

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Daily N

et

Cash

Flo

ws in

$M

M

Tra

ded

Vo

lum

e in

$M

M

HYG Volume HYG (lhs)

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

30-Nov 31-Dec 31-Jan 29-Feb 31-Mar 30-Apr

Fu

nd

Pre

miu

m/D

isco

un

t %

HYG HY Closed-End Fund


Source: Deutsche Bank, Bloomberg Finance LP. Note: HY Closed End Fund data provided for comparison purposes as an example of the efficiency of other fund structures offering access to HY investment via on-exchange prices and trading

Our conclusion from these two tests is that HY ETFs do contribute to ease

liquidity pressure on HY debt by providing a safety valve or liquidity buffer for

the asset class when the underlying market experiences stress, and by

providing transparent additional liquidity to access the HY asset class which

can be easily transformed in bond liquidity during normal market conditions.

9 May 2016

US ETF Trade Alert


Appendix 1

Important Disclosures

Additional information available upon request

*Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Sebastian Mercado

Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock.

Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock

Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell.

Newly issued research recommendations and target prices supersede previously published research.

47 %51 %

3 %

52 % 43 %

19 %0

50100150200250300350400450500

Buy Hold Sell

North American Universe

Companies Covered Cos. w/ Banking Relationship

http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

9 May 2016

US ETF Trade Alert


Regulatory Disclosures

1.Additional Information

Information on ETFs is provided strictly for illustrative purposes and should not be deemed an offer to sell or a

solicitation of an offer to buy shares of any fund that is described in this document. Consider carefully any fund's

investment objectives, risk factors, and charges and expenses before investing. This and other information can be found

in the fund's prospectus. Prospectuses about db X-trackers funds and Powershares DB funds can be obtained by calling

1-877-369-4617 or by visiting www.DBXUS.com. Read prospectuses carefully before investing. Past performance is not

necessarily indicative of future results. Investing involves risk, including possible loss of principal. To better understand

the similarities and differences between investments, including investment objectives, risks, fees and expenses, it is

important to read the products' prospectuses. Shares of ETFs may be sold throughout the day on an exchange through

any brokerage account. However, shares may only be redeemed directly from an ETF by authorized participants, in very

large creation/redemption units. Transactions in shares of ETFs will result in brokerage commissions and will generate

tax consequences. ETFs are obliged to distribute portfolio gains to shareholders. Deutsche Bank may be an issuer,

advisor, manager, distributor or administrator of, or provide other services to, an ETF included in this report, for which it

receives compensation. db X-trackers and Powershares DB funds are distributed by ALPS Distributors, Inc. The opinions

expressed are those of the authors and do not necessarily reflect the views of DB, ALPS or their affiliates.

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the

"Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

2. Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are

consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the

SOLAR link at http://gm.db.com.

http://www.dbxus.com/

http://gm.db.com/

9 May 2016

US ETF Trade Alert


Additional Information

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9 May 2016

US ETF Trade Alert


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Prudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and Financial

Conduct Authority. Details about the extent of our authorisation and regulation are available on request.

Hong Kong: Distributed by Deutsche Bank AG, Hong Kong Branch.

India: Prepared by Deutsche Equities India Pvt Ltd, which is registered by the Securities and Exchange Board of India

(SEBI) as a stock broker. Research Analyst SEBI Registration Number is INH000001741. DEIPL may have received

administrative warnings from the SEBI for breaches of Indian regulations.

Japan: Approved and/or distributed by Deutsche Securities Inc.(DSI). Registration number - Registered as a financial

instruments dealer by the Head of the Kanto Local Finance Bureau (Kinsho) No. 117. Member of associations: JSDA,

Type II Financial Instruments Firms Association and The Financial Futures Association of Japan. Commissions and risks

involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by

multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to

losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional

losses stemming from foreign exchange fluctuations. We may also charge commissions and fees for certain categories

of investment advice, products and services. Recommended investment strategies, products and services carry the risk

of losses to principal and other losses as a result of changes in market and/or economic trends, and/or fluctuations in

market value. Before deciding on the purchase of financial products and/or services, customers should carefully read the

relevant disclosures, prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in

this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the

name of the entity. Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank

Group's analysts with the coverage companies specified by DSI. Some of the foreign securities stated on this report are

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9 May 2016

US ETF Trade Alert


not disclosed according to the Financial Instruments and Exchange Law of Japan.

Korea: Distributed by Deutsche Securities Korea Co.

South Africa: Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register

Number in South Africa: 1998/003298/10).

Singapore: by Deutsche Bank AG, Singapore Branch or Deutsche Securities Asia Limited, Singapore Branch (One Raffles

Quay #18-00 South Tower Singapore 048583, +65 6423 8001), which may be contacted in respect of any matters

arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who

is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and

regulations), they accept legal responsibility to such person for its contents.

Taiwan: Information on securities/investments that trade in Taiwan is for your reference only. Readers should

independently evaluate investment risks and are solely responsible for their investment decisions. Deutsche Bank

research may not be distributed to the Taiwan public media or quoted or used by the Taiwan public media without

written consent. Information on securities/instruments that do not trade in Taiwan is for informational purposes only and

is not to be construed as a recommendation to trade in such securities/instruments. Deutsche Securities Asia Limited,

Taipei Branch may not execute transactions for clients in these securities/instruments.

Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial Centre

Regulatory Authority. Deutsche Bank AG - QFC Branch may only undertake the financial services activities that fall

within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower,

West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related

financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre

Regulatory Authority.

Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute,

any appraisal or evaluation activity requiring a license in the Russian Federation.

Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regulated by the

Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall

within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya

District, P.O. Box 301809, Faisaliah Tower - 17th Floor, 11372 Riyadh, Saudi Arabia.

United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated

by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services

activities that fall within the scope of its existing DFSA license. Principal place of business in the DIFC: Dubai

International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has been

distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as

defined by the Dubai Financial Services Authority.

Australia: Retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product

referred to in this report and consider the PDS before making any decision about whether to acquire the product. Please

refer to Australian specific research disclosures and related information at

https://australia.db.com/australia/content/research-information.html

Australia and New Zealand: This research, and any access to it, is intended only for "wholesale clients" within the

meaning of the Australian Corporations Act and New Zealand Financial Advisors Act respectively.

Additional information relative to securities, other financial products or issuers discussed in this report is available upon

request. This report may not be reproduced, distributed or published without Deutsche Bank's prior written consent.

Copyright © 2016 Deutsche Bank AG

https://australia.db.com/australia/content/research-information.html

David Folkerts-Landau Chief Economist and Global Head of Research

Raj Hindocha Global Chief Operating Officer

Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Steve Pollard Global Head

Equity Research

Michael Spencer Regional Head

Asia Pacific Research

Ralf Hoffmann Regional Head

Deutsche Bank Research, Germany

Andreas Neubauer Regional Head

Equity Research, Germany

International Locations

Deutsche Bank AG

Deutsche Bank Place

Level 16

Corner of Hunter & Phillip Streets

Sydney, NSW 2000

Australia

Tel: (61) 2 8258 1234

Deutsche Bank AG

Große Gallusstraße 10-14

60272 Frankfurt am Main

Germany

Tel: (49) 69 910 00

Deutsche Bank AG

Filiale Hongkong

International Commerce Centre,

1 Austin Road West,Kowloon,

Hong Kong

Tel: (852) 2203 8888

Deutsche Securities Inc.

2-11-1 Nagatacho

Sanno Park Tower

Chiyoda-ku, Tokyo 100-6171

Japan

Tel: (81) 3 5156 6770

Deutsche Bank AG London

1 Great Winchester Street

London EC2N 2EQ

United Kingdom

Tel: (44) 20 7545 8000


60 Wall Street

New York, NY 10005

United States of America

Tel: (1) 212 250 2500

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