8 December 2015 World Outlook 2016: Managing with less liquidity !Figure 4: US and European M&A activity (left) and share buybacks (right) 2.500 2,000 1.500 1,000 500 0 • US Acquirer •WE Acquirer 700 • US (S&P 500) • Europe (Stoxx 600) 600 500 400 300 200 100 0 8 8 8 No 8 8 N 00000000 00000 NNNNNNNNNNNNN Am far 2 0 lS wroth* end a Nombre Sane DeunoM Sw "march 66 6 6 6 61 6 c&—) c&"') c&'"' eeeeeeeeemeee 0000000 00000000 Overall these charts show that Europe is some way behind the US in terms of a deteriorating credit cycle. As such even if US credit widens further, it's possible that European credit can continue to outperform. We would be mildly bullish European credit and would be more aggressive if we saw some stabilization in the US credit market. VilitlatierP1 Credit spreads globally are all wider than their 50th percentile observation through history with most rating bands having been tighter 60-80% of the time. Figure 5: Spread percentile rank - Current vs. YE 2013 and 2014 Wi USD Fin San 7rs) 1 deSpread CUR Non.Fin NYB Mrs) GBP Fin Son 1172•4) CUR NornFin KY GEC Ilans) FUR Erna Sin II lver) USD Fin Sub U Ina) CUR Fin Sab U 2r.) /19519vreed GBP Fin Sub 0 21,n10 USO Non.Fin A1, 21410 .nannnerani_ .._, GBP Noo.Fin BBB 0 7yrs) 1 —i EUR Ncn.F,n 1390 06710 EUR Non.FIn HY BB II 3rts) GBP Non.F m A ll 7rs) ,.....1....., ....1, - , USD Corp HY BEI 0 Oars) USD NonSin AA 0 7yrin a•nn I i GBP Non-Fin M II 7VIS) USD Non.Fin BBB Ohre) CUR Non-Fri A II 7r USD Corp KT B I16yre) yam/awe EUR Non-Fin A4 lyre) USD Corp 14YCGC Inkke) ) 44a , 0% 10% 20% 30% 40% 50% 00% 70% 80% 90% 100% •Cuttani Rank •flena 131 Dec 20141 = Rank 131 Dec 20131 Sane Dana* NA Romeo% MS Grap The only caveat to this analysis is that the widest 10-15% of observations usually sees credit spreads gap wider as a recession hits. We are very close to the edge of pricing in a mild recession in global credit spreads. If we avoid it in 2016, spreads look very attractive but given that we're probably late cycle in the US there are risks at this stage to trying to eke out carry for another 12 months. On balance we're mildly bullish European credit due to being less late cycle than the US and due to valuations. Jim Reid, (44) 20 754 72943 Nick Burns, (441 20 754 71970 Page 52 Deutsche Dank AG/London CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0119159 CONFIDENTIAL SDNY_GM_00265343 EFTA01458984