# Important investment information

The purpose of the information given on this page is to ensure that the recipients of investment recommendations from Jyske Bank have been informed of Jyske Bank and the services mentioned by Jyske Bank and have been made informed of the basis of the information and assessments that are given in the investment recommendation, including information of the relevant financial instruments and investment strategies.  Furthermore, the purpose of the information given on this page is to inform the recipient of the risks involved in investment.

Jyske Bank A/S (Vestergade 8-16, DK-8600 Silkeborg, Business Reg. No. DK-17616617) is supervised by the Danish Financial Supervisory Authority.
Recommendations and research reports are based on information that Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of this information nor any liability for transactions made on the basis of the information or assessments included in recommendations and research reports. The estimates and recommendations of research reports may be changed without notice. The research report is for the personal use of Jyske Bank's clients and may not be copied. If no other source has been stated, the source is Jyske Bank.

Research reports and recommendations are general information and not personal advice.

Research reports and recommendations may refer to other research reports and recommendations. In such cases, a link will be given, through which adequate information can be found about the specific recommendation.

See the front page of the research report for date and time of publication.

Conflicts of interest
Jyske Bank has prepared procedures to prevent and preclude conflicts of interest thus ensuring that analyses are being prepared in an objective manner. These procedures have been incorporated into the business procedures covering the research activities of Jyske Markets, a business unit of Jyske Bank. Jyske Bank's analysts may not hold positions in the instruments for which they prepare research reports. If an analyst takes over for the responsible analyst in connection with illness, business activities, etc., this analyst cannot trade in the relevant instrument on the publication day of the research report and the following day. Moreover, Jyske Bank may hold positions in the instruments for which such reports are prepared and will often have business relations with the companies for which research reports are prepared or the issuers of the instruments for which research report are prepared. Analysts receive no payment from units interested in individual research reports.

Qualitative recommendations for individual companies based on Jyske Quant models rest on a quantitative method. This ensures that conflicts of interest do not occur, as the recommendation of the research report is generated on the basis of the total Quant score.

Research reports have not been presented to the issuer prior to their publication (unless otherwise stated).

Risk
Investment may be associated with risk, and therefore assessments and recommendations, if any, may be associated with risk. The listed risk factors and/or sensitivity calculations cannot be regarded as exhaustive. If instruments are traded in a currency other than the investor’s base currency, the investor accepts a currency risk. In connection with an ADR or similar, the currency risk relates to the currency in which the underlying share trades.

Risk classification
Green: An investment product type is in green category if the risk of losing all the invested amount is regarded as insignificant, and if the product type is simple to grasp.
Amber: An investment product type is in amber category if there is a risk of losing the invested amount partially or fully, and if the product type is simple to grasp.
Red: An investment product type is in red category if there is a risk of losing more than the invested amount, or if the product type is difficult to grasp.

Complexity
For a product to be characterised as "non-complex":

• It must be possible to sell, redeem or in any other way realise the product at a publicly accessible price;
• It must not involve actual or potential obligations for the client exceeding the expenses of acquisition;
• Pricing must be determined without reference to the prices of other securities as well as other indices and targets;
• Easily comprehensible, publicly accessible information about the characteristics of the product must be available;
• The product must not be a derivative instrument.

Performance and price development
The future and historical returns estimated in the research report are stated as returns before costs and tax-related circumstances since returns after costs and tax-related circumstances depend on a number of factors relating to individual client relations, custodian charges, volume of trade as well as market-, currency- and product-specific factors. It is not certain that an expected future return stated will accord with the actual development. The stated expected future returns solely reflect our assessment.
Past performance and price development are not reliable indicators of future performance and price development. Performance and/or price development may be negative. Forecasts included in the research report cannot with certainty be used as reliable indicators of future performance.

All prices stated are the latest closing prices before the release of the research report, unless otherwise stated.

Tax

Update of the research report
Research reports, recommendations and ad-hoc publications will not be updated. Instead a new publication will be published when and if Jyske Bank finds it necessary. See the front page for the initial date of publication of the report. Quantitative recommendations for individual ISIN codes will be updated on an ongoing basis. See the front page of the research report for date and time of publication

See below for a list of the asset classes within which Jyske Bank prepares research reports and recommendation. Here you will see all relevant investor information for the asset class in question.

## Equities

Recommendation changes and distribution: Individual shares

Recommendation changes and distribution: Strategy

Models

Quantitative recommendations for individual companies
Jyske Bank employs a quantitative model, Jyske Quant Global Large Cap Equities, to identify investment opportunities globally. Jyske Quant Global Large Cap Equities includes approx. 3,000 of the world's largest listed companies in terms of market value. Through a quantitative analysis the companies are scored on the basis of 23 key figures and subsequently ranked within three classic and well-documented factors:

• Value – the share is undervalued relative to the other companies.
• Quality – the share involves low risk and high quality relative to the other companies.
• Momentum – the share is attractive compared with other companies based on price development and analyst expectations.

The three factors are finally weighted equally, resulting in an overall Quant score, which forms the basis of the recommendation. The total Quant score ranks the companies within five quintiles. The Q1 quintile is the 20% best-scoring companies, i.e. the companies with the highest total score. On the other hand, the Q5 quintile is the 20% worst scoring companies etc. Jyske Quant Global Large Cap Equities is based on a thorough and well-documented method with strong historical results. The better the ranking, the higher the likelihood of experiencing a positive excess return. The model excludes Financials and Utility since both sectors are considered being significantly different from other sectors. Among other things as a result of regulation and the companies’ typical capital structure. Also, there are large differences between the industries within these sectors. Jyske Bank will not make a fundamental assessment or a risk assessment of the company which is why we do not state a price target for the share.

Fundamental recommendations for individual companies
Jyske Quant Global Large Cap Equities (see description under the section ”Models”) is used to screen the market and identify future potential winners. When we launch a new Buy or Strong Buy recommendation, the company must have a Q1 or Q2 score – i.e. among the 40% best-scoring companies of Jyske Quant Global Large Cap Equities. We revise our recommendations on an ongoing basis. The analyst's assessment of the company is the determining factor behind a change of our recommendation from Buy or Strong Buy to Hold or Sell.

Jyske Bank employs one or more of the following models:

• Discounted cash flow model (DCF-model): In this model, the valuation of the company is based on the expected future free cash flows generated by the company's operations. The valuation is divided into a forecast period of ten years, an intermediate period, in which it is assumed that the company will be able to maintain its competitive advantage, and a terminal period. The value in the forecast period and in the intermediate period is calculated through a simple discounting of the free cash flows in the individual years with the relevant cost of capital, WACC. The value is calculated as:

NPV of budget period (EV) = $\sum$T(t=0)  (FCFt+1/(1+WACC)(t+1) )

Where

FCFt +1 = The free cash flow during period t+1 (both owners and lenders)
WACC = The weighted average cost of capital (both owners and lenders)
EV = Estimated value (both equity and interest-bearing debt)
• Dividend model: In individual cases, a dividend model is applied to determine the company's fundamental value. According to this model, the value of a company is the discounted value of all expected future dividend payments.
• Relative valuation: The fundamental value is compared with a relative valuation where key figures like P/E, P/B and EV/EBITDA are compared with those of the rivals. If the company is a consolidated company consisting of different business areas, a sum-of-the-parts valuation can be used where the valuation of the company is based on the value of the individual business areas determined on the background of key figures from comparable companies.
• Market sentiment: The recommendation and the price target are moreover adjusted for the expected news flow and the market sentiment based on knowledge of the industry and company-specific circumstances. This includes the momentum score in the Jyske Quant model. The momentum score comprises factors like earnings momentum, implicit volatility, analysts' estimate changes and recommendation changes.

Strategy
Scenario model: The purpose of the model is to categorise expected return regimes in the equity market based on four simple and traditional market drivers: Valuation, interest-rate development, market sentiment and investor sentiment. The model has a clearly defined structure and is not based on distribution assumptions. Every week, the above-mentioned factors are evaluated, resulting in one of four expected return scenarios each with their own unique characteristics:

• Fundamentals: The most positive scenario with the highest expected return and normally distributed returns. Historically, approx. 62% of the observations have been positive in this scenario. This will typically occur around a market trough.
• Optimistic scenario: The second-best scenario is characterised by high expected returns, the lowest drawdown of all scenarios and a distribution of returns which is approximate normally distributed. Historically, approx. 56% of the observations have been positive in this scenario. This will typically occur between market trough and peak.
• Pessimistic scenario: The pessimistic scenario has a slightly negative expected return, the lowest upside of all scenarios and a distribution of returns that is leptokurtic and left skewed, i.e. more extreme and negative observations than you would have expected on the basis of a normal distribution. This will typically occur between market peak and trough.
• Speculative scenario: The scenario with definitely the lowest expected return and largest drawdown. The distribution of return is highly leptokurtic and left skewed, i.e. to a high degree more extreme and negative observations than you would have expected on the basis of a normal distribution. This will typically occur around market peaks.

Recommendation concepts

Quantitative recommendations for individual companies
The recommendation concepts Strong Buy, Buy, Hold and Sell are used. The recommendation alone depends on the quintile the company is placed in.

• Q1: STRONG BUY since there is a strong likelihood that the company will outperform the market.
• Q2: BUY since there is a moderate likelihood that the company will outperform the market.
• Q3: HOLD since it is likely that the company will perform in line with the market.
• Q4: SELL since there is a moderate likelihood that the company will underperform the market.
• Q5: SELL since there is a strong likelihood that the company will underperform the market.

Please note that the above descriptions of the recommendation concepts are average considerations. Consequently, it is still possible that companies in, for instance Q5, outperform the market whereas it is also possible that companies in Q1 underperform the market etc.

Fundamental recommendations for individual companies
Our recommendation structure consists of the four recommendations: Strong Buy, Buy, Hold and Sell. This results in the following recommendation structure:

Recommendation   Absolute return
Hold                        0-10%
Sell                          <0%

Our recommendations are based on an evaluation of the forecast return over the next twelve months. The forecast return is the difference between the current price and our 12-month price target (our price target is inclusive of dividends over the period). The price target mirrors the potential we see in a share in the form of a price change and dividend within the coming 12 months.

It is the recommendation, not the price target, which is the anchor. A Buy recommendation will remain a Buy recommendation until changed, even if price increases have taken the price ‘too close’ to the price target. Hence, we will explicitly point out if we change our recommendation whereas a change of the price target will not necessarily trigger a new research report or comments.

jyskebank.dk/equityrecommendationstructure

Strategy
Recommendations of risk level and asset allocation (overweight, underweight and neutral) are, among other things, assessed on the basis of Jyske Bank's expectation of whether an asset class will perform better, poorer or on level with the general market within the coming twelve months.

## Corporate Bonds

Recommendation changes

Models
Different models are applied for fundamental and quant research reports
Fundamental
Jyske Bank may apply one or more of the following models

Forecast model:
Jyske Bank uses a forecast model, which is adjusted to the individual issuer as needed so the model projects the factors relevant to the specific company in the specific sector. In the model, the items of the financial statements are projected to ensure a correlation between the historical financial statements and the projection of the model. Selected items of the income statement, the balance sheet and the cash flow statement are projected. The projected items form the basis of calculating credit-related financial ratios, which together with other relevant input is used to predict the future credit quality.

Three models for expected credit spread are employed:
Expected changes in the credit quality – if the forecast model indicates a strengthening of the credit quality, it will point to a narrowing of the credit spread whereas expectations of a weakened credit quality will point to a widening of the credit spread.
Credit spread relative to comparable companies - identical issues should trade at identical credit spreads. Therefore the credit spread of an issue is compared with the credit spread of issues from comparable issuers. Same sector, rating, maturity, financial leverage, etc.
Credit spread relative to historical credit spread. The credit spread for an issue is compared with its history.

Quantitative recommendations
Jyske Bank applies a quantitative model, Jyske Quant Corporate Bonds, to identify global investment opportunities within corporate bonds. With Jyske Quant Corporate Bonds we monitor more than 8,000 bonds worldwide.

Through quantitative analysis, the issues are scored on the basis of financial ratios and subsequently ranked within three categories – Value, Momentum and Size – which have a weighting of 60%, 30% and 10%, respectively, in the final Jyske Quant Score. The Quant score is calculated every week on a scale from 0 up to and including 10, so that the bond with the best key figure gets the score 10, and the bond with the poorest key figure gets the score 0.

Recommendation concepts
Different recommendation concepts are applied for fundamental and quantitative research reports.

Fundamental
The recommendation concepts Strong Buy, Buy, Hold and Sell are used. The specific recommendation depends on the expected risk-adjusted return of the individual bonds relative to the expected return of the reference index.

To achieve the category Buy, a bond must, according to Jyske Bank’s assessment, generate a risk-adjusted return in the 12-month term that is above the expected return on the reference index for the bond.

To achieve the recommendation Strong Buy, a bond must, according to Jyske Bank’s assessment, generate a risk-adjusted return in the 12-month term that is above the expected return on the reference index for the bond +50% of the current credit spread for the reference index.

In the event of a Sell recommendation, Jyske Bank estimates that risk adjusted the bond will generate a return in the 12-month term that is below the expected return on the reference index for the bond.

To achieve the category Hold, a bond must, according to Jyske Bank’s assessment, generate a risk-adjusted return in the 12-month term that is on level with the expected return on the reference index for the bond.

Quantitative
Generally a Buy recommendation requires a Quant Score above 5.0. A Strong Buy recommendation requires a Quant Score among the top 25% scores.

Trading in corporate bonds can only take place in lots of minimum EUR 100,000. This means that corporate bonds can be traded in lots of, e.g., EUR 101,000 or EUR 102,000, but never in lots of, e.g., EUR 99,000. In the event of partial redemption or resale, there is a risk of ending up with a residual which cannot be traded in the market without a supplementary purchase.

## Danish Bonds

Conflicts of interest

The analysts of Fixed Income Research may be physically placed next to the Sales and Trading departments. There may be consultations regarding publicly available information about the market, including prices, spread level and trading activity.

Research reports have been prepared by Research in Jyske Markets, which is a part of Jyske Bank A/S. Jyske Bank A/S is the owner of Jyske Realkredit. Jyske Bank A/S has considerable financial interests in relation to Jyske Realkredit.

Jyske Bank A/S is a joint owner of DLR Kredit and therefore has considerable financial interests in relation to DLR Kredit.

Jyske Bank participates in the market-maker scheme for Danish mortgage bonds and therefore in its capacity as this may have positions in these securities.

Models

Research reports
Danish mortgage bonds are modelled on the basis of an own-developed model based on RIO (mortgage model developed by Scanrate) consisting of a stochastic yield curve model to estimate future yield development and a statistic remortgaging model calibrated to borrowers' historical remortgaging behaviour.
In the preparation of research reports, the relative valuation, supply/demand, debtor structure and parameters from Jyske Bank's mortgage model, for instance, are given weight.

Recommendation
Jyske Bank applies one or more of the following models:

• Regression models with input from economic and financial data, including Jyske Bank's outlook on these (e.g. outlook on economic growth, inflation and monetary policy).
• Rate curve analysis, including slope of rate curve and curvature.
• Positioning, market psychological assessments, game theoretical scenario analysis and pattern recognition techniques are included in the assessment material.
• Danish mortgage bonds are modelled on the basis of an own-developed model based on RIO (mortgage model developed by Scanrate) consisting of a stochastic yield curve model to estimate future yield development and a statistic remortgaging model calibrated to borrowers' historical remortgaging behaviour. In the preparation of research reports, the relative valuation, supply/demand, debtor structure and parameters from Jyske Bank's mortgage model, for instance, are given weight.

Recommendation concepts
The research reports of Fixed Income Research focus mainly on two types of recommendations:

Relative recommendations focusing on relative value in the bond and derivatives markets. The interest and/or volatility risks are therefore typically hedged in other bonds or derivatives. This will often include both a BUY and a SELL recommendation.

Direct recommendations focusing on the absolute value in the bond market. The interest and/or volatility risks are therefore typically not hedged. This will often include either a BUY or a SELL recommendation.

The analyst estimates that the bond is relatively undervalued against comparable alternatives. It is the estimate of the analyst that the bond will generate a relatively better return than the alternatives within a horizon of typically three months.

Sell
The analyst estimates that the bond is relatively overvalued against comparable alternatives. It is the estimate of the analyst that the bond will generate a relatively poorer return than the alternatives within a horizon of typically three months.

## Fixed Income

Conflicts of interest
The analysts of Fixed Income Research may be physically placed next to the Sales and Trading departments. There may be consultations regarding publicly available information about the market, including prices, spread level and trading activity.

Research reports have been prepared by Research in Jyske Markets, which is a part of Jyske Bank A/S. Jyske Bank A/S is the owner of Jyske Realkredit. Jyske Bank A/S has considerable financial interests in relation to Jyske Realkredit.

Jyske Bank A/S is a joint owner of DLR Kredit and therefore has considerable financial interests in relation to DLR Kredit.

Jyske Bank participates in the market-maker scheme for Danish mortgage bonds and therefore in its capacity as this may have positions in these securities.

Models
Jyske Bank applies one or more of the following models:

• Regression models with input from economic and financial data, including Jyske Bank's outlook on these (e.g. outlook on economic growth, inflation and monetary policy).
• Rate curve analysis, including slope of rate curve and curvature.
• Positioning, market psychological assessments, game theoretical scenario analysis and pattern recognition techniques are included in the assessment material.
• Danish mortgage bonds are modelled on the basis of an own-developed model based on RIO (mortgage model developed by Scanrate) consisting of a stochastic yield curve model to estimate future yield development and a statistic remortgaging model calibrated to borrowers' historical remortgaging behaviour. In the preparation of research reports, the relative valuation, supply/demand, debtor structure and parameters from Jyske Bank's mortgage model, for instance, are given weight.

Recommendation terms
The rates forecast reflects the expected direction of rates over a given horizon. The Rates forecast is an estimate of how in all probability we expect to see the rate at the horizon stated. The Rates forecast should therefore not be considered a precise minimum or maximum for the rate in the period given.

The interest rates and prices stated in the material are the latest observed in the market, cf. the time stamp. For information on mortgage bonds, please see jyskebank.dk/erhverv/ejendomsfinansiering/kurser. It is important to emphasise that the interest rates and prices stated are not tradeable for the client.

## Currency

Models
Jyske Bank’s financial modelling of the market is based on standard economic tools and methods based on publicly available statistics. Tools that may be applied:

• Simple regression model where the value of the currency pair is determined via variables such as spreads between real rates, slope of rate curve, curvature, commodity prices and volatilities.
• Principal component analysis model where the value of the currency pair is determined via variables such as spreads between real and nominal swap rates, slope of rate curve and curvature.
• Jyske Markets' economic outlook on growth, inflation and monetary policy is included in the model variables.
• Positioning, market psychological assessments, game theoretical scenario analysis and pattern recognition techniques are included in the assessment material.

Recommendation concepts
Price targets reflect the direction in which the exchange rate is expected to move over a given horizon (direction and strength). The target is an estimate of how in all probability we expect to see the exchange rate at the horizon stated. The target should therefore not be considered a precise minimum or maximum for the exchange rate in the period given.

## Commodities

Models
Jyske Bank applies one or more of the following models:

• A simple regression model where the value of commodity is determined via variables such as the development in inventories, supply situations, demand indicators, commodity prices and volatilities.
• Jyske Markets' economic outlook on growth, inflation and monetary policy is included in the model variables.
• Positioning, market psychological assessments, game theoretical scenario analysis and pattern recognition techniques are included in the assessment material.

Recommendation concepts

Price target
The price targets reflect the direction in which the  price is expected to move over a given horizon (direction and strength). The price target is an estimate of how, in all probability, we expect to see the price over the horizon stated. Therefore, the price target should not be regarded as an exact minimum or maximum for the price over the period given.
Recommendation
The individual client should together with his or her adviser always consider the recommendation and strategy selected relative to the client's risk profile and purpose.

Buy: For the period, believe in price increases that will offset costs (inventory, return on the investment, etc.); therefore exposure should be hedged over the period*
Sell: May be caused by a belief that an actual price decline will take place, yet also that we do not see any possibilities of increases that can offset costs for inventory and return on the investment over the period*.
Hold: We await more favourable opportunities for transactions at a later time, where we include reservations for inventory costs and liquidity.
* for the 3 - 6-month term, our rule of thumb is that we recommend hedging of half of the full amount; for the 6 - 12-month term, we recommend a third of the full amount.

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