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Deutsche Asset
& Wealth Management
Equity and Currency Outlook
May 2013
Larry Adam, CFA®, CIMA®
U.S. Chief Investment Strategist
Telephone (410) 895-4135
[email protected]
Four reasons we remain constructive on equities
Still positive longer term
Aggressive synchronized
monetary policy
Accelerating global
economic growth
Attractive absolute
valuations
An easier path to 3%
long term returns?
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
1
Aggressive synchronized monetary policy
QE: Benefits outweigh the risks
Debt servicing improving
— The consumer has seen its net wealth increase $12.4 trillion
since the first QE program (Nov 2008). They have
benefitted from improving home prices, lower mortgage
rates, higher equity prices and a lower debt service ratio.
However, we still believe that the positive “wealth effect”
from the rise in asset prices is in its infancy stages.
Balance sheet restructuring
— Corporations have benefited from lower borrowing costs as
the extra yield investors demand to own debt has
dramatically declined (High yield -1500 bps, Invt Grade -410
bps) since the first QE program. As a result of improving
investor confidence and lower interest rates, corporations
have been able to extend the average duration of their debt
(from 5.5 to 7.0) and lower net interest costs.
— In addition, corporations have issued 15% more debt since
the first QE program but interest costs have declined by
48%. A premature end to QE may negatively impact
corporations borrowing ability.
Data Source: FactSet
Data Source: Strategas Research
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
2
Aggressive synchronized monetary policy
QE: Benefits outweigh the risks
Low rates allow increased leverage
Refinancing risk
66% of total Treasury debt
outstanding comes
due in five years
— The Federal government has been able to increase debt by
90% (since 2008) while keeping net interest costs 13%
lower and at the same levels seen 12 years ago.
— With the substantial amount of funding needs by the
government, a rise in interest rates would negatively impact
the Federal budget.
— Especially since 66% of the Treasury debt outstanding
comes due over the next five years.
Data Source: FactSet, Bloomberg Finance LP
Data Source: Bloomberg Finance LP
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
3
Accelerating global economic growth
Growth to benefit from record low interest rates
Global growth estimates
— As aggressive monetary policy continues to support growth,
our estimate is for an acceleration of growth in 2013
(3.20%) and even more pronounced in 2014 (4.0%).
— Global growth is expected to be led by Asia ex Japan (2013:
6.8%, 2014: 7.5%) and Latin America (2013: 3.4%, 2014:
4.0%).
Record low interest rates
— Accommodative central bank policy is expected to be a
driving force of growth in 2013 and 2014.
— While the major developed central banks have rates at
historic lows, the emerging market central banks have
shown some flexibility in cutting or at least keeping rates
status quo.
— Within the developed economies, the U.S is expected to be
the leader.
Footnotes: Estimates as of April 26, 2013.
Data Source: Deutsche Bank Global Markets
Data Source: Bloomberg Finance LP
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
4
Attractive absolute valuations
Global equities attractive on an absolute and relative basis
MSCI AC world attractive
Attractive relative to history
— The trailing P/E of the MSCI AC World is trading (15.6x)
well below average and at the lower end of the trend range.
— When looking at the trailing P/E compared to its historical
average, all the major regions are trading at a discount.
Data Source: FactSet
Data Source: FactSet
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
5
An easier path to 3% long term returns?
Global equities attractive on an absolute and relative basis
The math to a 3% annual return over 5 years
Change in
bps from
current level
Coupon
return over
5 years
New yield
Price return
(2% for 5 yrs)
Total return
Dividend Increases versus decreases YTD
Annual
return
+60 bps
2.3%
-5.4%
10.0%
4.6%
0.9%
+40 bps
2.1%
-3.6%
10.0%
6.4%
1.3%
+20 bps
1.9%
-1.8%
10.0%
8.2%
1.6%
0 bps
1.7%
0.0%
10.0%
10.0%
2.0%
-20 bps
1.5%
1.8%
10.0%
11.8%
2.4%
-40 bps
1.3%
3.6%
10.0%
13.6%
2.7%
-60 bps
1.1%
5.2%
10.0%
15.2%
3.0%
Year to date there has been
152 companies that have
raised their dividend versus 6
companies that have cut.
Footnotes: Data as of April 30, 2013.
Data Source: Bloomberg Finance LP
Change in
S&P 500
from current
level
New index
level
Global dividend yields
Div return
over 5 years
Price return (2.2% for 5 yrs) Total return
Annual
return
+200 pts
1797
12.5%
11.0%
23.5%
4.7%
+150 pts
1747
9.4%
11.0%
20.4%
4.1%
+120 pts
1717
7.5%
11.0%
18.5%
3.7%
+90 pts
1687
5.6%
11.0%
16.6%
3.3%
+60 pts
1657
3.8%
11.0%
14.8%
3.0%
+30 pts
1627
1.9%
11.0%
12.9%
2.6%
Footnotes: Return projections as of April 30, 2013.
Data Source: FactSet
Data Source: FactSet
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
6
Near term caution warranted
Assessing the rally’s “pullback” potential
S&P 500 “pullbacks” in perspective
S&P 500 indexed – 2013 vs. recent years
2012 (~13%)
2010 (~13%)
2013 YTD
(~12%)
2011 (~0%)
Average Per Year = 4
?
Footnotes: Data as of April 22, 2013.
Data Source: FactSet.
—
—
—
Since 1997 the S&P 500 has averaged four “pullbacks” per year as
defined by a peak to trough decline of 5% or greater without a 5%
rebound. However, “pullbacks have been less frequent since 2011 as
we have only seen two occur since January 1, 2012.
Similar to the last three years, the S&P 500 has rallied ~12% year-todate through April. In each of these years, the late spring and early
summer months reflected a period of consolidation in equities that
occurred in sync with weakening economic data and other market
shocks (e.g. debt ceiling debate).
In addition, when using history as a guide, the S&P 500 has, on
average, increased 2.8% from January to April (since 1928). This year,
the S&P 500 is up over 10% during the same time period
History suggests market overbought
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2.8%
3.9%
4.3%
1.1%
2.5%
1.6%
Jan-Apr
Since 1928
May-Sep
Since 1980
Oct-Dec
2013
Data Source: FactSet
Footnotes: Price return only. Time period reflects 1928-2012.
Data Source: FactSet
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
7
Dollar impact on U.S. earnings
Return of the Greenback a challenge to corporate America
U.S. Dollar vs. S&P 500: 1990 to 1999 (YoY %)
U.S. Dollar vs. S&P 500: 2000 to 2012 (YoY %)
60%
50%
50%
40%
30%
20%
10%
0%
Trend line signals positive
correlation in the 1990’s.
-10%
-20%
-15%
-10%
-5%
0%
5%
U.S. Trade Weighted Dollar Index (YoY %)
10%
15%
Footnotes: U.S. Trade Weighted Dollar Index, data is monthly.
Data Source: FactSet, DB Global Markets
S&P 500 Index (Price, YoY %)
S&P 500 Index (Price, YoY %)
60%
Trend line signals negative
correlation in recent years,
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
-20%
-15%
-10%
-5%
0%
5%
10%
U.S. Trade Weighted Dollar Index (YoY %)
15%
20%
Footnotes: U.S. Trade Weighted Dollar Index, data is monthly.
Data Source: FactSet, DB Global Markets
S&P 500 U.S./foreign profits as % of total (2012)
S&P 500 sectors – foreign sales as % of total
60
8%
Foreign Sales as a % of Total Sales
50
15%
in % terms
40
Europe
Emerging markets
10
Other
Telecom
Utilities
Financials
Consumer
Discretionary
Healthcare
Industrials
Energy
0
Materials
vs. ~80% in
the 1990’s
Consumer Staples
U.S.
60%
20
Info Tech
17%
30
Data Source: DB Global Markets
Data Source: FactSet
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
8
Can EM “Emerge” from subpar performance?
Is the emerging markets story over?
Emerging markets underperforming
Superior economic growth
15%
Estimate
10.0%
9.5%
10%
9.0%
8.5%
5%
8.0%
7.5%
0%
7.0%
6.5%
-5%
6.0%
5.5%
Russia
China
EM
Brazil
India
U.S.
-10%
5.0%
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
China GDP (YoY%)
Year to Date Total Return
Data Source: Deutsche Bank Global Markets
— As of April 25, 2013, the MSCI Emerging Market Index was
underperforming the S&P 500 by 1388 bps (in USD).
— However, we think the sell off in emerging market equities
may be overdone considering their superior growth
prospects.
— We continue to favor Asia, specifically China, as growth is
expected to rebound in 2013.
Valuations attractive versus U.S.1
70
60
50
40
30
20
10
— In addition, valuations favor the emerging markets versus
the U.S. on a historical trend P/E basis.
0
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
MSCI EM Relativ e Attract iv eness v ersus S&P 500 (P/E LTM)
Trendline: Linear with 1st st andard dev iation, t rend based
Data Source: FactSet
Footnotes:(1) MSCI EM LTM P/E over S&P 500 LTM P/E.
Data Source: FactSet
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
9
Four reasons for a stronger Dollar
The return of “King” Dollar?
Secular, not cyclical,
trends in the Dollar
Superior U.S. economic
growth prospects
Relatively less aggressive
monetary policy
Fund flows
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
10
Secular, not cyclical, trends in the Dollar
Return of the Greenback? – A new upward cycle
— The U.S. dollar has strengthened YTD and appears to be at
an inflection point after trending lower since 2002. We
expect an upward cycle to occur as U.S. growth improves
and the U.S. deficit is reduced from recent fiscal reform
(e.g. sequestration).
Nominal and real U.S. trade weighted Dollar Index
150
145
6
140
years,
135
10
+67%
130
years,
6
125
-46%
7
years,
120
years,
-18%
115
+43%
110
105
100
95
90
85
80
75Footnotes: Data is monthly as of February 28, 2013.
70Data Source: FactSet
65
1973
1978
1983
1988
1993
1998
2003
Nominal U.S. Trade Weighted Dollar Index
Real U.S. Trade Weighted Dollar Index
— Over the last 40 years the U.S. dollar has seen five major
cycles, both downward and upward, averaging 8 years in
length.
9
years,
-40%
???
2008
2013
— Catalysts for an uptrend include superior U.S. growth
versus other developed markets, China rebalancing efforts
away from investment and foreign central banks weakening
currencies.
— While a strong dollar may benefit the fiscal health of the
economy and foreign demand for U.S. stocks we are
monitoring it closely especially since the U.S. receives a
large portion of their corporate profits from overseas.
Footnotes: Data is monthly as of April 30, 2013.
Data Source: FactSet
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
11
Relatively less aggressive monetary policy
QE: A global phenomenon
Fed balance sheet
Global balance sheet expansion
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
'03
'04
'05
'06
'07
'08
'09
'10
Total Balance Sheet
'11
'12
'13
Forecast
BoJ balance sheet
$2,000
$1,800
Bank of Japan Holding of
Japanese Govt Bonds
— Expansion of the Fed balance sheet has become a global
phenomenon. The Fed’s balance sheet (at $3.2 trillion) is
expected to expand another $680 billion in 2013.
Forecast
— In addition, the Bank of Japan has adopted a similar
aggressive program and is expected to see their balance
sheet nearly double.
in million USD
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
Mar-05
Oct-06
May-08
Dec-09
Jul-11
Feb-13
Sep-14
Data Source: FactSet
Data Source: Deutsche Bank Global Markets
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
12
Superior U.S. economic growth prospects
U.S. growth to outpace its developed market counterparts
2013 and 2014 GDP estimates
GDP over time – world bank in USD
300
4.0%
3.5%
3.0%
250
2.5%
index
2.0%
200
1.5%
1.0%
150
0.5%
0.0%
100
-0.5%
-1.0%
2013
2012
U.S.
Japan
2014
Euroland
— Within the developed economies, the U.S is expected to be
the leader.
50
1992
1994
France
1996
1998
Germany
2000
Japan
2002
2004
2006
2008
United Kingdom
2010
2012
United States
— The growth trajectory of the U.S. continues to accelerate at
a faster pace than other developed markets.
— Better growth prospects, contained inflation, potentially
higher “relative” interest rates and better demographics
should drive capital flows to the U.S.
Data Source: Deutsche Bank Global Markets
Footnotes: Indexed GDP is using nominal GDP in U.S. dollars
Data Source: IMF
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
13
Will the Dollar be “King”?
Hedging matters
Global equity returns – year to date
Why hedging is still important
40%
USD Based Return
36%
Local Currency Based Return
32%
Current
12 Month
Forecast
Potential
Upside % on
Hedge
Japan
97.37
105.00
-7.3%
Europe
1.31
1.22
-6.9%
UK
1.55
1.46
-5.8%
18%
28%
24%
20%
16%
5%
12%
8%
4%
0%
Russia
Korea
China
Canada
Brazil
India
Taiwan
UK
Europe ex UK
Australia
Switzerland
Japan
-4%
— Our expectation of a dollar rally has materialized over the last 12 months and has had significant repercussions on local versus
U.S. dollar based returns. This recent performance across global investments highlights the importance of hedging currency risk.
Assuming our forecasts prove correct, hedging could continue to prove valuable.
— The rally in the dollar has been concentrated in gains versus the developed markets. Therefore, the MSCI EAFE in U.S. dollars is
underperforming the MSCI EAFE in local currency by 545 bps year to date.
— When looking at investments across individual countries, the currency impact has been even more pronounced.
— For example, a U.S. investor who purchased the MSCI Japan unhedged would be underperforming an U.S. investor who
purchased the MSCI Japan on a hedged basis by ~1800 bps year to date (37.7% versus 19.7%).
Footnotes: Data as of April 25, 2013, and sorted by U.S. dollar based returns.
Data Source: FactSet
Footnotes: Current and expected returns as of April 25, 2013
Data Source: Bloomberg Finance LP.
Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
14
Investment strategy group
Larry Adam, CFA®, CIMA®
Chief Investment Strategist
Telephone (410) 895-4135
Facsimile (410) 895-4250
[email protected]
Megan Horneman
Investment Strategist
Telephone (410) 895-4148
Facsimile (410) 895-4250
[email protected]
Jonathan Rosner
Investment Strategy Analyst
Telephone (410) 895-4282
Facsimile (410) 895-4250
[email protected]
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Deutsche Asset
& Wealth Management
Past performance is not indicative of future returns. No assurance can be
given that any investment objectives and/or expected returns can be achieved.
15
db X-trackers
MSCI EAFE Hedged Equity Fund
db X-trackers MSCI international currency-hedged equity funds
Returns and volatility for the MSCI EAFE U.S. Dollar
Hedged Index and MSCI EAFE Index
Hedged vs. unhedged returns (as of 3/31/13)
Hedged vs. unhedged volatility (% as of 3/31/13)
40
110
35
30
100
25
20
90
15
80
10
5
70
2/9/11
5/9/11
8/9/11 11/9/11 2/9/12
5/9/12
MSCI EAFE U.S. Dollar Hedged Index
0
2/9/11
8/9/12 11/9/12 2/9/13
MSCI EAFE Index
5/9/11
8/9/11
11/9/11
2/9/12
5/9/12
8/9/12
MSCI EAFE U.S. Dollar Hedged Index
11/9/12
2/9/13
MSCI EAFE Index
Since inception (2/10/11) to 3/31/13, the hedged index has been 23% less volatile than the unhedged index.
MSCI EAFE U.S. Dollar Hedged Index
MSCI EAFE Index (unhedged)
6-month return
17.72%
12.06%
1-year return
16.91%
11.27%
1-year volatility
11.74%
15.02%
4.03%
1.86%
15.06%
19.60%
Since-inception return
Since-inception volatility
Source: Bloomberg. Performance is historical and does not guarantee future results. Index returns assume reinvestment of all distributions and do not
reflect any fees or expenses. It is not possible to invest directly in an index. Current performance may differ from the data shown. See slide 2 for
important definitions. Volatility is measured by standard deviation.
Deutsche Asset
& Wealth Management
17
About db X-trackers MSCI EAFE Hedged Equity Fund
(DBEF)
— DBEF seeks to track the MSCI EAFE U.S. Dollar Hedged Index.
— The index is designed to provide exposure to equity securities in developed international stock markets while
mitigating exposure to fluctuations between the value of the U.S. dollar and non-U.S. currencies.
— The index includes securities from 22 countries: Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland and the United Kingdom.
Why the MSCI EAFE Index?
Why DBEF?
— Provides investors with instant diversification to
the largest and most liquid segments of
international developed equity markets
— Offers attractive valuations and dividend yields:
As of 3/1/13, the dividend yield for the S&P 500
Index was 2.1% vs. 3.4% for the MSCI EAFE
Index. The price/earnings ratio of the S&P 500
Index was 13.4 vs. 12.5 for the MSCI EAFE
Index.1
— Offers significant industry and country
diversification
— DBEF provides pure and balanced exposure to
developed-market equities, matching exposure
to the unhedged index.
— Since inception on 2/10/11 through 3/31/13, the
fund’s underlying index has outperformed the
unhedged index with less volatility.2
(1) Source: DeAWM. The price-to-earnings ratio compares share prices to per-share earnings. The dividend yield is the rate of income generated in the form of dividends.
(2) Source: Bloomberg. Past performance is no guarantee of future results. Performance over other time periods might not be as favorable. Volatility is measured by
standard deviation, which depicts how widely an investment’s returns vary from the investment’s average return over a certain period. See slide 2 for definitions. of the MSCI
EAFE Index and S&P 500 Index. Volatility is measured by standard deviation.
Deutsche Asset
& Wealth Management
18
db X-trackers
MSCI Emerging Markets Hedged Equity Fund
db X-trackers MSCI international currency-hedged equity funds
Returns and volatility for the MSCI Emerging Markets
U.S. Dollar Hedged Index and MSCI Emerging
Markets Index
Hedged vs. unhedged returns (as of 3/31/13)
Hedged vs. unhedged volatility (% as of 3/31/13)
40
110
105
35
100
30
95
25
90
20
85
15
80
10
75
5
70
2/9/11
5/9/11
8/9/11 11/9/11 2/9/12
5/9/12
MSCI EM U.S. Dollar Hedged Index
8/9/12 11/9/12 2/9/13
0
2/9/11
5/9/11
8/9/11
11/9/11
2/9/12
5/9/12
8/9/12
MSCI EM U.S. Dollar Hegded Index
MSCI EM Index
11/9/12
2/9/13
MSCI EM Index
Since inception (2/10/11) to 3/31/13, the hedged index has been 25% less volatile than the unhedged index.
MSCI EM U.S. Dollar Hedged Index
MSCI EM Index (unhedged)
6-month return
3.16%
3.64%
1-year return
2.18%
1.73%
1-year volatility
10.17%
13.51%
Since-inception return
0.76%
–0.03%
Since-inception volatility
13.65%
18.28%
Source: Bloomberg. Past performance does not guarantee future results. Index returns assume reinvestment of all distributions and do not reflect any
fees or expenses. It is not possible to invest directly in an index. Current performance may differ from data shown. See slide 2 for definitions. Volatility is
measured by standard deviation.
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& Wealth Management
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About db X-trackers MSCI Emerging Markets Hedged
Equity Fund (DBEM)
— DBEM seeks to track the MSCI Emerging Markets U.S. Dollar-Hedged Index.
— The index is designed to provide exposure to equity securities in developing stock markets while mitigating
exposure to fluctuations between the value of the U.S. dollar and non-U.S. currencies.
— The index includes securities from 21 countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt,
Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Morocco, Peru, Philippines,
Poland, Russia, South Africa, Taiwan, Thailand and Turkey.
Why the MSCI Emerging Markets Index?
Why DBEM?
— The index provides broad exposure to some of
the largest and most liquid segments in
developing equity markets.
— The index offers significant industry and country
diversification.
— Emerging markets are projected to grow 5.5%
and 5.9% in 2013 and 2014, respectively.1
— DBEM provides pure and balanced exposure to
emerging-market equities, matching exposure to
the unhedged index.
— As of 3/1/13, the P/E ratio of the MSCI EM Index
was 10.6 vs. 13.4 for the S&P 500 Index.2
— Since inception on 2/10/11 through 3/31/13, the
fund’s underlying index has outperformed the
unhedged index with less volatility.3
(1) Source: IMF as of January 2013.
(2) Source: Morningstar. The price-to-earnings ratio compares share prices to per-share earnings.
(3) Source: Bloomberg. Past performance is no guarantee of future results. Performance over other time periods might not be as favorable. See slide 2 for important
definitions, including that of the MSCI EM Index and S&P 500 Index. Volatility is measured by standard deviation.
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& Wealth Management
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db X-trackers
MSCI Japan Hedged Equity Fund
db X-trackers MSCI international currency-hedged equity funds
Returns and volatility for the MSCI Japan U.S. Dollar
Hedged Index and MSCI Japan Index
Hedged vs. unhedged returns (as of 3/31/13)
Hedged vs. unhedged volatility (% as of 3/31/13)
120
40
35
110
30
25
100
20
90
15
10
80
5
70
2/9/11 5/9/11
8/9/11 11/9/11 2/9/12
5/9/12
MSCI Japan U.S. Dollar Hedged Index
8/9/12 11/9/12 2/9/13
0
2/9/11
MSCI Japan Index
5/9/11
8/9/11 11/9/11 2/9/12
5/9/12
8/9/12 11/9/12 2/9/13
MSCI Japan U.S. Dollar Hedged Index
MSCI Japan Index
Since inception (2/10/11) to 3/31/13, the hedged index’s volatility has been comparable to the unhedged index’s.
MSCI Japan U.S. Dollar Hedged Index
MSCI Japan Index (unhedged)
6-month return
41.07%
18.18%
1-year return
22.09%
8.63%
1-year volatility
17.75%
16.96%
5.46%
0.43%
19.95%
19.93%
Since-inception return
Since-inception volatility
Source: Bloomberg. Performance is historical and does not guarantee future results. Index returns assume reinvestment of all distributions and do not
reflect any fees or expenses. It is not possible to invest directly in an index. Current performance may differ from the data shown. See slide 2 for
important definitions. Volatility is measured by standard deviation.
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& Wealth Management
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About db X-trackers MSCI Japan Hedged
Equity Fund (DBJP)
— DBJP seeks to track the MSCI Japan U.S. Dollar Hedged Index.
— The index is designed to provide exposure to Japanese equities while at the same time mitigating exposure to
fluctuations between the value of the U.S. dollar and Japanese yen.
Why the MSCI Japan Index?
Why DBJP?
— The Bank of Japan (BOJ) has committed to
significant quantitative easing and established
a 2% inflation target.
— Japan is an export-oriented economy and
stands to significantly benefit from a weakening
yen and subsequent pickup in global growth.
— Japanese equities are trading at a discount to
their historical book value.
— DBJP provides pure and balanced exposure to
Japanese equities, matching exposure to the
unhedged index.
— The underlying index is diversified across
10 sectors and is extremely liquid.
— Since inception on 2/10/11 through 3/31/13, the
fund’s underlying index has outperformed the
unhedged index with comparable volatility.1
(1) Source: Bloomberg as of 3/31/13. Past performance is no guarantee of future results. Performance over other time periods might not be as
favorable. See slide 2 for important definitions. Volatility is measured by standard deviation.
Deutsche Asset
& Wealth Management
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db X-trackers
MSCI Brazil Hedged Equity Fund
db X-trackers MSCI international currency-hedged equity funds
Returns and volatility for the MSCI Brazil U.S. Dollar
Hedged Index and MSCI Brazil Index
Hedged vs. unhedged returns (as of 3/31/13)
Hedged vs. unhedged volatility (% as of 3/31/13)
50
120
110
40
100
90
30
80
20
70
60
2/9/11 5/9/11
8/9/11 11/9/11 2/9/12 5/9/12
MSCI Brazil U.S. Dollar Hedged Index
8/9/12 11/9/12 2/9/13
10
2/9/11
MSCI Brazil Index
5/9/11
8/9/11
11/9/11
2/9/12
5/9/12
MSCI Brazil U.S. Dollar Hedged index
8/9/12
11/9/12
2/9/13
MSCI Brazil Index
Since inception (2/10/11) to 3/31/13, the hedged index has been 26% less volatile than the unhedged index.
MSCI Brazil U.S. Dollar Hedged Index
MSCI Brazil Index (unhedged)
6-month return
–0.25%
2.64%
1-year return
–8.62%
–12.80%
1-year volatility
17.23%
21.14%
Since-inception return
–5.44%
–8.24%
Since-inception volatility
19.26%
26.07%
Source: Bloomberg. Performance is historical and does not guarantee future results. Index returns assume reinvestment of all distributions and do not
reflect any fees or expenses. It is not possible to invest directly in an index. Current performance may differ from the data shown. See slide 2 for
important definitions. Volatility is measured by standard deviation.
Deutsche Asset
& Wealth Management
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About db X-trackers MSCI Brazil Hedged Equity Fund
(DBBR)
— DBBR seeks to track the MSCI Brazil U.S. Dollar Hedged Index.
— The index is designed to provide exposure to Brazilian equities while at the same time mitigating exposure to
fluctuations between the value of the U.S. dollar and Brazilian real.
Why the MSCI Brazil Index?
Why DBBR?
— According to the International Monetary Fund,
Brazil is projected to grow 3.5% in 2013 and
4.0% in 2014.1
— In 2012, the Brazilian government enacted a
stimulus package to spur investment and boost
the economy.
— Brazil will host both the 2014 World Cup and
2016 Summer Olympics. These events will
require increased infrastructure development
that could boost a wide range of companies.
— DBBR provides pure and balanced exposure to
Brazilian equities, matching exposure to the
unhedged index.
— The underlying index is diversified across 10
sectors and is extremely liquid.
— Since inception on 2/10/11 through 3/31/13, the
fund’s underlying index has outperformed the
unhedged index with less volatility.2
(1) IMF as of 2/4/13.
(2) Source: Bloomberg. Past performance is no guarantee of future results. Performance over other time periods might not be as favorable. See slide 2
for important definitions. Volatility is measured by standard deviation.
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& Wealth Management
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db X-trackers MSCI international currency-hedged
equity fund information
Gross
expense
ratio1
Net expense
ratio2
Inception
date
NYSE
ticker
Index ticker
CUSIP
db X-trackers MSCI EAFE Hedged
Equity Fund
6/9/11
DBEF
M0EFHUSD
233051 200
0.57%
0.35%
db X-trackers MSCI Emerging
Markets Hedged Equity Fund
6/9/11
DBEM
M0EMHUSD
233051 101
1.19%
0.65%
db X-trackers MSCI Brazil Hedged
Equity Fund
6/9/11
DBBR
M0BRHUSD
233051 309
1.13%
0.60%
db X-trackers MSCI Japan Hedged
Equity Fund
6/9/11
DBJP
M0JPHUSD
233051 507
1.03%
0.50%
Fund
(1) As of the latest prospectus dated 9/28/12.
(2) The advisor has agreed to cap its fees at this level until 9/30/13.
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Important information
DBX Advisors LLC (DBX) is the investment advisor to the db X-trackers funds, which are distributed by ALPS Distributors, Inc.
(ALPS). DBX is a subsidiary of Deutsche Bank AG, neither of which is affiliated with ALPS.
Carefully consider the funds’ investment objectives, risk factors and charges and expenses before investing. This and other important
information can be found in the funds’ prospectuses, which may be obtained by calling 1-855-DBX-ETFS (1-855-329-3837) or by
viewing or downloading a prospectus. Read the prospectus carefully before investing.
Risks
Investing involves risk, including possible loss of principal. Funds that invest in specific countries or geographic regions may be more
volatile than investing in broadly diversified funds. Securities focusing on a single country may be more volatile. In addition to the
normal risks associated with investing, international investments may involve risk of capital loss from unfavorable currency
fluctuations, from differences in generally accepted accounting principles or from economic or political instability in other nations.
Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. There
are additional risks because of potential fluctuations in currency and interest rates. Investing in derivatives entails special risks relating
to liquidity, leverage and credit that may reduce returns and increase volatility.
Indexes are unmanaged and you cannot invest directly in an index.
Shares of the funds may be sold throughout the day on the exchange through any brokerage account. However, shares may only be
purchased and redeemed directly from the funds by authorized participants in very large creation/redemption units. There is no
assurance that an active trading market for shares of a fund will develop or be maintained.
MSCI is a servicemark of MSCI Inc. (MSCI) and has been licensed for use by DBX. The funds are not sponsored, endorsed, issued,
sold or promoted by MSCI nor does MSCI make any representation regarding the advisability of investing in the funds.
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Definitions
The MSCI EAFE Index captures large- and mid-cap representation across developed markets countries around the world, excluding
the United States and Canada. The MSCI EAFE U.S. Dollar Hedged Index is calculated using the same methodology as its
corresponding MSCI EAFE Index, but is designed to mitigate exposure to fluctuations between the value of the U.S. dollar and nonU.S. currencies.
The MSCI Emerging Markets Index captures large- and mid-cap representation across 21 emerging markets The MSCI Emerging
Markets U.S. Dollar Hedged Index is calculated using the same methodology as its corresponding MSCI Emerging Markets Index,
but is designed to mitigate exposure to fluctuations between the value of the U.S. dollar and non-U.S. currencies.
The MSCI Brazil Index is designed to track the performance of the large- and mid-cap segments of the Brazilian market. The MSCI
Brazil U.S. Dollar Hedged Index is calculated using the same methodology as its corresponding MSCI Brazil Index, but is designed to
mitigate exposure to fluctuations between the value of the U.S. dollar and non-U.S. currencies
The MSCI Japan Index is designed to track the performance of the large- and mid-cap segments of the Japanese market. The MSCI
Japan U.S. Dollar Hedged Index is calculated using the same methodology as its corresponding MSCI Japan Index, but is designed
to mitigate exposure to fluctuations between the value of the U.S. dollar and non-U.S. currencies
The U.S. Dollar Index measures the performance of the U.S. dollar vs. a basket of currencies including the euro, yen, British pound,
Canadian dollar and Swiss franc.
The MSCI Emerging Market Currency Index tracks the performance of 25 emerging-market currencies relative to the U.S. dollar.
The S&P 500 Index tracks the performance of 500 leading U.S. stocks and is widely considered representative of the U.S. equity
market.
Standard deviation is often used to represent the volatility of an investment and depicts how widely an investment’s returns vary from
the investment’s average return over a certain period.
It is not possible to invest directly in an index.
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& Wealth Management
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