P4: ETF Funds: Latest Developments for Risk Management and Investment pot

Fixed Income ETP Market has been Growing RapidlyNow make up about 20% of the US ETF Market Allan LevinInvestment Symposium / 26 March 2012Deutsche Bank FOR INSTITUTIONAL USE ONLY – NOT F

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Investment Symposium

March 2012

P4: ETF Funds: Latest Developments for Risk

Management and Investment

Allan Levin Steve Mickle

Moderator Allan Levin

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Fixed Income Exchange Traded Products

March 2012

FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

— Exchange Traded Funds are listed investment funds, just like stock

— Fixed Income ETFs allow investors to obtain exposure to various indices and market sectors through a cash investment.

Fixed Income ETFs

Overview

indices and market sectors through a cash investment.

— Much of the liquidity in ETFs is generated by Authorized Participants (“APs”) who have the ability to create shares of a fund and pass them

Allan LevinInvestment Symposium / 26 March 2012Deutsche Bank

FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION 1

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Fixed Income ETP Market has been Growing Rapidly

Now make up about 20% of the US ETF Market

FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

3/15/2012 2:16:34 PM 2010 DB Blue template

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Some of the Largest ETFs are Fixed Income

Six of the Largest 20 ETPs are Fixed Income ETFs

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US ETP AUM by Investment Focus – Fixed Income

Approximately $210 Billion in Total as at February 2012

Corporate

Inflation 13.0%

Muni 4.8%

Mortgage 2.3%

6.2%

Deutsche Bank Allan Levin

Investment Symposium / 26 March 2012 FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

Government 21.0%

High yield 13.3%

Sample of Active Fixed Income ETFs

Selected Large Fixed Income ETFs

Sector Total AUM $Bn Largest AUM $Bn ADV $mm

Investment Symposium / 26 March 2012 FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION 5Source: BlackRock Investment Insitute, Bloomberg

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2011 Exceptional Growth in Fixed Income ETPs

Strong Flows into Corporate ETFs

— $48bn of new asset gathering in the US

— $22bn of Inflows into Corporate Debt (esp IG), $9.5bn into Agg., $6bn into EM

— ETFs received 2.8x higher flows than the ten-fold larger mutual fund industry

— 42 New Fixed Income ETFs Listed in the US in 2011 Launches included Inflation-linked, International & Actively Managed

FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

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Source: BlackRock Investment Institute, Bloomberg, National Stock Exchange (NSX), Deutsche Bank

2011 was an Excellent Year for Treasuries & TIPS

Eight of the Ten Best Performing ETPs (14 of the 20 Best ETPs)

ETP Name Issuer Asset Class Ticker TER Perf%

PowerShares DB 3x Long 25+ Year Treasury Bond ETN Deutsche Bank AG Fixed Income ETN LBND US 0.95% 117.80% Daily 30-Year Treasury Bull 3X Direxionshares Fixed Income ETF TMF US 0.95% 107.60%

ProShares Ultra 20+ Year Treasury ProShares Fixed Income ETF UBT US 0.95% 71.30% PIMCO 25+ Year Zero Coupon U.S Treasury Index PIMCO Fixed Income ETF ZROZ US 0.15% 54.20% Vanguard Extended Duration ETF Vanguard Fixed Income ETF EDV US 0.13% 47.30% iPath US Treasury 10-year Bull ETN iPath (Barclays) Fixed Income ETN DTYL US 0.75% 46.20% Daily 10-Year Treasury Bull 3X Direxionshares Fixed Income ETF TYD US 0.95% 43.90% iPath US TSY Long Bond Bull ETN iPath (Barclays) Fixed Income ETN DLBL US 0.75% 42.90% PowerShares DB Base Metals Double Short ETN Deutsche Bank AG Commodity ETN BOM US 0.75% 41.80% iPath Short Enhanced MSCI Emerging Markets Index ETN iPath (Barclays) Equity ETN EMSA US 0.80% 41.30%

ProShares Ultra 7-10 Year Treasury ProShares Fixed Income ETF UST US 0.95% 30.70% iShares Barclays 20+ Year Treasury Bond Fund BlackRock Fixed Income ETF TLT US 0.15% 28.80%

iPath US Treasury Flattener ETN iPath (Barclays) Fixed Income ETN FLAT US 0.75% 26.80% SPDR Barclays Capital Long Term Treasury ETF State Street GA Fixed Income ETF TLO US 0.14% 25.90%

Vanguard Long-Term Government Bond ETF Vanguard Fixed Income ETF VGLT US 0.15% 24.60% PIMCO 15+ Year US TIPS Index Fund PIMCO Fixed Income ETF LTPZ US 0.27% 20.10% PowerShares DB Base Metals Short ETN Deutsche Bank AG Commodity ETN BOS US 0.75% 19.70%

Source: Deutsche Bank, Bloomberg Finance LP, Reuters.

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Fixed Income ETFs

Features and Risks

ETF holdings are published every day Tracking error (due to bond selection,

Tradable intraday

Open-ended

rebalancing costs, etc.)

Bid-offer spread / management fee

Legal/fraud Risk

(Normal due diligence must be exercised when investing in any fund managed by someone else, including ETFs However

ETFs are generally seen as having an extremely low risk to fraud-type activities due to the transparency of the fund.)

— Issued by a corporate institution, and so carry with them the risk of default by

an issuer, causing the issuer not to be able to make payments described in the ETN prospectus

— Typically, has one final payment at maturity which is determined by formula

— Generally ETNs are creatable and redeemable on any business day The daily creation feature allows ETNs to be liquid even when traded volumes or total amounts outstanding are low The daily redemption feature generally mitigates the long term credit exposure to the issuer , as any holder can redeem shares of the ETN at the index NAV for that day

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Exchanged Traded Notes ( ETNs )

Features and Risks

No Tracking Error Senior Unsecured Credit Exposure

Transparency

Tax Efficient

Liquidity

(short-term due to the ability to redeem)

Less liquidity outside of underlying’s trading hours

Subject to an investor fee

Recent Innovations in Fixed Income ETPs

as demonstrated by recent launches

— US Fixed Income Sectors

— Active Management

— Different Exposure Structures

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Inflation-Linked ETPs

Focus on reducing “real duration” exposure

Spread FINF

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Floating Rate Note ETPs

Earn a credit spread while mitigating interest rate exposure

Floating Rate Note ETPs

SPDR IG Floating Rate Note FLRN

Investment Symposium / 26 March 2012 FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION 13

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Sovereign Bond ETNs

Summary of Sovereign Bond ETNs

Country or Regional Fixed Income ETPs

Diversified exposure to Sovereign and International Corporate Bonds

Country-Specific ETPs

Region-Specific ETPs

Market Vectors LatAm Ag Bond BONO

/ Sub-Sov Debt

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Increasing Sectorization of Fixed Income

Diversified exposure to Sovereign and Corporate Bonds

Sector-based ETPs

Corporate Debt ETPs

iShares Aaa-A Rated Corportes QLTA

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Active ETFs

Combining Active Management and Fixed Income ETFs

PIMCO Total Return Exchange-Traded Fund (TRXT)

— Modeled on PIMCO’s flagship Total Return strategy

— Cannot use options, futures or swaps

— Daily disclosure of holdings

Notes: 9pt, regular, bottom aligned, bottom margin only set at 0.2cm

(1) Footnote 9pt, regular, spacing 0pt

Source: 9pt, italic, spacing 0pt

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between Nominal Treasuries and TIPS

Market-implied Inflation Expectations

= Nominal Yield less Real Yield

Effectively, Long TIPS & Short Treasuries

Net Yield will results in a 10c change in the Share Price

Either a 0.01% reduction in TIPS Real Yields or a 0.01% increase in Treasury Yields should move the Share price up

by 10c E.g from $50 to $50.10

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Notional of underlying chosen such that DV01 is exactly 10c Accordingly, actual notional of TIPS and Treasuries backing the ETP may change over time

Summary

Fixed Income Exchange Based Products

— Exceptionally Strong Growth in Fixed Income ETPs

— Excellent Returns in 2011 – especially Treasuries and TIPS

— Both ETNs and ETFs are available

— Number of Recent Developments, including:

— Inflation-linked Products & Floating Rate Notes

— Sovereign & Emerging Market ETPs

— Sector-based and Active Funds

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This document is intended for discussion purposes only and does not create any legally binding obligations on the part of Deutsche Bank AG and / or its affiliates (“DB”) Without limitation this document does not constitute an offer an invitation to offer or a recommendation to enter into any

Disclaimer

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ETF Funds: Latest Developments for Risk Management and Investment

SOA Investment Symposium

Growth of exchange traded funds

Increasing institutional adoption of ETPs

5427891,009 1,065

iShares AUM US ETP AUM Number of Institutional Users

share of the fixed income US ETP market

• Largest range of exposures based on most widely held, institutionally relevant benchmarks

• Approximately 54% of ETP AUM held by institutional clients

• 5 of the 10 most actively traded US equities by dollar volume YTD were ETFs

• ETFs represent ~30% of US daily equity trading volume YTD

Sources: FactSet, Bloomberg, BlackRock ETF Research and Implementation Strategy, Thomson Reuters, NYSE Arca, Credit Suisse

2009–2011 users estimated based on Ten-year CAGR and 2008 users Statistics as of 11/30/11

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ETF applications in institutional portfolios

• Institutional investors often cite liquidity, flexibility and diversification opportunities as the main reasons for investing in ETFs

• A recent Greenwich Associates survey indicates that nearly one-third of the institutions polled plan to increase their use

of ETFs over the next two years*

• The table below shows the wide spectrum in which ETFs can help institutional investors meet specific objectives, from short-term tactical allocations to long-term strategic applications

Greenwich survey highlights:

How institutions are using ETFs today

short term tactical allocations to long term strategic applications

“We recently replaced a small cap

growth manager due to underperformance and we used an ETF that provided passive exposure while

we conducted a formal search for another active manager In an underperformance situation, using ETFs is a better solution than leaving the money with the manager.” – large

Benefits of iShares ETFs

• ETFs offer immediate exposure to a basket or group of securities for

• ETFs offer two sources of liquidity

 Liquidity measured by secondary market trading volume

 The liquidity of the underlying assets via the creation and redemption process

• Investors can generally see the ETF composition at any given time

• ETFs offer a cost-effective route to diversified market exposure

• The average annual total expense ratio (TER) for equity ETFs listed in the US is 49 bps versus 75 bps for domestic equity index funds and 134 bps for active domestic equity funds*

• ETF units and underlying assets can be lent out to potentially offset holding costs

• ETFs are listed on exchanges and can be traded at any time the market is open

• Pricing is continuous throughout the day

diversification through a single trade

• Broad range of asset classes, including equities, bonds, commodities, investment themes, etc.

Securities

Lending

*Source: Morningstar, BlackRock Investment Institute, as of 12/31/11 ETF TER is for all US listed equity ETFs

There is no guarantee that there will be borrower demand for shares of the iShares Funds, or that securities lending will generate any level of income Distributions paid out

of the Fund's net investment income, including income from securities lending, if any, are taxable to investors as ordinary income

ETF units and underlying assets can be lent out to potentially offset holding costs

Tax Efficiency • In-kind creation and redemption mechanism helps insulate ETF holders from

unintended tax consequences

• Experienced portfolio management team actively seeks to minimize capital gains

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