db x trackers Simply buy the market Deutsche Bank Exchange Traded Funds (ETFs)

db x‑trackers Simply buy the market Deutsche Bank Exchange Traded Funds (ETFs) Contents   Introduction  3 db x‑trackers – a real solution Solu...
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db x‑trackers

Simply buy the market

Deutsche Bank Exchange Traded Funds (ETFs)

Contents

 

Introduction 

3

db x‑trackers – a real solution Solution

4

ETFs offer institutional investors great new opportunities!

5

db x‑trackers – Efficient, Transparent, Flexible Success factors

6

Uses of db x‑trackers

8

Comparison of db x‑trackers   to other alternatives

9

db x‑trackers   product information Appendix

10  Important Information Contacts 12

Deutsche Bank ETF Sales,

 

Trading and Research Contacts

 



Contents

db x‑trackers – a real solution

db x‑trackers are Exchange Traded

This brochure provides further

Funds (ETFs), an index tracking

information on the key features

investment solution offered by

of the db x‑trackers ETFs and

Deutsche Bank.

demonstrates how institutional investors can use them.

ETFs combine the advantages of stocks (tradability and liquidity) and

The current range of db x‑trackers

mutual funds (diversification and

ETFs is shown in the enclosed  

regulated infrastructure) into one

document entitled “db x‑trackers

product. With ETFs, it is possible

Product List”. This includes

to achieve exposure to a diversified

information on the relevant exchange

portfolio of securities in one instant

codes ­and product information on

transaction in the same way as

each ETF.

trading any other stock exchange listed security.

Further product information on db x‑trackers is also available

ETFs are an ideal long- and short‑ 

through the following sources:

term investment tool for institutional investors and ­provide a viable

Website: www.dbx-trackers.co.za

alternative to other instruments such

Hotline: 0861 111288

as futures. Institutional investors

E-mail: [email protected]

such as pension funds, insurance companies, fund of funds, asset

The telephone numbers for the sales,

managers and corporate treasurers

trading and research contacts at

can use ETFs in a diverse range of

Deutsche Bank for ETFs are provided

investment strategies.

on the back cover of this brochure.

Over the last five years 30% of net inflows in the US fund industry have been into passive index tracking products, of which 68% has flowed into ETFs. 

Introduction



ETFs offer institutional investors great new opportunities! Exchange Traded Funds (ETFs) have

A growing number of institutional

been a phenomenal global success

investors are using ETFs in their

since their introduction in the USA in

portfolios to benefit from a variety

1993 and this growth is forecast to

of strategy implementations (e.g.

continue. The average growth rate of

asset allocation, cash management,

ETFs assets globally has been 83%

core-satellite strategy or long‑short

over the last 12 years.

strategies or sector rotation). In the past year, the number of institutional

The graph below shows the growth

investors who declared holding

of the global ETF market since 1993.

US‑listed ETFs grew to 2,000 showing a rise of 65% over the last

Since the launch of the first ETFs

five years2.

in Germany in 2000, the European ETF market has developed rapidly. As of December 2007, the assets in European ETFs were EUR 89 billion with a daily average turnover of almost EUR 1.05 billion on the various stock exchanges across

1

Europe where ETFs are traded1.

2

Source: Deutsche Bank AG: ­„European Listed Exchange Traded Funds — ETF Liquidity Trends“, January 2008. Source: Thomson Financial.

Worldwide ETF Growth Euros billion

Number ETFs

550

1.100

500

1.000

450

900

400

800

350

700

300

600

250

500

200

400

150

300

100

200

50

100

0

0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Nov Number of ETFs Assets under Management Source: Deutsche Bank AG



Solution

db x‑trackers – ­  Efficient, Transparent, Flexible The db x‑trackers ETFs are dynamic

Transparent

and unique investment instruments.



They combine the advantages of  

 Continuous Pricing – db x‑trackers

funds (diversification and regulated

trade on a stock exchange with

infrastructure) and stocks (tradability

continuous two way pricing

and continuous pricing) under a

commitments from Deutsche Bank

Collective Investments Scheme

and other market makers during

Control Act compliant fund framework.

exchange trading hours  Transparent NAV – the intraday

With the db x‑trackers ETFs, it is

price of db x‑trackers can be

possible to achieve exposure to a

followed through the NAV (Net

diversified portfolio of securities in

Asset Value) which is calculated

one instant transaction in the same

and disseminated daily

way as trading any other equity listed on a stock exchange.

Flexible 

The key benefits of the db x‑trackers

Intraday Trading – db x‑trackers

ETFs can be described in three

can ­be bought or sold on the

words – Efficient, Transparent and

stock exchange during normal

Flexible

trading hours in the same way as any exchange listed share

Efficient

Trading Size Flexibility – unlike other instruments such as futures,

Low Fees – db x‑trackers ETFs are

db x‑trackers can be traded

passive index tracking instruments

in small lot sizes. The unique

with low annual management fees

structure of ETFs such as

and total expense ratios (TERs)

db x‑trackers also allows them

Low Tracking Error – db x‑trackers

­to be traded in large sizes without

ETFs are designed to closely track

causing any market impact

their benchmark index with

Multiple Investment Uses –

minimal tracking error and

db x‑trackers can be used by

performance leakage

institutional investors for a variety of investment strategies ranging from an intraday trading tool to forming the basis of long‑term asset allocation decisions

Solution



Uses of db x‑trackers

Institutional investors can use the

Cash management

db x-trackers ETFs for a variety of purposes and strategies. They

The convenience of continuous

can view the db x‑trackers as a

liquidity and tight trading spreads

highly flexible investment tool that

provided by market makers enable

provides index exposure. Below are

db x‑trackers ETFs to be an

some uses and strategies for the

attractive short‑term cash substitute

db x‑trackers ETFs:

for institutional investors. Fund managers can minimize “cash

Asset allocation

drag” in their portfolios by investing

Cash management

surplus cash in db x‑trackers ETFs

Core-satellite strategy

linked to a particular benchmark.

Trading strategies Derivatives alternative

Fund managers can “park” their

Performance enhancement

surplus cash balances in ETFs until

through securities lending

a long-term decision is made about



investing in specific securities.

Asset allocation Core-satellite strategy With an index tracking instrument such as an ETF, the diversification

ETFs such as db x‑trackers can help

aspect of the Portfolio Selection

to increase diversification within an

Theory devised by Harry M.

investment portfolio. For example, if

Markowitz in 1952 can be met

the mandate of an equity fund is to

simply and cost-effectively. Through

invest globally, it is possible to build

db x‑trackers, an exact index

a “core” equity portfolio (say 70% of

replication can be achieved (beta

the portfolio) by using a handful of

of virtually 1), so that the individual

db x‑trackers such as the ones linked

risk enclosed in single securities can

to indices tracking the USA, Japan

be diversified away. Additionally,

and Europe. The ‘core’ of ETFs

building a portfolio of ETFs with

provides a way to reduce the running

exposure to different markets (e.g.

costs of a portfolio without deviating

a variety of sectors, countries,

too much from the benchmark.

durations etc.) can help to diversify away sector ­or country or duration

The remaining part of the portfolio

specific risk.

(“the satellites”) can be actively managed through investment in ­  selected equities or actively managed assets such as other ETFs or mutual funds. The aim here is to generate “alpha” through picking investments that will outperform ­the core portion of the portfolio.



Success factors

Trading strategies

Furthermore, db x‑trackers are available in smaller sizes and more

The fact that db x‑trackers are

flexible denominations compared to

listed on stock exchanges with

their futures counterparts.

continuous two way pricing gives fund managers the flexibility to react

As db x‑trackers are not classified as

in real time to market fluctuations.

derivatives, there may also be some

With db x‑trackers ETFs, you can

benefits to holding them from an

take advantage of both rising (long)

accounting point of view instead of

and declining (short) markets. It

holding futures or other derivatives.

should be possible to borrow ETFs to enable them to be sold short with

Performance enhancement

the intention to buy them back some

through securities lending

time in the future when prices have fallen.

Institutional investors can generate extra revenues for their portfolios

Derivatives substitute

by lending out their holdings of db x‑trackers ETFs to other market

db x‑trackers can be used as a

counterparties such as hedge

substitute for derivatives such as

funds. This can be a good way for

futures without being viewed as

institutional investors to reduce the

derivatives themselves. The use

cost of holding db x‑trackers.

of db x‑trackers does not require any documentation, margin or

Further information on the lending

collateral accounts associated with

out of db x‑trackers is available from

the use of derivatives. As ETFs are

Deutsche Bank (see contact list on

typically classified as open‑ended

the back cover).

mutual funds, there are no roll‑over costs like those of derivative transactions e.g. futures. In addition, db x‑trackers are a viable alternative for institutional investors that cannot use futures in their portfolios due to regulatory requirements or for their internal reasons.

Success factors



Comparison of db x‑trackers to other alternatives Risk profile

Futures

db x‑trackers ETFs

Swap

Securitized products

Roll risk

Yes

No

No

No

Tracking error 

Depends on benchmark

Minimal 

Minimal/No 

Minimal/No 

All 

All 

Money & Credit Markets

 

 

Index, Sector, Style 

Index, Sector, Basket,

Index, Sector, Basket,

Single Stock

Single stock

(in Roll/Basis) Asset classes 

Equities, Bonds,

Equities, Bonds,

 

Commodities 

Property, Commodities, 

Level 

Index, Sector, Basket, Single stock

Funding

Margin

Fully funded

Possible margin

Fully funded

Settlement 

Listed derivatives

Listed Stock Exchange 

OTC 

EuroClear 

Exchange Credit risk

Central counterparty

N/A

Counterparty

Counterparty

Cash flow

Daily

No

Monthly/Quarterly

No

Dividends / Coupons

Included in price 

Full payout / 

Included in price

Mostly not included  

 

 

included in price 

 

 

 

 

 

 

 

Costs 

 

 

 

 

  Management fee

No

Yes

No

Yes/No

Financing costs

No (embedded in

No

Yes

No

Roll/Basis)

Source: Deutsche Bank AG. The table compares the key features of db x‑trackers ETFs with other index tracking alternatives available to institutional investors.



Success factors

db x‑trackers   product information Structure

Dividends

db x-trackers are not available to   US persons. Before investing in  

The db x-trackers ETFs are sub funds

The db x-trackers track the

db x-trackers, prospective investors

of the db x-trackers Collective

performance of the benchmark index

are advised to take professional

Investment Scheme. The db x-trackers

on a price return basis (i.e. with a

advice on their status under US

Collective Investment Scheme and  

distribution). Dividends are paid

Securities Law.

its sub-funds comply with the

semi-annually. Risk Warning

relevant Financial Services Board regulations relating to collective

Taxation Investors should note that the  

investment schemes in securities, as amended from time to time. A

The taxation of investors holding  

db x-trackers ETFs are not capital

copy of the offering circular for the

db x-trackers will vary according

protected or guaranteed and that

db x-trackers Collective Investment

to the country of domicile of the

the capital invested or its respective

Scheme is available from:  

investor, type of investor (e.g.

amount are not protected or

[email protected].

insurance company, pension fund

guaranteed and investors in the  

or private investor), the country

db x-trackers ETFs should be

of domicile of the db x-trackers

prepared and able to sustain losses

(Luxembourg) and whether it

of the capital invested up to a total

The annual management and running

complies with any local regulatory  

loss. Investors will also bear some

fees are capped at a maximum

or tax reporting obligations.

other risks including, among others,

Fees

level for each db x-trackers ETF. This is called the “All In Fee” and

market, counterparty default and Availability

is disclosed in the “db x-trackers

illiquidity risk as described under the section “Risk Factors” in the offering

Product List”, the individual product

The availability of db x-trackers to

fact sheets for each db x-trackers ETF

institutional investors is subject to

and the respective offering circular of

local laws and regulations. The  

the sub-fund.

db x-trackers website and fact sheet

circular.

includes the latest information on the The annual management fees are

jurisdictions where db x-trackers are

calculated on a sliding scale based on

authorized for public distribution.

AUM (Assets Under Management) and are disclosed in the individual product fact sheets.

Success factors



Important Information

Disclaimer

Index Disclaimer

© 2008 Deutsche Bank AG The information provided in this document does not constitute investment advice; its sole purpose is to provide a brief description of the product. You should be aware that certain transactions give rise to substantial risk. Product values may be affected by market values, interest rates, exchange rates, volatility, dividend yields and issuer credit ratings. These factors are interrelated in complex ways, and as a result, the effect of any one factor may be offset or magnified by the effect of another factor. Accordingly, certain transactions are not suitable or appropriate for all investors. You should take steps to ensure that you fully understand any transaction which you intend entering into and have made an independent assessment of the transaction in the light of your own objectives and circumstances, including the possible risks and benefits of entering into such transaction. You should also consider seeking advice from your advisers in making this assessment. This Document should not be considered as a recommendation by Deutsche Bank or any of its affiliates that the db x-trackers ETS are a suitable investment. db x-trackers may or may not be suitable for all investors. Deutsche Bank AG or any of its affiliates does not guarantee the performance of the db x-trackers. Past performance is no guarantee of future returns. The complete terms and conditions should be taken from the respective offering circular; this, and any supplements, may be obtained free of charge from Deutsche Bank AG or any of its affiliates. Any investment in a db x-trackers ETF should be made solely on the basis of the Listing Particulars. All statements of opinion reflect the current assessment of Deutsche Bank AG or any of its affiliates, which may change without prior notice. Although the information herein has been obtained from sources believed to be reliable, Deutsche Bank AG or any of its affiliates does not guarantee its accuracy, completeness or fairness. Deutsche Bank or any of its affiliates may make markets or hold units in the db x-trackers ETFs mentioned in this document or hold positions in the investments in which the db x-trackers invest. As set out in the offering circular, the sale of securities is subject to restrictions in some jurisdictions. In particular, any direct or indirect distribution of this document into the United States, Canada or Japan, or to U.S. persons or U.S. residents, is prohibited.

10

Appendix

The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, FTSE, STOXX Limited and/or Dow Jones & Company, Inc (“Index Providers”) and they bear no liability with respect to any such funds or securities or any index on which such funds or securities are based. The Offering Circular and the relevant Supplement contain a more detailed description of the limited relationship the Index Providers has with Deutsche Bank AG or any of its affiliates, db x-trackers and any related ETFs. All database rights, copyright and any other intellectual property rights in the Index and constituent list vests in the Index Providers and/or its licensors. Deutsche Bank AG or any of its affiliates has obtained full license from the Index Providers to use such database rights, copyright and other intellectual property rights in the creation of this product. The Index Providers and Deutsche Bank AG or any of its affiliates make no warranty or representation whatsoever either as to the results obtained from use of the indices and/or the figures at which the said indices stand at any particular day or otherwise. These index sponsors shall not be liable to any person for any error in their indices and shall not be under any obligation to advise any person of any error therein.

Deutsche Bank ETFs Trade the equity markets  

Deutsche Bank ETF Sales,

in one product

Trading and Research Contacts

Low-cost index investment No front end loads1 in exchange

Deutsche Bank – ETF Sales 

trading, 100% transparent

Equities: 

High liquidity, low bid/offer

+27 11 775 7236

 

spreads

Deutsche Bank – ETF Trading  

Transparent fund assets

Equities:

+27 11 775 7994

Opportunity for flexible use Deutsche Bank –  

ETF Securities Lending   Equities: Further information

+27 11 775 7076

  Deutsche Bank – ETF Structuring  

Internet: www.dbx-trackers.co.za

Equities:

+27 11 775 7076 

E-mail: [email protected] Hotline: 0861 111288

Deutsche Bank – ETF Research  

Weekly and monthly research Address: Deutsche Bank db x-trackers ETF Team 3 Exchange Square 87 Maude Street Sandton

Printed on environmentally friendly paper.

1 For stock exchange trading plus normal transaction costs and further remuneration.

© January 2008 Deutsche Bank AG 003 81135 40

reports:

+27 11 775 7236

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