Deutsche Bank db X-trackers

­db X-trackers ETFsA­10­Step­Guide­to­Exchange­Traded­Funds

db x-trackers­–­Simply­buy­the­market

Marketing­material

2 Contents

3 Introduction

­ 4­ Step­1­–­What­are­ETFs?

­5­ Step­2­–­How­do­ETFs­work?

­6­ Step­3­–­How­can­I­invest­in­ETFs ­ ­ and­what­are­the­costs?

­7­ Step­4­–­What­types­of­ETFs ­ ­ are­available?

­8­ Step­5­–­Pricing­efficiency­and­ ­ liquidity­of­ETFs­ ­ Step­6­–­Understanding­synthetic­­ ­ market­tracking

­9­ Step­7­–­Understanding­the­risks­ ­ of­ETFs

­10­ Step­8­–­The­use­of­collateral­ ­ to­offset­counterparty­risk­exposure

­11­ Step­9­–­Taxation­and­ETFs

­12­ Step­10­–­The­differences­between­ ­ ETPs,­ETCs,­ETFs­and­ETNs

­13­ Investment­risks­relating­to­ ­ db X-trackers ETFs

­14­ About­db X-trackers ETFs

15­ Important­Information

16­ Further­Product­Information

Contents

Introduction 3

Exchange­Traded­Funds­(ETFs)­are­becom-ing­increasingly­popular­thanks­to­their­low­fees,­accessibility,­flexibility,­diversity,­transparency­and­liquidity.­Investors­with­existing­holdings­in­investment­funds­or­pension­funds­may­well­find­that­those­in-vestment­vehicles­are­already­using­ETFs­to­some­extent.

Investors­and­financial­advisers­may­now,­however,­wish­to­look­at­how­ETFs­can­be­invested­in­directly.­This­10-step­guide­from­db X-trackers,­Deutsche Bank’s­ETF­platform,­is­designed­as­a­plain­language­introduction­to­the­world­of­ETFs,­cover-ing­the­possible­benefits,­risks­and­uses­of­ETFs­for­all­investors,­and­showing­how­investors­can­simply­“buy­the­market”.­Please­note­that­in­conjunction­with­read-ing­this­guide,­potential­investors­should­also­read­the­relevant­prospectus­and/or­key­investor­information­document­(KIID)­available­on­individual­ETFs.­Before­invest-ing,­investors­should­also­engage­with­their­financial­advisor­so­as­to­ensure­they­understand­the­characteristics,­invest-ment­strategy­and­risks­of­a­particular­ETF.

For­further­information­on­risks­please­see­Steps­7,­8­and­page­13.

The­ETF­market­is­now­sufficiently­broad­in­scope­such­that,­whatever­the­area­or­market­sector­an­investor­may­be­interest-ed­in,­there­is­likely­to­already­be­an­ETF­available­to­suit­their­needs.­Indeed,­there­may­be­many­other­ETFs­that­investors­may­not­yet­have­considered­that­could­help­reshape­a­portfolio.­It­is­important­however­to­always­take­into­consideration­that­some­ETFs­are­only­appropriate­for­sophisticated­investors.

This­guide­does­not­constitute­invest- ment­advice­as­explained­more­fully­in­ the­disclaimer­on­page­15­of­this­guide.

Introduction

ETFs­are­funds­that­trade­on­an­exchange­as­a­single­security,­and­which­usually­ aim­to­provide­exposure­to­the­compo-nents­of­an­index.­They­combine­in­a­single­product­the­tradability­and­liquidity­advantages­of­stocks­with­the­low­costs­and­diversification­benefits­of­index­funds.­Most­ETFs­listed­in­Europe­–­and­all­ db X-trackers ETFs­–­comply­with­the­UCITS­(Undertakings­for­Collective­Invest-ment­in­Transferable­Securities)­regula-tions.­

ETFs­could­therefore­be­considered­a­straightforward­way­for­an­investor­to­potentially­gain­instant­exposure­to­a­particular­market,­region,­sector,­asset­class­or­investment­strategy­via­a­single­transaction.­If­an­investor­wishes­to­rebal-ance­part­of­their­portfolio­towards­the­US,­the­Far­East,­European­small­companies,­telecoms,­natural­resources,­fixed­interest,­healthcare,­utilities­–­(the­list­is­extensive),­then­they­can­simply­“buy­the­market”­they­want,­when­they­want,­through­an­ETF.

Most­ETFs­can­be­held­in­an­ISA­or­SIPP­and­most­are­also­regulated­as­authorised­open-ended­investment­funds,­yet­with­the­key­additional­advantage­that­they­can­be­traded­“intra-day”­(throughout­the­trading­day)­on­the­stock­exchange­in­the­same­way­as­any­other­listed,­tradable­security.

— One­of­the­most­cost­effective­ways­ to­invest — Typically­UCITS­compliant­when­listed­in­Europe — Instant­market­access­at­low­cost — Trade­intra-day

Step­1­–­What­are­ETFs?

4 Step 1

Step 2 5

ETFs­are­structured­as­open-ended­invest-ment­funds­and­can­be­traded­intra-day­on­various­stock­exchanges,­including­the­London­Stock­Exchange­(“LSE”).

Most­ETFs­are­passive­investments­and­are­not­actively­managed­by­a­fund­man-ager.­The­aim­of­these­passively­managed­ETFs­is­to­mirror­or­replicate­an­index­that­represents­a­particular­market,­such­as­the­UK­FTSE­All­Share,­or­a­specific­sector­such­as­the­DJ­STOXX®­600­Banks­(an­index­which­represents­the­largest­Euro-pean­companies­in­the­banking­sector).

There­are­a­wide­variety­of­indices­in­exist-ence­today­and­more­are­being­created­that­allow­products­like­ETFs­to­track­the­aggregate­value­of­all­the­companies­or­securities­that­make­up­a­particular­index.

There­are­two­methods­used­by­ETFs­to­track­the­performance­of­an­index.­The­first­method­typically­involves­directly­investing­in­some­or­all­of­the­components­of­the­relevant­index­in­order­to­track­the­performance­of­that­index.­With­the­direct­investment­method­the­performance­of­the­ETF­reflects­the­returns­of­the­compo-nents­comprising­the­index­less­fees­and­replication­costs.­The­direct­replication­method­may­be­subject­to­tracking­differ-ences­due­to­the­practicalities­of­manag-ing­the­index­components.­When­only­a­portion­of­the­underlying­index­is­held­physically­this­is­called­“sampling”,­or­“optimized­sampling”.­Sampling­relies­on­mathematical­models­to­build­a­portfolio­consisting­of­a­smaller­number­of­securi-ties­than­the­broader­basket­the­portfolio­is­tracking.­The­accuracy­of­the­track-ing­when­sampling­therefore­is­model­dependent.

The­second­method­involves­replicating­the­index­performance­“synthetically”­via­an­over­the­counter­(OTC)­index­swap­transaction­with­a­counterparty­such­as­an­investment­bank.­This­provides­precise­replication­of­the­index­performance­less­fees­and­any­replication­costs.

Both­tracking­methods­are­used­by­ leading­ETF­providers­in­Europe.­In­the­case­of­db X-trackers­most­of­the­ db X-trackers ETFs­track­indices­through­synthetic­replication,­with­Deutsche Bank­as­the­counterparty.

The­returns­of­ETFs­include­income­distributions­which­are­either­paid­out­at­regular­intervals­or­automatically­rein-vested,­and­therefore­reflected­in­the­level­of­the­index­that­the­ETF­is­tracking,­which­means­ETF­holders­do­not­miss­out­on­dividend­payments.

— Exposure­to­an­index­through­a­ regulated­UCITS­fund — Dividends­included­in­the­returns­ of­an­ETF — Synthetic­replicated­ETFs­can­provide­very­good­tracking­of­an­index­before­fees­plus­any­replication­costs

Step­2­–­How­do­ETFs­work?

6 Step 3

Step­3­–­How­can­I­invest­in­ETFsand­what­are­the­costs?

ETF­shares­can­be­traded­through­a­broker­or­via­a­fund­or­wrap­platform­–­a­service­offered­by­investment­companies­offering­a­portfolio­of­ETFs­–­or­other­online­deal-ing­services.­They­trade­and­settle­through­stock­exchanges­and­clearing­systems­in­the­same­way­as­any­other­listed,­tradable­security,­with­no­set-up­documentation­or­specific­trading­process­required.­

Unlike­an­“active”­mutual­fund,­where­the­investor­is­paying­an­extra­layer­of­fees­for­a­fund­manager­to­select­stocks­with­the­aim­of­outperforming­an­index­or­benchmark,­an­ETF­is­a­“passive”­fund­that­just­tracks­the­underlying­index,­without­the­additional­costs­associated­with­active­fund­management.­It­is­also­worth­noting­that­most­mutual­funds­will­deal­only­once­a­day­at­a­forward­point,­on­either­the­same­or­the­following­day­from­when­the­investor­deals,­and­also­at­an­unknown­valuation­from­the­time­the­order­was­placed.­ETFs­however­can­be­traded­at­any­time­during­stock­exchange­trading­hours­and­at­any­size­at­the­price­the­investor­sees­and­agrees­to.­

Annual­management­fees­and­running­costs­for­ETFs­are­extremely­competitive­and­are­known­as­the­“All­In­Fee”.These­are­capped­at­a­maximum­level.­For­example,­the­annual­All­In­Fee­for­the­db X-trackers­FTSE­100­ETF­is­0.30­%.

There­are­no­upfront­or­exit­fees­for­ETFs­and­there­is­also­no­stamp­duty­on­buying­ETFs­on­the­LSE.­(There­may­be­other­fees­and­commissions­payable.­Please­consult­your­financial­advisor­regarding­any­ad-ditional­fees­for­which­you­may­be­liable.)

— Buy­or­sell­through­your­broker,­ platform­or­dealing­service — Trade­and­settle­the­same­as­any­ stock­exchange-listed­security — Low­All-in­Fees,­no­stamp­duty­on­ LSE-listed­ETFs,­and­no­up-front­or­ exit­fees

Impact­of­fees­on­long­term­Performance

With­long-term­investments­the­fee­structure­has­a­significant­impact­on­an­invest-ment’s­performance.­Take­for­example­a­one-off­investment­of­£20,000­with­an­annual­return­of­8­%­p.a.­for­20­years.­Assuming­a­management­fee­of­1.5­%­p.a.­this­would­return­a­final­sum­of­£70,472.90,­while­with­a­lower­management­fee­of­0.5­%­p.a.­the­final­sum­would­be­£84,957.02;­over­£14,000­more­just­from­a­lower­fee­structure!

Step­4­–­What­types­of­ETFs­are­available?

On­the­LSE­there­are­over­500­ETFs­avail-able­(incorporating­db X-trackers­offer-ings­and­the­ETFs­from­other­providers),­including­many­providing­exposure­to­markets­that­were­previously­difficult­to­access­or­beyond­the­scope­and­means­ of­many­investors.­Now,­through­the­simplicity­and­efficiency­of­ETFs,­investors­can access:

­ 1.­­Developed­markets UK,­USA,­Europe,­Japan,­world

­ 2.­­Emerging­markets regional­and­individual­countries, e.g.,­India,­China­and­Brazil

­ 3.­­Different­investment­styles value/growth,­small/mid­cap, high­dividends

­ 4.­­Fixed­Income government­and­corporate­bond

­ 5.­­Sectors gain­exposure­to­sectors­such­as­healthcare­and­banks­on­a­pan­ European,­global­developed­and­ global­emerging­markets­basis

­ 6.­­Money­market track­overnight­money­market­rates­for­major­currencies­(Euro,­US­Dollar,­Sterling)

­ 7.­­Commodities1 diversified­indices­covering­a wide­range­of­commodities

­ 8.­­Investment­themes­and­sectors e.g.­infrastructure,­private­equity,­Shariah

­ 9.­­Alternative­investments hedge­fund­indices

10.­­Daily­short­and­daily­leveraged­index­ETFs for­financially­sophisticated­investors­who­want­to­use­ETFs­as­a­short­ term­trading­tool,­e.g­to­hedge­their­portfolio­or­take­contrarian­views

As­ETFs­are­becoming­ever­more­specific­in­the­areas­they­cover,­investors­and­advisers­can­now­be­very­precise­in­their­portfolio­construction­and­asset­allocation.

— ETFs­provide­access­to­mainstream­areas­as­well­as­those­only­previously­available­to­specialised­investors — The­ETF­market­continues­to­expand­ to­provide­investors­with­more­granular­and­different­types­of­exposures

1­Investors­should­note­that­commodity­ETFs­provide­exposure­to­broad­commodity­indices­only.­ There­are­other­exchange­traded­products,­called­ETCs­(Exchange­Traded­Commodities),­which­ provide­exposure­to­single­commodities­such­as­gold.­See­Step­10­for­a­definition­of­ETCs.

Step 4 7

Step­5­–­Pricing­efficiency­and­liquidity­of­ETFs

8­ Step­5,­Step­6

Step­6­–­Understanding­synthetic­market­tracking

As­stated­earlier­in­this­guide,­there­are­two­basic­ways­in­which­ETF­providers­can­construct­products­for­the­purposes­of­trying­to­track­indices.­The­traditional­method­involves­buying­and­holding­the­physical­underlying­securities­of­the­index­being­tracked.­However,­this­method­is­constrained­in­terms­of­the­types­of­un-derlying­indices­that­can­be­tracked,­and­in­some­cases­can­be­prone­to­tracking­difference­–­transaction­costs­relating­to­index­turnover­for­periodic­index­rebal-ancing­and­corporate­actions­can­impact­tracking­performance,­for­instance.­

With­synthetic­replication­ETFs,­the­swap­counterparty­agrees­to­deliver­the­returns­on­the­index,­which­means­the­investor­receives­the­precise­returns­of­the­index­minus­the­all-in­fee­plus­any­index­replica-tion­costs,­if­relevant.­Another­benefit­of­the­synthetic­or­precision­replication­method­is­that­it­allows­for­the­tracking­of­indices­in­difficult­to­access­markets,­such­as­some­emerging­markets,­for­example.­

Finally,­by­outsourcing­the­indexing­provi-sion­to­a­group­best­placed­to­handle­it­–­a­major­financial­institution­such­as­Deutsche Bank­–­efficiency­gains­can­be­had­which,­in­the­highly­competitive­ETF­market­ultimately­get­passed­down­to­the­end­investor.

— Synthetic­replication­ETFs­seek­to­pro-vide­investors­with­the­most­accurate­index­tracking­available — Synthetic­replication­ETFs­can­provide­access­to­certain­market­indices­ that­physical­replication­ETFs­could­ not track

A­feature­of­the­efficiency­that­ETFs­offer­is­that­under­normal­market­conditions­the­price­of­an­ETF­will­generally­be­kept­close­to­its­net­asset­value­by­authorised­market­making­firms,­which­correct­any­premium­or­discount­that­may­occur­in­the­price­during­trading­on­an­exchange.­The­market­making­firms­attempt­to­cor-rect­supply­and­demand­imbalances­that­can­cause­the­price­of­the­ETF­to­trade­at­a­premium­or­discount­to­the­net­asset­value­(note­that­premiums­or­discounts­to­NAV­can­occur,­and­may­typically­last­for­a­short­period­of­time­before­trading­

by­market­makers­corrects­the­anomaly;­liqudity­may­not­always­be­present­in­ETF­markets).­This­has­advantages­for­both­large­and­small­investors­as­it­means­trades­could­be­made­in­any­size.­

The­pricing­of­ETFs­therefore­tends­to­be­both­efficient­and­transparent.­Many­ETFs­publish­an­iNAV­or­Indicative­Net­Asset­Value,­which­is­calculated­and­updated­to­reflect­real­time­movements­of­the­index­being­tracked.­In­most­cases­the­bid/of-fer­quotes­for­an­ETF­share­on­the­stock­exchange­will­move­in­line­with­its­iNAV.

— Transparent,­continuous­and­efficient­intra-day­pricing­on­the­stock­exchange­(liquidity­depends­on­market­conditions) — Instant­access­and­no­premiums/dis-counts­to­fair­value — Flexible­–­easy­to­trade­in­small­and­large­sizes,­typically­without­market­impact

Very­few,­if­any,­investments­today­can­be­truly­thought­of­as­risk-free,­and­ETFs­are­no­different.­ETFs­are­designed­to­track­an­index­closely,­both­up­and­down­in­value,­so­investors­should­have­an­appreciation­of­market­risk­when­buying­an­ETF.­ETFs­also­expose­investors­to­counterparty­risk.­In­the­case­of­synthetic­replication­ETFs,­this­comes­from­the­bank­providing­the­swap­agreement.­In­the­case­of­physically­backed­ETFs,­this­typically­comes­from­securities­lending­(see­Step­8).

However,­an­ETF­(such­as­the­ db X-trackers ETF­range)­or­any­other­mutual­fund­that­is­structured­under­the­Europe-wide­UCITS­(Undertaking­for­Collective­Investments­in­Transferable­Se-curities)­regulations­is­subject­to­various­diversification­requirements­and­limits­on­counterparty­risk­exposure.­These­regula-tions­apply­to­both­methods­of­index­rep-lication,­covering­portfolio­diversification­requirements­and­limits­on­counterparty­exposure­in­relation­to­securities­lending­activities­and­OTC­derivative­transactions.

There­are­specified­limits­on­counterparty­exposure­for­the­synthetic­or­precision­replication­type­of­ETFs­like­db X-trackers.­Under­the­UCITS­regulations,­the­maxi-mum­exposure­to­an­OTC­derivative­coun-terparty­is­10­%­of­the­Net­Asset­Value­(NAV)­of­the­fund.­The­reason­for­such­a­requirement­is­to­try­to­ensure­that­if­the­counterparty­becomes­insolvent­then­losses­to­the­fund­are­reduced­(ideally­to­no­more­than­10­%­of­the­fund’s­current­NAV).­However,­this­does­not­necessarily­mean­an­investor­will­get­back­90­%­of­the­amount­originally­invested.­The­amount­received­would­depend­on­the­perfor-mance­of­the­underlying­index,­which­may­have­fallen­over­the­period­of­investment­and,­in­the­case­of­synthetic­replication­ETFs,­would­depend­on­the­value­of­the­collateral­posted­to­the­fund­–­which­will­differ­from­the­underlying­index­being­tracked.

Some­ETF­providers,­such­as­ db X-trackers,­seek­to­minimize­this­risk­even­further­by­setting­strict­limits­on­OTC­derivative­counterparty­exposure­(see­next­step).

The­investment­risks­relating­to­ db X-trackers ETFs­are­outlined­ on­page­13.

— Investors­in­ETFs­must­have­an­appre-ciation­of­market­risk — Counterparty­risk­is­also­present­in­ synthetic­ETF­investments,­and­may­ be­present­in­physically-backed­ETFs­(see­Step­8) — UCITS­regulations­limit­counterparty­risk­in­ETFs,­while­some­providers­such­as­db X-trackers­seek­to­minimize­this­risk­further

Step­7­–­Understanding­the­risks­of­ETFs

Step 6 9

10 Step 8

Investors­in­any­fund­investment­product­will­generally­be­exposed­to­some­form­of­counterparty­risk.­Traditional­mutual­fund­providers­and­physically-backed­ETF­providers­typically­engage­in­securi-ties­lending,­for­example.­This­involves­lending­purchased­securities­in­order­to­increase­profits­and­returns,­thereby­creating­counterparty­risk­to­the­borrow-ers­of­those­securities.­Because­there­is­no­requirement­for­details­on­securities­lending­activities­to­be­disclosed­at­regular­intervals,­it­can­be­difficult­for­investors­in­physically-backed­ETFs­and­traditional­mutual­funds­to­measure­or­intuitively­grasp­the­counterparty­risk­they­are­exposed­to.­To­limit­this­counterparty­risk,­funds­that­engage­in­securities­lending­generally­enter­into­collateral­agreements,­whereby­collateral­is­posted­to­secure­the­arrangement­–­which­means­if­the­bor-rower­defaults­then­the­lender­retains­the­collateral­as­compensation.­

In­the­case­of­db X-trackers,­ db X-trackers ETFs­do­not­engage­in­secu-rities­lending,­so­investors­are­not­exposed­to­counterparty­risk­in­this­respect.­How-ever,­with­db X-trackers ETFs­the­swap­agreements­that­exist­between­the­ETF­and­Deutsche Bank­AG­creates­counter-party­risk­for­the­ETF­to­Deutsche Bank­AG.­As­with­securities­lending­arrange-ments,­this­counterparty­risk­must­be­kept­within­appropriate­limits­by,­for­example,­the­counterparty­posting­collateral.

As­stated­in­Step­7,­regulatory­rules­limit­the­counterparty­risk­in­UCITS-compliant­ETFs­to­10­%­of­current­NAV.­However,­db X-trackers­limits­this­exposure­to­5­%­for­its­fixed­income­ETFs.­For­most­of­its­equity,­commodity­and­currency­ETFs,­a­type­of­swap­agreement­known­as­a­“fully-funded­swap”­ensures­the­ETF­has­no­uncollateralized­derivatives­exposure.

db X-trackers­publishes­swap­exposures­and­collateral­basket­compositions­for­all­of­its­ETFs­on­its­website­(www.dbxtrack-ers.com).­This­information­is­updated­daily­and­provides­a­full­breakdown­of­underlying­collateral­positions,­even­to­the­individual­security­level.

— Investors­throughout­the­fund­industry­may­be­exposed­to­counterparty­risks — Although­db X-trackers ETFs­do­not­engage­in­securities­lending,­counter-party­risk­results­from­the­use­of­swap­arrangements.­Such­counterparty­risk­is­kept­within­certain­limits­by,­for­example,­posting­collateral — Any­interested­party­can­access­daily­updated­information­on­swap­expo-sures­and­collateral­basket­securities­from­the­db X-trackers­website

Step­8­–­The­use­of­collateralto­offset­counterparty­risk­exposure

The­below­is­an­example­of­how­this­information­is­presented­on­the­db X-trackers­website.

ETFs­could­be­used­by­a­wide­variety­of­investors­and­could­form­part­of­an­Individual­Savings­Account­(ISA)­or­pen-sion­through­a­self­invested­pension­plan­(“SIPP”).

Outside­of­these­tax­wrappers­they­can­still­be­used­for­tax­planning,­as­many­ETFs­listed­on­the­LSE­are­registered­as­“Reporting­Funds”­with­Her­Majesty’s­Revenue­and­Customs­(HMRC).­All­ db X-trackers ETFs­are­compliant­with­ the­Reporting­Fund­rules.­What­this­means­for­UK­individual­investors­is:

— Any­distributed­income­or­reported­income­will­be­subject­to­income­tax — Any­gains­made­on­the­disposal­of­units/shares­of­an­ETF­will­be­subject to­capital­gains­tax

If­an­investor­is­in­any­doubt­about­the­taxation­of­db X-trackers ETFs­then­they­should­in­all­cases­consult­a­financial­adviser­before­investing.

As­mentioned­in­Step­4,­there­is­no­stamp­duty­when­buying­ETFs­listed­and­trading­on­the­LSE.

— ETFs­can­be­held­in­an­ISA­or­SIPP — ETFs­are­compliant­with­Reporting­Fund­rules — Investors­with­questions­on­the­ taxation­of­ETFs­should­contact­ their­financial­adviser

Step­9­–­Taxation­and­ETFs

Step 9 11

This­wording­appliesonly­to­UK­investors.

12 Step 10

A­number­of­three-letter­acronyms­have­emerged­in­recent­years­as­market­tracker­investment­products­have­proliferated.­Exchange-traded­products­(ETPs)­is­an­umbrella­term­that­typically­refers­to­secured­(meaning­backed­by­assets),­exchange-traded­equity­or­debt­instru-ments.­Exchange-traded­funds­(ETFs)­and­exchange-traded­commodities­(ETCs)­typically­fall­into­this­category.

The­other­index­tracking­product­to­be­aware­of­is­exchange-traded­notes­(ETNs),­which­are­typically­unsecured­debt­instru-ments.­ETNs­are­issued­by­banks­as­direct­funding­instruments,­which­means­inves-tors­in­ETNs­bear­counterparty­credit­risk­to­the­issuing­bank.

In­terms­of­risks,­the­different­types­of­products­come­with­different­levels­of­counterparty­risk.­ETFs­and­ETCs­mini-mise­counterparty­risk,­either­through­the­holding­of­physical­assets­or­by­posting­collateral­with­an­independent­third­party.­ETNs,­on­the­other­hand,­typically­come­with­full­counterparty­risk­to­the­issuing­institution.

Definitions

Exchange­Traded­Products­(ETP)­–­Securities­that­trade­on­exchanges,­with­ETPs­being­an­umbrella­term­to­describe­ETCs­and­ETFs.Exchange­Traded­Fund­(ETF)­–­A­type­of­ETP­that­is­structured­and­regulated­as­a­mutual­fund.­In­Europe­most­ETFs­comply­with­the­UCITS­regulations.Exchange­Traded­Commodities­(ETC)­–­A­type­of­ETP­that­trades­and­settles­like­an­ETF­but­which­is­structured­as­a­debt­instrument.Exchange­Traded­Notes­(ETN)­–­An­exchange-traded­structured­note­investment­which­is­not­collateralized.­ETNs­are­debt­instruments­issued­by­a­financial­institution,­which­means­holders­are­exposed­to­issuer­credit­risk.

Step­10­–­The­differences­between­ETPs,­ETCs,­ETFs­and­ETNs

— UCITS­compliant — OTC­counterparty­exposure­limited­ to­10­%

— Single­commodity­or­diversified­basket­of­commodities — Futures­or­physicaly­backed — Secured/collateralised

— Single­asset­or­diversified­basket­of­securities — Unsecured/uncollateralised — Issuer credit risk

Stock­Exchange

Exchange­Traded­Products­(ETPs)Secured/Collateralised­(Backed­by­assets)

ETFsExchange­Traded­Funds

ETCsExchange­Traded­Commodities

Other­ProductsUnsecured

ETNsExchange­Traded­Notes

— A­number­of­three-letter­acronyms­have­emerged­to­describe­listed­investment­products — It­is­important­that­investors­know­the­difference­between­ETFs­and­other­listed­investment­instruments — Risk­profiles­of­each­product­category­differ

The­following­illustrates­the­differences­between­the­instruments.

Investment­in­db X-trackers ETFs­involve­numerous­risks­including­among­ others,­general­market­risks­relating­to­ the­relevant­index,­credit­risks­on­the­provider­of­index­swaps­utilised­in­the­db X-trackers ETFs,­exchange­rate­risks,­interest­rate­risks,­inflationary­risks,­liquid-ity­risks­and­legal­and­regulatory­risks.

The­db X-trackers ETFs­use­Deutsche Bank­as­the­counterparty­for­OTC­derivative­transactions.­In­the­event­of­a­default­under­the­terms­of­the­OTC­deriva-tive­transaction­by­Deutsche Bank,­the­db X-trackers ETFs­would­be­liquidated,­which­means­an­investor­could­lose­all­or­a­significant­proportion­of­their­original­investment.­The­NAV­at­the­time­of­default­may­be­considerably­less­than­the­amount­an­investor­originally­invested­depending­on­the­performance­of­the­relevant­un-derlying­index.­Investors­should­therefore­understand­and­evaluate­the­counterparty­credit­risk­prior­to­making­any­investment(Please­refer­to­Steps­7­and­8).

The­value­of­an­investment­in­a­ db X-trackers ETF­may­go­down­as­well­as­up­and­past­performance­is­not­an­indicator­or­a­guarantee­of­future­perfor-mance.­db X-trackers­may­trade­in­limited­markets.

db X-trackers­may­be­unable­to­track­pre-cisely­the­performance­of­an­index.

Investors’­income­is­not­fixed­and­may­fluctuate.

The­value­of­any­investment­involving­exposure­to­foreign­currencies­can­be­af-fected­by­exchange­rate­movements.

ETF­shares­may­be­denominated­in­a­currency­different­to­that­of­the­traded­currency­on­the­stock­exchange­in­which­case­exchange­rate­fluctuations­may­have­an­adverse­effect­on­the­returns­of­the­fund.

Tax­treatment­of­the­db X-trackers ETFs­depends­on­the­individual­circumstances­of­each­investor.The­levels­and­bases­of,­and­any­applica-ble­relief­from,­taxation­can­change.

For­further­information­regarding­risk­fac-tors,­please­refer­to­the­risk­factors­section­of­the­listing­particulars­or­full­prospectus.

Investors­should­note­that­the­ db X-trackers ETFs­are­neither­capital­protected­nor­guaranteed.­Investors­ could­lose­part­or­all­of­their­investment.­

An­investment­in­a­db X-trackers ETF­tracking­a­daily­leveraged­or­daily­short­in-dex­is­intended­for­financially­sophisticat-ed­investors­who­wish­to­take­a­very­short­term­view­on­the­underlying­index,­e.g.,­for­day­trading­purposes.­Therefore­the­db X-trackers ETFs­on­leveraged­or­short­indices­are­appropriate­only­for­financially­sophisticated­investors­who­understand­the­strategy,­characteristics­and­risks.­The­db X-trackers ETFs­on­leveraged­or­short­indices­are­not­intended­to­be­a­buy­and­hold­investment.

Please­refer­to­the­db X-trackers­full­ prospectus­and­any­relevant­product­ annex­for­more­information­on­ db X-trackers ETFs.­These­documents­ are­available­free­of­charge­from­ Deutsche Bank­(see­contact­details­ on­the­back­cover).

Investment­risks­relating­todb X-trackers ETFs

Investment­risks­ 13

db X-trackers­is­Deutsche Bank’s­ Exchange­Traded­Funds­(ETFs)­index­tracking­solution­platform.

db X-trackers­was­launched­in­January­2007­and­is­one­of­the­fastest­growing­ETF­providers­in­Europe.­With­€36­billion­of­as-sets­under­management­(as­at­June­2011)­db X-trackers­is­one­of­the­three­largest­ETF­providers­in­Europe.

db X-trackers’­ETFs­are­listed­on­nine­different­exchanges­across­Europe­and­Asia­and­are­supported­by­multiple­market­makers.

On­the­London­Stock­Exchange,­ db X-trackers­offers­over­120­equity,­ fixed­income,­credit,­money­markets,­currencies,­commodities­and­alternative­investment­ETFs;­providing­all­types­ of­investors­with­the­opportunity­to­invest­ in­a­highly­transparent,­flexible­and­ efficient­way.­

db X-trackers ETFs­are­domiciled­in­ Luxembourg­and­comply­with­UCITS­regulations.

All­of­the­above­data­was­correct­asat­August­2011

About­db X-trackers ETFs

14­ About­db X-trackers­ETFs

Important­Information­ 15

This­document­is­intended­for­discussion­purposes­only­and­does­not­create­any­legally­binding­obligations­on­the­part­of­Deutsche Bank­AG­and/or­its­affiliates­(“DB”).­Without­limitation,­this­document­does­not­constitute­an­offer,­an­invitation­to­offer­or­a­recommendation­to­enter­into­any­transaction.­When­making­an­invest-ment­decision,­you­should­rely­solely­on­the­final­documentation­(including­the­most­recent­Key­Investor­Information­Document,­if­applicable,­which­is­available­on­[www.dbxtrackers.com/www.funds.db.com])­relating­to­the­transaction­and­not­the­summary­contained­herein.­These­documents­are­available­free­of­charge­from­Deutsche Bank,­London­Branch.­DB­is­not­acting­as­your­financial­adviser­or­in­any­other­fiduciary­capacity­with­respect­to­this­proposed­transaction.­The­transaction(s)­or­products(s)­mentioned­herein­may­not­be­appropriate­for­all­inves-tors­and­before­entering­into­any­transac-tion­you­should­take­steps­to­ensure­that­you­fully­understand­the­transaction­and­have­made­an­independent­assessment­of­the­appropriateness­of­the­transaction­in­the­light­of­your­own­objectives­and­cir-cumstances,­including­the­possible­risks­and­benefits­of­entering­into­such­transac-tion.­For­general­information­regarding­the­nature­and­risks­of­the­proposed­transac-tion­and­types­of­financial­instruments­please­go­to­www.globalmarkets.db.com/riskdisclosures.­You­should­also­consider­seeking­advice­from­your­own­advisers­in­making­this­assessment.­If­you­decide­to­enter­into­a­transaction­with­DB,­you­do­so­in­reliance­on­your­own­judgment.­The­information­contained­in­this­docu-ment­is­based­on­material­we­believe­to­be­reliable;­however,­we­do­not­represent­that­it­is­accurate,­current,­complete,­or­error­free.­Assumptions,­estimates­and­opinions­contained­in­this­document­constitute­our­judgment­as­of­the­date­of­the­document­and­are­subject­to­change­without­notice.­Any­projections­are­based­

on­a­number­of­assumptions­as­to­market­conditions­and­there­can­be­no­guarantee­that­any­projected­results­will­be­achieved.­Past­performance­is­not­a­guarantee­of­fu-ture­results.­This­material­was­prepared­by­a­Sales­or­Trading­function­within­DB,­and­was­not­produced,­reviewed­or­edited­by­the­Research­Department.­Any­opinions­expressed­herein­may­differ­from­the­opin-ions­expressed­by­other­DB­departments­including­the­Research­Department.­Sales­and­Trading­functions­are­subject­to­additional­potential­conflicts­of­inter-est­which­the­Research­Department­does­not­face.­DB­may­engage­in­transactions­in­a­manner­inconsistent­with­the­views­discussed­herein.­DB­trades­or­may­trade­as­principal­in­the­instruments­(or­related­derivatives),­and­may­have­proprietary­positions­in­the­instruments­(or­related­de-rivatives)­discussed­herein.­DB­may­make­a­market­in­the­instruments­(or­related­derivatives)­discussed­herein.­Sales­and­Trading­personnel­are­compensated­in­part­based­on­the­volume­of­transactions­effected­by­them.­The­distribution­of­this­document­and­availability­of­these­prod-ucts­and­services­in­certain­jurisdictions­may­be­restricted­by­law.­You­may­not­distribute­this­document,­in­whole­or­in­part,­without­our­express­written­permis-sion.­DB­SPECIFICALLY­DISCLAIMS­ALL­LIABILITY­FOR­ANY­DIRECT,­INDIRECT,­CONSEQUENTIAL­OR­OTHER­LOSSES­OR­DAMAGES­INCLUDING­LOSS­OF­PROF-ITS­INCURRED­BY­YOU­OR­ANY­THIRD­PARTY­THAT­MAY­ARISE­FROM­ANY­RELIANCE­ON­THIS­DOCUMENT­OR­FOR­THE­RELIABILITY,­ACCURACY,­COM-PLETENESS­OR­TIMELINESS­THEREOF.­DB­is­authorised­under­German­Banking­Law­(competent­authority:­BaFin­-­Federal­Financial­Supervising­Authority)­and­regu-lated­by­the­Financial­Services­Authority­for­the­conduct­of­UK­business.

“Passion­to­Perform”­is­not­a­product­performance­guarantee.

©­Deutsche Bank­AG­2011.All­rights­reserved.

Important­Information

Further­product­information­on­the­ db X-trackers ETFs,­including­the­Key­Investor­Information­Document­and­full­prospectus­are­available­on­the­website:­www.dbxtrackers.com

Alternatively­you­can­contact­us­in­writing,­by­telephone­or­by­email­on­the­details­provided­below.

­Deutsche Bank­AGdb X-trackers­TeamWinchester­House1­Great­Winchester­Street4th­Floor­WH/04/KD15London­EC2N­2DB

Hotline:­ 020­7547­1747Phone­calls­will­be­recorded

E-Mail:­ etf@db.com

Reuters:­ DBETF

©­February­2012­Deutsche Bank­AGD-60311­Frankfurt­am­Main

003 81138 00

Further­Product­Information

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