Currencies & Currency Hedging

Ugo Egbunike, Moderator Director of Business Development ETF.com Currencies & Currency Hedging Juliana Bambaci, Panelist Index Applied Research MSCI Jonathan Citrin, Panelist Founder & CEO Citrin Group Luke Oliver, Panelist Director, Portfolio Manager Deutsche Asset & Wealth Management

Juliana Bambaci Panelist Index Applied Research MSCI Ugo Egbunike Moderator Director of Business Development ETF.com Jonathan Citrin Panelist Founder & CEO Citrin Group Luke Oliver Panelist Director, Portfolio Manager Deutsche Asset & Wealth Management

Hedging FX Exposure in Global Equity Portfolios Juliana Bambaci Panelist Index Applied Research MSCI

The US Dollar

Currency Exposure Currency exposure in MSCI ACWI 33 foreign FXs in MSCI ACWI Top 10 Currencies in MSCI ACWI Currency Weight (%) US Dollar 48.17 Euro 10.52 Pound Sterling 8.10 Japanese Yen 7.71 Canadian Dollar 3.82 Swiss Franc 3.31 Hong Kong Dollar 3.28 Australian Dollar 3.02 Korean Won 1.72 Brazilian Real 1.42 New Taiwan Dollar 1.31 Swedish Krona 1.18 Indian Rupee 0.81 South African Rand 0.79 Data as of November 2013. Source: MSCI.

Importance of Currency Risk Performance of Hedged and Unhedged MSCI Indexes (USD) Data period November 2012-3. Source: MSCI.

Currency Risk: Why Hedge? Comparison of MSCI Europe Index returns in local currency vs. the EUR/USD Source: MSCI, * Data as of November 29, 2013.

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Producing Alpha via Currencies Jonathan Citrin Panelist Founder & CEO Citrin Group

In Search of Alpha: Agriculture, 4.65% Energy, 2.77% urrency, 4.87% Metals, 17.71% Global Equity, 70.00% Asset Target Developed Markets 32.20% U.S. Market 28.91% Emerging Markets 8.89% Platinum 6.00% Gold 6.00% U.S. Dollar 4.87% Tin 3.71% Unleaded Gas 2.77% Sugar 2.65% Agriculture (Inverse) 2.00% Silver 2.00%

Return (%) Std Dev (%) Ratio Historic Performance (1996 2013) Russell Fundamental US Sm Company TR 14.17 19.25 0.736103896 Russell Fundamental US Lg Company TR 10.88 15.53 0.700579524 Russell Fndmntl Dv ex US Lg Cmpny TR 9.51 17.51 0.543118218 Russell Fndmntl Dv ex US Sm Cmpny TR 9.15 17.41 0.525560023 Russell Fundamental Emerging Mkts TR 13.04 25.12 0.51910828 Gold London PM Fixing 7.24 17.73 0.408347434 Platinum Spot 7.81 22.92 0.340750436 Swiss Franc 1.96 11.00 0.178181818 S&P GSCI Crude Oil 3.75 33.77 0.111045306 Japanese Yen 0.62 11.00 0.056363636 - DB Long USD ER -1.00 8.43 0.118623962

Return (%) Std Dev (%) Ratio Historical Performance (2009 2013) Russell Fundamental US Lg Company TR 26.80 15.82 1.694058154 Russell Fundamental US Sm Company TR 33.26 22.00 1.511818182 Russell Fndmntl Dv ex US Sm Cmpny TR 23.54 18.36 1.282135076 Russell Fundamental Emerging Mkts TR 21.72 22.93 0.947230702 Russell Fndmntl Dv ex US Lg Cmpny TR 18.88 20.07 0.940707524 Swiss Franc 5.49 11.65 0.471244635 Gold London PM Fixing 5.95 21.30 0.279342723 Platinum Spot 5.67 22.77 0.249011858 S&P GSCI Crude Oil 5.04 26.93 0.187151875 Japanese Yen -0.95 9.61-0.098855359 - DB Long USD ER -3.55 9.01 0.394006659

Historical Correlations (1996 2013) 1 2 3 4 5 6 7 8 9 10 11 1) Russell Fundamental US Lg Company TR 1.00 2) Russell Fundamental US Sm Company TR 0.91 1.00 3) Russell Fndmntl Dv ex US Lg Cmpny TR 0.82 0.80 1.00 4) Russell Fndmntl Dv ex US Sm Cmpny TR 0.70 0.73 0.92 1.00 5) Russell Fundamental Emerging Mkts TR 0.71 0.72 0.81 0.78 1.00 6) S&P GSCI Crude Oil 0.18 0.25 0.33 0.35 0.33 1.00 7) Gold London PM Fixing 0.01 0.06 0.17 0.22 0.23 0.21 1.00 8) Platinum Spot 0.21 0.23 0.35 0.37 0.39 0.29 0.56 1.00-9) Japanese Yen 0.04-0.08 0.09 0.17 0.03-0.02 0.24 0.05 1.00 10) Swiss Franc 0.07 0.13 0.32 0.34 0.17 0.19 0.37 0.25 0.34 1.00-11) DB Long USD ER 0.29-0.32-0.53-0.53-0.36-0.30-0.42-0.32-0.37-0.85 1.00

Historical Correlations (2009 2013) 1 2 3 4 5 6 7 8 9 10 11 1) Russell Fundamental US Lg Company TR 1.00 2) Russell Fundamental US Sm Company TR 0.95 1.00 3) Russell Fndmntl Dv ex US Lg Cmpny TR 0.87 0.82 1.00 4) Russell Fndmntl Dv ex US Sm Cmpny TR 0.84 0.81 0.95 1.00 5) Russell Fundamental Emerging Mkts TR 0.81 0.81 0.88 0.88 1.00 6) S&P GSCI Crude Oil 0.51 0.46 0.54 0.54 0.56 1.00 7) Gold London PM Fixing 0.09 0.07 0.15 0.16 0.28 0.30 1.00 8) Platinum Spot 0.49 0.45 0.52 0.52 0.59 0.50 0.72 1.00 9) Japanese Yen -0.15-0.19-0.11-0.04-0.02-0.08 0.38 0.06 1.00 10) Swiss Franc 0.39 0.34 0.62 0.62 0.62 0.51 0.39 0.53 0.19 1.00 11) DB Long USD ER -0.62-0.52-0.79-0.75-0.72-0.60-0.33-0.55-0.22-0.79 1.00

Global Macro & Currency Effect

Currency Hedging in Focus Luke Oliver Panelist Director, Portfolio Manager Deutsche Asset & Wealth Management

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Definitions Price-to-earnings ratio (P/E) ratio compares a company s current share price to its per-share earnings. 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. 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 non-u.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 Germany Index is designed to track the performance of the large- and mid-cap segments of the German market. The MSCI Germany U.S. Dollar Hedged Index is calculated using the same methodology as its corresponding MSCI Germany Index, but is designed to mitigate exposure to fluctuations between the value of the U.S. dollar and non-u.s. currencies.

Definitions (continued) 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 MSCI AC Europe Index captures large- and mid-cap representation across 16 developed-markets countries and five emerging-markets countries in Europe. The MSCI Europe U.S. Dollar Hedged Index is designed to provide exposure to equity securities in 16 developed European stock markets, while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and selected non-u.s. currencies. The MSCI Asia ex Japan Index captures large- and mid-cap representation across two of three developed-markets countries (excluding Japan) and eight emerging-market countries in Asia. The MSCI Asia Pacific Ex Japan U.S. Dollar Hedged Index is designed to provide exposure to equity securities in developed and emerging stock markets in the Asia-Pacific region (excluding Japan), while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and selected non-u.s. currencies. The MSCI United Kingdom Index is designed to measure the performance of the large- and mid-cap segments of the UK market. The MSCI United Kingdom U.S. Dollar Hedged Index is designed to provide exposure to the equity market of the United Kingdom, while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and British pound sterling. 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 S&P 500 Index tracks the performance of 500 leading U.S. stocks and is widely considered representative of the U.S. equity market. It is not possible to invest directly in an index.

International Equity Allocation Risks? International equity investing Even when investing in U.S. dollars, an international equity investor is exposed to fluctuations in local currencies of underlying holdings. Currency risk Typically, investors are unaware of this risk and how to control it. Country risk Typically, investors manage this through portfolio diversification. International equity investors are also exposed to the economic and/or political risks of individual countries. Hedged products are designed to mitigate the exposure to fluctuations between the value of the U.S. dollar and non-u.s. currencies while allowing pure exposure to equity markets. Diversification does not guarantee protection against losses..

Currency Risk Misconceptions Currency risk is an inherent component of international equity investing and cannot be controlled in an efficient and cost-effective manner. Realities Through the use of currency-hedged equity ETFs, investors are able to strip out or dampen currency fluctuations from their international equity portfolios. Currency risk Typically, investors are unaware of this risk and how to control it. Currency risk can be avoided or mitigated through the use of American Depositary Receipts (ADRs). Currency risk is not significant enough to warrant concern. ADRs are still exposed to currency risk despite being U.S. dollar denominated. Currency fluctuations are often significant and unpredictable driven by central bank activities, policy rhetoric, international trade flows and speculators. International investing is one dimensional. International equity investing subjects investors to two sources of risk: currency risk and country risk. An ADR is a certificate issued by banks representing shares in a foreign stock traded on a U.S. exchange.

Trends in the U.S. Dollar Since 1968, the average U.S. dollar cycle has been approximately eight years. The current cycle with the U.S. Dollar Index near all-time lows is in its 11th year. The dollar has been in a secular decline for more than a decade. With the average USD cycle at about eight years and the USD near all-time lows, that tide could shift at any time. U.S. Dollar Index (2/3/67 12/31/13) 10.8 Yrs. 6.3 Yrs. 7.5 Yrs. 9.4 Yrs. 6.1 Yrs. End of Bretton Woods +95.57% (+11.11% ann) Black Wednesday, Sept. 1992 Sept. 11, 2001 Plaza Accord Sept. 1985 +52.06% (+4.56% ann) Lehman collapse Sept. 2008-32.61% (-4.26% ann) -51.70% (-9.25% ann) Asian currency crisis -40.09% (-7.91% ann) Source: Deutsche Bank and Bloomberg as of 12/31/13. See slide 2 for index definitions. Past performance is no guarantee of future results. The numbers on the vertical axis represent index levels for the U.S. Dollar Index.

MSCI EAFE Unhedged vs. Local Currency 79% 33% Source: Deutsche Asset & Wealth Management as of 12/31/13. Past performance is no guarantee of future results. For comparison purposes, each entry begins with a value of 100.

What is Your Currency Risk Exposure? Euro Austria Belgium Finland France Germany Greece Ireland Italy Portugal Spain The Netherlands Swiss franc Switzerland Yen Japan Singapore dollar Singapore Australian dollar Australia British pound United Kingdom Hong Kong dollar Hong Kong Krona Sweden Krone Denmark Krone Norway New Zealand dollar New Zealand Shekel Israel EUROPE 16 countries / 6 currencies ASIA / PACIFIC 5 countries / 5 currencies Middle East 1 country / 1 currency See slide 2 for index definitions.

Japanese Indices 64% 27% Source: Deutsche Asset & Wealth Management as of 12/31/13. Past performance is no guarantee of future results. For comparison purposes, each entry begins with a value of 100.

MSCI Currency-Hedged Indices International equity investments and FX forward contracts These indices combine international equity investments with FX forward contracts in an attempt to mitigate the impact on performance of the currency exposure of MSCI equity indices against a U.S. dollar-based investor. Month Start[i] start[i] Month Start[i+1] start[i+1] Time Time The index is long equity constituents. The index goes long a series of U.S. dollar one-month forwards. 1 The notional value of the forwards represents the relative marketcap weights of the equities within the index. 2 The index does not adjust the hedge intramonth. Forward positions are rolled over using the new value of the index and any changes in the portfolio. Equity indices + hedge = Hedged indices The MSCI hedged indices provide benchmarks for funds that aim to help investors mitigate the effects of FX movements on their equity exposures and therefore have access solely to the equity returns. 3 (1) A forward currency contract is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. (2) An index where 50% of the underlying equity market cap is denominated in euros would buy U.S. dollar one-month forwards against euros in a notional amount equalling 50% of the index s equity market capitalization. (3) MSCI hedged indices do not adjust the hedge intramonth and therefore actual currency exposure may fluctuate. FX is the exchange of one currency for another, or the conversion of one currency into another currency.

Thank you. Questions?

Juliana Bambaci Panelist Index Applied Research MSCI Ugo Egbunike Moderator Director of Business Development ETF.com Jonathan Citrin Panelist Founder & CEO Citrin Group Luke Oliver Panelist Director, Portfolio Manager Deutsche Asset & Wealth Management