Xtrackers Japan JPX-Nikkei 400 Equity ETF (JPN)

Transcription

1 Xtrackers Japan JPX-Nikkei 400 Equity ETF (JPN) Strategy deck

2 Risks Investing involves risk, including the possible loss of principal. Stocks may decline in value. Foreign investing involves greater and different risks than investing in U.S. companies, including currency fluctuations, less liquidity, less developed or less efficient trading markets, lack of comprehensive company information, political instability and differing auditing and legal standards. Funds investing in a single industry, country or in a limited geographic region generally are more volatile than more diversified funds. Investing in derivatives entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Performance of the fund may diverge from that of the underlying index due to operating expenses, transaction costs, cash flows, use of sampling strategies or operational inefficiencies. The Funds focus their investments in Japan, which can be impacted by the events and developments in Japan that can adversely affect performance. The fund is new and has limited operating history. An investment in any fund should be considered only as a supplement to a complete investment program for those investors willing to accept the risks associated with that fund. See the prospectus for details. 1

3 Definitions Tokyo Price Index (TOPIX) is a market-cap-weighted index measuring all large firms on the Tokyo Stock Exchange 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. The MSCI Japan Index tracks the performance of Japanese stocks. The DAX tracks the performance of the 30 major German companies trading on the Frankfurt Stock Exchange. Price-to-earnings ratio (P/E) ratio compares a company s current share price to its per-share earnings. Price-to-book (P/B) ratio compares a stock s market value with its book value. Dividend yield is the rate of income generated by a stock in the form of dividends. Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. The Nikkei 225 Stock Average (Nikkei) tracks the top 225 blue-chip companies on the Tokyo Stock Exchange. The JPX-Nikkei Index 400 is composed of 400 Japanese companies which meet the requirements of global investment standards including efficient use of capital and investor-focused management perspectives. The JPX-Nikkei 400 Currency Hedged Index measures the return of the JPX-Nikkei 400 Net Total Return Index achieved by fully hedging its currency risk for investors outside Japan. The Government Pension Investment Fund (GPIF) is the pension fund for all Japanese public-sector employees. Operating margin is a ratio used to measure a company s pricing strategy and operating efficiency. Profit margin measures how much out of every sales dollar a company keeps in earnings. It is calculated by dividing net profits by sales. Correlation is a measure of how closely two variables move together over time. A 1.0 equals perfect correlation. A 1.0 equals total negative correlation. The Tokyo Stock Exchange (TSE) is the largest stock exchange in Japan. 2

4 Agenda 01 About 02 The JPX-Nikkei 400 Net Total Return Index: a new benchmark for Japanese equities 03 Comparing to the broader market 04 Xtrackers Japan JPX-Nikkei 400 Equity ETFs 05 Appendix

5 01 About

6 AM Passive: Global powerhouse exceptional scale Global passive AUM $73.94 billion in AUM ETFs $11.90 billion in AUM 35 ETFs 9% 4% 3% $127 #3 ETF provider in Europe 1 26% 58% #6 ETF provider globally ETFs $85.84 billion in AUM globally Europe ETPs Passive mandates U.S. ETPs Systematic funds Certificate Source: and Morningstar as of 9/30/17, unless otherwise noted. (1) Bank, Bloomberg Finance LP, Reuters as of 6/12/17. Rankings in terms of assets under management. Not all AM products and services are offered in all jurisdictions and availability is subject to local regulatory restrictions and requirements. Subject to applicable laws and internal policies and procedures. 5

7 A world-class partner to our clients Strength based on a unique global perspective Among the TOP 15 Asset managers globally 1 Americas 30% of AUM Amsterdam Birmingham Dusseldorf Koln Brussels Frankfurt Luxembourg Paris Zurich Munich Geneva Vienna Milano Madrid A diverse global platform with more than 50 offices spanning 19countries 3 Europe 68% of AUM One of the world s leading investment organizations $840BILLION of invested assets globally Jersey Chicago City Boston San Francisco Atlanta New York Costa Mesa Baltimore Dallas Jacksonville Miami Mexico Dubai Mumbai Seoul Hong Kong Taipei Tokyo Asia-Pacific 2% of AUM Exchange-traded products (ETPs) 2 TOP currency-hedged U.S. exchange-traded fund (ETF) provider #6 ETP provider Globally Nearly 950 investment professionals provide fundamental research and diverse perspectives Nearly Singapore 100 years of U.S. asset management experience, going back to 1919 Source: as of 9/30/17, unless otherwise noted. Not all products and services are offered in all jurisdictions and availability is subject to local regulatory restrictions and requirements. 1. Source: Towers Watson report as of 10/31/17, results as of 12/31/ Xtrackers ranked as the #2 currency-hedged U.S. ETF provider by assets under management, source: Morningstar as of 9/30/17. Global ETP providers ranked by assets under management; source: Bank, Bloomberg and Reuters as of 6/12/ Source: as of 1/9/17. Melbourne Sydney 6

8 Xtrackers by AM expert specialty provider Xtrackers ETFs targets core portfolio allocations by providing unique access to individual markets, asset classes, and strategies. 1 extraordinary global intelligence We synthesize the perspectives of more than 900 economists, analysts and investment professionals around the world. With unique insight on emerging trends we aim to spot opportunities that others may miss. Research Unique global perspective Global reach/local presence exacting product design 2 Our ETFs seek to provide relevant investment solutions that answer client s unmet needs. Best new U.S. Fixed Income ETF 2016 (ETF.com-HYLB) Best new International/Global Fixed Income ETF 2016 (ETF.com-IFIX) United States platform growth since products products 35 products 40 products 35 products 35 products 30 5 products products Q Q Q Q Q Q Q (1) Most notably with our currency-hedged and China-focused product offerings. (2) Awards sources as follows: 2016 best new U.S. fixed income ETF, best International/Global Fixed Income ETF of the year - ETF.com awards as of 3/30/17; ETF of the year overall (flows) - Fund Action ETF awards as of 2/23/16; AM as of 09/29/17. Investment products: No bank guarantee I Not FDIC insured I May lose value 7

9 Xtrackers: Full product range Equity Currency-hedged international Ticker Gross/net expense (%) Xtrackers MSCI All World ex U.S Hedged Equity ETF DBAW 0.40/0.40 Xtrackers MSCI EAFE Hedged Equity ETF DBEF 0.35/0.35 Xtrackers MSCI EAFE Small Cap Hedged Equity ETF DBES 0.45/0.45 Xtrackers MSCI Europe Hedged Equity ETF DBEU 0.45/0.45 Xtrackers MSCI Asia Pacific ex Japan Hedged Equity ETF DBAP 0.60/0.60 Xtrackers MSCI Emerging Markets Hedged Equity ETF DBEM 0.65/0.65 Xtrackers MSCI Eurozone Hedged Equity ETF DBEZ 0.45/0.45 Xtrackers MSCI Japan Hedged Equity ETF DBJP 0.45/0.45 Xtrackers MSCI United Kingdom Hedged Equity ETF DBUK 0.45/0.45 Xtrackers MSCI Germany Hedged Equity ETF DBGR 0.45/0.45 Xtrackers MSCI South Korea Hedged Equity ETF DBKO 0.58/0.58 Xtrackers Eurozone Equity ETF EURZ 0.15/ Xtrackers MSCI Brazil Hedged Equity ETF DBBR 0.60/0.60 Xtrackers Germany Equity ETF GRMY 0.15/ Xtrackers MSCI Mexico Hedged Equity ETF DBMX 0.50/0.50 Xtrackers CSI 300 China A-Shares Hedged Equity ETF ASHX 1.75/ High-dividend yield Xtrackers MSCI All World ex. U.S. High Dividend Yield Hedged Equity ETF HDAW 0.45/0.45 Xtrackers MSCI EAFE High Dividend Yield Hedged Equity ETF HDEF 0.45/0.45 Xtrackers MSCI Emerging Markets High Dividend Yield Hedged Equity ETF HDEE 0.65/0.65 Xtrackers MSCI Eurozone High Dividend Yield Hedged Equity ETF HDEZ 0.45/0.45 Equity Developed markets Ticker Gross/net expense (%) Xtrackers Japan JPX-Nikkei 400 Equity ETF JPN 0.15/ Emerging markets Xtrackers MSCI All China Equity ETF CN 0.96/ Xtrackers Harvest CSI 300 China A-Shares ETF ASHR 0.65/0.65 Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF ASHS 0.65/0.65 Factor Xtrackers Russell 1000 Comprehensive Factor ETF DEUS 0.19/0.19 Xtrackers Russell 2000 Comprehensive Factor ETF DESC 0.30/0.30 Xtrackers FTSE Developed ex U.S. Comprehensive Factor ETF DEEF 0.35/0.35 Xtrackers FTSE Emerging Comprehensive Factor ETF DEMG 0.50/0.50 Fixed income Government Xtrackers Barclays International Treasury Bond ETF IGVT 0.25/0.25 Investment-grade corporate Xtrackers Investment Grade Bond Interest Rate Hedged ETF IGIH 0.25/0.25 Xtrackers Barclays International Corporate Bond Hedged ETF IFIX 0.30/0.30 High-yield corporate Xtrackers High Yield Corporate Bond Interest Rate Hedged ETF HYIH 0.35/0.35 Xtrackers USD High Yield Corporate Bond ETF HYLB 0.20/0.20 Emerging markets Xtrackers Emerging Markets Bond Interest Rate Hedged ETF EMIH 0.45/0.45 Municipal bonds Xtrackers Municipal Infrastructure Revenue Bond ETF RVNU 0.30/0.30 (1)For ASHX and CN, the Adviser has contractually agreed, until October 1,2018, to waive fees and/or reimburse the Fund s expenses to limit the Fund s current operating expenses (except for interest expense, taxes, brokerage expenses, distribution fees or expenses, litigation expenses and other extraordinary expenses) by an amount equal to the Acquired Fund Fees and Expenses attributable to the Fund s investments in the affiliated fund. 2) DBIT has become GRMY and DBSE has become EURZ.GRMY:Prior to 10/27/2017, this fund had a different investment strategy. Returns reflect the performance of the MSCI Italy 25/50 U.S. Dollar Hedged Index through 10/27/2015. After, returns reflect performance for the NASDAQ Germany Large Mid Cap Index, the fund s new underlying index.eurz:prior to 10/27/2017, this fund had a different investment strategy. Returns reflect the performance of the MSCI Southern Europe U.S. Dollar Hedged Index through 10/27/2017. After, returns reflect performance for the NASDAQ Eurozone Large Mid Cap Index, the fund s new underlying index. (3) Expense information reflects the fee as of the current prospectus supplement dated 10/27/17. 8

10 02 The JPX-Nikkei 400 Net Total Return Index: a new benchmark for Japanese equities

11 Opportunity within Japanese equities Investment rationale Positive Japanese equity growth potential Continued accommodative policies Increasing focus on corporate governance The Japanese economy is forecasted to grow at 1.5% in , supporting a positive outlook on equity markets. From a P/B perspective, Japan is trading at a discount to its five year average against the US. The Bank of Japan (BoJ) has retained its accommodative monetary policy stance, and continues to target a 0% yield in the 10 year Japanese Government Bonds 2. All things equal, this ought to be positive for riskier assets. The JPX-Nikkei 400 Net Total Return Index is designed to contribute to improved capital efficiency and corporate value as well as stimulate the qualitative improvement and revitalization of the Japanese stock market. 1 AM CIO as of October, Bank of Japan as of October 23,

12 Potential opportunity within JPX-Nikkei 400 New benchmark The JPX-Nikkei 400 Net Total Return Index has been designed by stock exchanges Japan Exchange Group and Tokyo Stock Exchange (JPX Group), and, index provider Nikkei, to serve as new investment benchmark for domestic and international investors GPIF allocation change The Government Pension Investment Fund (GPIF) changed its asset allocation targets in 2014 to include a higher proportion of domestic equity, using the JPX-Nikkei 400 Net Total Return Index as their implementation benchmark exacting design The design philosophy and constituent selection criteria of the JPX-Nikkei 400 Net Total Return Index make it distinct from other established Japanese indices, taking into account factors such as trading volume, return on equity (ROE), operating profit and market value First to market JPN is the first U.S. listed ETF tracking the JPX-Nikkei 400 Net Total Return Index, which is positioned to potentially become the newest benchmark of Japanese equities Source: AM as of September

13 $ millions Growth opportunity potential, historically attractive flows picture Cash flows into non-us based Nikkei 400 ETFs have grown exponentially since the beginning of ,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Jan-14 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun-16 Nov-16 Apr-17 Sep-17 Nikkei Index 400 ETFs - daily cumulative flows Source: Bank, ETF Research, as of 9/30/17. 12

14 03 Comparing to the broader market

15 Return on equity (%) Return on equity (%) Focus: return on equity (ROE) The rationale for capital efficiency & profitability metrics in a benchmark index Historically, Japanese companies have underperformed their international peers with regards to capital efficiency metrics (such as ROE) Investments in Japanese companies may have seemed relatively less attractive compared to other regions JPX-Nikkei 400 Using these efficiency metrics for the index s selection process may put pressure on Japanese firms with lower ROE scores to improve On an aggregate basis, the JPX-Nikkei 400 Net Total Return Index has had one of the highest ROE figures of the established Japanese benchmark indices Japanese equities have historically shown lower ROE Since launch, the JPX-Nikkei 400 has had one of the highest ROE than other key Japanese benchmark indexes Feb-02 Apr-04 Jul-06 Oct-08 Jan-11 Mar-13 Jun-15 Sep-17 Japanese equities U.S. equities German equities Jan-14 Jul-14 Jan-15 Aug-15 Feb-16 Aug-16 Mar-17 Sep-17 JPX-Nikkei 400 MSCI Japan Nikkei 225 TOPIX Source: Bloomberg, left chart 2/1/02 9/30/17, right chart 1/6/14 9/30/17. Past performance does not guarantee future results. One cannot invest directly in an index. Japanese equities represented by TOPIX, U.S. equities by S&P 500, German equities by DAX. See slide 2 for definitions. 14

16 Comparing Japanese equity benchmarks Analytics of Japanese benchmark indices JPX-Nikkei 400 Net Total Return Index MSCI Japan Index TOPIX Nikkei 225 Index Price/Earnings Price/book Dividend yield 2.0% 2.0% 2.0% 1.8% Operating Margin 8.7% 8.3% 7.7% 8.5% Profit Margin 6.3% 5.8% 5.5% 6.0% Return on assets 1.6% 1.3% 1.4% 3.2% Return on equity 10.2% 9.1% 9.0% 10.5% Comparison of top 10 constituents of Japanese benchmark indices JPX-Nikkei 400 Net Total Return Index MSCI Japan Index TOPIX Nikkei 225 Index Toyota Motor Corp 1.66% Toyota Motor 4.70% Toyota Motor 3.35% Fast Retailing 6.13% Honda Motor Corp 1.58% Mitsubishi UFJ Financial 2.36% Mitsubishi UFJ Financial 2.22% Softbank 5.04% Keyence Softbank 1.49% Softbank 2.01% Nippon Telegraph & Telephone 1.68% FANUC 4.21% 1.45% Keyence Corp 1.56% Softbank 1.66% KDDI 3.29% KDDI Sumitomo Mitsui financial 1.45% Sumitomo Mitsui Financial 1.56% Sumitomo Mitsui Financial 1.40% Tokyo Electron 3.19% 1.44% Honda Motor 1.54% Honda Motor 1.23% Kyocera 2.58% Sony Corp 1.42% KDDI 1.44% Sony Corp 1.21% Daikin 2.11% NTT 1.41% Sony Corp 1.42% KDDI Corp 1.17% Shin-Etsu Chemical 1.86% Mizuho Financial Group 1.40% Mizuho Financial 1.27% Keyence Corp 1.11% Nitto Denko 1.73% Mitsubishi UFJ Financial 1.40% Nintendo 1.26% Mizuho Financial 1.08% Terumo 1.64% Total 14.71% 19.12% 16.11% 31.78% Source: Bloomberg as of 9/30/17 unless otherwise noted. Past performance does not guarantee future results. One cannot invest directly in an index. 15

17 Performance analysis With high correlations to other benchmark indexes, the JPX-Nikkei 400 Net Total Return Index represents the broad Japanese economy Due to the thoughtful stock selection process, however, performance may differ from other benchmark index performances Representing the broad Japanese economy with benchmark performance Strong performance given its differing sector weights and precise methodology JPX-Nikkei 400 Index MSCI Japan Index Nikkei 225 Index TOPIX Index 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% % -1.0% -2.0% JPX-Nikkei 400 MSCI Japan Nikkei 225 TOPIX 85 Jan-14 Jun-14 Dec-14 May-15 Nov-15 Apr-16 Oct-16 Mar-17 Sep % Jan-14 Jun-14 Dec-14 May-15 Nov-15 Apr-16 Oct-16 Mar-17 Sep-17 Source: Bloomberg 1/6/14 9/30/17. Past performance is no indication for future returns. Index returns do not include dividend distributions and do not reflect fees or expenses. It is not possible to invest directly in an index. 16

18 04 Xtrackers Japan JPX-Nikkei 400 Equity ETFs

19 JPN Xtrackers Japan JPX-Nikkei 400 Equity ETF The selection process screens for Trading volume 3-year average return on equity (ROE) 3-year cumulative operating profit Market value Qualitative factors, such as outside directors and International Finance Reporting Standards (IFRS) adoption Final index constituents are weighted by their free-float adjusted market capitalization and capped at 1.5%, reviewed annually ETF details Fund name Xtrackers Japan JPX-Nikkei 400 Equity ETF Index JPX-Nikkei 400 Net Total Return Index Ticker JPN Expense ratio % Listing date 6/24/15 Distributions Semi-annually 1 Expense ratio as of 9/30/17. Sector allocation Top 10 holdings Sector Weight Industrials Consumer Discretionary Financials Information Technology Consumer Staples Materials Health Care Telecommunication Services Real Estate Utilities Other Energy Toyota Motor Corp Consumer discretionary 1.61% Keyence Corp Industrials 1.56% Honda Motor Co Ltd Consumer discretionary 1.55% KDDI Corp Telecommunication services 1.43% Sumitomo Mitsui Financial Financials 1.41% SoftBank Group Telecommunication services 1.41% Sony Corp Technology 1.40% Nippon Telegraph & Telephone Telecommunication services 1.39% Mizuho Financial Financials 1.38% Mitsubishi UFJ Financial Financials 1.37% Source: Bloomberg LP as of 9/30/17. Holdings subject to change.(1) Expense information reflects the fee as of the current prospectus supplement dated 10/27/17. JPN seeks investment results that correspond generally to the performance, before fees and expenses, of the JPX-Nikkei 400 Net Total Return Index 18

20 05 Appendix

21 Strategic beta exposure to the Japanese market Index screening & weighting process 1. Screening a. Screening by Eligibility Criteria Issues are excluded if they have: Been listed for under 3 years Liabilities in excess of assets during any of the past 3 fiscal years Operating deficit in all of the past 3 fiscal years Overall deficit in all of the past 3 fiscal years Been designated for delisting b. Screening by market liquidity indicator The top 1000 issues will be selected in consideration of: Trading value during the most recent 3 years Market capitalization on the selection base date 2. Scoring based on Quantitative Indicators The 1,000 issues selected will be scored and ranked in accordance with the following criteria: 3-year average ROE: 40% 3-year cumulative operating profit: 40% Market capitalization on the base date for selection: 20% Tokyo Stock Exchange (TSE) Universe Listing / market Liquidity Screening Top 1000 securities Quantitative Screening Qualitative Screening Top 400 securities 3. Scoring based on Qualitative Factors Following the quantitative scoring, issues will be further scored based on: Appointments of independent outside directors (at least 2) Adoption or scheduled adoption of IFRS (pure IFRS) Disclosure of earnings information in English 4. Determination of Constituents Following the scoring, the 400 highest ranking issues will be selected for inclusion in the index. Constituent Review A constituent review is conducted on the last business day of August each year with the last business day of June as the base date. Index Calculation Method Free-float adjusted market capitalization-weighted (with 1.5% cap) Start of Calculation & Base Date The index is being calculated in real-time since Jan 06, 2014 with a base date Aug 30, 2013 Source: Japan Exchange Group, Tokyo Stock Exchange and Nikkei. 20

22 Important information Nothing contained herein is fiduciary or impartial investment advice that is individualized or directed to any plan, plan participant, or IRA owner regarding the advisability of any investment transaction, including any IRA distribution or rollover. 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 downloading a prospectus at Read the prospectus carefully before investing. Xtrackers ETFs ( ETFs ) are managed by DBX Advisors LLC (the Adviser ) and distributed by ALPS Distributors, Inc. ( ALPS ). The Adviser is a subsidiary of Bank AG, and is not affiliated with ALPS. On 10/2/17 X-trackers ETFs changed its name to Xtrackers ETFs. A complete list of the new names is available at JPX-Nikkei Index 400 is servicemark of Nikkei Inc. and the Tokyo Stock Exchange, Inc. (the Index Vendor ) and has been licensed for use by Bank AG. The fund is not sponsored, endorsed, issued, sold or promoted by the Index Vendor nor does the Index Vendor make any representation regarding the advisability of investing in the fund. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report and are subject to change. Investment products: No bank guarantee Not FDIC insured May lose value Shares are not individually redeemable, and owners of Shares may acquire those Shares from the Fund, or tender such Shares for redemption to the Fund, in Creation Units only. represents the asset management activities conducted by Bank AG or any of its subsidiaries. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report and are subject to change. AM Distributors, Inc., 222 South Riverside Plaza Chicago, IL service@db.com Tel (800) Bank AG. All rights reserved. R (11/17) DBX2596 (3/18) 21