US ETF Model Portfolios

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1 Deutsche Bank Markets Research North America United States Synthetic Equity & Index Strategy US ETF Model Portfolios Date 22 November 2016 House View Portfolio - End of Year positioning House View Update as of Nov 18 th 2016 Readjusting our portfolio allocations by dropping our defensive positioning and embracing a more positive view towards risky assets following US elections. In particular, we favor higher allocation to equities, particularly the US, while maintaining some exposure to fixed income via Credit, but away from Rates. In addition, we have also moved completely away from Gold, and added some Inflation allocation. Sebastian Mercado, CFA Strategist Our HVP is up 20.5% since its launch on Oct 2, 2012, and 5.8% lower since the last rebalancing on Jun 30, In the meantime, the equity market (ACWI) and our multi-asset-class benchmark are 35.4% up and 5.3% up since the launch of our HVP, and 3.2% up and 0.2% down since the last rebal, respectively. Portfolio Updates and New Membership We changed our strategic asset allocation from 45% allotted to equities to 70%, from 35% to fixed income to 20%, and from 20% to 10% alternatives via FX. Within equities, we doubled our allocation to the US (25% to 50%), and maintained a 20% exposure to Non-US equities including EM as well. In the US, we reduced Utilities from 10% to 5%, and added 10% to each Banks and Biotech/Pharma, respectively. In fixed income, we exited Rates, maintained IG Credit exposure at 15%, and added 5% to Inflation. In alternatives we fully exited the 15% Gold position, and doubled the USD allocation to 10%. Figure 1: New House View Portfolio* Weight Position Asset Direction Type Class Exposure VTI 0.05% 25% Long Core Equity US Broad XLU 0.14% 5% Long Satellite Equity US Utilities KBWB 0.35% 10% Long Satellite Equity US Banks IBB 0.48% 10% Long Satellite Equity US Biotech/Pharma VXUS 0.13% 20% Long Core Equity Global ex US LQD 0.15% 15% Long Core Credit Inv. Grade TIP 0.20% 5% Long Satellite Inflation US TIPs UUP 0.80% 10% Long Core FX Long USD Source: Deutsche Bank. *Target Weights. See Figure 3 for old basket and change details. Distributed on: 22/11/ :09:09 GMT Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.MCI (P) 057/04/2016.

2 Figure 2: Table of Contents The House View Porfolio... 3 House View following US election Portfolio Commentary Performance analysis... 5 Summary of closed & changed portfolio positions... 7 Product commentary... 8 Portfolio constituent correlations ETF Standard Comparison Page 2

3 The House View Portfolio House View following US election 1 That the outcome of the US election was unexpected is an understatement. Few dared forecast a Trump victory, let alone a Republican sweep. Yet with Trump headed to the White House and the Republicans retaining control of both houses of Congress, the US has elected a unified government for the first time since Despite criticism of some of Trump s policies, they could provide a material boost for growth and, in return, for risk assets, if they are implemented well. He has pledged a large fiscal stimulus, ambitious tax cuts and reduced regulation. The fiscal plan would represent the first tangible shift away from the policy mix that has prevailed since the crisis -- very accommodative monetary policy compensating for tight fiscal policy -- and that many investors have been hoping for over the last year. There is a risk that these policies will not be fully implemented, especially given that Trump s fiscal plans could lead to a larger deficit than Congress will allow. This means that policy uncertainty will prevail for the time being. Moreover, not all of Trump s proposals may prove positive. The biggest threat to growth is a possible protectionist turn, which could depress global trade and even trigger trade wars. Markets have so far given the result of Trump's proposals the benefit of the doubt, embracing the potential boost to growth and inflation that could come from a shift in the policy mix. The extent to which this continues will depend on the policy signals from the next administration over the coming months. A Trump Presidency should be positive for the dollar and US equities and should allow for the continuation of yield curve steepening. Portfolio Commentary Following the recent results from the US elections and the potential impact of the policies, particularly on the fiscal side, on the economic outlook we have decided to readjust our portfolio allocations by dropping our defensive positioning and embracing a more positive view towards risky assets. In particular, we favor higher allocation to equities, particularly the US, while maintaining some exposure to fixed income, but away from rates. In addition, we have also moved completely away from gold, and added some Inflation allocation. 1 Taken from "The House View Special: US election a potential game changer" published on 11 Nov 2016 by Deutsche Bank Research Page 3

4 Figure 3: House View Portfolio Change Details Weight Position Asset Old New Direction Type Class Exposure VTI 0.05% 0% 25% Long Core Equity US Broad USMV 0.15% 15% 0% Long Core Equity US LC Min Vol XLU 0.14% 10% 5% Long Satellite Equity US Utilities KBWB 0.35% 0% 10% Long Satellite Equity US Banks IBB 0.48% 0% 10% Long Satellite Equity US Biotech/Pharma VXUS 0.13% 0% 20% Long Core Equity Global ex US EFAV 0.20% 20% 0% Long Core Equity DM Intl LQD 0.15% 15% 15% Long Core Credit Inv. Grade TIP 0.20% 0% 5% Long Satellite Inflation US TIPs IEF 0.15% 20% 0% Long Core Rates Intermediate UST IAU 0.25% 15% 0% Long Core Comdty Gold UUP 0.80% 5% 10% Long Core FX Long USD Source: Deutsche Bank, Bloomberg Finance LP. Highlighted fields are portfolio updates Red: wgt decrease. Green: wgt increase. Gray: ETF update More specifically, Equity exposure has been increased to 70% from 45%, Fixed Income allocation has decreased from 35% to 20%, and Alternatives have decreased from 20% to 10%. Within Equities we doubled the exposure to US equities from 25% to 50%, while we maintained the allocation to Non-US equities at 20%, but including some country diversified exposure to EM equities in the new portfolio. Within US equities, we have adopted a sector bias with a core total market allocation of 25% and satellite sector and industry tilts. Outside equities, we removed the 20% rates exposure from the portfolio, maintained a 15% Investment Grade credit exposure, and added a 5% allocation to Inflation. Furthermore, we exited the 15% Gold position completely, and increased the 5% US Dollar allocation to 10%. US Equity positions: diversify exposure+sector tilts 2 We switched the minimum volatility core for a total market diversified core in order to manifest our increasing appetite for risk. In addition, we also decreased the exposure to Utilities, and maintained a 5% exposure to express a positive view on the sector as a bond substitute alternative. At the same time, we added two 10% allocations to Banks and Biotech/Pharma which are expected to benefit from the new government policies. Non-US Equities: cheap access to diversified international exposure We adopted a diversified approach to international exposure by replacing our minimum volatility DM position for a market cap weighted allocation across multiple countries and regions in the DM and EM space. Fixed Income: avoid rates We have exited our full rates position on the back of imminent rate hikes and a more likely path for future hikes. At the same time, we have maintained our 15% Credit exposure to the IG segment on the back of potential support from a proposed repatriation tax holiday. We have also added a 5% allocation to Inflation on the back of upside pressure driven by growth expectations. Alternatives: exit gold, add to US Dollar With lower market volatility and two major volatility catalysts (Brexit and US elections) mostly digested and processed by the markets, we see lower safe- 2 More details on US equity sector strategy can be found in "US Equity Insights - Trump: the huge picture for stocks" published last Fri Nov 18, 2016 by David Bianco Page 4

5 haven demand for gold going forward and therefore don't see a purpose for it in the portfolio any longer. On the other hand, expected yield curve activity going forward supports a strong dollar theme and therefore we have doubled our portfolio exposure to the greenback to 10%. Figure 4: Asset Class Allocation Figure 5: Equity Allocation 80% 70% 60% 50% Previous Current 60% 50% 40% Previous Current 40% 30% 30% 20% 10% 20% 10% 0% Equity Fixed Income Alternatives 0% US Non-US Source: Deutsche Bank Source: Deutsche Bank Performance Analysis At a headline level, we compare the performance of our HVP against the performance of Global2 equities and of a multi-asset-class benchmark. The Global 3 equities benchmark is represented by ACWI which tracks the MSCI All Country World index, while the multi-asset-class benchmark represents a basket of Global equity (ACWI), US fixed income (BND), and commodity (DBC) exposures with the following weights: 50%, 30%, and 20%, respectively. Our HVP is up 20.5% since its Oct 2012 launch, while ACWI and the multi-assetclass benchmark have gained 35.4% and 5.3% during the same period, respectively. The multi asset class benchmark has been the least volatile with annualized volatility of 8.3%, compared to 10.7% for our HVP and 13.6% for ACWI, since inception. Figure 6: Portfolio performance since launch Normalized Level (100) House View Port. ACWI Bnchmk 90.0 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Source: Deutsche Bank, FactSet, Performance corresponds to Total Returns and it does not include transaction costs Since the last rebalancing date on Jun 30, 2016, the HVP lost 5.8% vs. a 0.2% loss for the benchmark. Defensive assets sold off strongly, particularly following the US election; risk assets, on the other hand, rebounded vigorously. In general, we saw weakness across most of our portfolio which was positioned to face a more volatile environment; DM International equities, Rates, and Gold were the main drags on the House View portfolio removing over 1% each; while the long 3 Since Nov 1, 2013 we have changed the equity benchmark from US Equities (S&P 500 SPY) to Global Equities (MSCI All Country World Index ACWI). The House View Portfolio is a global multi-asset-class portfolio; therefore a Global equity benchmark is more appropriate than a US-centric one. Page 5

6 USD position was the only one slightly contributing to the positive side since the last rebalancing. Figure 7: Performance by position Figure 8: Performance contribution by position Eq. US LC Min Vol (USMV) Eq. US Utilities (XLU) Eq. DM Intl Min Vol (EFAV) Rates Interm. (IEF) IG Credit (LQD) Gold (IAU) FX Long USD (UUP) Equity (ACWI) Comdty (DBC) Fixed Income (BND) Bnchmrk House View Port. Performance -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% Source: Deutsche Bank, FactSet. Total Return performance from Jun 30, 2016 to Nov 18, 2016 Eq. US LC Min Vol (USMV) Eq. US Utilities (XLU) Eq. DM Intl Min Vol (EFAV) Rates Interm. (IEF) IG Credit (LQD) Gold (IAU) FX Long USD (UUP) Equity (ACWI) Comdty (DBC) Fixed Income (BND) Performance Contribution -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Source: Deutsche Bank, FactSet. Total Return performance from Jun 30, 2016 to Nov 18, 2016 House View Port. Bnchmrk Page 6

7 Summary of closed & changed portfolio positions Figure 9: Details for closed & changed positions (most recent changes on top) Ticker Exposure Open Weight Close Weight Weight Change OPEN CLOSED Exit/Chg Performance USMV US LC Min Vol 15.0% 0.0% -15.0% 9-Feb Nov-16 Full 12.22% EFAV Equity - DM Intl Min Vol 20.0% 0.0% -20.0% 30-Jun Nov-16 Full -7.05% XLU US Utilities 10.0% 15.0% 5.0% 9-Feb Nov-16 Partial 1.82% IEF Rates - Intermediate UST 20.0% 0.0% -20.0% 9-Feb Nov-16 Full -3.22% IAU Cmdty - Gold 15.0% 0.0% -15.0% 30-Jun Nov-16 Full -8.86% UUP FX - Long USD 5.0% 10.0% 5.0% 9-Feb Nov-16 Increase 5.05% KBWB US Banks 5.0% 0.0% -5.0% 9-Feb Jun-16 Full 9.77% EFAV Equity - DM Intl Min Vol 25.0% 20.0% -5.0% 9-Feb Jun-16 Partial 8.77% IAU Cmdty - Gold 10.0% 15.0% 5.0% 9-Feb Jun-16 Increase 11.34% LQD Credit - Investment Grade 10.0% 15.0% 5.0% 7-Oct Jun-16 Increase 7.70% QQQ Equity - US Large Caps 15.0% 0.0% -15.0% 7-Oct-15 9-Feb-16 Full -8.54% XLU US Utilities 5.0% 10.0% 5.0% 7-Oct-15 9-Feb-16 Increase 8.26% DXJ Equity - Japan 15.0% 0.0% -15.0% 29-Jul-14 9-Feb-16 Full -3.04% DBEU Europe 25.0% 0.0% -25.0% 7-Oct-15 9-Feb-16 Full % EPI Equity - India 5.0% 0.0% -5.0% 5-Jan-15 9-Feb-16 Full % FXI Equity - China 5.0% 0.0% -5.0% 12-Jun-15 9-Feb-16 Full % IEF Rates - Intermediate UST 10.0% 20.0% 10.0% 7-Oct-15 9-Feb-16 Increase 3.35% UUP FX - Long USD 10.0% 5.0% -5.0% 6-Mar-13 9-Feb-16 Partial 10.85% QQQ Equity - US Large Caps 20.0% 15.0% -5.0% 12-Jun-15 7-Oct-15 Partial -2.41% KBWB US Banks 7.5% 0.0% -7.5% 12-Jun-15 7-Oct-15 Full -9.24% IBB US Biotech/Pharma 5.0% 0.0% -5.0% 12-Jun-15 7-Oct-15 Full % XLU US Utilities 2.5% 5.0% 2.5% 12-Jun-15 7-Oct-15 Increase 4.06% DBEU Europe 20.0% 25.0% 5.0% 12-Jun-15 7-Oct-15 Increase -5.45% HYG Credit - High Yield 10.0% 0.0% -10.0% 5-Jan-15 7-Oct-15 Full -0.64% QQQ Equity - US Large Caps 25.0% 20.0% -5.0% 5-Jan Jun-15 Partial 7.46% BBH US Biotech 5.0% 0.0% -5.0% 29-Jul Jun-15 Full 35.54% XRT US Retail 5.0% 0.0% -5.0% 5-Jan Jun-15 Full 5.97% XLU US Utilities 5.0% 2.5% -2.5% 5-Jan Jun-15 Partial -8.50% HEDJ Eurozone 10.0% 0.0% -10.0% 5-Jan Jun-15 Full 17.37% ASHR China 5.0% 0.0% -5.0% 5-Jan Jun-15 Full 47.28% KBWB US Banks 5.0% 7.5% 2.5% 29-Jul Jun-15 Increase 13.10% QQQ Equity - US Large Caps 15.0% 25.0% 10.0% 29-Jul-14 5-Jan-15 Increase 5.64% EUFN Equity - European Fin. 5.0% 0.0% -5.0% 31-Oct-13 5-Jan-15 Full -9.24% EWG Equity - Germany 5.0% 0.0% -5.0% 29-Jul-14 5-Jan-15 Full % EWP Equity - Spain 5.0% 0.0% -5.0% 29-Jul-14 5-Jan-15 Full % EZU Equity - Eurozone 5.0% 0.0% -5.0% 29-Jul-14 5-Jan-15 Full % FXI Equity - China 7.5% 0.0% -7.5% 29-Jul-14 5-Jan-15 Full 2.70% GMF Equity - EM Asia Pacific 5.0% 0.0% -5.0% 29-Jul-14 5-Jan-15 Full -4.19% EPI Equity - India 7.5% 5.0% -2.5% 29-Jul-14 5-Jan-15 Partial -0.60% PCY Credit - EM Debt 5.0% 0.0% -5.0% 29-Jul-14 5-Jan-15 Full -2.54% VTIP Inflation - Short Term TIPs 5.0% 0.0% -5.0% 29-Jul-14 5-Jan-15 Full -2.69% QDF Equity - US Divs. 15.0% 0.0% -15.0% 14-Feb Jul-14 Full 8.66% QQQ Equity - US Large Caps 20.0% 15.0% -5.0% 14-Feb Jul-14 Partial 8.55% EWG Equity - Germany 10.0% 5.0% -5.0% 14-Feb Jul-14 Partial -3.15% EZU Equity - Eurozone 15.0% 5.0% -10.0% 14-Feb Jul-14 Full 0.18% Source: Deutsche Bank, FactSet. Performance corresponds to Total Returns Page 7

8 Figure 10: Details for closed & changed positions (cont) Ticker Exposure Open Close Weight Weight Weight Change OPEN CLOSED Exit/Chg Performance JNK Credit - HY Debt 5.0% 0.0% -5.0% 14-Feb Jul-14 Full 2.78% BKLN Credit - Senior Loans 5.0% 0.0% -5.0% 14-Feb Jul-14 Full 1.25% DXJ Equity - Japan 10.0% 15.0% 5.0% 14-Feb Jul-14 Increase 8.64% FXI Equity - China 5.0% 7.5% 2.5% 14-Feb Jul-14 Increase 16.13% JNK Credit - HY Debt 10.0% 5.0% -5.0% 3-May Feb-14 Partial 2.64% MCHI Equity - China 7.5% 0.0% -7.5% 28-Nov Feb-14 Full 3.94% IVV Equity - US Large Caps 20.0% 0.0% -20.0% 7-Feb Feb-14 Full 24.40% VGT Equity - US Technology 5.0% 0.0% -5.0% 3-May Feb-14 Full 23.25% BKLN Credit - Senior Loans 10.0% 5.0% -5.0% 7-Feb Feb-14 Partial 4.03% VIG Equity - US Divs. 20.0% 0.0% -20.0% 3-May Feb-14 Full 10.68% DXJ Equity - Japan 7.5% 10.0% 2.5% 3-May Feb-14 Increase -0.32% XLF Equity - US Financials 5.0% 0.0% -5.0% 3-May Oct-13 Full 9.97% IVV Equity - US Large Caps 25.0% 15.0% -10.0% 7-Feb Aug-13 Partial 13.49% MCHI Equity - China 10.0% 7.5% -2.5% 28-Nov-12 3-May-13 Partial 3.00% SDY Equity - US Divs. 25.0% 0.0% -25.0% 7-Feb-13 3-May-13 Full 9.71% HYS Credit - High Yield 10.0% 0.0% -10.0% 7-Feb-13 3-May-13 Full 2.98% IVV Equity - US Large Caps 35.0% 25.0% -10.0% 7-Feb-13 3-May-13 Partial 7.33% IAU Cmdty - Gold 5.0% 0.0% -5.0% 1-Oct-12 6-Mar-13 Full % FXE FX - EURUSD 5.0% 0.0% -5.0% 1-Oct-12 6-Mar-13 Full 0.64% DVY Equity - US Divs. 20.0% 0.0% -20.0% 1-Oct-12 7-Feb-13 Full 5.74% USMV Equity - US Low Vol. 25.0% 0.0% -25.0% 1-Oct-12 7-Feb-13 Full 4.10% PCY Credit - EM Debt 10.0% 0.0% -10.0% 1-Oct-12 7-Feb-13 Full 0.40% JNK Credit - HY Debt 10.0% 0.0% -10.0% 1-Oct-12 7-Feb-13 Full 3.33% IAU Cmdty - Gold 15.0% 5.0% -10.0% 1-Oct-12 7-Feb-13 Partial -5.96% FXE FX - EURUSD 10.0% 5.0% -5.0% 1-Oct-12 7-Feb-13 Partial 3.81% DVY Equity - US Divs. 25.0% 20.0% -5.0% 1-Oct Nov-12 Partial -0.87% IAU Cmdty - Gold 20.0% 15.0% -5.0% 1-Oct Nov-12 Partial -3.24% Source: Deutsche Bank, FactSet. Performance corresponds to Total Returns Product Commentary US Broad: total market index We looked for a product that could offer broad exposure including all sectors, and all market capitalization segments at low price. In addition, we focused on products that could offer a good level of liquidity for trades of institutional size. We found three very good products that fit these requirements very well, and for the House View portfolio, in particular we have leaned towards the most liquid one (VTI) among the three of them given the investment horizon of our core positions (~1+ year). Figure 11: US Broad equity candidates Ticker Index 5-Day $ 5-Day bps VTI CRSP US Total Market Index 0.05% 3,610 67, ,371 5, SCHB DJ U.S. Broad Stock Market Index 0.03% 2,000 7, ,838 1, ITOT S&P Total Market Index 0.03% 3,703 5, Source: Deutsche Bank, Bloomberg Finance LP. Data as of Nov 22, TER # of Hldngs AUM $M 20D ADV $M Implied Liq. $M Total Liq. $ Avg. Bid/Ask Spreads Page 8

9 US Equity industry tilts Our analysis for Banks and Health Care positions focused on Large Caps; and in the case of Health Care, in the Biotech and Pharmaceutical industries. For Banks, we decided to select KBWB which focuses on Large cap Banks and to some extent (~12%) also in Capital Markets, unlike other ETF alternatives which focus on less large cap-heavy or regional bank allocations. Meanwhile, for Health Care we decided to select IBB which focuses mostly in Biotech companies with a hint of Pharma exposure (~11%) excluding Mega Cap Pharmaceuticals. For additional details on candidates, readers may refer to our latest monthly report 4 where we reviewed the different ETF alternatives for Banks and Health Care implementation. Non-US Equity: Broad diversified exposure For international equity exposure we sought the most diversified exposure both in terms of markets and market capitalization. Therefore we focused on ETFs offering exposure to Large, Mid, and Small Cap companies among both developed and emerging markets. Our short list included two large and liquid products which offer exposure to the World equity market excluding the US. We ended up leaning towards the vehicle with the most abundant liquidity and trading efficiency (VXUS), which was not the cheapest, but still very low cost. Figure 12: Non-US Broad Equity candidates Ticker Index TER # of Hldngs Implied Liq. $M Total Liq. $ Avg. Bid/Ask Spreads 5-Day $ 5-Day bps VXUS FTSE Global All Cap ex US 0.13% 6,059 6, IXUS MSCI All Country World ex US Index 0.11% 3,364 3, Source: Deutsche Bank, Bloomberg Finance LP. Data as of Nov 22, 2016 AUM $M 20D ADV $M Inflation We selected TIP for implementing our Broad Inflation exposure. From the Broad Inflation alternatives in the ETF market with over $100m in assets (i.e. TIP, IPE, and SCHP), although at 0.20% it is not the cheapest one, TIP offers liquidity and trading efficiency second to none. Modified Duration for the TIP ETFs considered is around 8. Figure 13: Inflation candidates Ticker Index Avg. Bid/Ask Spreads 5-Day $ 5-Day bps TIP Bloomberg Barclays Capital US Treasury Inflation Notes Index 0.20% 20, SCHP Bloomberg Barclays Capital US Treasury Inflation Notes Index 0.07% 1, IPE Bloomberg Barclays US Gov Inflation linked Bond Index 0.15% Source: Deutsche Bank, Bloomberg Finance LP. Data as of Nov 22, 2016 TER AUM $M 20D ADV $M 4 See "US ETF Compass: October recorded $18bn inflows for ETPs despite weak markets" published on 10 Nov Page 9

10 Portfolio constituents correlations Pair-wise correlations within the HVP are relatively low and are key in improving the portfolio s risk adjusted performance. They expand the investment opportunity set by providing actual risk/return profile differentiation. Figure 14: Correlations for HVP constituents and main asset classes 1 Year Daily Correl. Portfolio Constituents Equity Real Estate Fixed Income Comdty Crncy VTI XLU KBWB IBB VXUS LQD TIP UUP SPY VNQ BND DBC UUP VTI XLU KBWB IBB VXUS LQD TIP UUP Source: Deutsche Bank, FactSet. As of 18 Nov 2016 Page 10

11 ETF Standard Comparison This section presents standard performance and fee & expense information about all the ETFs mentioned in the present report. Figure 15: Average Annual Total Returns # Average Annual Total Returns Data as of Sep 30, 2016 Ticker Name Inception Date One Year Five Year Ten Year Since Inception Prospectus available at ETFs BBH VanEck Vectors Biotech ETF 12/21/ % n.a. n.a % BKLN PowerShares Senior Loan Portfolio 3/3/ % 4.60% n.a. 3.06% DVY ishares Select Dividend ETF 11/7/ % 16.03% 6.41% us.ishares.com DXJ WisdomTree Japan Hedged Equity Fund 6/16/ % 10.10% 1.02% EPI WisdomTree India Earnings Fund 2/22/ % 3.87% n.a % EUFN ishares MSCI Europe Financials ETF 2/3/ % 5.38% n.a % us.ishares.com EWG ishares MSCI Germany ETF 3/18/ % 9.57% 3.48% us.ishares.com EWP ishares MSCI Spain Capped ETF 3/18/ % 1.05% -0.94% us.ishares.com EZU ishares MSCI Eurozone ETF 7/31/ % 7.49% 0.15% us.ishares.com FXI ishares China Large-Cap ETF 10/8/ % 5.84% 5.51% us.ishares.com GMF SPDR S&P Emerging Asia Pacific ETF 3/23/ % 6.94% n.a. 5.43% HYS PIMCO 0-5 Year High Yield Corporate Bond Index 6/17/ % 6.44% n.a. 5.09% IVV ishares Core S&P 500 ETF 5/19/ % 16.30% 7.18% us.ishares.com JNK SPDR Barclays High Yield Bond ETF 12/4/ % 6.71% n.a. 5.65% KBWB PowerShares KBW Bank Portfolio 11/1/ % n.a. n.a % MCHI ishares MSCI China ETF 3/31/ % 7.66% n.a. 1.06% us.ishares.com PCY PowerShares Emerging Markets Sovereign Debt 10/11/ % 8.12% n.a. 7.78% QDF FlexShares Quality Dividend Index Fund 12/19/ % n.a. n.a % QQQ PowerShares QQQ 3/10/ % 19.18% 12.28% SDY SPDR S&P Dividend ETF 11/15/ % 16.49% 8.06% VTIP Vanguard Short-Term Inflation-Protected Securities 10/16/ % n.a. n.a. 0.14% USMV ishares Edge MSCI Min Vol USA ETF 10/20/ % n.a. n.a % us.ishares.com VGT Vanguard Information Technology ETF 1/30/ % 17.77% 10.30% VIG Vanguard Dividend Appreciation ETF 4/27/ % 13.95% 7.29% XLF Financial Select Sector SPDR Fund 12/22/ % 17.17% -1.66% UUP PowerShares DB US Dollar Index Bullish Fund 2/20/ % 2.08% n.a % XRT SPDR S&P Retail ETF 6/22/ % 14.84% 9.55% XLU Utilities Select Sector SPDR Fund 12/22/ % 11.91% 7.68% HEDJ WisdomTree Europe Hedged Equity Fund 12/31/ % 11.13% n.a. 6.49% HYG ishares iboxx $ High Yield Corporate Bond ETF 4/11/ % 7.10% n.a. 5.56% us.ishares.com ASHR Deutsche X-trackers Harvest CSI 300 China A- 11/6/ % n.a. n.a. 9.42% etfus.deutscheawm.com DBEU Deutsche X-trackers MSCI Europe Hedged Equity 10/1/ % n.a. n.a. 5.44% etfus.deutscheawm.com IBB ishares Nasdaq Biotechnology ETF 2/9/ % 25.62% 14.86% us.ishares.com LQD ishares iboxx $ Investment Grade Corporate Bond 7/26/ % 5.72% 6.03% us.ishares.com IEF ishares 7-10 Year Treasury Bond ETF 7/26/ % 3.21% 5.97% us.ishares.com EFAV ishares Edge MSCI Min Vol EAFE ETF 10/20/ % n.a. n.a. 9.03% us.ishares.com VTI Vanguard Total Stock Market ETF 5/31/ % 16.30% 7.29% us.ishares.com TIP ishares TIPS Bond ETF 12/5/ % 1.79% 4.34% us.ishares.com Indices* SPTR S&P United States 500 Total Return 15.43% 16.37% 7.24% NDUEACWF MSCI AC World Daily TR Net USD 11.96% 10.63% 4.34% LBUSTRUU Barclays US Aggregate TR Value Un-hedged USD 5.19% 3.08% 4.79% Notes: Since Inception performance data is provided for those ETFs which do not have full 10 Year performance history. Performance calculations are based on total returns (i.e. reinvested dividends). Price utilized corresponds to ETF NAV. *Index returns do not reflect deductions for fees, expenses, or taxes. Source: Deutsche Bank, Bloomberg Finance LP. Additional information can be found in the prospectus for each fund at their respective Issuer s ETF websites Page 11

12 #Performance data quoted represents past performance. Past performance is not a guarantee of future results and current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and shares when sold or redeemed, may be worth more or less than their original cost. Figure 16: Fees and Expenses Data as of most current prospectus Ticker Name Prospectus Date Management Fee Distribution and Service (12b-1) Fees Other Expenses Acquired Fund Fees and Expenses Total Annual Fund Operating Expenses Fee Waiver Total Annual Fund Operating Expenses After Fee Waiver ETFs BBH VanEck Vectors Biotech ETF 2/1/ % None 0.05% None 0.40% 0.05% 0.35% BKLN PowerShares Senior Loan Portfolio 2/29/ % None None None 0.65% None 0.65% DVY ishares Select Dividend ETF 9/1/ % None None None 0.39% None 0.39% DXJ WisdomTree Japan Hedged Equity Fund 8/1/ % None None None 0.48% None 0.48% EPI WisdomTree India Earnings Fund 8/1/ % None 0.01% None 0.84% None 0.84% EUFN ishares MSCI Europe Financials ETF 12/1/ % None None None 0.48% None 0.48% EWG ishares MSCI Germany ETF 12/31/ % None None None 0.48% None 0.48% EWP ishares MSCI Spain Capped ETF 12/31/ % None None None 0.48% None 0.48% EZU ishares MSCI Eurozone ETF 12/31/ % None None None 0.48% None 0.48% FXI ishares China Large-Cap ETF 12/1/ % None None None 0.73% None 0.73% GMF SPDR S&P Emerging Asia Pacific ETF 1/31/ % None None None 0.49% None 0.49% HYS PIMCO 0-5 Year High Yield Corporate Bond Index ETF 10/31/ % None None None 0.55% None 0.55% IVV ishares Core S&P 500 ETF 8/1/ % None None None 0.04% None 0.04% JNK SPDR Bloomberg Barclays High Yield Bond ETF 10/31/ % None None None 0.40% None 0.40% KBWB PowerShares KBW Bank Portfolio 2/29/ % None None None 0.35% None 0.35% MCHI ishares MSCI China ETF 12/31/ % None None None 0.63% None 0.63% PCY PowerShares Emerging Markets Sovereign Debt Portfolio 2/29/ % None None None 0.50% None 0.50% QDF FlexShares Quality Dividend Index Fund 3/1/ % None 0.01% None 0.38% 0.01% 0.37% QQQ PowerShares QQQ 1/31/ % None 0.14% None 0.20% None 0.20% SDY SPDR S&P Dividend ETF 10/31/ % None None None 0.35% None 0.35% VTIP Vanguard Short-Term Inflation-Protected Securities ETF 1/27/ % None 0.02% None 0.08% None 0.08% USMV ishares Edge MSCI Min Vol USA ETF 12/1/ % None None None 0.15% None 0.15% VGT Vanguard Information Technology ETF 12/22/ % None 0.02% None 0.10% None 0.10% VIG Vanguard Dividend Appreciation ETF 5/25/ % None 0.01% None 0.09% None 0.09% XLF Financial Select Sector SPDR Fund 9/2/ % 0.04% 0.06% None 0.14% None 0.14% UUP PowerShares DB US Dollar Index Bullish Fund 6/20/ % 0.05% None None 0.80% None 0.80% XRT SPDR S&P Retail ETF 10/31/ % None None None 0.35% None 0.35% XLU Utilities Select Sector SPDR Fund 9/2/ % 0.04% 0.06% None 0.14% None 0.14% HEDJ WisdomTree Europe Hedged Equity Fund 8/1/ % None None None 0.58% None 0.58% HYG ishares iboxx $ High Yield Corporate Bond ETF 7/1/ % None None None 0.50% None 0.50% ASHR Deutsche X-trackers Harvest CSI 300 China A-Shares ETF 9/30/ % None None None 0.65% None 0.65% DBEU Deutsche X-trackers MSCI Europe Hedged Equity ETF 9/30/ % None None None 0.45% None 0.45% IBB ishares Nasdaq Biotechnology ETF 8/1/ % None None None 0.47% None 0.47% LQD ishares iboxx $ Investment Grade Corporate Bond ETF 7/1/ % None None None 0.15% None 0.15% IEF ishares 7-10 Year Treasury Bond ETF 7/1/ % None None None 0.15% None 0.15% EFAV ishares Edge MSCI Min Vol EAFE ETF 12/1/ % None None None 0.33% 0.13% 0.20% VTI Vanguard Total Stock Market ETF 8/1/ % None None None 0.03% None 0.05% TIP ishares TIPS Bond ETF 3/1/ % None None None 0.20% None 0.20% Notes: You may also incur usual and customary brokerage commissions when buying or selling shares of the Funds, which are not reflected in the fees above. Fee waivers are temporary. Fund prospectus should be consulted for additional details. Source: Deutsche Bank, Bloomberg Finance LP Page 12

13 Appendix 1 Important Disclosures *Other information available upon request *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg, and other vendors. Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Sebastian Mercado Hypothetical Disclaimer Backtested, hypothetical or simulated performance results have inherent limitations. Unlike an actual performance record based on trading actual client portfolios, simulated results are achieved by means of the retroactive application of a backtested model itself designed with the benefit of hindsight. Taking into account historical events the backtesting of performance also differs from actual account performance because an actual investment strategy may be adjusted any time, for any reason, including a response to material, economic or market factors. The backtested performance includes hypothetical results that do not reflect the reinvestment of dividends and other earnings or the deduction of advisory fees, brokerage or other commissions, and any other expenses that a client would have paid or actually paid. No representation is made that any trading strategy or account will or is likely to achieve profits or losses similar to those shown. Alternative modeling techniques or assumptions might produce significantly different results and prove to be more appropriate. Past hypothetical backtest results are neither an indicator nor guarantee of future returns. Actual results will vary, perhaps materially, from the analysis. Equity rating key Buy: Based on a current 12- month view of total shareholder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ), we recommend that investors buy the stock. Sell: Based on a current 12-month view of total shareholder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Newly issued research recommendations and target prices supersede previously published research. Equity rating dispersion and banking relationships Regulatory Disclosures 1.Additional Information Information on ETFs is provided strictly for illustrative purposes and should not be deemed an offer to sell or a solicitation of an offer to buy shares of any fund that is described in this document. Consider carefully any fund's Page 13

14 investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the fund's prospectus. Prospectuses about db X-trackers funds and Powershares DB funds can be obtained by calling or by visiting Read prospectuses carefully before investing. Past performance is not necessarily indicative of future results. Investing involves risk, including possible loss of principal. To better understand the similarities and differences between investments, including investment objectives, risks, fees and expenses, it is important to read the products' prospectuses. Shares of ETFs may be sold throughout the day on an exchange through any brokerage account. However, shares may only be redeemed directly from an ETF by authorized participants, in very large creation/redemption units. Transactions in shares of ETFs will result in brokerage commissions and will generate tax consequences. ETFs are obliged to distribute portfolio gains to shareholders. Deutsche Bank may be an issuer, advisor, manager, distributor or administrator of, or provide other services to, an ETF included in this report, for which it receives compensation. db X-trackers and Powershares DB funds are distributed by ALPS Distributors, Inc. The opinions expressed are those of the authors and do not necessarily reflect the views of DB, ALPS or their affiliates. Aside from within this report, important conflict disclosures can also be found at under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. Page 14

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