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Industry with an Identity Crisis Alpha is Becoming Lost in Translation!

Roland Rousseau Deutsche Bank Director Quantitative Investment Strategy and Portfolio Construction Research
October 2008

Industry with an Identity Crisis Industry Background (Europe)

What do Investors Really, Really Want?


Is Alpha what we really, really want?
Investors probably want a return that covers or exceeds their opportunity cost of not investing. -> They want an excess return (eg above inflation, benchmark, liabilities etc) -> They want a positive return after costs -> They want a return without excessive risk Excess Return

Value Value for Money for Money Acceptable Costs Tolerable Risk

Is Alpha Necessary and Sufficient to achieve your investment goals?

Source: Quantitative Investment Strategy - Deutsche Bank

Mommy, Where do Excess Returns Come from?

Return = risk free rate

Exposure x Equity factor Exposure x Bond factor Exposure x Currency factor Exposure x Commodity factor Exposure x Emerging Market factor Exposure x Value factor

uncorrelated excess skill from fund manager

10%

2%

+
+

7%

+
+

1%

Return = risk free rate


Source: Quantitative Investment Strategy - Deutsche Bank

(i x Fi)

-> Alpha is the residual excess-return, after ALL beta excess-returns have been accounted for -> Excess returns come primarily from excess risk, not alpha!

Two Paths to Excess Returns: one easy, one difficult


Excess Return

Risk-Based
Scalable significant cheap easy

Skill-Based
- uncorrelated - valuable BUT -

Like Biofuel?

BUT - beta is risky

expensive scarce/zero-sum Like crude oil? difficult to find not scalable


Source: Quantitative Investment Strategy - Deutsche Bank

Example: How can we beat the following benchmark without skill? 60% Equity, 30% Bonds,10% Cash?

Industry with an Identity Crisis Benchmarking Skill Alpha is like Happiness but what is Happiness?

Alpha is like Happiness, but what is Happiness?


Google: The Importance of Happiness
VOL I: WHAT IS HAPPINESS? Comparing happiness to other viable alternatives helps us understand the importance of happiness on an intuitive level. But knowing what happiness is, ... Psychology Today: Opening up to happiness Mistake in wiping out sources of displeasure; Causes of unhappiness; Importance of happiness to an individual. By: Mark Epstein ... Money Won't Buy You Happiness - Forbes.com "I think it's possible to way overestimate the importance of happiness," says Loewenstein. "Part of the meaning of life is to have highs and lows. ...

Google: The Importance of Alpha


Functional importance of alpha adrenoceptor-mediated, D600 ... Functional importance of alpha adrenoceptor-mediated, D600-insensitive Ca++ entry in rabbit aorta. RK Hester. Department of Medical Pharmacology ... Emerging importance of alpha-adrenergic coronary vasoconstriction ... (20) in this issue of the Journal provides additional evidence for the importance of alpha2-adrenergic coronary vasoconstriction and its genetic ... The Importance of {alpha}-Lactalbumin in Infant Nutrition -- Heine ... This Article. Right arrow, Full Text (PDF). Right arrow, Purchase Article. Right arrow, View Shopping Cart. Right arrow, Alert me when this article is cited ...

Example: The most important attribute of happiness is that it must be meaningful and significant! -> Is 2% alpha with a tracking error of 10% really meaningful? -> What about leverage?

New-Age Benchmarking will change our Industry!


Benchmarking is ten-years behind marketing
In 1912, William Stern proposed a universal intelligence test called IQ to measure objectively the intelligence of children.

IQ = 100 x

Mental age Chronological age

IQ = 100 x

13 year old 10 year old

= 130

Many criticisms of this arbitrary approach have been put forward over the years. More modern attempts by eg. Howard Gardner rely on a multi-factor approach:
Bodily-Kinesthetic, Interpersonal, Verbal-Linguistic, Logical-Mathematical, Naturalistic, Intrapersonal, Spatial, Musical

In the same way the IQ-ratio is not a sufficient measure of intelligence, we need better ways to measure alpha. The implications are profound for our industry (eg perf based fees, flow of assets etc)!! alpha Returnfund Returnmarket These definitions of alpha are not sufficient and misleading!

Lets Get Real!


Well-defined Benchmarks MUST reflect all the risks!
It is not appropriate to say that you have a positive alpha (net risk-adjusted return) simply because the return is greater than the risk-free rate, unless your portfolio is risk-free. Similarly, comparing the return to the S&P500 or any other benchmark is inappropriate unless your strategy responds only to the same return drivers that drive the S&P500 or the cited benchmark.
- Thomas Schneeweis, 1999 - Alpha, Alpha, Whos got the Alpha? Journal of Alternative Investments

These are all misspecified alpha Returnfund Returnmarket alpha Returnfund Returnrisk free alpha Returnfund beta (Returnmarket) BUT only in a CAPM framework. For multi-factor benchmarking we need a range of betas
Expected Return = Security Selection + Factor Timing + Risk Premia
E[ R] = i =1E[ wit ] + k =1 Cov[ kt , Fkt ] + k =1 E[ kt ]E[ Fkt ]
n K K

Alpha = (Returnfund Returnrisk free) Beta (Returnmarket Returnrisk free)

- Andrew Lo - MIT 2007

Expected Return = alpha + Trad premia + Alt premia + non-linear returns + noise

r = + i

trad

Fi

trad

+ k Fk
alt

alt

+ f ( Fi , Fk ) +

- Fung and Hsieh - LBS 2007

Is your Benchmark/Mandate Fair?


Definition of Fair: free from bias, dishonesty, or injustice Our Definition: a fair benchmark is one where there is an equal chance of outperforming vs underperforming

Is the S&P500 fair?

Typical Mandate:
- Beat S&P500 BUT - Tracking error = 5% - Bet-size limit = 10% - VaR = $2m - Etc

50%

50%
10%

70%

30%
10%

We should measure fairness on an ongoing basis as market conditions change but benchmarks/mandates dont!

The Death of the ALSI!


Why mkt-cap weighted indices will be phased out as benchmarks
35%

Constraints
% of value traded that will not impact price : 20% Maximum holding in any stock : 10% Minimum holding in any stock : 0% Upper Bet-size limit : maximum of 4% overweight in any stock Lower Bet-size limit : maximum of 3% underweight in any stock Company ownership : Portfolio to hold max of 5% of M-Cap Tracking Error not to exceed 6%

Return Distribution for 1st Quarter 2006

30% 25%

Likelihood

20% 15% 10% 5% 0%


-10% -5% 0% 5% 10% 15% 20% 25%

Returns

Distribution of returns Portfolio return

Benchmark return Median Return

Likelihood of outperforming the Benchmark Return 1Q06 2Q06 +11.5% -0.5% Likelihood 95.4% 18.5%
Likelihood

35%

Return Distribution for 2nd Quarter 2006


30% 25% 20% 15% 10% 5% 0% -10% -5% 0% 5% 10% 15% 20% 25%

Source: Quantitative Investment Strategy - Deutsche Bank

Returns

Do we really need benchmarks to measure skill?


Constraints for 100m fund
Traditional
FTSE 100 stock selection universe Minimum of 30 positions Minimum Liquidity eg. 30m in five days No single position to exceed 10m

Simulation

Bench

Port

Add Other:
- Long/Short (eg dollar neutral) - Leverage 2:1 - VAR 20m, - 20% commodities + 80% equities Port CPI

P C
Source: Quantitative Investment Strategy - Deutsche Bank

Dynamic markets require a dynamic benchmarking process, not rigid indices or static mandates The consequences of this will be profound It directly challenges prevalent concepts like TEs and IRs that rely on traditional market-cap index benchmarks?

Industry with an Identity Crisis Translation Fallacy


what we think alpha is or what we want alpha to be is moving away from what alpha really is.

How special/unique is alpha?


Base Case: what is alpha?


Benchmark Return less risk free rate

Alpha is the residual return once the benchmark/market exposure has been accounted for

Source: Deutsche Bank Quantitative Investment Strategy

Fund Return less riskf free rate

How special/unique is alpha?


Introducing a new risk-factor / risk-premium When a new risk factor is introduced, we effectively are adding a new, 3rd dimension If this risk factor goes up in price, it will shift our line upwards in parallel, creating an illusion of alpha when all it really is, is more risk.

Excess return
Benchmark Return less risk free rate

Fund Return less riskf free rate

Example: Can you outperform the S&P500 without skill?


eg emerging markets, value etc

Source: Deutsche Bank Quantitative Investment Strategy

Hypothetical Case Study US Endowment Fund


Well-defined Benchmarks MUST reflect all the risks!

180

160

25% pa
Portable Alpha Return

140

120

100

15% pa

80

60

MSCI The World (US$ Price Index)

40 2002 2003 2004 2005 2006 2007

Source: Deutsche Bank graphic

Comparing an investment strategy with multiple embedded risks to a benchmark with unrelated risks is meaningless.

Absolute Return Translation Enigma


All returns are relative, not absolute!
These are real names of actual funds: - Absolute Alpha Fund - European Alpha Absolute Fund - Currency Absolute Alpha - Diversified Absolute Alpha - UK Absolute Alpha Fund But Absolute Alpha is a problem: By definition, Alpha is a return above a benchmark and beta represents some type of benchmark? Therefore alpha (and beta) cannot be used in the same sentence as absolute return!

Is this just semantics or should we take this seriously?

Then, by definition, Alpha and beta are relative-return concepts?

Cash or CPI+x% are not benchmarks, merely return-targets. Benchmarks have to reflect the risks taken and then, by definition, all returns are relative, not absolute

Absolute Return Enigma


All returns are relative, not absolute!
What do others say?
Barton Waring, CFA Institute Hedge Fund Management Confernece, Feb 16 2006, Philadelphia All managers have to beat a benchmark! For the traditionalists out there who deny this fact, and who rail against the constraints of benchmark relative investing, GET OVER IT! Even Warren Buffet has to beat his cost of capital! The cost of capital is itself just a benchmark, a beta! Everyone is a relativereturn investor! Laurence Siegel, Financial Analysts Journal, Vol 62, March/April 2006 So, the term absolute-return investing has no meaning. It misleads the listener into thinking it has substance that it does not have, and in our opinion, the term simply should not be used. Standard & Poor press release, London 8 July 2008 S&P Fund Services warns investors against seeking absolute return magic bullet. S&P said no two absolute return funds were the same and that the risk of widespread misbuying among investors is high. Jeff Prestridge FSA eyes Absolute- and Target-return funds Telegraph UK, 09 Sept 2008 FSA spokesperson: We want to better understand how the funds are developed and what consideration is given at the product development phase to risk management and Treating Customers Fairly; to learn more about the marketing distribution of ARFs; and to assess the role of ARFs within the asset management industry as a whole" it added.

Industry with an Identity Crisis Is Excess Return, without skill, possible?

Portable Alpha Example


The Good, The Bad and the Ugly
Buy Market Neutral Equity Alpha (GEM HF) for $950k

S&P 500 Equity Benchmark

Long S&P 500 Futures ($50k)

Underperforming Long Only Manager ($1m)

Growth

Value

Equity Exposure plus pure alpha

Portable Beta is more scalable eg. Long Value + Short Growth

Portable Alpha Hurdles - Correlation to benchmark - Alpha is no guarantee - Alpha not scalable - Cost of derivatives - Tracking error of futures etc - Funding cost (if shorting is used) - Cost of pure alpha - Quality of alpha (beta pollution)
Source: Deutsche Bank Quantitative Investment Strategy Source: Quantitative Investment Strategy - Deutsche Bank

Portable Beta Example (FTSE)


Using FTSE Value vs Growth Risk Premia
250 250 Option 2: use beta risk premia as Option 2: use beta risk premia as no active excess return for portable beta excess return for portable beta

Requires skill

Long FTSE World Value Long FTSE World Value Short FTSE World Growth* Short FTSE World Growth*

200 200 Option 1: use HF alpha as Requires Option 1: use HF alpha as excess return for portable alpha active skill excess return for portable alpha 150 150 CS Tremont --Market Neutral CS Tremont Market Neutral + Hedge Fund Index + Hedge Fund Index

Risk premia are extremely valuable sources of excess return

100 100

Risk-free proxy: Risk-free proxy: US 10yr bond US 10yr bond FTSE World Index FTSE World Index

50 50 Source: Credit Suisse --Tremont, FTSE, Deutsche Bank calculations Source: Credit Suisse Tremont, FTSE, Deutsche Bank calculations **dollar neutral returns (without costs) --no active management dollar neutral returns (without costs) no active management + since inception 1999 (Investable index since inception 2003) + since inception 1999 (Investable index since inception 2003) 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005

Value stocks have higher returns than growth stocks Value stocks have higher returns than growth stocks in markets around the world. For 1975-1995, the difference in markets around the world. For 1975-1995, the difference between average returns on global portfolios for high and between average returns on global portfolios for high and low book-to-market stocks is 7.60% per year and value low book-to-market stocks is 7.60% per year and value stocks outperform growth stocks in 12 of 13 stocks outperform growth stocks in 12 of 13 major markets. Fama, French 1996 major markets. Fama, French 1996
2006 2006 2007 2007

The reliability of the value risk premium is high: The reliability of the value risk premium is high:

00 1999 1999

Source: FTSE, CS Tremont, Deutsche Bank calculations

Risk premia are more scalable and cheap than traditional alpha BUT they are risky and cyclical and therefore need to be actively managed

Industry with an Identity Crisis Industry Predictions, Applications and Conclusion

Individual Fund-Manager Portfolio Construction


SA fund managers mostly no alpha beta separation
No Alpha/Beta Separation
Boutique 1 Boutique 1 Boutique 2 Boutique 2

Alpha/Beta separation through proper performance attribution


4 1

Portable Alpha (No Benchmark)

Market Neutral Market Neutral Absolute Return Absolute Return

Portable Alpha Portable Alpha

House House View View

(eg S&P, FTSE) (eg S&P, FTSE)

ALSI ALSI

Boutique 4 Boutique 4

Boutique 3 Boutique 3

(eg. Liability Benchmark, (eg. Liability Benchmark, target return) target return)

Cash or CPI+x% Cash or CPI+x%

SA Fund Manager (house-view core)

US/Europe Fund Manager (static passive core)

SA/US/Europe Alternative Fund Manager

Pension Fund Portfolio Construction


SA pensions still have no alpha/beta separation core
No Alpha/Beta Separation
(eg. liability benchmark, strategic asset (eg. liability benchmark, strategic asset allocation, target return) allocation, target return)

Alpha/Beta Separation

Multiple Portable Alpha (high beta pollution)

Pension Fund -- Cash or CPI+x% Pension Fund Cash or CPI+x%

Manager A
Boutique 1 Boutique 1 Boutique 2 Boutique 2

Manager B
Boutique 1 Boutique 1 Boutique 2 Boutique 2

(eg. liability benchmark, strategic asset (eg. liability benchmark, strategic asset allocation, target return) allocation, target return)

Pension Fund -- Cash or CPI+x% Pension Fund Cash or CPI+x%

(eg. liability benchmark, strategic asset (eg. liability benchmark, strategic asset allocation, target return) allocation, target return)

Pension Fund - Cash or CPI+x% Pension Fund - Cash or CPI+x%

House View A

House View B

Core

Boutique 4 Boutique 4

Boutique 3 Boutique 3

Boutique 4 Boutique 4

Boutique 3 Boutique 3

Manager D
Boutique 1 Boutique 1 Boutique 2 Boutique 2

Manager C
Boutique 1 Boutique 1 Boutique 2 Boutique 2

Strategic Asset Allocation

Alpha 4 Alpha 4

Alpha 3 Alpha 3

Portable Portable Alpha 4 Alpha 4

Core

Alpha 1 Alpha 1

Alpha 2 Alpha 2

Portable Portable Alpha 1 Alpha 1

Portable Portable Alpha 2 Alpha 2 Portable Portable Alpha 3 Alpha 3

House View D

House View C

Boutique 4 Boutique 4

Boutique 3 Boutique 3

Boutique 4 Boutique 4

Boutique 3 Boutique 3

SA Pension Funds (active, house-view, core)

US/Europe Core-Satellite (strategic passive core)

SA/US/Europe Alternative Fund Manager

Future Portfolio Construction


The active core will focus on high quality risk premia
Portable alpha + Portable beta
Satellites Satellites
Portable Portable Alpha 1 Alpha 1 Portable Portable Alpha 4 Alpha 4 Portable Portable Alpha 2 Alpha 2 Portable Portable Alpha 3 Alpha 3

Benefits to Portable Beta Core


1. Core to produce scalable, cheaper excess returns! 2. Active Risk Budgeting and Risk Management 3. Asset classes and market-cap weighted indices to be replaced by

(eg. liability benchmark, strategic asset (eg. liability benchmark, strategic asset allocation, target return) allocation, target return)

Pension Fund -- Cash or CPI+x% Pension Fund Cash or CPI+x%

Portable beta Portable beta Core Core

1 1

2 2 3 3 4 4

-> fundamental indices and -> risk-premia indices -> primitive trading strategies

Conclusion: Better Portfolio Construction


Be careful what you call alpha! Alpha or active skill is only measurable if you follow these steps:
Step 1: Avoid ALSI-type market-cap indices and move to multi-factor attribution Step 2: Agree on a Multi-factor risk-model upfront in your mandate - PvR 2 factor (FINDI vs RESI) - F&F 3 factor (Market, Small-cap and Value) - DMS, Carhart momentum (4th factor) - Barra, APT, Wilshire etc. Step 3: Agree on Risk-Budget upfront in Mandate Step 4: Measure alpha as the residual return after accounting for ALL the above risk-factors.

Tips
- Beware Absolute Return funds that deliver alpha! - Cash and CPI+x% are not benchmarks! They are merely target-returns - All returns are relative to the risks that are taken. If you dont know what these risks are you cannot even measure alpha or skill.

Concluding Thought
Are we focusing on alpha too much?

Alpha is like jam and beta is like bread. When you retire, you will need the bread much more than the jam! Who is baking bread for you? Dont underestimate the important role of cheap, scalable beta risk-premia because that is what drives your excess returns the most. But they need to be actively managed.

Quotes: Some new industry thinking


Are we focusing on alpa too much?
Fund of Hedge Funds Hedge Funds
Hedge Funds generate excess returns by exploiting inefficiencies in imperfect markets (alpha) but primarily through beta risk premia. Dr Lars Jaeger Beckers, Curds, Weinberger (2007): Funds of hedge funds, on average, have managed to deliver consistent alpha with low volatility (i.e., high informationratio returns). Unfortunately,these alphas have come mixed with significant (simple) common factor risks. Even worse, these common factor risks have not been rewarded over the last 12 years. This is probably because the common factor exposures are incidental to the portfolio construction process, rather than actively managed.

Hedge Fund Risks


Hedge funds may be capturing risk premia with option characteristics as opposed to pure alpha. Typical investors would not desire this investment profile. Fred Dopfel, BGI, Journal of Portfolio Management (2005)

Portable alpha implementation issues


Princeton University, Murphy (2006): It seems that the whole concept of portable alpha contains many fundamental flaws. An institutional money manager should not rely on portable alpha product to receive alpha gains. If positive alphas really can be gained by investing in a hedge fund, then they should not try to be stripped away. Instead, the investors should have their hedge funds exposures in their larger diversified portfolios and manage the beta exposures caused by the hedge funds on an aggregate level.

Alternative beta
Existing hedge fund benchmarks are neither transparent, nor investable. However, alternative beta is liquid, scalable, transparent, cost-effective and easily accessible. Lakshmi Seshadri Alpha Beta Summit (2006)

How simple is Portable Alpha, really?

Conventional wisdom holds that we can improve portfolio efficiency by manufacturing a portable alpha from securities within a portfolio and extending it beyond its own asset class. But conventional Portable Beta wisdom is wrong. Mark Krtitzman 2008 While portable alpha strategies have become fashionable lately among institutions, our research suggests that for certain classes of hedge-fund strategies, portable beta The Myth of Absolute Return may be an even more important source of untapped So, the term absolute-return investing has no meaning. It misleads the listener expected returns and diversification. into thinking it has substance that it does not have, and in our opinion, Lo and Hasanhodzic 2006 the term simply should not be used. Waring and Siegel (2006)

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Appendix 1
Important Disclosures Additional Information Available upon Request For disclosures pertaining to recommendations or estimates made on a security mentioned in this report, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com.

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Special Disclosures Opinions and recommendations inherent in Macro Strategy research (i.e., Economics, Quantitative, Portfolio Strategy, Corporate Activity, Corporate Governance, Accounting) may conflict with those of our fundamental industry/company analysts. For more information about valuation methods used by our strategists and industry analysts, please visit our website or call your institutional sales representative. Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Roland Rousseau

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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 projected 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. Notes: 1. Published research ratings may occasionally fall outside these definitions, in which case additional disclosure will be included in published research and on our disclosure website (http://gm.db.com); 2. Newly issued research recommendations and target prices always supersede previously published research. 3. Ratings definitions prior to 27 January, 2007 were: Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period

Rating Dispersion and Banking Relationships

40 30 20 10 0

45%

45%

37% 17%

9% 17%
Sell

Buy Companies Covered

Hold

Cos. w / Banking Relationship

GEMs South African Universe

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Disclaimer
Important information:
This presentation contains a short summary description of the db x-trackers ETFs. A complete description of al sub-funds are in the respective and most recent prospectus of db x-trackers ETF. This brochure is not for distribution to, or for the attention of, US or Canadian persons. Without limitation, this brochure does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction. When making an investment decision, you should rely solely on the final documentation and any prospectus relating to the transaction and not this summary. Investment strategies involve numerous risks. Prospective investors or counterparties should understand and discuss with their professional tax, legal, accounting and other advisor(s) the effect of any transaction they may enter into. In no way should Deutsche Bank be deemed to be holding itself out as a fiduciary of the recipient hereof. Deutsche Bank may make a market or trade in instruments economically related to fund units or derivatives mentioned herein, and / or have investment banking or other relationships with issuers of the relevant securities. Deutsche Bank actively manages various risks, and on occasion may deal in securities mentioned in this document or in related instruments during the period between your receipt of this brochure and the award of any order. Whilst Deutsche Bank's trading or hedging activities are not intended to have any significant impact upon prices, our dealings could affect the prices you pay or receive for transactions in related securities or fund units. Deutsche Bank, and its current and future subsidiaries, parents, affiliates, divisions, officers, directors, agents and/or employees, disclaim all liability with respect to this document and the information herein, and are not liable for any errors or omissions, or for any damages howsoever arising from any reliance placed thereon, save as required by applicable laws and regulations.

Index Disclaimer
NEITHER STOXX LIMITED NOR DOW JONES & COMPANY, INC. HAS ANY RELATIONSHIP TO THE DB X-TRACKERS SICAV (THE COMPANY), OTHER THAN THE LICENSING OF THE DOW JONES EURO STOXX 50 INDEX AND THE RELATED TRADEMARKS FOR USE IN CONNECTION WITH THE DB X-TRACKERS DJ EURO STOXX 50 ETF (THE SUB-FUND). DAX is a registered trademark of Deutsche Brse AG. iNAV und XTF Exchange Traded Funds are registered trademarks of Deutsche Brse AG. The db x-trackers SMI ETF (the Sub-Fund) is not in any way sponsored, ceded or sold by the SWX Swiss Exchange and the SWX Swiss Exchange makes no warranty or representation whatsoever, express or implied, either as to the results to be obtained from the use of the SMI Index (the Index) and/or the level at which such Index stands at any particular time on any particular day. However, the SWX Swiss Exchange shall not be liable (whether through negligence or otherwise) to any person for any error in the Index and SWX Swiss Exchange shall not be under any obligation to disclose such errors. S&P and Standard & Poors are registered trademarks of The McGraw-Hill Companies, Inc. and MIB is a trademark of the Borsa Italiana S.p.A. These trademarks have been licensed for use by Deutsche Bank AG. The db x-trackers S&P/MIB INDEX ETF is not sponsored, endorsed, sold or promoted by S&P or Borsa Italiana and S&P and Borsa Italiana make no representation, warranty or condition regarding the advisability of investing in the db x-trackers S&P/MIB INDEX ETF. The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities or any index on which such funds or securities are based. The Prospectus for db xtrackers contains a more detailed description of the limited relationship MSCI has with Deutsche Bank, db x-trackers and any related funds. A full description of the terms and conditions of all sub-fund are included in the prospectus of db x-trackers. You can get the full and the simplified prospectus of each sub-fund of db x-trackers at your adviser at the Investment & FinanzCenter of Deutsche Bank or at Deutsche Bank AG, TSS/Global Equity Services, Taunusanlage 12, 60325 Frankfurt am Main.