All you need to know
about certificates
Deutsche Bank Certificates
New freedom for investors:
opportunities and risks – the
decision is yours
The right products for all market
expectations, for conservative
and risk-oriented investors
Price information
www.db-xm.com
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Additional information
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Deutsche Bank AG
X-markets-Team
Große Gallusstraße 10-14
60272 Frankfurt/Main, Germany
Information hotline +49 (69) 910-38807
Email x-markets.team@db.com
© May 2003
Deutsche Bank AG
60262 Frankfurt/Main, Germany
003 88122 00
and
certificates offer new freedom to
investors: opportunities and risks – the decision is yours
Contents
The new millennium –
new ways to invest
The Scenario
The new millennium – new ways to invest
3
The Solution
New freedom for investors
4
In the 1990s, successful investing
was relatively simple: investors
merely needed to buy equities.
After all, share prices seemed to
be going only one way: up.
The Success Factors
X-pert certificates: Just buy the index
Strategy certificates: Systematic outperformance
Theme certificates:
The optimal diversification for your portfolio
Discount certificates: Buy at a discount and lower your risk
DoubleChance certificates:
Get the most from moderate growth
Guarantee certificates: Full protection for your investment
Parachute certificates: Keep upside, protect downside
BestChance certificates: Optimised investment timing
Winner certificates: Act with hindsight
Appendix
Deutsche Bank Certificates:
The right product for any market scenario
Glossary: Terms you should know
if you want to invest in certificates
Important Notice
Additional information: Tax regulations in Germany
Notes
Order form: All products – all brochures
2 Contents
6
8
10
12
14
16
18
20
22
The slump following the euphoria
has eliminated billions of euros
and dollars. However, the losses
were not just tied to “fate”; indeed
many investors had invested
unwisely. The market developments
of the last few years have again
brought into focus what it means
to invest capital wisely.
Instead of simply counting on
rising prices, investors should
balance opportunities and risks to
account for market conditions as
well as individual objectives.
US economist Harry S. Markowitz
already recognised this problem
back in 1969, in his article
“Portfolio Selection”, for which
he later won the Nobel Prize for
Economics. According to his
findings, a portfolio should be
well-balanced, offering profit
potential and hedging possibilities
for a multitude of possible future
developments.
Such a balance is difficult to
achieve if investors restrict
themselves to traditional
investments, such as mutual
funds or individual shares. These
investments are profitable only
if prices rise.
24
29
31
32
36
The Scenario 3
A strong team in pole position
New freedom for investors
Investors assess
opportunities and risks
The time is right for a new
generation of financial products.
Deutsche Bank certificates offer
investors the freedom to assess
the opportunities and risks of their
investment choices. Investors’
personal market expectations
should drive their investment
decisions.
Investors assess
opportunities and risks
There is a wide range of new
investment opportunities. For
example, there are downside
cushions that make it possible
to reap a profit even if shares have
lost value.
Or how about increasing moderate
gains without being exposed to
additional risk? Or automatically
lowering an entry price later on?
This brochure describes how
to achieve these goals. For
more detailed information about
individual certificates, please
refer to the specific product
brochures, which you can order
via the order coupon on page 37.
Derivatives House, Certificates House
and Best Issuer 2002
To be successful in a highly competitive market, each
individual team member is important. Our team holds the
pole position with our Xavex and X-markets product range
– that is why Deutsche Bank is not only the market leader*,
but was also awarded the prize of “Best Derivatives Issuer”.
Xavex and X-markets, your direct
access to Deutsche Bank’s global
investment expertise
Internet: www.db-xm.com
Further information: +49 69 910-38807
What made us the best issuer?
a broad range of over 3,500 products;
continuous innovation and strong customer focus;
trading hours from 8:00 a.m. to 10:00 p.m. CET;
fair pricing and narrow spreads;
an enthusiastic, service-driven team;
Our power to innovate and our outstanding service will keep
us at the forefront. Why not try it out yourself?
Leading to results.®
* Source: Deutsche Börse Exchange Clearing System
4 The Solution
X-pert certificates:
Just buy the index
Fair prices, transparency,
no restrictions
1:1 tracking of indices
Maximum transparency
and liquidity
No front-end loads or
management fees
Broad range of certificates –
no fixed maturities
Fair prices, transparency,
no restrictions
Traditionally, investors wishing to
diversify their equity investments
choose mutual funds. They relied
on an established fund manager
to continually look for the bestperforming stocks in the market,
thus offering real added value
to investors.
However, this system did not work
as smoothly in practice as it did
in theory. Only very good fund
managers succeed in beating
the benchmark index consistently.
And mutual funds include frontend loads (selling fees) of up to 5
percent, plus annual management
fees and other costs which reduce
overall returns.
1:1 tracking of indices
So, if it is so difficult to beat the
benchmark, why not invest directly
in the index? Deutsche Bank X-pert
certificates allow you to do so.
Their price exactly tracks the
performance of the index. The price
of the certificate is determined by
the subscription ratio.
opportunities and risks works
in the other direction as well: if
the DAX drops to 2,500 the price
of the certificate will fall to ¤25.
Thus, X-pert certificates ensure
you always achieve market
performance.
Maximum transparency
and liquidity
Investors must look up the daily
value of their mutual funds. But
with X-pert certificates investors
can calculate the value themselves.
All they need to know is the current
level of the index and, in the case
of foreign indices, the current
exchange rate.
Of course investors can buy and
sell at any time between 8:00 am
and 10:00 pm (CET) on any
exchange trading day at a price
based on the current index level.
In addition, the index sponsors’
websites inform investors daily
about the individual shares
included in the index and their
respective weightings.
Stock market one-to-one
at minimal cost
-perts – Index Certificates without maturity
With Deutsche Bank’s X-pert
certificates, investors enjoy the
full benefits of index funds –
making the certificates much
more cost-effective. There is no
front-end load or selling fee
either. Buying and selling the
certificates costs only a small
bid/offer spread in addition to
the usual commission charged
by custodian banks. In the case
of some indices Deutsche Bank
does not even charge a spread.
An additional advantage of
choosing an X-pert certificate
based on a total return index
such as the DAX is that investors
will participate in the price
performance of the index and
will also benefit from continual
reinvestment of the dividends
distributed by the companies
included in the index.
6 The Success Factors
X-pert certificates are available on
all major indices, such as the DAX,
the TecDAX, the EURO STOXX 50,
the Dow Jones Industrial Average,
the S&P 500 or the Nikkei 225. In
addition, we have issued certificates
based on the indices of the
exchanges of the Central and
Eastern European EU accession
candidates and on many EURO
STOXX sector indices. The broad
range of our products allows
investors to build a diversified
global portfolio, tailor-made, at
low cost and offering maximum
efficiency. The time horizon is
completely up to the investor; in
contrast to many other certificates
there are no fixed maturities for
X-pert certificates.
European equity funds versus STOXX 600
120%
99%
100%
80%
80%
60%
40%
No front-end loads or
management fees
20%
0%
–20%
For example: if the DAX trades at
3,000 points, a DAX-based X-pert
certificate with a subscription ratio
of 1:100 will cost exactly ¤30. If
the index rises to 3,500 the price
of the certificate will rise as well,
to ¤35. This symmetric profile of
Broad range of certificates –
no fixed maturities
Indices are regularly recomposed
according to certain criteria,
such as market capitalisation or
exchange turnover. However, this
does not require the services of a
fund manager, and therefore there
are no management fees to be paid.
–40%
–19%
–14%
–32%
–34%
–52%
–60%
2002
–47%
2000-2002
1998–2002
1993–2002
European equity funds (average performance)
Dow Jones STOXX 600 Return Index
Sources: BVI, Deutsche Bank
The Success Factors 7
Strategy certificates:
Systematic outperformance
Intelligent stock picking
Intelligent stock picking
The perfect solution:
quantitative investment
strategies
We have lived with two different
investing cultures for ages:
passive management and active
management. Passive management
focuses exclusively on transparent
and cost-efficient index investments,
thus performing neither better
nor worse than the market as a
whole. Active management
focuses on picking stocks that
should outperform the index, thus
offering the opportunity to beat
the market. Unfortunately, active
management often fails to achieve
its goals. In fact, most active fund
managers do not outperform their
benchmarks.
Better assessment of
opportunities and risks
Active management takes
time and costs money
Strategy certificates bring
efficiency and professional
know-how to investors
The perfect solution:
quantitative investment
strategies
Quantitative investment strategies
offer a solution to this dilemma.
They combine the transparency
and objective criteria of index
investments with the potential
outperformance inherent in active
management. This is because
shares are not picked subjectively,
but by applying systematic
objective parameters. An example:
numerous research studies have
shown that equities with a high
dividend yield outperform the
market over the long run (see box:
“The most important strategies”).
Investors who want to benefit from
this knowledge for their exposure
8 The Success Factors
to European equities will not buy
a EURO STOXX 50 certificate,
but will instead select the 15
constituents that offer the highest
dividend yield. As the market
situation changes, they will
of course have to adjust and
recompose their portfolios
(e.g. every six or twelve months),
depending on which shares
offer the highest dividend yield
at the respective time.
Better assessment of
opportunities and risks
The advantages of a quantitative
selection method are obvious.
The selection process is based
exclusively on technical criteria;
thus, investors can calculate how
the strategy would have performed
in the past. This helps to clarify
whether the selected approach
offers added value in the long
term – by way of higher returns –
and/or reduced return volatility in
comparison to the index.
Active management takes time
and costs money
The challenge of this approach is in
its implementation. Even if investors
choose only 15 shares and adjust
their portfolio semi-annually, they
will have to execute up to 30
transactions each year. And as all
these transactions involve fees,
beating the benchmark becomes
difficult. In addition, investors have
European blue chips
with high dividend yield
EuroLeader CertificateTM
to do time-consuming research –
after all, not every model is based
on such an easily-available figure
as the dividend yield.
basis of certain criteria. The exact
parameters are researched and
laid down in detail before the
certificate is launched.
Strategy certificates bring
efficiency and professional
know-how to investors
Deutsche Bank’s investment
experts continually analyse a
great variety of models, with
only the most promising ones
resulting in the launch of a new
strategy certificate. Costs are
no problem either. A management
fee of usually 1.0 – 1.5 percent
p.a. covers all transaction fees.
Dividends are usually reinvested
in the basket of shares and passed
on to investors.
Deutsche Bank has developed its
strategy certificates especially to
make such professional investment
strategies available to private
investors. The certificates are
based on a basket of shares, which
is regularly and automatically
adjusted and recomposed on the
The most important strategies
Value investing: In line with legendary US investment guru Warren Buffet’s mantra,
value investors buy only undervalued equities with high earnings quality. The selection is
usually based on dividend yields or a low price/earnings ratio. Regular dividend payments
are a clear indicator of intrinsic value (“shareholder value”), giving shareholders an
objective measure of the value of their investment. In addition, high dividend yields
protect the share price to the downside.
Growth investing: It is not always value shares that perform best. Growth-oriented
investors have their moments of glory, too. They invest in shares promising the highest
growth potential. The current share price does not play a role right from the outset
because the price level will rise anyway, if the company's earnings growth remains
on track.
Style switching: Since value and growth cycles follow each other over time, it makes
sense to combine the two strategies, as they are both based on logical assumptions. This
is made possible by ratios such as the PEG (price/earnings to growth ratio), which
establishes a relationship between the share price and its performance. For this purpose,
the price/earnings ratio (which can be used to indicate a low valuation) is divided by the
long-term forecast for the growth in earnings (the “growth” element) – the lower the
result, the better. Other models use parameters such as the Sharpe ratio, known from
portfolio theory, in order to determine exactly when to invest in value or growth issues.
Momentum: Traders often follow the rule “stay with the trend, the trend is your friend”.
And that is exactly what investors do with this strategy. Accordingly, investors regularly
buy those issues that performed best in the past (e.g. in the past six months). This
indicator is also often used to boost the results of other strategies.
The Success Factors 9
Theme certificates: The optimal
diversification for your portfolio
The need to diversify your
portfolio
Short-term sector rotation ...
... or long-term mega trends
Investment in commodities
without the disadvantages of
physical buying
Alternative investments:
strategies focused on
absolute returns
The need to diversify your
portfolio
If Wall Street sneezes, Europe
develops a cold. This traders’
saying points to an important
relationship: equity markets in
industrialised countries often move
in the same direction, usually
following the trend set in New
York. So if the overall trend points
downwards, investors will not
escape it if they have invested
exclusively in the large indices
covering the whole range of the
market, such as the DAX, the
EURO STOXX 50 or the S&P 500.
This is why it makes sense to
diversify portfolios by adding
investments in different sectors
or exposure to special trends. In
doing so, investors might benefit
from sector-specific developments,
which will enable them to offset
temporary losses on some positions
and enjoy an overall more stable
and/or higher performance from
their portfolios.
Short-term sector rotation ...
Sector-specific investments, such
as Deutsche Bank certificates on
the sector indices of the EURO
STOXX index family, are one way
of diversifying portfolios. These
products allow investors to put
their money into European equities
from the automobile, chemical,
10 The Success Factors
financial, technology or telecoms
sectors. These certificates are
particularly interesting for active
investors who want to effectively
exploit the phenomenon called
sector rotation. Depending on the
current phase of the economic
cycle, cyclical sectors often
outperform the market. Only a
few months later, however, traders
will return to preferring a more
defensive strategy. Turnaround
speculation on sectors, which
have fallen considerably in the
past, can be realised using these
certificates as well.
... or long-term mega trends
In contrast, investors who prefer
a more passive approach will
select long-term mega trends.
Sectors such as biotechnology or
internet-related industries hold
considerable growth potential in
the long run. Investors can fully
participate in this outlook thanks
to certificates on the respective
sector-specific indices or regularly
updated equity baskets. Emerging
markets are another enticing
investment opportunity. Central
and East European economies and
China often have decoupled from
the trends of established markets.
This makes Deutsche Bank’s
emerging-markets certificates
an ideal addition to investors’
portfolios.
Collaborative teamwork
for success
Investment in commodities
without the disadvantages of
physical buying
DB ARIXTM Equity Strategies Transparent Certificate
The universe of theme certificates,
however, covers a much wider field,
since they do not necessarily have
to be based on individual shares or
equity indices. In fact, just about any
asset whose price is determined
objectively and regularly can serve
as an underlying instrument. Take,
for example, commodities and
precious metals: Deutsche Bank’s
Gold X-pert certificate is always
worth the price of one-tenth of a
fine ounce troy gold in euros, so
it allows investments in precious
metals without entailing the
disadvantages of the physical
purchase of coins or bars – namely
physical storage, premium, etc.
Alternative investments:
strategies focused on
absolute returns
Private investors can even enter
into an altogether different
investment segment that has
traditionally been reserved for
institutional investors: hedge
funds. In contrast to mutual
funds, whose primary objective
is generally just to outperform
the benchmark index, hedge
funds aim to realise an absolute
return.
Hedge fund managers want to
generate profits independently of
the market trend, and to keep the
price of their hedge funds more
stable (less volatile). Hedge fund
certificates can, for example, reflect
the performance of a portfolio
managed by Deutsche Bank and
consist of investments in up to
50 individual funds. Investors
can benefit from optimal risk
management while participating
in numerous promising alternative
investment strategies.
Additionally, Deutsche Bank AG
has also created certificates based
on independent hedge fund
indices.
Types of theme certificates
Type
Themes
Basket certificates
Countries: China, Russia, etc
Mega trends: biotechnology, nanotechnology, etc
Sector certificates
Dow Jones EURO STOXX: automobiles, insurance, etc
S&P Amex: biotechnology, oil, etc
Other theme certificates
Asset classes: hedge funds, real estate, private equity, etc
Commodities/precious metals: gold, silver, crude oil, etc
The Success Factors 11
Discount certificates: Buy at a
discount and lower your risk
Profit potential limited to
price discount
Maximum return reached
more quickly than with
direct investment
Stop relying on a bull market
to make profits
Traditional investors will only realise
profits on their investments in
mutual funds or index certificates
if the underlying markets or
equities rise. But what if markets
decline or trade sideways – is
there no way to realise returns?
Limited risk of losses
Cap level determines the
risk/return profile
Securitised short options
position
Profit potential limited
to price discount
Fortunately, there is. Discount
certificates are the solution –
these differ from traditional index
certificates and/or equities because
they have a set lifetime (usually
between 3 and 18 months), and
have a maximum redemption (the
so-called “cap”). Two scenarios can
occur at maturity of the certificate:
The price of the underlying
is at or above the cap level:
the discount certificate is
redeemed in cash equal to
the value of the cap.
The price of the underlying
is below the cap level: the
investor receives the underlying
instrument, or the current price
of the underlying in cash.
In return for the limited return
potential, a discount certificate is
always cheaper than its underlying
12 The Success Factors
share or index. For instance, a
discount certificate with a lifetime
of 18 months and a cap of ¤110
euros might cost only ¤80, while
the underlying share is trading at
¤100. Thus, the discount is ¤20
(20 percent).
Maximum return reached
more quickly than with direct
investment
The upside potential is
straightforward: in the best-case
scenario, the certificate can rise
from ¤80 to ¤110 – the maximum
return is 37.5 percent. However, to
realise this maximum return, a price
rise in the underlying share by only
10 percent (from ¤100 to ¤110) is
already sufficient at the maturity of
the discount certificate. And even if
the stock returns to a level of ¤100
in 18 months’ time, the discount
certificate will still bring a profit.
It will be worth ¤100 – given the
entry level of ¤80 investors will
still make a profit of 25 percent,
whereas a direct investment
would have led to zero profit.
Limited risk of losses
On the other hand the 20 percent
discount protects investors
against losses: the share price
will have to fall by more than
20 percent, to below ¤80, in order
to fall below today’s value of the
An opportunity for attractive
returns with a risk cushion
Discount Certificates
discount. And even below this
loss threshold the certificate will
still outperform the underlying
instrument. Only if the share price
rises by more than 37.5 percent
(the maximum return of the
discount certificate) would a direct
investment be the better solution.
Cap level determines the
risk/return profile
The cap level is consequently the
main determining factor for the
certificate’s risk/return profile.
The higher the cap, the higher the
potential profit; the smaller the
cap, the larger the risk cushion.
A discount certificate whose
cap is considerably below the
current price of the underlying
instrument allows investors to
generate attractive returns even
if markets slide.
Securitised short options
position
Theoretically, discount certificates
are a securitised form of a short
option position: investors buy
the underlying instrument and
simultaneously sell a call option.
The option premium is reflected
by the discount. Investing in
discount certificates thus
becomes more attractive as the
markets move more – high
volatility leads to high option
premiums and sizeable discounts.
Please note, however, that the
risk/return profile described
above applies only if the discount
certificate is held until maturity.
Risk/return profile at maturity
60%
Loss threshold (¤80):
20% risk buffer
40%
Profit / Loss
Stop relying on a bull market
to make profits
20%
25.0% return for
sideways market
Maximum return:
37.5%
0%
Cap level (¤110): maximum return
achieved with just 10% share
performance
–20%
–40%
–60%
50
60
70
80
90
100
110
120
130
Price of the underlying instrument at maturity
140
150
Discount certificate
Direct investment
The Success Factors 13
DoubleChance certificates: Get
the most from moderate growth
No additional risk
Double your potential return
Even though daily price
movements suggest otherwise,
most fluctuations in share prices
are relatively moderate (at least in
“normal” times). Leveraging such
a moderate performance would
thus be a rather obvious concept.
Alternative to direct
investment in a share or
an index
Performance disadvantage
only if prices soar
Double your potential return
Regularly updated product
offer
Leverage is generally associated
with warrants. However, these
speculative instruments may not
only lead to disproportionate
gains, but also to disproportionate
losses. If investors do not want
to take on additional risk in
comparison to a direct investment
but would nevertheless like to
optimise moderate gains,
Deutsche Bank’s DoubleChance
certificates are the right choice.
Up to a certain cap level, investors
can double the performance
of the underlying instrument.
On the downside, the risk of the
certificate is equivalent to that
of the underlying.
Alternative to direct investment
in a share or an index
Let’s assume that an investor
believes a certain share, which is
currently trading at ¤100, will rise
by 15 to 25 percent within the
next twelve months. Instead of
buying shares, the investor buys a
14 The Success Factors
DoubleChance certificate with a
lifetime of one year, which also
costs ¤100 and has a cap of ¤120.
Three different scenarios are
possible at maturity:
The underlying instrument
is trading at or above the
cap level: the investor has
realised the maximum return
at a share price of ¤120 –
however, that return is not 20
percent (as for the share), but
40 percent thanks to the
DoubleChance mechanism.
Only if the share price exceeds
¤140 would a direct investment
have been more advantageous.
If it trades between ¤120 and
¤140, the certificate is still the
better investment.
The underlying rises, but
remains below the cap level:
if the share trades between
¤100 and ¤120, the profit is
exactly double that of a direct
investment. A share price
increase of 15 percent will thus
result in a return of 30 percent.
The price of the underlying
declines: below the purchase
price of ¤100 the DoubleChance
certificate behaves exactly like
the underlying share. If, for
example, the share price has
fallen to ¤90, the certificate
will realise a 10 percent loss
as well.
Performance disadvantage
only if prices soar
Double your profits
without additional risk
DoubleChance CertificatesTM
This means that there is only
one scenario in which the
DoubleChance certificate is less
advantageous than a direct
investment: namely if the share
rises by at least double the
difference between the purchase
price of the certificate and the
cap level. As long as prices rise
moderately, however, investors
can double their returns. And if
there are any losses, they are
never higher than those of the
direct investment.
Regularly updated
product offer
which gains are doubled)
include the volatility of the
underlying instrument and the
lifetime of the certificate.
Deutsche Bank regularly launches
new DoubleChance certificates,
which are in line with prevailing
market levels.
However, investors should note
that the DoubleChance effect
always refers to the prices at
issuance and at maturity of the
certificate. During the lifetime of
the certificate, its changes in
value may be smaller than that of
the underlying share. Thus, it is
recommended that investors hold
the certificate until its maturity.
The factors determining the
difference between the purchase
price and the cap level (up to
Risk/return profile at maturity
60%
40%
Profit / Loss
No additional risk
Maximum return:
40.0%
20%
0%
Cap level (¤120): maximum
return achieved with just
20% share performance
–20%
–40%
No additional
risk exposure
–60%
50
60
70
80
90
100
110
120
130
Price of the underlying instrument at maturity
140
150
DoubleChance certificate
Direct investment
The Success Factors 15
Guarantee certificates:
Full protection for investment
Two-component structure
Flexible specifications
Capital protection always
refers to maturity date
Combine security and profit
opportunities
Even though equities tend to
rise in the long term, recent
developments have clearly shown
the threat of losses even if
investors stay invested for five
years or more. Against this
background it is quite logical that
many investors put security first in
new investments – they simply do
not want to lose any more money.
Two-component structure
However, this does not mean
that investors necessarily have
to give up on potential equities
performance to preserve the
capital. Guarantee certificates
combine full protection of capital
with virtually unlimited return
potential. These securities always
contain two components:
Guarantee component:
Deutsche Bank will invest a
large part of the price paid
for a guarantee certificate at
issuance – e.g. ¤100 – into a
zero-coupon bond. The portion
of the certificate price will
be calculated exactly so that
this component is worth ¤100
at maturity, thus protecting
investors’ initial capital
investment. If, for example, the
certificate has a lifetime of five
years and interest rates stand
16 The Success Factors
at 4.0 percent p.a. at the time
of issuance, ¤82.19 (100/1.045)
must be invested in the zerocoupon bond. If the lifetime of
the certificate is longer or
interest rates are higher, this
amount will be lower.
The performance
component: The remainder (in
our example ¤17.81) is invested
in the equities market, usually
in options on an index such as
the EURO STOXX 50. However,
as only a minor portion of the
issuance price is invested in this
component, investors will only
partially participate in any upside
performance – for instance, to
50 percent, based on the initial
¤100 investment. This means
that the certificate will yield a
return of only 10 percent if the
index rises 20 percent between
the certificate’s issuance and
maturity. If the index declines
over the product lifetime, the
options will expire valueless.
However, this does not affect
your capital investment because
the guarantee component
protects you from any losses,
regardless of the extent of
falling share prices.
High coupons are possible
even in a low-interest environment
Opportunity BondsTM
always have to cover 100 percent of
the issuing price. With a protection
level of only 95 percent, investors
would assume some risk to their
capital, but would also participate
in market performance to a larger
degree because less money needs
to be invested into the bond.
Alternatively, the guaranteed
amount can also be higher than
the issuing price, further reducing
the degree of participation in
market performance. The
performance component can be
shaped differently as well. For
example, returns can be based
on the average gains during the
lifetime of the certificate instead
of on the index levels at issuance
and maturity. Doing so would
help to smooth out volatility and
enhance the participation rate.
Capital protection always
refers to maturity date
Regardless of specifications,
investors should note that the
guarantee is only valid at maturity
of the certificate. During the first
years of its lifetime, the price of
the certificate may even fall below
the guaranteed amount if the
underlying instrument performs
poorly. On the other hand,
declining interest rates during the
lifetime may push the price of
the certificate above 100 percent.
Investors planning to buy a
guarantee certificate should
therefore be reasonably sure that
they can hold it until maturity,
and will not need to redeem it
before that time.
Risk/return profile at maturity
100%
75%
50%
Profit / Loss
Combine security and profit
opportunities
25%
0%
–25%
–50%
–75%
–100%
Flexible specifications
0
In practice, there are many possible
variations to this basic model. For
example, the protection does not
Guarantee certificate (50% participation)
Direct investment
25
50
75
100
125
150
Price of the underlying instrument at maturity
175
200
The Success Factors 17
Parachute certificates: Keep
upside, protect downside
Retain return potential
Partial cushioning is less
expensive
Security-oriented investors and
car owners are often faced with
the same question: do they really
need fully comprehensive cover?
Full protection of the invested
capital, as offered by a traditional
guarantee certificate, is very
comforting, particularly in view of
the experience of the past few
years. This level of security,
however, comes at a price: the
performance participation of
guarantee certificates is relatively
low, particularly in times of low
interest rates and high volatility.
Three possible scenarios
Parachute will open only
at maturity
Partial cushioning is less
expensive
That is why Deutsche Bank’s
parachute certificates are an
interesting alternative. Possible
losses are buffered only up to a
limit defined beforehand. At the
same time, investors participate in
any price increases just as if they
had bought the underlying
instrument (or at least very close
to 100% performance).
Three possible scenarios
The following example illustrates
how this partial protection
mechanism works. An index is
trading at 100 points when a four-
18 The Success Factors
year parachute certificate with a
guarantee limit of 25 percent and
a participation of 100 percent is
issued at a price of ¤100. Three
scenarios are possible at maturity:
The index trades above the
starting level: In this best
possible case, investors receive
the full performance, in cash.
Thus, a rise from 100 to 150
points in four years’ time will
result in a return of exactly 50
percent.
The index trades below the
starting level, but above the
protection limit: Normally,
investors would have lost
money, but this is where the
parachute comes into play.
As long as the index has not
lost more than 25 percent
(100 – 75) over the lifetime
of the certificate, investors
will receive a redemption of
the full issue price of ¤100.
Keep the upside,
protect the downside
Parachute CertificateTM
the parachute certificate would
only lose 20 percent. An index
certificate, in contrast, would
be down by 40 percent.
This shows that profit potential and
protection do not necessarily have
to be opposites. The protection
limit and the participation ratio will
depend on both the underlying
instrument and the lifetime of the
parachute certificate. For current
details, please refer to the regularly
updated Deutsche Bank product
descriptions.
Parachute will open only at
maturity
Investors should consider that the
parachute mechanism described
will only be effective at maturity
of the certificate. During the
certificate’s lifetime, its price
may fall below the issuing price
even if losses on the underlying
instrument are still within the
protection range. In addition to
the current index level, volatility,
dividends, the interest rate level
and the remaining lifetime will
influence market prices of the
certificate. Consequently,
parachute certificates will not
protect investors against shortterm losses. However, they
are a useful instrument for
conservative, long-term investors
who, in principle, expect prices
to rise over a four-to-five-year
horizon but do not exclude the
possibility of a moderate
downturn and want to hedge
against this eventuality.
Risk/return profile at maturity
100%
75%
The index trades below the
protection level: If the index
drops by more than 25 percent,
the parachute certificate no
longer fully protects against
losses. However, thanks to the
parachute effect, the losses are
always lower than in the case
of a direct investment. With the
index trading at 60, for example,
50%
Profit / Loss
Retain return potential
75% protection level
(=25% risk buffer)
25%
0%
–25%
–50%
–75%
–100%
0
25
50
75
100
125
150
Price of the underlying instrument at maturity
175
200
Parachute certificate
Direct investment
The Success Factors 19
BestChance certificates:
Optimised investment timing
Buy today or a few weeks
later – it’s the best price
that counts
Particularly attractive for
investors who expect a
short-term setback
Exploit attractive buying
opportunities
Everybody knows the situation: an
investor has decided in principle
to buy a share, but remains
uncertain about the timing. Has
the price already reached an
attractive buying level? Or might
it fall somewhat further over the
next few weeks, for example,
because the company’s quarterly
figures might come in below
market expectations? Now
investors no longer have to
leave the answer to fate. With
Deutsche Bank BestChance
certificates, investors automatically
buy at the lower of two prices –
either the price at the issuance
date or the price at the BestChance
date a few weeks later. The only
cost they incur for being able
to retroactively optimise their
chances is that the return of the
certificate is capped right from
the beginning.
Buy today or a few weeks later
– it’s the best price that counts
Let’s assume that the target share
is traded at ¤100. At the same price,
investors can buy a BestChance
certificate expiring in 13 months,
with a return capped at 30 percent.
Six weeks are left until the
BestChance date. Investors might
want to look at three different
scenarios:
20 The Success Factors
The share price rises
continually: If the share
trades at a higher price on the
BestChance date (compared
to the buying date of the
certificate), nothing changes.
Investors stay invested at an
entry level of ¤100, and will
benefit from any upside
performance at maturity of the
certificate. If the price is ¤120
after 13 months, investors
receive a return of 20 percent.
Only if the share trades above
¤130 (i.e., if the price exceeds
the 30 percent cap on the
return), the return will be smaller
than for a direct investment.
The share price falls until
the BestChance date, but
rises later on: In that case,
investors benefit directly from
the BestChance mechanism. If,
for example, the share trades
at only ¤80 when the first six
weeks have elapsed, this level
will be the entry price for the
share. The ¤100 you invested
initially will be reinvested at the
new price level, so investors
will eventually hold 1.25 shares
(100/80). If the share price
rises again – say, to ¤90 by the
maturity date of the certificate
– investors will receive a
redemption of ¤112.50 (90 x
1.25). This means a return of
12.5 percent. Had investors
bought the share at ¤100, they
would have lost 10 percent on
Profit from
optimised timing
BestChance CertificateTM
their investment. However, the
cap on returns is still in place.
If the share rises above ¤104
(entry level of 80 euros plus
30 percent), any further
performance will no longer be
reflected in the certificate.
The share price continues
to decline: The BestChance
certificate will help investors to
cushion losses. Let’s assume
that the price falls from its
initial level of ¤100 to ¤80 at
the BestChance date, and then
further to ¤70 at maturity.
Investors will have to take only
the losses incurred after the
BestChance date – and the
certificate will trade at ¤87.50.
Had they bought the share
directly at ¤100, they would have
lost 30 percent of their capital.
Particularly attractive for
investors who expect a
short-term setback
The BestChance mechanism
makes the most sense in
uncertain times, particularly if
short-term setbacks are imminent
and the medium-term potential is
limited. In such a situation,
investors can exploit performance
opportunities by securing a lower
entry price and simultaneously
enjoying a cushion against risks.
However, this holds only if
investors buy the certificate
shortly after its issuance (and in
any case before the BestChance
date) and hold it until maturity.
During its lifetime, the certificate
will not necessarily move in line
with the underlying instrument.
Risk/return profile at maturity
60%
40%
Profit / Loss
Exploit attractive buying
opportunities
20%
Maximum return: 30.0%
0%
Maximum return is achieved at a level of
¤104 thanks to the lower price prevailing
on the BestChance date
–20%
–40%
–60%
50
60
70
80
90
100
110
120
130
Price of the underlying instrument at maturity
140
150
BestChance certificate (performance based on price level at issue)
BestChance certificate (performance based on price level on the BestChance date)
Direct investment
The Success Factors 21
Winner certificates:
Act with hindsight
Enjoy the benefit of
hindsight to structure
the best portfolio
Only the best performers
decide
Lower return only in case
of a broadly-based, strong
market rise
The logical answer to the
market environment
Particularly interesting for
sector exposure
Enjoy the benefit of hindsight
to structure the best portfolio
Picture this: investors put ¤100 in
each of five selected shares and
wait to see what happens. Four
years later, they take another look
at their portfolios and find that,
while most shares performed
quite well, one or two did poorly.
Now go back in time to the entry
date, distribute the ¤500 invested
initially between the three best
performers and enjoy a remarkable
investment success.
Only the best performers decide
Correlation as a decisive
factor
No, this is not another stockmarket fairy tale but a very real
investment opportunity, brought
to investors by the Winner
certificates from Deutsche Bank.
In contrast to plain vanilla basket
certificates, the redemption
payment depends only on the
best-performing issues during the
lifetime of the certificate. This
means investors know right from
the beginning that their investment
return will depend exclusively on
the winners – a nice feeling.
Lower return only in case
of a broadly-based, strong
market rise
This re-weighting, which does
remind one of time travel, becomes
possible because the return
22 The Success Factors
potential is limited right from the
beginning. However, this limit
will only have a negative effect
on the overall return if all equities
included in the basket at the
issuance date of the certificate
rise strongly (scenario 1). In this
case, the Winner mechanism will
no longer be an advantage, so the
return cap will leave investors in a
disadvantaged position compared
to a direct investment.
The logical answer to the
market environment
In any other scenario, however,
investors would be better off.
Usually equities do not rise or
fall in parallel because companyspecific factors have at least the
same influence on prices as the
overall market sentiment. If
investors hold five or six different
issues in their portfolio, it is
therefore very likely that at least
one share will underperform or
even fall, even if markets rise
overall (scenarios 2 and 3). In the
case of a traditional investment
this would weigh on profits – the
Winner certificate, however, will
allow investors to disregard these
underperformers. And even if
equities do fall (scenario 4), the
Winner certificate will at least
limit losses because the worst
performers will be kept out when
the average is calculated at
maturity.
Particularly interesting for
sector exposure
Correlation as a decisive factor
Profit from the
best performers
Winner CertificateTM
These certificates are particularly
attractive to investors who want
to put their money in specific
sectors. In the case of sectorspecific ‘mega trends’ - such as
biotechnology or high-tech –
uncertainties abound as to which
companies will perform best in the
long term. With the help of
Winner certificates investors not
only obviate the risk related to
choosing individual issues, but
they benefit even more from the
best performers and thus optimise
their return.
However, this is only true to its
full extent if investors leave their
money invested until maturity.
The key factors determining the
value of a Winner Certificate are:
underlying share prices and
the correlation between them.
Increases in the share prices will
have a positive impact on the
value of the Certificate. However,
any similar behaviour of the stock
prices (‘increasing correlation’) will
have a negative effect on the value
of the Certificate because it is less
likely that there will be any distinct
winners or losers in the end.
Scenarios for the Winner certificate mechanism
Share
Underlying #1
Share price at maturity
Price at
issue date
Scenario 1
Scenario 2
Scenario 3
Scenario 4
100.0
130.0
130.0
90.0
80.0
Underlying #2
100.0
125.0
80.0
105.0
80.0
Underlying #3
100.0
160.0
120.0
114.0
100.0
Underlying #4
100.0
140.0
140.0
75.0
90.0
Underlying #5
100.0
105.0
65.0
124.0
100.0
Value of equity basket
(5 issues)
100.0
Basket return
Value of Winner basket
(3 issues)
Redemption
Winner certificate*
Return of Winner
certificate
132.0
107.0
101.6
90.0
+32.0%
+7.0%
+1.6%
–10%
143.3
130.0
114.3
96.7
120.0
120.0
114.3
96.7
+20%
+20%
+14.3%
–3.3%
Winners
Losers
* Cap at 120.0 (20 percent)
The Success Factors 23
Deutsche Bank Certificates:
The right product for any market scenario
X-pert Index Certificates
Strategy Certificates
Theme Certificates
Discount Certificates
DoubleChance Certificates
Time horizon
Unlimited
Several years or unlimited horizon
Several years or unlimited horizon
Limited (generally to between
3 and 18 months)
Limited (generally to between
3 and 15 months)
Underlying instruments
Indices, commodities
Basket of equities or indices
Indices, equity baskets,
commodities
Indices, individual equities, other
investment products
Indices, individual equities, other
investment products
Structure
Price of the underlying
instrument is continually reflected
in a certain subscription ratio
(1:1, 1:100 etc).
At regular intervals our strategy
models select those index
constituents that best fulfil certain
objective investment criteria
(validation on the basis of a
retrospective historical simulation).
Exact tracking of specialised
sector indices, theme baskets of
equities, commodity prices or
portfolios of hedge funds.
Redemption is limited to a
maximum amount (cap level) - in
turn, the certificate has a price
discount compared to the
underlying instrument.
Redemption is limited to a
maximum amount (cap level) – in
turn, the certificate performance
is double the performance of the
underlying instrument (up to the
cap level).
Profit potential
Unlimited and complete
participation in all price gains.
Unlimited and complete
participation in all price gains.
Unlimited and complete
participation in all price gains.
Limited participation up to the
cap level. A lower performance
of the underlying instrument
(compared to a direct investment)
is required for the maximum
return on the certificate;
depending on the cap level, the
underlying may even decline.
Limited participation up to the
cap level. To realise the maximum
return the underlying instrument
has to rise half as much as in the
case of a direct investment.
Risk exposure
Unlimited and complete
participation in all price losses.
Unlimited and complete
participation in all price losses.
Unlimited and complete
participation in all price losses.
The discount works as a cushion
against the risk at maturity; a
net loss is only incurred if the
underlying instrument loses more
than covered by the discount.
Unlimited and complete
participation in all losses (as in
the case of a direct investment).
Investment rationale
Investment for investors who
expect prices to rise (particularly
in the long term); efficient
alternative to mutual funds at
attractive costs (no fees, no
performance risk).
Investment for investors who
expect prices to rise in the long
run, but want to outperform the
index (and are ready to take the
risk of a worse performance in
comparison to the overall market).
Useful for diversifying the
portfolios of conservative investors
(e.g. for participation in economic
mega trends or in alternative
investments) and short-term
investors (e.g. for speculation on
sector rotation effects).
Very flexible instrument for
conservative investors who are
looking for a risk-buffered
investment which offers profits
if markets rise moderately,
stagnate or decline.
Useful instrument for active
investors who believe in
moderate gains of the
underlying and want to
maximise them without an
additional risk buffer.
Risk/return profile (at the end
of the lifetime, in comparison
to direct investment)
24 Appendix
Appendix 25
Deutsche Bank Certificates:
The right product for any market scenario
Guarantee Certificates
Parachute Certificates
BestChance Certificates
Winner Certificates
Time horizon
Limited (generally to between
4 and 10 years)
Limited (generally to between
4 and 6 years)
Limited (generally to 13 months)
Limited (generally to between
4 and 6 years)
Underlying instruments
Indices, equity baskets
Indices, equity baskets,
individual equities
Indices, individual equities
Basket of equities
Structure
The minimum redemption
amount at maturity (usually the
issue price) is defined in
advance; investors participate in
positive performance on top of
the guaranteed amount.
Unlimited participation in price
gains; losses are covered at
maturity, up to a predefined
protection level.
Redemption is limited to a
maximum amount (cap level) –
in turn, the entry level for the
certificate is set at the lower of
the issue price and the price level
at the later BestChance date.
Redemption payments at maturity
are calculated on the basis of
those shares that performed best;
underperformers are excluded.
In return there is a cap on the
maximum yield.
Profit potential
Partial participation in all price
gains.
Unlimited, very high degree (up
to 100%) of participation in all
price gains.
Limited participation up to the
cap level. A profit is achieved if
the price of the underlying
instrument, at the BestChance
date, is below the price level at
issuance and subsequently rises.
Limited participation up to the
cap level. Focussing on the best
performers yields better results
compared to a direct investment
(exception: strong rise in all
issues contained in the basket).
Risk exposure
Complete or partial guarantee
for the invested capital at
maturity.
Losses are incurred only if the
underlying instrument trades
below the protection level at
maturity (risk is always lower
compared to a direct
investment).
A better price at the BestChance
date serves as a risk buffer at
maturity; investors will realise
only the losses exceeding this
downturn of the underlying.
Theoretically unlimited
participation in all losses;
however, these are always
lessened compared to a
direct investment because
underperformers are excluded.
Investment rationale
Investment for very risk-averse
investors who want to avoid
losses completely and at the
same time partially participate in
the performance opportunities of
equity markets (as an alternative
to bond investment).
Investment for safety-oriented
investors who expect prices
to rise over a period of several
years, but also consider a limited
downside movement against
which they want to hedge their
capital.
Useful instrument for active
investors who are generally
optimistic about the underlying
instrument, but want to eliminate
the risk of timing or believe shortterm setbacks are possible.
Add-on investment for investors
who want to eliminate the risk
resulting from share selection –
particularly useful for sectordriven investment.
Risk/return profile (at the end
of the lifetime, in comparison
to direct investment)
26 Appendix
Appendix 27
X-press – Expert knowledge for free
Glossary: Terms you should know
if you want to invest in certificates
The investor magazine for
warrants and certificates
The magazine presents interesting facts about warrants
and certificates. X-press focuses on readers who already
have some derivatives experience. Readers will get
expert tips on trading these products, receive regular
updates about new issues by Deutsche Bank and get a
lot of interesting and valuable information in each issue.
In addition there is a complete survey of all Xavex and
X-markets products in a separate booklet.
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Leading to results.®
First name
Benchmark: A measure of how a
single investment has performed
in relation to the development of
the market as a whole. Usually the
benchmark is a suitable →index;
the performance of German
equity funds is thus measured in
comparison to the DAX.
Outperformance: Excess return –
the fact that an investment offers
a better →return than another
investment. Strategy certificates,
for example, are designed to
ensure an outperformance over
the benchmark →index. Opposite:
→underperformance.
Degree of participation:
Indicates the extent to which a
certificate lets investors participate
in the performance of the
→underlying instrument. In the
case of index and strategy
certificates investors participate
to 100% in all gains or losses
(unlimited participation). Other
certificates offer a lower
participation, or cap it.
Performance: Development of
the price or →return of a share, an
index or another investment.
Direct investment: Direct
purchase of the →underlying
instrument, instead of a certificate.
Index: Continuously calculated
price indicator which aggregates
the performance of many
individual securities (equities,
bonds) in a single figure. Usually
adjusted at regular intervals on
the basis of transparent criteria
(stock exchange turnover, market
capitalisation).
Issue: Launch of a new certificate.
Performance index: An index
that does not only cover price
developments, but also includes
the reinvestment of dividends
distributed by companies in the
index. Opposite: →price index.
Price index: Index which does
not take into account dividends
distributed by the companies it
covers. Opposite: →performance
index.
Return: Difference in percent
between the final value of an
investment and the capital
invested.
Risk cushion (buffer): Amount
by which the →underlying
instrument of a certificate may fall
at most without entailing losses
for the investor.
Stock picking (active portfolio
management): Attempt to
identify equities which will
outperform the →benchmark, by
way of fundamental and/or
technical analysis.
Subscription ratio: Describes
the relation in which a certificate
reflects the price development of
the →underlying instrument. In the
case of certificates on individual
shares the subscription ratio is
usually 1:1; certificates on indices
often have a subscription ratio of
1:10 or 1:100.
Underlying instrument: The
share, basket of shares, investment
product or index on whose price
development a certificate is based.
Underperformance: The fact that
an investment offers a lower
→return than another investment.
Opposite: →outperformance.
Volatility: Intensity of fluctuation
in prices or returns, usually
measured as a percentage
(expressing the statistical concept
of standard deviation). For some
types of certificates, e.g. discount
certificates, high volatility makes
for particularly attractive
investment perspectives.
Name
Street address
Postcode
Number
Town/city
ZB
Appendix 29
X-markets –
Listening is fundamental to service
Important Notice
For more detailed information
about the certificates described
in this document please
consult the individual product
brochures. In addition, the
“Basic Information on
Investments in Securities”
will inform you about the
opportunities and risks of
these certificates.
The statements made in this
document do not represent
investment advice.
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Leading to results.®
Certificates denominated in
a currency other than that of
the investor’s home country
will be subject to exchangerate fluctuations, which may
negatively impact their value,
price or return.
Changes in exchange rates of
the currencies in which index
component shares are quoted
and of the denominating
currency of the individual
certificate may affect the market
price and the cash redemption
payments of such certificate.
Moreover, Deutsche Bank
cannot make any forecast
regarding the price development
of any certificate on the
secondary market, or about
its liquidity. There may be only
one market-maker, namely
Deutsche Bank AG or one of
its affiliated companies.
Some of the certificates
described in this document pay
no dividends to the investor,
even if the underlying pays
dividends. Please consult the
relevant product brochure for
detailed information on the
dividend treatment.
Certificates are not useful for
all types of investors, and
investing in one of these
certificates may entail major
legal and tax consequences,
as well as risks to the capital
invested. Investors should
therefore seek professional
advice. We urgently advise
our clients to discuss such
investments with their tax or
financial consultant before
investing.
Prospectuses containing
detailed descriptions of the
individual certificates are
available on request. Please
contact your advisor at your
local branch of Deutsche
Bank AG.
(Germany only – EUR 0.12/minute)
Appendix 31
Additional information:
Tax regulations in Germany
General information
General information
Taxation of private individuals
subject to unlimited tax liability
in Germany
The information given below
contains some information about
German tax regulations, which
may be relevant for investors
resident in Germany or subject to
German taxation for any other
reason. This information does not
constitute or represent tax advice.
The following statements are
based on current German tax laws
and their interpretation, which
may be subject to change. Any
such changes may be introduced
with retroactive effect, and may
change the tax situation described
below to the detriment of the
taxpayer. This summary does not
purport to deal with all tax aspects
which may be important due to
the personal situation of an
individual investor. Investors are
therefore advised to discuss the
tax consequences of buying,
holding, redeeming, or selling
securities with their tax advisor.
Taxation of business assets of
persons subject to unlimited
tax liability in Germany
Taxation of non-resident
taxpayers under German law
Taxation of private individuals
subject to unlimited tax
liability in Germany
For a person who is subject to
unlimited tax liability in Germany
(i.e. a person whose residence or
32 Appendix
usual residence is in the Federal
Republic of Germany), and who
holds financial investments as
private (non-business) assets,
profits from capital investments
pursuant to section 20 (1) No 7
of the German Income Tax Act
(Einkommensteuergesetz –
“EstG”) are only incurred if the
repayment of the capital is
guaranteed and/or the investor
can claim interest payments
and/or other types of payment in
return for the provision of capital.
Therefore, a distinction must
be between the following
types of certificates:
The security grants neither
interest payments nor the
repayment of capital, and the
redemption price (and
consequently the value of the
security) relate exclusively to
the value of the underlying
instrument.
In two letters dated 21 July
1998, and 27 November 2001,
respectively, the German
Ministry of Finance clarified
that revenues from a financial
investment are not to be
treated as taxable revenues
from capital investment
provided that the repayment of
the invested capital depends
exclusively on the uncertain
development of an equity
index. This regulation applies
even if dividends, for example,
are included in the calculation
of the value of the equity
index. In the letter dated 27
November 2001, this view was
expressly extended to also
cover financial investments for
which the repayment of the
invested capital depends on
the development of a basket of
equities, or a single share.
This means that profits from
the sale or redemption of a
security with the characteristics
described above are not taxable
revenues from capital assets.
Profits realised on the sale
of private assets:
A person who is subject to
unlimited tax liability in Germany
is exempt from income tax on
the sale or redemption of
securities held as private
assets, provided that more
than one year has passed
between purchase and sale
or redemption. In contrast,
profits resulting from the
sale/redemption of a security
within one year after purchase
are subject to income tax
(plus a solidarity surcharge
equivalent to currently 5.5% of
the income tax burden). The
profit or loss is equivalent to
the difference between the
sales proceeds (or the cash
settlement paid by the issuer)
and the cost of purchase of the
security. Where physical
deliver of the underlying
instrument takes place, the
value of this underlying at the
moment of its being credited
to the creditor’s account is
considered in lieu of a cash
settlement. Losses are only
tax-deductible if less than one
year passes until the security is
sold or redeemed. These taxdeductible losses may be
offset only with taxable profits
from private sales of the
current, the preceding or the
following tax years.
The securities guarantee the
full repayment of capital, or a
guaranteed minimum amount
below the issue price, with
this minimum amount being
Appendix 33
dependent on the price
development of an underlying
instrument exposed to market
fluctuations. Such securities
fall under the definition of
‘financial innovations’ pursuant
to section 20 (2), sentence 1/
no. 4 sentence 1 of the EStG.
If these securities are sold or
redeemed, the profits from
sale or redemption are taxed
according to the so-called
market yield, which is defined
as the (positive or negative)
difference between the
consideration paid upon
purchase and the proceeds
upon sale or redemption of the
securities. Losses stemming
from sale or redemption result
in a negative market yield,
which may be tax-deductible
as negative revenue from
capital assets.
Interest income tax
(Zinsabschlagsteuer):
In the case of the sale or
redemption of ‘financial
innovations’, the (positive)
market yield is subject to the
interest income tax (plus 5.5%
solidarity surcharge on that tax
charge) if the securities were
bought or sold via a domestic
34 Appendix
German bank or financial
services provider where the
customer’s account is
maintained, and which has
kept the securities in safe
custody since the purchase.
Otherwise such domestic
German bank or financial
services provider is obliged to
withhold the interest income
tax (plus 5.5% solidarity
surcharge on that tax charge),
applying a flat rate of 30% of
the profits from the sale or
redemption of the securities.
This flat-rate withholding tax
procedure only covers interest
income tax, but is irrelevant for
the assessment of income or
corporation tax. The definition
of a ‘domestic German bank or
financial services provider’ also
covers domestic branches
of a foreign bank or financial
services provider, but excludes
foreign branches of a domestic
bank or financial services
provider.
Taxation of business assets of
persons subject to unlimited
tax liability in Germany
Persons or entities who are
subject to unlimited tax liability in
Germany, and who hold the
securities as part of their business
assets in Germany are subject to
trade tax (with a varying tax rate
among municipalities) and income
or corporation tax (plus 5.5%
solidarity surcharge on the income
or corporation tax) on profits made
on such securities, calculated on
the basis of the positive difference
between the sales proceeds or the
redemption payment and the
cost of purchase. No distinction
is made as to whether the
securities include a guaranteed
full repayment of capital.
Taxation of non-resident
taxpayers under German law
Where securities are held by a
person whose residence (or
ordinary residence) is outside
Germany, or a legal entity whose
registered office or place of
management is outside Germany,
the positive difference between
the sales proceeds and/or the
redemption payment and the cost
of purchase is subject to income
or corporation tax (plus 5.5%
solidarity surcharge on the income
or corporation tax liability) insofar
as these securities form part of
the business assets of a place of
operations (in which case the
taxable income may also be
subject to trade tax) or another
permanent establishment the
creditor maintains in Germany.
Interest income tax and the
solidarity surcharge are treated
as a prepayment on the
investor's income tax liability
(including solidarity surcharge
thereon), and are refunded in
the event of an overpayment.
Appendix 35
Notes
All products – all brochures
Please detach the fax form, and fax the completed form to +49 69 910-38673. Alternatively, post the form to
Deutsche Bank AG, X-markets Team, Große Gallusstrasse 10-14, 60272 Frankfurt/Main, Germany.
© 2003 Deutsche Bank AG.
This document is a summary of
the characteristics of the securities
presented. The complete terms
and conditions can be found in
the detailed sales prospectuses,
which are available from Deutsche
Bank AG, free of charge. Details
specified in this document do not
represent investment advice, but
shall be construed exclusively
for the purposes of product
description. In any case an
investment decision should be
made on the basis of the respective
sales prospectus. Any opinions
expressed reflect the current
views of Deutsche Bank AG and
are subject to change without
notice. Although details included
in this document were taken from
sources considered to be reliable,
the Bank will not assume any
liability for their accuracy,
completeness or adequacy. Past
performance is not indicative of
future returns. As described in the
individual sales prospectuses, the
sale of the securities is restricted
in various jurisdictions. In
particular, these securities must
not be marketed in the United
States of America, and must not
be offered for purchase or sale
to, or for the benefit of, any US
person. This document, and the
information contained therein,
may only be disseminated or
published in such states in which
this is permissible pursuant to the
prevailing statutory provisions.
The direct or indirect distribution
of this publication in the USA, the
UK, Canada and Japan, or its
distribution to US persons, are
forbidden. Xetra DAX® Index, Dow
Jones EURO STOXX 50SM Price
Index, Dow Jones STOXX 600SM
Price Index, Dow Jones Industrial
Average® Index, S&P 500® Index,
Nikkei 225 Index, Dow Jones
EURO STOXXSM Automobile Index,
Dow Jones EURO STOXXSM
Insurance Index (jointly the
“Indices”), S&P Biotechnology,
and S&P Oil are registered trade
or service marks of Deutsche
Börse AG, STOXX Limited and
Dow Jones & Company, Inc.,
Market Inc., Standard & Poor’s,
Nihon Keizai Shimbun Inc. (jointly
the “Holders”). The Holders
neither promote nor issue, sell or
advertise the certificates. The
Holders neither assume liability for
the results achieved by the use of
the Indices, nor do they guarantee
the level of one of the Indices
described above on a given
date. The Holders are free of all
responsibility and are not subject
to a duty to provide advice
regarding any possible mistakes
in the Indices.
Publication
Description
X-pert Certificates
The particular characteristic of X-pert certificates is that they
do not have a finite lifetime. In every other respect X-perts
work like traditional certificates: investors participate in a
one-to-one relation in the development of the underlying index.
Discount Certificates
DoubleChance Certificates
Parachute Certificates
Other certificates
Stock
at mi market
one-t
nimal
o-one
cost
ts
-per
– Inde
x Cert
ifica
tes with
out mat
urity
A discount certificate allows investors to participate in the
development of an index or a share, up to a certain cap level.
The price of a discount certificate is, in turn, lower than the
price of the underlying instrument.
An op
return portunit
y for
s wit
h a ris attrac
tive
k cus
Disc
hion
ount
Cert
ifica
The “double chance” evoked by the name of the product
means that at maturity – if the underlying instrument has
reached the cap level – investors will not only get the price of
the share, but additionally the difference between the cap level
and the issue price.
Doub
le
witho your pro
ut ad
dition fits
al ris
Dou
bleC
k
Parachute certificates, which are available based on a variety
of indices, include a limit to the downside, which will buffer
potential losses at maturity – just like a parachute would.
Keep
protecthe upsid
e,
t the
down
side
Para
tes
hance
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e Cert
Cert
ifica
ifica
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te TM
Deutsche Bank AG offers a wide variety of strategy, theme
and guarantee certificates. We will be glad to send you a
current overview of our certificates product range. If you
require information on a particular product, please indicate
the name, or the securities ID number.
Name / Securites ID Number
X-press Magazine
X-press – the client magazine published by X-markets – will
bring you new information about certificates and warrants
every month. It will give you a unique overview of the broad
range of products offered by X-markets and help you to take
the right investment decision. The integrated, comprehensive
X-markets product overview can be easily detached.
Please send the free brochures indicated to the following address:
First name
Last name
Street address
Postcode
36 Appendix
Order
Number
Town/city
ZB