the NeXt GeNeratiON OF COMMODitY iNVeStiNG...

white paper 2010

the NeXt GeNeratiON OF COMMODitY

iNVeStiNG StrateGieS

Deutsche Asset Management believes that commodities—which

are basic goods such as oil, metals and livestock—are an important

part of a diversified portfolio. They provide low correlation to other

asset classes and may serve as a hedge against rising interest rates

and rising inflation. Moreover, the emerging markets are creating

long-term demand for commodities.

Despite these potential benefits, many investors have avoided

commodity investment products due to their volatility. In our opinion,

however, the volatility of commodity investment products stems

from the fact that until recently, most of these products passively

allocated to the asset class, riding volatile commodity prices for

better or for worse. For instance, a commodity product might have

the same exposure to crude oil if it is priced at $30 or $130 per barrel.

We believe that active management can help address the volatility

of commodity investment products, helping more investors

participate in this important asset class. But how should investors

go about choosing a commodity investment product—especially

when we have recently seen a proliferation of these products?

In this report, we examine the differences between commodity

investment products in order to evaluate which use strategies

that may have the potential to increase risk-adjusted returns.

We conclude that investors may want to consider three distinct

characteristics in a commodity investment product: 1) the ability

to re-weight commodities as needed, 2) the ability to enhance roll

returns and 3) the ability to seek a measure of downside protection.

OutliNe

1 An introduction to commodities (page 2)

2 Potential benefits of investing in commodities (page 3)

3 Unique challenges of investing in commodities (page 9)

4 Mechanisms of potentially reducing risk and adding alpha (page 13)

5 Choosing a commodity investment product (page 16)

6 Implementing commodities as part of a broad portfolio (page 18)

ExECUTIvE sUMMAry

spurred by global demand trends and concerns about inflation, more and more investors are turning to commodities to help diversify their portfolios and increase return potential. This report examines the dynamics that drive the commodities market—and discusses ways for investors to participate in this unique asset class.

CONtriButOrS

Darwei Kung, portfolio manager, DWs Investments � n Jonathan Diorio, portfolio specialist, DWs Investments

William Chepolis, portfolio manager, DWs Investments (see page 19 for bios) �

W h I T E PA P E r / / PA g E 2

1 l AN INTrODUCTION TO COMMODITIEs

iMpOrtaNt riSk iNFOrMatiON

Commodity-related securities, including commodity-linked derivatives, create special risks for a commodity investment. Market price

movements or regulatory and economic changes will have a significant impact on the investment’s performance. Any investment that

concentrates in a particular segment of the market will generally be more volatile than an investment that invests more broadly. A

counterparty with whom the investment does business may decline in financial health and become unable to honor its commitments,

which could cause losses for the investment. Bond investments are subject to interest-rate and credit risks. When interest rates rise, bond

prices generally fall. Credit risk refers to the ability of an issuer to make timely payments of principal and interest. Investing in derivatives

entails special risks relating to liquidity, leverage and credit that may reduce returns and/or increase volatility. Investing in foreign securities,

particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes, and market

risks. A commodities investment is non-diversified and can take larger positions in fewer issues, increasing its potential risk.

Commodities can be broken down into five broad sub-sectors: energy, base metals (also referred to as industrial metals), precious metals,

agriculture and livestock. Energy includes brent crude oil, gas oil, heating oil, natural gas and WTI crude oil. Base metals include aluminum,

coal, copper, iron ore, lead, nickel, steel, tin and zinc. Precious metals include gold, palladium, platinum and silver. Agriculture includes

cocoa, coffee, corn, palm oil, rice rubber, soy meal, soybeans, soybean oil, sugar and wheat. Livestock includes feeder and liver cattle as

well as lean hogs and pork bellies.

Markets exist around the world to exchange commodities. however, some commodities are not traded on exchanges. For example, steel

is essential to the global economy, with world production coming in at 1.22 billion metric tonnes in 2009, according to the World steel

Association. Compare that to aluminum production (which exceeds the combined production of all the other nonferrous metals) of just

53.6 million tonnes over the same period, according to the World Aluminum Market. Despite its significance to the global economy, steel

is not traded on any global commodities exchanges. Why? Because the numerous grades of steel available make establishing a benchmark

difficult. Thus, steel prices are typically determined by individual contracts between producers and consumers. Because some commodities

are not traded on exchanges, investing directly in commodities may result in one having no exposure to certain raw materials.

There are two types of transactions to buy and sell commodities: Direct physical trading, where commodities themselves are bought and

sold, and derivatives trading, where contracts on commodities (such as futures) are bought and sold.

uNDerStaNDiNG DeriVatiVeS

A derivative is a security whose price is based on an underlying asset. Common derivatives include futures, which are contracts

obligating someone to buy or sell another asset (such as a stock or commodity) at a predetermined future date and price.

It is worth noting that contracts to buy and sell commodities differ from contracts to buy and sell other assets (namely, stocks and bonds)

in a number of ways. First, commodity contracts are not claims on corporations, but claims on real assets. second, unlike contracts to

buy or sell stocks and bonds, which can last forever, contracts on commodities tend to have a time limit (because commodities markets

are seasonal). Third, contracts to buy or sell stocks and bonds are based on expectations of future gains or losses, so they are valued by

attempting to predict future earnings. Commodity prices, on the other hand, are driven by supply and demand fundamentals. These differences

result in different return and risk drivers between contracts to buy and sell commodities and contracts to buy and sell other assets.


2 l POTENTIAl BENEFITs OF INvEsTINg IN COMMODITIEs

There are a number of reasons to consider investing in commodities, including low correlation to traditional asset classes, compelling return

potential, exposure to world economic growth and a potential measure of protection against unforeseen events, rising inflation and a weak

Us dollar. Additionally, price trends in commodities tend to last a long time. We describe each reason to consider investing in commodities

in more detail below. In the charts in this section, commodities are represented by the Dow Jones UBs Commodity Index. Natural

resources stocks are presented by 50% MsCI World Materials Index and 50% MsCI World Energy Index. Us stocks are represented

by the s&P 500 Index. Us bonds are represented by the Barclays Capital Us Aggregate Index. Us Treasury bills are represented by the

Citigroup 3-Month Treasury Bill Index. global stocks are represented by the MsCI World Index. global bonds are represented by the

Citigroup World government Bond Index. Us real estate is represented by the MsCI Us rEIT Index. see back page for index definitions.

COMMODitieS haVe eXhiBiteD lOw COrrelatiON tO Other MajOr aSSet ClaSSeS

One of the main benefits of investing in commodities is their low correlation to traditional asset classes, such as stocks and bonds.

Because portfolio volatility is a function of the correlation of the combined assets in a portfolio, adding commodities to a portfolio can

potentially help diversify a portfolio and thus help mitigate its overall volatility. Of course, diversification neither assures a profit nor

guarantees against loss.

source: Morningstar, Inc. as of 6/30/10. Past performance is no guarantee of future results. Correlation is a measure of how closely two variables move together over time.

A 1.0 equals perfect correlation, where variables more in the same direction. A –1.0 equals total negative correlation, where variables move in opposite directions. A 0 equals

no correlation. The values of equity investments are more volatile than those of other securities. Fixed-income investments are subject to interest-rate risk, and their value will

decline as interest rates rise. Commodities are long-term investments and should be considered part of a diversified portfolio; market-price movements, regulatory changes,

economic changes and adverse political or financial factors could have a significant impact on performance. Equity index returns include reinvestment of all distributions. Index

returns do not reflect fees or expenses, and it is not possible to invest directly in an index. see back page for index definitions.

Correlation for other time periods as of 6/30/10 5-year 10-year

Commodities 1.00 1.00

Natural resources stocks 0.79 0.66

Us stocks 0.47 0.33

Us bonds 0.15 0.08

Us Treasury bills 0.12 0.02

global stocks 0.57 0.43

global bonds 0.29 0.26

Us real estate 0.30 0.23

Commodities

Natural resources stocks

US stocks

US bonds

US Treasury bills

Global stocks

Global bonds

US real estate

0.0 0.2 0.4 0.6 0.8 1.0

0.07

0.03

1.00

0.60

0.27

0.36

0.22

0.23

COMMODITIEs hAvE ExhIBITED lOW COrrElATION TO OThEr MAJOr AssET ClAssEs

(15-year correlation as of 6/30/10)


COMMODITIEs hAvE PrOvIDED COMPEllINg rETUrN AND vOlATIlITy POTENTIAl

(average annual return and volatility as of 6/30/10)

10-year 15-year

Return Volatility Return Volatility

Commodities 4.41% 17.60% 5.38% 16.19%

Natural resources stocks 4.98% 19.98% 5.84% 18.73%

Us stocks –1.59% 16.16% 6.24% 16.07%

Us bonds 6.47% 3.83% 6.39% 3.76%

Us Treasury bills 2.56% 0.54% 3.43% 0.55%

global stocks –1.02% 16.70% 4.68% 15.89%

global bonds 6.52% 7.47% 5.39% 6.99%

Us real estate 9.67% 25.60% 9.61% 22.13%

COMMODITIEs hAvE hElPED ENhANCE rETUrNs AND lOWEr vOlATIlITy WhEN ADDED TO A

hyPOThETICAl DIvErsIFIED POrTFOlIO (average annual return and volatility, 6/30/00–6/30/10)

source for both charts: Morningstar, Inc. as of 6/30/10. Past performance is no guarantee of future results. volatility is represented by standard deviation, which measures

an investment’s volatility; the higher the standard deviation, the higher the volatility. The values of equity investments are more volatile than those of other securities. Fixed-

income investments are subject to interest-rate risk, and their value will decline as interest rates rise. Commodities are long-term investments and should be considered part of

a diversified portfolio; market-price movements, regulatory changes, economic changes and adverse political or financial factors could have a significant impact on performance.

Equity index returns include reinvestment of all distributions. Index returns do not reflect fees or expenses, and it is not possible to invest directly in an index. see back page for

index definitions.

return and volatility for other time periods as of 6/30/10 1-year 5-year

Return Volatility Return Volatility

50% Us stocks, 50% Us bonds 12.34% 8.39% 2.69% 8.95%

45% Us stocks, 45% Us bonds, 10% commodities 11.39% 8.42% 2.43% 9.20%

Ret

urn

Volitility

0% 2% 4% 6% 8% 10%

0%

1%

2%

3%

4%

50% US stocks, 50% US bonds: 2.74% return, 8.18% volatility

45% US stocks, 45% US bonds,10% commodities: 3.03% return, 8.13% volatility

COMMODitieS haVe prOViDeD COMpelliNG returN aND VOlatilitY pOteNtial

Most investors seek assets with low correlations, but they also want these assets to exhibit strong return potential. Commodities are

one such asset class: While past performance does not guarantee future results, commodities have historically provided compelling

returns with similar volatility as stocks as of 6/30/10, and the overall effect has been that commodities have helped enhance returns and

lower volatility when added to a diversified portfolio.


gDP grOWTh AND OIl DEMAND hAvE BEEN COrrElATED

(percentage change in oil demand vs. percentage change in gDP growth, 1986 to 2009)

source: Ihs global Insight for percentage change in gDP growth, International Energy Agency for percentage change in oil demand, as of 12/31/09.

–4%

–2%

0%

2%

4%

6%

8%

10%

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

% change in oil demand % change in GDP growth

While past performance is no guarantee of future results, this chart shows that oil demand and GDP growth have historically tended to move in the same direction.

COMMODitieS OFFer eXpOSure tO wOrlD eCONOMiC GrOwth

The world’s population has more than doubled in the past 50 years, and is expanding by more than 78 million people per year, according

to the United Nations as of 2008. The world population is also becoming more urban. In 2010, 3.5 billion of the world’s 6.9 billion people

are estimated to live in cities. By 2030, 5 billion of the world’s 8 billion people could live in cities, according to the United Nations as of

2009. Why does the growing and urbanizing population matter? Because as the world grows, it demands more commodities. As just one

example, there has been a correlation between the growth of global gross domestic product (gDP)—the value of all goods and services

produced in an economy—and the use of oil as far back as the 1980s.

COMMODITIEs OFFEr ExPOsUrE TO A grOWINg, UrBANIzINg POPUlATION

(world population growth, 1950 to 2030, in billions)

source: United Nations, 2009 for urban data and 2008 for world data.

0

3

6

9

12

15

203020252020201520102005200019951990198519801975 19701965196019551950

Urban population World population

Pop

ulat

ion

(bill

ions

)

2.5 2.8 3.0 3.3 3.7 4.1 4.44.8

5.3 5.7 6.16.5

6.9 7.37.7 8.0 8.3


Another way to understand how urbanization affects an economy is to compare motor vehicles statistics between the United states,

which is one of the most urbanized nations, and China, which is in the process of urbanizing but still very rural. In 2010, the United states

has 985 personal vehicles for every 1,000 drivers, while China has just 43 personal vehicles for every 1,000 drivers, according to

JD Power. With three times the population of the United states, according to the United Nations, that gives China plenty of potential

future demand for vehicles—and plenty of future demand for the commodities used to manufacture them.

eMerGiNG MarketS DriVe DeMaND FOr COMMODitieS

The number of cars in China addresses the other big driver of commodities—emerging countries' infrastructure spending. The

emerging markets are modernizing—and as countries develop, they spend more money on infrastructure, and infrastructure

requires commodities. China and India are good examples: Each has a population of approximately 1 billion people who are

demanding more food, more housing and more infrastructure.

COMMODitieS MaY OFFer a MeaSure OF pOteNtial prOteCtiON aGaiNSt uNFOreSeeN eVeNtS

Commodities may help provide a measure of potential protection against geopolitical risk, such as wars and embargos, or other

unforeseen events, such as earthquakes and hurricanes. That’s because commodity prices are a function of supply and demand.

Commodity prices tend to react differently to events that would otherwise be viewed negatively. For example, an earthquake, a war or an

oil spill may negatively impact stocks of commodity-producing companies, because it disrupts supply, which impacts the ability of those

companies to produce and sell their commodities. But this same disruption in supply may lead to higher commodity prices, potentially

benefiting investors in direct commodities.

COMMODitieS MaY OFFer a MeaSure OF pOteNtial prOteCtiON aGaiNSt riSiNG iNFlatiON

Many investors believe there has not been inflation in the United states since the 1970s. however, $100 in 1980 is worth only $37.86

today, according to the Consumer Price Index, a common measure of inflation. In other words, that $100 dinner in 1980 would now

cost you $264.12. Commodities may help provide a measure of potential protection against rising inflation because they are real assets,

so their prices typically rise with inflation. In fact, going back to 1975, commodities have performed well in years when inflation has

increased. Conversely, they have tended to underperform in years when inflation has decreased.

source: Morningstar, Bloomberg, Factset as of 12/31/09. Past performance is no guarantee of future results. The chart above is for illustrative purposes only and does not

represent any DWs fund. Commodities, bonds and stocks are represented by the s&P goldman sachs Commodities Index, Barclays Capital Us Aggregate Index and s&P 500

Index, respectively. The values of equity investments are more volatile than those of other securities. Fixed-income investments are subject to interest-rate risk, and their value

will decline as interest rates rise. Commodities are long-term investments and should be considered part of a diversified portfolio; market-price movements, regulatory changes,



COMMODITIEs hAvE PErFOrMED WEll WhEN INFlATION hAs rIsEN

(average annual return, 12/31/75–12/31/09)

Commodities Stocks

Below average and rising Above average and rising

Bonds

0%

10%

20%

30%

40%

6.2% 6.1%27.8% 8.4% 5.9%28.3%

Average inflation is the average US Consumer Price Index (CPI) inflation growth rate from 12/31/75 through 12/31/09, which was 4.5%. Inflation was considered rising when it was higher than it was one year prior.


source: Morningstar, Bloomberg, Factset as of 12/31/09. Past performance is no guarantee of future results. The chart above is for illustrative purposes only and does not

represent any DWs fund. Commodities, bonds and stocks are represented by the s&P goldman sachs Commodities Index, Barclays Capital Us Aggregate Index and s&P 500

Index, respectively. The values of equity investments are more volatile than those of other securities. Fixed-income investments are subject to interest-rate risk, and their value

will decline as interest rates rise. Commodities are long-term investments and should be considered part of a diversified portfolio; market-price movements, regulatory changes,



When dollar up When dollar down

Commodities Bonds Stocks

0%

3%

6%

9%

12%

15%

18%

21%

24%

14.5%6.4% 7.2%9.8% 12.7%12.4%

The dollar is represented by the US Dollar Index (DXY). The chart shows the returns of different assets when the DXY was higher than it was in the year-ago period ("dollar up") or lower than it was in the year-ago period ("dollar down").

COMMODITIEs hAvE PErFOrMED WEll WhEN ThE Us DOllAr hAs DEClINED

(average annual return, 12/31/76–12/31/09)

what iS iNFlatiON?

Inflation is not always represented clearly by the media. That’s because the media tends to use the core Consumer Price Index

(CPI) to measure US inflation, and it may not show the whole picture. First, core CPI does not account for rising energy and

food prices because these prices can be volatile. Second, 40% of core CPI consists of housing (depending on the exact CPI index

used). Third, investors may also want to consider global price and currency movements, as US inflation can be affected by

foreign factors. These dynamics may mean that instruments linked to core CPI may miss developing inflation trends.

COMMODitieS MaY OFFer a MeaSure OF pOteNtial prOteCtiON aGaiNSt a weak uS DOllar

Commodities may offer a measure of protection against a weak Us dollar for two reasons. First, because commodities are denominated

in Us dollars, a weak Us dollar drives commodities prices higher so producers can keep purchasing power parity for goods sold. second,

a weak Us dollar may allow countries with appreciating currencies to buy commodities at cheaper prices.


priCe treNDS iN COMMODitY MarketS haVe teNDeD tO laSt a lONG tiMe

As we’ve shown, adding commodities to a portfolio may potentially enhance risk-adjusted performance while giving investors access to

world economic growth and providing a possible hedge against a number of unforeseen events. But there’s one more reason to consider

investing in commodities now: Price trends in commodity markets have tended to last a long time. From 1971 through 2009, stocks and

commodities alternated seven times, during which time the commodity bull and bear markets have lasted approximately 18 years—and

we appear to be in the middle of a bull market for commodity prices.

WE MAy BE IN ThE MIDDlE OF A BUll MArKET FOr COMMODITIEs

(Us stock prices vs. commodity prices, 1871–2009)

source: Bloomberg for Us stock market, http://data.bls.gov/cgi-bin/surveymos for Producer Price Index (PPI), as of 12/31/09. Past performance is no guarantee of future

results. PPI is an index that measures the average change in selling prices received by domestic producers of goods and services over time. Each point is a 12-month

average of the s&P Index divided by the 12-month average of the PPI for All Commodities Index. The chart does not include reinvested dividends. The values of equity

investments are more volatile than those of other securities. Fixed-income investments are subject to interest-rate risk, and their value will decline as interest rates rise.

Commodities are long-term investments and should be considered part of a diversified portfolio; market-price movements, regulatory changes, economic changes and

adverse political or financial factors could have a significant impact on performance. Index returns do not reflect fees or expenses. It is not possible to invest directly in an

index. see back page for index definitions.

0

2

4

6

8

10

12

14

16

1871

1876

1881

1886

1891

1896

1901

1906

1911

1916

1921

1926

1931

1936

1941

1946

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

Commodities beat stock returns and inflation eventually roseStocks beat commodity returns and inflation eventually fell

Rel

ativ

e pr

ice

stre

ngth

, sto

cks

vs. c

omm

oditi

es

Post-Civil-War reconstruction ends in 1877.

The gold standard begins in 1879.

A deflationary boom ensues. Stocks rally.

The Post-WWI commodity

bubble bursts. Deflation

ensues in 1920. A bull market

begins.

Gold is nationalized and the US dollar is

devalued by two- thirds in 1933.

FDR's New Deal and reflation begin.

The Post-WWII commodity and inflation

bubble bursts around 1950. Disinflation ensues.

The Eisnehower equity bull market begins.

LBJ's “Great Society” begins in 1965.

The Vietnam War takes place. Nixon “closes the gold

window” in 1971. Inflation ensues.

Progressivism enters US politics. The Panic of 1907 occurs when the New York Stock Exchange falls close to 50% from its previous-

year peak.

WWII takes place from 1914 to 1918.

The stock market crash

of 1929 takes place.

US Federal Reserve Chief Paul Volcker curtails

inflation from 1981 to 1982. Reagan cuts taxes. The Soviet Union collapses. Disinflation rises. A bull

market begins.

OPEC proclaims an oil embargo in 1973. The Iranian government falls

in 1979.

The Saudis flood the market with inexpensive oil in 1981, forcing price cuts by OPEC.


3 l UNIqUE ChAllENgEs OF INvEsTINg IN COMMODITIEs

DIvErsIFyINg ExPOsUrE TO COMMODITIEs MAy hElP lOWEr vOlATIlITy

(three-year volatility of various commodities as of 6/30/10)

Aluminum

Coffee

Copper

Corn

Cotton

Crude oil

Heating oil

Lean hogs

Live cattle

Nickel

Silver

Soybean oil

Soybeans

Gold

Natural gas

Sugar

Unleaded gas

Wheat

Zinc

Dow Jones UBS Commodity Index

0% 10% 20% 30% 40% 50%

28.60%

32.11%

36.95%

35.26%

31.37%

41.38%

36.95%

27.93%

12.34%

44.18%

35.93%

35.67%

33.65%

22.85%

41.86%

42.76%

41.76%

39.79%

35.87%

23.93%

As we have shown, there are a number of reasons to consider investing in commodities, including low correlations, compelling return

potential, exposure to world economic growth and a potential measure of protection against unforeseen events, rising inflation and a

weak Us dollar. however, there are also many unique challenges of investing in commodities.

some of these challenges are basic. For example, the commodities market consists of many participants, including producers, long-

term investors and speculators—the latter of whom may have short-term horizons, meaning their trading can quickly impact supply and

demand dynamics in the commodity market.

In the past, some investors have speculated on individual commodities or tried to time the market to invest in commodities over shorter

time periods. The risk of this investment strategy is that because commodity investments are volatile, selecting ideal commodities or

entry points can be difficult.

Investing in a diversified basket of commodities may help lower volatility. The chart below shows the volatility of the 19 commodities that

comprise the Dow Jones UBs Commodity Index as well as the volatility of the index itself. As you can see, in most cases, investing in a

basket of commodities has reduced volatility vs. investing in individual commodities. This is interesting given the popularity of products

that track single commodities, such as crude oil and natural gas.

source: Morningstar, Inc. as of 6/30/10. Past performance is no guarantee of future results. The chart above is for illustrative purposes only and does not represent any

DWs fund. Commodities are represented by Dow Jones UBs Commodity Index sub-indices. volatility is represented by standard deviation, which measures an investment’s

volatility; the higher the standard deviation, the higher the volatility. Index returns assume reinvestment of all distributions. Index returns do not reflect fees or expenses and it

is not possible to invest directly in an index. see back page for index definitions. see next page for volatility over other time periods.

W h I T E PA P E r / / PA g E 1 0

hIgh ENErgy WEIghTINg IN TrADITIONAl COMMODITy INDICEs MAy INCrEAsE vOlATIlITy

(commodity index sector weights as of 6/30/10)

source: DWs as of 6/30/10. Past performance is no guarantee of future results. see back page for index definitions.

S&P GSCI Dow Jones UBS Commodity Index

Energy Agriculture Industrial metals Precious metals Livestock

0%

10%

20%

30%

40%

50%

60%

70%

6.86%5.07%

31.84% 13.83% 29.12% 7.83% 17.59%3.65%

14.59%69.63%

The S&P GSCI has more than double the energy weighting of the Dow Jones UBS Commodity Index, which has resulted in the S&P GSCI having 30% more

volatility over the past five years ending 6/30/10 (a standard deviation of 28.25% vs. 20.53% for the Dow Jones UBS Commodity Index).

But investing in a diversified basket of commodities cannot eradicate all of the challenges of investing in commodities. To explain why,

it’s important to understand how traditional commodity indices—which include the Dow Jones UBs Commodity Index, the s&P goldman

sachs Commodities Index (gsCI) and the Deutsche Bank liquid Commodities Indices (DBlCI)—and the products benchmarked to them

(which we will henceforth refer to as “strategies”) work. These strategies invest in a static number of commodities with weights that do

not change (which is why these strategies are referred to as “passive” commodity investing strategies). As a result, passive commodity

investing strategies have a number of limitations: They can be static, they roll futures contracts on a predefined schedule (which can

decrease return potential) and they can be volatile. let’s look at each limitation in more detail.

Volatility for other time periods as of 6/30/10 5-year 10-year Volatility for other time periods as of 6/30/10 5-year 10-year

Aluminum 25.08% 20.62% silver 33.93% 29.21%

Coffee 28.01% 31.49% soybean oil 29.97% 29.61%

Copper 35.72% 30.29% soybeans 29.08% 28.07%

Corn 33.12% 28.19% gold 20.12% 17.11%

Cotton 26.64% 29.83% Natural gas 51.62% 55.95%

Crude oil 35.24% 33.91% sugar 38.85% 34.46%

heating oil 33.65% 33.63% Unleaded gas 41.45% 37.72%

lean hogs 24.86% 25.42% Wheat 34.17% 28.61%

live cattle 13.10% 14.95% zinc 38.17% 30.02%

Nickel 42.74% 40.97% Dow Jones UBs Commodities Index 20.53% 17.60%

source: Morningstar, Inc. as of 6/30/10. Past performance is no guarantee of future results. The chart above is for illustrative purposes only and does not represent any

DWs fund. Commodities are represented by Dow Jones UBs Commodity Index sub-indices. volatility is represented by standard deviation, which measures an investment’s

volatility; the higher the standard deviation, the higher the volatility. Index returns assume reinvestment of all distributions. Index returns do not reflect fees or expenses and it is

not possible to invest directly in an index. see back page for index definitions.

liMitatiON 1: traDitiONal COMMODitY iNVeStiNG StrateGieS CaN Be StatiC

Traditional commodity investing strategies typically set weights based on commodities with the largest trading volume or greatest global

consumption. For example, an index based on world consumption, such as the s&P gsCI, may have a high weighting to energy because

energy commodities (specifically oil) dominate world consumption. Because energy commodities can be volatile, this method may

potentially lead to greater volatility.


NATUrAl gAs IllUsTrATEs ThE NEgATIvE EFFECTs OF A PAssIvE rOllINg sTrATEgy

(s&P gsCI natural gas excess return vs. spot return, 12/31/99–12/31/09)

source: DeAM and Bloomberg as of 12/31/09. Past performance is no guarantee of future results. The graph above is for illustrative purposes only and does not represent

any DWs fund. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly in an index.

GSCI natural gas excess return GSCI natural gas spot retun

Spo

t re

turn

and

exc

ess

retu

rn in

dex

0

100

200

300

400

500

600

2009-122008-122007-122006-122005-122004-122003-122002-122001-122000-121999-12

liMitatiON 2: traDitiONal COMMODitY iNVeStiNG StrateGieS rOll FutureS CONtraCtS ON a

preDeFiNeD SCheDule

As we explained earlier, investing in commodities entails buying a contract to buy or sell a specific commodity on a specific date. This

contract, called a future, typically expires monthly. When that happens, passive commodity investing strategies automatically purchase—

or “roll into”—the next available contract, which may be higher-priced. This can negatively impact returns.

Additionally, passive commodity investing strategies may experience increasing difficulty as they all generally roll into the same contracts on

the same days, leading to more crowded trading.

The chart below illustrates the potential negative effect of automatically rolling into the next available contract. The spot price of natural

gas (which is simply the price at which a particular commodity can be currently bought or sold) rose twofold over the past 10 years

ending 12/31/09. At the same time, an investment in natural gas contracts that was continually rolled to the next month’s contract

declined almost 95% over the same period. In other words, the natural gas contracts would be almost worthless today.


liMitatiON 3: traDitiONal COMMODitY iNVeStiNG StrateGieS CaN Be VOlatile

Most commodity indices set commodity weights at the beginning of each year. These weights then drift with price changes throughout

the year. Those price changes can be significant. As the chart below illustrates, returns for the more liquid commodities in the Dow

Jones UBs Commodity Index have varied dramatically from quarter to quarter during the past three years ending 6/30/10. On average,

the difference in return between the best- and worst-performing commodity in the Dow Jones UBs Commodity Index on a quarter-to-

quarter basis is approximately 35% over the past three years, according to Morningstar as of 6/30/10.

The result is that some commodities gain disproportionately high weightings—and events that impact those commodities can cause

significant volatility in those indices and the commodity investing strategies that are benchmarked to them.

Additionally, because commodity prices can be cyclical, when global demand is weak, commodities can go through extended periods

of negative returns. This was made clear during 2008—when the Dow Jones UBs Commodity Index returned –35.65%, according to

Morningstar—erasing years of commodity gains.

vAryINg COMMODITy WEIghTs CAN lEAD TO sIgNIFICANT vOlATIlITy

(quarterly returns over past three years ending 6/30/10)

2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2

gold –2.45% 14.36% 11.81% 9.20% 0.68% –5.72% 0.24% 4.23% 0.09% 8.54% 8.49% 1.45% 11.67%

heating oil 7.10% 6.75% 18.59% 12.97% 37.22% –27.95% –52.76% –8.35% 23.95% –3.26% 9.69% 1.84% –9.84%

Crude oil –0.56% 17.05% 20.71% 6.71% 39.87% –28.32% –56.29% –18.69% 26.33% –4.75% 6.67% 3.47% –13.57%

Corn –13.05% 5.54% 17.99% 22.06% 25.29% –36.07% –20.11% –3.13% –16.28% –4.57% 16.11% –19.36% –0.69%

Wheat 30.02% 54.40% –7.57% 2.71% –10.32% –22.86% –13.49% –14.72% –5.08% –19.81% 13.97% –19.27% –0.07%

Aluminum –2.72% –8.72% –5.73% 22.94% 2.90% –23.32% –38.28% –12.10% 14.85% 14.24% 16.05% 2.66% –16.15%

highest 30.02% 54.40% 20.71% 22.94% 39.87% –5.72% 0.24% 4.23% 26.33% 14.24% 16.11% 3.47% 11.67%

lowest –13.05% –8.72% –7.57% 2.71% –10.32% –36.07% –56.29% –18.69% –16.28% –19.81% 6.67% –19.36% –16.15%

Difference 43.06% 63.12% 28.28% 20.23% 50.19% 30.36% 56.53% 22.92% 42.60% 34.05% 9.45% 22.83% 27.82%

source: Morningstar, Inc. as of 6/30/10. Past performance is no guarantee of future results. The chart above is for illustrative purposes only and does not represent any DWs

fund. Commodities are represented by Dow Jones UBs Commodity Index sub-indices. Index returns assume reinvestment of all distributions. Index returns do not reflect fees

or expenses and it is not possible to invest directly in an index. see back page for index definitions

uNDerStaNDiNG alpha

Alpha refers to returns above and beyond those of a benchmark.


index and inception date average annual return average annual volatility Sharpe ratio

1-year 3-year 5-year 1-year 3-year 5-year 1-year 3-year 5-year

DBlCI (2/28/03) –2.31% –7.60% –0.62% 18.51% 28.63% 24.03% –0.05 –0.17 –0.01

DBlCI-Mr (2/28/03) 0.91% –1.54% 9.55% 19.50% 27.06% 23.32% 0.13 0.03 0.40

Difference between DBlCI-Mr and DBlCI +3.22% +6.06% +10.17% +0.99% –1.57% –0.71% +0.18 +0.20 +0.41

source: DeAM, Bloomberg and Morningstar, Inc. as of 6/30/10. Past performance is no guarantee of future results. volatility is represented by standard deviation, which

measures an investment’s volatility; the higher the standard deviation, the higher the volatility. sharpe ratio measures risk-adjusted performance; the higher the sharpe ratio, the

better the risk-adjusted performance. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly in an index.

see back page for index definitions.

rE-WEIghTINg hAs INCrEAsED rIsK-ADJUsTED rETUrN POTENTIAl

(average annual return, volatility and sharpe ratio as of 6/30/10)

given the challenges of investing in commodities, investors may want to look for three distinct abilities when considering a commodity

investment product: 1) the ability to re-weight commodities as needed, 2) the ability to enhance roll returns, and 3) the ability to seek a

measure of downside protection in volatile markets. In examining these abilities, we look at three next-generation Deutsche Bank liquid

Commodity Indices (DBlCI), which were designed to address many of the limitations of passive commodity investing strategies.

CharaCteriStiC 1: the aBilitY tO re-weiGht COMMODitieS aS NeeDeD

Addresses limitation 1: Traditional commodity investing strategies can be static

On 2/28/03, Deutsche Bank launched an index called the DBlCI–Mean reversion (DBlCI-Mr). The goal of the DBlCI-Mr was to

address the changing price dynamics of various commodities by exploiting the tendency of commodity prices to trade within wide but

defined ranges.

Commodity prices tend to mean revert—i.e., eventually move back towards their mean or average—because of supply and demand

factors. The reason is based on fundamental economics. If the price of a commodity falls below a threshold, profit margin for producers

will be squeezed and weaker players will exit the market; at the same time, demand will increase, driving the price up. generally, if the

price of a commodity rises too high, consumers will substitute it with another commodity or will reduce consumption, when possible; at

the same time, higher margins will drive supply up and bring prices down.

Accordingly, individual commodity weights in the DBlCI–Mr are re-balanced so that “expensive” commodities have their weights

reduced while “cheap” commodities have their weights increased according to a pre-defined formula. This process, which is rules-based,

looks at differences in one-year and five-year average prices to weight commodities.

In the chart below, we compare the DBlCI–Mr to a passive commodity investing index, the DBlCI. The DBlCI compares well with the

DBlCI–Mr because it invests in the same commodities (six of the most liquid commodities, namely crude oil, heating oil, corn, wheat,

aluminum and gold with the same weights). As you can see from the chart below, the DBlCI–Mr’s re-weighting methodology has

generated compelling excess returns over the three available time periods.

4 l MEChANIsMs OF POTENTIAlly rEDUCINg rIsK AND ADDINg AlPhA


CharaCteriStiC 2: the aBilitY tO eNhaNCe rOll returNS

Addresses limitation 2: Traditional commodity investing strategies roll futures contracts on a predefined schedule

On 5/31/06, Deutsche Bank launched an index called the DBClI–Optimum yield (DBlCI–Oy). As we explained earlier, investors in

passive commodity investing products, which roll automatically into the higher-priced future contract at expiration, may potentially

experience a lower return since they are continually “buying high.” The DBlCI–Oy is designed to address this problem by carefully

selecting the futures contracts that a commodity investing strategy rolls into at expiration.

In the chart below, we compare the DBlCI–Oy to a passive commodity investing index, the DBlCI. The passive DBlCI compares

particularly well with the DBlCI–Oy because it invests in the same commodities (six of the most liquid commodities, namely crude oil,

heating oil, corn, wheat, aluminum and gold) with the same weights. As you can see from the chart below, the DBlCI–Oy’s methodology

has generated compelling excess returns over the two available time periods.

ENhANCINg rOll rETUrNs hAs INCrEAsED rIsK-ADJUsTED rETUrN POTENTIAl

(average annual return, volatility sharpe ratio as of 6/30/10)


1-year 3-year 1-year 3-year 1-year 3-year

DBlCI (2/28/03) –2.31% –7.60% 18.51% 28.63% –0.05 –0.17

DBlCI–Oy (5/13/06) –1.27% –3.29% 19.37% 27.74% 0.02 –0.03

Difference between DBlCI–Oy and DBlCI +1.04% +4.31% +0.86% –0.89% +0.07 +0.14




see back page for index definitions.


DBlCI-Mr PlUs MAy INCrEAsE rIsK-ADJUsTED rETUrN POTENTIAl OvEr lONgEr-TErM PErIODs

(average annual return, volatility and sharpe ratio as of 6/30/10)


1-year 3-year 1-year 3-year 1-year 3-year

DBlCI-Mr (2/28/03) 0.91% –1.54% 19.50% 27.06% 0.13 0.03

DBlCI-Mr Plus (6/20/07) –6.45% 8.88% 16.13% 18.41% –0.34 0.49

Difference between DBlCI-Mr Plus and DBlCI-Mr –7.36% +10.42% –3.37% –8.65% –0.47 +0.46




see back page for index definitions

CharaCteriStiC 3: the aBilitY tO Seek a MeaSure OF pOteNtial DOwNSiDe prOteCtiON iN

VOlatile MarketS

Addresses limitation 3: Traditional commodity investing strategies can be volatile

Finally, we look at the ability to allocate away from commodities if the asset class as a whole appears too expensive. here we examine

the DBlCI-Mr Plus, which Deutsche Bank launched on 6/20/07. This index combines the DBlCI-Mr’s approach to re-weighting

commodities with a quantitative, rules-based methodology that address the fact that commodities can suffer prolonged periods of negative

returns—particularly in environments where global demand is weak—and seeks to help immunize returns from such downturns.

To do so, the DBlCI-Mr Plus attempts to detect longer-term commodity cycles by differentiating between short-term price movements

and long-term trends. Based upon its methodology, in periods when exposure to commodities is relatively high, any sharp drop in

commodity returns will lead to an immediate and significant reduction in the DBlCI-Mr Plus’s exposure to commodities. A series of

moderate, negative returns over time will lead to a gradual reduction in the exposure to commodities. The opposite is the case during

upturns, when exposure to commodities is relatively low.

Money not allocated to commodities is allocated to Us Treasury bills. Thus, if the DBlCI-Mr Plus were fully allocated to commodities,

it would have the same returns as DBlCI-Mr. If it were fully allocated away from commodities, it would have the same returns as Us

Treasury bills.

since the DBlCI-Mr Plus utilizes the same dynamics as the DBlCI-Mr, with one addition—the ability to allocate away from

commodities—we can look at the difference between the two indices to determine how the DBlCI-Mr Plus’s downside protection

component affects return and volatility. As you can see from the chart below, the DBlCI-Mr Plus methodology may underperform in the

bull markets seen in the past year, but it may have the potential to help improve performance and lower volatility over the longer term.


While a number of mutual funds offer access to commodities

through stocks of commodity-related companies, investments

in direct commodities (i.e., commodity futures) through mutual

funds remain relatively new to the typical investment portfolio.

It wasn’t until 2009 that Morningstar created a direct commodity

mutual fund category in the United states. Today, investors can

gain access to commodities in a number of ways. however, most

commodity investing products fit into five main categories. In this

section, we’ll look at each in more detail.

GrOwth OF aN aSSet ClaSS

The direct commodities asset class, as represented by the newly

created Commodities Broad Basket Morningstar category, has

garnered more than $12 billion in new sales in the past year

alone, according to Strategic Insight Simfund as of 12/31/09.

This growth is impressive compared to Morningstar’s Natural

Resource category, which garnered $4.8 billion in assets, or

other alternative categories, such as Real Estate ($3.7 billion)

and Long-Short ($6.9 billion) during the same time period.

Natural reSOurCe StOCk FuNDS

Natural resource stock funds typically invest in the stocks of

companies that produce natural resources.

A benefit of investing in natural resource stock funds is that they

offer exposure to commodities that investors would not typically

obtain by investing directly in direct commodities. One example

is steel, which, as we explained earlier, is not traded on any global

commodity exchange.

Natural resource companies can also attempt to manage some

of the risk associated with weaker commodity demand by cutting

back capacity and managing resources and capital.

however, while past performance does not guarantee future

results, natural resource stocks have actually exhibited higher

volatility than direct commodities over the past 10 and 15 years

ending 6/30/10, as shown on page 5. Additionally, natural resource

stocks exhibit high correlation to the s&P 500 Index. Over the

past 10 years ending 6/30/10, natural resource stocks had a

0.75 correlation to the s&P 500 Index. given this high historical

volatility and correlation, natural resource stock funds may lack

the diversification benefits that direct commodity investments

may provide.

paSSiVe COMMODitY iNVeStMeNt prODuCtS

Passive commodity investment products typically track passive

commodity indices, such as the Dow Jones UBs Commodity

Index, s&P gsCI and DBlCI.

Because these products tend to be inexpensive, they may be an

option to consider for investors looking to gain cheap access to

the commodities market.

As we’ve shown, however, passive commodity investing

strategies have a number of limitations: They’re static, they can be

volatile and they roll futures contracts on a predefined schedule,

which may decrease returns.

paSSiVe COMMODitY iNVeStMeNt prODuCtS

with COllateral alpha DriVerS

We believe investing in commodities is capital-efficient, meaning

it only takes a small portion of a product’s assets to gain full

exposure to the commodities market. As a result, a large portion

of a commodity product’s assets can be invested outside of

commodities. This investment outside of commodities is called

a collateral portfolio—and some passive commodity investment

products seek to add value through this collateral portfolio.

To understand how a collateral portfolio works, consider the

hypothetical example of an individual who wants to invest

$100 in commodities. This investor might gain $100 worth of

exposure to the commodities market by purchasing a commodity

futures contract for $25. The remaining $75 could be invested

elsewhere—perhaps in fixed-income investments. These non-

commodity investments would be considered a collateral portfolio.

The collateral portfolio, given its investments in other types

of securities, may add another level of diversification and the

potential to improve returns. Of course, diversification neither

assures a profit nor guarantees against loss.

however, investors should be aware of new risks added by

a collateral portfolio. For instance, a collateral portfolio may

5 l ChOOsINg A COMMODITy INvEsTMENT PrODUCT


be invested in longer-term bonds, which could be negatively

impacted by rising inflation and rising interest rates—a scenario

that may not correspond with the reason the investor is investing

in commodities in the first place (to hedge against inflation, for

example). Other risks that may be introduced by a fixed-income

collateral portfolio include interest-rate risk and credit risk.

lONG-ShOrt COMMODitY iNVeStMeNt prODuCtS

long-short products, in addition to buying securities (i.e., taking

long positions), also sell securities short, which involves selling

borrowed securities in anticipation of a price decline, then returning

an equal number of the securities at some point in the future.

long-short commodity investment products are often referred to

as “managed futures” or commodity trading advisors (CTAs). They

typically trade commodities, along with other futures contracts,

both long and short. These products seek to create returns

regardless of dynamics in the commodity market, and they seek to

provide diversification and downside protection potential.

however, long-short commodity investment products may

underperform in commodity or equity bull markets. That’s because

they typically aren’t benchmarked to a commodity index, and

they tend to have little correlation to any asset class, including

commodities. For example, these products (as represented by

the Barclay CTA Index) had a correlation of only 0.32 to direct

commodities (as represented by the Dow Jones UBs Commodity

Index) over the past 10 years ending 12/31/09, according to

Morningstar.

aCtiVelY MaNaGeD COMMODitY

iNVeStMeNt prODuCtS

Actively managed commodity investment products have the ability

to overweight and underweight commodities in much the same

way that some stock-fund managers overweight and underweight

stocks in the s&P 500 Index.

Actively managed commodity investment products may have the

potential to outperform traditional passive commodity benchmarks

because individual commodities have different supply and demand

dynamics and can be driven by different factors at different times.

For instance, a bad corn harvest may lead to higher agricultural

prices but may not increase the price of industrial metals.

Overall, the product’s manager and the manager’s investment

process are some of the most important elements to examine

when investing in an actively managed commodity investment

product (as well as a long-short commodity investment product),

since you’re betting on the manager’s ability to go long (or

overweight) individual commodity winners and go short (or

underweight) the losers.

the pOteNtial BeNeFit OF MaNaGiNG

allOCatiONS

Commodities consist of a number of distinct sectors (energy,

agriculture, base metals, precious metals and livestock), each

of which has unique characteristics. Different commodities

indices have different weights to these sectors. For example,

some provide more than 70% allocation to energy, while

others provide closer to 30%. In our view, neither is optimal.

In some market environments, investors may want to increase

exposure to energy. In other market environments, they

may want to reduce it. Thus, some products overweight and

underweight commodities. Overweighting means having

a higher weighting in a given sector or security than a

benchmark; underweighting means having a lower weighting.

SeleCtiNG a COMMODitY iNVeStMeNt prODuCt

Investors should examine their objectives when choosing a

commodity investment product. Investors who want to make their

own tactical decisions—meaning they decide when to enter and

exit the market—or who are cost sensitive may prefer passive

commodity investment products. Investors who are seeking

absolute return potential may prefer long-short commodity

investment products. however, longer-term investors seeking

long exposure with an element of alpha and risk management

may prefer actively managed commodity investment products.

CONSiDer the riSkS

All of these products have risks. stocks may decline in value. Also,

because these products invest in commodity-related securities,

including commodity-linked derivatives, they may subject the fund

to special risks. Because they concentrate in a particular segment

of the market, they will generally be more volatile than products

that invest more broadly. Market-price movements or regulatory

and economic changes will have a significant impact on their

performance. Investing in derivatives entails special risks relating

to liquidity, leverage and credit that may reduce returns and/or

increase volatility. short sales could magnify losses and increase

volatility. Additionally, a counterparty with whom the product does

business may decline in financial health and become unable to

honor its commitments, which could cause losses for the product.


6 l IMPlEMENTINg COMMODITIEs As PArT OF A BrOAD POrTFOlIO

As we’ve explained, there are a number of reasons to consider

investing in commodities, including low correlation to traditional

asset classes, compelling return potential, exposure to world

economic growth, and a potential measure of protection

against unforeseen events, rising inflation and a weak Us dollar.

Additionally, we have seen a tremendous amount of assets

flowing into fixed-income portfolios, and commodities may help

complement the fixed-income portion of a portfolio given that

commodities may benefit from rising interest rates while fixed-

income assets may be negatively impacted.

Investing in commodities is not without risks, however.

speculators may have short-term horizons, and their trading can

quickly impact supply and demand dynamics in the commodity

markets. The influx of investment money into the commodity

markets has caused increased tightness in some markets,

especially in the front months, when many passive indices

or products roll their contracts. Commodities prices can be

cyclical, and when global demand is weak, they can go through

extended periods of negative returns. (Commodities are long-

term investments and should be considered part of a diversified

portfolio, as market-price movements, regulatory changes,

economic changes and adverse political or financial factors could

have a significant impact on performance.)

In an attempt to maximize the benefits and minimize the risks, in

the past decade there have been a number of developments in

the way commodity exposure is constructed.

In particular, direct investments in commodities have become

more widespread. We believe investors should consider

allocating a piece of their alternative portfolio to this asset class—

using a risk-conscious approach—to complement traditional

stocks and bonds.

given the unique challenges of investing in commodities,

investors may want to look for three distinct abilities when

considering a commodity investment product: 1) the ability to

re-weight commodities as needed, 2) the ability to enhance

roll returns, and 3) the ability to seek a measure of downside

protection in volatile markets.


DArWEI KUNg

Kung, a portfolio manager, manages the commodities portion of DWs Enhanced Commodity securities Fund. With

a total of 10 years of investment industry experience, he has extensive experience in risk modeling and quantitative

trading. he received a bachelor’s degree in computational finance and a master’s degree in electrical engineering from the

University of Washington, as well as a master’s degree in business administration from Carnegie Mellon University.

WIllIAM ChEPOlIs

Chepolis, CFA, a portfolio manager, manages the fixed-income portion of DWs Enhanced Commodity securities Fund.

he joined the firm in 1998. With a total of 25 years of investment industry experience, he has extensive experience

managing derivative investments and fixed-income assets. he received a bachelor’s degree from the University

of Minnesota.

JONAThAN DIOrIO

Diorio, a senior portfolio specialist, covers commodities for DWs Investments. he joined the company in 2002 and served

as head of DWs Investments' closed-end mutual fund business before moving into the role of portfolio specialist. he

received a bachelor’s degree in business from loyola University and a master’s degree in business administration from

New york University’s stern school of Business.

AUThOr BIOgrAPhIEs

© 2010 DWs Investments Distributors, Inc. All rights reserved. PM102843 (7/10) r-17961-1 COMM-WhITE

DWS Investments Distributors, Inc.222 south riverside Plaza Chicago, Il 60606-5808www.dws-investments.com [email protected] (800) 621-1148

NOT FDIC/NCUA INSURED MAY LOSE VALUE

NO BANK GUARANTEE NOT A DEPOSIT

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

DWs Investments is part of Deutsche Bank’s Asset Management division and, within the Us, represents the retail asset management activities of Deutsche Bank Ag, Deutsche Bank Trust Company Americas, Deutsche Investment Management Americas Inc. and DWs Trust Company.

OBTAIN A PROSPECTUS To obtain a summary prospectus, if available, or prospectus, download one from www.dws-investments.com, talk to your financial representative or call (800) 621-1048. We advise you to carefully consider the product’s objectives, risks, charges and expenses before investing. The summary prospectus and prospectus contain this and other important information about the investment product. Please read the prospectus carefully before you invest.

Cert no. XXX-XXX-XXXX

The opinions and forecasts expressed herein by the fund managers and product specialist do not necessarily reflect those of

DWs Investments, are as of 6/30/10 and may not come to pass.

INDEx DEFINITIONs

The Barclays Capital US Aggregate Index is widely considered representative of the Us bond market. The Barclay CTA Index is a

benchmark of representative performance of commodity trading advisors (CTAs). The Citigroup 3-Month Treasury Bill Index is an

unmanaged index reflecting and an average of the last three three-month Treasury-bill issues. The Citigroup World Government Bond

Index consists of worldwide fixed-rate government bonds with remaining maturities greater than one year. The DBLCI tracks six of the

most liquid commodities, namely crude oil, heating oil, corn, wheat, aluminum and gold. The DBLCI-MR tracks the same six commodities

as the DBlCI, but attempts to enhance returns by actively overweighting, underweighting or shorting each commodity based on price

movements. The DBLCI-MR Plus tracks the same six commodities as the DBlCI, but attempts to enhance returns by tactically reducing

commodity exposure when commodities appear overvalued. The DBLCI-OY tracks the same six commodities as the DBlCI, but

attempts to enhance returns by managing when contracts are rolled. The MSCI US REIT Index tracks the most actively traded Us real

estate investment trusts (rEITs) and is designed to measure real estate equity performance. The S&P 500 Index is widely considered

representative of the Us stock market. The Dow Jones UBS Commodities Index is composed of futures contracts on physical

commodities. The MSCI World Index is a measure of stock markets around the world, including North America, Europe, Australia and

Asia. The MSCI World Energy Index measures the performance of energy equities in world developed markets. The MSCI World

Materials Index measures the performance of material equities in world developed markets. The MSCI US REIT Index tracks the most

actively traded Us real estate investment trusts (rEITs) and is designed to measure real estate equity performance. The S&P Goldman

Sachs Commodities Index measures an unleveraged, long-only investment in futures that are broadly diversified across the spectrum

of commodities.

the NeXt GeNeratiON OF COMMODitY iNVeStiNG...

Documents

Transcript of the NeXt GeNeratiON OF COMMODitY iNVeStiNG...