EFTA01421840.pdf

Spectrum Asset Management / Principal Adviser Select Preferred Securities Investment Philosophy Spectrum Preferred Securities is managed to an intermediate duration, and is predominantly comprised of $25 Par Preferred Securities that trade on the NYSE. Spectrum feels that because retail investors are the primary owners of $25 Par Preferred Securities, there is more inefficiency, and more trading opportunities that can be exploited than are usually found with other fixed income sectors that are owned primarily by institutional investors Spectrum's strategy provides yield enhancement over traditional fixed income portfolios without subjecting the portfolio to increased credit risk. Investment Selection Process Spectrum invests in issues that offer high quality, risk-adjusted yield premiums and compensation for any subordination, liquidity, maturity, and call differences. Only issuers whose senior unsecured debt is rated BBB-, or above by at least two credit rating agencies are included in Spectrum's investment universe. Key drivers in the security selection process are credit strength and yield. For a security to be considered for investment, the credit status of the issuer must be improving or stable. The security yield must be attractive, given the credit rating and credit trend relative to other preferred securities. Sell decisions can be either a function of a credit development or recognition that the preferred yield has become "rich" relative to the debt level. Approximately 30-40% of the portfolio will qualify for the 15% tax rate on dividends. Firm/Product Info Date Founded Firm Assets ($B) Firm Employee Ownership (%) Inception Date Vehicle Assets ($B) Analyst Commentary Spectrum underperformed the Bank of America Merrill Lynch Preferred Stock Fixed Rate Index (POP1) in 01 (+1.0% vs. +1.6%). During the quarter, relative underperformance came from a variety of areas, including Domestic Banking, Foreign Banking, Industrial, REIT Preferreds, and Utilities. From a security selection standpoint, Banking names that were relative detractors included Wells Fargo, JP Morgan, UBS, and HSBC. Additional detractors EFTA01421840 included General Electric, Public Storage, Aegon, Partner Re, and the Southern Company. Conversely, sectors that generated relative gains for the Strategy included Life Insurance, Media, and Foreign Reinsurance. Among the names that provided positive contributions to return were Royal Bank of Canada, Met Life, BofA, US Bank, Renaissance Re, American Express, and Capital One. The Manager continues to believe that due to Preferreds' subordinated nature and subsequent yield premium, they offer an attractive opportunity versus high-yield, corporate, and U.S. Treasuries. This Strategy seeks to maintain a target allocation to qualified dividend investments of 30-40%. Past performance is no guarantee of future results. 1/1/1987 17.9 3/31/1989 1.3 Asset Allocation US Equity % Non-US Equity % Pref Stock % Cash % 14.07 3.85 75.91 6.17 Annualized Returns (%) 0.0 0.8 1.5 2.3 3.0 3.8 4.5 5.3 6.0 6.8 7.5 8.3 YTD Spectrum Pfds (gross) Spectrum Pfds (gross) Spectrum Pfds (net) BofAML Prfds Fixed Rate Spectrum Pfds (gross) Spectrum Pfds (net) EFTA01421841 BofAML Prfds Fixed Rate Manager vs Index Top Quartile 3.8 4.5 5.3 6.0 6.8 7.5 8.3 0.0 0.8 1.5 2.3 3.0 YTD Spectrum Pfds (net) 1 Year 3 Years Spectrum Pfds (gross) 5 Years 10 Years BofAML Prfds Fixed Rate Performance is shown both gross and net of fees. Net of fee returns reflect deduction of the maximum 1.4% annual fee. Data frequency is monthly and all performance data and analysis is for the period ending as of current quarter end unless otherwise indicated. These documents are for use in one-on-one client presentations. Deutsche Bank Wealth Management Quarter 1.0 0.6 1.6 2015 9.1 7.6 7.6 2nd Quartile 1 Year 3 Years Spectrum Pfds (net) YTD 1.0 0.6 1.6 2014 16.5 15.4 14.9 1 Year 6.1 EFTA01421842 5.7 4.7 2013 -3.9 -3.7 3rd Quartile -5.3 5 Years 3 Years 6.1 5.7 4.7 2012 17.0 13.6 15.4 10 Years BofAML Prfds Fixed Rate 5 Years 10 Years 7.5 6.8 6.0 2011 3.1 4.1 Bottom Quartile 1.7 5.5 3.3 4.1 2010 15.2 13.7 13.6 As of 10 2016 Page 1 of 5 Total Annualized Return (%) Return EFTA01421843 Spectrum Asset Management / Principal Adviser Select Preferred Securities Statistical Analysis (5-Years) (%) Time Period: 4/1/2011 to 3/31/2016 Alpha Spectrum Pfds (gross) Spectrum Pfds (net) BofAML Prfds Fixed Rate Risk/Return Analysis (%) Time Period: 4/1/2011 to 3/31/2016 0.0 2.0 4.0 6.0 8.0 10.0 Std Dev 0.0 1.7 Spectrum Pfds (gross) 3.3 5.0 Spectrum Pfds (net) Portfolio Characteristics Inception Date Product AUM ($MM) # of Holdings (Long) Average Credit Quality Portfolio Turnover (%) Average Eff Duration Modified Duration Current Yield at NAV % Yield to Maturity Average Eff Maturity 6.7 8.3 10.0 BofAML Prfds Fixed Rate 0.00 0.21 -1.19 Beta 1.08 1.08 1.00 R2 97.12 97.12 100.00 Std Dev EFTA01421844 5.26 4.80 5.26 Tracking Error 0.00 0.97 0.97 Up-Down Capture (%) Time Period: 4/1/2011 to 3/31/2016 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 Up Capture Ratio 62.0 72.5 Spectrum Pfds (gross) Style Box 3/31/1989 1,289 156 BB 13 3.28 3.14 5.43 Ltd Mod Ext 83.0 93.5 104.0 114.5 Spectrum Pfds (net) Portfolio Date: 3/31/2016 Morningstar Fixed Income Style BoxIm 125.0 BofAML Prfds Fixed Rate Sharpe Ratio 1.40 1.38 1.13 Sortino Ratio 2.76 2.66 2.09 EFTA01421845 Information Ratio (arith) 0.78 -0.76 Best Quarter 8.29 7.70 7.91 Worst Quarter -4.27 -4.07 -4.61 Returns-Based Style Map Time Period: 4/1/2011 to 3/31/2016 Max Drawdown -7.92 -7.48 -8.78 Batting Average 65.00 41.67 100.00 Excess Return 0.00 0.76 -0.73 As of 10 2016 BofAML US Corps 10+ Yr TR USD BofAML US Corps 1-10 Yr TR USD BofAML US Treasuries 10+Y TR USD BofAML US Treasuries 1-10 Yr TR USD Spectrum Pfds (gross) BofAML Prfds Fixed Rate Fixed-Income Stats Average Eff Duration Average Eff Maturity Average Coupon Average Price EFTA01421846 Average Credit Quality 3.3 BB Top Holdings (%) Portfolio Date: 3/31/2016 Pnc Finl Svcs Grp Pfd Hsbc Hldgs Pfd Schwab Charles Corp New Goldman Sachs Grp Pfd Royal Bank of Scotland Group (The) PLC ADR Bk Amer Citigroup Pfd Cap One Finl Pfd Bk Amer Pfd Bb&T Pfd 2.54 2.27 2.27 2.27 1.71 1.67 1.65 1.64 1.63 1.62 Performance is shown both gross and net of fees. Net of fee returns reflect deduction of the maximum 1.4% annual fee. Data frequency is monthly and all performance data and analysis is for the period ending as of current quarter end unless otherwise indicated. These documents are for use in one-on-one client presentations. Deutsche Bank Wealth Management Page 2 of 5 High Med Low Return Down Capture Ratio EFTA01421847 Spectrum Asset Management / Principal Adviser Select Preferred Securities Credit Quality Exposure Portfolio Date: 3/31/2016 % AA A BBB BB B Not Rated Total 3.0 2.5 55.8 27.2 4.4 7.0 100.0 Industrials Financials Telecom Services Utilities Total Sector Exposure Portfolio Date: 3/31/2016 5.5 86.8 6.4 1.3 100.0 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 11-12 Total Coupon Portfolio Date: 3/31/2016 56.1 17.9 14.7 11.3 EFTA01421848 0.0 0.0 0.0 0.0 0.0 0.0 100.0 As of 10 2016 Key Investment Personnel Name: Title: Joined Firm: Education: Prior Experience: Name: Title: Joined Firm: Education: Prior Experience: Maturity Mark Lieb Executive Director/Chief Financial Officer 1987 MBA, University of Hartford Founder- DBL Preferred Management Phillip Jacoby Managing Director/Senior Portfolio Manager/CIO 1995 BA, Boston College Senior VP- USL Capital Corporation 1-3 Yr 3-5 Yr 5-7 Yr 7-10 Yr 10-15 Yr 15-20 Yr 20-30 Yr 30+ Yr Total Portfolio Date: 3/31/2016 12.3 0.0 32.5 29.2 14.6 0.0 11.3 0.0 100.0 Performance is shown both gross and net of fees. Net of fee returns reflect EFTA01421849 deduction of the maximum 1.4% annual fee. Data frequency is monthly and all performance data and analysis is for the period ending as of current quarter end unless otherwise indicated. These documents are for use in one-on-one client presentations. Deutsche Bank Wealth Management Page 3 of 5 EFTA01421850 Spectrum Asset Management / Principal Adviser Select Preferred Securities Glossary As of 10 2016 Alpha - Alpha is a measure of the difference between a portfolio's actual returns and its expected performance, given its level of risk as measured by beta. A positive Alpha figure indicates the portfolio has performed better than its beta would predict. In contrast, a negative Alpha indicates the portfolio has underperformed, given the expectations established by beta.Alpha is calculated by taking the excess average monthly return of the investment over the risk free rate and subtracting beta times the excess average monthly return of the benchmark over the risk free rate. Beta - Beta is a measure of systematic risk with respect to a benchmark. Systematic risk is the tendency of the value of the fund and the value of benchmark to move together. Beta measures the sensitivity of the fund's excess return (total return minus the risk-free return) with respect to the benchmark's excess return that results from their systematic co-movement. It is the ratio of what the excess return of the fund would be to the excess return of the benchmark if there were no fund - specific sources of return. If beta is greater than one, movements in value of the fund that are associated with movements in the value of the benchmark tend to be amplified. If beta is one, they tend to be the same, and if beta is less than one, they tend to be dampened. If such movements tend to be in opposite directions, beta is negative. Beta is measured as the slope of the regression of the excess return on the fund as the dependent variable and the excess return on the benchmark as the independent variable. The beta of the market is 1.00 by definition. Morningstar calculates beta by comparing a portfolio's excess return over T-bills to the benchmark's excess return over T-bills, so a beta of 1.10 shows that the portfolio has performed 10% better than its benchmark in up markets and 10% worse in down markets, assuming all other factors remain constant. Conversely, a beta of 0.85 indicates that the portfolio's excess return is expected to perform 15% worse than the benchmark's excess return during up markets and 15% better during down markets. Excess Return - This is a measure of an investment's return in excess of a benchmark. R2 - R-Squred reflects the percentage of a portfolio's movements that can be explained by movements in its benchmark. Std Dev - Standard Deviation is a statistical measurement of dispersion about an average, which, for a mutual fund, depicts how widely the returns varied over a certain period of time. Investors use the standard deviation of historical performance to try to predict the range of returns that are most likely for a given fund. When a fund has a high standard deviation, the predicted range of performance is wide, implying greater volatility. Standard deviation is most appropriate for measuring risk if it is for a fund that is an investor's only holding. The figure can not be combined for more than one fund because the EFTA01421851 standard deviation for a portfolio of multiple funds is a function of not only the individual standard deviations, but also of the degree of correlation among the funds' returns. Morningstar computes standard deviation using the trailing monthly total returns for the appropriate time period. All of the monthly standard deviations are then annualized. Sharpe Ratio - Sharpe Ratio is a risk-adjusted measure developed by Nobel Laureate William Sharpe. It is calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe Ratio, the better the fund's historical risk-adjusted performance. The Sharpe ratio is calculated for the past 36-month period by dividing a fund's annualized excess returns by the standard deviation of a fund's annualized excess returns. Since this ratio uses standard deviation as its risk measure, it is most appropriately applied when analyzing a fund that is an investor's sole holding. Sortino Ratio - Sortino Ratio is similar to Sharpe Ratio except it uses downside risk (Downside Deviation) in the denominator. It was developed in early 1980's by Frank Sortino. Since upside variability is not necessarily a bad thing, Sortino ratio is sometimes more preferable than Sharpe ratio. Information Ratio - Information ratio is a risk-adjusted performance measure. The information ratio is a special version of the Sharpe Ratio in that the benchmark doesn't have to be the risk-free rate. The Israelson method is an adjustment of the Information Ratio to take into account the inconsistency of the IR when excess returns are negative. Deutsche Bank Wealth Management These documents are for use in one-on-one client presentations. Page 4 of 5 EFTA01421852 Spectrum Asset Management / Principal Adviser Select Preferred Securities As of 1Q 2016 Performance Notes: Historical performance data relating to Spectrum Asset Management is provided by said manager. We do not guarantee its accuracy or completeness, and as such data may change without notice. Further information may be obtained directly from Spectrum Asset Management. Other portfolio metrics are calculated by Deutsche Bank based on information we deem reliable and accurate. Results reflect realized and unrealized appreciation and the reinvestment of dividend and interest income. Taxes have not been deducted. Performance results are shown both "gross" (before the deduction of Adviser Select or investment advisory fees) and for illustration purposes, "net" of the maximum 1.4% program fee, deducted daily within Morningstar. In practice, the fee will be deducted quarterly by Deutsche Bank. The compound impact on performance of the deduction of fees is determined by the account size, the amount of the fee, the time period and the gross performance. Investment advisory fees are described in Part II of the Manager's Form ADV. Performance results will vary based upon the period measured. Past performance is no guarantee of future results. Spectrum Asset Management's SMA Preferred Securities Composite contains fully discretionary SMA preferred securities accounts. The composite may consist of accounts from more than one SMA sponsor platform. Creation date of Spectrum's SMA preferred securities composite is April 1, 2006. Performance prior to April 1, 2006 reflects Spectrum's Intermediate Duration Preferred Securities institutional composite and does not reflect any actual SMA portfolios. Performance April 1, 2006 and thereafter reflects Spectrum's SMA Preferred Securities composite. Performance for time periods of one-year and greater are generated by geometrically linking Spectrum's SMA Preferred Securities composite (effective April 1, 2006) and Spectrum's Intermediate Duration institutional composite. Wrap fee schedules are provided by independent wrap sponsors and are available upon request from the representative wrap sponsor. The SMA Preferred Securities composite consists of portfolios that invest in listed securities, primarily $25 par hybrid preferred securities. The historical Spectrum Intermediate Duration institutional composite consists of portfolios that invest in various securities including $25 par securities, $1,000 par preferred securities, corporate bonds, Treasuries, government securities, and potentially other securities. The historical institutional composite consists of various types of accounts including individually managed institutional accounts, closed-end mutual funds, and open-end mutual funds. The historical institutional portfolios may have benefited from recurrent trading practices, up to and including intraday trading. The SMA portfolios trade on a less frequent basis. Disparity in trading practices between institutional portfolios and SMA portfolios may contribute to a divergence of performance results. As of 04 2015, the composite consisted of 73 accounts totaling $2.3B and represented 13% of the product assets under management. No balanced portfolio segments are included in this EFTA01421853 composite. Leverage is not used in this composite. The minimum account size for inclusion in the SMA composite is $100,000. The Spectrum Asset Management SMA Preferred Securities Composite contains fully discretionary SMA preferred securities accounts. The Spectrum's SMA preferred securities composite was created March, 2013 and is comprised primarily of portfolios of $25 par preferred securities. The composite may consist of accounts from more than one SMA sponsor platform. Additional information on calculation of composite performance data is available on request. Actual investment advisory fees charged to clients may vary. The financial strategies used by the manager may not be suitable for all investors, and investors must make their own independent legal, tax, accounting, and financial evaluation of the strategies' risks and merits prior to pursuing such investment strategies. This product is subject to investment risk including possible loss of principal. Unless you are notified to the contrary, any products and services mentioned herein are not insured by the FDIC (or by any governmental entity) and are not guaranteed by or obligations of Deutsche Bank. This report has been prepared by Deutsche Bank as of the date noted. We have gathered the information contained in this report from sources we believe to be reliable; but we do not guarantee the accuracy or completeness of such information, and we assume no liability for damages resulting from or arising out of the use of such information. Deutsche Bank AG, including its subsidiaries and affiliates, does not provide legal, tax or accounting advice. This communication was prepared solely in connection with the promotion or marketing, to the extent permitted by applicable law, of the transaction or matter addressed herein, and was not intended or written to be used, and cannot be relied upon, by any taxpayer for the purposes of avoiding any U.S. federal tax penalties. The recipient of this communication should seek advice from an independent tax advisor regarding any tax matters addressed herein based on its particular circumstances. The BofA Merrill Lynch Fixed Rate Preferred Securities Index tracks the performance of fixed rate US dollar denominated preferred securities issued in the US domestic market. "Deutsche Bank" means Deutsche Bank AG and its affiliated companies. Deutsche Bank Wealth Management refers to the wealth management activities for high-net-worth clients around the world conducted by Deutsche Bank AG or its subsidiaries. Brokerage services are offered through Deutsche Bank Securities Inc., a broker-dealer and registered investment adviser, which conducts investment banking and securities activities in the United States. Deutsche Bank Securities Inc. is a member of FINRA, NYSE and SIPC. Lending and banking services are offered through Deutsche Bank Trust Company Americas, member FDIC, and other members of the Deutsche Bank Group. 0 2016 Deutsche Bank AG. All rights reserved. 023256T 021816 Deutsche Bank Wealth Management These documents are for use in one-on-one client presentations. Page 5 of 5 EFTA01421854