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									                 ALM & Strategic Asset Allocation
                 Investment management for insurance companies and pension funds
                 DeAM Insurance Solutions



                 June 2006




Evgenij Minkin
Organization of Deutsche Bank




                                                      Global financial institution
                                                      100 years of experience
                                                      AA-/Aa3 rated financial institution*



                         Corporate                      Corporate and                 Private Clients and
                                                                                                            Alternative Investments
                        Investments                    Investment Bank                Asset Management      Real Estate
                                                                                                            Infrastructure
                                                                                                            Hedge Funds
                          Industrial
                                                        Corporate Finance               Private Banking     Retail
                        Shareholdings
                                                                                                            Mutual Funds
                                                                                                            Retail Structured Products
                        Private Equity                   Sales & Trading               Personal Banking
                                                                                                            Traditional Institutional
                                                                                                            Insurance Asset Management
                                                                                                            Fixed Income
                                                       Transaction Banking             Asset Management     Equity
                                                                                                            Quantitative Strategies
                                                                                                            Cash

* As rated by Standard & Poor’s/Moody’s Investors Service as at 31 December 2005



                                                                          1
Global Assets under Management
EUR 535.8 billion

              Fixed Income
                  225.2



                                                       Real Estate
                                                          51.9
                                                                                                       Insurance assets are
                                                                                                       22% of global assets
Alternative
 Investing                                                                                             under management
    9.4

    Balanced
                                                    Equity
      35.9
                                                    129.3
                  Cash
               Management
                  84.1




As at 31 December 2005
Due to rounding, numbers may not add up to total
Note: Equity and Fixed Income Assets above include assets managed as a part of the Balanced mandates



                                                                          2
DeAM’s global insurance presence
                                               Europe
                                               Frankfurt
                                               London                  A diversified global
                                               Zurich                   insurance asset
                                                                        management organization

                                                                       USD 142 billion in assets
                                                                        under management

                                                                       90 dedicated insurance
United States                                                           employees including
New York                                                                investment professionals
Chicago
Boston
                                                                       Broad range of capabilities,
                                                       Asia/Pacific
                                                       China*           tailored to client objectives
                                                       Hong Kong
                                                       Tokyo           Clarity of purpose: value
   Asia/Pacific offices                                Mumbai           creation for clients
   Other offices managing Asian assets                 Seoul
   Asia joint venture                                  Singapore
                                                       Sydney

As at 31 December 2005
* Joint venture with Harvest Fund Management



                                                              3
Global Insurance Assets under Management
EUR 119.8 billion total

                      Asset allocation                                                           Regional breakdown*

                                      Equity
                                                                                                                               Asia Pacific
                                      6.6% Balanced
                                             2.5%                                                                                 5.2%
                                                  Cash
                                                  0.6%
                                                                                        Europe
                                                         Alternatives                   43.3%
                                                             0.3%




                                                                                                                                  Americas
        Fixed Income
                                                                                                                                   51.5%
           90.0%


As at 31 December 2005
* By service area
Due to rounding, numbers may not add up to total
Assets shown exclude the Stable Value product, which is manufactured by DeAM’s global insurance business unit; they do not include assets in which we
provide sub-advisory management of assets distributed at third-party insurance companies



                                                                            4
…it seems that optimists are working for insurances


The history shows the pro-cyclic behavior of insurance asset management.

                              Equity exposure and equity prices                                                     Equity exposure, unrealized losses and equity prices
                    20                                                       8000                                   20                                                  8000
                                                                             7000                                                                                       7000
% of total assets




                                                                                                % of total assets
                    15                                                       6000                                   15                                                  6000
                                                                             5000                                                                                       5000




                                                                                    Index




                                                                                                                                                                               Index
                    10                                                       4000                                   10                                                  4000
                                                                             3000                                                                                       3000
                    5                                                        2000                                    5                                                  2000
                                                                             1000                                                                                       1000
                    0                                                        0                                       0                                                  0
                         1980 1990 1995 1999 2000 2001 2002 2003 2004                                                    1997 1998 1999 2000 2001 2002 2003 2004
                               Equities (l. h.s.)                                                                                  Unrealized gains/losses (l. h. s.)
                               Equities and major shareholdings (l. h. s.)                                                         Equity exposure (l. h. s.)
                               DAX (r. h. s.)                                                                                      DAX (r. h. s.)
Source: GDV, Thomson Financial Datastream                                                       Source: GDV, Thomson Financial Datastream



                                Rising equity exposures with increasing or high stock prices, the asset management was
                                not able to reduce this exposure due to unrealized losses.




                                                                                            5
What are usually taken as reasons for high equity
exposures?

 Protection from inflation

 Grow shareholder value / surplus




                               6
Agenda


 The arguments towards high equity exposure revisited

 Which process assures the systematic optimization of the Strategic Asset
  Allocation with respect to liabilities?




                                      7
Protection from inflation: The connection between
inflation and equity performance
                     80%
                                                                                    Intercept of the
                     60%                                                            regression:              17.73%
                     40%                                                            Slope of the
Performance of DAX




                     20%                                                            regression:                -3.1
                      0%                                                            R-square:                6.44%
                     -20%

                     -40%

                     -60%

                     -80%
                         -2%          0%        2%               4%       6%   8%
                                                     Inflation

During the last 40 years, the dependence of equity performance on inflation rates was
negative and statistically insignificant

                               A better protection against inflation is provided by inflation linked bonds

                                                                      8
The Shareholder Value approach


 Diversification assumption: symmetric participation at asset performance

     The shareholder is interested in insurance-specific risk

 Asymmetric participation in returns: lower participation at the upside

     The shareholder covers all guarantees, small participation on assets outperforming
     the guarantees

 The Principal-Agent-Conflict

     Incentive to load systematic risk




                                           9
Agenda


 The arguments towards high equity exposure revisited

 Which process assures the systematic optimization of the Strategic
  Asset Allocation with respect to liabilities?




                                     10
Which process assures the systematic optimization of
the Strategic Asset Allocation with respect to
liabilities?




                                       Determinatio
                 Calibration of                         Overlay/-
  Modeling of                                 n
                  immunizing                           Managemen
   Liabilities                              of an
                    portfolio                               t
                                       efficient SAA




                                  11
The modeling of liabilities:
The interdependence with assets

             The dependence of technical reserves and the path of the book yield
 700                                                                                                       4.5%
                                                                                                           4.0%
 600
                                                                                                           3.5%
 500
                                                                                                           3.0%
 400                                                                                                       2.5%

 300                                                                                                       2.0%
                                                                                                           1.5%
 200
                                                                                                           1.0%
 100
                                                                                                           0.5%
   0                                                                                                       0.0%
   05

         07

                09

                      11

                            13

                                  15

                                          17

                                                19

                                                      21

                                                             23

                                                                      25

                                                                              27

                                                                                    29

                                                                                          31

                                                                                                33

                                                                                                      35
 20

        20

               20

                     20

                           20

                                 20

                                        20

                                               20

                                                     20

                                                            20

                                                                    20

                                                                           20

                                                                                   20

                                                                                         20

                                                                                               20

                                                                                                     20
                                       Technical reserves        Book yield




                                                       12
Optimizing the SAA I:
The immunizing portfolio
                                   Cashflow of Liabilities und Assets
                                  Cashflow der liabilities and assets
    600                                                                                                        5.0%
    500                                                                                                        4.5%
    400
                                                                                                               4.0%
    300
                                                                                                               3.5%
    200
    100                                                                                                        3.0%

      0                                                                                                        2.5%
    -100                                                                                                       2.0%
    -200
                                                                                                               1.5%
    -300
                                                                                                               1.0%
    -400
    -500                                                                                                       0.5%

    -600                                                                                                       0.0%
           2004   2007   2010   2013   2016   2019   2022    2025   2028   2031   2034   2037   2040   2043

                   Assets       Assets           Minimum requirements of liabilities (fulfillment
                                              Liabilities Add. CF requirements       NN             of garantees)
                   Planned book yield            Additional requirements (bonus)




                                                            13
Optimizing the SAA II:
The efficient frontier (1)

The immunizing portfolio is a critical benchmark to be outperformed by the portfolio
management and a key reference point calibrating the efficient frontier


                1.2%                                                                   100%                                            100%

                                                                                        90%                                            90%
                1.0%
                                                                                        80%                                            80%
Excess return




                0.8%                                                                    70%                                            70%

                0.6%                                                                    60%                                            60%                                                              Corporates
                                                                                                                                                                                                        Corporates                                      C
                                                                                                                                                                                                        Geldmarkt
                                                                                                                                                                                                        Money market                                    G
                                                                                        50%                                            50%
                0.4%                                                                                                                                                                                    Aktienquote
                                                                                                                                                                                                        Equity exposure                                 A
                                                                                        40%                                            40%                                                              Governments
                                                                                                                                                                                                        Governments                                     G
                0.2%                                                                    30%                                            30%

                0.0%                                                                    20%                                            20%

                    0.0%             1.0%        2.0%           3.0%       4.0%        5.0%
                                                                                         10%                                           10%

                                                                                         0%                                              0%
                                                Excess risk




                                                                                                                                                0,23%
                                                                                                                                                        0,33%
                                                                                                                                                        0,44%
                                                                                                                                                                0,63%
                                                                                                                                                                0,88%
                                                                                                                                                                        0,83%
                                                                                                                                                                        1,10%
                                                                                                                                                                                1,37%
                                                                                                                                                                                1,65%
                                                                                                                                                                                        1,92%
                                                                                                                                                                                        3,01%
                                                                                                                                                                                                3,07%
                                                                                                                                                                                                3,07%
                                                                                                                                                                                                        3,07%
                                                                                                                                                                                                                3,07%
                                                                                                                                                                                                                        3,07%
                                                                                                                                                                                                                                3,07%
                                                                                                                                                                                                                                        3,07%
                                                                                                                                                                                                                                                3,07%
                                                                                               0,23%
                                                                                                       0,33%
                                                                                                               0,44%
                                                                                                                       0,63%
                                                                                                                               0,88%
                                                                                                                                        0,83%
                                                                                                                                                1,10%
                                                                                                                                                1,37%
                                                                                                                                                        1,65%
                                                                                                                                                        1,92%
                                                                                                                                                                3,01%
                                                                                                                                                                3,07%
                                                                                                                                                                        3,07%
                                                                                                                                                                        3,07%
                                                                                                                                                                                3,07%
                                                                                                                                                                                3,07%
                                                                                                                                                                                        3,07%
                                                                                                                                                                                        3,07%
                                                                                                                                                                                                3,07%
                Efficient frontier          Current portfolio          Highest Sharpe Ratio




                                                                               14
Executive summary


 The usual argumentation towards high equity exposures is questionable
   – No relationship between equity performance and inflation
   – Due to the asymmetric participation, shareholder should prefer low systematic risk

 The portfolio immunizing the liabilities is the key reference calibrating the
  efficient frontier

 The capacity to take risks should determine the choice of one portfolio of the
  efficient frontier as benchmark for the portfolio management

 The performance attribution should show the performance of the immunizing
  portfolio, of the efficient portfolio implemented as benchmark and of the
  portfolio effectively invested in and therefore make the "real" α transparent




                                           15
Contact

DWS Investment Russia
Ul. Shepkina 4
129090 Moscow

Elena Loginova, CEO
Tel.    +7 (495) 797 - 5230
elena.loginova@db.com

Arsen Manoukian, Head of Corporate Sales
Tel.   +7 (495) 981 - 4955
arsen.manoukian@db.com


Although the information herein has been obtained from sources believed to be reliable, we do not guarantee its accuracy, com pleteness or fairness. Opinions
and estimates involve a number of assumptions which may not prove valid and may be changed without notice. Neither Deutsche A sset Management nor its
affiliated enterprises assume any form of liability for the use of this publication or its contents.

Past performance is no guarantee of future results and no assurance can be given that any structure described herein would yi eld favourable investment results
or that the Fund's investment objectives will be achieved or that the investor will receive a return of all or part of their investment.




                                                                              16

								
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