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

1. ALM & Strategic Asset AllocationInvestment management for insurance companies and pension fundsDeAM Insurance Solutions June 2006 Evgenij Minkin

2. Global financial institution • 100 years of experience • AA-/Aa3 rated financial institution* Private Clients and Corporate Corporate and Asset Management Investments Investment Bank Personal Banking Private Equity Sales & Trading Transaction Banking Industrial Shareholdings Private Banking Corporate Finance Asset Management Organization of Deutsche Bank Alternative Investments Real Estate Infrastructure Hedge Funds Retail Mutual Funds Retail Structured Products Traditional Institutional Insurance Asset Management Fixed Income Equity Quantitative Strategies Cash * As rated by Standard & Poor’s/Moody’s Investors Service as at 31 December 2005

3. Global Assets under ManagementEUR 535.8 billion Insurance assets are 22% of global assets under management 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

4. A diversified global insurance asset management organization USD 142 billion in assets under management 90 dedicated insurance employees including investment professionals Broad range of capabilities, tailored to client objectives Clarity of purpose: value creation for clients Europe Frankfurt London Zurich United States New York Chicago Boston Asia/Pacific China* Hong Kong Tokyo Mumbai Seoul Singapore Sydney Asia/Pacific offices Other offices managing Asian assets Asia joint venture DeAM’s global insurance presence As at 31 December 2005 * Joint venture with Harvest Fund Management

5. Global Insurance Assets under ManagementEUR 119.8 billion total Asset allocation Regional breakdown* 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

6. …it seems that optimists are working for insurances • The history shows the pro-cyclic behavior of insurance asset management. Equity exposure, unrealized losses and equity prices Equity exposure and equity prices 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.

7. What are usually taken as reasons for high equity exposures? • Protection from inflation • Grow shareholder value / surplus

8. Agenda • The arguments towards high equity exposure revisited • Which process assures the systematic optimization of the Strategic Asset Allocation with respect to liabilities?

9. Protection from inflation: The connection between inflation and equity performance • Intercept of the regression: 17.73% • Slope of the regression: -3.1 • R-square: 6.44% • 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

10. 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

11. Agenda • The arguments towards high equity exposure revisited • Which process assures the systematic optimization of the Strategic Asset Allocation with respect to liabilities?

12. Which process assures the systematic optimization of the Strategic Asset Allocation with respect to liabilities? Modeling of Liabilities Calibration of immunizing portfolio Determination of an efficient SAA Overlay/- Management

13. The modeling of liabilities:The interdependence with assets The dependence of technical reserves and the path of the book yield

14. Assets Minimum requirements of liabilities (fulfillment of garantees) Planned book yield Additional requirements (bonus) Optimizing the SAA I:The immunizing portfolio Cashflow of liabilities and assets • Cashflow der Liabilities und Assets

15. 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 Corporates Money market Equity exposure Governments

16. 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

17. 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, completeness or fairness. Opinions and estimates involve a number of assumptions which may not prove valid and may be changed without notice. Neither Deutsche Asset 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 yield 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.