ERISA Section 408(b)(2) Disclosures

Deutsche Bank Securities Inc. and its affiliates are required by federal regulations to provide disclosures regarding compensation for services furnished to employee pension benefit plans that are subject to the Employee Retirement Income Security Act of 1974, as amended. If you are not the plan fiduciary responsible for procuring the services described herein, please forward these disclosures to the named fiduciary of the plan. If these disclosures do not apply to you or the plan(s) you represent, you may consider the information reflected herein as you wish, but you need not take any action.


Dear Plan Fiduciary:

On February 3, 2012, the Department of Labor (“DOL”) issued final regulations under Section 408(b)(2) of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  Section 408(b)(2) exempts the provision of services to a covered employee benefit plan from ERISA’s prohibited transaction rules.  The regulations prescribed enhanced disclosure requirements for certain covered plans and services under certain conditions.  The following disclosures are made pursuant to those regulations in connection with institutional service contracts or arrangements your plan may have with Deutsche Bank Securities Inc. (“DBSI”) or its affiliates (collectively, “DB”).  The new regulations are effective July 1, 2012.

If you have questions about these disclosures, please email us at Section.408B2@db.com. DB will update the disclosures as necessary through the online copy.  DB recommends that you review the online copy periodically for any changes.

Other statutory, class or individual exemptions may independently exempt the services provided to the plan.  These disclosures do not affect the relief provided by those exemptions.

Description of Services Provided

We may provide the following services to the plan.  We may do so directly or through an affiliate or subcontractor.

  • prime brokerage
  • agency brokerage
  • futures commission merchant
  • custody
  • account administration
  • over-the-counter (“OTC”) derivatives clearing
  • financial intermediation

DB may act in other capacities in connection with the plan (e.g., as a dealer, counterparty in principal transactions or credit support provider).  The new disclosure requirements do not apply to such situations.

Whether We Act as a Fiduciary in Providing the Described Services

In providing the above-described services, we have not agreed to provide investment advice to the plan, and we do not otherwise act as fiduciaries under ERISA, the Investment Advisers Act or under the investment advisory laws of any State.

Direct Compensation for the Described Services

DB may receive direct compensation in connection with services provided to the plan.  Following is a description of such compensation.  Except as stated below (or unless otherwise separately agreed), direct compensation will be received from the plan or deducted from the plan’s accounts with DB.

DB may receive commissions when it acts as the plan’s agent in connection with securities transactions.  Commissions generally range:  (a) for equities, up to $0.05 per share or 5% of the notional amount of the trade, (b) for listed options, up to $3.00 per contract, and (c) for convertibles, up to $.06 per share.  The commission charged in any given circumstance depends on, e.g., (i) type of security, (ii) market, (iii) size of the trade, (iv) trading desk or platform employed, (v) method of execution, (vi) size of the plan’s account, (vii) mutual financing expectations, and (viii) other relationships with DB.  Actual commissions paid are reflected in the trade confirmation (“trade confirm”).

DB, in its capacity as futures commission merchant (“FCM”) or broker-dealer, may receive commissions when it acts as the plan’s agent in futures and listed options trades or when the plan exercises an option.  Commissions may range up to $3.00 per contract, depending on, e.g., (i) type of contract, (ii) market, (iii) size of the trade, (iv) size of the plan’s account, (v) mutual financing expectations, and (vi) other relationships with DB.  Actual commissions paid are reflected in the trade confirm.

DB may impose a ticket charge for clearing OTC derivatives or listed derivatives for the plan. Applicable ticket charges are disclosed in the plan’s client agreement or related fee disclosure.

DB may charge a position maintenance fee in connection with clearing OTC derivatives. Applicable charges are disclosed in the plan’s client agreement or related fee disclosure.
 
DB may charge a fee to recoup regulatory and central counterparty (“CCP”)-related costs in connection with clearing OTC derivatives.  Applicable charges are disclosed on the trade confirm or in the plan’s client agreement or related fee disclosure or on the CCP’s website.

1) If DB provides other services to the plan under Section 408(b)(2) of ERISA, the plan fiduciary responsible for procuring the other services should receive separate disclosures with respect to those services, to the extent required under the regulations.  If separate disclosures are not received, please email us at:  Section.408B2@db.com.

DB may charge a fee for overdraft services.  The fee is generally a range of basis points over a fixed rate (e.g., Fed Funds or LIBOR).  For prime brokerage clients, the fee is disclosed in the plan’s pricing letter (“Pricing Term Sheet”).   For all other clients, the relevant client agreement or separate fee disclosure will reflect any such fee.

For prime brokerage clients, DB may impose a clearing/ticket charge for securities trades in non-U.S. markets.  Charges for the various markets are listed in the plan’s Pricing Term Sheet. 


DB may charge a wire or transfer fee for any payments directed from the plan’s accounts.  For prime brokerage clients, applicable fees are listed in the plan’s Pricing Term Sheet.  For all other clients, the relevant client agreement or separate fee disclosure will reflect any such fee.

DB may charge a fee for canceling and correcting trades.  For prime brokerage clients, applicable fees are listed in the plan’s Pricing Term Sheet.  For all other clients, the relevant client agreement or separate fee disclosure will reflect any such fee.

DB may charge a fee for the custody and administration of the plan’s accounts, generally expressed as a percentage of custodied assets.  For prime brokerage clients, any applicable charges are listed in the plan’s Pricing Term Sheet.  For all other clients, the relevant client agreement or separate fee disclosure will reflect any such fee. 

DB may charge a fee (either a flat dollar amount or related to the value of the securities borrowed) when a prime brokerage client borrows securities from broker-dealers not affiliated with DB.  Applicable fees are listed in the plan’s Pricing Term Sheet.
 
DB may act as a financial intermediary (i.e., step in between the plan and its counterparty on a principal basis) in OTC transactions.  In connection therewith, DB may charge a fee, which is disclosed in the applicable client agreement or related fee disclosure.

In connection with securities trades, DB may charge a fee – commonly called an “SEC fee,” “Section 31 Transaction Fee” or “Regulatory Transaction Fee” – to recoup fees paid by DB to regulators or self-regulatory organizations (“SROs”).  To see the current SEC rates, go to (www.sec.gov/divisions/marketreg/mrfreqreq.shtml) and click on the most recent “Fee Rate Advisory” under “Section 31 Fees.”  Any fee charged to the plan will be reflected in the trade confirm.

In connection with securities trades, DB may charge a “Trading Activity Fee” to recoup fees charged by Financial Industry Regulatory Authority, Inc. (“FINRA”) to cover its cost of supervising and regulating financial institutions.  Any fee charged to the plan will be reflected in the trade confirm.  To see the current FINRA rates, go to: 

2) Pricing Term Sheets may be amended from time to time, either by the issuance of a new Pricing Term Sheet or through a separate written or electronic communication with you.  The term “Pricing Term Sheet”, as used herein, refers to your plan’s Pricing Term Sheet, as amended.

In connection with futures trades, DB, in its capacity as FCM, may charge an “NFA fee” to recoup fees paid by DB to the National Futures Association (“NFA”) to cover the costs of supervising and regulating financial institutions.  Any fee charged to the plan will be reflected in the trade confirm.  To see the current NFA rates, go to: 

In connection with listed options trades, DB may charge an “Options Regulatory Fee” (“ORF”) to recoup fees paid by DB to exchanges to cover the costs of supervising and regulating the options market.  The fees are reflected in a separate fee disclosure provided to the plan or its agent.  Any fee charged to the plan will be reflected in the trade confirm.
 
In connection with clearing OTC derivatives trades, DB may pass through service and regulatory fees charged by the CCP involved in the trade.  Applicable charges are disclosed in the plan’s client agreement or related fee disclosure.

If DB is granted a use of cash collateral as part of its compensation for any services, DB will have a use of that cash and will generally earn a prevailing money market rate of interest on such cash.

If DB is granted a use of securities collateral as part of its compensation for any services, DB will benefit from that use.  The benefit is impossible to quantify in advance, as its value will depend on many variables, including, e.g., the type of securities, quantity of securities, length of time the securities are available and market demand for such securities.

Indirect Compensation

Commissions paid to DB for futures or listed option trades (as described above) may be collected from the clearing broker or FCM where DB does not clear the trades.

DB’s employees may periodically receive gifts (other than cash or cash equivalents), entertainment or meals from third parties or attend educational conferences hosted by third parties.  No agreement or arrangement exists between DB and any third party regarding the provision of gifts, entertainment, meals or conferences based on service contracts or arrangements with any particular plan, and none of the foregoing is received by DB’s employees by reason of services provided to a particular plan.  DB employees are subject to Deutsche Bank AG internal policies and procedures relating to gifts, meals, entertainment, and conferences that are consistent with regulatory requirements, including ERISA where applicable.

From time to time, DB may sponsor entertainment events.  These events are unrelated to any contract or arrangement for services with any particular plan.  Client representatives may be given tickets to such events to the extent consistent with the Department of Labor’s de minimis rules described in its enforcement manual.  The cost of these events may be subsidized by a third party. 

DB may receive payment for order flow, rebates or other benefits under arrangements with CCPs, securities exchanges, alternative trading systems, electronic communication networks and other market centers or trading venues.  Receipt of such compensation may depend on whether DB provides or takes net liquidity.  The payments, rebates or other benefits received may exceed DB’s own trading costs.  The rebate paid for trades in securities may be up to $0.0040 per executed share and up to $0.40 per contract for listed options.  Other amounts may be received in connection with other types of trades.  CCPs, exchanges, centers or venues may post additional disclosures concerning such payments, rebates and other benefits on their respective websites.  In accordance with SEC Rule 606, DBSI discloses quarterly the principal exchanges, centers and other venues to which it routed securities orders for execution.  DBSI’s Form 606 appears under DBSI’s name on the following website:  http://www.tta.thomson.com/reports/.

DB may have ownership interests in CCPs, exchanges or other market centers or trading venues.  Any such interest may become more valuable as a result of the use of such CCPs, exchanges, centers or venues.  To the extent permitted under applicable law, pursuant to its shareholder, partnership or similar agreements, DB may receive additional benefits from such CCPs, exchanges, centers or venues.

DB may receive fees in connection with the plan’s investments in private funds, foreign exchange strategies, deposit programs, structured products and other funds, products or investments.  The fees are paid by the fund, the product sponsor or the distributor under a referral, solicitation, placement or distribution agreement or arrangement.  The fees are generally described in the offering memorandum or similar documentation for the fund, product or investment.

DBSI or Deutsche Bank AG may receive all or part of the compensation that its affiliate, Deutsche Bank Trust Company Americas (“DBTCA”), receives in connection with the plan’s investment in money market or other mutual funds through DBTCA (including, but not limited to, shareholder service fees and revenue sharing) received under agreements with the funds, their sponsors or managers.

If DBSI or Deutsche Bank AG introduces the plan to DBTCA for custody services, DBSI or Deutsche Bank AG may receive from DBTCA all or a part of the fees that the plan pays to DBTCA for such services.

Compensation Paid among Related Parties (Affiliates or Subcontractors) on a Transaction Basis or Charged Against Investment and Reflected in Net Value of Investment

DB may pay the clearance, execution, settlement and related fees charged by foreign sub-custodians.  These fees vary, e.g., with the type of trade, manner of execution and market, and generally may range up to $50 in developed markets, $100 in less-developed markets and $250 in hard-to-trade or emerging markets.  DB may recoup all or a portion of these fees by charging the plan a clearing/ticket charge, as described above.

DB may pay fees to local brokers or agents for executing securities trades in foreign markets.  These fees may range up to $.035 per share or 45 basis points of the notional amount of the trade. 

DB may share up to 50% of the commissions it earns on securities, futures or listed options trades with any introducing broker.

Compensation for Termination of Service

DB and its subcontractors reasonably expect to receive no compensation in connection with the termination of the services described herein. 

Custody agreements with DBTCA may provide for advance payment of fees.  Any prepaid fees not actually earned will be refunded (calculated on a pro-rata basis) upon termination.  With this exception, unless otherwise separately agreed, no other fees received by DB or its subcontractors in connection with services described herein are reasonably expected to be prepaid.
 

DEUTSCHE BANK SECURITIES INC.

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Last Update: June 29, 2012
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